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Archive for the ‘NewTaxLaws’ Category

Retroactive 2017 Extenders

Posted by taxguru on February 13, 2018

How is this for another illustration of how screwed up things are in DC?  As has been covered extensively, our royal rulers passed a huge and very complicated mess of a tax law near the end of December 2017 that takes effect in 2018.  Then, after that, in February of 2018, they passed a law that retroactively, as of January 1, 2017, extends several tax breaks that had expired as of the end of 2016.

It’s like the popular story telling technique used in so many movies and TV shows nowadays, where everything is revealed in strange convoluted order.  Doing things in normal chronological order seems to be too old fashioned for people in these here modern times. 

These extensions are good news for the folks on the TaxBook discussion board, who have been panicking about what to do for their early filing clients and whether or not to charge them for amending returns to pick up the newly restored deductions that they couldn’t claim before now. 

The University of Illinois Tax School has a good eight page PDF summary of this newest retroactive tax law that will affect many 2017 tax returns.  I will post links to other useful explanations and summaries of this newest tax law, as I discover them around the ‘net.

How these retroactive Federal tax changes will affect State tax returns, many of which automatically conform with Federal law, is yet to be seen; but will be certain to add to the confusion of this current Tax Season.

Anyone in DC, Dimm or GOP, who claims that our tax system has been simplified is a 100% certifiable moron.

More info this retroactive legislation:

   From Congress – H.R.1892 – Bipartisan Budget Act of 2018

   From TheTaxBook6 page PDF summary

   From The Tax Foundation: Budget Deal Would Retroactively Extend Several Expired Tax Provisions

   From Intuit’s Tax Pro Center: Government Shutdown Averted and Tax Provisions Providing Tax Relief Passed

Posted in NewTaxLaws | Comments Off on Retroactive 2017 Extenders

Checking out the new tax law…

Posted by taxguru on January 31, 2018

I intentionally avoided discussing the new tax law over the past several months as it went back and forth between the House and the Senate and was lied about in the press. Besides the heavy doubts surrounding the ability of the GOP in DC being able to pass any significant legislation, it would have been a big waste of everyone’s time dissecting and analyzing provisions that wouldn’t become part of the actual law.

With all of the promises that this latest reform of the tax code would make everything so simple and fair that doing our taxes would be so much fun, this gave me such a case of deja vu because it exactly mirrored the analogy I have been using for decades to describe how tax laws are created and the changes they undergo as they move through the legislative processes.  The poster I designed decades ago to graphically illustrate this is just as relevant to this latest handiwork by our rulers as it was back in the 1980s.     

Now that a unified bill has been passed and signed into law, it’s time to take some serious looks at exactly what it contains.  Just like our rulers in DC who voted on this bill, those of us in the real world don’t have time to read and try to interpret all 500 or so pages of the actual legislation; so we rely on professionals who have done that and produced easy to follow summaries.

While there is a very good chance that many people will save some money on their tax returns because of the new law, the actual amounts will vary on a case by case basis.  The figures being bandied about by our rulers in DC, as well as the calculated "costs" of the new law have been pulled out of their recta, as are all such predictions from everyone in DC, including the GAO, OMB, CBO, WTF, et al.  They have never been right when it comes to comparing their supposedly detailed calculated predictions with the real world results and there is there is absolutely no reason to expect these latest predictions to be any more accurate.   

One thing is certain.  This new law does not simplify the tax game one bit.  As always, every attempt by our rulers in DC to make taxes so simple that we practitioners will have no more work ends up doing the exact opposite.  It’s another case of increased job security for those of us in the tax profession.  All of these new changes to the Tax Code actually give us many more more opportunities to help clients structure things to save on the amount of taxes they pay. 

There may be some different rules for the Tax Game, but there are still plenty of ways to "game the system," to borrow a favorite phrase of the Left.  Even with robots and other forms of automation taking over various occupations, there is no way any kind of artificial intelligence can replace the tax saving abilities of a skilled and knowledgeable professional tax advisor, especially one who utilizes the tax savings strategies of the TaxCoach system

As I have done in previous years when significant new tax laws have been enacted, I am planning to post links to handy summaries of those laws to share with readers.  If anyone has seen a good summary that they would like to share, please send me a link to it and I will include it here. 

