Friday, March 31, 2017

Watch Putin's lips as U.S. tax quote gets lost in translation

The Congressional investigations into alleged improper Russia-Trump Administration connections are attracting worldwide attention.

Read Putins lips-I didnt hack US election
Click image to watch the NBC News clip of Vladimir Putin paraphrasing a famous U.S. tax quote.

Even Vladimir Putin, Russia's president and Donald J. Trump's sometimes bromantic partner, chimed in on the issue of his country's hacking of computers during America's 2016 presidential election.

"Ronald Reagan, debating about taxes and addressing the Americans, said, 'Watch my lips.' He said, 'No. Watch my lips. No,'" Putin said through an interpreter during a CNBC-moderated discussion March 30 at the annual Arctic Forum in the Russian city of Arkhangelsk.

Nice try, Vlad, but it looks like a couple of things were lost in translation and re-translation.

Wrong U.S. president: I understand why Putin, deemed the most powerful person of 2016 by Forbes, might have had Ronald Reagan on his mind.

Back in the 1980s, Reagan was the U.S. commander in chief during the still on-going Cold War. And as history books and the FX television show The Americans note, Ronnie took a hard line against the Ruskies.

During that time, Putin was a young KGB agent serving in an isolated part of East Germany who, according to numerous reports, was shaped by the changes that decade brought to his homeland.

But the famous American tax quote was not spoken by Reagan. Rather, it was one uttered by his vice president and Oval Office successor George H.W. Bush.

"Read my lips. No new taxes," Bush famously said at the 1988 Republican National Convention when he accepted the Republican presidential nomination.

Result not as expected: Of course, the elder Bush — father of George W., our 43rd president and namesake of what became known as the Bush tax cuts — ended up paying a big political price for his no tax pledge.

Most political analysts say Bush père's decision to work with Democrats in 1990 to raise taxes in order to reduce the federal budget deficit ended up costing him reelection two years later.

Hindsight has been a bit kinder to the Bush 41. In 2014 he received the John F. Kennedy Library Foundation's Profiles in Courage Award for his tax action that put the country's fiscal welfare ahead of politics.

Accolades are nice, but I suspect a part of George H.W. Bush still would have liked to have lived in the White House for an additional four years.

Putin watch: As for the current Russia-U.S. election inquiries, Putin also said at the gathering in the White Sea port city near the Arctic Circle that "all those things are fictional, illusory and provocations, lies."

"All these are used for domestic American political agendas," the Russian president told the conference audience. "The anti-Russian card is played by different political forces inside the United States to trade on that and consolidate their positions inside."

Is Putin correct?

Or will the Russia inquiries on Capitol Hill come back to similarly bite Putin and, more importantly, some high-ranking U.S. citizens?

We'll just have to, as Putin suggested, keep watching.

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Thursday, March 30, 2017

IRS bringing in more tax money despite budget cuts

The Internal Revenue Service collected more than $3.3 trillion during the 2016 fiscal year.

That tax tidbit is part of the agency's 2016 Data Book, which details IRS activities from Oct. 1, 2015 through Sept. 30, 2016.

IRS 2016 Date Book Collections graphics
After taking a dive in 2009, IRS collection of taxes has increased each of the last five fiscal years even though it's been forced to so with smaller budgets.

Bringing in tax dollars and making sure that you, I and all the other U.S. taxpayers comply with the nation's tax laws are two of the IRS' major jobs.

But for the last few years — specifically since the 2015 controversy over the agency's handling of applications for tax-exempt status by conservative tea party groups — it's been tougher for the IRS to do that job because Republican control of Congress has meant budget cuts.

Smaller FY18 IRS budget cut: It looks like that trend will continue in fiscal 2018. But there's a bit of good news.

The Trump Administration's budget proposal calls for a $239 million cut for IRS operations from what it got this year.

While it's still less money, it's only a 2 percent cut and much more generous than original projections that the nation's tax agency could take a 14 percent hit in the new presidents first budget.

Maybe Treasury Secretary Steven T. Mnuchin, who said in his confirmation hearings that the IRS needs more money and staff, did make a difference.

Some members of Congress are hoping they can help, too.

Some House support for more IRS money: A group of Representatives on March 29 wrote the House Financial Services and General Financial Services and General Government Appropriations Subcommittee urging it to increase FY18 IRS funding to $12.9 billion.

Keith_Ellison _U.S._House_of_Representatives_from_Minnesota's_5th_district_01_Wikipedia-Lorie Shaull
U.S. Rep. Keith Ellison is leading an effort to get the IRS more money for FY18. (Photo by Lorie Shaull via Wikimedia)

Rep. Keith Ellison (D-Minnesota) and 47 of his Democratic colleagues cited Mnuchin's public comments that cuts at the agency could be preventing it from doing its job.

"An increase in funding for the IRS will reverse the short-sighted and damaging budget cuts which have increased our national debt, left the IRS ill-equipped to combat refund errors and fraud, drastically reduced taxpayer services, dangerously reduced audits, and limits the IRS’s ability to implement new laws passed by Congress," the Representatives wrote.

"The IRS is by far the most efficient tax administrator of all the major economies, with others spending up to twice as much to collect a dollar of revenue," Ellison et al added. IRS Commissioner John Koskinen has noted in several public speeches that for every dollar the agency gets, it brings in $6.

The union that represents Treasury workers, including those at the IRS, welcomes the support from Ellison and his colleagues.

The IRS is at a tipping point," said Tony Reardon, president of the National Treasury Employees Union. "It is time to properly fund this agency so taxpayers get the services they need, identity theft and other tax fraud schemes can be thwarted, and Americans have confidence in the voluntary tax system."

Will Congressional appropriations panels listen to Ellison and other IRS supporters? Maybe.

But I suspect that the best the IRS can hope for right now is that it will not face any funding cuts deeper than what Trump now seeks.

