Sunday, April 30, 2017

Sparsely populated TX county is fracking richest in U.S.

McMullen County is the sixth least-populous county of the 254 such jurisdictions in Texas. An estimated 820 people live there.

McMullen County also was the richest county in 2015, not only in the Lone Star State, but also in the entire country.

Mcmullen County courthouse_Larry D Moore_Wikipedia
You wouldn't think it by looking at the basic square courthouse on Tilden, Texas' town square, but that McMullen County home of county governance sits in the wealthiest county, at least according to 2015 tax data, in the United States. (Photo by Larry D. Moore via Wikipedia/CC BY-SA 3.0)

That ranking is per Internal Revenue Service filing data analyzed by the Transactional Records Access Clearinghouse (TRAC).

Energy source = high Texas incomes: Using the tax data from 2015, the most recent year for which the complete information is available, McMullen County's average adjusted gross income (AGI) of $303,717 was tops.

That six-figure average AGI earns this week's By the Numbers honor.

The wealth in the south-central Texas county, about an hour and a half south of San Antonio, is thanks in large part to fracking. McMullen County is smack dab in the middle of the Eagle Ford shale patch.

That energy source and its controversial retrieval technique also helped two other Texas counties climb into the high wealth list.

Glasscock County in West Texas comes in fourth thanks to its average income in 2015 of $181,375. Its boundaries encompass part of the Barnett shale patch.

La Salle County, a neighbor to McMullen amid the Eagle Ford shale source, was 10th based on its average income of $146,991.

In 2005, no Texas county cracked the top 30 of most wealthy in the United States.

"I joke that oil and gas finally made ranching profitable," Thomas Tunstall, research director for the Institute for Economic Development at the University of Texas at San Antonio, told Bloomberg. "A lot of old Texas families live on large ranches in McMullen County, and the older generation went through tough times prior to five years ago."

Other county high and low rankings: So what other counties across the United States join McMullen, Glasscock and La Salle in the top 10? They are:

   County (County Seat)  Average AGI
  1. McMullen County (Tilden, Texas) $303,717
  2. Teton County (Moose, Wyoming) $248,949
  3. New York County (Manhattan, New York)  $210,233
  4. Glasscock County (Garden City, Texas)  $181,375
  5. Marin County (Point Reyes Station, California) $158,573
  6. Fairfield County (Danbury, Connecticut)  $158,253
  7. McKenzie County (Watford City, North Dakota) $154,013
  8. San Mateo County (Menlo Park, California) $152,911
  9. Pitkin County (Aspen, Colorado)   $147,271
10. La Salle County (Cotulla, Texas)   $146,991

And the 10 counties with the lowest average adjusted gross income in 2015? They are:

   County (County Seat)  Average AGI
  1. Greene County (Eutaw, Alabama) $30,236
  2. Todd County (Rosebud, South Dakota) $30,141
  3. McCreary County (Pine Knot, Kentucky)  $29,909
  4. Echols County (Haylow, Georgia)  $29,722
  5. Noxubee County (Brooksville, Mississippi) $29,644
  6. Atkinson County (Axson, Georgia)  $29,451
  7. Buffalo County (Fort Thompson, South Dakota) $28,911
  8. Hayes County (Hayes Center, Nebraska) $28,307
  9. Holmes County (Lexington, Mississippi)   $28,147
10. Clay County (Fort Gaines, Georgia)   $26,649

You can see the full U.S. counties average incomes and rankings, or sort by your state only, as well as see other IRS fiscal information you can sort TRAC's tax data page.

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Saturday, April 29, 2017

Lewis aims to end latest private tax debt collection effort

The Internal Revenue Service's third attempt to bring in overdue tax money by using private debt collectors has been in place for less than a month, but some House members are already trying to halt it.

Opponents of the program question not only the collection system's costs and efficiency. They also worry that the use of private bill collectors will make it easier for crooks to create even more tax scams.

Rep John Lewis opening statement at WM Oversight hearing 26April2017
Rep. John Lewis makes his opening statement at last week's Ways and Means Oversight Subcommittee hearing on the 2017 tax season. During his remarks, Lewis announced the introduction of a bill that would, in part, repeal the required use by the IRS of private bill collectors. (Click screenshot to watch full subcommittee hearing on YouTube.)

Rep. John Lewis (D-Georgia) on April 26 introduced the Taxpayer Protection Act of 2017. The first section of the measure, officially H.R. 2171, is titled "Protection of Taxpayers from Abusive Tax Collection Practices." Original cosponsors, all Democrats, are Reps. Suzan K. DelBene of Washington, Earl Blumenauer of Oregon and Danny K. Davis of Illinois.

Lewis, the ranking Democrat on the House Ways and Means Oversight Subcommittee, announced his new taxpayer protection bill during his opening statement preceding that panel's hearing on the recently concluded main tax filing season.

"For the record, I want to be crystal clear — in today's world, private debt collection will only make a bad situation much worse," said Lewis. "We have been down this road before. It has been tried and tried again. Each and every single time, private debt collection fails. It creates confusion and wastes taxpayer dollars. Most importantly, the program does not help or serve the American people."

Twice tried, twice failed: This latest iteration of debt collectors going after delinquent taxpayers was mandated as part of a 2015 transportation bill. Advocates of the practice say it could bring the U.S. Treasury around $2.4 billion over the next 10 years from unpaid tax accounts the IRS has officially stopped pursuing.

Employees of the four debt collection agencies hired by the IRS — CBE Group, Conserve, Performant and Pioneer — must follow strict procedures to safeguard taxpayers' rights and privacy.

But skeptics like Lewis, which include the current and previous IRS commissioners and the National Taxpayer Advocate (and me), point to prior private tax collection problems during the 1996 and 2006 efforts, including reports of abuse from taxpayers.

The 1996 pilot program was cancelled after 12 months and a net loss of $17 million. By the time the 2006 effort was halted, the U.S. government reported a loss of almost $4.5 million to the federal government, which took into account $86.2 million spent on program administration costs and more than $16 million in commissions to the private collection agencies.

Adding to the unease over this version of private tax debt collection is the involvement of a company, Pioneer Credit Recovery, that was among the agencies fired by the Department of Education two years ago from its contract to collect delinquent student loan debt.

