Archive for the ‘2016 Filing Season Tips’ Category

Tax Roundup, 3/25/16: Who is qualified to appraise your old laundry? And: Dept. of Revenue explains coupling.

Friday, March 25th, 2016 by Joe Kristan
Flickr image courtesy Jen Waller under Creative Commons license.

Flickr image courtesy Jen Waller under Creative Commons license.

Why you really don’t want a $10,000 deduction for that trip to Goodwill. Some taxpayers view the deduction for donations of stuff you can’t sell at a rummage sale as a standard deduction by other means. How likely is it that the IRS is going to look at the $250 deduction I’m claiming for dropping those bags at Salvation Army, anyway?

The poison is in the dose. Just yesterday we discussed the magic words you need to get from any charity for gifts of $250 or more. If your gift of property exceeds $500, you have to notify the IRS by filing Form 8283. And if your donation goes over $5,000, you have to get a “qualified appraisal.”

How does that affect your trip to the thrift store? One taxpayer who cleaned out his late mother’s possessions found out the hard way. The Tax Court describes the donations:

These items allegedly included seven sofas, four televisions, five bedroom sets, six mattresses, a kitchen set, a dining room set, a china cabinet, and three rugs. For charitable contribution purposes, petitioner placed a value of $11,730 on these items.

Petitioner testified that he also donated to AMVETS during 2009 numerous items of clothing belonging to him and his children. These items allegedly included 180 shirts, 63 pairs of slacks, 153 pairs of jeans, 173 pairs of shoes, 51 dresses, 35 sweaters, nine overcoats, and seven suits. For charitable contribution purposes, petitioner placed a value of $14,487 on these items.

You have to group “similar items” to see whether you exceed $5,000 and trigger the need for an appraisal. IRS Publication 561 describes what “similar items” means (my emphasis):

The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return.

So splitting up your donations between Goodwill and Salvation Army doesn’t help. But carefully identifying your donation and keeping each category (eg, books, china, silver) under $5,000 can work. Be sure to carefully document what you are donating; pictures are a good idea.

The taxpayer who went to Tax Court with his AMVETS donation ended up getting a zero deduction for his trouble. You don’t get a “partial” deduction when you claim a >$5,000 property charitable deduction and fail to get a proper appraisal. You get nothing.

Now if you can even find an appraiser for your old laundry, be sure you get one that counts. A qualified appraiser has to meet certain requirements for independence and expertise. For example, neither the donee nor the person who sold you the property qualifies.

You can’t wait for the IRS examination to find the appraiser. The appraisal also has to be timely, made not more than 60 days before the donation and not later than the extended due date of the return claiming the deduction. So if you don’t have that appraisal yet for your 2015 donation, it may not be too late — if you extend your return.

This is another of our irregular series of 2016 filing season tips. Collect them all!

 

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The Iowa Department of Revenue, Immediate income tax changes for Iowa taxpayers:

Effective with the enactment of House File 2433 on March 21, 2016, Iowa tax provisions are coupled with federal provisions retroactive to January 1, 2015 for tax year 2015 only.  The most common federal provisions with which Iowa is now coupled are listed below.

 NOTE: Iowa did not couple with the bonus depreciation provisions allowed for federal tax purposes for the 2015 tax year

 For Tax Year 2015 Only:

For Individual Income Tax Filers Only:

-Deduction of educator expenses
-Tuition and fees deduction for higher education
-Election to deduct state sales/use tax as an itemized deduction in lieu of state income tax
-Treatment of mortgage insurance premiums as qualified residence interest
-Tax free distribution from an IRA to certain charities for individuals 70½ and older

For Individual Income Tax Filers as well as Corporate Income Tax (including S Corporations), Partnership, Fiduciary and Franchise Tax:

-Section 179 limit for Iowa for the 2015 tax year is $500,000, which is the same as the federal section 179 limit. The phase-out threshold is $2 million.

The Department will update online forms, instructions, and web pages accordingly. Taxpayers impacted by these provisions who have already filed tax year 2015 returns should review information provided on the Department’s website at https://tax.iowa.gov about how to file an amended return.

