Why Filing Taxes for Your Client, Even When They Aren't Required, Might Be a Good Thing!

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Most all tax preparers understand how income levels and filing requirements are contingent upon filing status, age and the type of income clients receive. What is often overlooked, however, even when clients aren't required to file with Uncle Sam, is the fact that it may indeed advantage them to do so.

Not surprisingly, the Irs provides definitive instructions on the requirements for filing Forms 1040, 1040A, or 1040Ez. With all of the new prestige tax revisions and exceptions, some tax preparers are turning to Tax Cpe procedure materials or Ea Cpe curriculum to brush up on how these new revisions stand to advantage clients. Some continuing instruction tax courses are even focused exclusively on these new tax laws, showing tax preparers how to clients who fit into this scenario to get the greatest bang out of their tax returns.

Form 1040 Instructions

Quick Tips on Non-Required Filing Benefits

Why Filing Taxes for Your Client, Even When They Aren't Required, Might Be a Good Thing!

Homebuyer Credit

First time homebuyers are eligible for a maximum 00 or 00 if filing married status separately. To qualify, a someone must have entered into a compact on or before April 30th 2010 and have accomplished by September 30th 2010.

Tax Withheld

For taxpayers who have estimated their tax payments, had a former years overpayment, or had income tax withheld, they may be eligible for a refund.

Child Tax Credit

If a taxpayer has at least one child that qualifies and they didn't receive the full estimate of the current Child Tax prestige originally, they could get a refundable credit.

American occasion Credit

Given the newly renamed and vast Hope credit, taxpayers can claim this prestige for tuition and positive fees for undergraduate and post-secondary education. The maximum prestige per student is ,500.

Earned income Tax Credit

For those individuals who worked but earned dinky in 2010, this tax prestige may prove beneficial in considering to file because it may qualify them for a refund.

Health Coverage Tax Credit

This prestige is primarily for individuals who have received Adjustment aid (either Trade or Reemployment Trade). Further, those receiving Pbgc pension payments may also qualify and receive a credit.

Quick Tips of Non-Required Filing for Losses

Two Scenarios

When taxpayers have suffered an whole loss because of an speculation losses:

• Only if filed in 2010 can they carry that loss transmit and offset dutible capital gains in future years
• They can carry these losses as far back as 2008 and perhaps ask a reimbursement of carry forward, but, again, only if they filed in 2010.

When taxpayers have company losses that experienced a net operating loss (Nol) for 2010:
There are a plethora of resources ready that cover these details and the types of taxpayers that fall into this unique category. The key for enrolled agents, certified collective accounts and other tax professionals is to do the research, sign up for an enrolled agent class or look on the tax Cpe sites that showcase this information.

Irs Circular 230 Disclosure

Pursuant to the requirements of the Internal income aid Circular 230, we forewarn you that, to the extent any guidance relating to a Federal tax issue is contained in this communication, together with in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax connected penalties that may be imposed on you or any other someone under the Internal income Code, or (b) promoting, marketing or recommending to another someone any transaction or matter addressed in this communication.

Why Filing Taxes for Your Client, Even When They Aren't Required, Might Be a Good Thing!Is the IRS lying and defrauding the American people? Hear from the man who beat Video Clips. Duration : 45.58 Mins.

Robert Lawrence challenged the IRS claim that he is required to file a 1040 Income Tax Confession Form and pay a Federal Income Tax. The US Government charged him with committing “tax crimes”, but later dismissed these charges! The IRS dropped the case when they found out that Robert relied on the instructions within the IRS' 1040 booklet and the law. Robert had proof from these sources that he was not required to file. Hear how this living “David” won his victory over the paper-tiger “Goliath” (the IRS). Freedom Law School Speaker: Robert Lawrence Host: Peymon Mottahedeh
Keywords: googlevideo

WHAT'S NEW FOR NEW YORK STATE INCOME TAXES FOR 2012

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The2012 New York State income tax returns are now available online.
Thefirst thing I noticed is that Page 1 of the IT-201 and IT-203 resident andnon-resident income tax forms are expanded to include a detailed listing ofdependents. 
Theforms are still 4 pages, and the space for the dependent listing section ismade by eliminating the detail for itemized deductions previously on the bottomhalf of Page 2.  The itemized deductionschedule has been moved to new Forms IT-201-D and IT-203-D.  
Goodnews, at least for me.  Forms IT-2,IT-1099-R, and IT-1099-UI have been eliminated! I no longer have to waste my time filling in these stupid forms.  We now merely attach the state copy of theW-2 and appropriate 1099s with the filing of the return, like with the federaland other state filings, and like what used to be the case with NY state filings.  Thank God for small favors.  
Taxrates have been reduced for taxpayers with taxable incomes of over $40,000. andthe tax computation worksheets for taxpayers with New York adjusted grossincome of more than $100,000 are now based on filing status.
Taxpayersrequesting direct deposit are asked some additional information about the bank accountto which refunds are to be deposited, and taxpayers must now enter only whole dollaramounts on income tax forms (nothing major here – I have never used cents ontax returns, except for some dependent returns).
Thereare a couple of new tax credits for 2012, including a “Beer Production Credit”.  Too bad there is not a “Beer ConsumptionCredit”.
The2012 NJ returns are not yet available.  Iwill let you know when they are.

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ - SPECIAL FRIDAY EDITION!