In ending that program, the Education Department said its review found inaccurate information was being given to borrowers at "unacceptably high rates."

Tax ID theft schemes complicate things: And now, noted Lewis, there's the added threat to taxpayers from con artists.

"Let me explain how things have changed since Congress last repealed this program," said Lewis in support of his legislation. "In the fall of 2013, the Treasury Inspector General for Tax Administration began investigating a new wave of scams. Nearly two million victims received telephone calls from people pretending to be IRS or Department of Treasury employees. Some of us — even Members of this very Committee — received calls from these criminals."

Now efforts to fight this scam, noted Lewis, are hampered by the use of private collection agents:

"The thieves demand money; they claim that the victim owes unpaid taxes. To date, these criminals have swindled taxpayers out of $55 million. Before the return of the private debt collectors, our best defense for taxpayers was a simple and clear message: the agency will never call you. Now, there is confusion. The new message is that the IRS will not call you, but a private debt collector might. It makes absolutely no sense."

Lewis nailed it in that last remark, which bears repeating (and emphasizing): "The new message is that the IRS will not call you, but a private debt collector might. It makes absolutely no sense."

TIGTA has tax scam concerns, too: During that hearing, the Treasury Inspector General for Tax Administration's (TIGTA) office also expressed concern about the private collection process, specifically the possibility that criminals will use it as the basis for added IRS impersonation scams.

"There's just a potential that people would use this new process to perpetrate scams that [are] already underway,” said TIGTA Deputy Inspector General for Audit Michael McKenney. To guard against that, McKenney said TIGTA believes the IRS needs to strengthen its process for authenticating taxpayer identities when they are being contacted by private debt collectors on behalf of the IRS.

McKenney also said TIGTA is concerned that there is no special private collector complaint mechanism through which the IRS could identify problems early on to improve the mandated debt collection program.

Union adds its support: The National Treasury Employees Union (NTEU), whose members include IRS personnel, lauded Lewis' bill.

"Rep. Lewis has wisely proposed a quick and easy way to stop this program before it does any more damage to the U.S. Treasury or to taxpayers," NTEU National President Tony Reardon said. 

Taxpayer protection act debt collector repeal excerpt HR 2171

"Repealing the IRS authority to use private collection agencies would save money and reduce taxpayers' exposure to identity theft and fraud," Reardon added. "We commend Rep. Lewis for trying to prevent the IRS from making this same mistake a third time."

NTEU's statement also noted that last week TIGTA announced that 11 people have been charged with crimes involving schemes to impersonate IRS agents and steal money from taxpayers by claiming they owed back taxes.

"Telephone scams are already a threat and allowing private companies to represent the IRS only compounds the problem," Reardon said.

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Friday, April 28, 2017

Popular property tax deduction among those threatened by Trump's tax reform proposal

The federal deduction for local property tax payments could be eliminated as part of the Trump Administration's tax reform proposal.

I'm trying not to get too exorcised about the Trump Administration's recently released tax cut plan. In a past career I worked on Capitol Hill and watched first-hand how tax proposals morphed from concept to actual law.

But I still get a little knot in my stomach when I think about losing my state and local tax write-offs when I fill out my federal Form 1040.

Wait, you say. You're in Texas. There's no state or local income tax in the Lone Star State.

You're right. But we make up for it in many parts of the state with big property tax bills. 

An analysis by the Lincoln Institute of Land Policy of 2013 real estate taxation found Texas' property tax rates were the fourth highest in the United States and about 58 percent above the median rate for all states. Another study, issued in 2015 by the Tax Foundation, placed Texas sixth nationwide in property tax rankings. Comparisons of state real estate tax rates by CoreLogic in 2016 and this March ranked Texas fourth and sixth, respectively.

Trust me, despite Texans' annoying affection for all things oversized, this is one area where many of us are not thrilled.

The only good thing about the bill is that they are tax deductible. But maybe not for much longer as local property tax deductions, in Texas and across the country, appear to be on the federal tax reform chopping block.

Eliminating deductions to pay for tax cuts: The Trump Administration's tax rewrite proposes to pay for its tax cuts in part by ending many of the tax breaks currently in the code.

"We are going to eliminate on the personal side all tax deductions other than mortgage interest and charitable deductions," said Treasury Secretary Steve Mnuchin when the plan was revealed on April 26.

Wait, wait, wait, yelled a lot of homeowners at their TV screens. OK, maybe not a lot were watching the press conference earlier this week, but you get the idea.

I need not only my mortgage interest deduction, but also my property tax bill claim, note these homeowners. After all, the amount of mortgage interest I pay goes down a bit every year of my loan, but my property taxes seem to increase every year.

OK, maybe this is the conversation in my head, but some lawmakers already are making similar arguments.

Democratic states vs. GOP lawmakers: Since the proposal was released, most of the attention has focused on the states that collect a lot in state and local income taxes.

Whether by political design (I know, too much conspiratorial credit for policy wonks) or just coincidence, those primarily are states that tend to be Democratic, at least in national elections. The Wall Street Journal notes:

The top nine states for the deduction, measured as a percentage of income, all voted for Hillary Clinton, and they have 18 senators, all Democrats. In the House, those same states have 33 Republicans, a number that exceeds the party's overall governing margin. That means they have the numbers to protect the break — if they all agree on the policy and use their leverage.

National policy vs. local voters: However, as the late U.S. House Speaker Thomas P. "Tip" O'Neill so astutely observed, all politics is local.

And some Democratic and Republican lawmakers who represent residents who will be hard hit by the tax deduction changes are already digging in to fight for their preservation.

Rep. Peter King (R-New York), whose district includes part of Long Island, is one of those lawmakers. He told the Wall Street Journal that he agrees with the general idea of eliminating tax breaks and cutting rates, but he's not happy with a tax law change that would prevent his constituents from deducting their $12,000 annual property-tax bills from their federal income.

I'm hoping my Representative, also a Republican, shares King's point of view. (Yes, I'm writing as an individual taxpayer now, not as a tax blogger evaluating policy pros and cons.)