While the pickings are a bit sparse right now, during the traditionally slow holiday season, I do know that most tax research services, including the fine folks at TaxCoach, are planning to release their analyses in the early part of January.

Here is what I have come across so far:

From my favorite tax reference service, The TaxBook19 Page PDF Summary

From Forbes: Tax Geek Tuesday: Making Sense Of The New ‘20% Qualified Business Income Deduction‘ (31 page PDF version)  Thanks to Ohio CPA Dana Stahl for passing this along to me.

From TaxCoach: They are planning a lot of detailed guides, which I will be sharing here.  Here is their first one page summary.  

From RIA (another thanks to Dana Stahl):

Special Study on Business Tax Changes in the "Tax Cuts and Jobs Act" (20 page pdf)

Special Study on Individual Tax Changes in the "Tax Cuts and Jobs Act" (23 page pdf)

Special Study on S corp, partnership & other changes in the "Tax Cuts and Jobs Act" (11 page pdf)

A new two page brochure from The TaxBook.

The National Association of Realtors has published an analysis of the new tax law as it affects Realtors, homeowners and real estate investors.  I learned about this 1/31/18 from the weekly marketing webinar with the TaxCoach group, which has been on the forefront of learning how to utilize the new tax law to help clients minimize their taxes. 

     23 Page PDF downloadable version

     Web Version

From Intuit: Tax Reform Law: What Clients Should Know  (1 page PDF)

Posted in NewTaxLaws | Comments Off on Checking out the new tax law…

Prepaying Taxes

Posted by taxguru on December 28, 2017

The new tax law does include a lot of changes; some good and some not so good.  Remember that the word “Reform” just means to change shape, not always as an improvement for the better.  This latest reformation-reformulation of our taxation policies does, surprisingly, eliminate and reduce a lot of deductions that have been around at least since many years before I started preparing tax returns in 1975. 

I don’t have time to discuss too many of the changes right now, as I have been busy doing a lot of year-end consulting with clients.  However one big change does need to be covered ASAP.  In fact, the following is based on some emails I sent to clients earlier today, who had asked about the idea of prepaying their property taxes before the end of this month.

As has been widely publicized, the new tax law, effective for 2018, puts a $10,000 cap on Schedule A deductions for State and Local taxes, including property taxes on personal use property.  There is no such limit on deducting taxes on business or rental properties, which are shown on different schedules with the 1040.

For those in high tax states such as Calif, this upcoming limit does have many people choosing to prepay some of their State and Local taxes before the end of 2017 in order to claim them without the limit on their deductibility.

There are special rules for deducting property taxes that do prevent too much prepayment.  The taxes paid and deducted have to be actually assessed and thus a true current liability. In Calif, the current year 2017/18 taxes are payable half by October 10, 2017 and the other half by April 10, 2018.  This means you can send the county the money for the 4/10/18 installment by 12/31/17 and deduct it on your 2017 1040. 

This is also the case for other states that allow their property taxes to be paid in multiple payments, such as Oklahoma that has due dates of December 31, 2017 and March 31, 2018 for their2017/18 tax assessments.   

Since taxes for the 2018/19 and future years have not yet been assessed, any payments sent in for those years are not legally deductible.  This has been such a hot topic that IRS issued a press release on this issue yesterday.

IRS Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017

Income Taxes

While the above discussion focuses on property taxes, it also applies to payments of State income taxes, which are included in the new $10,000 limit.  The final 2017 estimated tax payments for both IRS and the States are technically due January 16, 2018.  For the past few months, with the threat of this new limit looming, I have been advising clients to send in their final 2017 ES payment by 12/31/17 in order to definitely be able to claim it.  Since Federal income tax payments are not deductible anywhere, making that final payment for 2017 in December or January makes absolutely no difference of any kind.

Just as with the issue of timing of a deduction for property taxes, a similar concept applies to State income tax payments.  Since 2017 is almost over and income taxes on what you earned are already accruing, you are allowed to deduct payments for your 2017 State income taxes.  You re not technically allowed to prepay in 2017 for what you expect your 2018 income taxes to be because as of 12/31/17, you have no legal liability for any 2018 income taxes. 

