Sunday, May 12, 2019

Master Index of Posts

I've compiled a Master List of my posts for easy reference. Not every post is included, and I have changed the order to put the most important or timely ones on top, and to group some based on categories (Military, Obamacare, Tax Software). I will try to keep this updated and just below the latest post. Please let me know in the comments if I screw up a link :) Some of the posts are OLD so be careful assuming the information is current.

If you have a Kindle, you can get a copy of my entertaining and useful book, The Short, Cheap Tax Book for Everyone for only 99 cents!

For the new tax law, there's The Short Cheap Tax Book for the Trump/GOP Tax Law

If you like the blog, buy my other books: Kirk Taylor, EA Author Page

Important or Time Sensitive Posts

2018 Social Security Warning!
Wants and Needs and Kids
Emergency Fund Advice
Solar Credits and Solar Sales
The Dreaded CP2000 Letter from the IRS
The IRS did NOT Call You!
I Got an E-mail from the IRS!
I Want to Lower my Taxes!
10 Simple Pieces of Tax Advice
10 Things Everybody Should Do
Check Your Withholding

Trump/GOP Tax Law

Post 2018 Tax Season Thoughts on the New Law
Quick Thoughts on the New Tax Law (Post 2017 Tax Season Edition)
2018 Tax Bill Changes
What the New Tax Law Didn't Change (2018)

South Carolina

SC Gas Tax Credit Advice
SC Military Retirement Change (2016)
Obamacare in SC - Something's Fishy


Military Spouses Residency Relief Act 2018 Change
Military Spouses Residency Relief Act Details and Matrix
Retiring from the Military? Tax Warnings!
Reenlistment Bonus, Social Security, Compensation Repayment and Taxes
2018 Military State Tax Guide
2017 Military State Tax Guide
2016 Military State Tax Guide
2017 Boomer Deduction Worksheet
2016 Boomer Deduction Worksheet
2015 Military State Tax Guide
2015 Boomer Deduction Worksheet

Tax Software

TurboTax Admits That Easy Is Better Than Accurate
Tax Preparation Software Sucks - An Open Letter to H&R Block

Business Guides

Sole Proprietorships are Bad
Avon, Pampered Chef, Party Lites, Amway, etc. MLM Tax Guide
UBER Driver Tax Guide
Tax Guide for Contractors - or - 1099MISC WTF?
Real Estate Agent Tax Guide
Rental Property Guide for Homeowners
Rental Property Sale Worksheet

General Posts

Getting Married? One Piece of Important Tax Advice.
The Dreaded CP2000 Letter from the IRS
Investing and Taxes - A Primer
How Much does it Cost to File Taxes?
Reenlistment Bonus, Social Security, Compensation Repayment and Taxes
Open a Roth IRA Today! And Not For the Reason You Think
Foreign Earned Income Exclusion Warnings - Update
Charity Made Simple
How Fast Can I Get my Refund?
Make Estimated Tax Payments the Easy Way
Depreciation Recapture - an inaccurate description
Don't Touch that 401K or IRA!!
What do you do with that Big Tax Refund?
It's Okay to Get a Big Refund - Really...
Common Tax Return Errors - Updated
Common Tax Return Errors
Mortgage Tax Credit Information
Lesson from the Government Shutdown - Emergency Fund
Don't Pay Capital Gains Taxes if You Don't Have To!
I got a 1099C - Now What?
Cancelled Debt and Insolvency
The IRS, email and privacy...
IRS Checking Facebook?
>$250 Donation Acknowledgement
Drop Box Donations - US Marines
Tax Scams
Taxes and Divorce
Random Thought about Books
Taking Care of the Client
Warning - Tax Resolution Scams
Foreign Earned Income Exclusion - WARNINGS!
IRS.GOV Website Update

Affordable Care Act (Obamacare) Posts

The Affordable Care Act (Obamacare) and People with Health Insurance
Affordable Care Act (Obamacare) for the 2014 Tax Filing Season
Obamacare, Affordable Care Act and Married Filing Separately - Warning
Affordable Care Act, Obamacare update and advice
Healthcare Law, Obamacare, Affordable Care Act Info
Weird Obamacare Strategies and Incentives - 1
Weird Obamacare Incentives and Strategies - 2
Weird Obamacare Incentives and Strategies - 3
Weird Obamacare Incentives and Strategies - 4
Weird Obamacare Strategies and Incentives - 5
Weird Obamacare Strategies and Incentives - 6

If You Had a Great Tax Professional...

It's obviously no secret that I favor the use of tax professionals over software. With that said, having a great tax pro matters, and it costs money. This post is about a few of the things that might or might not occur to the average person that a great tax pro can provide. Some of these became especially important with the advent of the new tax law and its effect on tax return results.

Here's the list:

1. If you had a great tax pro, you wouldn't have been surprised that refunds in general were going to be down, but you also would have known that actual taxes paid would also be down. More importantly, a great tax pro would have taken your 2017 tax information and analyzed it under the new law so you would know the EXACT effects on your tax situation.

