They use underemployed people to stand near traffic, waving signs and otherwise make fools of themselves. This guy is obviously waving the sign for a CPA. The tie gives it all away. I wonder if he has casual 'sign waving' Fridays?
Tuesday, February 2, 2010
Thursday, January 7, 2010
Nice Seasonal Tax Practice You Have Here. Be Ashame If Something Happened To It!
That something may be happening in the form of IRS regulations regarding paid preparers. This proposal appears to have the support of outfits such as H&R Block (or H&R Blockheads as the WSJ identifies) and Jackson Hewitt. I've written before about Jackson Hewitt.
Are these firms truly trying to make the world a better place by ensure fair and accurate tax preparation or are they engaged in rent seeking?
This proposal is bound to make it cost prohibitive for some small shops to comply with the rules. If cost isn't a factor, the bureaucratic nightmare will be. That would cause some preparers to close shop, thereby providing a nice competitive advantage to the H&R Crocks of the world.
I've never been much for protectionists and now that it has come to my industry, I feel no differently. If the Treasury Department believes there is a revenue gap created by fraudulent returns it should use its existing resources and systems to address that problem rather than creating more bureaucratic red tape which may be difficult to enforce anyway.
And even better, how about simplifying the code, removing targeted tax breaks and reduce tax rates? Sound good? Don't hold your breath!
Are these firms truly trying to make the world a better place by ensure fair and accurate tax preparation or are they engaged in rent seeking?
This proposal is bound to make it cost prohibitive for some small shops to comply with the rules. If cost isn't a factor, the bureaucratic nightmare will be. That would cause some preparers to close shop, thereby providing a nice competitive advantage to the H&R Crocks of the world.
I've never been much for protectionists and now that it has come to my industry, I feel no differently. If the Treasury Department believes there is a revenue gap created by fraudulent returns it should use its existing resources and systems to address that problem rather than creating more bureaucratic red tape which may be difficult to enforce anyway.
And even better, how about simplifying the code, removing targeted tax breaks and reduce tax rates? Sound good? Don't hold your breath!
Obama Back High-End Health Plan Tax
Remember all the campaign stops in 2008 when Joe Biden said McCain was tax people with employer sponsored health insurance for the benefits? Yeah, I'd like to forget the 2008 election also.
Now, Obama supports taxing those benefits, but don't worry it's just for those with 'Cadillac Plans'. That's right now the federal governmoent is proposing that it knows the right amount of insurance for you to carry to stay healthy and anything more than that will be taxed to the point of not being economically sensible.
Wednesday, January 6, 2010
The State Doesn't Evaluate the Benefits Probably Because They Are Largely Nonexistent
Last month, the Georgia Department of Audits and Accounts issued a report charging the state legislature with issuing corporate tax credits without evaluating their costs and benefits. You can download the full report here.
The AJC reports that there is a little blame casting on who should ultimately have authority to monitor accountability. It appears that the Governor's office does a back of the napkin calculation for credits it vetoes and does nothing for credits that are signed into law. The legislature obviously does nothing, after all, what's the use once the press release, ribbon cuttings and photo ops are over? The Department of Revenue says it doesn't have the job of providing cost benefit analysis on tax credits, with which I agree. The DOR should only be charged with compliance and enforcement issues related to existing tax law not legislative policy decisions.
I've written before about tax credits in general. If the legislature wants to lower the cost of doing business it should lower tax rates for all businesses and not offer targeted tax credits only to those businesses that have the politicians' ears.
I suppose it could be worse. I could live in Iowa as Joe Kristen reminds me on an almost weekly basis.
The AJC reports that there is a little blame casting on who should ultimately have authority to monitor accountability. It appears that the Governor's office does a back of the napkin calculation for credits it vetoes and does nothing for credits that are signed into law. The legislature obviously does nothing, after all, what's the use once the press release, ribbon cuttings and photo ops are over? The Department of Revenue says it doesn't have the job of providing cost benefit analysis on tax credits, with which I agree. The DOR should only be charged with compliance and enforcement issues related to existing tax law not legislative policy decisions.
I've written before about tax credits in general. If the legislature wants to lower the cost of doing business it should lower tax rates for all businesses and not offer targeted tax credits only to those businesses that have the politicians' ears.
I suppose it could be worse. I could live in Iowa as Joe Kristen reminds me on an almost weekly basis.
Tuesday, January 5, 2010
IRS Proposes New Regulations Regarding Tax Preparers
On Monday the IRS announced the findings of its six-month research project.
The main recommended steps are:
1. Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number (PTIN). These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid.
The main recommended steps are:
1. Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number (PTIN). These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid.
2. Requiring competency tests for all paid tax return preparers except attorneys, certified public accountants (CPAs) and enrolled agents who are active and in good standing with their respective licensing agencies.
3. Requiring ongoing continuing professional education for all paid tax return preparers except attorneys, CPAs, enrolled agents and others who are already subject to continuing education requirements.
4. Extending the ethical rules found in Treasury Department Circular 230 -- which currently only apply to attorneys, CPAs and enrolled agents who practice before the IRS -- to all paid preparers. This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct.
I will have more thoughts on this to share later this week.
Monday, January 4, 2010
2010 Mileage Rates
Since today is most everyone’s first working day of the new year, I thought it might be appropriate to list the 2010 standard mileage rates that took effect January 1.