These aren’t the only provisions coupled, of course.

 

TaxGrrrl, Worried You Might Run Out Of Time To File Your Taxes? Get An Extension. It’s always better to extend than to file late. It’s always better to extend than amend.

Annette Nellen, ACA Complexity Evident in IRS Incomplete Tax Tip. “For the past few weeks, the IRS has been publishing Health Care Tax Tips.  The one I received by email today was troubling because it includes an error or at least not enough detail to be entirely useful.”

Jack Townsend, TRAC Offerings on IRS and DOJ Criminal Tax Enforcement. “The data reported shows that referrals by the IRS to DOJ Tax peaked in the early 90s at 20 per million of population and are about 9 per million in fy 2015.”

Carl Smith, CDP Notice of Determination Sentence Causing Late Pro Se Petitions. “At the very least, it is time for the IRS to redraft the CDP notice of determination sentence so that it does not anymore trick pro se taxpayers into filing late.”

Kay Bell, Attention White House wannabes: the IRS audits presidential tax returns every single year.

 

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Joseph Thorndike, Face It: Americans Just Don’t Like the Estate Tax (Tax Analysts Blog) “At what point do liberals need to consider the possibility that something besides ignorance and stupidity is necessary to explain the popular distaste for the estate tax?”

TaxProf, The IRS Scandal, Day 1051

Howard Gleckman, The Gulf Between the Presidential Candidate Tax Plans Is Historic (TaxVox). “Calling it a gap hardly does it justice. It is an ocean of difference.”

News from the Profession. However the Presidential Election Goes, CPAs Probably Not Moving to Canada (Caleb Newquist, Going Concern)

 

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Tax Roundup, 3/24/16: Executors get until June to file basis reports. And: Don’t foot-fault that charitable deduction!

Thursday, March 24th, 2016 by Joe Kristan

20160122-3Now it’s June. The IRS has again delayed (Notice 2016-27) the new requirement for executors of taxable estates to notify beneficiaries of their basis. The rule is meant to keep the IRS from being whipsawed by having taxpayers use lower values for estate tax filings than for income tax filings.

The rule, which would require the executor to provide Form 8971 to the IRS, has been delayed several times now. The form includes a schedule for each beneficiary of the assets they are inheriting, along with the asset basis reported on the Form 706 filed for estate tax purposes. Each beneficiary is to receive a copy of their own schedule.

The filing is mandatory for estates required to file an estate tax return when the return is filed after July 31, 2015. It had been due March 31. The deadline is now June 30, 2016.

 

Charitable contributions: paperwork or bust. The law isn’t willing to take your word for charitable contributions any more. If you make a charitable contribution of $250 or more, the tax law now says no deduction is allowed unless you have magic words in writing from the charity. From IRS.gov:

The written acknowledgment required to substantiate a charitable contribution of $250 or more must contain the following information:

-Name of the organization;

-Amount of cash contribution;
-Description (but not value) of non-cash contribution;
-Statement that no goods or services were provided by the organization, if that is the case;
-Description and good faith estimate of the value of goods or services, if any, that organization provided in return for the contribution; and
-Statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible religious benefits, if that was the case.

In addition, a donor may claim a deduction for contributions of cash, check, or other monetary gifts only if the donor maintains certain written records.

Even if you have a cancelled check for your $250+ gift, if you lack the magic words, your deduction is zero. 

A taxpayer learned this lesson the hard way in a Tax Court opinion released yesterday. The taxpayer’s gift in this case was a conservation easement valued at $350,971. While there are complex additional requirements for deducting such property gifts, those weren’t the problem. The taxpayer never got past the magic words:

Although the conservation deed includes provisions stating that the intent of the parties is to preserve the property, those provisions do not confirm that the preservation of the property was the only consideration because the deed did not include a provision stating that it is the entire agreement of the parties. Without  such a provision, the IRS could not have determined by reviewing the conservation deed whether petitioners received consideration in exchange for the contribution of the conservation easement. We conclude, therefore, that the conservation deed taken as a whole is insufficient to satisfy section 170(f)(8)(B)(ii). Because petitioners’ contemporaneous written acknowledgment does not comply with section 170(f)(8)(B)(ii), petitioners are not entitled to any claimed carryover charitable contribution deductions,

Lacking the magic words, the deduction suddenly went from $350,971 to nothing. 

