Tax Guru – Ker$tetter Letter

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Receiving Stimulus Payments

Posted by taxguru on April 17, 2020

From a Client:


Hello. We were wondering about the stimulus payment so we checked it and they have nothing filed on us that they can determine our eligibility for a payment.

Is there something they don’t have because we usually don’t have any returns direct deposited, just mailed to us. But we get our SS checks direct deposited.

Thank You for information


My Reply:

As you may know, this stimulus payment program is so new that the details are constantly evolving. I did take a webinar on Wednesday that discussed the details as they currently stand.

There are actually a couple of issues at play with your situation.

1. Eligibility For Stimulus Payment
Only people with an expected 2020 income below a certain threshold ($99,000 per person or $198,000 per couple) are supposed to receive these special IRS payments. To guesstimate the 2020 income, IRS is using the income that was reported on the latest filed tax return, which for most people would be their 2018 or 2019.

While most people have fairly consistent incomes year to year, that wasn’t the case for you between 2018 and 2019. If you did, as we discussed, hold off mailing in your 2019 returns until closer to the July 15 due date, IRS will use what was reported on your 2018 1040 and will send you a check for the full $2,400.

If, however, you did send in the 2019 return and IRS was able to process it before it shut down all of its activities, the large capital gain that is on that return will make your total income well above the eligibility limit.

If IRS does have your 2019 income in their computer, even though you won’t be receiving a stimulus check now, you will receive it when you file your 2020 tax return and show them that your actual income for this year is under the limit. While the actual mechanics of this process are in the design stage, most tax pros are predicting that it will be handled in a similar manner to the $300 per person rebate checks sent out in 2008, where any over or under-payment was fixed with the filing of the actual 2008 1040.

2. Payment Logistics
IRS has already started direct depositing stimulus payments into some accounts where it has the bank info from what was reported on 1040s. While SSA does direct deposit their payments into recipients’ bank accounts, that system is separate and is not shared with IRS. Since we didn’t set you up for direct deposit of refunds with IRS, they will be sending you a check, most likely in the next few weeks.

You are in the exact same scenario as Sherry and I are. We have our SSA benefits deposited directly into our bank, only because they don’t give us any other option. With IRS, we don’t use their direct deposit option because there is always a possibility that those bank details could be used, intentionally or accidentally, to take money out of our account. It’s a rare occurrence, but it does happen often enough to make me wary of revealing too much personal info to IRS.

I hope I have explained the situation clearly. If anything does change in regard to the stimulus payments that would affect you, I will let you know.


Posted in IRS | Comments Off on Receiving Stimulus Payments

IRS Broadens Application of July 15 Filing Date

Posted by taxguru on April 9, 2020

IRS has just published a press release moving more deadlines to July 15 than just the ones covered in their earlier pronouncements. 

IRS extends more tax deadlines to cover individuals, trusts, estates corporations and others

Of key interest to me:

The due date for the second installment of 2020 estimated taxes for individuals has been moved from June 15 to July 15.  No surprise there; except what took them so long to fix that screw-up?

Other tax returns and payments that would normally be due in between April 1, 2020 and July 14, 2020 now have until July 15.  This applies to some fiscal year C-corps, such as those with a tax year ending 1/31/20 (normally due 5/15/20) and those with a tax year ending 2/29/20 (normally due 6/15/20).

Posted in TaxDay | Comments Off on IRS Broadens Application of July 15 Filing Date

Making the Best of House Arrest

Posted by taxguru on April 9, 2020

Even though 2019 tax returns aren’t due in until July 15, it’s not a bad idea to use this time to get them done as soon as you can.  Of course, my usual advice still applies.  Don’t rush tax returns in until you have all of the information.  Amended returns do receive more IRS scrutiny than do original ones; so it is safest to be completely confident in the completeness and accuracy of your returns before sending them in.


Posted in TaxDay | Comments Off on Making the Best of House Arrest

IRS Tries To Explain the New July 15 Tax Day Details

Posted by taxguru on March 25, 2020

As is almost always the case with the wonderful tax systems in this country, even the simplest of concepts is more complicated and twisted than necessary.

Moving the 2020 Tax Day for 2019 tax returns to July 15 has already created a lot of confusion among taxpayers and tax practitioners.  To remedy, or add to, the confusion, IRS has already published 24 FAQs related to this new date.