More IRS data: The annual IRS Data Book is a tax and numbers geek's Bible, so I'll be spending some time going over the latest info on the tax agency. Admit it; you're jealous of my life!

As I sort through the latest figures, I'll blog in the coming days about things I find particularly interesting.

You have been promised ... or warned!

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Social Media Guide for Tax Business Owners

Have you been promoting your tax business on social media? If not, you should be. It has been estimated that the average person spends nearly two hours on social media every day. That’s a lot of screen time your business could be capitalizing on! As social media channels become more prevalent (and more continue to crop up), screen time is only going to increase (and may even take over some of our t.v. time).

It’s crucial for your business to have a presence on social media. Not only does it increase your exposure, it makes you competitive with national firms and is expected among consumers. The problem most tax business owners face when it comes to social media is how to best leverage it and break through the noise. Here is a simple guide with best practices that will show you how each channel can be used to increase exposure.


With over 1 billion users, it’s hard to ignore the importance of Facebook. The most important thing to remember about this channel is that consistency and engagement are crucial. Facebook uses an algorithm to determine what content it serves up to each user. This means that everyone who likes your company Facebook page won’t necessarily see every post. It all depends on how engaged they are with your content.

Facebook Best Practices

  • Post daily to keep your audience engaged
  • Consider these questions before posting: Would my audience find this valuable? Would I share it?
  • Use a mix of images (like infographics, pics, quotes), video, and links.
  • It’s ok to post blog posts more than once on Facebook, just make sure you spread them out.
  • Highlight your staff and show off your company culture. This adds more personality to your page and can help your audience connect to you.
  • Go Live! Facebook Live is a great way to mix it up. Live videos get more reach than other types of posts.
  • Share content from referral partners or complimentary local businesses and be sure to tag them.

Facebook Ads

Facebook ads are a great way to help boost special announcements and promotions or just give you some increased reach. The great thing about Facebook ads is you can target very specific demographics. Here are some interesting ways you can target people on Facebook:

  • Location (choose a specific radius around your business)
  • Income level
  • Newly weds, new home buyers, new parents (anything that could change their tax situation)
  • Business Owners
  • People on your email list
  • Specific households, job titles, and interests


Facebook Insights is a great place to go for metrics. Metrics you should be looking for:

  • Likes
  • Engagement
  • Reach
  • Referral traffic to website (you can find that metric in Google Analytics)


LinkedIn is also a must when it comes to social media for tax business owners. LinkedIn is strictly professional and can be a great way to network with potential clients. Think of LinkedIn as an extension of your networking. Staying in touch with your network and building relationships could not be easier.

LinkedIn Best Practices

  • Connect with everyone you meet so you can stay in touch.
  • Read your newsfeed daily and engage with your connections.
  • Follow influencers in your industry (or in marketing) to stay on-top of the latest trends.
  • Join LinkedIn Groups and contribute to them in a meaningful way (start by joining Tax Business Owners of America).
  • Post regularly (early in the morning is the best time). Make sure you’re posting your company blogs on LinkedIn.
  • Create a LinkedIn Company page and post regularly to it.
  • Make sure all of your employees are connected to your company page and encourage them to share your updates.
  • Do you or your employees have a certificate from The Income Tax School? Add it to your profile.
  • Use LinkedIn’s advanced search capabilities to find potential clients and/or potential employees.

LinkedIn Ads

Just like Facebook, LinkedIn has a very robust ads platform that can help you get in front of the right people. Because of the business nature of the platform, there are different targeting capabilities on LinkedIn. You can target by location, occupation, industry, seniority, company, and much more.


LinkedIn has insights as well for both pages and for people. Here are some metrics to pay attention to:

  • Who’s viewed your profile (personal)
  • Views of your post (personal)
  • Article views (personal)
  • Followers (company page)
  • Engagement (company page)
  • Reach (company page)


Company blogs are a great way to show off your knowledge, provide value to your clients or potential clients and give people a reason to keep coming back to your website. They also give you great content for your social media channels.

Blogging Best Practices

  • Maintain an editorial calendar to plan topics ahead of time.
  • Speak in plain language – no legalese or tax terms.
  • Keep your posts between 500 and 700 words.
  • Use headers to break up your posts into easily digestible or scannable chunks.
  • Blog about topics that your clients are interested in or ask questions about.


Are people reading your blogs? Your Google Analytics will tell you. Make sure you have Google Analytics set up so that you can track how many people are visiting each blog post.


Twitter is a fast-paced social media platform that communicates in 140 characters at a time. Twitter is used by bloggers, business owners, and journalists as a networking tool, and is very popular with journalists who use it to find story leads.

Twitter Best Practices

  • Set aside time to read your feed and interact with people daily or weekly.
  • Follow local news media (and the journalists who write about the industry).
  • Follow businesses and individuals in your community.
  • Use a tool like Hootsuite to listen for conversations and mentions of your company and to schedule tweets.
  • Write 5-10 tweets to promote each blog post you write. Schedule these to post every other day after each blog is written.
  • Respond when others tag you.
  • Sharing is caring. RT (retweet) others and tag people when you tweet their articles.
  • Plan and write tweets ahead of time and then schedule them weekly.
  • Use hashtags.


Twitter analytics is a great place to go to see how you’re doing on the platform. Here are some analytics to pay attention to:

  • Followers
  • Impressions
  • Mentions
  • Top Tweets

Other Social Media Channels

The key to social media is not to be on every channel imaginable. It’s all about finding the channels your target audience uses the most and that suit your business and the type of content you are able to produce. Know your strengths and only focus on the channels you are capable of managing. That said, here are some best practices for other social media channels that might suit you.


