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THE WANDERING TAX PRO

 

BLOG

DECEMBER 2014

 


SOAPBOX

 

For the past 43 years, except for my personal concern for their well-being, I could care less whether or not my clients had “sufficient” health insurance coverage, other than to see if the out of pocket costs of any coverage was deductible on their federal and/or state income tax returns.  Nothing has changed.

 

And for the 43 years that I have been preparing 1040s, whether or not a person has “sufficient” health insurance coverage had absolutely nothing whatsoever to do with determining an individual’s net taxable income and calculating their legal tax liability.  Again, nothing has changed.  

 

The administration of “Obamacare”, and other federal welfare and social benefit programs, does not belong on the 1040! 

 

A tax preparer is not a Social Worker, and should not be required to determine if an individual qualifies for federal welfare, health, or social benefit programs, or if they should be penalized for not properly complying with non-tax related federal requirements.

 

And requiring an individual to pay a fee to a tax professional to calculate a penalty for not having “sufficient” coverage just adds insult to injury.  If the government thinks a person should be penalized for not complying with certain federal obligations then let the government assess and request the penalty.

 

{As an aside, in my personal 1040 practice I expect that almost all of my clients have health insurance coverage either via Medicare or their employer - and the one or two that may not will be exempt from the penalty under the “affordable” (coverage costs more than 8% of total household income) or “does not have to tile” exceptions – so the penalty is actually a non-issue for me.}

 

According to the IRS as of 11/3/2014 the “Number of Individuals with Current Preparer Tax Identification Numbers (PTINs) for 2014” is 700,461.  This consists of –

 

Attorneys = 31,443

CPAs = 215,766

EAs = 50,089

Enrolled Actuaries and Retirement Plan Agents = 1,147

“Unenrolled” Preparers = 402,016

 

The “unenrolled” preparers are those who previously would have had to become RTRPs before Loving v IRS, and includes those who had been “awarded” the now dead RTRP designation and the potential participants in the new IRS voluntary AFSP program.

 

Basically any Tom, Dick, or Harriet can apply for and be issued a PTIN – and this is as it should be.  For the 100+ years that the 1040 has been in existence there has been no successful regulation of the preparation of income tax returns (preparation is NOT practice, as the court has upheld), other than the issuance of tax preparer penalties – and this has worked out fine.

 

What the tax preparation industry does need is an organization to speak for, represent the interests of, and lobby on behalf of, the individual income tax return preparer (the 700,000 PTIN holders) – an American Federation or American Institute of PTIN Holders.

 

If such an organization was in existence before the passage of the Affordable Care Act it could have said to the idiots in Congress –

 

“ACA places an excessive, unnecessary and non-tax related burden on tax preparers.  If passed as written the 700,000 members of the AFPTINH will refuse to calculate the shared responsibility penalty for individuals who do not have sufficient coverage under the Act.”

 

And if the organization was around when the IRS issued its new due diligence requirements for EITC claims it could have said to the Service –

 

“This new regulation, and corresponding tax form, places an excessive, unnecessary and non-tax related burden on tax preparers.  If instituted, the 700,000 members of the AFPTINH will refuse to prepare 1040s that include an Earned Income Credit claim.”

 

I had suggested as an easier alternative to creating from the new AFPTINH lobbying organization from scratch that “NATP, NSTP, NSA, NAEA, LTPA, and any other legitimate non-profit tax preparer membership organizations need to join together in a ‘Tax Preparer Advocacy Council’ with an office in Washington DC”.  However these organizations are apparently not interested in the idea.

 

Tax pros – PLEASE – what do you think?

 

 

AN OFFER FOR TAX PROS

  

I recently created a “Dollar Store” with a handful of tax guides available (as an email attachment) for only $1.00.

 

They include –

 

  1. BUSINESS EXPENSE GUIDE
  2. CHARITABLE CONTRIBUTIONS GUIDE
  3. MEDICAL EXPENSE GUIDE
  4. MORTGAGE INTEREST GUIDE

 

These guides, while written for sale to the taxpayer public, can be used by tax professionals as free hand-outs for clients and promotional material for potential clients.

 

You can purchase the “reprint rights” for all 4 of these copyrighted tax guides for $50.00, or $15.00 each for individual guides.  This gives you the right to reprint them, with “Compliments of Your Firm” replacing my authorship credit, for free distribution to clients and the public (you are not permitted to sell these guides to the public).

 

You may purchase one or more of these guides for $1.00 each, and the $1.00 - $4.00 you pay will be deducted from the $15.00 - $50.00 if you decide to purchase reprint rights.