While this was a six-figure problem in this case, the rule is just as effective for a $250 gift to your church or your favorite charity.

I’ll just get the acknowledgment if I get audited. That doesn’t work. The acknowledgement has to be “contemporaneous.” Tax Court explains:

A written acknowledgment is contemporaneous if the taxpayer obtains the acknowledgment on or before the earlier of the date the return was filed or the due date (including extensions) for filing the return for the year in which the charitable contribution was made.

Many smaller charities, and even a few bigger ones, have been slow to realize the importance of these acknowledgements. If you don’t have one yet, it is wise to get it. If you want the charitable deduction, it’s worth extending your return for.

Cite: French, T.C. Memo 2016-53.

This is another of our irregular series of 2016 filing season tips. They’ll keep coming through the April 18 deadline!

 

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Paul Neiffer, Are You 70 1/2?. “If you have retirement or IRA accounts and you are approaching age 70 1/2, you must be careful to make sure to take your required minimum distributions (RMD) and April 1 can be a key deadline.”

Jason Dinesen, If I Turn 65 in August, Am I 65 on My Tax Return?

TaxGrrrl, Taxes From A To Z (2016): I Is For Inheritance

Robert Wood, Payroll Tax Violators Get Penalties Or Jail, And IRS Is Watching. “The IRS is especially vigorous in going after payroll taxes.”

Nicolas Xanthopoulos, Investigating Assets Prior to Submission of Collection Remedies (Procedurally Taxing). Important work from a practioner dealing with the hard end of the tax law, collections.

Jack Townsend, Interview of Acting Assistant Attorney General Ciraolo on Tax Enforcement. It sounds like they still want to shoot jaywalkers.

Kay Bell, $10,000 crowdsourcing prize available to designer of Future IRS taxpayer accounts website

 

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Howard Gleckman, Paul Ryan and The “Ridiculous Notion” of Tax Distribution (TaxVox):

Last week, House Speaker Paul Ryan said in a CNBC interview that the distributional analysis of tax plans done by the Tax Policy Center, the Joint Committee on Taxation, and others is based on the “ridiculous notion” that the effect of tax changes on different income groups  is important.

Mr. Gleckman thinks Speaker Ryan is wrong, that it is very important to show how much tax changes benefit “the rich.” While that is interesting information, Speaker Ryan is right in that notions of distributional fairness have an outsized impact on tax policy deductions. I get the impression from some people that they would be fine with executing people, seizing their property, and selling their families into slavery, so long as it only affected the top 1% of earners.

David Brunori, How to Save the Corporate Tax (Tax Analysts Blog). “First, get all the states in a big room and have them agree to end all targeted tax incentives.”

TaxProf, The IRS Scandal, Day 1050. Today’s link: Chipping Away at the IRS Stonewall: A Federal Court Scores the Agency For its ‘Continuous Resistance’

 

Humor impairment is a lifestyle, not a crime! White-Collar Crime Watch: Polygamists, Fixed Tennis Matches, An Unfunny Accountant (Leona May, Going Concern).

 

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Tax Roundup, 3/9/16: A College Savings Iowa contribution today can reduce 2015 Iowa tax. And: Shoot more jaywalkers!

Wednesday, March 9th, 2016 by Joe Kristan

csi logoYou can still make a College Savings Iowa 2015 contribution. While Section 529 plans provide tax-free earnings for college for taxpayers in all states, Iowans can get an extra tax break for them. 2015 contributions to College Savings Iowa or Iowa Advisor Sec. 529 plans can generate a deduction on Iowa state 1040s up to $3,163 per donee.

