Make That Kid Work For You. Part 2 of 2. No Kidding, The Kiddie Tax

Posted on February 6, 2019 by Carol

Last week we broke the news that according to the Department of Agriculture, with middle-class income of $59,200-$107,000, it is going to cost you a whopping $233,610! to raise that kid until the age of 17. Families with lower incomes are expected to spend $174,690, while families with higher incomes will likely spend $372,210. We talked a little about what you get when you have a kid or two or three or four. Specifically, we talked about what makes a dependent, and what the government gives you when you have a kid(s): Child Tax Credit, Child and Dependent Care Credit, and Earned Income Credit.   Click here, if you missed it last week.

Get Credit Where Credit’s Due.

AND NOW THERE’S THE KIDDIE TAX   

REINFORCING THE BASICS

Kiddie Tax. What is it? The kiddie tax was invented in 1986 to take away advantages to parents shifting unearned/investment income to their children. It was a complicated tax calculation for sure. Up until last year there were two calculations and the second calculation had sub-calculations and bifurcations. (Bifurcating is kind of like sharing your fries.) Then divorce and MFS made it even worse. Basically, Congress’ intent, in the TCJA, was to enable taxpayers to figure out the tax without consideration of the parent’s tax situation.

Net Investment Income Tax (NIIT). What is it? In the case of an estate or trust, the NIIT is 3.8 percent on the lesser of: the undistributed net investment income, OR the excess (if any) of: the adjusted gross income over the dollar amount at which the highest tax bracket begins for an estate or trust for the tax year. (For estates and trusts, the 2018 threshold is $12,500).

Net Investment Income Tax. What isn’t it? It isn’t applied to certain income types that aren’t subject to regular income tax. Some examples are tax-exempt state or municipal bond interest, gain from the sale of a principal residence, and certain VA benefits.

Investment Income. Examples are: interest, dividends, certain annuities, royalties, and some rents (unless derived in a trade or business in which the NIIT doesn’t apply); income derived in a trade or business which is a passive activity or trading in financial instruments or commodities; and, net gains from the disposition of property (to the extent taken into account in computing taxable income), other than property held in a trade or business to which NIIT doesn’t apply.

TCJA AND THE KIDDIE TAX

Let’s look at 2018 to 2025, years in which the TCJA has supposedly simplified the original Kiddie Tax. Most children under 19 and full-time college students under 24 who pay less than half of their own support are subject to this tax on their net unearned income (NUI) as if it was held in a trust. Yes, even though 18 and 24-year-olds are hardly “kiddies” anymore.

Parent’s tax rates are now irrelevant as the children will be taxed applying trust and estate tax rates to unearned income exceeding $2,100. Although simpler to calculate and providing more privacy for parental tax data, higher taxes may ultimately be paid because trusts have higher tax rates on lower income limits.

Note: The tax rate for MFJ taxpayers in the $600,000 range is 35%, see below the income limit for the 35% trust/estate rate is $12,500. Definitely a huge difference.
Note: The 0% tax rate is attributable to a $1,050 standard deduction.

 

 

 

Kids will be taxed on capital gains and qualified dividend rates are 0% up to $2,600; 20% over $12,700 and 15% for everything in between. Pre-TCJA, the 20% rate didn’t kick in until individual taxable income hit $400,000.

Additionally, kiddie tax keeps company with the net investment income tax (NIIT). This NIIT is an additional 3.8% surtax on AGI exceeding $12,500. That could make the tax nearly 41 cents of every dollar. You may think of this as adding insult to injury.

Despite Congress’s intent to make the kiddie tax easier, the TCJA has actually complicated it even more. The concept of “earned taxable income” (ETI) while relating only to the computation of the kiddie tax, it has the potential to create confusion in at least two ways. First, the term “earned taxable income” is very similar to the term “earned income” but these items are computed in different ways. ETI is taxable income less NUI while earned income is the total of all the child’s compensation received for services provided during the year and taxable distributions to the child from a qualified disability trust. Next, if a child only has unearned income in a given tax year, the child has ETI because ETI = TI – NUI. Shameless Plug. Don’t worry, we totally understand all this new stuff.

KIDDIE TAX PLANNING TIPS FOR 2019

1. Consider transferring income-producing property to your children when they are too old for the kiddie tax but young enough to have a lower tax rate than you.
2. Or consider transferring property that defers income recognition until the child is past the kiddie tax. For example: growth stocks, mutual funds, remainder interests in property/land, tax exempt bonds, closely held stock and market discount obligations.
3. Evaluate including your child’s investment income on your return because more investment interest expense may be deductible and/or your individual tax rate may be lower than the tax rate applied to your dependent child’s unearned income.

