Saturday, December 31, 2016

Some tax penalty amounts increase in 2017

One of the big sticks that the Internal Revenue Service wields is penalties for our mistakes or willful disregard of tax laws.

Football official penalty flag

Some of the penalties were increased in 2016 thanks to law changes. Others are hiked each year if inflation so warrants.

Here's a roundup of some major tax penalties changes ahead in 2017.

Don't file, pay more: The biggie for individual taxpayers is the charge for late filing.

In 2016, if you filed a return more than 60 days after the due date or any extension to file that you got, then you faced a penalty of the lesser of $135 or 100 percent of your unpaid tax.

Starting in 2017, the Internal Revenue Service is getting a bigger fee from your tardiness.

Thanks to a provision in Trade Facilitation and Trade Enforcement Act of 2015 that was signed into law in February, if you were more than two months late filing your 2016 Form 1040, you were slapped with a penalty of $205 or 100 percent of your due tax, whichever amount was smaller.

Beginning in 2017, thanks to inflation, if you fail to file a tax return within 60 days after it's due (including extension time), you'll get slammed with a penalty charge of $210 or 100 percent of the amount of tax due, whichever is less.

Tax pros, too: While we individual taxpayers will be penalized for our tax filing failures, the folks we seek tax help from also face possible financial consequences if they knowingly understate a taxpayer's liability.

In situations where a tax preparer comes up with a filer's tax due that is less than it should be and the reason is because of what the IRS deems is an "unreasonable position," the tax preparer could be hit with a penalty of $1,000 or 50 percent of the payment the preparer got for filing the return, whichever is greater.

Basically, the IRS wants to discourage the use of tax strategies that a preparer knew, or reasonably should have known, were not realistic.

And where a tax preparer uses, in the IRS' estimation, willful or reckless conduct to get the taxpayer's liability to an amount lower than it should be, the penalty increases to the greater of $5,000 or 50 percent of the income from the return or claim for refund.

More tax preparer penalties: In addition to the penalties for understating clients' tax bills, there's a variety of other fines a tax preparer could face for failing to complete some other tasks.

These amounts are adjusted for inflation each year. For 2017, the amounts that tax preparers could face are:

Tax Preparer Action  Penalty per Return or Refund Claim Maximum Penalty
Fails to furnish a client with a copy of his/her return. $50 $25,500*
Fails to sign return. When a preparer is paid to do taxes, he/she must sign that 1040 (or 1040A or 1040EZ). $50 $25,500*
Fails to furnish identifying number. This goes along with the signature mandate. $50  $25,500*
Fails to retain a copy of the return or other filing list. $50  $25,500*
Fails to file correct information returns.  $50 per return
and item in return
Negotiates of a taxpayer's check. This is a fine for a preparer who receives a taxpayer's refund check, endorses it and deposits it as a third party check, even if the preparer and taxpayer have agreed to the process. Basically, the check negotiation fine is aimed at return preparers who charge based on taxpayer refund amounts. $510 per check  No Limit
Fails to be diligent in determining a filer's eligibility for the American opportunity tax credit, the child tax credit, and/or the Earned Income Tax Credit (EITC). $510 per check No Limit

*Increase of $500 from 2016 maximum penalty amount

Passport revocation: Finally, if you're planning on some international travel, you best pay the U.S. Treasury before you buy that transcontinental airfare.

Back in December 2015, the Fixing America's Surface Transportation Act, or FAST Act, became law along with its authorization of the State Department to revoke, deny or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt.

When this tax law took effect in 2016, the trigger was $50,000 in overdue taxes. It stays at that amount in 2017 thanks to low inflation.

Paying taxes is bad enough, so make sure you don't do anything that will force you to pony up even more in penalty payments.

Wrapping up inflation amounts: Inflation affects every part of our lives, including taxes. These penalties that are adjusted each year to keep them in line with how prices generally are going up are the final part of a 10-part series on tax-related inflation adjustments for 2017.

Welcome to Part 9 of the ol' blog's series on 2017 inflation adjustments.
You can find links to all 2017 inflation posts in the series' first item: 
Income Tax Brackets and Rates.
Today we look at changes to the foreign earned income exclusion amount
and how that inflation adjustment affects the housing tax break
available to U.S. taxpayers working abroad.
Note: The 2017 figures apply to 2017 returns that are due in 2018.
For comparison purposes, you'll also find 2016 amounts to be used
in filing 2016 returns due next April.

My completion of the series is cause for celebration on my part (and I hope yours, too, faithful readers) on this final day of 2016. Sorry for the delay. The IRS released its annual inflation adjustments in late October, but other tax items just kept popping up that demanded my attention. Plus, I also had to sandwich in some bill-paying work in there.

But as the saying goes, better late than never. Even with tax filing, although you'll pay a penalty!

And while this final inflation-focused post technically is #9 (#10 on tax deductible mileage rates leap-frogged it), today's rounding out of the series also means that the full collection of 10 tax year 2017 inflation posts (note the link to the first one, which has all the other post links in the blue box above) makes 10 this week's, and the year's final, By the Numbers figure.

You also might find these items of interest:


Friday, December 30, 2016

New Year will means new Carolina addresses and taxes for some NC/SC border residents

You might have seen the suggestion that you move to lower your tax bill.

Vintage moving van ad courtesy aldenjewell flickr
I love old ads like this one for Dodge commercial trucks courtesy Alden Jewell via Flickr. Folks making this vintage move look much happier than they ever do when relocating in real life.

That usually tongue-in-cheek recommendation didn't make my 12 year-end tax moves list, but all y'all are welcome to join me here in no-income-tax Texas. I must warn you, however, that if you buy a home, property taxes could eat up a chunk of what you're saving by not paying state tax on your earnings.

Well, some folks in the Carolinas are about to change their tax residences without moving one stick of furniture.

And they're going to be dealing with, among other things, different and potentially confusing tax changes, too.

New Year's border, tax shift: On Jan. 1, 2017, resolution of a years-long border dispute in York and Gaston Counties along the North and South Carolina border will mean that 19 homes technically will be in another state.

Or in both of them.

Three homes now in North Carolina will end up in South Carolina. Sixteen Palmetto State homes, however, will be in the Tar Heel State when the New Year arrives.

And one woman told a local TV station that the new state line will go right through her home's master bedroom.

One of her neighbors also shared with CBS affiliate WBTV the two 2017 tax bills he's already received. They show he owes South Carolina real estate taxes on his home, but North Carolina property taxes on his backyard.

One of his concerns is that each jurisdiction has different homestead exemptions. I'm wondering if the yard alone will even be eligible for this common tax break, since there's no actual residential structure there.

A map showing North and South Carolina in 1834
North and South Carolina as depicted by mapmakers in 1834

Tax and other hassles: The split property issues are particularly ironic since, according to the North Carolina Geodetic Survey's web page, the program's mandate is to resurvey ambiguous sections of the state's borders and county boundaries to, in part, facilitate emergency 911 services, building inspections, school assignments and, you got it, real estate property assessments.