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Anotherspecial Friday edition of the BUZZ!
* There isstill time for you to order my stocking stuffers!  Click here and here and here and here.  Hey, it is ok to buy them for yourself (andthey are tax deductible)!
* And don’tforget my special pre-publication offer for MY BEST TAX ADVICE.
*I never thought I would ever reference something written by an idiot fromCongress in a positive light here.  But heregoes.  An editorial by Sen. Jeff Bingaman,a Democrat at that, actually gets it right! He tells the other idiots in Washington, “Don’t Tie Tax Extenders Bill to Fiscal Cliff”.
He correctly says (highlight ismine) –
“Lostamong the fiscal cliff debates on marginal tax rates and the sequester is abipartisan package of important tax cuts that the House and the Senate shouldtake up and pass immediately,regardless of whether Democrats and Republicans can reach a larger compromise.”
And –
“WhileI hope the negotiations to avert the fiscal cliff are successful, we should notwait for a “grand bargain” to materialize before we finish our work on tax extenders.Tax extenders are different from the other fiscal cliff issues.”
Who knew an idiot from Congresscould actually say something smart!  As Iwrite this I am looking out my window for airborne pigs.
* Along these lines, ACCOUNTINGTODAY reports that “IRS Warns Congress Tax Season Might Be Delayed until March or Later without AMT Patch”.
*The WALL STREET JOURNAL knows “A Bad Budget Deal” when they see one, and feel,“Higher taxes now for notional reformlater is worse than nothing”.
They also tell us (highlight ismine) –
“It'sclear by now that the budget talks are drifting in a drearily familiarWashington direction: Tax and spending increases now, in return for the promiseof spending cuts and tax and entitlement reform later. This is a bad deal for everyone except the politicians who want moremoney to spend.”
* TrishMcIntire explains the IRS “Identity Theft PIN” at OUR TAXING TIMES.
*Jamaal Solomon, himself an EA, lists the latest in a series of “Reasons Why You Should Love EAs: John Sheeley, EA” at TAX FACTOR.
WhileI have never met John, he has been an online friend and supporter for severalyears.
BTW,Jamaal is correct when he says, “EAs arethe only federally licensed tax practitioners who specialize in taxation andalso have unlimited rights to represent taxpayers before the IRS.”  RTRPs may be federally licensed taxpractitioners who specialize in taxation, but their rights to representtaxpayers before the IRS is limited.  AndCPAs may have unlimited rights to represent taxpayers before the IRS, but theyare in no way, shape or form federally licensed tax practitioners whospecialize in taxation.
*I came across some good non-tax news via CNN MONEY (by way of theAccountantsWorld.com daily headlines) – “Refunds from Credit Card Issuers on the Way”.
Ijust wish we didn’t have to wait till March to get the credit.
*The TAX ADVISOR’s Tax Clinic reminds us of the importance of “Contemporaneous Documentation of Charitable Contributions”.
Thisitem elaborates on what I included in my MAINSTREET.COM article “How to Give at the Holidays With Tax Day in Mind”. 
*Kay Bell has been running a series titled “Reindeer Year-end Tax Games”, withyear-end tips provided each day by Santa’s sleigh-pullers.  For example, #7 was “Donder Says Harvest Investment Losses”.     
*Paul Neiffer explains the annual gift tax exclusion in “Annual Exclusion Update”at FARM CPA TODAY.  
*Kelly Phillips Erb, the internet’s TaxGirl, has a thoughtful post worth readingat FORBES.COM – “Lawmakers, Guns and Money: Where Do We Go After Sandy Hook?”.
*And Kelly continues her “12 Days of Charitable Giving 2012” by highlighting “Doctors Without Borders”.
THELAST WORD
Ihope you have a “successful” Christmas holiday!
Iwill be continuing with my annual tradition of typing W-2s on Christmas Eve(and New Years’ Eve), and driving to New Jersey for a homemade Christmas Daydinner with my sister.  As such, this yearI am NOT dreaming of a white Christmas.
Don'tforget animals in your holiday charitable giving. Support your local non-profitanimal shelters & rescue groups. Check out www.petfinder.org.
“Talk”to you again next Wednesday!
HO!HO! HO!
TTFN

