Archive for the ‘Taxable Talk’ Category

The 2016 Tax Season

Monday, April 25th, 2016

It actually went fairly smooth this year. Some thoughts (in no particular order):

1. The IRS help lines for tax professionals were well staffed. Hold times were way, way down from prior years (especially last year). The average hold time for me was about ten minutes. In the 2015 tax season, hold times were above one hour.

2. Deadlines matter. We set a fairly early deadline this year (March 16th). While we did get to returns received after that (we got to returns through March 30th), some clients were not happy with the deadline. That’s reality: There are only so many hours in the day. We told you back in January what our deadline was.

3. K-1s are coming later and later. Many of my clients had to extend this year because a K-1 from a partnership is missing. I’m definitely seeing more business entities filing extensions, and that leads to more individuals filing extensions.

4. While tax software may be somewhat flawed, it’s essential for any tax professional. A tax return still must always pass the smell test, but it would be impossible for most tax professionals to complete complex returns without it.

5. Next year could be very interesting for my practice because of the FBAR deadline. For 2015 FBARs filed in 2016, the deadline is June 30th. The law will change next year and the deadline will be April 15th. Will this deadline be literally April 15th no matter what day of the week that falls on or will it match tax deadlines? Will FINCEN accept the federal tax extension or will it require its own extension to be filed? I’ll have more on this issue in a post that’s coming tomorrow.

6. Federal refunds appear to be fairly smooth this year. None of my clients have noted any issues with those. The same cannot be said for state tax refunds, though. Many states are drastically slowing refunds and/or requiring additional information prior to the refund being issued.

I cannot complain overall, though. Of course, now that Tax Season is over comes my paperwork season: shredding and invoicing. And more than six hours of sleep each night.

Bozo Tax Tip #10: Email Your Social Security Number!

Friday, April 1st, 2016

It’s time for our annual rundown of Bozo Tax Tips, strategies that you really, really, really shouldn’t try. But somewhere, somehow, someone will try these. Don’t say I didn’t warn you!

This is a repeat for the third year in a row, but it’s one that bears repeating. Unfortunately, the problem of identity theft has burgeoned, and the IRS’s response is pitiful. Indeed, this year the IRS decided that identity theft victims should get hit a second time! Let’s hear it for the IRS’s wonderful view of “service!”

Seriously, use common sense! Would you post your social security number on a billboard? That’s what you’re doing when you email your social security number.

We use a web portal for secure loading and unloading of documents and secure communications to our clients. As I tell my clients, email is fast but it’s not secure. It’s fine to email your tax professional things that are not confidential. That said, social security numbers and most income information is quite confidential. Don’t send those through email unless you want to be an identity theft victim or want others to know how much money you make!

If I send an email to my mother, it might go in a straight line to her. It also might go via Anaheim, Azusa, and Cucamonga. At any one of these stops it could be intercepted and looked at by someone else. Would you post your social security number on a billboard in your community? If you wouldn’t, and I assume none of you would, why would you ever email anything with your social security number?

A friend told me, “Well, I’m not emailing my social, I’m just attaching my W-2 to the email.” An attachment is just as likely to be read as an email. Just say no to emailing your social security number.

If you’re not Internet savvy, hand the documents to your tax professional or use the postal service, FedEx, or UPS to deliver the documents, or fax the documents. (If you fax, make sure your tax professional has a secure fax machine.) If you like using the Internet to submit your tax documents, make sure your tax professional offers you a secure means to do so. It might be called a web portal, a file transfer service, or perhaps something else. The name isn’t as important as the concept.

Unfortunately, the IRS’s ability to handle identity theft is, according to the National Taxpayer Advocate, poor. So don’t add to the problem–communicate in a secure fashion to your tax professional.

Annual Blog Hiatus

Monday, March 7th, 2016

It’s time for my annual blog hiatus. There will be occasional posts regarding deadlines (the corporate tax deadline is in one week–Tuesday, March 15th) and my annual Bozo Tax Tips will appear beginning on April 1st (no foolin’). If anything truly momentous in the world of tax happens I’ll interrupt my hiatus and post on it; otherwise, I’ll be back no later than April 25th.

Phishers Target Tax Professionals

Thursday, February 11th, 2016

I received the following email today:

From: [redacted] []
Sent: Thu 2/11/2016 3:06 PM
To: undisclosed-recipients:


I and my Family are looking for a very Qualified CPA in your area. Please let us know if you can be available to help us with our tax preparation, both company and individual..Please download to view my previous 1040 tax return and W-2 before we discuss about your payment.I will be waiting to read from you on on when to make an appointment with you.Please view my Doc’s for me and my family to know how I can prepare my self to become one of your client.

I await your email.



Email: [redacted]

There are a few hints that this is a phishing attempt. First, the writing (grammar, capitalization, etc.) is atrocious. Second, this is clearly a mass email (the recipients names aren’t disclosed). Third, the person is willing to send his tax documents–presumably containing his social security number and other items that should never be emailed by email. Fourth, the sender’s name (which I redacted) doesn’t match the email address. Fifth, the name of the sender doesn’t match his supposed email address (an ‘s’ was added at the end).

Most importantly, my anti-malware program stripped out the attachments. Yes, that 1040 and W-2 were malware.

Tax professionals, be wary. There are phishing emails supposedly from the IRS targeting tax professionals. Now, we have supposed new clients emailing tax professionals. My mantra, if it sounds too good to be true it probably is, holds for tax professionals, too. Do not click on links that you do not know for certain are valid. Consider installing anti-malware programs (the professional version of Malware Bytes will scan incoming emails for malware; there are other programs that do this, too). I use Malware Bytes and am happy with it.

I think I would have caught this email with or without Malware Bytes (it really is a poorly written email), but as they said on Hill Street Blues, “Let’s be careful out there!”