This year's issuance of property appraisals in Austin and some suburban/exurban Travis and Williamson communities has me and many of my neighbors freaking out. Home values in Travis and Williamson counties, upon which the property tax amount is calculated, are up by 8 percent

Of course, further underscoring O'Neill's adage, not all Texans are joining the wailing ranks of California, New York and New Jersey homeowners who stand to lose real estate itemized tax deductions. Texas's lack of an income tax and large segments of lower-taxed rural properties mean that the federal deductions make up only 2.5 percent of the state's overall income.

That's helps explain why House Ways and Means Chairman Rep. Kevin Brady, a Republican whose district includes a large swath of suburban and rural territory north of Houston, argues that repealing the break will lead to equal treatment of residents of high-tax states and low-tax states.

New era, old tax reform template: The Trump tax reform approach is following the path taken three decades ago when the last major tax code overhaul, the historic Tax Reform Act of 1986, was created and enacted. Tax loopholes were closed and rates were cut.

It's not a bad idea in overall policy terms. Everyone wants to get rid of what they see as unfair loopholes. But things get sticky when you start looking at specifics. What's unfair to some taxpayers is seen as necessary for others.

Welcome to D.C., Mr. Trump. Your self-proclaimed negotiation powers are going to be sorely tested as the tax reform debate progresses.

Tax wiggle room: There is some straw grasping hope from the Trump Administration's one-page of tax bullet points, which National Economic Council Director Gary Cohn, who joined Mnuchin to make the tax announcement, adhered to more closely.

The Trump plan would eliminate targeted tax breaks that mainly benefit the wealthy, Cohn said, but "homeownership, charitable giving and retirement giving will be protected." (Data show that that the home mortgage interest and charitable donation deductions are used disproportionately by the wealthy, but that's for another discussion.)

Homeownership deductions as I read it includes property tax payments. I, my neighbors and lots of Representatives and Senators no doubt will argue that point as the tax reform/tax cut debate intensifies in the coming months.

Those of us who cringe every year when our tax appraiser and subsequent county tax assessor/collector notices arrive are clinging to hope that our county real estate taxes will remain federally tax deductible.

Appealing your property appraisal: Regardless of what ultimately happens to our property tax deduction, home owners nationwide will continue to have to deal with these assessments and taxes.

In many cases, that means contesting a real estate appraisal when it's surprisingly large.

Property appraiser point of view

If your county appraisal review board agrees that your local officials overestimated what your home is worth, you'll get a lower figure. And that will mean a lower tax bill based on that value.

These 7 property tax appraisal steps will help you through the process.

Good luck on your appraisal appeal. And if you rely on the property tax deduction, add an 8th step: Contact your House and Senate members to let them know how you feel about possibly losing this tax break.

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Thursday, April 27, 2017

Trump's latest tax reform plan faces skeptical taxpayers, lobbyists & Congress

More Americans believe the Trump Administration will hike their taxes rather than cut them, according to a new poll.

The CBS News survey found 38 percent believe the president will raise their taxes, 25 percent believe he will lower them and 33 percent think their tax bills won't change. The tax increase belief was strongest among poll participants who made less than $100,000.

CBS News April 2017 poll_taxes

The telephone poll, conducted between April 21-24 by SSRS of Media, Pennsylvania, was released by CBS News on Wednesday, April 26, the same day that the White House revealed its latest tax reform plan.

That tax plan, however, might not do much to change people's minds about Donald J. Trump's tax intentions.

Big ideas, little details: Although Treasury Secretary Steven Mnuchin, who along with National Economic Council director Gary Cohn released the plan, called it "one of the biggest tax cuts in history," the pair's presentation was light on detail.

Trump tax plan bullet points 042617Instead, the Administration issued a one-page fact sheet of its core tax principals that were very similar to what candidate Trump promised pre-election.

In fact, the tax information distributed on Wednesday actually was much less than what Trump released when he was seeking the presidency.

In case you can't read that image to the right, here are the individual tax highlights:

  • Ordinary income tax rates would go from the current seven tax brackets to three: 10 percent, 25 percent and 35 percent. No details yet on income ranges for those tax rates.
  • The standard deduction would be doubled and some itemized deductions eliminated. Mnuchin, however, said the existing mortgage interest and charitable contribution itemized deductions would remain.
  • Alternative minimum and estate taxes would be repealed.

On the business side, the top tax rate would be cut to 15 percent and the tax structure would be converted from the current worldwide system to a territorial one.

PR not policy: The brevity of the written material, along with Mnuchin's and Cohn's refusal to discuss details — those, they said, would be hammered out in negotiations over the next few months with Congressional leaders — has led many skeptics to categorize the tax plan announcement as a public relations attempt to pad Trump's list of accomplishments during his first 100 days in office. That traditional marker arrives Saturday, April 29.

"This could have been written on a napkin, and the changes could have been written on a business card. This is an effort to create some buzz within the first 100 days, but not propose any meaningful changes to his tax plan," Lily Batchelder, a former Obama Administration aide who now teaches at New York University, told Richard Rubin of the Wall Street Journal.

Opposition on and off the Hill: Industry groups who could see dramatic changes in the tax treatment of their businesses also have raised issues. Although Trump's surrogates pledged that the mortgage interest deduction would remain, the housing sector, for example, is not happy.

"Current homeowners could very well see their home's value plummet and their equity evaporate if tax reform nullifies or eliminates the tax incentives they depend upon, while prospective home buyers will see that dream pushed further out of reach," National Association of Realtors president William Brown said in a statement issued after this version of Trump tax reform was released.

Many of Trump's tax proposals also will face tough critics on Capitol Hill, including some in his own party who are not happy with how much the proposal might increase the federal deficit.

So while Trump can add releasing an outline of tax reform to his 100-day list, actually getting a tax code overhaul enacted this year is going to be much more difficult.

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Evaluating Tax Season

You made it! Tax season is over! Evaluate-tax-season

While clients may not be piling through the door to have their tax returns filed, there’s still work to be done. Evaluating your season and planning for next season is an important task to tackle right now while everything is fresh.

Before you pack that suitcase and head off on a post tax vacation, you should meet with your staff and take a hard look at how the season went. We’ve been doing this for Peoples Tax and have also been following a great discussion in Tax Business Owners of America, our LinkedIn Group.