In addition to the new addresses and property tax concerns, the soon-to-be displaced Carolinians also will have to get new driver's licenses, change voter registration and deal with changes in health care coverage and services.

But at least the children in the relocated residences will get to stay in their current schools and be eligible for in-state college tuition for the next 10 years.

Property tax, moving tax breaks: If you are secure in your state and have a pending property tax bill, paying it early -- like today unless your county or parish tax assessor/collector office is open on Saturday -- could be an added itemized deduction on your 2016 federal tax return.

That's just one of the end-of-year tax moves I mentioned earlier. Check them all out and if any or all of them apply to your personal tax situation, make sure you make them in time to cut your upcoming Internal Revenue Service bill.

And when you do make the decision to actually, physically load up the van and hit the road, some of those moving costs might be tax deductible. And in this case, you don't have to itemize to write off the work-related relocation.

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Thursday, December 29, 2016

Tax Preparation in Pearl River

The end of the year is here & w-2’s will soon be in the mail.   Soon you’ll be faced with the chore of completing and filing your income tax returns.
J. Slattery & Company ( has provided tax preparation services in Pearl River full-time since 1982.  All taxes are prepared under the supervision & reviewed of an enrolled agent (EA) tax professionals licensed by the IRS to file & defend taxpayer’s returns.  For the best in tax prepation in Pearl River, NY — we recommend you give us a call (845)735-2511.

The post Tax Preparation in Pearl River appeared first on | Irs Problems & Tax Preparers.



Missing the Dec. 31 RMD deadline could be very costly

Time is rapidly running out to make year-end tax moves, but if you're a septuagenarian, here's one that you definitely cannot afford to overlook.

Senior women birthday celebration via Todays Senior Network
If you're 70½ or older, congrats and happy, happy on all those full and half birthdays! Remember, though, that now you must take out at least an IRS-specified amount from your tax-deferred retirement account(s) by the end of the year. Miss the deadline and you'll owe a major tax penalty. (Birthday party photo courtesy Today's Senior Network)

Half birthday tax trigger: If you're 70½ and have a traditional IRA (or more than one of these accounts) or other tax-deferred retirement plans, then the tax law says you've got to start taking money out of it. In most cases, that's by the end of the tax year.

But since Dec. 31 this year is on a Saturday, you effectively have until tomorrow, Friday, Dec. 30, to take care of your RMD, unless your account administrator is working over the weekend.

These mandated withdrawals are known as required minimum distributions, or RMDS.

In addition to traditional IRAs, those accounts where contributions sometimes are tax deductible and taxes aren't collected as earnings grow, the RMD rule applies to SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, 457(b) plans, profit sharing plans and any other defined contribution plans.

RMD rules also apply to folks who inherited retirement accounts.

And while Roth IRAs, on which you pay tax before your put the money into the account, aren't subject to the RMD rules, Roth 401(k), 403(b) and 457 plans are.

Tired of waiting for tax revenue: The reason for the withdrawal requirement is simple. Uncle Sam wants his money.

He's been waiting for years, likely decades, for his tax cut on these tax-deferred retirement accounts. And he's had enough.

So once you celebrate your 70½ birthday -- I know I have a big party planned for that day -- he wants you to start taking out at least some of your taxable (at ordinary income tax rates) retirement money.

About that birth date: Despite my wisecrack about a big party for your 70½ birthday, that actual date is important. It determines whether you must take your first RMD this year, or whether you can push that initial distribution into the next tax year.

The Internal Revenue Service says you reach age 70½ on the date that is six calendar months after your 70th birthday.

For example, your 70th birthday was June 30. You reached age 70½ on Dec. 30. Don't worry, you don't have to take your first RMD by the end of the year. You can wait until April 1 of the next year to take that inaugural RMD.

If, however your 70th birthday was July 1, you turned 70½ on the subsequent Jan. 1, according to the IRS calendar. Yes, the tax agency gives you a free day. And that means you don't have to make an RMD for the chronological year you actually turned 70½.

Instead, since your half-birthday is, in the IRS' eyes, on the following Jan. 1, your first RMD is due that next year, either by that Dec. 31 or April 1 of the next year.

Two RMDs instead of one: Note, though, that if you push that first RMD to April of the following year, then you'll have to make two required withdrawals in that same year.

The first one by April 1 covers your 70½ birthday requirement. The next one is for that actual calendar year and is due by Dec. 31.

Consider your overall tax situation in making the delayed distribution decision.

Even though your retirement account might be in an investment vehicle, the withdrawals are taxed as ordinary income, not at the lower capital gains rate. Taking two retirement distributions in one year could bump you into a higher tax bracket.

Take the money: But what if you don't need the account money to cover your day-to-day living expenses? You might be tempted to ignore the IRS withdrawal order and leave the retirement cash untouched.


The penalty for not making an RMD is 50 percent of the amount of money you were supposed to withdraw.

Calculate all your account amounts: You must figure the RMD for each of your retirement accounts, based on their value on Dec. 31 of the previous year.

RMD withdrawal rates IRS table III excerptThe best way to do this is to list the fair market value of your IRAs as of that date. Then, using the appropriate IRS life expectancy table from IRS Publication 590, figure your RMDs.

Most folks use Table III, Uniform Lifetime Table. That's an excerpt there to the left up to age 90; it actually goes to age 115 and older. And if you've saved enough to enjoy retirement well into your 100s, please give me a call!

Let's say you have one traditional IRA valued at $100,000. The Uniform Lifetime Table indicates that for the first year's distribution period (that's age 70), you divide your $100K IRA value by 27.4 years. That means your first RMD would be $3,649.64.

You also have another traditional IRA that's worth $50,000. The RMD from this account is $1,824.82.

Your total RMD for your first year is $5,474.46.

But you don't have to take the RMDs from each IRA. In this case, you can take the full $5,474.56 from either IRA.

If, however, you also have a 401(k) you left with your former employer, you'll have to take that specific RMD amount from that account. You might want to think about finally rolling that plan into an IRA to give you some withdrawal flexibility.

Withdrawal, not spending, required: Remember that 50 percent penalty? If you don't take your RMD in connection with the examples above, you'll owe the IRS $2,737.23 for missing the deadline.

Plus, of course, you owe the income tax due on the money you should have taken out on time.

You can, of course, take out more than the RMD amount. If one year your taxable income will be particularly low, it might be worth doing this.

But you can't apply any excess RMD taken in one year against future RMDs.

And just because you have to take out the money, that doesn't mean you have to spend it.

You can always put it into a taxable account and let it grow that way to fund your golden years.

Or you can transfer your RMD directly to a qualified charity. This option was made a permanent part of the Internal Revenue Code back in December 2015 as part of the Protecting Americans from Tax Hikes (PATH) Act.

Whichever withdrawal option works for you, just remember to meet the RMD rules. Soon!