  • Research relevant hashtags in your community and use no more than 10 in each post.
  • Upload high quality images.
  • Stick to a particular look for all of your Instagram photos so that your feed is consistent and compelling.
  • Post regularly throughout the week.
  • Comment and like other Instagram photos.
  • Follow influencers and people in the community.
  • Tag others in photos when it makes sense.


  • Use target keywords in file names and pin descriptions.
  • Pin blog posts as well as images.
  • Create compelling infographics that break down processes or explain complicated tax topics.
  • Make sure your photos are high quality.
  • Re-pin other pins and follow people who follow you.
  • Use taller images that take up more space in the Pinterest feed.
  • Credit your sources by linking to their site.


  • Make content, not ads.
  • Tell stories.
  • Make sure your videos are high quality and shorter in length (under two minutes).
  • Include descriptions with keywords for each video.
  • Link back to your website in the about section.
  • Create videos that teach and engage.
  • Read and respond to comments.

So how do you manage all of this and run a tax business? There are some great tools out there that will help my allowing you to monitor everything in one dashboard and schedule posts. Hootsuite and Buffer are two great tools to check out. If it’s just too overwhelming, you can hire a professional, like Emergent Social Solutions to help you!

More Great Reads:

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

Get More Done During Tax Season with Technology

5 Essentials to Developing a Client Newsletter



Wednesday, March 29, 2017

Democrats strike out on 3rd attempt to get Trump's taxes

Everybody saw this coming. The Republican-controlled Ways and Means Committee killed the latest effort by Democrats to get a glimpse of Donald J. Trump's tax returns.

The tax-writing panel held a hearing Tuesday, March 28, afternoon on H. Res. 186, a measure sponsored by committee member Rep. Bill Pascrell Jr. (D-New Jersey), that would have ordered the Treasury Secretary to provide 10 years of Trump's tax returns to the House.

Rep Bill Pascrell of NJ argues for his bill Trump tax return bill
New Jersey Rep. Bill Pascrell makes a point during the markup of his resolution seeking to see a decade's worth of Donald Trump's tax returns.

In addition to the president's returns for tax years 2006 through 2015, Pascrell's resolution sought other financial information, such as debts held by foreign governments, foreign investments and the use of tax shelters.

The committee rejected Pascrell's bill in a party-line 24 to 16 vote.

Limited Capitol Hill review: The New Jersey Democrat relied on Internal Revenue Code section 6103(f)(1) in crafting his request.

This law gives the Ways and Means Committee, along with Senate Finance and the Joint Committee on Taxation, the power to request the tax returns of an individual and review the materials "only when sitting in closed executive session, unless such taxpayer otherwise consents in writing to such disclosure."

Pascrell said the effort to see Trump's tax returns is a way to "follow the money" as it relates to potential connections between Trump and Russia.

GOP reject effort as political stunt: From the get-go, however, Republicans denounced Pascrell's proposal as pure politics.

"I'm going to keep my remarks short today because, frankly, this resolution is a procedural tool being utilized – and I think abused – for obvious political purposes," said W&M Chairman Rep. Kevin Brady (R-Texas) in his statement opening the markup.

That sentiment was echoed by Rep. James Renacci (R-Ohio), a tax professional who said he has audited, reviewed and prepared tax returns for 30-plus years and who called Pascrell's bill a "political mission." Rep. Kristi Noem (R-South Dakota) called it a "stunt that some even question the legality of."

"Tax returns do not list investments. They don't. What does list investments are the reports, the disclosure reports which Mr. Trump has done," Renacci said. "Let's face it, release of presidential tax returns by candidates is tradition, it's not law, and if we abuse the authority given to the tax-writing committee under 6103 of the tax code to obtain the president's tax returns in this manner, then I guess we can pick any political person we want to go after their tax returns."

Democrats seek foreign relations, tax info: Democrats, however, expanded their interest in Trumps returns from the Russian implications to other more tax-specific legislation that will come before the committee.

The president wants to lead the effort for tax reform, but is hiding his, said Rep. Sander Levin (D-Michigan).

"This committee has a role to play with reference to tax returns," added Rep. Lloyd Doggett (D-Texas). "This committee has a significant interest in these returns as it relates to the administration of our business, both with reference to our trade agenda … and with reference to our tax responsibilities."

Doggett raised the question as to Trump's motivation when it comes to tax reform that Ways and Means will consider. The Central Texas lawmaker elaborated:

"After all, this is a gentleman who has bragged during the course of his campaign … about his ability to manipulate members of the Congress and get pretty much whatever he wants in the tax code. 'I know our complex tax laws better than anyone,' President Trump said, 'anyone who's ever run for president and I'm the only one who can fix them.'

"The question is whether he's going to fix them for himself or fix them for the American people. And without those tax returns to know what conflicts may exist for him, what kind of self-dealing may exist for him, we will never know. …

"There is every reason why in terms of its work in tax and the fact that we are considering major tax legislation that we [as Ways and Means members] would want to know whether he will benefit personally and that's why he's advancing these various legislative changes."

Broken tax pledge: And Rep. Joseph Crowley (D-New York) took the president to task for misleading the American people regarding his returns. It's time for Trump to do what he pledged to do during the campaign, which is to release his tax returns, said the New York City Representative.

Now that the election is over, added Crowley, he's said he no longer has to hand over his tax returns because he's president. "That's right. He's president and we're not. We get that," said Crowley, his voice indicating a frustration that was felt by other Ways and Means' members during what at times was a contentious 2½-hour hearing. You can watch the full session on YouTube.

In the end, though, the result was the same as two other Democratic attempts. Republicans voted to report the resolution "unfavorably" to prevent it from going to the full House floor for consideration.

Will there be a fourth try to get Trump's tax returns? Or, as Doggett said, is it clear that the Ways and Means committee has struck out on this issue?

Following the committee's vote, Pascrell vowed to "continue to make the case until Mr. Trump's returns see the light of day."