Efiling Opens, But…

Tuesday, January 19th, 2016

…It’s likely you can’t file yet.

Today the IRS sent out a “QuickAlert for Tax Professionals.” They stated, “Authorized IRS e-file Providers must not submit electronic returns to the IRS prior to the receipt of all Forms W-2, W-2G, and 1099-R from the taxpayers.” Additionally, most brokerage 1099s are not distributed until mid-February. Those of us who have interests in partnerships or S-Corporations may not receive that paperwork for months.

Tax professionals need all the paperwork: It’s far better to extend than amend. That means we’re in hurry up and wait mode; for many taxpayers it will be weeks to months before we can file.

Wasting Away in HPVille

Monday, January 11th, 2016

Today was the day my new computer was to have been encrypted. But some things aren’t meant to be:

So what happened? When my IT person started the encryption process using HP software, my computer decided to take a siesta — the operating system crashed. When he called HP support, he discovered that the problem was known, impacting a “minority” of computers. My IT person had tested the encryption on a test computer but all worked well.

Little did we know that the HP encyrption software fails on that “minority” of computers. Well, at worst it’s a failure rate of 50%: it failed on mine and worked on his.

I lost half a day, but no data. A key lesson I had learned years ago (and that my IT person had learned) is to have backups. We made three backups prior to the process, and they were useful in getting me back up and running.

So I’m back on my old computer while my IT person will get my new computer up and running…again. We’re going to use different encryption software—software that does not destroy the operating system.

Right now you could not pay me to buy a product manufactured by Hewlett-Packard. I’m that annoyed with them.

Last Chance for Nominees for 2015 Tax Offender of the Year

Sunday, December 27th, 2015

In just four days (December 31st) I’ll be announcing this year’s winner of the prestigious “Tax Offender of the Year” award. Remember, To be considered for the Tax Offender of the Year award, the individual (or organization) must do more than cheat on his or her taxes. It has to be special; it really needs to be a Bozo-like action or actions. Here are the past lucky recipients:

2014: Mauricio Warner
2013: U.S. Department of Justice
2012: Steven Martinez
2011: United States Congress
2010: Tony and Micaela Dutson
2009: Mark Anderson
2008: Robert Beale
2007: Gene Haas
2005: Sharon Lee Caulder

Harvesting Capital Losses: Act Quickly on Shorts!

Sunday, December 27th, 2015

One of the common techniques at year-end to reduce taxes is to harvest capital losses. Let’s say you own 100 share of some stock that hasn’t done well. If you sell it on or before December 31st, you can use the capital loss to offset capital gains (and take up to $3,000 of capital gains in excess of losses). You do have to remember not to repurchase the stock until the 31st day after the sale (including in any other brokerage account, even an IRA).

But what about a short position? You short a stock by selling the stock at first, and then you buy to cover the short. Where a normal stock sale is considered to occur on the date of sale, a short sale is considered to be consummated on the settlement date. The settlement date is typically three days after the trade date.

What this means is that if you’re going to harvest capital loss(es) with short sales you likely need to act on Monday, December 28th. (Your broker should be able to confirm how long it will take for a trade to settle.) If you wait on your short position until Tuesday the 29th, you may be too late for that sale to have occurred in 2015.

Nominations Due for 2015 Tax Offender of the Year

Monday, November 30th, 2015

With just about one month left in 2015, it’s time for a reminder to submit nominations for the 2015 Tax Offender of the Year. To be considered for the Tax Offender of the Year award, the individual (or organization) must do more than cheat on his or her taxes. It has to be special; it really needs to be a Bozo-like action or actions. Here are the past lucky recipients:

2014: Mauricio Warner
2013: U.S. Department of Justice
2012: Steven Martinez
2011: United States Congress
2010: Tony and Micaela Dutson
2009: Mark Anderson
2008: Robert Beale
2007: Gene Haas
2005: Sharon Lee Caulder

That Was the Year that Was

Sunday, October 18th, 2015

Last November I wrote about “The Horrible, No Good, Very Bad Upcoming Tax Season.” This definitely wasn’t the best tax season but it also wasn’t the worst (but it was close to the bottom). The four issues that I identified as problems were tax extenders, the IRS budget, the Affordable Care Act (aka ObamaCare), and the IRS Property/Capitalization regulations.

Tax extenders were passed late, but there weren’t any surprises. Thus, the impact to the 2015 Tax Season was minimal.

The same can’t be true for the IRS budget cuts. This probably impacted me more than any of the other issues I faced. Calling the IRS was almost a joke. The “Practitioner Priority Service” hold times were so bad that I’d hate to think of what they were for regular numbers. Unfortunately, I see no improvement possible with the IRS budget until the IRS scandal is resolved. That’s not going to happen until we have a new President, so we have probably two more years of misery in dealing with the IRS.

(The Obama Administration promised to be the most transparent in history. Its record is one of obfuscation and deceit, not of being open and honest.)

For the most part ObamaCare did not impact many of my clients. Of course, for 2014 tax returns a client could self-certify they had health insurance. Coming for 2015 returns will be IRS Forms 1095-B and 1095-C. Almost everyone will need to provide tax professionals with a health insurance form.

The property regulations almost had a huge impact. A literal reading of the regulations was that everyone impacted needed to file a Form 3115. The IRS realized that they didn’t have the personnel to handle the incoming tsunami of paperwork and, at the last moment, issued procedures that basically mitigated the impact of the new regulations.

While I’ll post about the upcoming season in another month, it looks like deja vu all over again. Once more, tax extenders haven’t passed, we have another year of impacts of ObamaCare, and the IRS budget constraints will continue. Unfortunately, this year I’m not taking a vacation to New Zealand and Australia in December. In any case, tax professional will likely be grouchy next tax season, too.