Here are some items to mull over while the season is fresh in your mind.


One important thing to determine after tax season is what worked and what didn’t. To quote John Wanamaker, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”  You need to figure out what money was wasted and what money was well spent. Spend time looking over the numbers for every marketing channel you used during the season. 

  • How much did you spend and what was the ROI?
  • What advertising brought in business and how much?
  • What should you try next season?
  • Where was your marketing budget best spent?
  • What networking/speaking events were most fruitful?

Staffing levels

How well staffed were you this tax season? Staffing levels should be examined after the season is over. Evaluate the following:

  • Do you need to hire an admin or receptionist to help you next season?
  • Should you consider taking on an intern?
  • Should you hire or fire tax preparers?
  • How was scheduling?


Examine the types of clients you served throughout the season and what their behaviors were. Take a look at:

  • Return rate of past clients
  • Number of new clients
  • Number of extensions filed and the reason for them
  • Types of returns
  • Slow and busy times throughout the season

Examining client behaviors can give you insights into how to improve next season. For example, if you had a number of extensions filed because your preparers couldn’t get to them, you might need to adjust your staffing levels. If you had a mad rush at the end of the season, you might need to offer an early bird discount to encourage more appointments at the beginning of the season.


Now is a great time to evaluate your software and look for other options if you’re not happy with what you’re currently using.


Efficiency is important when it comes to tax season (particularly the end of tax season). Now is a good time to reassess your processes to see what improvements can be made.

  • What was the average time per return?
  • Were preparers using their time efficiently?
  • What caused the most delays?

Examining work flows can help you develop better processes next year. For example, if scheduling is an issue perhaps you need to offer a drop-off service. If returns are taking too long, perhaps you need a training session for your slower preparers.


Finally, you should take a look at the big picture.

  • Revenue vs. Expenses
  • Client satisfaction surveys
  • Employee feedback/office moral

Now that you’ve evaluated the season, document it, identify areas of improvement, and brainstorm ideas to improve next year. Start planning now so that you’re not struggling to remember things when it’s time to plan for next season.






Wednesday, April 26, 2017

President Trump's 1-page Tax Plan

White House Photo of 4/26/17 Release of Trump Tax Plan
Today, members of President Trump's cabinet (Secretary Mnuchin and National Economic Director Gary Cohn) released a 1-page list of items he wants in a tax reform plan.  CNN has the 1-pager posted here

A few observations (I'll have more later):

The plan is quite similar to what Trump talked about and had posted on his website during the presidential campaign. 

The plan doesn't say how tax rates will be lowered for everyone in a revenue neutral manner.  While the expectation underlying the proposals is that economic growth will occur to generate more revenue, that's not an exact science.  If "rosy" projections are made, fewer deductions, exclusions and credits have to be cut back to "pay for" the lowered rates. If a more conservative projection is computed, more tax breaks have to be eliminated or cut back.  I'm guessing we'll see very rosy projections of the economic effects of tax reform.

During the campaign his individual tax reform plan matched the House Republican plan for the individual rate structure - 12%, 25% and 33%.  This plan always seemed a bit odd as a tax cut to sell to the public because today, the lowest rate is 10% (and the highest is 39.6%).

The rates in today's release are 10%, 25% and 35%.  So, it seems that the Administration realized that it might be hard to sell a tax cut on the premise that the lowest rate today is increased.  And, perhaps he is listening to Treasury Secretary Mnuchin who had indicated top rates should not be lowered, as President Trump's new plan says the top rate would be dropped to 35% rather than to 33% (see story from CBPP).

More later.

What do you think?


Popovich's big tip prompts tips about taxes and gratuities

Tony Parker and Gregg Popovich from Daniel Lewis autograph collection
An autographed photo of San Antonio Spurs point guard Tony Parker and the NBA team's head coach Gregg Popovich from Daniel Lewis' autograph collection. Another Popopvich signature on a restaurant receipt with a really, really big tip is now getting attention.

Gregg Popovich is in the midst of going for his sixth NBA championship as a head coach, but he's already the champ to one Memphis, Tennessee, restaurant employee.

Pops, as the coach of the San Antonio Spurs is known, apparently left an almost 613 percent tip after a visit April 21 to McEwen's on Monroe. The dollar amount is just as astounding: $5,000.

Gregg Popovich big tipIs it really Pops? Amateur sleuths are on the case, looking to confirm that the idiosyncratic Pops is indeed a major league big tipper shown on the receipt, shown at left from a Twitter post after first being uploaded to Redditt.

Unofficial graphologists are poring over Pops' penmanship, like the autograph in the photo above, comparing the receipt's signature with the coach's other John Hancocks.

Then there's the date on the receipt. It was an off day in the playoff series between the Spurs and Grizzlies.

The eatery's owner told the San Antonio Express-News that Popovich "has been in our restaurant in the past multiple times."

And a final big tip-off that Pops indeed was the grantor of the generous gratuity is that McEwen's reportedly is known for its wine selection and Pops apparently appreciates a good glass or two of vino.

Tips and taxes: Naturally, the tip raises a variety of tax issues.

My first thought went to the lucky server. I'm sure he or she is thrilled with the added five grand. But the $5,000 isn't tax free.

As noted in the April tax moves there in the ol' blog's right column (as well as in previous posts on the usual tips folks receive and more atypical tips), servers who receive more than $20 in tips for a month must report the amount to their employers, usually by completing Form 4070.

Tip income issues: However, there's a big potential problem for this tip recipient with an amount as large as that left by Pops. The seemingly lucky server might not make enough in regular wages to cover the tip taxes.

In such cases, you need to work with your employer to, for example, have the taxes taken out of future paychecks.

Remember, too, that if your restaurant has a tip-splitting or tip-pooling arrangement, the server will report only the tips he or she receives. That's why it's important to keep a record of your tips.

If you get tips as part of your work, you can get more information directly from Internal Revenue Service in Publication 531, Publication 1244 and in a special IRS video.

If you're an employer in an industry where tips are a regular part of your staff members' income, the IRS this week issued a new Fact Sheet on the differences between reporting tips and service charges.