For the first time, Iowans can make their 2015 contributions as late as the April 30, 2016 due date of their 2015 tax return. In prior years you had to make the contribution by December 31 to get the deduction.

The $3,163 limit is per donee, per donor. That means a couple with 2 children can get four full deductions for 2015 529 contributions totaling up to $12,652. For a couple at the 8.98% top Iowa rate, that’s a savings of $1,136 on their Iowa return.

This is another of our occasional series of 2016 filing season tips. Collect them all!

 

Jack Townsend, Report on Remarks of AAG Tax and Practitioner Regarding Nonwillfulness and Foreign Account Enablers:

Ciraolo and Bryan Skarlatos questioned whether foreign account holders can remain nonwillful about foreign account reporting obligations at this stage.  The article quotes from her prepared comments (linked above) as follows:

After three very well-publicized voluntary disclosure programs, nearly 200 criminal prosecutions, ongoing criminal investigations and the increasing assessment and enforcement of substantial civil penalties for failure to report foreign financial accounts, a taxpayer’s claims of ignorance or lack of willfulness in failing to comply with disclosure and reporting obligations are, quite simply, neither credible nor well-received. 

This is so wrong. Something that is a big deal in the IRS enforcement bureaucracy can be invisible to a person going about their business, maybe taking a temporary position overseas or getting a U.S. green card.

People get in IRS trouble for having an interest in a foreign account they aren’t even aware of. One practitioner I know had to deal with an immigrant from India who paid thousands of dollars in penalties for not reporting an interest in a foreign bank account that her parents back home put her name on as a joint owner without her knowledge, and without her receiving any income from it. Others find themselves in hot water after get an inheritance overseas that they don’t learn about until after the reporting deadline.

The IRS remains clueless about how many people go through their daily financial lives without pondering whether there is an obscure form lurking to ruin them for non-compliance. The system is broken, but the only answer the enforcers have is to continue the beatings until morale improves.

 

20120906-1David Brunori speaks wisely: If You Need Tax Credits, You Shouldn’t Be in Business (Tax Analysts Blog)

Here’s what got me thinking. Iowa — no paradise when it comes to good tax policy — gave 186 companies tax credits worth more than $42 million last year. Those credits were handed out as an incentive to conduct research and development. There are other credits available for businesses. Oh, and the credits are refundable because, like with poor families receiving the earned income tax credit, R&D credits provide a critical safety net. All right, I’m being facetious.

Iowa’s biggest welfare recipient was technology company Rockwell Collins Inc., which received $12 million. Rockwell is a great company, but it has $5 billion in revenue. Giving money to Rockwell isn’t quite the same as giving money to a shoestring nonprofit feeding the homeless in Des Moines.

In all, 20 companies claimed more than $500,000 in R&D credits, including DuPont Co., Deere & Co., and Monsanto Co. I ask them, where is your pride? Do you really want a government handout?

For a full-throated defense of tax credit corporate welfare, today’s IowaBiz.com blogger, Brent Willett, offers Job creation fuel: R&D policy move is important for Iowa. Not surprisingly, the cost of paying these subsidies in increased taxes on less fortunate and less influential Iowa businesses never comes up. The “job creation” part is also weakly defended.

 

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Russ Fox, Online Gambling Addresses Updated for 2016. Russ performs a valuable service in gathering street addresses of offshore online gaming websites. Online gaming accounts at these sites are “foreign financial accounts” for FBAR purposes, and you need a street address to fill out Form 114. They can be hard to find. Hat’s off to Russ.

TaxGrrrl, Tax Season Proving Confusing (Again) For Taxpayers Affected By Obamacare

Kay Bell, Have you received your Obamacare coverage forms yet? “Recipients of the B or C versions want to hang onto these forms as verification that they did have ACA required coverage, which they tell the Internal Revenue Service about by checking the appropriate box on their 1040EZ, 1040A or long form 1040.”

Michelle Drumbl, The Automated Substitute for Return Procedures (Procedurally Taxing) “The ASFR assessment process takes into account all income reported as earned by the taxpayer, but it ignores reported items that would reduce taxable income.”

