There was a good piece in today’s emailed newsletter from Institute For Policy Innovation (IPI), calling for an update to the classic song that has been my theme practically forever. The emailed newsletter says that it was written by David R. Henderson, but the byline on their website has Merrill Matthews as the author.
Updating George Harrison’s “TaxMan”
Posted by taxguru on May 17, 2023
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Combining Two Famous Sayings
Posted by taxguru on April 29, 2023
You might not have seen this Mallard Fillmore comic from April 18 because that strip had been cancelled from most large newspapers over two years ago for daring to mention something deemed by our rulers to be not politically correct: that it’s unfair for men to compete against women in some sports.
Luckily, the folks behind this conservative comic didn’t quit making them and their most recent ones can be found on the net, such as here at Comics Kingdom.
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Tax Day For 2022 Returns Is Now October 16 For Many In Calif.
Posted by taxguru on February 25, 2023
The residents of the formerly Golden State have been clobbered by so many major events that IRS has officially given them until October 16, 2023 to file their 2022 tax returns.
This also applies to tax filers in parts of Georgia and Alabama, who had their own miseries befall them.
The IRS Press Release:
May 15 tax deadline extended to Oct. 16 for disaster area taxpayers in California, Alabama and Georgia
Unlike the normal type of six month extension from April until October, this special change also allows tax payments to be postponed until 10/16/23 without any of the late penalties that would apply to tax due under a normally extended 10/16 filing.
Since this IRS pronouncement is so new, the California Franchise Tax Board hasn’t yet had a chance to issue its own press release regarding this new filing deadline for 2021 returns; but there’s no reason to suspect that they won’t conform to the IRS time schedule as they did in January.
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Tax Day is May 15 For Parts of Calif.
Posted by taxguru on January 11, 2023
Because of April 15 falling on a Saturday this year, along with DC’s special Emancipation Day holiday on April 17, the official IRS Tax Day for filing most kinds of 2022 income tax returns (or extensions) is Tuesday, April 18, 2023.
As happened last year here in Florida, with Hurricane Ian, when a Federally Declared disaster hits a large part of the country, IRS has the power to provide extra time for those taxpayers and preparers who were in those affected areas.
Less than two weeks into the new year and IRS has already given such an extension to many parts of California.
IRS News Release:
California storm victims qualify for tax relief; April 18 deadline, other dates extended to May 15
Unlike the Hurricane Ian deadline extension, which encompassed the entire state of Florida, this new one currently only covers the following named counties:
Colusa, El Dorado, Glenn, Humboldt, Los Angeles, Marin, Mariposa, Mendocino, Merced, Monterey, Napa, Orange, Placer, Riverside, Sacramento, San Bernardino, San Diego, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Sutter, Tehama, Ventura, Yolo and Yuba
As the press release says, this list may need to be expanded as things develop out there on the Left Coast.
We have several Calif clients who do benefit from this one month delay under the current list, but clients in our old stomping grounds of Alameda and Contra Costa counties weren’t hit hard enough by the storms to qualify at this time.
[Update 1/11/23] – IRS has added the following Calif. counties to the list of those qualifying for the May 15 filing deadline:
Alameda, Contra Costa, Fresno, Kings, Lake, Madera, Mono, San Benito, San Francisco, and Tulare counties.
[Update 1/13/23] – As was expected, the Calif Franchise Tax board has gone along with this filing extension for storm affected counties, including the ones recently added by IRS.
The FTB news release: Tax Relief for Californians Impacted by Storms
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IRS Standard Mileage Rates For 2023
Posted by taxguru on December 29, 2022
IRS has released its standard mileage rates for the types of driving during 2023 that can affect taxes.
From today’s IRS news release:
Beginning on January 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
- 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
- 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.
These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
While these actual deductions won’t be claimed for more than a year, when 2023 tax returns are filed, the rates are useful for current situations, such as employee reimbursements and charges to customers by some businesses.