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Get Social in 2017: A Social Media Checklist for Tax Preparers

The 2017 tax year is right around the corner. If you haven’t jumped on the social media train, you’re likely losing out to exposure and leads. Social media isn’t a magic bullet but it can have a huge impact on growth, reach, and exposure when combined with other marketing efforts this tax season. Here are some things you’ll want to make sure you do before the tax season is underway. We’ve also included a downloadable checklist to help prepare you for the upcoming year.

Check your profiles

How do your profiles look? Are the profile thumbnails and cover photos up to date? How about your ‘About us’ tabs and bios? You need to make sure your descriptions are fresh, the correct logos are in use, and the information about your company is complete.

In addition to corporate social media profiles, your tax preparers should check that their LinkedIn profiles are up-to-date. Have your tax preparers (and yourself) make sure they are linked to the company LinkedIn Page and check that all bios and experience reflect the work that they do. Getting more clients is the goal, so make sure your LinkedIn profile is in tip-top shape.

READ: How to Use LinkedIn as a Tax Preparer

Add Social media information to relevant marketing materials

People won’t know to connect with you on social media if they don’t know how to find you. Make sure your social media handles are on marketing materials like business cards, pamphlets, brochures, email signatures, email newsletters, your website, etc.

Create an editorial calendar

Do you have a plan for social media and blog content for the upcoming tax season? An editorial calendar is the perfect way to help you thoughtfully plan out posts, graphics, social media campaigns, newsletter topics, blog topics and any other content that needs to go out during the tax season.

READ: 5 Essentials to Developing a Client Newsletter

Set an Ad Budget

It has become increasingly harder to gain organic reach on social media because of the sheer volume of noise that’s out there. If you want to reach the right audience and make sure your best posts are seen, plan to spend a little money on social media advertising. Take a look at your editorial calendar and decide which pieces of content need to be boosted and then plan out who your audience will be and what platforms you will put money behind. We recommend checking out LinkedIn, Facebook and Twitter ads.

Choose Your Tools

If you aren’t using tools to help you manage social media, do some research now and save yourself some time! There are tools like Hootsuite that help you monitor your social media channels and schedule posts, tools like Canva that help you create stunning visuals, tools like Pocket that help you save and discover shareable content, and tools like BuzzSumo that help you research blog topics and keywords.

READ: Get More Done This Tax Season with Technology

Cross these things off your list before tax season and your social media marketing will be prepped and ready for a successful tax season. Want to make sure you’re ready and that you keep up with social media throughout the season? Download our free social media checklist!



Wednesday, December 28, 2016

4 popular homeowner, education tax breaks end Dec. 31 Among 36 tax extenders that might — or might not — be part of tax reform in 2017

With Republicans soon to be in control of Congress and the White House, the tax focus has shifted to a major rewrite of the Internal Revenue Code.

But this legislative approach means that more than 30 temporary tax provisions will disappear from the tax code on Jan. 1, 2017.

Tax extenders expired at the end of 2014_will they be renewed

Whether they are resurrected in any new tax overhaul depends on how persuasive the various laws' lobbyists are, how committed Senators and Representatives are to streamlining the tax code and how much tax revenue is gained or lost by their continued absence or revival.

Extenders usually long lives: These tax laws, which over the years ballooned to more than 50, are known collectively as extenders because they usually are renewed, or extended, for a year or two, sometimes retroactively, by Congress.

Last December, many expiring/expired extenders were made a permanent part of the tax code as part of the Protecting Americans from Tax Hikes (PATH) Act of 2015.

Thirty-six provisions, however, were extended only through this or a few more years.

They include special interest tax breaks that, over the last decade or so, have received much public attention and derision. , such as special depreciation rates for race horses and NASCAR and other motorsports tracks; specific expensing rules for television, movie and theater performances (thanks "Hamilton"); and special excise tax rates for rum made in Puerto Rico and the U.S. Virgin Islands.

But also among the tax laws expiring at the end of 2016 are four that affect millions of individual taxpayers. Three are connected to residences; the fourth is used by students and/or their families. Below is a closer look at the exiting extenders.

Tuition and fees deduction: This is an adjustment to income, also known as an above-the-line deduction that can be claimed without the hassle of itemizing expenses on Schedule A. With this deduction, which is found at the bottom of page 1 of both the long Form 1040 and slightly shorter Form 1040A, eligible taxpayers can deduct up to $4,000 in higher education expenses paid for themselves, their spouse or dependents during the year.

Mortgage insurance premium deduction: This law lets homeowners who have private mortgage insurance (PMI) as part of their mortgage deduct these monthly premiums as interest on Schedule A. Typically, homeowners must purchase a PMI policy if they can't come up with at least a 20 percent down payment on their home. The ability to deduct PMI was first enacted in 2006 and has been extended for the last decade. It's popular not only with affected homeowners, but also the housing industry.

Mortgage debt relief exclusion: In the wake of the bursting housing bubble, this law was created to provide relief to some homeowners who had their mortgage restructured or debt forgiven due to a foreclosure or short sale. In most canceled debt situations, the forgiven amount is considered taxable income. But consumer advocates convinced lawmakers that this saw was too punitive for homeowners looking to keep their homes by working with their lenders to obtain more payable terms, and the Mortgage Debt Relief Act was enacted in 2007. It has been extended for subsequent tax years … until now.

Credit for energy-efficient home improvements: This credit has been around in various forms since 2005. It allows homeowners to write off part of the cost of certain energy-efficient improvements, such as insulation, some roofs and exterior windows and doors. This latest iteration of the law that applies to specific residential energy upgrades has a lifetime credit cap of $500 and they must be in place by Dec. 31.

Better tax policy practice: The individuals and businesses that benefit from the soon-to-expire tax extenders are no doubt freaking out a bit.

But the evaluation of special-interest extenders separately, rather than in an end-of-year rush as part of a large package, is a positive tax policy move.

"It's really not ideal when you have a Congress that only acts on things when it has to," says Scott Greenberg, an analyst with the Washington, D.C.-based Tax Foundation.

"Some are good tax provisions," says Greenberg of the extenders. "Some are unideal, but on balance more good than bad. Some are straight up not worth being in the tax code at all."

Rather than consider them as a take them all or leave them all group, Greenberg thinks it's better to "just leave them alone, don't expend the political energy."

"The preferable approach," he says, "is to examine each provision one by one and decide which should be kept."

In or out of reform: Will all the expired extenders be dealt with as part of tax reform? Possibly. But not in the way that their supports hope.

They are just as likely to be jettisoned as extended. The incoming president-elect has, after all, said that any part of tax code overhaul should reduce or eliminate most of the deductions and loopholes available to the wealthy.

And if they don't make it into any code revision, many tax policy experts believe that wouldn't necessarily be a bad thing. Their thinking is that there's no need to junk up a new, presumably less convoluted tax code with temporary provisions.