Robert Wood, Erin Andrews Wins $55M Peephole Verdict But Faces Heavy IRS Tax Hit

Jim Maule, Buying and Selling Dependency Exemptions for Tax Purposes. “It’s too bad Congress cannot be indicted, convicted, and punished for making a mess of the tax system, continuing to make it worse, and refusing to clean it up.”

 

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Annette Nellen, AICPA Advocacy on IRS Funding. It’s hard to see how the IRS gets more funding when it does such an awful job with the funding it has.

TaxProf, The IRS Scandal, Day 1035. “The IRS doesn’t know if its data backups are deleted or not created, and doesn’t test to ensure backups can be used if information is lost, even after a “significant” December 2014 incident, according to a Treasury Inspector General for Tax Administration (TIGTA) report.”

Alan Cole, Tax Policy Must Be Proportionate to Spending Policy (Tax Policy Blog). “This gets to the heart of one of the principles of good tax policy: your tax policy should actually be able to fund the government you want. One way or another, Donald Trump will have to assent to this principle.”

Elaine Maag, Complicated Families: Complicated Tax Returns (TaxVox):

The law is built on the idea that a child lives in a traditional family – married parents with only biologically related siblings. The tax unit it is presumed to include the adults supporting the child.

But increasingly, children live in arrangements that belie that traditional family; children move between homes of divorced or never-married parents in formal and informal custody arrangements; children live with unmarried, cohabiting parents; children live in multigenerational households. In short, children are supported by adults in multiple tax units.

But only one tax unit gets to claim the earned income credit for each child.

 

News from the Profession. Apparently Accountants Are Terrible on the Phone (Caleb Newquist, Going Concern).

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Tax Roundup, 2/12/16: I want my K-1. I want it now, Daddy!

Friday, February 12th, 2016 by Joe Kristan

Accounting Today visitors, click here for the post on password hygiene.

20160212-1No, your K-1 isn’t late. As even late 1099s are arriving, more and more taxpayers are ready to file their 2015 1040s. So why is that stupid partnership or S corporation taking so long to get me that 1099? Isn’t there a penalty for not getting that to me by the end of January?

No, there isn’t. First, it’s not a 1099, it’s a K-1. The earliest any K-1s are due is March 15, and that’s only for “electing large partnerships”  — typically publicly-traded ones (and if you own a bunch of these, expect a dirty look from your tax preparer, as they are time-consuming and therefore bill-increasing).

K-1s for S corporations are due March 15 for calendar-year corporations. Unlike with 1099s, though, the S corporation can get an automatic extension of the filing deadline until September 15. This is often needed because preparing a business return is a more complicated project than computing someone’s wages or interest income. It can be more complex still if the S corporation itself has to wait on…

Partnership K-1s. For 2015, these have an April 15 deadline that can be extended to September 15 (except for the publicly-traded partnerships due March 15). Preparing partnership returns can be devilishly complex, especially when partners come and go. The deadline becomes March 15 next tax season, but that just means more extensions will be filed.

Trust K-1s are also due April 15. Most bank trust departments can get their trust returns and K-1s filed in January and February, as they have all of the information at hand. If the trust has business or rental property, or is waiting on K-1s of its own, though, expect delays.

Remember, almost all pass-throughs are calendar year taxpayers. That means everybody is trying to get their returns done at once. We preparers do our best, but the pipe is only so wide.

Tax is hard. If you think preparing your 1040 is painful, it’s minor compared to doing a return for an operating business.  Look at the IRS publications for partnerships or S corporations if you don’t believe me. If you have to wait on your K-1, it’s not because the partnership, S corporation or tax preparer is indolent or incompetent. It just takes time to get it right — and when you have a bunch of 1040s that will be thrown off if you goof, you really want to get it right.

