Tax Guru – Ker$tetter Letter

My earlier comments and experiences with the current IRS project (which is what they are calling it) to audit refund claims dealt with individual returns (1040X).  I wasn’t aware whether or not the project also included corporations, which raised a dilemma for us a few months ago when a client wanted to carry a corporate net operating loss (NOL) back to recover some previously paid tax. Such a carryback should be a straight forward calculation, with nothing for IRS to need to examine in excruciating detail.  However, because of the current uncertainty, we opted to hold off the carryback and roll the loss forward instead. 

The other day I was speaking with an IRS auditor who is examining some 1040Xs I  had prepared and was among those who had told me of the IRS’s current policy of auditing all amended returns claiming refunds.  When I told him that we had held off carrying back an 1120 NOL because of this situation, he said that was a wise move because they are also examining those. 

As I said earlier, I wasn’t aware if the current IRS attack on amended returns included 1120s.  Now I know and am glad that we held off doing one for my corp client. 

While an NOL carryback or over sort of works its way out and is more of a timing issue as to the tax savings, with the other kinds of things that create most amended returns, such as overlooked deductions, not being able to claim them on an amended return means they are lost forever.  It’s a classic use it or lose it situation.

I wasn’t given any idea of how long this current IRS project will continue.  However, I was given a heads up on their next project, extensive audits of pass-through entities, such as partnerships, S corps, LLCs, and trusts, which will also trace each item to the owners’ tax returns.  While checking the owners’ tax returns, auditors will also almost definitely fish around for other things to mess with. 

Social Security: Defending the cap – One of my long running predictions on how our rulers will try to keep the Social Security system anywhere close to solvent is the removal of the cap on income subject to the tax, while at the same time denying benefits to those same people.  Those “evil rich” people have long been high profile targets for the leftys who love to exploit class warfare and others’ envy of the wealthy to garner support from their base.

Grading the Social Security debate – Good look by Alan Reynold at many of the bogus issues being discussed in this debate, including AARP’s extremely dishonest propaganda campaign to equate private control of retirement accounts with outright gambling.

The Net Is Modernizing Home Buying and Selling – How I wish we would have had the current access to real estate info via the internet 13 years ago, when we were scoping out places to relocate to in our escape from the PRC. 

The Social Security crisis begins in just 5 years – From Donald Luskin.  I’ve considered the system to be in crisis for decades already, considering the hundreds of thousands of dollars people have been forced to pay into the Ponzi Scheme.

Daunting tax-reform task – Bruce Bartlett is also not too optimistic about the the tax reform panel’s chances of actually accomplishing anything worthwhile.  As I said earlier, without the input of at least a few real world tax practitioners, the entire exercise seems futile.  They don’t have to remove any of the current members.  Just add someone from one of the big CPA firms who can address tax issues facing large clients and a small firm CPA or EA who can convey how things are for smaller clients.

Emulating their spokesman Dan Rather’s approach to dealing with reality, the DemonRats think they can continue to control all of our money by denying that there are any problems with Social Security and continuing with their arrogant attitude that people are just too stupid to see the truth for themselves.

…and it’s so much more fun when they’re doing it with other people’s hard earned money.

One of the many frustrations in dealing with the tax system in this country is the propensity for our rulers to continuously tinker with it.  To say that it is a constantly moving target is quite the understatement.  

To add to the already mind boggling level of complexity is the fact that so many of the minute details of the tax code have different expiration dates.  These are meant to give our rulers an opportunity to revisit those issues on a perpetual basis and renew them for a few more years, or just allow them to die off.

Thanks to Tom Herman at the Wall Street Journal for the link to this recently published 18 page pdf list of the various tax provisions expiring for each year from 2004 through 2014. Most of them are esoteric items that few regular people ever encounter; but some are very important, such as an end to the reduced capital gain rates at the end of 2008.

Of course, this entire list is subject to change at the whim of our rulers, especially if the tax reform panel does anything.

I was intrigued by the new low cost Apple Mac mini that was just introduced because we have long had a few clients who use Macs for their QuickBooks and  it has been impossible for me to work with their data files, as I do with clients using Windows versions of QB.  The conversion feature in the Mac version of QB, which is supposed to allow data files to be accessed by Windows users, has never worked for any of our clients, so I have been stuck having to rely on printed reports and write out journal entries for the clients to enter themselves.

I was actually starting to order one of these new computers from Apple, as well as a KVM switch and USB keyboard from Tiger, when I thought I should check to see if the Mac version of QB was among the dozen or so discs that I was sent a few months back as part of the 2005 product release.  It had been my understanding that we QuickBooks Pro Advisors were supplied with every version of the program so that we could service our QB using clients.

After a lengthy wait on hold, and a discussion with the Pro Advisor contact, I learned that I would have to actually buy a copy of the QB for Mac at the new user price of almost $300 for the cheapest version.  The fact that I have been using QuickBooks since it first came out in the DOS and Windows formats, and have been a Pro Advisor since that program was started, don’t mean anything to them.  I’m obviously a little disappointed in this attitude by the powers that be at Intuit.  We Pro Advisors are provided with free copies of the useless Online and Simple Start versions; but not the Mac, which I would be more likely to actually use.

I told the QB rep that if they want to enlarge their user base among Macs, they would need to support us Pro Advisors in that format.  She said that there are currently so few Mac users of the program that they don’t care about them and don’t see any need to help Pro Advisors with those users.  It seems like we have a classic “chicken or egg” scenario here that Steve Jobs may want to look into if he is serious about expanding Apple’s market share beyond its current three percent.

For now, I’m holding off on buying one of the new Mac minis and will continue to work with print-outs for those clients using QB for Mac.

IRS’s warnings on fraudulent tax preparers