Tax Guru – Ker$tetter Letter

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D-I-Y Tax Audits

Posted by taxguru on December 31, 2021

Here’s something we will be seeing more of in the near future: Do It Yourself tax return audits.

I was reading the January 2022 Tax News from the California Franchise Tax Board and saw this announcement of a new tactic they are starting to use.

“Select taxpayers who reported large Schedule C expenses will receive self-correct letters

Beginning the week of January 10, 2022, Franchise Tax Board (FTB) will begin an outreach effort by sending self-correct letters to selected taxpayers who reported large Schedule C expenses on their 2019 tax returns that are “significantly higher than expected.”

The purpose of the self-correct letters is to encourage these taxpayers to review their 2019 tax return, and current tax years, for any discrepancies. The letter informs the taxpayers to file an amended tax return to correct any discrepancies.

This self-correct letter does not constitute an audit. The tax returns remain subject to audit until the expiration of the statute of limitations. The taxpayer should maintain documentation to substantiate their deductions are in line with their business activity.

We will start the outreach effort by sending a small volume of self-correct letters in January, and increase the volume over the next several months. Our goal is to expand future outreach efforts to include other issues and tax years.”

What this sounds like is that there will be a cursory review by FTB of tax returns with large Schedule C expenses, with letters going out to those taxpayers threatening full blown audits if they don’t “voluntarily” file amended returns to reduce those expenses. Obviously the threat will be implied, but it will be real.

While this may be starting in California, that State and its FTB have a long running reputation as a test-bed for tax administration and enforcement tactics by other States, as well as by the IRS. We can be sure that the head honchos at IRS and other State tax agencies will be monitoring the results of this FTB experiment very closely. With the current huge shortage of IRS auditors, this approach has to be very tempting as a means to cover many more tax returns than is possible with their limited resources.

Posted in audits, Calif | Comments Off on D-I-Y Tax Audits

2022 IRS Inflation Adjustments

Posted by taxguru on November 10, 2021

IRS has officially calculated the various increases for 2022 that are required to be adjusted annually.

IRS News Release with some of the “most popular” changes

Revenue Procedure 2021-45 with all of the details (29 Page PDF)

Not mentioned in either of the above referenced documents is the fact that there should be a huge asterisk with the disclaimer that all of these figures are subject to changes at the whim of the rulers currently in power.  With all of the threats to retroactively increase all tax rates coming from DC, we can only hope that the IRS assumptions of 2022 rates will actually survive.

One noteworthy change for 2022 is the annual Gift Tax exclusion, which can only be increased in $1,000 increments after multiple years of inflation.  For 2022, it will be raised from the current $15,000 per donor (giver) per donee (recipient) to $16,000.  Many people design their long-term gifting strategies based on these annual exclusion amounts.

[Update 11-30-2021]: The good folks at TheTaxBook have produced this handy one page summary of the most popular inflation adjustment amounts for 2020, 2021 and 2022.

Posted in inflation, IRS | Comments Off on 2022 IRS Inflation Adjustments

IRS Spying Negotiations Continue

Posted by taxguru on October 19, 2021


When the Dims proposed allowing IRS to spy on everyone’s bank account that has at least $600 in it, I had a sneaking suspicion that using such an insanely low threshold so as to encompass everybody was a negotiating tactic. It would eventually lead to people feeling a sense of relief when the break-point for IRS spying was raised to a higher level.

As this news story shows, the second phase of this “negotiation” with the public has been announced by the Dims, raising  the “spying is acceptable” threshold to $10,000. This actually isn’t as big a compromise as it may seem at first blush. It doesn’t mean balances of $10,000 or more, which would exempt a lot of accounts.  It is $10,000 or more total deposits and withdrawals during a year.  That works out to a little more than $192 per week.  That would put a lot more accounts into the IRS crosshairs.


Their ultimate goal is to make everyone comfortable with the concept of IRS examining every aspect of all of our finances. Once the spying mechanism is accepted as a valid government procedure, even if it begins at $10,000, it will then be an easy step for that number to be lowered.  The camel’s nose under the tent cliché fits here.