However there is an easy way around this little technicality if you are desperate to maximize your 2017 State income tax deduction.  You could send your State a huge check postmarked by 12/31/17 for thousands more than your 2017 taxes could possibly be and have it all applied to your 2017 account with the State.  Later on, when you file your 2017 State income tax return, have the overpayment rolled over to your 2018 account. 

I should point out that this discussion also applies to those folks who are lucky enough to reside in one of the cities that require their residents to pay separate City income taxes.

 

 

Taxes Are Not Donations

While this limit on deducting State and Local taxes was being debated over the past few months, some people suggested just claiming those payments as charitable donations on their tax returns as a way to avoid the $10,000 limit.  That idea would not fly for some very basic reasons. 

While it is true that governments do qualify as charities and deductions can be taken for voluntary contributions paid to them, that isn’t how tax payments work.  First is the fact that a legitimate deductible charitable donation has to be completely voluntary with no strings attached and nothing of value can be received back in return for the payment.  Nobody can say with a straight face that paying property and income taxes is in any way voluntary, or that nothing is received in return for those payments.  Paying those taxes allows you to keep the property and stay out of prison. Those are quite valuable things you receive in exchange for the “contributions” paid to the State and County.  Anyone who tries that trick will hasten their trip to the hoosegow. 

 

TaxCoach Software: Are you giving your clients what they really want?

Posted in Deductions, NewTaxLaws, PropertyTax, StateTaxes | Comments Off on Prepaying Taxes

Better late than never

Posted by taxguru on December 29, 2015

Despite many predictions that it would be impossible for the current do-nothing Congress to get an extender bill up to the White House before the end if the year, they seemed to have done it, with less than two weeks to spare. 

Considering that many of the provisions are retroactive to the beginning of 2015, it doesn’t give calendar year taxpayers much time to take advantage of the newly restored tax breaks.  With the maximum Section 179 allowance increasing from $25,000 to $500,000, there will most likely be a lot of year-end purchases of business vehicles and equipment.  Remember that the newly acquired assets have to be placed into service before January 1, 2016 in order to be deducted on the 2015 tax return.  Just paying for them by December 31 isn’t good enough.

As I come across them, I will be posting links to as much useful coverage of this newly passed legislation as I can find.

From Tax Foundation: The Twelve Most Important Provisions in the Latest Tax Bill

SECTION BY SECTION SUMMARY OF THE PROPOSED “PROTECTING AMERICANS FROM TAX HIKES ACT OF 2015" – 20 page PDF

From AICPA: Congress Passes Extender and Other Tax Legislation

From Spidell:  2015-2016 extenders and new tax laws

From CCH: House Passes Extenders Package

From Congress: Protecting Americans from Tax Hikes Act of 2015

From Western CPE: 2015 Extender Bill Passed By Congress

Posted in NewTaxLaws | Comments Off on Better late than never

New IRS Due Dates

Posted by taxguru on August 24, 2015

As is often the case with the bozos in Congress, they love to slip various tax items into unrelated legislation.  Such was the case with the recently signed Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. 

As part of this new law, some long running due dates for certain kinds of tax returns will be changing in the next year. 

The ones that will likely be most widely felt among the practitioner community are:

Partnerships – Form 1065 (or an extension request) will be due a month earlier than previously, March 15 instead of April 15.  This is no surprise and continues a recent trend to give some distance in time between the due dates of tax returns for pass-through entities and the due dates for individual tax returns (1040s) so that we aren’t scrambling to do all of the tax returns on the same day.   

C Corporations – Form 1120 (or an extension request) will be due four and a half months after the end of the tax year, instead of the long standing three and a half month timeframe.  However, there is an odd exception in the law just for corporations with tax years ending June 30.  Their returns (or extensions) will still be due by September 15, three and a half months after the end of the year.  As a long time believer and advocate of a non-December tax year for corporations, that will mean a lot of due date changes for our clients, except for the several June 30 ones.

 

Longer Statute of Limitations (SOL)
This highway bill also modified the definition of “Substantial Understatement of Income” that allows IRS an SOL of six years to audit tax returns if the cost bases of assets that were sold were overstated. 

I am often asked how long tax related records need to be retained.  This new provision extends the time you should keep records of assets that were sold to at least six years after the tax returns reporting their sales were filed with IRS.