 

I will throw in free reprint rights for SURFING USA with any order for tax guide reprint rights.

 

Send your check or money order for the appropriate amount, payable to Taxes and Accounting, Inc., to –

 

TAX PRO REPRINT RIGHTS

TAXES AND ACCOUNTING, INC

POST OFFICE BOX A

HAWLEY PA 18428 

 

And, BTW, don’t forget the Tax Pro Forms, Schedules, Worksheets, Client Memos, and Handouts compilation I discussed in last month’s issue.

 

 

THE TWELVE DAYS OF TAX SEASON

 

I usually post my “Twelve Days of Tax Season” at The Wandering Tax Pro on February 1st.  But, considering it is a parody of a Christmas carol, and considering I am short on content this month, here it is.

 

Fellow tax pros are welcome to reprint this on their website or in their newsletters as long as you give me full authorship credit, and include “copyright © Taxes and Accounting, Inc.”.

 

On the first day of tax season my client gave to me a Closing Statement for the purchase of a home.

 

On the second day of tax season my client gave to me 2 W-2 forms.

 

On the third day of tax season my client gave to me 3 mortgage statements.

 

On the fourth day of tax season my client gave to me 4 Salvation Army receipts.

 

On the fifth day of tax season my client gave to me 5 Form K-1s.

 

On the sixth day of tax season my client gave to me 6 1099s for dividends.

 

On the seventh day of tax season my client gave to me 7 cancelled checks.

 

On the eighth day of tax season my client gave to me 8 useless items.

 

On the ninth day of tax season my client gave to me 9 medical bills.

 

On the tenth day of tax season my client gave to me 10 stock sale confirms.

 

On the eleventh day of tax season my client gave to me 11 employee business expenses.

 

On the twelfth day of tax season my client got from me a finished tax return, 11 employee business expenses, 10 stock sale confirms, 9 medical bills, 8 useless items, 7 cancelled checks, 6 1099s for dividends, 5 Form K-1s, 4 Salvation Army receipts, 3 mortgage statements, 2 W-2 forms, and a Closing Statement for the purchase of a home.

 

And, of course, on the thirteenth day of tax season the client gave to me a corrected Consolidated 1099 from Wells Fargo Advisors!

 

 

JANUARY CPE FOR NEW JERSEY TAX PROFESSIONALS

   

* The 13th ANNUAL NORTHERN NEW JERSEY WORKING TOGETHER CONFERENCE will be held on Thursday, January 8, 2015, from 7:30 a.m. to 5:00 p.m. in the main lounge of the Seton Hall University Student Center (400 South Orange Avenue, South Orange, NJ 07079).

 

The purpose of this annual event is “to promote the positive ongoing relationship between the tax practitioner community and the Internal Revenue Service” and “to engage in ongoing, meaningful dialogue aimed at improving our dealings with one another, thereby improving service to our common customer – the taxpayer public”.

 

The focus of this Working Together will be on the Affordable Care Act and how it affects different aspects of the both the taxpayer and the practitioner in the fields of Examination, Collection, and Taxpayer Advocate.

 

There will updates on current Examination and Collection Initiatives; as well as a presentation by the Taxpayer Advocates Office. There will a presentation by Criminal Investigations and a Hot Topics discussion as well. The main thrust of the presentations will on the Affordable Care Act with our main speaker discussing the latest on the topic and answering your questions.”

 

Eight (8) CPE credits in tax will be awarded for full-day attendance.

 

The cost is $140 per attendee - $155 after January 4th.  You can click here to register online.

 

For any additional information on the Northern New Jersey Working Together Conference, please contact Glenn Gizzi, IRS Senior Stakeholder Liaison, at 732-777-7269 or e-mail him at Glenn.J.Gizzi@irs.gov.    

 

* The NJ chapter of NATP’s “Famous New Jersey State Tax Seminar” will be held on Saturday January 10, 2015, as usual at the Hotel Woodbridge at Metro Park (formerly known as the Woodbridge Hilton) on 120 Wood Ave South in Iselin, NJ (easily accessible via the Garden State Parkway).  Registration is from 7:30 – 8:00 AM and the seminar runs from 8:00 AM – 4:30 PM.

 

The education starts off with returning “keynote speaker” Michael Bryan, CPA, Director of the NJ Division of Taxation.  Let us hope he has something of value to say this year.