Deducting meal (+ tip) costs: Now to possible tax considerations for Pops and others who opt to financially recognize a restaurant staff member's efforts.

Since he's not talking (yet) about the tip, I'm going to look at a couple of possibilities.

First, if the McEwen's tab was incurred while Pops and others discussed team strategy for the next game in the NBA playoffs, it could be a legitimate business expense.

When a business employee has an expense account, that person needs to submit receipts for reimbursement by his or her employer. If the company decides not to fully cover the costs, the excess can be claimed as an itemized business expense on Schedule A when that worker files his or her taxes.

But in order to be of any tax value, qualifying business expenses and other eligible miscellaneous claims must exceed 2 percent of the taxpayers adjusted gross income.

Self-employment expenses: Entertainment claims are a bit easier for self-employed folks. In these cases, meals and entertainment expenses are claimed on your personal taxes.

For sole proprietors, that's Schedule C. That form offers a variety of ways to write off your business costs.

One of those lines, specifically 24b, is for deductible meals and entertainment, which also tells you to "see instructions."

The reason for you need added info in filling out this line is that only 50 percent of your business meal is tax deductible. The instructions (or your tax pro and/or tax software) will help you do the math.

Tip amount counts, too: But there's also some good tax news if you're a big tipper, although probably not in the same league as Pops. Your tip amount counts toward your overall meal amount that is then cut in half for deduction purposes.

So if you pick up the more realistic business meal tab of $40 and you added a 25 percent tip, then your full $50 dollar expenditure counts toward figuring your deductible amount. In this case, that would be a $25 tax deduction. (Yes, I used a calculator to be sure!)

Weekly Tax Tips launch: This taxes and tipping tip earns the honor of being the first first Weekly Tax Tip of 2017. (Say that fast three times!)

You'll see this post highlighted (shortly!) in the upper right corner where the Daily Tax Tips have lived for the last three-plus months. Now that we're past the main tax filing season, look for a new weekly tax tip every Wednesday.

And here's a bonus unofficial tax tip for today. Whether you're receiving the tip or leaving it, keep good records.

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Tuesday, April 25, 2017

What does Jason Chaffetz's impending departure mean for IRS Commissioner John Koskinen?

Rep Jason Chaffetz arguing for John Koskinen impeachment in June 2016 via Facebook

Since Rep. Jason Chaffetz announced on April 19 that he won't seek reelection in 2018 and then the next day suggested he may even leave before his term ends, there has been much speculation as to what this might mean for additional Congressional investigation into possible questionable ties between the Trump Administration and Russia.

Chaffetz is, after all, chairman of the House Oversight and Government Reform Committee, which is one of the Capitol Hill panels with jurisdiction over the international conflict of interest questions.

To many, Chaffetz, a Utah Republican, seemed reticent to dive into such inquiries, although today he and ranking minority member Rep. Elijah Cummings (D-Maryland) said Donald Trump's former national security adviser, Michael Flynn, did not properly disclose payments from Russia and might have broken the law in applying for his security clearance.

What about the IRS? But less has been said about what might happen to another person under Chaffetz scrutiny — Internal Revenue Service Commissioner John Koskinen.

Chaffetz has been trying to boot Koskinen from his IRS office since July 2015.

Koskinen vs Chaffetz

Chaffetz and a group of fellow Republicans say Koskinen should be held responsible for IRS actions in improperly reviewing applications by conservative groups for 501(c)(4) nonprofit status. Those questionable application assessments were revealed in May 2013, well before Koskinen took the IRS post. He was, in fact, hired to make sure the mess was cleaned up and procedures put in place to prevent it from happening again.

But some House (and Senate) Republicans contend that Koskinen hampered lawmakers' efforts to recover lost emails sent by former IRS executive Lois Lerner, who was head of the division charged with evaluating and granting the tax-exempt requests at the time of the improper application reviews.

That, say Koskinen opponents, makes him just as culpable in what has become known as the IRS/Tea Party Scandal.

Censure, but no impeachment…yet: The Lerner emails were a key factor in the IRS chief's censure by the Oversight Committee. So far, however, Koskinen has escaped full impeachment.

Koskinen's term ends in November, but the question of whether he will serve out the remaining months still comes up on Capitol Hill, most recently during his April 6 appearance before the Senate Finance Committee to discuss the current tax filing season.

Koskinen said then that he planned to stay.

Will Chaffetz, as he winds down his tenure in the House and as head of the Oversight Committee, let up on his Koskinen, particularly if the panel now takes a more active role in examining Russia-Trump connections? 

Or will Chaffetz try to cap off his chairmanship by going full bore after the IRS commissioner one more time?

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Monday, April 24, 2017

Government shutdown could delay billions in tax refunds

At midnight on Donald J. Trump's 99th day in the Oval Office, the federal government could shut down.

That would be a public relations disaster for the 45th president, who's struggling to show that he and his administration can get things done as he promised in his 100-day contract with voters.

IRS absence from a job fair in 2013 due to government shutdown
"Saw this at my school's accounting career fair," wrote LittleNuclearReactor in a Reddit post during the last government shutdown Oct. 1-16, 2013.

But it could be a bigger disaster for folks waiting on their federal tax refunds.

Millions left waiting for tax cash: The Center for American Progress (CAP) estimates that if the federal government shuts down for two weeks this spring, that closure would delay nearly $8 billion in tax refunds for roughly 2.5 million families.

The hold-up would be because the Internal Revenue Service would, as it did 3½ years ago when Congress couldn't agree on funding for federal offices, would be mostly closed. In October 2013, the IRS furloughed almost all its workers for the 16-day shutdown, temporarily halting the issuance of $4 billion refunds to individual and business taxpayers.

In 2017, the IRS already is facing a slower than usual tax season. With the April 18 filing deadline looming, the agency said it expected around 13 million taxpayers to either file our 2016 returns or get an extension. By April 14, the IRS said it had in hand only 118.5 million of the 153 million returns it expects to eventually receive this year.

Money problems for some filers: And while late filers tend to postpone the task because they owe Uncle Sam, some folks who file near the annual deadline actually get refunds.

If the federal government shuts down because lawmakers can't agree on how to pay for its operations, then many of those late-filing tax refund recipients will be out of luck.