THE AMERICAN TAXPAYER RELIEF ACT OF 2012

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Hereis a listing of the major provisions of the American Taxpayer Relief Act of2012 (passed in 2013) that affect Form 1040 (and 1040A) filers, based on my readings -
(1)  All the expiring “Bush” tax cuts(from the Economic Growth and Tax Relief Reconciliation Act of 2001 and theJobs and Growth Tax Relief Reconciliation Act of 2003) are made permanent, withthe addition of a new top tax rate for regular income tax and capital gains andqualified dividends.
Theindividual marginal tax rates will remain 10%, 15%, 25%, 28%, 33%, and 35%,with a new top rate of 39.6% on taxable income over $400,000 for Single,$425,000 for Head-of-Household filers, $450,000 for Married Filing Joint, and$225,000 Married Filing Separate.
Thespecial tax rates for capital gains and qualified dividends remains at 15% forthose in the 25% - 35% tax brackets and 0% for those in the 10% and 15%brackets.  A 20% rate will apply to thosein the new 39.6% bracket.  
(2)  The exemption amount for the dreadedAlternative Minimum Tax (AMT) is permanently indexed for inflation, retroactiveto January 1, 2012, as is relief from the dreaded AMT for nonrefundablecredits. For 2012 the exemption amounts are $50,600 for single filers, $78,750for married taxpayers filing joint returns, and $39,375 for separate filers.
(3)  The American Opportunity Credit forqualified tuition and other post-secondary education expenses and the recently enhancedprovisions of the Child Tax Credit and the Earned Income Credit are extendedthrough 2017.  The basic “Bush-era”increases to the Child Tax Credit (from $500 to $1,000 per qualifying child)and the Earned Income Credit are made permanent.  
(4)  The PEP and Pease reductions ofpersonal exemptions and itemized deductions based on “excessive” Adjusted GrossIncome (AGI) are reinstated.  The amountsof AGI at which the reductions kick in are $250,000 for Single, $275,000 forHead of Household, $300,000 for Married Filing Joint, and $150,000 for MarriedFiling Separate.
Itemized deductions are reduced by3% of the amount a taxpayer’s AGI exceeds the appropriate amount.  The reduction cannot exceed 80% of itemized deductions,with some adjustments.   
Personal exemptions are reduced by2% for each $2,500 ($1,250 if Married Filing Separate), or portion thereof, thata taxpayer’s AGI exceeds the appropriate amounts.
(5)  The following “temporary” taxbenefits are extended for 2012 and 2013 -
·     Theabove-the-line deduction for certain expenses of elementary and secondaryeducators;
·     Theabove-the-line deduction for qualified tuition and related expenses;
·     Theitemized deduction as interest for mortgage insurance premiums;
·     Theoption to elect to claim as an itemized deduction state and local general salestaxes instead of state and local income taxes;
·     Theexclusion from gross income of discharge of qualified principal residenceindebtedness; and
·     Theability to make a direct tax-free transfer of IRA distributions to a charityand use this as one’s Required Minimum Distribution (RMD).  
Taxpayers can choose to treatdistributions made from an IRA to a charity in January of 2013 as being made inDecember of 2012, and to treat an IRA distribution received in December of 2012as a tax-free transfer to a charity if the money is transferred to a charitybefore February 1 of 2013.
(6)  The increased Section 179 expensingamounts and the additional 50% first-year bonus depreciation are extended through2013.  For 2012 and 2013 the maximumSection 179 deduction is $500,000, with a “qualifying property threshold” of $2Million.  
And under the Act the federal EstateTax and Gift Tax lifetime exclusion of $5 million indexed for inflation ($5.12million in 2012) is made permanent, with the top tax rate increasing from 35%to 40% effective Jan. 1, 2013. The option of the Estate Tax “portability”election (under which the surviving spouse’s exemption amount is increased bythe deceased spouse’s unused exemption amount) is also permanent. 
This legislation also extends forone-year unemployment benefits that were due to expire Jan. 1^st, anddelays until March 1 the across-the-board budget cuts known as “sequestration”that were supposed to take effect on January 2nd.
What is noticeably missing is anextension of the 2% reduction of the employee’s share of Social Security Taxwithholding, and the corresponding reduction in the Self-Employment Tax, whichexpired on December 31, 2012.  This wasthe latest incarnation of Dubya’s disastrous tax rebate checks.  It appears that no new “gimmick” will replacethe 2% reduction. 
Beginning with pay checks issuedafter December 31, 2012, the employee’s share of Social Security Taxwithholding will return to 6.2% of wages (up to the maximum wage base), equalto the employer’s share, and the Self-Employment Tax will return to 15.3% forthe same combined maximum W-2 and net self-employment earnings base .  So everyone will get a 2% cut in paybeginning January 1, 2013.
I wish that the idiots in Congresswould have either “fished or cut bait” regarding the “extenders”.  Some should have disappeared and other madepermanent (as long as they were making just about everything else permanent). 
The deduction for educator expenses hasalways confused me.  It is of no realconsequence - the tax savings is $60-$70 for most educators.  Depending on where you live, this barelycovers the cost of a dinner out.  And whywere educators singled out.  Are theymore valuable than policemen, firemen, nurses, EMTs, or even school cafeteriaworkers, all of whom have “out of pocket” employee expenses?
And God only knows why the deductionfor mortgage insurance premiums was ever created.  It is basically life insurance.  I expect some Congressarseholes owed the mortgageinsurance lobby a favor.  It certainlyshould not have been extended.
As mentioned in an earlier post,there is absolutely no “tax reform” in the Act. CCH has published a good "Tax Briefing" on the Act.  Click here to download the briefing.
TTFN 

IT'S HERE - MY BEST TAX ADVICE!

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It’shere!  MY BEST TAX ADVICE has “gone topress”!
AsI mentioned last month, this special report is “chock-a-block” with the besttax advice I have accumulated from over 40 years of preparing 1040s forindividuals in all walks of life.
Theadvice in this report is not aboutspecific tax deductions, credits, situations, or “loopholes”, and is not specific to 2012, 2013, or anyother tax year.  I talk about choosing atax preparer, recordkeeping, record retention, tax planning concepts, and manyother topics.
Italso includes the best tax advice of my fellow tax bloggers, and a listing ofonline tax planning and preparation resources.
Iwill send this special report to you as a “pdf” email attachment for only $4.95!
Companies,organizations, professionals, and publishers who would like to give this reportas a “gift” or “benefit” to customers, clients, members, or subscribers canalso purchase “reprint rights”.  If youthink you may be interested in this, order and pay for a copy.  If you do decide to purchase the reprintrights the $4.95 cost of the report will be deducted from the fee for theserights.
Sendyour check or money order payable to TAXES AND ACCOUNTING, INC and your emailaddress to –
MYBEST TAX ADVICETAXESAND ACCOUNTING, INCPOSTOFFICE BOX AHAWLEYPA 18428
TTFN

HAPPY NEW YEAR!

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{I hear that the Senate has passed a bill.  But it ain't over till it's over.  And I do not hear the fat lady warming up yet.  The House still has to accept, reject, or revise the bill}