2. A great tax pro would also have anticipated, through asking great questions, what changes would occur in your life and how they would affect your tax situation. It is amazing to me how many people with okay tax pros end up surprised by simple things that are easily anticipated such as a child turning 17.

3. Expanding on the above, a great tax pro will tell you what you can do to mitigate the effects of tax law or life situation changes. Unlike tax software, a tax pro can make changes to your return, see the results and then make more changes so that you can make informed decisions about what to do.

4. A great tax pro can show you how to use the tools the IRS provides such as withholding calculators, installment agreements and many others.

5. A great tax pro knows state tax laws or where to find them. Software sucks at state taxes. There are numerous state tax deductions that you basically need to know about ahead of time to take advantage of. Software just draws numbers from the Federal with occasionally a few questions. If you use software, ask yourself how many times the state tax return magically occurs without ONE SINGLE QUESTION about state taxes.

6. If you have to file more than one state, your software is going to mess it up. An average tax pro might have difficulty with a state other than the one they work in and maybe a neighboring state. A great tax pro understands how to file multiple states intimately.

7. A great tax pro will save you a ton of time, frustration and worry. If your tax pro is really good, the time and effort you save should make every penny worth it.

8. A great tax pro can answer your questions in the off-season, BEFORE you make a mistake.

9. A great tax pro can help you understand IRS and state tax letters and (often for a fee) help you respond or (if you get their extended guarantee) handle the letters for you and/or go to audits for you. A tax pro who is an Enrolled Agent or CPA is critical for this.

10. A great tax pro will tell you about deductions you've never heard of.

11. A great tax pro can give you interesting non income tax advice you might not think of. The perfect example in South Carolina is when people are paying WAY to much real estate tax because they don't realize they need to inform the county that they are living in the home they just bought. We will also give you a redacted copy of your tax return that you need to file the paper work, and often provide a copy of the form and instructions.

12. A great tax pro can tell you some interesting military stuff, like the 6 states that give military bonus money of various types, the extended period you get to sell a rental property and avoid a lot of taxes, and how to manage tax free combat pay.

13. Really great tax pros have a bunch of worksheets, spreadsheets and calculators that you can use for tax planning or record keeping.

14. Great tax pros see a lot of life occurring and can give great advice based on what we've seen work and not work in people's lives.

15. A great tax pro will check your prior year tax returns for free and make sure you didn't miss anything.

16. A great tax pro can counsel you on the appropriate level of aggression based on the position you want to take and your tolerance for risk.

17. A great tax pro will be up on every tax law change, every IRS ruling and every court case result that affects taxes.

We cost a lot of money. We're worth it. Just make sure your tax pro is great. Okay is not okay.

Friday, April 26, 2019

The IRS Needs Color Codes for their Envelopes

I'm an Enrolled Agent.

I could tell by the thickness of the letter that it wasn't a big deal.

I knew my taxes were completely defensible.

I still couldn't help the moment of panic that comes from getting a letter from the IRS.

Letters like this should come in green envelopes. Maybe orange for CP2000 letters (the ones that suggest changes) and red for payment demands.

Seriously...I'll bet people have had heart attacks as a result of these letters.

At least they don't have the payment voucher on the bottom of all of them like they used to.

Of course, I still can't figure out how to rotate the picture once I inserted it...or I'm too lazy...

Wednesday, April 24, 2019

SC Gas Tax Credit Made Easy

The SC Gas Tax was essentially a waste of effort for 2018, and for 2019 it will be mostly the same. But the credit gets better every year, and you should think of 2019 as your practice year for 2020, and start getting into the habit of tracking your required expenses in a simple, easy to keep up with manner. Your reward will be a few dollars in 2019, and hopefully a few more in 2020, more in 2021, and even more in 2022.

Here's what you need (do this for each car):
1. The Year, Make, Model, Plate #, and Registered Owner Name
2. The number of gallons of gas bought IN SOUTH CAROLINA
3. The cost of routine or preventative maintenance

The stuff in 1 is easy, and number 3 doesn't have to be a big number, because you get the credit (around 4 cents a gallon in 2019) or the maintenance cost whichever is LOWER. So you only need an oil change or two to cover the gas tax credit amount.

Here's how to make 2 and 3 easy:

What you are looking at is an envelope that will go in the glove compartment of the car in question with a gas receipt and an oil change receipt. On the outside of the envelope, there are 2 columns, one for gallons of gas, and one for cost of maintenance. Just write the numbers on the envelope right after you fill-up or have maintenance done, and then slip the receipts into the envelope. At the end of the year, add the numbers on the envelope up and put the envelope with your tax documents for when you file.

Make sure to grab the envelope and put it somewhere safe if you sell the car!

When you file, just put the information into the I385 form in the appropriate spots (or where the software asks for it).

Bonus hint: We keep our gas rewards card from Lowe's Foods in the envelope so we never forget it!

Tuesday, April 23, 2019

Image may contain: 1 person, text

Just to be clear...

This is not how it works.

Me: "What if I get it wrong?"

Gov't: "We will send you a letter explaining what you did wrong, suggesting changes and giving you 30 days to respond."