Do you still want to see Trumps taxes? Do you have questions about how any proposed tax code changes will affect and/or benefit the president, his family and his business? Or is it time to let the tax return quest go?

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Tuesday, March 28, 2017

5 tax-saving investment options

Most high-income investors last were likely a little bummed last week when the Republican proposal to replace the Affordable Care Act failed.

It didn't have anything to do with their personal opinions on Obamacare or health care in general. It meant that the Net Investment Income Tax, or NIIT, remains on the books.

Wall Street bull statue_NY-1524129

This 3.8 percent surtax is assessed on capital gains, dividends, interest, and other passive income earned by single investors making more than $200,000 a year or $250,000 if married filing jointly. It was one of the many ACA-related taxes that would have been repealed if the GOP had succeeded.

Tax breaks for investments: But while the NIIT remains, there still are some other investment options that could help cut your taxes.

"Making new investments in retirement, education and health care accounts can really bring down the amount of your income that's subject to taxes," says Mildred Carter, senior federal tax analyst for Wolters Kluwer Tax & Accounting.

Here are four moves that Carter and her Wolters Kluwer colleagues recommend that may lower your current tax bill, let your investments grow tax-free or both. I've added a fifth.

1. Maximize 401(k) matching contributions.
If your employer matches your 401(k) contributions, then contributing to the maximum matched amount is a great tax-savings investment move.

"If your employer matches three percent of your contribution, that's free money to you as well as a significant amount of tax-free savings that many people may have a hard time putting aside on their own," says Carter.

Roth 401(k)s also have increased in workplace retirement plan popularity. Like traditional 401(k)s, the money grows tax-free. However, unlike traditional 401(k)s, you pay taxes on your initial contribution rather than on the gains at future distribution.

"Even with higher current taxes, contributing to Roth 401(k)s can be a good choice, especially for younger individuals who anticipate the value of their accounts will appreciate considerably over time," Carter added.

The maximum amount an employee can contribute in 2017 to a 401(k) remains the same as it was in 2016: up to $18,000 or up to $24,000 for those age 50 and over. The same rules apply for 457 and 403(b) retirement plans.

2. Contribute to an IRA.
Both traditional IRAs and Roth IRAs allow contributions to grow tax free. And in some situations, contributions to a traditional IRA are tax deductible.

There is, however, not so good news for the higher income earners already bemoaning the retention of the NIIT. When it comes to traditional IRA deductions, they also are out of luck.

The tax deduction for traditional IRA contributions is phased out if you or your spouse are covered by a retirement plan at work and your modified adjusted gross income  is:

  • More than $98,000 but less than $118,000 ($99,000 to $119,000 for 2017) for a married couple filing a joint return or a surviving spouse; 
  • More than $61,000 but less than $71,000 ($62,000 to $72,000 for 2017) for a single taxpayer or head of household filer.

And while contributions to Roth IRAs are not deductible — no complaining about this rule; you won't owe any tax when you withdraw the money! — there still are income limits on who can open a Roth IRA.

The AGI restriction for Roth IRAs in 2016 for single filers is $117,000 phasing out at $132,000; for the 2017 tax years the income phase-out range is $118,000 to $133,000. The restriction for married taxpayers filing jointly in 2016 starts at $184,000 and phases out at $194,000; for 2017, the range is $186,000 to $196,000.

If you can deduct a traditional IRA contribution, you still have time to make a difference on your 2016 taxes. You have until the April 18 filing deadline to make an IRA contribution for 2016. That same deadline also applies to Roth IRAs if you just want to maximize that account, which also is a good, if not tax-deductible, idea.

3. Contribute to a 529 education savings plan.
Named after Section 529 of the Internal Revenue Code which created these plans in 1996, 529 plans allow you to make after-tax contributions to pay for college costs for your child or other family members. The contributions grow tax-deferred and the funds can be withdrawn tax-free if used for qualified college tuition and other expenses.

Nearly every state operates a plan as well as many educational institutions. In most instances, the state plan you select does not limit your choice of schools. For example, a resident in Illinois can invest in a California plan and send the student to a university in New York. The amount put into a 529 plan may be tax deductible under some state income taxes and distributions for qualified tuition and expenses are not taxed.

"Because 529 plans are funded with after-tax dollars, you don't have immediate tax savings, but avoiding future taxes on capital gains and dividends means you’ll have saved more to cover education costs," said Carter.

4. Contribute to an HSA.
High-deductible health plans (HDHP) continue to increase in popularity as people look to lower their monthly health care premiums. If you have one of these medical plans, you also can (should) open a Health Savings Accounts (HSA). With an HSA you make pre-tax contributions and take tax-free distributions to pay qualified medical expenses for yourself and HDHP-covered family members. These distributions can be made at any time to pay for qualified medical expenses in the near-term or health care expenses in retirement.

For 2016, the maximum amount an individual can contribute to an HSA is $3,350; it increases to $3,400 for 2017. For families in both the 2016 and 2017 tax years, the HSA contribution maximum is $6,750. If you're age 55 by the end of the tax year, you can make a catch-up contribution of $1,000.

As with IRAs, taxpayers have until April 18 to make their 2016 HSA contributions.

5. Donate your RMD to charity.
In addition to the four fine tax saving investment moves recommended by Wolters Kluwer experts, I want to add one more.

If you've been regularly investing for your retirement, good for you. But there is, in many cases, a tax cost. If you've saved a lot in a traditional IRA or similar tax-deferred retirement plan, then you'll have to start taking out some of the accounts' money when you turn 70½. These withdrawals are known as required minimum distributions, or RMDs.

When you take an RMD, it's taxed at your ordinary income tax rate. But if you don't need the RMD for day-to-day retirement expenses, then you can avoid the taxes on your mandated withdrawals by donating them directly to a qualified charity.