Wellwe have done it – American has fallen over the “fiscal cliff”.
Actuallythat is not quite true.  As Rex Nuttingexplained in his commentary “Stop Calling It A Fiscal Cliff” at MARKETWATCH.COM-
“The fiscal cliff is a misleading metaphor.The laws will change on that day, it’s true, but the impact will be spread outover many, many months. In fact, the effects are already being felt,particularly in financial markets. Businesses, investors, workers and consumershave begun to prepare for the changes, and that’s caused the economy to slow abit already.
It’s not a NiagaraFalls, with billions of gallons going over a cliff. It’s more like a bathtubslowly filling up. And, on Jan. 1, it’s going to spill over the edge.Eventually, it will flood the house, but that’ll take time.
It’s not an explosion;it’s water torture.”
Whathas happened, from a tax point of view, is this – the idiots in Washington havedone nothing to extend the tax law that expired on December 31, 2011, andDecember 31, 2012.
Sowhat is new for taxes for 2013?
(1)  The contribution limits for tax-deferredpension accounts are -·     IRA= $5,000·     IRACatch-Up Contributions at age 50 and older = $1,000·     SIMPLEPlan = $12,000·     SIMPLECatch-Up Contributions at age 50 and older = $2,500·     401(k),403(b), Profit Sharing Plans = $17,500·     Catch-UpContributions for these plans at age 50 and older= $5,500(2)  The Standard Mileage Allowance ratesare – • 56.5 cents permile for business  • 24 cents permile for medical or moving • 14 cents permile in in service of charitable organizations  (3)  The following provisions ofObamacare take affect –·     The employee’s share of the Medicare tax increases by 0.9% - to2.35% - for taxable wages over $200,000 for single filers, $250,000 for jointfilers, and $125,000 for married couples filing separately. The self-employmenttax is similarly increased on these levels of income.·     A new 3.8% “surtax” on “net investment income” is added on theForm 1040 for taxpayers with “modified” AGI (MAGI) over $200,000 for singles,$250,000 for joint filers, and $125,000 for married couples filingseparately.  ·     Ifyou are under age 65 you will only receive a tax benefit for your itemizedmedical expenses if the total of your allowable expenses exceeds 10% of yourAdjusted Gross Income (AGI).  ·     Employeecontributions to an employer-provided medical expense FSA are limited to $2,500per year.Whatelse?  To be honest – God only knows, andhe ain’t talking!If the idiots inWashington continue to do nothing we will be taxed like its 1999, or actually2000.  The so-called “Bush” tax cuts andthe various BO tax benefits expired on December 31, 2012.  Therefore, as of January 1, 2013, the Tax Codepretty much goes back to the way it was on December 31, 2000, unless there issome kind of tax extension or tax reform legislation passed.Actually, at thispoint we really do not know how we are being taxed for 2012 either.  The popular “extenders”, including the AMT patch,expired on December 31, 2011.So, based on the TaxCode as of this writing, American taxpayers will need to dig deep in theirpockets to pay their 2012 and 2013 federal income tax bills!My only hope is thatthe idiots in Washington at least act on the dreaded AMT and the other“extenders” before the end of January so I can begin the “season” knowing howto properly prepare 2012 tax returns.Regardless of yourpolitical “persuasion” – the Republicans, the Democrats, and BO are all equallyguilty of acting like idiots during this nonsense.   TTFN

WHAT’S THE STORY, MORNING GLORY? WHAT’S THE WORD, HUMMING BIRD?

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Isit time for a change?  Or do you prefer Ikeep WHAT’S THE BUZZ as the title?  Letme know.  
*Russ Fox has announced the winner of the prestigious “Tax Offender of the Year”for 2012 at TAXABLE TALK.
“To be considered for this award you must domore than cheat on your taxes. It has to be special; it really needs to be aBozo-like action or actions.”
Iwas disappointed to see that the idiots in Congress were the runner up thisyear - #2 (and yes, you can imply the appropriate comment regarding Congressbeing #2).  Congress was the 2011 The TaxOffender of the Year.  I felt that theiractions, or rather inactions, and especially the fiscal cliff nonsense theyperpetuated, certainly qualified them for the 2012 award as well.
Whowas #1?  Steven Martinez.  Why is he such a bozo?  You will have to read Russ’ post to find out.
*CCH has published a Tax Briefing of the Senate’s “Fiscal Cliff Legislation”.
*Dr. Jean Murray identifies “#1 Most Important New Year's Resolution for Your Business” at ABOUT.COM -
"Iresolve to keep excellent records in my business this year."
Lookfor my suggestions for 2013 New Year’s resolutions at the MAINSTREET.COM Taxespage coming soon!
 