Gov't: "Actually, we probably won't even notice. We're understaffed and incompetent and rely almost completely on poorly programmed computers to send letters automatically. Unless you miss an important document that we already know about you probably won't hear from us."

Gov't: "Hell, even in that case your odds are pretty good."

Gov't: "Oh, and you pretty much have to try to get thrown in jail. That isn't even close to a planned part of enforcement and is used only as a last resort, and usually not even then...but we WILL take your shit..."

Monday, April 22, 2019

Trump Tax Law Post Tax Season Thoughts

If you bought my book on the subject, this post will expand upon some lessons learned following the first full season of implementation. The book was accurate, but there were definitely some lessons learned. I will write this post as best I can such that anyone can use it, even if they didn't buy the book (which is pictured in the upper right corner of this blog and a click there will get you a copy...hint...hint). I'm going to reluctantly start with some politics, just because I'm baffled by the big mistake made in implementation. It will be directed at Trump and the GOP, but you shouldn't take any partisan bent away from it, it is just about the law and political advantage, not a critique of any political philosophy.

Politics: Adjusting the withholding tables for the new tax rates AND doing a bad job of it was a HUGE political mistake. The tax cut was pretty nice for most people, but spread out over 20 plus paychecks it had almost zero perceivable impact. If they had left the tables alone, the narrative right now would be about bigger refunds, not smaller ones, and that would temper some of the negatives going on right now (Mueller Report). Instead, people are pissed off about their refund AND dirty politics (as if there is any other kind). Okay...enough politics.

Now onto what I learned or want to emphasize from doing a few hundred tax returns under the new law:

1. There is still a bit of adjustment being accounted for in the new new tax tables, so if your refund dropped in 2018, it will drop a tiny bit more for 2019 - assuming all things being equal year over year. I still highly recommend using the withholding calculator to ensure you get results in the area you want.

2. The new tax rates were a big deal, especially at the higher rates. This plus the higher limit for the Child Tax Credit were the largest impact on families in the solid middle class ($100k plus income).

3. The loss of the personal exemption for everyone in the family had some unique impacts. Even though many people had lower taxes, their actual taxable income was higher (made up later by higher credits for children). People who had good itemized deductions were hurt the most, due to not feeling the effect of the new standard deduction. I think the biggest impact of the higher taxable income was in how it affected the taxability of long term capital gains and qualified dividends. While the new tax law technically decoupled the lower capital gains rates from tax bracket, it is still closely tied with taxable income. This means that more capital gains will be taxed at rates higher than zero and more near the maximum rates. It also had impacts on Foreign Earned Income Exclusion tax rates and the 20% "pass-through" deduction for businesses.

4. Speaking of the 20% pass through deduction...what seemed like a very simple deduction (as long as you were below the taxable income limit at which restrictions applied) turned out to be much harder. Hard enough that it seems to have baffled some software programmers. If you filed very early, you might want to double check that your software did it correct. I'm not going to hit the details, but just be aware that "20%" didn't turn out to be 20%. I had one client who hit the income limit where restrictions came into play and it was a big deal. The convolutions that came into play at that point caused me to recommend that he seek additional help from a CPA experienced in partnerships and S-corporations so that he could explore changes in business structure and methods of sub-contractor payments to maximize the deduction. If you are near the income limits ($315,000 for MFJ and $157,500 for others) and this limit applies to you, seek experienced professional help NOW!

5. Many fewer people took the standard deduction, but this doesn't mean you can ignore it. If you are a regular contributor to charities, paying attention to how close you are to exceeding the standard deduction, and then grouping donations for maximum affect in a single year can be very rewarding in the year you itemize, as opposed to just donating willy-nilly without concern for taxes.

6. If you have a child in private school, you should explore your states laws regarding 529 plan contribution and withdrawal timing, as well as if you get a deduction for contributing. It is possible to route money you were already going to spend on school through a 529 plan and get a tax deduction for something you were already doing.

7. You don't have to have health insurance now to avoid a penalty.

8. If you had significant employment deductions, you already know you took a big hit. For others, you get NO deductions for work expenses as an employee. You can stop asking about clothes, uniforms, tools etc.

9. The above said, many people confused expenses for BUSINESSES with expenses for EMPLOYMENT. As an employee, you get no work expense deduction. If you are a business (paid on a 1099MISC or tracking your own income) your deductions were not significantly changed. The mileage deduction didn't go away, it was just eliminated for employees.

10. Starting with divorces completed in 2019, alimony is no longer deductible to the payer or added as income to the payee. Make sure you take this into account during divorce proceedings. Lawyers and judges will be slow to recognize the significance of this change.

Thursday, January 17, 2019

Military Spouses Residency Relief Act Change

A lot of people seemed to have missed this, but there is a MAJOR change to the Military Spouses Residency Relief Act!
In the past, the spouse of a service member had to have established residency in the military member's state of residency in order to claim that state for residency.
Now, to summarize, the spouse of a service member may claim one of two states as their state of residency: the state they live in, or the service member's state of residency.
On initial reading of the law I can see very little restriction on the spouse changing this as needed, especially after a PCS move. The states may feel differently.
The law took affect for 2018 tax year and later.