This process reminds me of the old joke about negotiating a price for sex.

Current Treasury Secretary Janet Yellen and other wacko Dims can’t stop screaming about the fact that every single person in this country is a dastardly tax cheat and the only way to close the wildly exaggerated Tax Gap is to give IRS even more powers to ignore the Constitution and do whatever it takes to squeeze more money out of everybody.  Dims have never been shy about their guiding philosophy of the ends justifying the means approach to accomplishing their goals, even if those are flagrantly unconstitutional.

Lisa Benson cartoon

Posted in IRS | Comments Off on IRS Spying Negotiations Continue

More IRS Spying–What Could Go Wrong With That?

Posted by taxguru on October 8, 2021

There has been plenty of news coverage over the Dims’ plans to increase the IRS’s powers to spy on every aspect of everyone’s finances.  While text and audio can explain the pitfalls of such an insane and unconstitutional  scheme, nothing can convey the upcoming horror better than an illustration like this one from Ben Garrison of GrrrGraphics.


Posted in Big Brother, IRS, spying | Comments Off on More IRS Spying–What Could Go Wrong With That?

Eventually All Ponzi Schemes Collapse

Posted by taxguru on September 2, 2021

This shouldn’t surprise anybody.

Social Security funds could run out of money sooner than expected, forecast warns (Fox Business)

Social Security Costs Expected to Exceed Total Income in 2021 as Covid-19 Takes Financial Toll (Wall Street Journal)

Social Security trust funds now projected to run out of money sooner than expected due to Covid, Treasury says (CNBC)

Accounting Critic Says Biggest Problem Facing Social Security, Medicare Is Trillions in Unfunded Debts (The Epoch Times)   PDF version of this article


What is disappointing from a reporting perspective is that these supposedly objective news services use the term “Trust Fund” to describe the money allocated for Social Security benefit payments.  It has been common knowledge for decades that there is no such thing as a separate secure bank account holding the FICA and Self Employment taxes that we have been paying in during our working careers.  That money has been commingled with the Federal government’s general funds and pissed away like the rest of it. 

As I often mention, if a private non-government custodian of retirement funds were to commingle that money, s/he would be sent to the slammer for a very long time, just as Bernie Madoff was.  Instead, our rulers become multi-millionaires by diverting our “Trust Fund” to their campaign contributors (aka bribers).

Posted in SSA | Comments Off on Eventually All Ponzi Schemes Collapse

Exposing the Tax Gap

Posted by taxguru on July 23, 2021

One of my many pet peeves with the whole tax game has long been how many people blindly accept the IRS’s pronouncements of how large the Tax Gap is in this country.  The Tax Gap is supposed to represent the difference between the amount of money the IRS is collecting and the amount they should be collecting if nobody was cheating on their tax calculations.  IRS has a vested interest in promoting this number as being extremely large, with the goal of encouraging our rulers in Congress to provide them more money in order to hire more employees to squeeze more money out of everyone.

Many years ago, after seeing the publicity around the hundreds of billions of dollars supposedly lost in the Tax Gap, I was sincerely interested in learning how this figure was being calculated by IRS.  We numbers people love to see the details of such large amounts.  Just like in grade school math back in earlier times, we want to see the work behind the end result.

I contacted various people in the IRS headquarters in DC and was passed around several times before I received an uncharacteristically honest explanation from one of them.  She admitted to me that there were no actual detailed calculations to support their widely publicized Tax Gap totals.  They had estimated everything.  I would prefer the term “guesstimated” or even WAG (Wild Ass Guess) to better represent the origins of their number.  To consider it as a SWAG (Scientific Wild Ass Guess) would probably be too generous an assessment.

I am revisiting this topic once again in response to this recent article from Fox Business, which shows some Republicans in Congress actually questioning the accuracy of the IRS’s “Tax Gap” figures.  With so many obvious lies coming out of every component of the Federal government, it’s more impossible than ever to trust anything we are told.