WHAT ELSE SHOULD I KNOW?

 ⇒ Irony. Top-bracket parents and grandparents are probably able to transfer more money to kids before triggering a higher tax than parents and grandparents in the lower-bracket adults. The top tax rate of 37% begins at $600,000 of taxable income (TI) for married taxpayers filing jointly and at $12,500 for trusts. That means a top-bracket family can transfer up to $12,500 of gains or other unearned income to a child or grandchild before the 37% rate is triggered on the child. But an adult in a lower tax bracket has to transfer less than $12,500 before the child begins paying a higher rate than the adult would pay.
 ⇒ Consider bequeathing kids subject to the Kiddie Tax a ROTH IRA instead of a Traditional IRA.
 ⇒ Remember investment fees and expenses are no longer tax deductible but investment interest expense may be.
 ⇒ You can still opt to report your child’s dividends, interest income, and capital gain distributions up to $10,500 on your tax return by filing Form 8814, Parents’ Election to Report Child’s Interest and Dividends.
 ⇒ Shameless Plug. We like taxes and kids and we sure can help you with the calculating and tax planning for the kiddie tax.

Reach out to McAtee & Associates for answers and guidance all things Kiddie Tax and more. Carol would enjoy doing some tax planning and advising with you and assisting you with tax preparation and filing.

[email protected] OR 727-327-1999.

Check back here next week for a new and entertaining blog. And be sure to like us on Facebook and follow us on Twitter; for whatever it is we’ll be posting.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Posted in Individual Taxes, Tax Planning, Taxes | Tagged , , , | Comments Off on Make That Kid Work For You. Part 2 of 2. No Kidding, The Kiddie Tax

Make That Kid Work For You. Part 1of 2. Get Credit Where Credit’s Due.

Posted on January 30, 2019 by Carol

HERE’S WHAT’S UP! With middle-class income of $59,200-$107,000, it is going to cost you a whopping $233,610! to raise that kid until the age of 17, says the Department of Agriculture. Families with lower incomes are expected to spend $174,690, while families with higher incomes will likely spend $372,210. This is by definition a long-term investment. After TCJA, the little bundle of joy, doing double duty as a tax deduction still brings government gifts in the form of cash.

‘Of course we love you. You’re our tax deduction…’

REINFORCING THE BASICS.

The kid is no longer counted as an exemption worth a couple of hundred dollars because personal exemptions are long gone. Instead the standard deduction increased to $12,000 for those filing Single and Married Filing Separate; 18,000 for Head of Household; and, $24,000 for Married Filing Jointly and Surviving Spouse. And surviving does not mean you survived another year with him or her! So what tax benefits do you get for the little creatures in the era of TCJA?

FIRST THINGS FIRST.

To be your dependent, a person must be a qualifying child (or qualifying relative). Since we’re talking about the TCJA and Kids, to be a qualifying child, a child MUST:

1. Be your son, daughter, step-child, foster child, brother, sister, half-brother, half-sister, step brother, step sister or a descendant of any of these;
2. Be under age 19 at year-end or under age 24 and a full-time student. These age limits do NOT apply to disabled children;
3. Live with you for more than half the year and must not have provided more than half their own support; and,
4. Not file a joint tax return – unless solely for getting a refund.

WHAT YOU GET.

Child Tax Credit. Now requires the dependent child have a social security number. And it doubles from one thousand to two thousand dollars (through 2025). Twice as much buck for the bang. That’s practically another year of diapers or almost eight pairs of Nike kicks. What if you have a qualifying child (under age 17) but no tax liability or the credit is more than your liability? You can still get free money (refundable credit) and even more of it, $1,400 from $1,000. The phaseout limit more than doubled; it now starts at $200,000 (S) and $400,000 (MFJ). More families with (qualifying) child(ren) will get the Child Tax Credit in 2018 than ever before.

Child & Dependent Care Credit. The TCJA did not change this non-refundable credit. It can reduce your tax bill to zero but you won’t get a refund on anything left over from the credit. If you have some earned income and paid a provider who isn’t you or your spouse, who isn’t a dependent on your return, and who isn’t another of your kids under 18, to take care of child(ren) under age 13, go for it. If you’re married, to get the credit you must file MFJ. $3,000 paid out for one kid, can get anywhere between $600 and $1,050. $6,000 paid out for two or more kids will double those amounts.

Be sure that a provider provides you the all-important Taxpayer Identification Number unless it is a tax-exempt organization for which only name and address need be provided.