Filing and Payment Deadlines Questions and Answers

The University of Illinois TaxSchool has posted this video explanation of the IRS FAQs.

As the presenter says, these FAQs are fluid and will almost certainly be changed before July 15 comes around and as a result of items in the massive stimulus bill that is working its way through Congress.

One of the craziest answers from IRS is Q16 regarding the due date of the second estimated tax payment for 2020.

A16. No, second quarter 2020 estimated income tax payments are still due on June 15, 2020. First quarter 2020 estimated income tax payments are postponed from April 15 to July 15, 2020.

The second quarterly payment is due a month before the first payment.  Does this make sense to anybody?  In the Bizarro world of Washington DC, it probably does.

Posted in IRS, TaxDay | Comments Off on IRS Tries To Explain the New July 15 Tax Day Details

State Tax Filing Dates

Posted by taxguru on March 24, 2020

While most state tax agencies do their best to mirror IRS due dates, that isn’t always the case, for various reasons  During this time of unprecedented uncertainty, it is even more confusing than ever.

The AICPA has assembled a 123 page pdf chart with the State rules as of now on the special section of their website dealing with this virus panic.  It is supposed to be updated daily, which will most likely be necessary as the end date of this mess continues to be pushed outwards.

Luckily, this chart and the website are available to anyone, not just AICPA members.

I learned about this from a comment on the very informative TaxBook Message Board.

[Updates 3/26/2020] – The AICPA chart of state details is being updated and expanded daily, with the same URL.  Today’s version is up to 169 pages.

As of today, the AICPA has not yet picked up the status of Arkansas tax deadlines, so I checked on the DFA’s website and I was glad to see that they have matched the IRS’s July 15 due date.  Since we prepare a lot of Arkansas returns, this will make things so much easier than having to deal with two separate filing deadlines.

Posted in AICPA, StateTaxes | Comments Off on State Tax Filing Dates

Tax Day is now July 15

Posted by taxguru on March 20, 2020



Finally, a bit more common sense.  Treasury Secretary Mnuchin has finally expanded the filing deadline for 2019 tax returns to July 15.  IRS has yet to issue a press release on the specifics of this new due date and what it will mean in what has now become real life in this country. This will remove at least one issue to worry about during the current shut-down of the country. 

From Fox News: Tax Day moving to July 15 amid coronavirus crisis, Mnuchin announces

States that mirror IRS due dates have or will also be setting their 2019 tax return deadlines as July 15.

California’s Franchise Tax Board has extended its earlier June 15 deadline to match the new IRS due date of July 15.

State Postpones Tax Deadlines Until July 15 Due to the COVID-19 Pandemic


[Update 3/21/2020] – IRS has published a press release explaining the new filing deadline for 2019 tax returns and extensions.

Tax Day now July 15: Treasury, IRS extend filing deadline and federal tax payments regardless of amount owed

If you can’t get your tax return done by July 15, taxpayers will need to file actual extensions by that date.

Posted in TaxDay | Comments Off on Tax Day is now July 15

IRS Filing Deadline Has Not Been Extended

Posted by taxguru on March 18, 2020

As is all too common, there is a lot of misinformation being reported by the media regarding the comments by the Treasury Secretary, Steven Mnuchin.  This has already led to widespread confusion among clients and the public at large.

For the past week, I was fully expecting to be able to write a headline that Tax Day was extended to July 15, which is what was widely speculated by the AICPA and other tax pros.

However, yesterday’s comments by Mnuchin were not as simple as giving everyone an additional 90 days (July 14) to file their 2019 income tax returns, or extensions.  What was actually announced was a 90 day grace period for paying taxes due for 2019, from the normal April 15 deadline to July 14, for up to one million dollars of taxes for individuals.  Tax returns or extensions still need to be submitted to IRS by April 15.

This interest free payment extension doesn’t give the level of stress reduction that was advertised.  Preparing tax returns and extensions is still a hassle that is added to the current extreme pressures from all of the closings, layoffs and cancelations around the country.  Idiotic is the word that comes to mind.

I am hopeful that there will be a great deal of push-back to this ridiculous plan and our rulers in DC do the right thing before April 15 and just set the filing date for 2019  tax returns and extensions as July 15. 