This is another in our irregular series of 2016 filing season tips

 

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Taxable Talk, Phishers Target Tax Professionals:

Tax professionals, be wary. There are phishing emails supposedly from the IRS targeting tax professionals. Now, we have supposed new clients emailing tax professionals. My mantra, if it sounds too good to be true it probably is, holds for tax professionals, too. Do not click on links that you do not know for certain are valid.

Read the whole thing for more good advice on protecting yourself.

 

William Perez, 3 States are Delaying Tax Refunds

Kay Bell, Full, permanent Internet access tax ban approved

Stuart BassinDistrict Court Certifies Class Action in Tea Party Challenge to IRS (Procedurally Taxing).

Robert Wood, IRS And Justice Department Push Tax Prosecutions

TaxGrrrl, Ask The Taxgirl: Solar Panels & Tax Credits

Kristine Tidgren, Iowa Court Denies Private Condemnation of Right of Way (AgDocket). “Iowa Code § 6A.4(2) confers the right to take private property for public use ‘upon the owner or lessee of lands, which have no public or private way to the lands, for the purpose of providing a public way which will connect with an existing public road.'”

 

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Howard Gleckman, Rubio’s Ambitious Consumption Tax Would Reduce Revenue by $6.8 Trillion, Give Most Benefits to the Highest-Income Households (TaxVox):

Senator Marco Rubio would convert the income tax into a progressive consumption tax, an ambitious idea that would eliminate the income tax’s penalty on saving. However, a new Tax Policy Center analysis finds that Rubio’s version would slash federal tax revenues by $6.8 trillion over the next decade with most of the benefits going to high-income households.

The “mostly benefits high-income households” is the most tiresome and useless cliché in tax policy. Considering that the high earners pay almost all the income taxes, any improvement to the (awful) system will inevitably benefit them disproportionately. But the possible revenue loss is a serious issue, if Rubio remains a serious candidate.

Alan Cole, The Most Important Chart from Tax Policy Center’s Analysis of the Rubio Plan (Tax Policy Blog). “Our latest estimates, calibrated for Washington’s traditional ten-year budget window, showed the plan reducing overall tax revenues by $6.1 trillion on a static basis, while TPC shows a reduction in revenue of $6.8 trillion.”

If only there was a candidate with a plan that would improve the tax system and not increase the deficit

 

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Megan McArdle, Obama’s Oil Tax Is Running on Empty. “The administration has made some gestures toward mitigating this opposition, notably by claiming that the tax will be paid by oil companies. But this is obvious nonsense.”

Carl Davis, More Details Emerge on President’s Proposed Oil Tax (Tax Justice Blog)

TaxProf, The IRS Scandal, Day 1009

Alex Durante, High Corporate Taxes May Increase Debt, Study Finds (Tax Policy Blog). “A new paper published in the Journal of Financial Economics finds that countries with high tax rates on corporate income also have higher corporate leverage ratios. This paper improves upon the methodologies of prior research that had struggled to confirm a link between tax rates and corporate structure.”

 

News from the… Profession? Area Police Department Offers Help to Drug Dealers Struggling With Tax Season Preparations (Caleb Newquist, Going Concern)

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Tax Roundup, 1/25/16: Four steps to a quicker, cheaper 1040. And: ID theft – prevention vs. punishment.

Monday, January 25th, 2016 by Joe Kristan

1040 corner 2015How to make your tax return cheaper. If you don’t have all of your 1099s, brokerage statements and so on, there’s a good chance you’ll have them by the end of the week (but if you’re waiting on K-1s, forget it). Then you will want to send it all to your tax pro and get it back right away. If you want to get it back quickly, and keep your fee down, the best way is to provide everything your tax pro needs the first time.

Every time we have to ask you a question or track down a document, it slows things down, and the fees start to creep up. Here are a few things taxpayers commonly forget to do or include.

Go through the tax organizer and at least answer the questions. Many taxpayers just return a blank organizer with their 1099s. That’s unwise. The question part is there for a reason. For example, it identifies life events that don’t show up on 1099s or W-2s. Once a client mentioned his wife in a phone conversation. I had improperly prepared returns for him as single for two years. Of course, the “change in marital status” question on the questionnaire had been returned unanswered on his blank organizer both years.