* Somegood advice from a “tweet” by ‏@scheumanncpa (if I may be permitteda slight correction) -
“Ok...do yourself and your {tax pro –rdf} a favor and go outside and writedown your odometer reading on your vehicles." *A great post caught my eye last week as I was waiting for BO and his fellowidiots in Congress to perform a miracle. It was “Your Tax Accountant's Top 10 ‘No’ Responses for 2012” by EA DavidFazio at his EAT...TAX... LOVE : Insights from an Tax Pro blog.
Forthe most part his clients are like mine – “They'rehonest, hard-working Americans who faithfully file their taxes every year”.  And it seems they ask similar questions.  Here are some of special interest, withDave’s correct answers, which echo what I have posted here over the years (asDave put it in a “tweet” – “Great taxminds truly do think alike!”) –
“Q. I just got married.  Human Resources sent me a new W-4 to fillout.  Should I check "Married"?
A.  NO. Assuming your spouse is also working, you need to discuss this with yourtax professional or continue as ‘Single’ for the remainder of the year.  Note that unless you take the time to fullycomplete the ‘Two Earners/Multiple Jobs’ worksheet on the back of the W-4, youcould find yourself under withheld when you have your return prepared.  Remember, unless you complete the worksheet,‘Married’ tricks the payroll company's computer into thinking that you are theonly one working.  If you file a jointreturn, your incomes and deductions get combined.  I have too many sad stories of newlywedswhose first interaction with the IRS as a married couple is to go on aninstallment plan because they screwed up their W-4 form.
Q.  My mom is 90. So she doesn't need to file, right?
A.  NO. Whether or not to file depends on your gross income.  There is no age cut-off (despite rumors tothe contrary).  For a single person 65 orolder, a return is not required if their income (excluding Social Security) isless than $11,200.  For a married couplewho are both 65 or older, the income limit is $21,800 for 2012.  Note that even if their income is below theseamounts, their tax forms (particularly Form 1099-R and 1099-SSA) should bechecked for federal tax withheld.  Iftaxes were withheld they can file simply to get this refunded to them even ifthey are not legally required to file a tax return.
Q.  I need to wear a suit and tie to work.  If I don't I'll be fired.  Can I deduct the cost of buying businessclothes and having them dry cleaned?
A.NO.  Clothing is a personal and thereforenon-deductible expense.  There aregenerally 2 exceptions.  If the clothingis not suitable for outside wear, it can be deductible.  This would include things like nursingscrubs, police uniform or an article of clothing with a company logo on it(think of the old Century 21 jackets the real estate agents used to wear).  The other exception is protective clothingsuch as steel-toed boots, work gloves or a hardhat.  I often have men and women in skilled trades(construction, painting, plumbing) noting that they go through scores of jeansfor work because they get ripped, stained, etc. Jeans are suitable for outside wear and are therefore non-deductible.
Q.I know I will owe. There is NO WAY I can pay the IRS what I owe them, but Ishould be able to pay them in full in a year. My best bet is to just file nextyear when I have the money.
A.NO! NO! NO! I can't stress enough the importance of filing a return on time.Even if you owe thousands of dollars. The penalty for not paying the tax by thedue date is 1/2% per month (0.50%). The penalty for not filing the return is 5%per month. The cost of not filing the return is literally 10 times higher thanthe cost of not paying the tax. So get the return filed by April 15th (orOctober 15th if you are ‘on extension’) and work (or have me work) with the IRSto setup a payment plan.”
*I hope it isn’t, but I will not be surprised if “2013 May Be the Year ofPerpetual Fiscal Crisis”, as Howard Gleckman suggests at TAXVOX.
*According to comedian Andy Borowitz in his satirical BOROWITZ REPORT at The NewYorker “Al Qaeda Disbands; Says Job of Destroying U.S. Economy Now in Congress’s Hands” -
“The internationalterror group known as Al Qaeda announced its dissolution today, saying that‘our mission of destroying the American economy is now in the capable hands ofthe U.S. Congress’.
In an officialstatement published on the group’s website, the current leader of Al Qaeda saidthat Congress’s conduct during the so-called ‘fiscal-cliff’ showdown convincedthe terrorists that they had been outdone.”
*Jason Dinesen takes a look at his predictions for 2012 in “6 Tax Predictionsfor 2012 — How Did I Do?”.  
*Joe Kristan’s comments on the lack of progress in the fiscal cliff negotiationsthat led off his Monday "Tax Roundup” are worth repeating (yes, I agree withJoe) -
“Rest assured, though, that even when theycobble together a lame and harmful deal, as they will today or weeks from now,they won’t even begin to address the real fiscal calamity — the government’sincontinent spending.
The unforgivable sinof the current president, and the last one, and their Congressional enablers,is spreading the idea that the government can buy us all free stuff, and therich guy will pick up the tab. Sorry.  The rich guy isn’t buying.”
*Over at OUR TAXING TIMES, Trish McIntire suggests some “IRS Prevention”.
*It seems I have won MISSOURI TAXGUY Bruce McFarland over to the cause of GRIP(Get Rid of Incumbent Politicians).  Inan extended “tweet” he suggests –
“So I say to you, next time a vote for Senatorsand Representatives, if they have been in office, don’t vote for them, let’sget a whole new group of folks in there. ‘The Good ol’ Boys’ have lost theirway.”
Brucepoints out –
“It shouldn't be ignored that lawmakers had507 days to address this problem (since the August, 2011 debt ceilingagreement).”
Regardingthe so-called “Bush” tax cuts - the idiots in Congress have had 12 years todeal with their expiration!
TTFN

SURPRISE! SURPRISE! SURPRISE!

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Tomy great surprise, and the surprise of most other tax bloggers and taxprofessionals, the House approved the Senate tax bill by a vote of 257-167 latelast night.  The American Taxpayer ReliefAct of 2012 now goes to BO for signature.
OnceI have had time to “digest” all of its provisions I will post a detailedanalysis of how the Act will affect 2012 and 2013 (and beyond) 1040s, withappropriate commentary.
WhileI am glad that at least something has been done - we now know how to properlyprepare 2012 tax returns, and the correct 2013 withholding tables can now bepublished – I am somewhat saddened by the final result. 
Itlooks to me that this Act, which makes most of the “Bush” tax cuts permanent, permanentlyextends the AMT “patch” retroactive to January 1, 2012, and extends therefundable credits through 2017, kills any hopes for a serious and substantiveoverhaul of the mucking fess that is the US Tax Code in 2013.
Itappears that now that this tax bill has been passed the idiots in Congress arenow finished with taxes for 2013.  Thisincludes the Republicans -   
“Nowthe focus turns to spending,” Republican House Speaker John Boehner said,promising that his party would “hold thepresident accountable for the balanced approach he promised, meaningsignificant spending cuts and reforms to the entitlement programs that aredriving our country deeper and deeper into debt.”
Yes,there needs to be a focus on cutting spending. But it should not be limited to reducing “entitlement programs”.  There is so much waste and pork in anygovernment budget – and this needs to be seriously addressed.  And there should also still be a focus on taxreform.
TheTax Reform Act of 1986 was passed because of Ronald Reagan’s commitment andleadership.  BO and the Democrats are notcommitted to legitimate tax reform, and will not provide leadership.
Whilereviewing the results of a Google search of Fiscal Cliff news I came across thepost “'I Will Ask For More Tax Increases on the Rich Later,' Obama Promises” byRobert Lenzner at FORBES.COM.
“On the eve of the pathetically rotten ‘fiscalcliff’ deal, President Obama has promised to reform the tax code ‘so thatwealthy individuals, the largest corporations, can’t take advantage ofloopholes and deductions that aren’t available to the rest of America’.”
Soit appears BO equates “tax reform” with “taxing the wealthy”.  
Actually,due to AGI phase-outs, wealthy individuals can’t take advantage of somedeductions and credits that are available to the rest of America.
BOand the Democrats want to continue to complicate the convoluted Tax Code with thebad tax policy of distributing social welfare and other benefits through theTax Code, instead of having these benefits distributed through “normal”channels via the budgets of the appropriate cabinet departments.
Thereis no tax reform in the compromise tax bill, other than BO-style reform (taxing the wealthy).  And it adds more complexity to the Code with thereinstatement of PEP and Pease AGI-based reductions of itemized deductions and thepersonal exemption for the “wealthy”.
Iwill continue to speak out for a serious and substantive rewriting of the TaxCode, and hope that others will as well. But I am not hopeful that anything of value will be done to fix thebroken Code in 2013.
TTFN