"Every tax refund that is delayed has the potential to throw family budgets into turmoil," write CAP analysts Alex Rowell and Harry Stein. The reason? Many people who get tax refunds say they rely on their annual tax cash to meet day-to-day needs

No federal tax refund check could mean a missed rent or car payment or fewer groceries for the family.

CAP also used the latest IRS data on how tax refunds are distributed across states and estimated the state-by-state impact of any refunds that might be delayed due to a federal shutdown later this week.

CAP April 2017 government shutdown table

One-two refund delay punch: A refund delay due to a government shutdown would be the second blow this filing season to taxpayers who count on their refund money.

Thanks to a federal law change, taxpayers who got refunds in full or part because they claimed the additional child tax credit or Earned Income Tax Credit had to wait until at least mid-February for those U.S. Treasury checks. Many actually didn't see their money until the end of that month or later.

So if you're a late filer who's expecting a refund you planned to use for necessary expenses, you might want to look at how you can adjust your budget. Now.

It also couldn't hurt to call your Representative and Senators and let them know that while they are debating greater economic issues in connection with government funding, there's a very personal micro matter that directly affects your own personal economy.

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Sunday, April 23, 2017

Idaho Keeps Sales Tax On Groceries

Many states exempt groceries from sales tax per the premise that food is a necessity of life. This is a poorly targeted exemption though in terms of helping low-income taxpayers. Higher income individuals spend more on food so get the bulk of the tax savings. If instead, groceries were taxed, tax relief could be better targeted to the taxpayers who need it via a refundable income tax credit based on income.

Idaho subjects groceries to sales tax, but offers a grocery credit on the personal income tax returns. The only variation in the amount of the credit is that it is $120 per year rather than $100 if the individual is age 65 or older. So, it is poorly targeted and includes the out-dated assumption that senior citizens have financial needs (not all do).

Recent legislative activity in Idaho called for repeal of the sales tax on groceries. The governor vetoed this effort due to the revenue loss and the fact that a refundable income tax credit exists to reduce the burden of the tax.

I have more in this blog post at  Please take a look.

What do you think?  Should all states tax groceries and provide a refundable income tax credit based on need?  Many states already provide an Earned Income Tax credit, so low-income individuals are already filing in most states even if they owe no personal income tax.


Tax Freedom Day 2017 has arrived!

Happy Tax Freedom Day!

Today is the day, according to Tax Foundation calculations, when the nation as a whole has earned enough money to pay its total tax bill for the year.


Critics of the tax-related designation, most notably the Center on the Budget and Policy Priorities, argue that Tax Freedom Day's average tax rate across the United States is misleading and doesn't accurately reflect typical U.S. households' tax burdens.

In answer to those concerns, the Tax Foundation acknowledges that its estimates reflect the average tax burden for the overall economy, rather than for specific subgroups of taxpayers.

So as not to compound any misunderstanding of what Tax Freedom Day shows, let's be clear that it's not the day until which the typical American must work to pay his or her taxes. So don't feel like you can slack off now.

But it also is fun to look at the breakouts of U.S. taxes as whole and how they are connected to our country's spending.

For 2017, the Tax Foundation calculations show that's today, Sunday, April 23.

Later tax freedom: This year, the national Tax Freedom Day came 113 days into the year. That's one day sooner than last year. The days to reach Tax Freedom Day also are this week's By the Numbers figure.

If you include annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur 14 days later, on May 7. The latest ever deficit-inclusive Tax Freedom Day occurred during World War II, on May 25, 1945.

This year, notes the Washington, D.C.-based nonprofit, Americans will pay $3.5 trillion in federal taxes and $1.6 trillion in state and local taxes, for a total tax bill of $5.1 trillion. That's 31 percent of national income.


Collectively, adds Tax Foundation numbers crunchers, Americans will spend more on taxes this year than they will on food, clothing and housing combined. This tax tidbit sounds like something that might show up in next week's promised release of the Administration's latest tax reform proposal.

Days to pay: The 113 days it takes, overall, to pay this year's national tax bill are dominated — no surprise — by income taxes.

Americans will work for 46 days in 2017 to pay federal, state and local individual income taxes, according to the Tax Foundation.

Payroll taxes will take 26 days to pay, followed by sales and excise taxes at 15 days, corporate income taxes at 10 days, and property taxes another 10 days.

The remaining six days are spent paying estate and inheritance taxes, customs duties and other taxes.

State variations: Of course, the many taxes collected across the country mean that any individual tax burdens vary considerably.

Generally, states where residents have higher incomes and face higher taxes celebrate Tax Freedom Day later.

Who has to wait the longest? Candles this year won't be lit on the Tax Freed Day cake in Connecticut until May 21.

Other late-arriving Tax Freedom Days in 2017 are in New Jersey on May 13 and New York on May 11.

Other states, however, already have had their Tax Freedom Day parties.

Residents of Mississippi bear the lowest average tax burden in 2017, meaning their Tax Freedom Day arrived on April 5. Also early this year were Tax Freedom Days in Tennessee on April 7 and South Dakota on April 8.

The Tax Foundation map below shows when your state's Tax Freedom Day arrives or arrived.

2017-Tax-Freedom-Day_US Map state dates

If you're done with covering taxes this year both at the state and federal levels, congrats!

If not, enjoy the rest of the weekend, then get ready to get back to work next week earning your state's taxable income so you can afford a big party when your state's Tax Freedom Day does arrive.

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Saturday, April 22, 2017

7 tax-saving breaks to celebrate Earth Day

Happy Earth Day 2017!

Earth Day tree logo_GSA Hackathon

Maybe you're spending this Saturday simply out enjoying the beauty of Mother Earth. Or perhaps you're participating in the March for Science (the main event in D.C. or satellite marches across the country) to support scientific efforts, including the study of climatology and climate change.

Regardless of how you acknowledge Earth Day, thank you for thinking of our planet.

In recognition of your commitment to protect and preserve the only place we humans and other creatures have (so far) to live, here are 7 tax saving options that reward energy and environmentally friendly efforts.

Let's start with travel.

Using mass transit instead of driving to and from work is a great way to reduce carbon emissions. 