Top Republicans question tax gap figures as IRS enforcement beef-up hangs in limbo

It’s encouraging to see some push-back against the blind acceptance of obviously biased numbers from IRS and I hope IRS is forced to show their work before spouting off any more “sky is falling” hysterics about matters such as this.

Posted in TaxGap | Comments Off on Exposing the Tax Gap

One Less Tax-Free State

Posted by taxguru on May 5, 2021

There is nothing subtle about the state of Washington’s embrace of Marxist principles, with their latest efforts in wealth redistribution.

Inslee signs off on capital gains tax for wealthy and tax rebate for lower-income workers in Washington

Now that the camel’s nose is under the tent, it won’t be long before those designated as the “Evil Rich” in that state will have to pay State taxes on more kinds of income than just Capital Gains.

Posted in StateTaxes | Comments Off on One Less Tax-Free State

The Second Year When April 15 Is Just a Regular Day

Posted by taxguru on April 15, 2021







Posted in TaxDay | Comments Off on The Second Year When April 15 Is Just a Regular Day

Tax Day is Now May 17 For Individuals

Posted by taxguru on March 17, 2021

After a lot of teasing us with “will they or won’t they,” IRS has decided to give most of the country until Monday, May 17 to file 2020 tax returns or extensions.

Tax Day for individuals extended to May 17: Treasury, IRS extend filing and payment deadline

While we should all appreciate any extension of the filing deadline, just moving it back by one month seems a bit half-assed.  While most people were expecting another July 15 Tax Day, I was betting on June 15, which would have brought everyone else in sync with Texas, Louisiana and Oklahoma,

Of course, there is a possibility that one month from now, IRS may move Tax Day out by another month or two, adding even more confusion to the process of preparing and filing tax returns.

It’s another crazy Tax Season.

Update 3/19/21:  There are a lot of critics, such as the AICPA, of this limited filing delay because it doesn’t cover businesses, which have a lot of new confusing issues to deal with from the pandemic, and the fact that IRS supposedly still wants people to send in their first estimated (ES) tax payment for 2021 by April 15.  Again, this is very much like the confusion we went through at this time last year, when for a while, IRS was requiring the second ES payment for 2020 to be made by June 15, while the first wasn’t due until July 15.  IRS is a master at complicating what should be a simple across the board delay for everyone.    

Posted in IRS, TaxDay | Comments Off on Tax Day is Now May 17 For Individuals

ARPA Tax Related Items

Posted by taxguru on March 16, 2021

Continuing a long tradition of assigning names to legislation that mean exactly the opposite of what they actually are (Affordable Care Act, etc.), our rulers in DC have just enacted a spending monstrosity they tagged as the American Rescue Plan Act of 2021.  As it was working its way through Congress, I could swear that I saw references to it being 600 plus pages.  However, this official PDF copy of the law that I just downloaded is only 242 pages.

Even that is too much text to have to wade through, especially during this busiest time of the year; so I rely on summaries that are produced by the tax reference services.

As I have mentioned on several occasions, my number one go-to for tax answers is TheTaxBook.  Once again, they did an excellent job of distilling the tax related items in those 242 pages, and have released a 25 page analysis, as well as a much more concise three page summary.  They also created this two-page client handout version of the summary.

The effective dates of the new tax items are varied.  Some are just for 2020, some are just for 2021, and others are for several years.  As we know all too well, any or all of these changes can be changed again at the whim of our out of control rulers in DC.

Luckily, I didn’t notice any changes that affect 2019 tax returns, so there won’t be any need to amend those years.  However, people who filed their 2020 returns early may need to amend if they qualify for either of the two very generous new tax breaks that only apply to 2020:

Up to $10,200 of tax free unemployment benefits

Waiver of the requirement to repay any excess Premium Tax Credits that were received during 2020 as reductions in the cost of health insurance.

As I like to do, I will be posting other useful analyses and summaries of this new law, as I come across them.

Posted in NewTaxLaws | Comments Off on ARPA Tax Related Items