SHAMELESS SELF PROMOTION

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Do you, or your membership organization, publish aprint or online newsletter or magazine? Are you, or your organization, looking for content on federal, or NewJersey state, income taxes?  Look nofurther.
I can write articles, columns, or blogs for your“publication” or portal – for a fee, of course. The articles, column, or blog can be geared toward a specific taxpayerdemographic or a specific trade or profession. The column or blog can be an “Ask the Taxpro”, with your members orreaders submitting questions.  I have been writing THE WANDERING PRO regularly sinceJune of 2001, so you have plenty of samples of my writing.  You can also get more samples of articles,columns, and guest posts I have written for other sources at http://robertdflach.blogspot.com.I am willing to work within your budget.I can also provide original syndicated content on taxesand a variety of other subjects for weeklies and advertisers.Interested in having me write about taxes for yourvenue?  Email me at rdftaxpro@yahoo.com with “WRITING INQUIRY” in thesubject line. I look forward to hearing from you!If you know of anyone who might be interested in myservices, I would appreciate it if you would pass this post along to them.TTFN

Why Filing Taxes for Your Client, Even When They Aren't Required, Might Be a Good Thing!

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Most all tax preparers understand how income levels and filing requirements are contingent upon filing status, age and the type of income clients receive. What is often overlooked, however, even when clients aren't required to file with Uncle Sam, is the fact that it may indeed advantage them to do so.

Not surprisingly, the Irs provides definitive instructions on the requirements for filing Forms 1040, 1040A, or 1040Ez. With all of the new prestige tax revisions and exceptions, some tax preparers are turning to Tax Cpe procedure materials or Ea Cpe curriculum to brush up on how these new revisions stand to advantage clients. Some continuing instruction tax courses are even focused exclusively on these new tax laws, showing tax preparers how to clients who fit into this scenario to get the greatest bang out of their tax returns.

Form 1040 Instructions

Quick Tips on Non-Required Filing Benefits

Why Filing Taxes for Your Client, Even When They Aren't Required, Might Be a Good Thing!

Homebuyer Credit

First time homebuyers are eligible for a maximum 00 or 00 if filing married status separately. To qualify, a someone must have entered into a compact on or before April 30th 2010 and have accomplished by September 30th 2010.

Tax Withheld

For taxpayers who have estimated their tax payments, had a former years overpayment, or had income tax withheld, they may be eligible for a refund.

Child Tax Credit

If a taxpayer has at least one child that qualifies and they didn't receive the full estimate of the current Child Tax prestige originally, they could get a refundable credit.

American occasion Credit

Given the newly renamed and vast Hope credit, taxpayers can claim this prestige for tuition and positive fees for undergraduate and post-secondary education. The maximum prestige per student is ,500.

Earned income Tax Credit

For those individuals who worked but earned dinky in 2010, this tax prestige may prove beneficial in considering to file because it may qualify them for a refund.

Health Coverage Tax Credit

This prestige is primarily for individuals who have received Adjustment aid (either Trade or Reemployment Trade). Further, those receiving Pbgc pension payments may also qualify and receive a credit.

Quick Tips of Non-Required Filing for Losses

Two Scenarios

When taxpayers have suffered an whole loss because of an speculation losses:

• Only if filed in 2010 can they carry that loss transmit and offset dutible capital gains in future years
• They can carry these losses as far back as 2008 and perhaps ask a reimbursement of carry forward, but, again, only if they filed in 2010.

When taxpayers have company losses that experienced a net operating loss (Nol) for 2010:
There are a plethora of resources ready that cover these details and the types of taxpayers that fall into this unique category. The key for enrolled agents, certified collective accounts and other tax professionals is to do the research, sign up for an enrolled agent class or look on the tax Cpe sites that showcase this information.

Irs Circular 230 Disclosure

Pursuant to the requirements of the Internal income aid Circular 230, we forewarn you that, to the extent any guidance relating to a Federal tax issue is contained in this communication, together with in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax connected penalties that may be imposed on you or any other someone under the Internal income Code, or (b) promoting, marketing or recommending to another someone any transaction or matter addressed in this communication.

Why Filing Taxes for Your Client, Even When They Aren't Required, Might Be a Good Thing!Is the IRS lying and defrauding the American people? Hear from the man who beat Video Clips. Duration : 45.58 Mins.

Robert Lawrence challenged the IRS claim that he is required to file a 1040 Income Tax Confession Form and pay a Federal Income Tax. The US Government charged him with committing “tax crimes”, but later dismissed these charges! The IRS dropped the case when they found out that Robert relied on the instructions within the IRS' 1040 booklet and the law. Robert had proof from these sources that he was not required to file. Hear how this living “David” won his victory over the paper-tiger “Goliath” (the IRS). Freedom Law School Speaker: Robert Lawrence Host: Peymon Mottahedeh
Keywords: googlevideo