Earned Income Credit. This credit has been helping working people with low to moderate income for 45 years and probably isn’t going anywhere anytime soon.

 

 

 

To see what you could possibly be receiving this year.   Calculate My Earned Income Credit

PLANNING TIPS FOR 2019

1. Consider paying a relative to watch your kids. You can get the credit and they get a little cash.
2. If your employer offers a dependent-care assistance program, jump on it. The reimbursement is usually better savings than the credit. And it is exempt from social security. Additionally, up to $5,000 can be excluded from taxable income.

Reach out to McAtee & Associates for answers and guidance all things tax. Carol would enjoy doing some tax planning and advising with you, as well as assisting you with tax preparation and filing.

[email protected] OR 727-327-1999.

Check back here next week where we continue with Part 2 talking about kids and the Kiddie Tax. And be sure to like us on FaceBook and follow us on Twitter; for whatever it is we’ll be posting.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Posted in Individual Taxes, Tax Planning | Tagged , , , , | Comments Off on Make That Kid Work For You. Part 1of 2. Get Credit Where Credit’s Due.

New Year Resolution.

Posted on January 23, 2019 by Carol

HERE’S WHAT’S UP! Conventional wisdom: It’s never too late to do financial planning. Carol’s wisdom: It’s never too early to take care of your money.

2019 Withholding Calculator

REINFORCING THE BASICS.

What is Retirement? Retirement is the withdrawal from an active working life, and for most retirees, for the rest of their lives. Retirement is in no way the same for any two people. No two Retirement Plans will ever be the same. A Retirement Plan requires a Financial Plan and a Financial Plan requires attention and development. We have put a few ideas together that you make an annual New Year Resolution.

FIRST THINGS FIRST.

Have you visited our website lately? We have quite a few Retirement Calculators that are really, really cool. Take a look:   Carol’s Calculators

THE NEW YEAR RESOLUTION.

Start Fresh. You don’t have to be a business to have a balance sheet. We have checking and savings accounts and credit card bills. We have cars and car payments; houses and mortgages. Some may have an extra house or two and maybe a 401K and the like. Others may have some medical expenses or college tuition. Update this balance sheet. It’s important to know where you are and where you want to be. Make a plan to reduce debts and increase assets and then achieve The Plan.

How much will you spend in 2019? Take a look back at 2018; it’s the best place to start. Throw out one-time expenses like a home improvement or buying an Alexa. Add in reasonably foreseen expenses: an emergency room visit or two; a car repair or two or three; the vet bill when your dog spars with the neighborhood alley cat. You can even budget commuting; the 2019 average gas price is predicted to be $2.70/gallon.

Subscriptions and stuff. Review bank and credit card statements for all the automatic payments and subscription renewals. Are they all current and correct? Are you using all six lines on that cell phone bill? It’s okay to choose between NetFlix and Hulu and Amazon Prime and Tubi and Sling. Check what’s in your phone plan: Sprint has Basic Hulu but AT&T has 30 stations of live streaming.

Update 2019 Form W-4. We are betting a lot of folks didn’t do this in 2018. There’s a good chance that this year’s tax return will let you know whether to increase or decrease withholding.

2019 Withholding Calculator

Workplace Retirement Plan Contributions. We should always be pushing to put more into our retirement. If you pay off a debt or ditch the gym, put the “new” cash in your retirement account. Think about splitting your next raise; keeping some for yourself now and saving some for yourself later. These portfolio(s) are the bulk of your Retirement Plan.

Analyze the Portfolio(s). If you aren’t constantly on your phone checking the portfolio, an annual maintenance check is a good idea. Is the asset allocation still in check with your Financial Plan: rebalancing for market volatility and material shifts is fundamental to diversification. Super stereotypical pic, we know.

IRA and HSA Contributions. If you missed these in December, no worries. Eligible 2018 IRA contributions can be made up to April 15, 2019. The lesser of $5,500 or taxable compensation and add a $1,000 if you’re over age 50 and want to catch-up. If you are jumpstarting 2019, the lesser of $6,000 or taxable compensation and add a $1,000 if you’re over age 50 and want to catch-up. If married filing joint and only one income, consider a spousal contribution.

Eligible 2018 HSA contributions can also be made up to April 15, 2019. HSAs have a 2019 contribution limit of $3,450 for single-serve high deductible health plan (HDHP) and $6,900 for a Family-size HDHP. 2018 contributions were limited to $3,425 and $6,850. If you missed our blogs about IRAs, see WHAT ELSE SHOULD I KNOW?