You don't get a tax deduction for your donation, known as a qualified charitable distribution, or QCD, but since you never take possession of the money, you don't owe taxes on it. And your charity gets a nice chunk of change.

Investing, tax wins: Finally, one important tax and investment reminder. Always make your investment decisions based on your personal and financial situations, not because of a tax law.

But if the Internal Revenue Code can help maximize your investments and lower your taxes, then by all means go for the win-win!

As Carter says, "If you are not benefiting from tax breaks with current investments, it may be worth looking at other options that encourage savings and can be beneficial for tax planning."

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Monday, March 27, 2017

5 FAQs about RMDs

The annual tax filing due date is the big day each April. Instead of falling on the usual April 15, the deadline for getting your taxes to the Internal Revenue Service this year is April 18.

But some older taxpayers, specifically that first big batch of Baby Boomers who turned 70½ last year, are facing a key April 1 tax deadline.

Older couple holding piggy bank

April Fools' Day is the deadline to take your first required minimum distribution, or RMD, from certain tax-deferred retirement accounts if you didn't do so by the end of last year. No kidding.

If you miss the April deadline, you'll face a substantial penalty. You'll owe a 50 percent tax on the amount you should have taken out of your affected accounts. Plus, you'll still have to pull that money out and pay the regular tax you owe and late charges for not doing so by April 1. Again, no kidding.

And remember, if you didn't take your RMD by last Dec. 31, in addition to the postponed withdrawal you must make in the next few days, you'll also have to take your 2017 RMD by the end of this year.

This April RMD is for last year and the next one is for this year. Miss the second RMD and you'll face the same 50 percent penalty on that money.

Beyond the basics of RMDs, many older taxpayers have lots of questions. Here are five commonly asked required withdrawal queries.

1. What types of retirement plans require minimum distributions?
You generally have to start taking withdrawals when you reach age 70½ from your traditional IRA and other IRA-based plans such as SEPs, SARSEPs and SIMPLE IRAs. The RMD rules also apply to all tax-deferred employer sponsored retirement plans, including profit-sharing plans, 401(k) plans including Roth 401(k)s, 403(b) plans and 457(b) plans. Note, however, that Roth IRAs do not require withdrawals until after the death of the owner.

2. How is the amount of the required minimum distribution calculated?
Generally, a RMD is determined for each account by dividing the prior Dec. 31 balance of that IRA or retirement plan account by a life expectancy factor that Internal Revenue Service publishes in three tables in Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).

  1. Joint and Last Survivor Table is used if the sole beneficiary of the account is your spouse and your spouse is more than 10 years younger than you.
  2. Single Life Expectancy Table is used if you are a beneficiary of an account, e.g., an inherited IRA.
  3. Uniform Lifetime Table is used if your spouse is not your sole beneficiary or your spouse is not more than 10 years younger than you.

You use the table that applies to your situation. The most commonly used table is the Uniform Lifetime Table. Click on over to the ol' blog's reproduction of the Uniform Lifetime Table to see how it works.

And remember that this is the minimum amount you must take out. You can always withdraw more if you need or want the money.

3. Can an account owner just take a RMD from one account instead of separately from each account?
You must calculate the RMD separately for each IRA that you own. However, you can withdraw the total amount due from just one of the affected IRAs. Similarly, a 403(b) contract owner must calculate the RMD separately for each 403(b) contract that he or she owns, but can take the total amount from one or more of the 403(b) contracts. But if you have other types of retirement accounts, such as 401(k) and 457(b) plans, these RMDs must be taken separately from each of those plans.

4. How are RMDs taxed?
Your retirement money is in an investment vehicle, so you'd think that your withdrawals would be taxed at the lower capital gains tax rates. You'd be wrong. Your RMDs are taxed at your regular income tax rate. The good news is that it's probably a lower tax rate than when you were working and starting stashing money into retirement plans.

5. If you take out more than your RMD, can you apply the excess to the RMD for a future year?
No. But if you don't need all the money that you must take out of your account in a particular year to live on, you can put it into another, non-retirement savings account. Or, as today's Daily Tax Tip explains, you can donate your RMD to your favorite charity.

So now that you're up to speed on your RMD responsibilities, if you're facing the April 1 deadline, make sure you don't miss it. It's firm.

There's no next-business-day calendar shift when the foolish due date falls on a weekend or federal holiday.

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W&M chair sees tax reform retroactive to start of 2017

House Ways and Means Chairman Kevin Brady (R-Texas) is confident that tax reform will happen this year.

And here's a note for your tax planning purposes. Brady sees any changes made in coming months to the Internal Revenue Code as being retroactively effective from Jan. 1, 2017.

WM Chair Kevin Brady talks tax reform with Maria Bartiromo Fox Sunday Morning Futures
House Ways and Means Chairman Kevin Brady (R-Texas) talked tax reform tactics and timetable with Fox News' Maria Bartiromo on Sunday, March 26. Click image to watch the full interview via YouTube.

That will make tax moves this year, uh, exciting.

Effective dates are always a pain any time Congress changes laws. Retroactive ones, however, can be a big mess when it comes to taxes, even with laws you want. 

Do we take Brady at his word?

Or do we wait to see if every item that might get tweaked indeed makes it into the final bill?

Or do we wait until we actually see a bill with Donald J. Trump's signature on it before making our tax moves?

And what will any wait — or any delayed move based on presumed/proposed changes — mean to our taxes?

Go bold on corporate tax changes: Maybe we should be thankful that, as Brady told Maria Bartiromo on Fox News' "Sunday Morning Futures" show today, major tax reform only happens once in a generation.

Since big tax law changes are infrequent, Brady said the plan is to go bold. Specifically, he said "very bold."

This American Authors' song is for Rep. Kevin Brady and his tax-writing colleagues.

"The priorities are growth, designing a code not built to punish people or wring money from them, but actually to grow jobs, wages, and the U.S. economy," Brady told Bartiromo.