A LAST MINUTE AGREEMENT

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AsI do each morning when I rise (except during the tax season), I have been checkingTwitter for tax-related “tweets” that lead me to online sources of news andcommentary.  This morning I wasespecially interested in finding details on the literally 11^th-hourSenate “fiscal cliff” agreement.
CNNMONEY tells us “Senate Bill Stops Many Tax Hikes, but Leaves Big Issues Pending”.  The bill would (highlights are mine) -
“Make most Bush tax cuts permanent: The Bush-era income tax rates would be permanently extended for all income upto $400,000 ($450,000 if married). Bush tax cuts that apply to income abovethose levels would expire.
Effectively that means forhouseholds above those thresholds, their top rate would rise to 39.6%, up from35% in 2012.
Plus, the capital gains and dividendtax rates for these high-income households would increase to 20% from 15%. Foreveryone else, investment tax rates would remain at 15% or below {I assume permanently, and I assumethe 0% rate remains – rdf}.
The compromise bill would alsopreserve the expanded parameters for the American Opportunity Tax Credit, theChild Tax Credit and Earned Income Tax Credit for 5 more years.
Permanently protect the middle classfrom the AMT: The bill would permanentlyadjust the income exemption levels for the Alternative Minimum Tax forinflation.
Cap itemized deductions onhigh-income households: The Biden-McConnell compromise would cap how much thosemaking $250,000 (married couples making $300,000) may take in itemizeddeductions.
Retain several expired tax breaksfor individuals: The compromise bill would extend for one or two years a few"temporary" tax breaks for individuals that regularly are extended.These include an option to deduct state and local sales taxes in place of stateand local income taxes; and a deduction for elementary and secondary schoolteachers for certain expenses.
Permanentlyextend a more lenient estate tax: The legislation would preserve the currentestate tax exemption level of $5.12 million but index it to inflation forfuture years. And it would raise the top rate to 40% from 35% currently.”
Anynegotiated agreement made at the very last minute (literally) by idiots likethe members of Congress is bound to be at the very least flawed, if notactually bad.
Myconcern is that in making the bulk of the provisions “permanent” will give theAdministration an excuse to avoid tackling serious and substantive tax reformin 2013 (or through 2016) as had been hoped for (at least by me) – since thereis no looming expiration deadline.
Iguess a permanent AMT patch is better than annual one-year patches – but neitherare better than doing away with the dreaded AMT altogether as part of anoverhaul of the convoluted Tax Code.
Therewere some temporary aspects of the bill – the American Opportunity Credit,Child Tax Credit, and the Earned Income Credit, all with refundable components,for 5 years.  A clear sign that the TaxCode will continue to be improperly used as a vehicle to distribute social welfarebenefits.  And the excessive tax fraud that results from refundble tax credits will continue for at least another 5 years.
The bill seems to bring back “Pease-like” limitations on itemized deductionsfor the “wealthy” (although these victims are less wealthy than thosehit by the increased tax rate).  I amagainst any kind of cap or phase-out of itemized deductions in general, andwould rather remove some of the actual deductions.
Andthe popular “extenders” have been extended for “one or two years”.  As longas the idiots were making things permanent what is wrong with these?
AsI said in my previous post it ain’t over till it’s over.  I do not hear the fat lady warming up.  The big challenge to this agreement is theHouse, who will either accept, reject, or revise (most probably revise) theSenate bill.  And then there is theConference Committee, and the beat goes on.   
Onthe 2013 withholding front ACCOUNTING TODAY reported this morning that -
“The Internal Revenue Service released newincome tax withholding tables for 2013 late Monday to reflect the expiration ofthe 2001 and 2003 Bush tax cuts and the more recent payroll tax cuts of 2011and 2012, but noted that the guidance would be modified if Congress acts.”
And-
“In issuing the guidance, the IRS said ittakes note of the fact that Congress is currently considering legislation thatcould affect these rates. If the legislation is enacted, IRS will issue new,corresponding tables at that time.”
Ihad received an email from Intuit Payroll (Quickbooks) on Friday stating thatit would continue the 2012 withholding tables into 2013 until Congress acts.  I trust software companies in general do thesame and wait for the end of this negotiation before revising their programs,so as not to FU withholding.
TTFN

2012's Worst Paying College Degrees

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Payscale.com analyzed the data in its online salary database and has revealed the college degrees that go along with the jobs that have the lowest median pay for their respective career professionals in its 2012-13 College Salary Report. Note - these figures represent the typical annual combination of pay, bonuses, commissions and profit sharing earned by people who have been successful in working in these fields for at least 10 years and were willing to participate in Payscale.com's survey, which means the reported median incomes will likely be inflated above each field's actual median incomes....

College Degree	Median Annual Salary
Child and Family Studies	$37,700
Social Work	$45,300
Elementary Education	$46,000
Human Development	$47,800
Special Education	$48,900
Culinary Arts	$49,700
Athletic Training	$49,800

So what possesses people to take out big student loans to go into professions like these that offer such little compensation? Payscale.com offers the following insight:

"According to our research, people in these majors typically believe their work makes the world a better place," says PayScale’s lead analyst Katie Bardaro.

To translate, the people in these majors are perhaps so disconnected from reality that they do not recognize that the reason their trades provide so little return on their educational investment is because they really do not require unique ability, which is why society does not reward them with greater compensation.

These people are then exploited by the higher education establishment, which really does know better, but can't help noticing that these same people are willing to pay nearly the same amount of money for their college degrees as do people in careers that society values a lot more.

And let's not forget the role of the U.S. federal government in guaranteeing and issuing student loans, which has its own ulterior motives for pushing higher education that offers little real benefit to society.

Elsewhere on the Web

Say what you will about the careers that go with the degrees above, but at least many of the people who pursue these degrees might actually get jobs in their fields of study, if only low paying ones. Kiplinger's Caitlin Dewey takes things several steps further and identifies the college degrees in Payscale.com's database that combine low pay with high rates of unemployment for their graduates!

Also, this isn't just an American phenomenon. Don't miss this perspective by a recent PhD graduate in Britain who complains that the "real world" doesn't understand or appreciate their skills.

Image Source: Global Elites.