Knock on Roth’s Back Door. Married couples with modified adjusted gross income over $203,000, cannot make direct Roth contributions; single folks, if over $137,000. You don’t have to make a grand entrance, roll on in through the back door. You need to be participating in a 401K that allows, 1: after-tax contributions and 2: an in-service withdrawal of after-tax contributions. Keep in mind that the 2019 limit for 401K contributions is $19,000 for the under 50 crowd and $25,000 for the over 50 crowd. If you still need to make a 2018 contribution: do sore before April 15, 2019 and the limits are $18,500 and $24,500, respectively. Make a non-deductible contribution of the six or seven thousand into a Traditional IRA and then immediately turn around and roll it over into a Roth IRA.

Annual Gift Exclusion. If you missed this in December. Don’t fret. You’re late for 2018 but you can be early for 2019. You can gift up to $15,000 to unlimited people per year without using the Lifetime Estate Tax Exclusion. You won’t even have to pay gift tax.

WHAT ELSE SHOULD I KNOW?

 ⇒ Individual Retirement Accounts: Traditional & Roth

⇒ Employer-provided Plans

⇒ Self-employed Plans

Reach out to McAtee and Associates for answers and guidance all things tax. Carol would enjoy doing some tax planning and advising with you and assisting you with tax preparation and filing.

[email protected] OR 727-327-1999.

Check back here next week for a new and entertaining blog. And be sure to like us on FaceBook and follow us on Twitter; for whatever it is we’ll be posting.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Posted in Individual Taxes, Tax Planning | 1 Comment

Government Doesn’t Run on Dunkin’!

Posted on January 16, 2019 by Carol

Here’s what’s up!  The longest ever paid vacation for 380,000 furloughed government employees.  The longest ever indentured servitude for 420,000 government employees and the Coast Guard as they work without pay.  All courtesy of the longest-ever partial government shutdown.  By the time you read this the shutdown will be in its 26th day far surpassing the eight-day average.  And government doesn’t run on ….. 

REINFORCING THE BASICS.

Government is partially shutdown when nonessential offices close because they didn’t get their fiscal year budget approved by Congress. Congress has to pass all twelve spending bills in the budget before October 1st and to date they have only passed five.  Us everyday folks are musing aloud – would we get paid for a job only 42% finished?

Congress had until December 21st to finish the job by either passing the remaining spending bills or pushing through continuing resolutions (CRs).  CRs provide for temporary funding by usually just throwing FY19 on last year’s budget and government stays open.  Congress still didn’t finish the job; nine of fifteen cabinet-level departments remain unfunded; and, here we are.

A furlough is a leave of absence without pay.  Furloughs are remedied by Congressional authorization for back pay.  The House has already passed legislation.  No one has never not gotten paid after a partial government shutdown.

FIRST THINGS FIRST.

Monday, January 28th is still the official start of tax season.  This is the first day that both paper and electronic returns will be accepted.  That being said.

The Internal Revenue Service and What’s Happening.

 9,946 employees are still working.  These are computer system operators, criminal investigators, and protectors of federal property because our tax dollars are government property which must be safeguarded.

Apparently computers are working too.  Computer-generated delinquency letters and their news of asset seizures are going out.  But the live assistance telephone number tells callers: “Welcome to the Internal Revenue Service. Live telephone assistance is not available at this time. Normal operations will resume as soon as possible. … We apologize for any inconvenience.”  And apparently, none of the 9,946 employees still working are answering phones.

Criminal law enforcement operations are continuing;

Upcoming filing year programs are being completed and tested;

Paper returns are being batch-processed;

Electronic returns are being processed;

Taxpayer electronic payments are being processed;

Implementation of the TCJA is running smoothly, as it is funded through September 2019.

 The Internal Revenue Service and What’s Not Happening.

 79,868 of employees are not at work and hopefully not watching The View.  They will be even more angrier and more bitter when they return to work.

The IRS’ contingency plan was only good for five days so, they ain’t got a plan no more;

Refunds are not being issued;

Form 1040X amended returns are not being processed;

Tax returns are neither being audited nor examined;

Paper returns with payments are not being processed;

Collections aren’t being collected;

Taxpayer services are not being provided.  No one will answer your call, open or read your letter, and no one will be opening the IRS office doors;  

Income isn’t being verified.  Income verification affects SBA, farm, and home purchase loans and home closings.

Shameless plug:  At Carol McAtee & Associates we are answering your phone calls, opening your mail to us, and our doors are open to you.  So make your appointment today!

The Internal Revenue Service and What Will Happen.