For 2010 the rates will be:
50 cents for business miles driven
16.5 cents for medical miles driven
14 cents for miles driven for a charitable organization
Standard mileage rates can’t be used if you have taken any depreciation under MACRS or for any vehicle you have taken a section 179 deduction. You also can’t use the standard deduction for vehicles held for hire or for more than four vehicles at once.
You do have the option of calculating and deducting the actual cost of operating the vehicle in lieu of the standard rate.
Each time these rates are announced, I am reminded that many years ago an automaker attempted to help taxpayers keep track of their mileage by having a button on the dash before the driver began his trip to indicate whether this was business, medical or charitable. At the end of the year the miles would be tallied.
There would be a couple of problems with this. First, this probably would not satisfy IRS record keeping requirements of keeping a log that indicate where and for what purpose you were traveling.
More importantly, this would mean that every time Elliot Spitzer picked up Kristen for a date, he would have to hit the ‘business’ button and every time Steve Phillips picked up his girlfriend Brooke he would have to hit the ‘Charity’ button.
For 2010 the rates will be:
50 cents for business miles driven
16.5 cents for medical miles driven
14 cents for miles driven for a charitable organization
Standard mileage rates can’t be used if you have taken any depreciation under MACRS or for any vehicle you have taken a section 179 deduction. You also can’t use the standard deduction for vehicles held for hire or for more than four vehicles at once.
You do have the option of calculating and deducting the actual cost of operating the vehicle in lieu of the standard rate.
Each time these rates are announced, I am reminded that many years ago an automaker attempted to help taxpayers keep track of their mileage by having a button on the dash before the driver began his trip to indicate whether this was business, medical or charitable. At the end of the year the miles would be tallied.
There would be a couple of problems with this. First, this probably would not satisfy IRS record keeping requirements of keeping a log that indicate where and for what purpose you were traveling.
More importantly, this would mean that every time Elliot Spitzer picked up Kristen for a date, he would have to hit the ‘business’ button and every time Steve Phillips picked up his girlfriend Brooke he would have to hit the ‘Charity’ button.
Thursday, December 31, 2009
Itemized vs. Standard Deductions
Each year taxpayers have the choice to take a standard deduction or to itemize their deductible expenses. This is usually a pretty simple decision. If your itemized expenses exceed the standard deduction for your filing status, complete schedule A and deduct the itemized amount.
For residents of Georgia (and possibly other states), the state’s standard deduction has largely remained constant with little or no adjustment for inflation. This creates a widening gap between the federal and state amounts for standard deductions. A Georgia resident who itemizes on their federal return must itemize on their Georgia return and taxpayers who take the standard deduction must also take the Georgia standard deduction. The quirk is that while Georgia allows 100% percent of the itemized deduction to reduce Georgia’s taxable income, Georgia only gives a standard deduction that amounts to one-quarter of federal deductions for most filing statuses (Single taxpayers are afforded about 40% of the federal amount).
This means that some taxpayers whose itemized deductions exceed the state but fall short of the federal standard deductions may save a few dollars by taking the smaller itemized deduction in lieu of the federal standard deduction.
The following chart shows the ‘break-even’ points at which residents of Georgia may prefer to itemize for each filing status and federal tax rate. The chart assumes a flat 6% rate for Georgia taxes and disregards any additional deduction for age or blindness.
For residents of Georgia (and possibly other states), the state’s standard deduction has largely remained constant with little or no adjustment for inflation. This creates a widening gap between the federal and state amounts for standard deductions. A Georgia resident who itemizes on their federal return must itemize on their Georgia return and taxpayers who take the standard deduction must also take the Georgia standard deduction. The quirk is that while Georgia allows 100% percent of the itemized deduction to reduce Georgia’s taxable income, Georgia only gives a standard deduction that amounts to one-quarter of federal deductions for most filing statuses (Single taxpayers are afforded about 40% of the federal amount).
This means that some taxpayers whose itemized deductions exceed the state but fall short of the federal standard deductions may save a few dollars by taking the smaller itemized deduction in lieu of the federal standard deduction.
The following chart shows the ‘break-even’ points at which residents of Georgia may prefer to itemize for each filing status and federal tax rate. The chart assumes a flat 6% rate for Georgia taxes and disregards any additional deduction for age or blindness.
Federal Rate - Dollar Amount (rounded to nearest dollar)
Single ($5,700 Fed - $2,300 State standard deductions)
10% - $4,425
15% - $4,729
25% - $5,042
28% - $5,100
33% - $5,177
35% - $5,202
MFS ($5,700 Fed - $1,500 State standard deductions)
10% - $4,125
15% - $4,500
25% - $4,887
28% - $4,959
33% - $5,054
35% - $5,085
MFJ ($11,400 Fed - $3,000 State standard deductions)
10% - $8,250
15% - $9,000
25% - $9,774
28% - $9,918
33% - $10,108
35% - $10,171
HOH ($8,350 Fed - $2,300 State standard deductions)
10% - $6,075
15% - $6,621
25% - $7,179
28% - $7,282
33% - $7,419
35% - $7,464
Tax software makes this easy to see which method is more advantageous. If you have any questions, you should contact a tax professional.
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