Cost of a complex tax code: Greenberg agrees that the costs of an inefficient tax code need to be taken into account during the tax reform debate.

"When talking about taxes, we tend to have a laser focus on revenue. That's not a bad thing. The most important job of a tax code is to raise money," says Greenberg. "But looking at other associated costs of tax policy, the lack of efficiency or tax complexity have their own costs."

This includes the time taxpayers must spend to determine if they qualify for a tax break. There's also the inefficiency effect of changing provisions, he says.

"There is very little rationale to have temporary tax provisions hanging around. A tax code should be stable. Individuals and businesses need certainty about what you're going to be paying this year and next year," Greenberg says. "A stable tax code is good for economy and helps people make the best the decisions for the long run."

In the coming months, we'll see what time frame will guide Congress as it re-envisions our tax laws.

For now, though, if any of the expiring extenders apply to you, claim the tax break while you can.


Tuesday, December 27, 2016

IRS offers tax relief to 2016's many disaster victims Tax help, later deadlines still available to some in FL, GA, LA, MN, NC, SC and TN

Social media sites are overrun with folks bemoaning the terrible things that happened during this year. I've even aired my grievances about 2016 before and after Festivus, so far be it from me to be pity party pooper. 

But here's some perspective for all of us.

North Carolina flooding Hurricane Matthew_FEMA photo
Military vehicles make their way down a flooded North Carolina following October's devastating Hurricane Matthew. (Photo courtesy Federal Emergency Management Agency)

For millions of people worldwide, 2016 literally was a disastrous year. In the United States alone, Mother Nature pummeled the country throughout the year, with the Federal Emergency Management Agency, or FEMA, issuing 46 major disaster declarations (still called presidentially declared disasters by some; OK, by me).

Not to tempt fate with a few days left, but that disaster figure could grow. I offer the count qualification since it takes a while to assess a storm's damages, meaning many of the declarations early this year were for 2015 disasters.

The one tiny sliver of a silver lining, however, is that in these disastrous situations, Uncle Sam and Internal Revenue Service offer affected storm victims some help.

And in seven states -- Florida, Georgia, Louisiana, Minnesota, North Carolina, South Carolina and, most recently, Tennessee -- that includes some 2016 tax deadlines extended into the coming New Year.

Latest 2016 disaster in Tennessee: This year started with the winter storm named Jonas by the Weather Channel.

Nicknamed "Snowzilla" by some, the Jan. 22-24 storm dropped record snowfall amounts on parts of the Mid-Atlantic and Northeast and 48 people lost their lives due to the storm or its aftereffects. The FEMA announcements came in March.

The most recent disaster was the deadly wildfire in the Gatlinburg, Tennessee, area. The flames, which investigators believe were intentionally set by two youths, consumed more than 17,000 acres of forest, damaged or destroyed almost 2,000 structures and, most tragically, injured 145 people and killed 14. The fire's total dollar cost is expected to be more than $500 million.

In the wake of the FEMA assessment, the IRS announced Dec. 20 that victims of the wildfires in Sevier Country, Tennessee may qualify for tax relief.

The special tax consideration applies to:

  • Any individual taxpayer (or spouse if the couple files a joint return) who lives in the county,
  • Any business owner whose principal place of business is located in the disaster-declared county,
  • Any relief worker assisting in the covered disaster area,
  • Any individual or business owner who doesn't live or work in the county, but whose records needed to meet a filing or payment deadline are maintained in the covered disaster area, and
  • Any estate or trust that has tax records necessary to meet a filing or payment deadline in a covered disaster area.

What may be postponed: Under the IRS announcement, the IRS gives affected Tennessee taxpayers until March 31, 2017, to file most tax returns. This includes individual, estate, trust, partnership, C corporation, and S corporation income tax returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns.

Affected taxpayers also have until the next March deadline to make tax payments, including estimated tax filings, that have either an original or extended due date falling between Nov. 28 and March 31, 2017.

The postponement of time to file and pay, however, does not apply to information returns in the W-2, 1098, 1099 or 5498 series, or to Forms 1042-S or 8027. But the IRS notes that penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause.

Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise deposits, due on or after Nov. 28 and by March 31, 2017.

Applying for relief: If you're one of the wildfire taxpayers who gets the extra time, you don't have to do anything.

The IRS says it automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief.

If you are eligible for the wildfire disaster extended tax due date, but get a late filing or late payment penalty notice from the IRS, call the telephone number on the notice to have the IRS abate the penalty.

Also, if you're an affected taxpayer who lives or has a business located outside the covered disaster area and think you, too, should get some wildfire related tax considerate, call the IRS disaster hotline at 866-562-5227 to request it.

Time shifting your tax filing: Affected taxpayers in a federally declared disaster area also have the option of claiming the disaster-related casualty losses on their federal income tax return for either the year in which the event occurred, or the prior year.

That means you need to look at your 2015 tax return and determine whether it would be more tax-beneficial for you to file an amended return for that year, or waiting and claiming the loss next year when you file your 2016 federal return.

If you decide to claim the disaster loss on your amended 2015 return, put the disaster designation "Tennessee, Wildfires" at the top of the form -- yes, you must file a paper amended Form 1040X -- so that the IRS can expedite the processing of the refund.

And if you need previously filed tax returns to complete your amended filing, the IRS will waive the usual fees and expedite requests for copies of those prior filings affected taxpayers.

Again, taxpayers should put the assigned disaster designation "Tennessee, Wildfires" in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

You also can find more about claiming losses related to casualties, disasters and thefts in IRS Publication 547, as well as in the links collected on the ol' blog's special Storm Warnings disaster resources page, including this post specifically on filing amended returns related to major disaster losses.

Later dates for more states: Earlier this year, the IRS established later due dates for tax actions of folks in previously announced other major disaster areas.

The following compilation of disaster extended tax deadlines is thanks largely to Thomson Reuters Checkpoint® Newsstand email alert.

Florida: The counties of Bradford, Brevard, Broward, Clay, Duval, Flagler, Indian River, Lake, Martin, Nassau, Orange, Osceola, Palm Beach, Putnam, Seminole, St. Johns, St. Lucie, and Volusia that were affected Oct. 3 by Hurricane Matthew. The extended date is March 15, 2017, which includes next Jan. 17's deadline for making quarterly estimated tax payments, as well as those who got an extension to Oct. 17 to file their 2015 income tax returns. Affected business tax deadlines include the Oct. 31 and Jan. 31, 2017, deadlines for quarterly payroll and excise tax returns, and the March 1, 2017, deadline that applies to farmers and fishermen who choose to forgo making quarterly estimated tax payments.

Georgia: The counties of Brantley, Bryan, Bulloch, Camden, Candler, Chatham, Effingham, Emanuel, Evans, Glynn, Jenkins, Liberty, Long, McIntosh, Pierce, Screven, Tattnall, Toombs, Ware, and Wayne that were affected Oct. 4 by Hurricane Matthew. The extended date is March 15, 2017, which includes next Jan. 17's deadline for making quarterly estimated tax payments and 2015 income tax returns that received a tax-filing extension until Oct. 17.