Posted in extensions, IRS, TaxDay | Comments Off on IRS Filing Deadline Has Not Been Extended

Virus Extends Filing Deadlines

Posted by taxguru on March 13, 2020

For the past several days, there has been a lot of speculation that all of the disruption surrounding the nationwide panic over the Wuhan Virus would motivate IRS to officially extend the upcoming filing due dates for 2019 income tax returns; March 16 for 1120S (S-corps) and 1065s (LLC & partnerships) and April 15 for personal (1040), trusts (1041) and Gift Tax (709) returns.  With today’s declaration by the President of a National Emergency, that should be a certainty.  However, no official announcement has yet been made by IRS on their news page.

Normally in situations of large disasters and emergencies, IRS is the first to issue such filing extensions so that affected people can focus on dealing with their more pressing problems.  The State tax agencies then usually follow suit with their own announcements of filing extensions.  Some States, such as California, have a policy of automatically complying with any IRS sanctioned extension of filing deadlines.  In the current situation, the Calif Franchise Tax Board (FTB) has beaten IRS to the punch and has issued its own press release giving a new due date of June 15 for all tax returns that are due March 16 and April 15.  

This is different from a normal extension that taxpayers file, because that kind is only for requesting an extension of time to file the tax returns.  It is not an extension of time for paying the taxes owed.  Penalties and interest are assessed on late payments of taxes, while the normal extension avoids the much more expensive late filing penalties.  This new emergency related extension allows all Calif. taxes for 2019 to be paid up until June 15 without any additional charges for penalties or interest. 

Whether this June 15 date will stick as the due date will obviously depend on how long it takes for the panic in the country to subside and things to get back to normal.  If the virus scare stretches out for months and months. there is a possibility that the June 15 due date will itself be extended.

I intend to add to this post as news comes out, including the anticipated IRS announcement, as well as any by other States.

This is definitely going to be another very strange Tax Season.

[Update 3/14/2020] – Still no official announcement from IRS.  The U.S. Tax Court has announced that it has cancelled all of its March and April trials, which will really back things up for them.

[Updates 3/15/2020] – Still no official announcement from IRS. I’ve seen some mentions that any delay in deadlines requires an act of Congress, which makes no sense.  For the past several years, whenever there has been a presidentially declared disaster or emergency, such as from hurricanes and tornadoes, IRS has been pretty quick to announce official extensions of time to file returns for those in the affected areas, without any congressional action. On March 6, IRS announced an extended filing deadline of July 15 for those in the vicinity of the Nashville Tennessee tornadoes. This current virus panic is the same kind of thing, although on a much larger geographic scale, the entire country.

Some free tax assistance services, such as AARP’s Tax-Aide, have announced they have shut down due to this current health scare.  Seeing as how the affects of this virus are supposed to be much more dangerous for us older folks, that does seem to be a very prudent move.  As I have had to constantly remind clients, whenever it is necessary to prioritize between tax and health matters, health should always be first in line, with or without any official IRS permission.

Posted in Calif, extensions, IRS, TaxDay, TaxSeason | Comments Off on Virus Extends Filing Deadlines

Why Claiming Social Security ASAP Makes the Most Sense

Posted by taxguru on February 1, 2020

From a recent email I sent to a client:

One of the most common questions I encounter is when is it best to make your initial claim to start drawing your benefits from Social Security (SSA).

When I notice that clients are over 62 and thus eligible to make an early claim for their Social Security benefits, I wonder if they have considered doing that or are waiting based on the promise of higher payments by deferring their initial claim.  There is a lot of misinformation floating around on this topic, which I have a lot of experience with, for ourselves as well as for clients. For several reasons, it has always been my belief that it’s the best strategy to claim SS as soon as possible rather than hold off for what may very likely be much less money several years down the road.

In spite of the big PR push by SSA and some supposed financial wizards, delaying when you officially request to start receiving your benefits is a very unwise move.  There are lots of seminars and fancy software designed to make the supposedly scientific calculations as to when the optimal date would be from a financial perspective.  Those kinds of pure math calculations are bogus for a number of very important and valid reasons.

1. Life Expectancy – The supposedly higher benefits promised for those who wait to make their claim only make financial sense if you are 100% positive that you will live well into your 90s, just to break even with what you would have from an early claim.  Since that kind of guarantee is an impossibility here in the real world, it’s ridiculous to accept that premise as a sure-fire payoff.