When the IRS gets funded, furloughed employees have four hours to get to work;

Refunds will be issued as determined by the Office of Management and Budget;

The National Treasury Employees Union and the American Federation of Government Employees, representing over 850,000 workers are suing the White House for requiring federal employees to work without pay which violates the Fair Labor Standards Act;

The Treasury Secretary anticipates 60 to 70% of taxpayer phone calls will be answered this filing season;

Payouts are expected to be 21 days for e-filed returns and 42 days for paper-file returns.  This is no different from previous years.  But last year, at the end of week one, 18.3 million returns were received; 136,359,149 were received by season end; and 95,451,404 refunds were issued for tax year 2017.   We wouldn’t be surprised by delayed refunds and suggest we all have reasonable expectations.  The earlier you file, the better.

The Internal Revenue Service and Who Knows What’s Happening. 

Since both the IRS and the Treasury Department are partially shut down, how are Advance Premium Tax Credits (APTC) going to be paid?  It is possible that delayed payment of APTC can result in increased premium costs or loss of coverage.  Some taxpayers may have to decide between paying the unsubsidized premium and dropping coverage.  We think that MarketPlace applications and plan year 2020 will also be affected because required maintenance and updating are not being done now.  To keep up on this development and more, follow us and like us on Social Media.

FaceBook           Twitter          LinkedIn

WHAT ELSE SHOULD I KNOW?

⇒ Refer to our December 5, 2018 blog:  We Are, After All, IRS Customers

⇒ Social Security checks are going out.

⇒ Medicare and Medicaid are open.

⇒ Veterans are unaffected; as the VA is funded through September 2019.

⇒ Robert Mueller’s Russia investigation marches onward.  It is not funded by Congressional appropriation.

Reach out to McAtee and Associates for answers and guidance all things tax.  Carol would enjoy doing some tax planning and advising with you and assisting you with tax preparation and filing.

[email protected]  OR   727-327-1999.

Check back here next week for a new and entertaining blog.  And be sure to like us on   FaceBook and follow us on Twitter; for whatever it is we’ll be posting.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Posted in IRS, Taxes | Tagged , , , , , | 2 Comments

“Voluntary Compliance” My (fill in the blank)!

Posted on January 9, 2019 by Carol

Here’s what’s up! America needs tax compliance to pay government’s bills. In all seriousness, voluntary compliance is a principle that we will cooperate with the tax system by filing honest and accurate annual returns and receive excellent customer service along the way.

REINFORCING THE BASICS.

Frivolous. Not having any serious purpose or value.

Frivolous Tax Argument. You’re a special kind of stupid if you still think this will work.

Internal Revenue Code. Federal statutory tax LAW.

Paradox. An absurd or self-contradictory statement that when investigated or explained may be true. Examples: Filing a tax return is voluntary. Paying income tax is voluntary.

FIRST THINGS FIRST.

Snopes fact check. Claim – Payment of U.S. federal income taxes is voluntary. Rating – False.
IRS fact check. Frivolous tax argument.

Frivolous tax arguments are divided into categories, one of which is: The Voluntary Nature of the Federal Income Tax System. That being said, let’s move on to why these popular arguments are really false and frivolous and NOT voluntary.

In the beginning, (a future blog), way back in 1914 the Commissioner of Internal Revenue had to examine each and every tax return. Eventually, by 1954, this got to be a little much and some commissioner had to figure out a better way to get the bills paid. Literally and figuratively, “more bang for the buck.” And the solution was to get businesses and individuals to do these examinations themselves thus making the tax system “voluntary”.

IS IT LEGAL? Why yes; yes, it is.

The Internal Revenue Code is all the laws Congress has passed to get us to fund America. There is a little section in the Internal Revenue Code (IRC) that according to the IRS “clearly imposes” tax on individual, estate, and trust income. In 1938, the Supreme Court upheld Congressional impositions of sanctions to ensure full and honest taxpayer disclosure and to discourage tax evasion. There is another little section in the IRC that according to the IRS, “the obligation to pay tax is described in section 6151, which requires taxpayers to submit payment with their tax returns”.

THEN WHAT EXACTLY IS MEANT BY VOLUNTARY?

The IRS perspective, if you pay, without being audited – that is voluntary. Voluntary means – without government involvement or compulsion. As far as government involvement, the government is neither calculating the tax liability nor completing the return. But what about compulsion? The government looks at this as persuasion. Laws have valid reasons that inspire persuasive, intrinsic motivations to abide by them. Therefore, actual payment of the tax is voluntary. The filing of a tax return is voluntary. And there you have what is meant by voluntary compliance. But what about the taxpayer perspective? From our perspective, we have no choice, so voluntary is, “comply or else”. We don’t pay taxes because we want to; we pay because we are convinced that we have to. We have to because of the “or else”.