Louisiana: The parishes of Acadia, Ascension, Avoyelles, East Baton Rouge, East Feliciana, Evangeline, Iberia, Iberville, Jefferson Davis, Lafayette, Livingston, Pointe Coupee, St. Helena, St. James, St. Landry, St. Martin, St. Tammany, Tangipahoa, Vermilion, Washington, West Baton Rouge, and West Feliciana that were affected by severe storms and flooding that took place beginning on Aug. 11. The extended date is Jan. 17, 2017. That deadline includes individual returns on extension to Oct. 17, the Sept. 15 deadline for making quarterly estimated tax payments, the 2015 corporate and partnership returns on extension through Sept. 15, and the Oct. 31 deadlines for quarterly payroll and excise tax returns. Louisiana residents also were allowed to tap their retirement accounts to make storm repairs.

Minnesota: The counties of Blue Earth, Freeborn, Hennepin, Le Sueur, Rice, Steele, and Waseca that were struck by severe storms and flooding that took place beginning on Sept. 21. The extended date is Jan. 31, 2017, which includes individual returns on extension to Oct. 17 and the Oct. 31 deadlines for quarterly payroll and excise tax returns.

North Carolina: The counties of Anson, Beaufort, Bertie, Bladen, Brunswick, Camden, Carteret, Chatham, Chowan, Columbus, Craven, Cumberland, Currituck, Dare, Duplin, Edgecombe, Franklin, Gates, Greene, Halifax, Harnett, Hertford, Hoke, Hyde, Johnston, Jones, Lee, Lenoir, Martin, Montgomery, Moore, Nash, New Hanover, Northampton, Onslow, Pamlico, Pasquotank, Pender, Perquimans, Pitt, Richmond, Robeson, Sampson, Scotland, Tyrrell, Wake, Washington, Wayne, and Wilson that were affected on Oct. 4 by Hurricane Matthew. The extended date is March 15, 2017. This includes the coming Jan. 17 deadline for making quarterly estimated tax payments and 2015 income tax returns that received a tax-filing extension until Oct. 17. A variety of affected business tax deadlines also are pushed to next mid-March, including the Oct. 31 and Jan. 31 deadlines for quarterly payroll and excise tax returns and the March 1, 2017, deadline that applies to farmers and fishermen who choose to forgo making quarterly estimated tax payments.

South Carolina: The counties of Allendale, Bamberg, Barnwell, Beaufort, Berkeley, Calhoun, Charleston, Chesterfield, Clarendon, Colleton, Darlington, Dillon, Dorchester, Florence, Georgetown, Hampton, Horry, Jasper, Kershaw, Lee, Marion, Marlboro, Orangeburg, Richland, Sumter, and Williamsburg that were affected Oct. 4 by Hurricane Matthew. The extended date is March 15, 2017, which includes the Jan. 17 deadline for making quarterly estimated tax payments and 2015 income tax returns that received a tax-filing extension until Oct. 17. On the business tax side, the mid-March deadline covers the Oct. 31 and Jan. 31 deadlines for quarterly payroll and excise tax returns, as well as the March 1, 2017, deadline that applies to farmers and fishermen who choose to forgo making quarterly estimated tax payments.

Here's hoping the special tax options for all who were affected by disasters this year helps.

And here's especially hoping for a much less disastrous 2017.

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Monday, December 26, 2016

China's new pollution tax excludes greenhouse gases

China has enacted a series of taxes on various types of industrial pollution. But to the dismay of even some of its own government researchers, carbon dioxide and other greenhouse gases are not included in the tax plan.

Industrial pollution_Graeme Maclean via Flickr
Some specific emissions could mean tax bills for Chinese companies under a new pollution tax law just enacted by that country. (Photo by Graeme Maclean via Flickr CC)

Still, for the first time ever, public institutions and companies that discharge listed pollutants directly into the environment will face specific environmental protection taxes.

Some air, water pollutants targeted: Under the law passed Dec. 25 by China's National People's Congress, emissions of such things as sulphur dioxide and sulfite will be taxed at 1.2 yuan (17 cents U.S. dollar) per unit when released into the air and 1.4 yuan (20 cents U.S.) if discharged into the country's waterways.

A 5-yuan-per-ton (72-cents-per-ton U.S.) tax will apply to coal waste, as will a 1,000-yuan-per-ton tax of 1,000 yuan (almost $144 U.S.) for hazardous waste.

The new tax rates will take effect Jan. 1, 2018.

Provincial-level governments can raise the rates for air and water pollution by up to 10 times after approval by the local legislatures. Lower rates may also apply if emissions are less than national standards.

Taxing path to cleaner environment: "Tax revenue is an important economic means to promote environmental protection," according to a Finance Ministry statement on the new law.

China has not previously imposed any specific environmental taxes, but instead uses a system of miscellaneous charges. Many, apparently including the country's lawmakers, felt that the current system's fees were too low to deter polluters.

"The core purpose (of the new policy) isn't to increase taxes, but is to improve the system, and encourage enterprises to reduce emissions," Environment Minister Chen Jining said earlier this year per a report in Shenzhen Daily. "The more they emit the more they will pay, and the less they emit the less they will pay."

That cleaner air goal was reiterated following the law's approval by Wang Jianfan, director of the Ministry of Finance tax policy department, who called the tax key to fighting pollution.

China's new tax law is expected to force companies to upgrade technology and shift to cleaner production, Wang told a press conference.

Currently collecting a fee: China has collected a pollutant discharge fee since 1979. In 2015, it collected 17.3 billion yuan ($2.5 billion U.S.) from some 280,000 businesses.

But switching to the specific tax system took a while, with debates between the Ministry of Environmental Protection, the Ministry of Finance, the State Taxation Administration and local governments forcing delays in the new tax law.

A major sticking point was that some government agencies will lose money when the current system of emission discharge fees is abolished. There also was concern among some government researchers that carbon dioxide and other greenhouse gases were not included in the new tax plan.

Greenhouse gas still OK: China leads the world in emission or greenhouse gases, primarily because of its reliance on coal to provide electricity to its 1.37 billion residents. The United States a close second in greenhouse gas emissions, according to United Nations data.

Most scientists agree that the gases are causing the earth's temperatures to rise.

Will the new, limited pollution taxes pave the way for similar action in China against greenhouse gases?

That likely will depend on how successful the taxes are at cleaning up the types of pollution specified by the new law.

It also will depend on how much better or worse pollution becomes in China.

Just last week, cities across China's northeast were placed on an air pollution red alert, an action that included taking large numbers of cars off the road and closing some factories.

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Saturday, December 24, 2016

Have a holly, jolly Christmas

Merry Christmas! The big day for all good boys and girls of all ages is finally here.

Snowmen with scarves_Cool Effect on Twitter

And here in Central Texas it's in the 70s.