These rates are supposed to be for all miles driven during 2023. However, as we saw earlier this year, if there are major changes up or down in the costs to operate vehicles (fuel being the most common), these rates might be modified mid-year.
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IRS Raising Its Interest Rates Again
Posted by taxguru on December 3, 2022
For the fourth straight quarter, IRS will be raising the interest rate that it charges on back taxes and pays on late refunds. As of 1/1/23, it will be 7.0%. This is good news for those who have refunds coming, but not so good if you owe IRS money.
With most banks still paying ridiculously low rates on their savings accounts, we may see the return of a strategy to maximize interest yields by “investing” with the IRS. There have been cases in the past where taxpayers intentionally overpaid their taxes to IRS by “accidentally” leaving off large legitimate deductions. A few years later, they (hopefully) “notice” their mistake and file an amended return (1040X) with IRS to recoup those overpaid taxes and much more interest on top of that than they could have earned with alternative uses of that money.
Anyone considering such a tactic should heed a few warnings:
1. If the 1040X is not submitted within the three-year statute of limitations, the refund will be forfeited and considered to be a gift to the IRS.
2. Amended returns receive much more scrutiny from IRS than original returns, especially when claiming a refund. When examining an amended return, it is not uncommon for IRS to initiate a full-blown audit on other things on the return, not just the item triggering the amendment. I have seen this happen and the ensuing hassles caused the taxpayers to regret ever filing the amended return.
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How long will this upward trend in interest rates continue? No sane person is anticipating a slow-down in the current inflation snowball for at least another two to three years, when there may be a new occupant of the White House. By then, the rate will definitely be in the double digits, which hasn’t been the case since the last quarter of 1991.
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IRS Press Release Announcing the Higher Interest Rate:
Interest rates increase for the first quarter of 2023
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A very handy chart of IRS Interest Rates, going back to the beginning of 1987, including this section for the past few years.
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IRS Announces 2023 Inflation Adjustments
Posted by taxguru on October 18, 2022
There are few aspects of life that are untouched by the current Biden created inflation. While most are bad consequences, some are pretty nice. Social Security recipients will have a large increase in our monthly payments. Bank savings accounts are now back to paying actual interest on deposits.
As I have covered for several years, IRS is required by law to index a lot of tax items for the higher cost of living in order to prevent inflation caused Bracket Creep, where raises received by people in order to offset higher living costs push them into higher percentage tax brackets.
Side-Note: Every so often some of our genius rulers in DC will float the idea of doing away with these annual inflation adjustments, citing the huge amounts of extra money the Federal government will collect as a result. Luckily, those plans don’t usually get very far in DC.
The math wizards at IRS have done the calculations and have come up with the inflation adjustments for over 60 items in the Tax Code that will take effect as of January 1, 2023.
The IRS Press Release with a general summary of some of the changes, as well as some obvious typos referencing incorrect years:
IRS provides tax inflation adjustments for tax year 2023
Many more specific details can be found in this 28 page PDF version of Revenue Procedure 2022-38.
Gift Tax Exemption Increases
Having this info almost two and a half months before the end of 2022 can be quite useful for people working up tax plans that cross multiple years. Besides the effects of these inflation adjustments on income taxes for 2023, a more interesting change is the annual Gift Tax exclusion. As I have described many times before, this figure often remains steady for a number of years before being bumped up because it is only allowed to increase in even one thousand dollar increments based on the cumulative inflation factor since the previous increase. This is the first time that I can recall the amount increasing in two consecutive years: to $17,000 in 2023, from the $16,000 amount we have had for 2022. Many people use these annual gift tax exemptions as part of their long term Estate and Gifting strategies.
Out of curiosity, I dug up the recent history of the annual Gift Tax exemption amounts so we can see how rare it is to have an increase so soon after a previous one.