AND WHAT IS THE “OR ELSE”?

The “or else” is compliance by enforcement.

The penalty for filing a frivolous tax return is $5,000.
Additional penalties are accuracy-related; civil fraud; erroneous refund claim; failure to file; and, failure to pay.
Tax Court can even slap a penalty on you for making a frivolous argument in court.
There is criminal prosecution for attempting to evade tax.
Filing a false return is a felony as is promoting frivolous arguments.
Then there are fines, interest charges, levies, garnishments, liens, prison.

A famous guy, Thomas Aquina, intellectualized this in the 12th century. A voluntary act is born of will and led down its path by knowledge of the end result. Problematic things such as ignorance, passion, and rational fear can reduce the level of voluntariness, but not make an act involuntary. Paradox-Point IRS.

A famous firm, McAtee & Associates, intellectualizes voluntary compliance, in essence, as fear of the “or else”. Paradox-Point IRS.

WHAT ARE THE OTHER FRIVOLOUS TAX ARGUMENTS?

First there are several other arguments in the Voluntary Nature category:

1. Taxpayers can reduce their federal income tax liability by filing a “zero return”;
2. The IRS must prepare federal tax returns for a person who fails to file; and,
3. Compliance with an administrative summons issued by the IRS is voluntary.

Then there are quite a few more in some categories. And the categories are:

The Meaning of Income: Taxable and Gross;
The Meaning of Certain Terms Used in the Internal Revenue Code;
Constitutional Amendment Claims;
Fictional Legal Bases; and,
Collection Due Process Cases.

We think that some of these arguments are pretty interesting and have a certain logic so we are definitely going to do future blogs highlighting one or two arguments from each category, except for maybe Collection Due Process Cases, which sounds horribly boring.

WHAT ELSE SHOULD I KNOW?

 ⇒ Frivolous Tax Arguments is a recurring scam on the IRS’ “Dirty Dozen” list of tax scams.
 ⇒ We’ll cover the rest of the “Dirty Dozen” in a future blog.
 ⇒ Shameless Plug. Voluntarily have McAtee & Associates assist you in the preparation and filing of your individual and business tax returns.

Reach out to McAtee and Associates for answers and guidance all things tax. CallCarolFirst! Carol would enjoy doing some tax planning and advising with you and assisting you with tax preparation and filing.

[email protected] OR 727-327-1999.

Check back here next week for a new and entertaining blog. And be sure to like us on FaceBook and follow us on Twitter; for whatever it is we’ll be posting.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Posted in Business Taxes, General Interest, Individual Taxes, IRS, Taxes | Tagged , , , | Comments Off on “Voluntary Compliance” My (fill in the blank)!

Happy New Year

Posted on January 2, 2019 by Carol

The Holidays are officially over. Welcome to this week’s blog: Happy New Year

REINFORCING THE BASICS.

All of us at McAtee & Associates wish all of you a Happy New Year filled with all the joys and successes, fun and good times that make the Memories of a Lifetime.

WHAT ELSE SHOULD I KNOW?

⇒ A classic.                  New Year’s Day

⇒ Shameless Plug. Our New Year is Happy when you make an appointment. Our New Year is Happy when you email us all your pdf’d tax info (especially the organizer). Our New Year is Happy when you drop stuff off and say hello. Make our New Year Happy!

[email protected] OR 727-327-1999.

Check back here next week when we write real blogs again. If there is anything you would like to know more about, leave a comment and we’ll blog it. And be sure to like us on and follow us on Twitter ; for whatever it is we’ll be posting.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Posted in General Interest, Holiday | Tagged , | Comments Off on Happy New Year

Merry Christmas

Posted on December 24, 2018 by Carol

Christmas is tomorrow. Welcome to this week’s blog:  Merry Christmas

REINFORCING THE BASICS.

A Very Merry Christmas to our Clients, our Families, Our Friends. And to everyone that isn’t a Client, Family, or Friend… yet.

WHAT ELSE SHOULD I KNOW?

 ⇒ The highest charting Christmas Song this month on Billboard Hot 100 is ….

All I Want for Christmas Is You

 ⇒ Shameless Plug. All we at McAtee & Associates want for Christmas is to see all of you in 2019!

Give us a call or email to schedule an appointment.

[email protected] OR 727-327-1999.