Cheery but not chilly: I know, 'tis the season for joy, not whining about the weather, especially since 70-degree temperatures are a heck of a lot better than dangerously cold ones.

Still, it's the warmest Christmas in Austin in 52 years. The short snowman on the left in the photo above and I are definitely a bit taken aback by this unseasonable turn this so-called winter weather has taken.

But it won't stop us -- the hubby and me, that is; it will pose a problem for snowmen -- from having a great Christmas filled with our customary holiday celebrations.

One of those traditions is that here at the ol' blog is, despite being a blog run by a tax geek for other tax aficionados, Dec. 25 is a no-tax day. Really.

If you just can't resist a tax tidbit or two (or more), feel free to peruse the site for lots of items to fill your time.

Tons of tradition … and food: We, however, have plenty of other things to do today.

Like enjoy Christmas tunes as we take a driving tour of Austin's wild Christmas trees and, after dark, neighborhood light displays.

Of course, sit down to a great meal. This year's menu, like previous ones, is ham and double-stuffed potatoes and corn pudding and collard greens and pumpkin and blueberry-banana pies, washed down with some wine and St. Arnold's Christmas Ale.

Plus presents. And family and friends.

Did I mention the presents?

Holly, jolly time: Wherever you're spending this special day and whatever the weather is there, from here in the Lone Star State the hubby and I wish you a wonderful, holly, jolly Texas Christmas.

And I'll be back tomorrow -- promise! -- with more tax posts. Maybe with a bit of a pie hangover, but I'll be here.

Happy Holidays!

You also might find the prior year Christmas messages of interest:


Iowa, Nebraska and Utah join Louisiana in getting Amazon to collect sales taxes in 2017

A couple of days ago when I blogged about Amazon's decision to start collecting sales tax amounts in 2017 on products it ships to Louisiana, I noted "…and counting" in the list of states where this already is happening.

I didn't, however, expect to have to do some more sales tax math so soon.

Woman shopping online photo by Keith Williamson via Flickr Creative Commons
Online shoppers in Louisiana, Iowa, Nebraska and Utah will see sales taxes added to their Amazon invoices beginning Jan. 1, 2017. (Photo by Keith Williamson via Flickr Creative Commons)

But Jan. 1, 2017, also is the day that the online retail giant also will add sales tax amounts on products bought by shoppers in Iowa, Nebraska and Utah.

Merry Belated Christmas to all four of those state treasuries.

Use tax troubles: The 45 states that have sales taxes have been grappling for years with how to get the money, known as use taxes, to which they are entitled, but which residents refuse to remit.

A use tax, as the name indicates, is the companion to a state's sales tax and applies to products bought elsewhere and brought into the state for the consumers' use.

State residents either don't know about the use tax -- not so likely anymore, as many states have implemented aggressive education programs -- or, more likely, they simply ignore their tax responsibility since it's difficult for state tax officials to enforce the use tax.

State officials had hoped that a federal law would provide a comprehensive solution. But three recent iterations of a national online sales tax collection bill all stalled and many states have tired of waiting. 

So instead of continuing the fruitless focus on taxpayers, these state have been looking at ways to force the tax collection by the online and catalog sellers.

Current law regarding a company's requirement to collect sales tax is that it have nexus, or a physical presence per the standard established by the 1992 U.S. Supreme Court ruling in Quill Corporation v. North Dakota, in the state demanding the tax. States, however, have been devising alternate ways to define nexus, both legislatively and thought court cases.

The state efforts generally apply to all remote sellers, but since Amazon dominates this shopping segment, getting the major player in the tax collection fold is a big first step.

Utah sales tax success: Amazon does not have a physical presence in Utah, but has become the first online company to sign a voluntary compliance agreement to collect the Beehive State sales tax, effective with the arrival of the New Year. 

The deal negotiated between Amazon and Utah reportedly allows Amazon to keep 1.31 percent of sales taxes it collects from Utah customers as a vendor discount for the cost of serving as a collection arm for the state as long as they are current on their filings.

Collections by Amazon will boost Utah's effort to get the estimated $200 million in state sales taxes not being paid on online purchases. Another $100 million in local sales taxes also are going uncollected.

Iowa 'required' Amazon tax: Beginning Jan. 1, 2017, "Amazon will be required to collect sales tax in Iowa." according to a company statement provided to KCCI.

There was no elaboration on the requirement, since, as in Utah, Amazon has no physical presence in the Hawkeye State.

Purely speculation on my part, but the company could be planning to build a distribution center in Iowa. It has done so in other states and agreed to pay sales tax in advance of that nexus component's completion. Plus, additional distribution operations will help Amazon reach its goal of more rapid delivery across the country.

The Iowa Department of Revenue estimates the online sales tax collection will mean an additional $18 million to $24 million a year.

And there's a public relations as well as tax bonus. Iowa's small businesses could be a big beneficiary of Amazon's tax collection, since it will eliminate the idea of a tax discount when buying from Amazon.

"It really is one of fairness to your brick-and-mortar, small-town retailers who have a physical presence here, who have employees, who have property tax that they pay," said state tax department spokesperson Victoria Daniels. "They're losing sales to companies that aren't even here."

Nebraska has no nexus either: Finally, Amazon announced on Friday, Dec. 22, that it will begin collecting sales taxes in Nebraska next year, even though the company has no physical presence in the Cornhusker State.

Nebraska Tax Commissioner Tony Fulton hailed Amazon's decision as "a good example of responsible corporate citizenship."

Fulton also hopes it will encourage the state's individual taxpayers to report their out-of-state Internet purchases on their state income tax forms. Only about 1 percent of cyber buyers currently comply with the state's use tax law.

"The tax is owed. So their announcement will just help Nebraskans to comply with the existing law," Fulton said.

Despite Amazon's welcome (to state officials, if not state shoppers), expect the Nebraska legislature to consider measures to require all online retailers to collect state and local sales taxes.

The legislative action is needed, according to Jim Otto, president of the Nebraska Retail Federation, because while Amazon is an online retailing giant, its sales represent only around 20 percent of the online purchases made by Nebraskans.

Previous estimates of Nebraska's tax revenue lost to the nonreporting of all internet sales range from $45 million a year to $118 million a year.

Amazon collecting in 34 jurisdictions: The table below shows the full list (I think/hope!) of states where Amazon will be collecting sales taxes in 2017.

