As I’ve always explained, the popular belief that everyone cheats on their taxes and underpays is 180 degrees off the mark. Most people don’t claim all of the legitimate deductions to which they are entitled, resulting in grossly overpaying taxes.

Financial data can be captured with a good bookkeeping system, of which QuickBooks is the easiest and most efficient.

Non-cash transactions are a little trickier to keep track of. I am constantly seeing people claim zero on their tax returns for non-cash donations. They always tell me that they did give things away, but didn’t keep track of it. What we end up doing is using guesstimates, which I am sure are grossly understated.

For several years, there has been a company that has produced a workbook called ItsDeductible to help people track their non-cash donations and assign proper values. A few years ago, they added a computerized version. H & R Block has even come out with its own version of this kind of program, Deduction Pro, selling to the public for the same $20 price.

I haven’t done a side by side comparison of these programs to know first hand which is superior. Both of them appear to produce the official IRS Form 8283 for non-cash donations, which can then be given to the user’s tax preparer.

However, the It’s Deductible has been around much longer. It was also recently purchased by Intuit, which has plans to integrate it with its Turbo-Tax programs. According to the latest news, there are no plans to have It’sDeductible integrate with Intuit’s professional tax prep programs (Pro Series and Lacerte) for the 2003 tax program; but I am hoping this can be done for 2004 because we use Lacerte for all of our tax returns.

ItsDeductible does have volume discounts for tax professionals to buy ten or more copies at a time to give or resell to their clients.

Special offer for our tax clients: We have long been trying to get more of you to computerize your records. If any of our clients are willing to use the computerized ItsDeductible to keep track of your non-cash donations for this year (2003), I will buy a bunch of them and give you the program on CD for free. If you use it properly for 2003, I will also provide you with a copy of the 2004 program, and so on. Any of our tax clients who are interested should send me a request to the top secret (currently spam free) email address that we have provided you to use in communicating with me.

Many conservatives do see Arnold as a stealth Kennedy, and he isn’t doing much to dispel that impression.

An estate tax return (Form 706) is required to be filed if the gross market value of the assets owned by the decedent, plus the total of taxable gifts made during his/her lifetime, exceeds the lifetime exclusion amount for the year of death (currently one million dollars). That in no way means that there will be any tax due because that is calculated on the net estate, after subtracting liens, final expenses, and charitable bequests. It is often advisable to file a 706 even when not legally required in order to formally establish values of assets passed on to heirs, as well as to start the statute of limitations running for any possible challenge by IRS.

It used to be that IRS wouldn’t revise the estate tax return form (706) for several years at a time. Now, with the almost yearly changes in the exemption amounts, IRS has been issuing new revisions of the form for each year. The 2002 form was released in August, 2002.

The normal due date for the 706 is nine months after the person passed away. For those who died in January, that nine months is almost here, and the 2003 version of the 706 has yet to be released. According to the official IRS schedule of releases dates, the 2003 706 is supposed to be available October 7, 2003. My experience with these schedules is that they are as reliable as an appointment with Bill Clinton, who is never on time to a meeting.

A draft of the 2003 706 was posted by IRS back in July.

There are often times when closing up an estate, including the filing of all tax returns, is a rush priority. If you can’t wait for the official release of the new form (IRS is notorious for missing these scheduled release dates) and need to close up an estate ASAP, you can go ahead and use the 2002 version. You just need to manually make any changes that would affect the tax calculations between years. I have had to do that on a number of occasions, and IRS has never had a problem with it.

If the nine months are up before the new form is released, or if you just need more time to get everything together, you can also file for a six month extension on Form 4768, sending in a payment for any expected tax.

BDO tax prep clients try to assert privilege – IRS is trying to force a CPA firm to disclose its client list so they can be busted for using questionable tax shelters. This has been a long running debate, whether CPAs can legally shield their clients’ information from others in the same manner as attorneys can. I have always believed that if the clients sign a power of attorney (Form 2848) authorizing the CPA to act on their behalf, they should be afforded the exact same client-attorney confidentiality privileges as with a regular attorney.

It’s been very disheartening over the past few months to hear and read so many people moaning about the GOP’s abandonment of one of its former cornerstones, the support for smaller, less expensive government. Bush and the top GOP have pulled out all stops to expand the size of the Federal government well beyond any constitutional justification, in an attempt to literally buy votes from supporters of the JackAss Party.

What is more depressing than this change in party philosophy is the reaction by the critics. Most of them claim to be disgusted by this change, but say that they will stick with the GOP because it is still the lesser evil, when compared to the outright socialism of the DemonRats. The idea of changing their support to a party that truly believes in the concept of smaller and less expensive government is just too radical for them to even consider.

A perfect example was a few days ago, when Rush Limbaugh spent a lot of time decrying the GOP’s wild spending binges. However, when a caller asked Rush why he didn’t support a third party that does believe in smaller government, such as the Libertarians, Rush said such a thing would be unthinkable. Rush gave the impression that he would much rather give a big open-mouth kiss to Queen Hillary or Janet Reno than even consider supporting any party other than the Republicans. I like and admire Rush very much, but his claim of being a conservative first and a Republican second doesn’t seem to be very honest if he is supporting the GOP as it abandons conservative principles.

Attitudes like this are just encouraging the GOP leaders to continue with their out of control spending. With no downside from the possibility of losing voters, and plenty of upside from the new voters they are buying, what motivation do they have to change? None.

IRS workers poor on tax law advice – Getting tax advice from IRS employees has always been a bad idea. Most of them don’t have a clue as to the proper application of tax laws and regulations. I am constantly having to teach IRS employees the rules, including a current case with an Appeals Officer in Oklahoma City, who should be embarrassed by his ignorance of how tax returns are supposed to be handled, as well as the objective viewpoint his office is supposed to maintain.

As if receiving erroneous advice from IRS isn’t bad enough, they won’t even stand up behind what they tell people. Relying on their bad info is no excuse because the IRS’s official position is that everyone should know that their employees are ignoramuses, and anyone who relies on their advice is too stupid to feel sorry for. This is why, if you have a tricky tax issue at stake, you are better off paying a tax pro for advice. Then, you would have legal (malpractice) recourse if you were given a bum steer.