1997 – 2001 $10,000 per donor (giver) per donee (recipient)
2002 – 2005 $11,000
2006 – 2008 $12,000
2009 – 2012 $13,000
2013 – 2017 $14,000
2018 – 2021 $15,000
2022 – 2022 $16,000
2023 – ???? $17,000
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New TaxMan Video from The Beatles
Posted by taxguru on October 15, 2022
For decades, a hobby of mine has been collecting and sharing different versions of George Harrison’s song “TaxMan” which was first heard on the Beatles’ 1966 album, Revolver. For obvious reasons, most of the versions have been covers by other artists and groups. We now have a new 2022 animated video version by The Beatles.
Over the past few years, Giles Martin, the son of the original Beatles producer, George Martin, has been working with the surviving Beatles, along with George and John’s families, to assemble newly remastered versions of their albums, using more modern technology than was available back in the 1960s. They have also included several out-takes and alternative studio versions from the Beatles’ recording sessions.
In a few weeks, on October 28, they will be releasing the new remixed and expanded version of Revolver, which is supposed to include alternative versions of TaxMan. Thanks to this article from the Ultimate Classic Rock website, I learned of this new video of the Beatles singing TaxMan with creative animations of the lyrics. I have already added this to my YouTube TaxMan playlist.
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IRS Disaster Related Extended Filing Dates
Posted by taxguru on September 29, 2022
As we were waiting for Hurricane Ian to reach us, I was thinking that if it turned out to be as destructive as predicted, IRS would have to extend the upcoming October 17 deadline for taxpayers and preparers who are located here in Florida, as they recently did for storm and flood victims in Alaska and Hurricane Fiona victims in Puerto Rico. Those extensions were until February 15 of 2023.
Fortunately, IRS acted quickly and has issued the same extension of the October 17 deadline for all taxpayers and preparers in Florida since the entire state is part of the federally designated disaster area. That extra time will help ease the stress of having to get a lot of tax returns wrapped up by October 17.
Besides the longer time allowed to prepare and file 2021 tax returns, the status of being a federally designated disaster allows for a very unique tax saving opportunity. Any losses suffered from these recent disasters may be deducted on 2021 tax returns, even though the disaster took place in 2022. It is an excellent way to get tax money back into the hands of the victims much sooner than making them wait another year.
I have prepared several of these kinds of tax returns, where we claimed the losses in the year before the disaster. Most of these were for losses due to earthquakes and wildfires in California. The trickiest aspect to claiming such a deduction is calculating the amounts of the losses so soon after the event happened. We need to factor in how much is expected to be received from any insurance coverage that may apply and come up with the net loss incurred.
A tip for anyone claiming these kinds of losses on their tax returns: I have been able to avoid any IRS challenges to these disaster loss deductions by attaching before and after photographs of the damaged or destroyed properties.
Update 10-5-2022: IRS has extended this same official filing delay (until 2/15/2023) to those who were in the Hurricane Ian targets in North & South Carolina.
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IRS Interest Rates Continue To Climb
Posted by taxguru on August 15, 2022
In spite of the Biden Gang’s attempts to pretend that there is no such thing as Inflation, IRS is required to adjust how much they charge for late payments and pay out for late refunds.
As of October 1, 2002, the rate will move from the current 5.0% APR to 6.0% APR.
Here is their official press release, announcing this:
IRS announces interest rate increases for the fourth quarter of 2022; 6% rate applies to most taxpayers starting Oct. 1
Three months from now, there will most likely be another IRS announcement of an even higher rate as of January 1, 2023.
For those people trying to maximize their return on investment, this presents an opportunity to earn much more than banks are paying. In earlier times when IRS interest rates were higher than bank savings accounts, I can recall some clients and others holding off on filing amended refund returns for longer than normal in order to accrue more interest from IRS. I’m not necessarily advising this, but just noting that it is a tactic that some people do in times like this.
Posted in inflation, interest, IRS | Comments Off on IRS Interest Rates Continue To Climb
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