You also might find these items of interest:


New Required Preparer Due Diligence for AOTC and Child Tax Credit

The addition of these two credits to the required due diligence of paid preparers in preparing a return that claims either or both was made by the PATH Act (P.L. 114-113, 12/18/15). The statutory language added at §6695(g) implied that regulations were needed. The IRS released draft Form 8867 and instructions in summer 2016, but did not release the regulations until 12/5/16. [TD 9799(12/5/16) and REG 102952-16 (12/5/16)]
The regulations note that Form 8867 must be completed “and such other information as may be prescribed by the” IRS. The preparer must include relevant worksheets and Form 8863 and instructions (AOTC), or “otherwise record in one or more documents in the tax return preparer’s paper or electronic files the tax return preparer’s computation of the credit or credits claimed on the return or claim for refund, including the method and information used to make the computations.”
The regulations also include this rule about knowledge (§1.6695-2(b)(3)):
“(3) Knowledge—(i) In general. The tax return preparer must not know, or have reason to know, that any information used by the tax return preparer in determining the taxpayer’s eligibility for, or the amount of, any credit described in paragraph (a) of this section and claimed on the return or claim for refund is incorrect. The tax return preparer may not ignore the implications of information furnished to, or known by, the tax return preparer, and must make reasonable inquiries if a reasonable and well-informed tax return preparer knowledgeable in the law would conclude that the information furnished to the tax return preparer appears to be incorrect, inconsistent, or incomplete. The tax return preparer must also contemporaneously document in the files any inquiries made and the responses to those inquiries.”
Form 8867, lines 3 and 4, address the “knowledge” requirement. The instructions for these lines provide:
“As a paid tax return preparer, when determining the taxpayer’s eligibility for, or the amount of, a credit claimed on a return or claim for refund, you must not use information that you know, or have reason to know, is incorrect. You may not ignore the implications of information provided to, or known by you, and you must make reasonable inquiries if the information provided to you appears to be incorrect, inconsistent, or incomplete. You must make reasonable inquiries if a reasonable and well-informed tax return preparer, knowledgeable in the tax law, would conclude that the information provided to you appears to be incorrect, inconsistent, or incomplete. You must also contemporaneously document in your files any reasonable inquiries made and the responses to these inquiries.
You must know the tax law for each credit claimed on a return or claim for refund you prepare and use that knowledge to ask your client the right questions to get all the relevant facts to determine your client’s eligibility for the credit(s) and the correct amount of the credit(s).”
Here are a few questions I’d suggest are appropriate for determining if someone is eligible for the child credit (not a complete list).
  • How old are your children? When were they born?
  • Where do they go to school? What grades are they in?
  • For a single parent, where does the child live? If the child lived the majority of the time with the parent who is your client, ask if he/she signed a Form 8332 to allow the other parent to claim the child.
  • If a client tells you they have a signed Form 8332 from the other parent, ask if it has been revoked (did they receive notice of revocation from the other parent)?
A few questions for someone who appears eligible to claim the AOTC for their dependent child and whose income is below the phase-out range (also see Form 8863 and instructions, along with IRC 25A and information on the IRS website (regulations addressing AOTC are still in proposed form - REG-131418-14 (8/2/16)):
  • When did they start college?
  • How many units did they take each semester? (student needs to be at least a half-time student for at least one semester; also see Box 8 of Form 1098-T)
  • Please provide me the Form(s) 1098-Tthe child received. If it shows amount billed rather than amount paid (see boxes 1 and 2), ask when the tuition was paid. You should also verify that the 1098-T is correct. Be sure Box 9 is not checked (student is a graduate student, indicating they are likely no longer in their first four years of collect).
  • How much is the tuition?
  • Did your child receive any scholarships or grants?
  • Do you have a 529 or 530 plan for the child? (If yes, was it used?) Is the taxpayer/child eligible for other education tax benefits that may be more beneficial? Did they receive any tax-free education assistance from his/her employer?
Here are some tougher questions for the AOTC:
  • Did you child receive academic credit for at least one semester of the tax year? This is a tough one as parents might not know the answer, particularly is the child dropped out after the refund period. Box 8 on Form 1098-T asks if the student was at least a half-time student. Perhaps that being checked is sufficient. Also, if not enrolled per how that term is defined at the university, a 1098-T likely should not have been issued. So, this might be a tough question if there is no 1098-T and the parent insists the child was in college during the year.
  • Does the student have a felony conviction for possession or distribution of a controlled substance?
Perhaps it would be best to put these questions on a checklist for the client to complete and sign. It should include the reason why the question is asked.  You might want to refer clients to the AOTC information in Publication 970 and FAQs.
The AOTC includes amount paid for books and related materials that are required by the university, even if not paid to the university. Before making any effort to determine these amount, see if the tuition paid for the year is high enough to max out the AOTC. In most cases, it will be (unless the student attends a community college in California). You max out the AOTC with $4,000 of tuition paid for the year (the credit is 100% of the first $2,000 and 25% of the next $2,000 for a maximum credit of $2,500).
The questions asked by the paid preparer and the answers/documents received from the client must be kept for three years after the return is filed. The Form 8867 is attached to the client’s return to avoid a $510 penalty to the preparer. Do note that even with the attached form, a preparer can still be subject to the penalty for not doing the required due diligence. This reminder is in the “what’s new” section of the Form 8867 instructions (although this is not new):
“Completing the form is not a substitute for actually performing the necessary due diligence and completing all required forms and schedules when preparing the return.”
I think the Form 8867 will help improve compliance with the child credit and AOTC as it will likely lead many preparers to review these credits in more detail and some may find that there were parts that they were not aware of before (such as that the AOTC is only for the first four years of college, even if that is only the first fall semester, it the student was at least half-time, that is a year of college). If a student attended a California community college for the first two years of college, parents might feel cheated because the tuition paid is not enough to max out the AOTC for those years (although books and other required materials, perhaps even a computer will help – see FAQ7). So, they might want to use the AOTC when the child transfers to a more expensive university, but it doesn’t work that way. The AOTC is only for the first four years of college. So, that parent (or student) doesn’t max out the AOTC, but they also aren’t paying a lot of tuition!
On a policy note, if a state university or college isn’t charging enough tuition to max out the credit, the California Legislative Analyst described this as the state giving a reverse subsidy to the federal government (that is, to students in other states). [See LAO’s February 1998 report]
Should the Form 8867 due diligence documentation requirement to avoid a penalty be expanded to other complex items claimed on a tax return? I don’t’ think so. Preparers already have required due diligence requirements such as the preparer penalty of §6694. Many preparers are also subject to licensing rules and those of professional organizations they belong to, as well as Treasury’s Circular 230. Congress likely expanded the §6695(g) penalty to these additional credits due to errors in claiming them. But, there are other solutions to address tax law complexity: (1) simplification, (2) required continuing education for all preparers (to address those not covered by licensing requirements for continuing education), (3) some assurance that paid preparers have adequate training including research skills and access to resources beyond IRS pubs and form instructions, and (4) due diligence checklists from the IRS to help preparers (and the IRS).
The PATH Act also requires the Treasury Department “to conduct a study evaluating the effectiveness of tax return preparer due diligence requirements for the EITC, child tax credit and AOTC. The study with respect to the EITC shall be completed one year from the date of enactment (December 18, 2015), and the study regarding the child credit and the AOTC shall be due two years from the date of enactment.” [JCT Bluebookto 2015 legislation, page 231]
The only study I find (at 12/24/16; 6 days after the 12/18/16 due date for the EITC report) is a 27-page report issued by Treasury in July 2016.  It addresses preparer due diligence, but doesn’t reference the PATH Act (only House Report 114-194). Per H. Rpt 114-194, the July report is tied to this request: “The Committee directs the Office of Tax Policy (OTP) and the IRS Office Research,  Analysis and Statistics to conduct data-driven analysis to  improve EITC compliance in collaboration with the tax  preparation community. Successful analysis will identify solutions effective for both paid preparers and self-preparers, ensure ease of taxpayer understanding. The Committee directs OTP and IRS to submit a report to the Committees on Appropriations in the House and Senate not later than six months after enactment of this Act on meeting this goal.” The report explains various initiatives the IRS used to improve EITC compliance (a subject for a future blog or article – looks interesting). So, it seems that we are still waiting for the §6695(g) EITC report due 12/18/16.