"We've decided since this is just once in a generation we get this opportunity, we can't go mediocre. We can't shoot for the middle of the pack. We have to be very bold."

Border tax in the mix: The first step is to revise corporate taxes, he said. And, yes, a border tax will be part of the plan.

However, any border tax will be structured to drive U.S. competitiveness, not to raise revenue, said Brady. Sorry all you wall builders looking for that money.

The goal with any corporate tax change, said Brady, is to level the playing field for U.S. and foreign made products. That includes eliminating tax incentives to move headquarters or manufacturing facilities overseas.

But if there's no added revenue from a border adjustment tax, asked Bartiromo, is there wiggle room in the tax rate to raise money? Perhaps going from a 20 percent corporate tax rate favored by Brady to a 28 percent rate that some tax policy experts have suggested.

No way, said Brady.

"No, that will not make us competitive," he said regarding a higher business tax rate. "That won't even get us to the middle of the pack. Frankly we are getting our brains beat out because our competitors are beating us with lower rates, they no longer tax worldwide, they border adjust."

Texas aside: Folksy phrases like "getting our brains beat out" delivered in a Lone Star drawl is the best (only in some cases) argument for putting my fellow Texans in spokesperson positions. 

Instead of focusing on revenue neutrality per se, Brady said "we're going for growth but also wanting to balance the budget by growing the economy in such a significant way that it helps us get back to a balanced budget and back to that day when we  start paying down the national debt." Google dynamic scoring.

House plan as starting point: Brady, naturally, believes the House tax plan is the best starting point from which to move tax reform this year.

And in making that argument, Brady threw some shade — I honestly can't tell if it was intentional or just my perception — at how the recently scuttled Republican replacement for the Affordable Care Act, which would have repealed the health care law's associated taxes, was handled. 

Republicans on the Ways and Means Committee have "spent five years getting ready for this moment," Brady said. "We never stopped working on transforming the [tax reform] blueprint into legislation."

That preparation, added Brady, is why his Party is turning the page on Obamacare and "going full steam ahead" with tax reform.

 "Tax reform is exciting. It's why we came here. It's the number one priority for the president and Republicans," said Brady.

And while the failure of the GOP's Obamacare replacement plan does make tax reform more difficult since the health care law's taxes remain in place, Brady said he and his colleagues are ready to "move forward with bolder tax reform."

He's looking at having a measure out of the House and to the Senate this spring and completed this year, effective for tax filing purposes for 2017.

Reagan redux: And yes, there will be fights over special interest tax breaks.

Brady said he's ready for that battle.

"Everything that drove the Reagan reforms has recreated itself," he said. "The American public is just sick of this complicated tax code full of lobbyist loopholes and special interests. The odds are greater than ever this year to pass tax reform."

And the individual tax change goal, according to Brady, is to make the tax code so simple that 90 percent of Americans will be able to file using a postcard style system.

I'll believe that when I see it.

Brady, however, is confident.

"Tough stuff is why it doesn’t happen often," he said, "but the easiest way to make tax reform fail is to not go bold."

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Saturday, March 25, 2017

Amazon wins $1.5 billion tax fight with IRS

Did you hear the tax news? No, I'm not talking about the online retailing giant's decision to collect sales tax in all the U.S. jurisdictions that have the levies.

A U.S. Tax Court ruling on Internal Revenue Service attempts to collect more tax from an Amazon U.S.-Luxembourg arrangement went the global internet giant's way, saving it billions in taxes.

The Seattle-based company also was a big winner last week when it comes to paying tax. We're talking $1.5 billion big.

That's how much a U.S. Tax Court ruling on March 23 apparently has saved Amazon.

European location, U.S. taxes: The court decision was in connection with Amazon's creation more than a decade ago of a European subsidiary in Luxembourg.

Neither Amazon nor the Internal Revenue Service would comment on the ruling. The online retailer's potential tax savings, however, were gleaned from the company's annual report.

That document noted that the IRS was seeking to increase the company's taxable U.S. income for transactions undertaken in 2005 and 2006. Because the U.S. has a worldwide tax system, American-based companies must pay U.S. tax on earnings worldwide.

If the IRS had prevailed in Tax Court, Amazon's tax bill per its annual report would have increased by around $1.5 billion (plus interest) for just those two years. There also was the possibility that the company would have faced additional IRS bills for other tax years.

That $1.5 billion in tax savings earns this week's By the Numbers honor.

Amazon tax arguments prevail: Tax Court Judge Albert Lauber agreed with Amazon that its arrangement with its European subsidiary generally provided a reasonable basis for allocating certain costs.

The Journal of Accountancy (JoA) explains:

Amazon granted the Luxembourg subsidiary the right to use certain preexisting intangible assets in Europe, including the software and other technology required to operate Amazon’s European website business, various trademarks, and customer lists. Under this arrangement, the subsidiary was required to make an upfront "buy-in payment" of $254.5 million to compensate Amazon for the value of the intangible assets that were to be transferred to the subsidiary and annual cost-sharing payments to compensate Amazon for ongoing intangible development costs (IDCs), to the extent those IDCs benefited the subsidiary.

Amazon used a multistep allocation system to allocate costs from its various cost centers to IDCs, noted the JoA.

Ruling adds insult to IRS injury: The IRS, however, while generally accepting Amazon's allocation method, determined that 100 percent of the costs captured in one cost center should have been allocated to IDCs.

Lauber agreed with Amazon on almost all points, finding that Amazon's methodologies were generally the best to determine the amount of the buy-in payment.

And in addition to a fiscal injury the IRS suffered in lost tax money from Amazon, the court ruling also hit the agency with an insult.

Lauber 207-page ruling — the length in large part is thanks to detailed analysis of competing experts' opinions on the useful lives of Amazon’s assets and the appropriate discount rates — also found that the IRS' determination with respect to the buy-in payment in the Amazon case was "arbitrary, capricious, and unreasonable."