Check back here next week when we wish you a Happy New Year. If there is anything you would like to know more about, leave a comment and we’ll blog it. And be sure to like us on Facebook and follow us on Twitter; for whatever it is we’ll be posting.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Posted in Christmas, General Interest, Holiday | Comments Off on Merry Christmas

Don’t Talk Turkey; Let’s Talk Trees

Posted on December 20, 2018 by Carol

We did get through Thanksgiving.  And now it’s Christmas. This week we are not talking accounting, not tax, and not turkey.  Welcome to this week’s blog:  Don’t Talk Turkey, Let’s Talk Trees.  White House Christmas Trees.

REINFORCING THE BASICS.

A Christmas tree in the White House has evolved over the past 100+ years from a private celebration in the Family quarters to a national celebration.

The White House Christmas Tree, also known as the Blue Room Christmas Tree, is the official indoor Christmas tree at the residence of the President of the United States, the White House.

The White House Christmas tree usually stands nearly 20 feet tall and the crystal chandelier in the Blue Room must be removed for the tree to fit the room. The Blue Room tree has been donated every year since 1966 by the National Christmas Tree Association. The tree is chosen through a contest among members of the trade group.

PRESIDENTS AND THEIR TREES

Franklin Pierce, 14th US President, decorated a tree outside on the White House lawn in 1853 for a group of Washington Sunday School children, supposedly while Christmas carolers sang “Hark, the Herald Angels Sing.”

The first-ever indoor Christmas Tree was put up by Benjamin Harrison in 1889 for his grandkids. It was in the Second Floor Yellow Oval Room which in those days was the Family parlor, which today for most of us is the living room.  The tree was decorated with ornaments and wax candles; truly a fire hazard.  He even dressed up as Santa Claus and gave the first documented presidential Christmas Bonus:  turkeys and gloves to his employees.  We’re thinking maybe he gave gloves because he wore gloves in public to hide what is thought to be sever eczema or maybe just because its cold in DC in December. Harrison had hoped that his example would be followed by every American Family; the example of indoor trees, not Christmas bonuses.  A couple of years later, in about 1891, the White House got electricity installed but POTUS AND FLOTUS were too afraid of the electric lights and left them to be turned on and off by the staff.

It wasn’t until three years later in 1894 during the second time around of Grover Cleveland, electric lights first appeared on a White House Christmas tree.  A big guy, the second biggest president, he wasn’t afraid of electric lights.  Neither was First Lady Frances Cleveland who created quite the techy tree in 1895 when she hung electric lights on the White House tree.  Heck, Grover even shot his own duck for Christmas Dinner.

President William McKinley, succumbed to protesters in 1899 urging him to drop the White House “Christmas tree habit.”  He, did however, put a small one in the kitchen for the maids.

Alas, in 1902, there was no Christmas Tree because POTUS Theodore Roosevelt had not ordered one by December 23.

The following year, President Theodore Roosevelt and First Lady Edith Roosevelt went all out and hosted a “carnival” during the 1903 Christmas season for 500 children. The event included dinner, dancing, musical entertainment, souvenirs, and ice cream formed in the shape of Santa Claus. According to popular belief, President Roosevelt, an avowed conservationist, did not approve of cutting trees for Christmas decorations.   Truly a “green” Christmas.  George Washington may have chopped down a cherry tree but Archie Roosevelt, in defiance of his Dad, the 26th President of the United States of America chopped down a little tree off the White House Lawn. He decorated it; it even had electric lights and then he hid the tree in a closet in the upstairs sewing room until early Christmas morning.

In 1909 Howard Taft and his FLOTUS went away for the holiday and left the decorating to their kids who put the indoor Christmas Tree in the Blue Room instead of the Yellow Room, where its been for all but two of the last 109 years.  Come to think of it, two days after Christmas that year, and in time for New Year’s Eve; Taft answered the question. “What is whiskey?” giving rise to straight and blended whiskey.

Again in 1922, there was no White House Christmas Tree.  First Lady Florence Harding was wheelchair bound from kidney failure that September.  POTUS sent 250 bucks to his mistress, who bought herself a diamond and sapphire bracelet.  He certainly wasn’t a cheap guy; that is $449.40 JFK dollars, $2,388.39 Clinton dollars and in today’s dollars 45 would have to drop $3,647.63 to be as thoughtful.  According to the news he drops way more than that.

In 1923, First Lady Grace Coolidge, gave the thumbs up for the District of Columbia Public Schools to put up a tree on the Ellipse in Presidents Park. This, the first National Christmas Tree was lit with a strand of 2,500 red, white, and green bulbs, by Calvin Coolidge.  There were concerts and crowds and celebrations.  This was the beginning of an American tradition now nearly a century old.