 

Forbes had some good recaps of these new changes:

IRS Audit Period Just Doubled From Three Years To Six Years For Many

Many IRS Tax Return Due Dates Just Changed, FBARs Too

 

For a number of years now, my favorite tax reference source has been The TaxBook.  They recently posted this very informative three page PDF recap of the tax aspects of this highway bill. 

Highway Bill Contains New Tax Law Changes

TaxCoach Software: Are you giving your clients what they really want?

Posted in Due Dates, NewTaxLaws | Comments Off on New IRS Due Dates

New Taxing Schemes

Posted by taxguru on July 3, 2015

Oregon launches program to tax drivers by the mile – Using Big Brother tracking devices to monitor every place we go. That can’t result in anything but more problems.

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The Windy City is enacting a 9 percent tax on streaming services. – Starting in the Socialist Utopia of Chicago, and soon to spread to others.

Posted in NewTaxLaws | Comments Off on New Taxing Schemes

Per Mile Tax

Posted by taxguru on May 20, 2015

For several years now, various governmental entities have been threatening to start levying a per mile tax on vehicles because they aren’t satisfied with what they are already taking in at the fuel pumps and toll collectors.

It looks like,Oregon is going to start that process, which will most likely spread across the county. Of course, as is always the case, this will end being an additional tax and not just a replacement for an existing one.

Oregon to test pay-per-mile idea as replacement for gas tax

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This issue reminds me of the following verse from George Harrison’s classic TaxMan song.

If you drive a car, I’ll tax the street
If you try to sit, I’ll tax your seat
If you get too cold I’ll tax the heat
If you take a walk, I’ll tax your feet

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TaxCoach Software: Finally! Plain-English Tax Planning That Builds Your Business!



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Posted in NewTaxLaws, TaxMan, Vehicles | Comments Off on Per Mile Tax

Is there anything the Left doesn’t want to tax?

Posted by taxguru on February 7, 2015

Of course not.  Everything is fair game to the Left, who consider all money to rightfully belong to them, to be spent as only they can do properly.

Former Obama Adviser: We Should Tax Fat People By Body Weight – Jonathan Gruber strikes again.  Can’t you just see how this idiotic plan would play out?  Every April 15, we all go step up on the official Big Brother scale, where we are assessed a tax for each pound we are above the official allowable weight.

 

 

Obama Wants Your Retirement Account – I’ve been warning about this scary scenario since the Clinton Organized Crime Family occupied the White House. Every so often, the Left raises a trial balloon of ways for the government to steal some or all of the growing amount of  money in private retirement accounts.  Changing the rules on such things as tax free Roth IRAs has always been a  possibility for our rulers in DC, who have no conscience about reneging on promises.

 

 

Posted in NewTaxLaws | Comments Off on Is there anything the Left doesn’t want to tax?

Life Imitating Art

Posted by taxguru on May 6, 2014

George Harrison’s classic song “TaxMan” has long been a motivating force for many of us in this profession. Even though it was intended to be somewhat satirical, with examples of ridiculous taxes that couldn’t possibly come true, some of our Big Government Rulers have always seen that as a challenge, such as in this section of the song. 

If you drive a car, I’ll tax the street
If you try to sit, I’ll tax your seat
If you get too cold I’ll tax the heat
If you take a walk, I’ll tax your feet

I couldn’t help but think of that when I saw this news story from the Left Coast, where eventually nothing will be left untaxed.

Sen. Introduces Bill To Test Out Taxing Motorists For Every Mile They Drive

 

For those of you who are new to my blog and websites, I do still have an assorted collection of musical artists performing TaxMan on my ScreenCast site for your listening and downloading pleasure. 

 

Posted in Music, NewTaxLaws, TaxMan | Comments Off on Life Imitating Art

New ObamaCare Taxes

Posted by taxguru on September 17, 2013

A great infographic of many of the new taxes created by the insane ObamCare law.

Click on the thumbnail version below for full size or check out the source page. It’s huge.

  New ObamaCare Taxes photo ObamaCareTaxes_Infographic-700x5592_zpsa9adc47a.jpg

Posted in NewTaxLaws, ObamaCare | Comments Off on New ObamaCare Taxes