The judge also agreed with Amazon's contention that the IRS "abused [its] discretion" in determining the percentage of costs that constituted IDCs.

Still facing European inquiry: While the U.S. Tax Court ruling was no doubt welcomed by Amazon, the company isn't yet clear of international tax concerns when it comes to its Luxembourg operations.

The European Commission is investigating the tax deal Amazon got for setting up its European headquarters in that small tax haven nation gives the U.S. company unfair global tax advantages.

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Friday, March 24, 2017

Millennials depend on mom and dad for tax filing help

Ah, youth. The excitement. The energy. The illusion of immortality.

The first-ever filing of a tax return.

Frustrated new taxpayer


Taxes often are the first indication of young adulthood. And apparently it's a grown-up responsibility that many millennials are turning over to other grownups, specifically their parents.

Real mom-and-pop tax help: More than a third (37 percent) of millennials relies on their parents at least in part for tax help, according to a new study released by TaxAct.

The survey, conducted by ORC International earlier this year on behalf of the tax software company, also found that young men are more likely to rely on parents for tax help than their female counterparts.

Forty-four percent of male millennials said they've turned to their parents for tax assistance, substantially more than the 31 percent of young adult women who got tax help from mom and dad.

Trust was a big factor in turning to the 'rents for tax help. The TaxAct survey found that 41 percent of millennials don't believe that do-it-yourself tax software always acts in the taxpayer's best interest.

Trust troubles: Part of that distrust likely was colored by the quarter+ of millennials (27 percent) who reported feeling lured into a tax-filing solution, only to be charged later for specific features and services.

Sanjay Baskaran, president of TaxAct, denounced such bait-and-switch tactics and encouraged all filers to shop carefully for a tax prep package.

"While it's a natural instinct to trust parents or DIY tax software providers on tax-related issues, Americans of all ages would be better served to do careful homework about preparing their own taxes online before choosing a provider," he said in a statement accompanying release of the TaxAct survey results.

Older filers, however, have more confidence in the computer-based tax preparation help. Their responses helped pull the overall number of filers who feel that DIY tax software companies act in taxpayers' best interest up to 59 percent overall.

Consider free filing options: I suspect finances also are a factor in seeking tax guidance from parents. The literal mom-and-pop tax advice is free.

And while Free File is still available to folks who this year make $64,000 or less, as well as some free online options from assorted tax preparation software manufacturers, if you buy software it will cost you.

Plus, if you're just now buying your tax software, less than a month from the April 18 filing due date, it'll probably cost you more.

That's a fact that escaped not just millennials, but all the taxpayers surveyed by ORC International earlier this year on behalf of TaxAct.

Two-thirds of survey respondents said they didn't realize that tax filing software programs raise their prices throughout tax season.

Note to self for filing season 2018, that's yet another reason to file early.

But for this rapidly winding down tax season 2017, today's Daily Tax Tip highlights 6 tax tips for new taxpayers.

Wait dear blog readers who are tax filing veterans, don't go. Several of these six newbie filing hints can be used by us, too!

Have you filed your taxes yet? Did you use tax preparation software?

Are you skeptical about such DIY tax options, preferring instead to pay a tax professional to help you complete your Form 1040 and get it to the Internal Revenue Service?

Or do you, regardless of age, depend on free help from a family member at tax time?

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7 Ways to Show Appreciation to Employees (and Clients) During Tax Season


Clients and employees are both essential to your business. Your employees keep your business running and your clients keep you in business. Showing a little appreciation for them is of utmost importance. Employees who feel appreciated are happier. And happy employees can have a huge effect on your company culture and your bottom line. According to research, happy employees:
  • Have lower absenteeism
  • Are better at customer service
Here are some ways to show appreciation to your employees and clients this tax season.

Have meals together

Everyone loves food. There’s something about sitting down for a meal that brings people together and builds relationships. It could be a lunch outside of the office, a lunch and learn, breakfast, or after work gathering.


The daily grind can be a little easier when you celebrate successes and holidays together. Take some time to celebrate holidays with employees. Holiday parties are fun and can be done at lunch or after work. Don’t forget Birthdays! Employee and client birthdays are great excuses to celebrate. For employees it could be a break in the day for Birthday cake. For clients it could be a Birthday card in the mail. 
You should also set goals and celebrate successes with employees. Maybe you need to land a certain number of new clients, or have specific productivity goals. Setting benchmarks and then celebrating them once you’ve reached them is huge.
One thing you should definitely celebrate: the end of tax season. Consider including your tax clients in the celebration by throwing a client appreciation party.

Praise them

It doesn’t cost any money to praise your employees and yet it can have a huge impact. Workplace recognition is motivating because it provides employees with a sense of accomplishment and lets them know they’re doing a good job.
Make sure you are specific when it comes to praise. Don’t just tell them they’re doing a good job, give examples. Are they consistently getting great customer feedback? Did they go above and beyond? Have they been tax filing maniacs? Tell them specifically what they’ve done to earn your praise. You should also make sure you praise employees in front of their peers. It could be at the weekly meeting or in the company email/newsletter. 
You should also praise clients. Praise them for setting their tax appointment, having their receipts in order, or bringing in their paperwork. Positive reinforcement is always a good thing.

Support them

Employees need to feel valued, appreciated, and supported. Make sure you are there when your employees have an issue. Take time to train or offer up help, offer advice or support when they’re having an issue outside of work. Showing general interest in your employees makes them feel appreciated.
Clients also need to feel supported – especially when you’re in the tax business. It’s scary to get audited or receive correspondence from the IRS. Your clients need to know that you’ll be there to support them in tax matters no matter what. Great customer service is a cornerstone of every good tax business.