Double-check your estimated tax payments. The standard answer tax pros get from taxpayers who return blank organizers is “I sent in all the payments you said on the dates you said.” And sometimes that’s actually true, but quite often it isn’t. That leads to IRS notices, tax penalties and extra tax pro fees. Go through your check register and bank statements and write down the actual dates and amounts on the organizer — or send copies of the cancelled checks from your statements.

Spend a few minutes culling your information. You don’t want to pay your tax pro to dig through your utility bills, cable provider statements, and junk mail to find your charitable contributions and information returns. Clear out the junk before you bring it in.

Make sure your contact information is current. If we do have to ask you questions, it’s a lot easier if we have your current email address and the right cell phone number.

This is the first of our 2016 filing season tips. Look for these occasionally until April, when they will come thick and fast. 

Related: Robert D. Flach, DON’T BE IN SUCH A HURRY – BUT DON’T WAIT UNTIL THE LAST MINUTE. “I have a strict long-standing rule that all returns that are not literally in my hands, with all the necessary information, by March 19th will be automatically extended!”

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Jim Maule, Will Providing a Driver’s License Number Reduce Tax Return Identity Theft?:

The problem is two-fold. On one side, better systems of identification are necessary, and need to be based on information that is not as easily stolen. Databases need to be secured more carefully than at present. On the other side, identity thieves and those thinking of engaging in that behavior need to be presented with changes in their risk analysis. Not only are better methods required to track them down, they also need to face more severe consequences for their behavior.

I think the penalties in place are already severe enough. The problem is that it is too easy to steal tax refunds. The grifters that go in for identity theft aren’t known for impulse control or careful weighing of benefits and costs. They just know that with the right personal information and a copy of Turbotax, they can make prepaid debit cards rain on their mailboxes. And, of course, the overseas crime syndicates don’t care about the penalties, because they are unlikely to ever face them.

It’s much more important to improve IRS procedures to thwart I.D. theft in the first place. The IRS is finally taking needed steps here, but lots of horses are already out of the barn.

TaxGrrrl, 11 Tips To Protect You From Identity Theft & Related Tax Fraud

 

Russ Fox, An Entity a Day Will Keep the IRS Away, Right? “Here’s a scheme that’s sure to work to avoid remitting payroll taxes to the IRS. Every day (or week or month), I’ll form a new business entity that’s collecting the tax. Once the amount due to the IRS gets large, I’ll just use a new entity. The IRS will never catch on, right?” As Russ explains, wrong.

Kay Bell, Taxpayers want up-front pricing from paid tax preparers.

William Perez, Taxes When Hiring Household Help

Matt McKinney, Anonymous ownership in an Iowa LLC (IowaBiz.com).

Jack Townsend, More on Transparency for Entities Acquiring Valuable Real Estate in Some U.S. Markets

Robert Wood, Trump Is Unapologetically Aggressive On Taxes, Like Buffett And Bono. All the sort of folks who are happy to increase taxes, on other people.

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Kadri Kallas-Zelek, Incorrect Claims for Earned Income Tax Credits Are Likely to Become More Costly (Tax Policy Blog). “The IRS estimates that for the fiscal year 2013, improper payments from EITC amounted to $13.3 to $15.6 billion, or 22 to 26 percent of total EITC payments.”

TaxProf, The IRS Scandal, Day 989Day 990Day 991. Hard drives as doggie treats.

Renu Zaretsky, Snow, Settlements, and Sales Taxes. Today’s TaxVox headline roundup covers Snowzilla, online sales tax cheats, and Oregon liquor taxes, among other things.

Matt GardnerAdobe Shifts Hundreds of Millions Offshore, Revealing, Like PDF Documents, Its Profits Are Portable Too (Tax Justice Blog). For some reason, this only inspires the Tax Justice folks to do what’s failing more and harder.

 

Career Corner. Let’s Review: Deloitte Demotivation, Denim, Bad Managers (Caleb Newquist, Going Concern).

 

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