If you commute by (1) mass transit, you may qualify for a $255 per month tax break to help cover your transit pass. The amount is adjusted for inflation each year. This pre-tax benefit pays for the transportation pass, token, fare card, voucher or payment system granting you access to bus, rail or ferry systems. 

You say that public transportation options in your area aren't the best, but you do your part by (2) bicycling to work. Good for you. See if your workplace offers (or you can convince your boss to offer) a tax break for your two-wheeled commute. Like the mass transit benefit, this pre-tax money of up to $20 per month that your commute on your non-motorized bike. It also covers other bicycle expenses, such as the vehicle's purchase, upkeep and storage.

If, however, you just can't let go of your steering wheel, consider an (3) electric vehicle. Uncle Sam can help here. A federal tax credit of up to $7,500 is available when you buy an electric auto. As happened years ago when a tax break was provided for hybrid autos, the electric vehicle credit phases out once the manufacturer sells 200,000 of the plug-in vehicles.

You can find more about the electric vehicle credit at the Department of Energy and IRS websites. Have fun shopping for your new Tesla.

Tesla Model S

Now let's head home by your preferred transportation method.

As you know by now (since I've blogged about it before, most recently in my spring energy tax breaks post), the possible $500 federal tax credit for a variety of (4) energy efficient home improvements expired at year-end 2016. But if you got an extension to file your 2016 tax return last week and qualify for the tax credit for some of residential energy upgrades (for example, insulation, new doors or windows, or a replacement roof), be sure to claim them. 

The (5) Residential Energy Efficient Property Credit, however, remains in the tax code through 2021. It's worth a 30 percent tax credit (through 2019; it's reduced a bit in 2020 and 2021) of the cost of solar-powered systems, such as sun driven water heaters and photovoltaic panels that produce a house's electricity. has details on the tax benefits of installing these environmentally friendly systems. Note: the other alternative energy systems that offered this 30 percent tax credit — small wind energy property, geothermal heat pumps and fuel cell systems — also expired at the end of 2016.

It's also better to give than to take tax-wise when it comes to the environment.

You can make (6) charitable donations to environmental nonprofits to help them achieve their goals and claim a deduction for your gift.

If you don't have a favorite, just Google "environmental nonprofits" and get ready to be overwhelmed by how many green causes are out there.

Environmental nonprofits1

You also can search the green giving groups listed in GuideStar and Charity Navigator. If you have the name of a group and want to make sure it's IRS-approved since that's one of the tax deduction rules you must follow, you can check the tax agency's official Exempt Organizations Select Check online search tool.

Environmental nonprofits2

Or since this Earth Day also is the national March for Science, you can give to 501(c)(3) groups that support scientific research.

Finally, take the oft-repeated phrase "think globally, act locally" to heart when it comes to environmental and energy saving situations and related tax breaks.

There are myriad tax credits, rebates and other government-subsidized energy-related savings at the (7) state and local levels. You can find many of them in the directory at DSIRE, the acronym for Database of State Incentives for Renewables & Efficiency.

The site, according to its "About" Web page, is the most comprehensive source of information on incentives and policies that support renewable energy and energy efficiency in the United States. It's been around since 1995, is operated by the North Carolina Clean Energy Technology Center at North Carolina State University and is funded by the U.S. Department of Energy (DoE).

There's also, which as its .gov suffix indicates is a DoE project. On that Web page, you can search for money-saving programs that promote energy efficiency and renewables, either nationally or by state.

I hope you have enough energy left after celebrating this Earth Day to check out these environmentally conscious tax savings. It's the least that you deserve for working to keep Mother Earth healthy.

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Texas' emergency preparedness sales tax holiday coincides with 2017 hurricane season's early start

When the clock ticked past midnight today (Saturday, April 22), Texans welcomed their first sales tax holiday of 2017.

During the three-day event, which runs until midnight Monday, April 24, no state or local sales tax will be collected on certain emergency preparation supplies.

Portable generator_John Deere
Portable generators like this sure come in handy when natural disasters disrupt regular power sources.

Tax-free purchases these next three days include:

  • batteries, fuel containers and flashlights priced at less than $75;
  • hurricane shutters and emergency ladders priced at less than $300; and
  • portable generators priced at less than $3,000.

There's no limit on the number of qualifying items that Lone Star State shoppers can buy tax-free during the holiday. The Texas Comptroller's website has a complete list of emergency supplies that are tax-free for the next three days.

Hurricane season '17 early start: Texas' emergency supplies tax holiday's timing couldn't have been better. It came on the heels of the first named Atlantic tropical storm of 2017.

Arlene was first designated Subtropical Depression One by the National Hurricane Center just before midday on Wednesday, April 19. It strengthened into Tropical Depression One 24 hours later and was designated Tropical Storm Arlene late in the afternoon of Thursday, April 20.

The good news was that Arlene's path posed no threat to any populated areas before it dissipated Friday, April 21, afternoon.

The early formation of an Atlantic tropical system, however, raises the question of what that could mean for the coming Atlantic Ocean-Gulf of Mexico hurricane system, which doesn't officially start until June 1.

Atlantic tropical storm tracks 2003_The Weather Channel Twitter
Arlene was the first tropical storm in the Atlantic in April since 2003. This image from The Weather Channel shows the storms that developed that hurricane season 14 years ago.

Not a storm season omen: Storms that form early in the year outside of the deep tropics do not necessarily foreshadow a busier hurricane season, Phil Klotzbach, a hurricane researcher with Colorado State University (CSU), told The Palm Beach Post.

"Generally, activity before August 1 doesn't correlate with the remainder of the season," Klotzbach said. "The only exception is if we get tropical cyclone activity in the deep tropics prior to August 1. Then, look out. It's probably going to be a very active season."

CSU researchers are predicting a slightly less active hurricane season this year as compared to the Atlantic's 30-year average. The Weather Channel meteorologists forecast a bit busier Atlantic-Gulf of Mexico storm season.

Hurricane season 2017 forecast

We'll have to wait to see how many of the remaining storm names listed below will be assigned in 2017.