What do you think? (about the expanded due diligence for preparers for 2016 returns, preparer obligations in general, complexity, or anything else in this post)


Friday, December 23, 2016

Freshly cut Christmas trees in Mississippi now tax-free New York, Pennsylvania to try again for tree sales tax breaks next year

I love Christmas. I love it so much that I convinced the hubby to put our tree up the week after Halloween. .

Christmas tree 2016_up before Thanksgiving this year
We -- OK the hubby, at my nagging request -- put our Christmas tree up the first week of November this year. The early decorating has made for a less hectic official holiday season.

My main reason is, as I said, I love Christmas. And we have a big artificial tree that takes a while to decorate with all the ornaments we've collected over all our years together. Plus, we have lots of other holiday decorations spread across the house.

It just seems silly to go to all the trouble to take all these festive items out of storage, take a couple of days to put them up and then dismantle everything just about a month later. I'll never, ever understand those folks who buy their trees on Christmas Eve. 

So rather than leaving the tree up to Valentine's Day (we actually did that, albeit not intentionally, one year; it was just a crazy time), we started a new Christmas tradition this year and decorated well before Thanksgiving. It comes down right after the Epiphany, Jan. 6, 2017.

Fake's early advantage: Of course, putting up a Christmas tree early is only possible if, like us, you have a fake tree.

I know. You're asking how can I be a true Christmas fan and have a plastic, although lovely, tree? In our defense, we do hang a wreath inside to get the evergreen scent.

The artificial tree allows us to celebrate the season longer than usual. So we're not changing to a real tree any time soon, despite the shade thrown at us by the Christmas Tree Promotion Board.


But the tree growers hope they can convince others to, as their slogan says, keep it real.

To get out that message, the Christmas tree industry is making use of the previously controversial and erroneously described Christmas tree tax.

Christmas tree "tax" tempest: You might remember this U.S. Department of Agriculture 15 cent fee -- it's technically not a tax -- on fresh-cut Christmas trees that prompted hand wringing and wailing back in 2011 from mostly conservative groups.

The fee/tax protesters saw it as part of the larger so-called war on Christmas and a specific effort to kill a beloved holiday tradition.

They were wrong.

The fee was not, as opponents wrongly proclaimed, an Obama Administration anti-Christmas tax effort. It actually was a fee sought by the Christmas tree growers to raise money to promote their industry.

The National Christmas Tree Association's interest in the fee started when Christmas tree production fell from about 37 million to 31 million trees between 1991 and 2007. In addition, the number of tree farms declined and sales of artificial trees grew.

The association looked at the success other agricultural sectors and commodities had with using an assessment designated for research and promotion. Essentially, the live Christmas tree folks wanted a "Got Trees?" to rival the milk industry's "Got Milk?" campaign.

So in 2008, they petitioned USDA to establish the Christmas Tree Promotion, Research and Information Order with its 15-cent per tree fee.

The outcry, however, got enough attention to lead to the tree fee's delay. The continuing complaints kept the fee's collection on hold for years.

Tree fee finally collected: Finally, though, the public opposition died down and the fee is now being collected on fresh tree sales.

The money it's raising is being used by Christmas tree growers to fund a $1.25 million social media campaign -- hashtag #ItsChristmasKeepItReal -- to convince holiday celebrants to buy live rather than artificial trees.

Topping the Christmas tree_Christmas Tree Promotion Board video scene
A tree-topping scene from the Christmas Tree Promotion Board's "25 Days of Keeping it Real" video, the production of which was paid for by the Christmas tree fee (not tax). Click image to watch the full story on YouTube of what live Christmas trees would say if they could talk.

Good luck to the tree growers. While I'm committed to my fake tree, I do appreciate the beauty -- and aroma -- of authentic evergreens.

State tree tax break in Mississippi: While there's not a federal Christmas tree tax, most states that collect sales taxes -- that's 45 plus the District of Columbia -- do add that levy to holiday tree purchases.

Some Mississippi tree buyers, however, now get a break when they buy their fir at a tree farm. This Christmas, real trees purchased "directly from the farm and the tree is cut or severed at the time of sale" are now tax-exempt, thanks to a new law that took effect earlier this year. 

Do note, Magnolia State tree shoppers, that his tax break applies only to freshly cut trees. The new law expressly states that, "Sales of pre-cut Christmas trees are taxable at the regular retail rate of tax."

Two other states also are looking to lessen the sales tax on freshly cut Christmas trees, but this is a gift that's on next year's legislative Christmas wish list.

Keystone State tree farm tax break: Pennsylvania State Rep. Seth Grove, Republican of York County, plans to reintroduce his "Don't be a Scrooge" bill in the 2017-18 legislative session.

Like the Mississippi law, it would make Christmas trees sold by Keystone State tree farms exempt from the state's 6 percent sales tax.

"Christmas trees are one of the few agricultural products not exempt from sales tax," said the aptly-named lawmaker. "This bill would produce some savings for families who buy Christmas trees at a time when most are counting pennies to afford presents to sit under those trees. Removing the trees from the list of taxed items also cuts down on work Christmas tree farms put toward managing the books."

Empire State tree tax holiday: In nearby New York, State Sen. Rich Funke, a Republican whose district encompasses the shores of Lake Ontario, Rochester and parts of the Finger Lakes wine country, also will try again next year to get approval for his proposed sales tax holiday for New York-grown Christmas trees.

Funke's original 2015 Go Green Weekend called for a state-wide, annual tax-free holiday on the sale of fresh trees, wreaths and garlands each year. The bill was amended to exempt fresh cut evergreen trees for the entire months of November and December.

The sales tax break, according to Funke, "would level the playing field for farmers and consumers alike … [and] combined with our support for an innovative new marketing campaign, would help make New York State our nation's capital for fresh Christmas tree shopping."

Maybe next year, Pennsylvania and New York fresh tree shoppers. 

Until then, enjoy your Christmas tree, real or artificial, wherever you are and whatever tax you paid on it.

And have yourself a very Merry Christmas.

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