A First Look at 2013's Quarterly Dividends

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We now have dividend futures data through the fourth quarter of 2013. Our chart below shows how the expected future for dividends looks:

Given all the dividend-related activity following the 6 November 2012 election in the United States, where companies have acted to pull dividends from 2013 into 2012 instead to beat a now guaranteed dividend tax increase, we anticipate that there may be quite a bit of error in the actual dividends that will be paid in 2012-Q4 and for 2013-Q1. We believe the value that will actually be recorded for 2012-Q4 will be about $0.42 per share higher than what we've shown on the chart above based on how much money appears to have been transferred from 2013-Q1.

Looking at the history of the expected future for that quarter, 2013-Q1's expected cash dividend of $7.88 per share is down considerably from the high value of $8.30 per share that was expected to be paid in that quarter back on 17 October 2012. Almost all of the decline in the level of expected dividends for 2013-Q1 has taken place since 15 November 2012.

Looking forward now in time, the expected level of cash dividends for the S&P 500 looks as if the first three quarters for the U.S. economy in 2013 will be lackluster. The fourth quarter looks as if it will be better by comparison, but even here we've already seen some erosion in investor expectations for that future quarter.

Here, the expected dividends for that quarter first debuted on 13 December 2012 at $8.90 per share. That has fallen to $8.84 through the futures for 19 December 2012.

We hope you've enjoyed 2012. As we've long forecast, 2013 will be a very different story....

Your Paycheck in 2013: Part 1

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How much money will Uncle Sam allow you to keep from your paycheck in 2013 in the form of federal income taxes?

Thanks to the so-called "fiscal cliff" standoff in Washington D.C., the answer, for now, is exactly the same as you would have taken home in 2012. That fact will hold true even if the reported deal struck and passed in the U.S. Senate early on 1 January 2013 is passed by the House of Representatives later in the day.

That's because President Obama has previously directed the IRS to not issue any change in the directions it provides for withholding income taxes from individual paychecks to the nation's employers until a deal is finalized. As a result, the rules that the IRS issued for employer withholding taxes in 2012 will continue to remain in force, at least for the time being.

And because those same withholding tax rates, income thresholds, personal exemptions and allowances will continue to apply into 2013, the amount of money that the U.S. federal government will take from your paycheck represents roughly a 2.6% increase over what it would otherwise be, thanks to the return of bracket creep for the first time in nearly 30 years.

That means that 2013 will mark the first time since 1984 that the corrosive effect of inflation upon personal income will be allowed to affect the amount of taxes withheld from individual paychecks.

While bracket creep specifically refers to the situation where individuals suddenly find themselves paying higher levels of taxes even though their inflation-adjusted income may not have increased at all, in this case, it will affect every working American who has federal income taxes withheld from their paychecks because the IRS' inaction also means that the size of the personal exemption and withholding allowances that they might claim through their W-4 form is not being increased to account for the effect of the inflation that has occurred since 2011.

But then, those are the income tax increases that most people are unlikely to notice on their paycheck. By contrast, they won't be able to help but notice that the size of the take-home portion of their paychecks is shrinking by 2% of their income thanks to the expiration of President Obama's temporary "stimulus" Social Security payroll tax cut, which isn't affected by the "fiscal cliff" standoff over federal income taxes. Here, the Social Security tax rate on personal income will return to 6.2% from its 2012 level of 4.2%, no matter what happens with the fiscal cliff situation. [There is no change in the portion of Social Security taxes paid by U.S. employers, who have continued to separately pay 6.2% of their employees' income to Social Security - Social Security has been running deeply in the red in part due to President Obama's "stimulus" tax cut.]

Our tool below reveals what your paycheck, minus any state income tax withholding, will look like for now in 2013:

Your Paycheck and Tax Withholding Data
Category	Input Data	Values
Basic Pay Data	Current Annual Pay
	Pay Period	Daily Weekly Biweekly Semimonthly Monthly Quarterly Semiannually Annually
Federal Withholding Data	Filing Status	Single Married
	Number of Withholding Allowances	0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
401(k) or 403(b) Contributions	Pre-Tax Contributions (%)
	After Tax Contributions (%)
Flexible Spending Account Annual Contribution Data	Health Care Spending Account
	Dependent Care Spending Account
What if You Had a Raise?	Desired Raise (%)

Your Paycheck Data
Category	Calculated Results	Values
Basic Income Data	Proposed Annual Salary (Including Raise!)
	Typical Paycheck Amount
Federal Tax Withholding Amounts	U.S. Federal Income Taxes
	U.S. Social Security Taxes
	U.S. Medicare Taxes
401(k) or 403(b) Contributions	Pre-Tax Contributions
	After-Tax Contributions
	Total Contributions
Flexible Spending Account Contributions	Health Care Spending Account
	Dependent Care Spending Account
Take Home Pay Estimate	Net Paycheck Amount

We'll update our tool once Washington D.C. gets its act together.

Speaking of which, if you want to find out how much federal income taxes would be being withheld from your paycheck in 2013 if not for President Obama's bracket creep, or to find out how much higher they might be if no deal is ever reached and the IRS has to go back to the income tax rates of 2001, our tool "Your Paycheck Over the Cliff" will answer those questions for you.

Previously on Political Calculations

We've been in the business of calculating people's paychecks (not including state income tax withholding) since 2005!

• Your 2005 Paycheck
• Your 2006 Paycheck
• Your 2007 Paycheck
• Your 2008 Paycheck
• Your 2009 Paycheck
• Your Paycheck in 2010
• Your Paycheck in 2011
• Your Paycheck in 2012
• Your Paycheck in 2013: Part 1

But before we forget, your employer pays a lot more to keep you on the payroll than just your paycheck! The tool below shows how much it costs to employ you in 2011-12!

• How Much Does It Really Cost to Employ You? (2011-12 Edition)

And you should also be aware that the employer's portion of Social Security and Medicare taxes (aka "FICA" taxes) have replaced corporate income taxes almost dollar-for-dollar over the years. Don't let anybody pull the "U.S. corporations aren't paying a fair share of taxes" line with you - they're really paying almost exactly the same share of all U.S. taxes that they have been for the last several decades!