Thank them

It’s crazy how far a thank you can go. Thank your employees for their work, for their efforts, and for going above and beyond. Thank your clients for their business. 

Provide opportunities

You know the adage “If you’re not moving forward you’re moving backwards?” Progress is something everyone strives for – especially in the workplace. The potential for growth is a huge motivator for employees. Showing appreciation can mean giving employees opportunities that will help them grow. Maybe there’s an event or conference they can attend, a new skill they can learn or a promotion.
Showing appreciation for employees and clients can have a huge impact on your bottom line. It forces management to be mindful of the people who work for them. When the people who work for you feel appreciated, they’re happier, more loyal, and are better with your clients. When clients feel appreciated they are more loyal and more likely to refer you to friends. 



ACA has lots of tax provisions

Lots of drama on possible repeal/repair of the Affordable Care Act with the House vote postponed to Friday (March 24) (see CNBC story).  There are a lot of tax provisions in the ACA.  I'll share a list of created of them based on when they went into effect (and the Cadillac tax has not yet gone into effect). And one provision was only added in December 2016 via bi-partisan legislation!

It's a long list so I'll ask my standard question first ...

What do you think?

Affordable Care Act Provision
Effective 2010 (or 2009)
COD income exclusion for certain student loans  (effective starting 2009)
10% excise tax on indoor tanning services (started July 1)
Small business health insurance credit [ACA includes later changes such as a requirement starting in 2014 to obtain coverage through the Small Business Health Options Program (SHOP) Marketplace, and that the credit is only available for two consecutive years.]
Expanded dependent coverage exclusion for employer-provided health plans until age 27
Codification of economic substance doctrine

Increase in adoption credit and exclusion increased; refundable credit; temporary
Credit for Qualifying Therapeutic Discovery Projects (2009 and 2010 only)
Disclosure allowed for certain information to Health and Human Services for the Premium Tax Credit and cost-sharing
Effective 2011
W-2 reporting of cost of employer-provided health insurance (postponed for all employers for 2011 and indefinitely for employers who issued less than 250 Forms W-2 in the prior year) [Notice 2010-69, Notice 2012-9,  and IRS website]
SIMPLE cafeteria plans allowed for small businesses
Restricted definition of “medicine” for certain savings arrangements, such as for an Archer MSA
220, 223
Increased tax on distributions from HSA and Archer MSA
Annual fee on manufacturers and importers for certain prescription drug sales [Form 8947, Report of Branded Prescription Drug Information and Notice 2011-9]
Reg. §51.2(d)
Effective 2012
Information reporting for payments of $600 or more made to C corporations [repealed before effective, P.L. 112-9, 2/14/11]
Fee on health plans to fund Patient-Centered Outcomes Research Trust Fund ($1/year, increasing later)
New requirements for §501(c)(3) hospitals
Effective 2013
Increase in Hospital Insurance tax (additional 0.9%) for high income individuals
New tax of 3.8% on unearned income of high income individuals, estates and trusts (net investment income tax)
Increase in medical expense deduction threshold to 10% of AGI unless age 65 or older
Salary reduction contributions to health FSA capped at $2,500 (adjusted for inflation after 2013)
Limit on deduction of certain excessive employee remuneration paid by certain health insurance providers
§139A, Federal subsidies for prescription drug plans, changed as follows: “Gross income shall not include any special subsidy payment received under section 1860D-22 of the Social Security Act. This section shall not be taken into account for purposes of determining whether any deduction is allowable with respect to any cost taken into account in determining such payment.”
2.3% excise tax on sales of certain medical devices [moratorium for 2016 and 2017 per P.L. 114-113 (12/18/15)]
Effective 2014
Small business health insurance credit must be offered through SHOP (exchange)
Premium Tax Credit (PTC) available to individuals who obtain coverage on an exchange and meet other eligibility criteria. [Supreme Court holds that individuals in a state without an exchange are eligible for a PTC on the federal exchange. Effect is that individuals in states without an exchange and without coverage must factor in hypothetical PTC to determine if they meet the unaffordability exemption to the individual mandate (King v Burwell, No. 14-114 (6/25/15))]
Individual mandate (penalty) applies if individual and shared responsibility family does not have coverage and does not meet an exemption [Supreme Court found this to be a permissible tax (National Federation of Independent Business, et al v. Sebelius (6/28/12)]
Employer mandate (penalty) applies if applicable large employer (ALE) does not offer coverage to full-time employees and their dependents up to age 26 (and other provisions). [IRS delays effective date to 2015 and for 2015 provides additional transitional relief. Notice 2013-45 and blog post of 7/2/13 of Assistant Treasury Secretary for Tax Policy Mark J. Mazur.]
Information reporting by exchanges, insurance providers and ALEs (Form 1095-A, 1095-B and 1095-C, respectively). [IRS make 1095-B and 1095-C reporting optional for 2014.]
Certain types of health coverage reimbursement arrangements (HRA) will fail the “market reforms” exposing the employer to a penalty of $100/day/employee. [Notice 2013-54 and IRS website] [In Notice 2015-17, IRS provided relief through 6/30/15; Congress provided relief through 12/31/16 (P.L. 114-255 (12/13/16))]
Excise tax on certain health insurance providers
Reg. 57.1, et seq. (TD 9643 (11/29/13))
Increase in estimated tax payments for large corporations (assets of $1 billion or more) due in July, August, or September 2014
Effective 2017
Increase in medical expense deduction threshold to 10% of AGI for individuals age 65 or older (applicable to other individuals starting in 2013)
Qualified Small Employer Health Reimbursement Arrangement allowed starting 1/1/17 [added by P.L. 114-255 (12/13/16))]
Effective 2018
Nondeductible 40% excise tax on high cost employer-sponsored health coverage (“Cadillac” plans) [postponed to 2020 by P.L. 114-113 (12/18/15)]