Arlene Harvey Ophelia
Bret Irma Philippe
Cindy Jose Rina
Don Katia Sean
Emily Lee Tammy
Franklin Maria Vince
Gert Nate Whitney


Numbers alone not a problem: But the standard hurricane season castigation remains. It doesn't matter how many storms develop; it only matters how many make landfall.

In 1992, only six named storms and one subtropical storm formed. But one of those named storms was Hurricane Andrew, the Category 5 that devastated South Florida.

The 2010 hurricane season, however, was quite active. Nineteen named storms and 12 hurricanes formed in the Atlantic Basin, but not a single hurricane and only one tropical storm made landfall in the United States.

Get ready early: While it's impossible to precisely predict where storms will form or hit, it's critical that everyone living in areas where storms could land be prepared.

So sales tax holiday or not, be sure you stock up on hurricane supplies and create your disaster survival kit before the next storm forms.

The ol' blog's special Storm Warnings page has a section with links to more storm prep posts, as well as additional tax and other information related to all types of natural disasters.

As Texas Comptroller Glenn Hegar noted in announcing the state's tax holiday, "Unfortunately, we can't predict when the next fire, flood or tornado may strike. But we can be prepared."

You might find these previous posts of interest:




Friday, April 21, 2017

How to tell if that IRS agent on your porch is legit

Is that really the Internal Revenue Service knock, knock, knocking on your door?

That's a concern shared not just by individuals who find people claiming to be with the federal tax collector's office, but also the IRS itself.

businessman knocking on door

"Many taxpayers have encountered individuals impersonating IRS officials – in person, over the telephone and via email," noted the IRS in a statement issued this week.

In-person tax scams: While email phishing attempts and the still pervasive fake IRS agent telephone tax scam are still going strong — and could even see a surge as the cons are tweaked to incorporate the return of private debt collectors now contacting folks who owe taxes — we haven't heard a lot about face-to-face tax scams.

Apparently, though, some brazen scammers do show up on people's porches pretending to be IRS collection agents.

That kind of freaks me out. If someone's that willing to look you in the eye and lie, then I'm a bit concerned about what else that person might do.

That's why I never answer my front door without first peeking out a side window.

If I don't see a U.S. Post Office or other delivery service employee (or a handful of neighbors; you know who you are!), I just quietly close the blinds and head back to my office. Or den, depending on the time of day and what sports are being televised then.

Special tax visit situations: These in-person tax scammers know that there are some special circumstances in which an IRS agent is allowed to show up in person at taxpayer's workplaces or homes.

And in some instances, the visits can be unannounced.

But in these cases, which typically fall into three categories, there are rules the IRS employees must follow.

1. Audits: IRS revenue agents will sometimes visit a taxpayer who is being audited. But that taxpayer would have first been notified about the audit. After first mailing an appointment letter to a taxpayer, an auditor would then call to confirm that in-person meeting and discuss items pertaining to the scheduled audit visit.

The bottom line, says the IRS, is that while there are various reasons why it might telephone or visit a taxpayer at home during an audit, by the time that happens the person whose returns are being examined would have by then been well aware of the audit.

2. Criminal investigations: IRS criminal investigators may visit a taxpayer’s home or place of business unannounced while conducting an investigation.

Criminal investigations can be initiated from information obtained from within the IRS when an auditor or collections officer detects possible fraud or from investigations underway by other law enforcement agencies. IRS special agents must follow strict procedures to initiate a criminal investigation and recommend prosecution to the Department of Justice.

When a criminal tax investigation does call for an in-person visit, the IRS notes that its CI agents are federal law enforcement officers and they will not demand any sort of payment. Criminal investigators also carry law enforcement credentials, including a badge.

3. Tax returns, taxes due: IRS revenue officers also will sometimes make unannounced visits to a taxpayer’s home or place of business to discuss taxes owed or due tax returns. Revenue officers are IRS civil enforcement employees whose role involves education, investigation, and when necessary, appropriate enforcement.

In the vast majority of collection cases, the IRS says that delinquent taxpayers first receive written notices via U.S. mail about the due taxes. Many of the cases also have previously been worked under the Automated Collection System, in which the agency tries to resolve the delinquent account over the phone directly with the taxpayer after the mailed notice didn't produce any results.

On the business side, what the IRS calls "a small portion" of revenue officers’ work involves proactive outreach to employers. These so-called Federal Tax Deposit Alerts are sent at the first sign that a business taxpayer is falling behind on payroll tax deposits. These are generally not preceded by a notice.

Proper ID required: In each of these allowable in-person contacts, the IRS notes that when a real employee from any of its divisions does show up at your home or office, he or she will present proper identification.

In fact, IRS employees always provide two forms of official credentials. The first is a pocket commission and the other is an HSPD-12 card. This ID badge, created pursuant to Homeland Security Presidential Directive-12 (hence the acronym), is a government-wide standard for secure and reliable forms of identification for Federal employees and contractors.

Criminal investigators, as noted earlier, also will have a badge. You have the right to see all of these credentials.

Dealing with an "IRS" visit: So what should you do if someone suddenly shows up at your door saying he/she is with the IRS?

Be polite. It might be a real IRS visit. In that case, there's no need to tick off the tax man.

Ask to see the person's ID badges. Plural. The versions described earlier in this post.

If you have any doubts about the identity of the person or the ostensible tax reason why he/she is at your door, tell the person that you want your representative to be there, too. Under the Taxpayer Bill of Rights, you have the right to retain an authorized representative of your choice to represent you in any dealings with the IRS.

If the person claiming to be with the IRS asks or demands that you make a payment then and there to them or another person or a place other than the U.S. Treasury, close the door.

Taylor Swift closing door on John Travolta_Giphy

Then lock it. Then call the police and the IRS.

What a real IRS agent won't do: IRS employees will not demand that you make an immediate payment. You always have the right to question or appeal the amount of tax the agency says you owe.

Neither will a real IRS agent ask for payment be made in an unusual form, such as prepaid debit or gift cards.

And an IRS employee will never, ever threaten to revoke your driver's or other licenses or bring in local police, immigration officers or other law enforcement officials to have you arrested for not paying your federal taxes.

Such collection techniques are scams, regardless of whether they're made in person by phone or in an email. Don't be taken in by tax crooks regardless of how they contact you.

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