2.  No Real Money in Account – Unlike the perception many people have that the SS taxes paid in are sitting safely in a trust account in DC, nothing could be further from the truth. Unlike true non-government retirement accounts, such as IRAs, unreceived SS benefits are not assets that can be left to others after your passing.  A surviving spouse can possibly receive some part of your benefits, but combined with her own benefits, the total will be much lower than what you had been receiving while alive.

3.  Changes In The System – As has been known for a long time, the huge number of Baby Boomers cashing in on their SS is draining SSA’s reserves so quickly that drastic changes are going to be required soon.  As has happened in past years, our Rulers in DC can modify the details of the SS system at any time they choose.  Some of the serious proposals being discussed in DC include:

A.  Raising the benefit eligibility age to 70, 75 or later so that more people will pass away before making their claims.

B.  Reducing the payout of benefits across the board to something like 50% to 80% of the current payment structure.

C.  Means Testing, where people with income and/or net worth over an arbitrary level will receive reduced or zero SS benefits, regardless of what they had paid in during their working lives.

All of these proposed changes are expected to be only applicable for new SS claimants, and not for those who have already begun receiving their SS benefits.  Any reduction in payments to current SS recipients would be curtains for any Congress-critters who vote for that, which they well know.

Bottom line, the only smart play is to take the SS benefits as soon as you are allowed, which is currently at 62.  That’s what Sherry and I have done and what I have been advising clients for decades. The old cliché “A bird in the hand is worth two in the bush” fits perfectly here.

Verify Recorded Earnings – Here’s a tip for you, based on what I had to go through.  Check your official earnings statement with SSA and see if they have included everything you earned in salaries and self employment income over your lifetime.  Unearned (not service) income, such as interest, capital gains, rents and royalties, are not included in the income that counts towards SS benefits. If you see any large amounts missing, start an appeal with them ASAP.  You should still apply for your benefits before your 62nd birthday, even if the earnings history has some gaps.  It took them a year and a half to correct some missing income from my records, but in the meantime I received monthly payments and then a very large retroactive catch-up payment when they finally made the proper adjustments.

Penalty on Too Much Earned Income – As has long been the case, the SS system has a penalty for those people who receive more than a certain amount of earned income while drawing their benefits prior to their full retirement age (FRA), which is 66 years and two months for you.  For 2020, this limit is $18,240.  SS benefits for someone under his/her FRA are reduced by 50% of the earned income over that threshold amount.  While this often scares some people enough to delay their initial benefit claim, this is super easy to avoid if you can adjust your income sources to be unearned kinds of income, such as rents or royalties, instead of W-2 wages.   This is a much easier task to accomplish when you have control over the business you are working in than if you were working for a huge entity.

I wanted to pass this along and hope it gives you some food for thought.  I realize it is very different from the current “conventional wisdom” that is hyping the delay for higher future benefits propaganda. My take is based on real world analysis of things, which includes the fact that all of those delayed calculations are based on living to a very ripe old age.  While that is something we all wish to achieve, we all know of examples where lives have ended all too soon and without any warning.

I have attached a Short summary of the rules for Social_Security_and_Medicare, which you will be automatically enrolled into this year when you turn 65.  I will be as well, and I am not looking forward to doing the research for which Medigap policy to sign up for.

Let me know if you have any questions about any of this.

Posted in social security | Comments Off on Why Claiming Social Security ASAP Makes the Most Sense

IRS Mileage Rates For 2020

Posted by taxguru on December 31, 2019

A few weeks later than has usually been the case, IRS just today released its standard mileage rates for vehicle usage in 2020.  While these rates won’t be used on actual tax returns until more than a year from now, most businesses use the official IRS rates for charging customers and for reimbursing employees; so this is very relevant information for immediate use.

Beginning on January 1, 2020, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 57.5 cents per mile driven for business use, down one half of a cent from the rate for 2019,
  • 17 cents per mile driven for medical or moving purposes, down three cents from the rate for 2019, and
  • 14 cents per mile driven in service of charitable organizations.

IRS Press Release: IRS issues standard mileage rates for 2020

I long ago gave up on ever understanding why IRS and the tax writers in Congress believe that vehicles cost less to operate when used for charity, medical or moving.  Like many aspects of tax law, we just have to accept it as gospel because our Rulers in DC consider themselves to be so much wiser than we “normal” little people are.

Posted in IRS, Vehicles | Comments Off on IRS Mileage Rates For 2020