 

Attorney Bruce E. Mantell will discuss the NJ Estate Tax, Alexis De Rosa and John Kelly from NJDOT will cover NJ state tax (income, payroll, etc) updates.  Allison Sheppard will tackle the NJ Inheritance Tax, and local favorite Kathryn Keane will provide NY state updates.

 

I have always said this is a “must-take” seminar for tax pros preparing NJ business and individual tax returns.

 

The cost for an NATP Member is $200.  It is $250 for a non-member.  Continental breakfast (one of the better ones), buffet lunch, and afternoon dessert is included.

 

Click here to download the registration form.

 

 

TAXPRO BUZZ

 

+ Join Tax Practice Pro Inc's “Official Fan List” and receive news on the group’s continuing professional education offerings in New York State via email.  Click here.   

 

+ Russ Fox describes “The Horrible, No Good, Very Bad Upcoming Tax Season”, explain the 4 reasons it will be so, at TAXABLE TALK.

 

+ Some information from the IRS on two entirely different topics via NSA (highlights are mine) -

 

Responding to concerns tax practitioners have expressed about how to document whether clients have health coverage under the Affordable Care Act, an IRS official has confirmed that practitioners will not have to get specific documentation.

 

 ‘There's no formal due diligence required or documents that you are required to obtain,’ William Smits, a senior manager in the IRS's Wage & Investment Division, said during a November 13 webcast. He emphasized, however, that "I think you have to apply a reasonable level of common sense in terms of determining whether the taxpayer does have minimum essential coverage, which is necessary to avoid penalties under the ACA.

 

 Practitioners still need to do the best they can to make sure taxpayers are ‘representing in good faith’ that they have a level of health coverage that will ensure they don't have to make ‘individual shared responsibility payments’ under the ACA, Smits said. Taxpayers could provide a variety of information showing they have coverage through an employer or private insurance company, for example. However, Smits said, ‘in some cases we're going to have to take oral testimony’."

 

And about something entirely different -

 

Tax preparers whose clients include marijuana retailers will get some guidance in early 2015 on how to perform due diligence and stay on the right side of the law, according to Karen Hawkins, Director of the IRS Office of Professional Responsibility.”

 

If you have an item of TAXPRO BUZZ you would like to share please email it to me at rdftaxpro@gmail.com.

 

 

TAX PRO PRACTICE TIPS

 

This month I would like to share an idea for a post-tax season promotional campaign that I had always wanted to undertake in the past, but never got around to it.  It will take an initial investment of money and time, but has great potential and could turn into an annual event.

 

Pick a slow month when you have free time – like May or June – and take out ads in local papers and on local radio programs to announce a special offer.  The ads will begin by asking taxpayers if they are confident that their past tax returns were prepared correctly, and that they paid the least amount of federal and state income tax or got the biggest federal and state refunds possible. 

 

You then offer a special free service.  During the chosen month taxpayers can bring their past three years’ federal and state tax returns to your office and you will review them for free.  If the returns were prepared correctly and there is nothing you would change there is no charge.  If you find an error, and can amend a return or returns to get a refund, you will prepare the amended return(s) at your normal fee schedule, or maybe a special reduced rate (perhaps 75% of your normal fee).

 

In the case of minor errors that would generate small refunds of perhaps $50 - $100, and your fee to amend might eat up most or all of the refund, amend anyway and either do not charge or charge a nominal amount not to exceed 50% of the refund.

 

My mentor and I discovered early on that the best way to get a new client for life, and a good source of future referrals, was to amend a past return to get a refund.  Of course back in “the day” we had more tricks we could use, like Income Averaging and 10-Year Averaging, to get a potential new client a really big check.

 

Today the main target audience of such a campaign is the taxpayer, with little or no knowledge of tax law and the Tax Code, who “self-prepares” by using a “box” (tax preparation software).  You want to emphasis the fact that no tax preparation software is a substitute for a competent and experienced tax professional.

 

And, what was always my favorite thing to do, you also want to take clients away from the fast food preparation chains.

 

If you find an error that caused the taxpayer to underpay their correct tax liability you would point it out and recommend that they amend, but charge nothing if they do not.  Sometimes identifying a serious mistake and offering to fix it promptly before the IRS bills the taxpayer(s), to reduce potential penalty and interest, will also result in a new loyal client.

 

If you have a practice tip you would like to share with fellow tax professionals you can submit it to me at rdftaxpro@gmail.com.

 

 

BEST WISHES FOR A “SUCCESSFUL” HOLIDAY SEASON - TALK TO YOU NEXT YEAR!