The annual tradition of decorating the indoor White House Christmas tree started in 1929 with FLOTUS Lou Henry Hoover and has been continued by First Ladies ever since.  Over the years, the White House Christmas tree has reflected the times, the tastes, and even the initiatives of the First Lady.  First Lady Jacqueline Kennedy began the tradition of Christmas Tree themes when she decorated the 1961 Christmas tree in toy trimmings from the Nutcracker Suite ballet by Tchaikovsky.  Nancy (Just Say No) Reagan had help decorating her trees from participants in a drug treatment program.  Barbara Bush, whose initiative was literacy, had a tree decorated with books.

In 2018, the White House Christmas Tree, was hijacked by internet trolls who are all about commenting on the Grand Foyer and Cross Hall, lined with 29 red trees all decorated with 14,000 red ornaments.  The choice of red is an extension of the stripes in the presidential seal designed by the Founding Fathers and symbolizing valor and bravery.

White House Christmas 2018

And that’s a long way from a little tree in a living room in 1889 put up by a President for his grandkids.

WHAT ELSE SHOULD I KNOW?

⇒ The Clintons had the most Christmas trees; 37 in 1997.

⇒ This year’s tree is lighted by 74,000 LED chips from dusk to 11pm at a cost of about $200.

⇒ Shameless Plug. We wish you a Happy Holiday season.

[email protected]  OR   727-327-1999.

Check back here next week when we wish you a Merry Christmas.  If there is anything you would like to know more about, leave a comment and we’ll blog it.  And be sure to like us on  Facebook and follow us on Twitter; for whatever it is we’ll be posting.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Posted in Christmas, General Interest, Holiday | Tagged , , | 1 Comment

Family Time

Posted on December 12, 2018 by Carol

Brand-new tax credit courtesy of the Tax Cuts and Jobs Act (TCJA). Employer Credit for Paid Family and Medical Leave. But first.

REINFORCING THE BASICS.

What is the Family and Medical Leave ACT (FMLA)? The FMLA entitles qualified employees of covered employers to take up to 12 workweeks of unpaid leave in a 12-month period for qualified Family and medical reasons. The employee on leave keeps his/her group health insurance coverage and if not their original job, a completely equivalent one. Congress passed the Act because they thought it was important for working parents to participate in early childrearing and that a lack of employment polices to accommodate them should not force them into choosing between job security and parenting. And so, it was on February 5, 1993 President Bill Clinton signed his very first piece of legislation (as President).

A qualified employee is one who?

1. Works for a covered employer;
2. Has worked for that covered employer for 12 months (consecutive or not consecutive);
3. Has clocked as least 1,250 hours during the preceding 12-month period;
4. Works at a location where the employer has at least 50 employees within 75 miles; and,
5. Didn’t make more than $72,000 in 2017 or 2018.

Who is a covered employer?

1. Private-sector. 50 or more employees in 20 or more workweeks in the current or preceding calendar year;
2. Public sector. All federal, state, and local agencies, regardless of the number of employees; and,
3. Public or private school. All elementary and secondary schools regardless of the number of employees.

What are the qualified Family and medical reasons?

1. Birth or adoption of a child;
2. To care for a spouse, child, or parent with a serious health condition;
3. For a serious health condition that makes the employee unable to perform the essential functions of his/her job;
4. For any qualifying emergency arising out of the fact that a spouse, child, or parent is a military member deployed to a foreign country; and,
5. A qualified employee may also take up to 26 workweeks of leave during a single 12-month period to care for a servicemember with a serious injury or illness, if the employee is the spouse, child, parent, or next of kin of the servicemember.

THE NEW EMPLOYER TAX CREDIT FOR PAID FAMILY AND MEDICAL LEAVE (FML). TCJA created a temporary general business tax credit for employers that provide paid FML. The credit is equal to a percentage of employee wages paid during their FML. Normally paid wages do not include discretionary bonuses or other than regular scheduled overtime. Big employers may qualify for the credit as well as small employers and even employers who are not even required to offer FML under federal FMLA.

How temporary is temporary? Only for calendar years 2018 and 2019.

First things first. Write and implement an FMLA paid leave policy. The policy must provide at least two weeks annually of paid FML to all qualifying full-time employees and a pro-rated paid leave for part-time (fewer than 30 hours a week) employees. The paid leave cannot be less than 50% what the employee usually makes.

What doesn’t count as FML wages paid?

If an employer provides paid vacation leave, personal leave, or medical or sick leave (other than leave specifically for one or more of the purposes stated above), that paid leave is not counted as FML.

Leave paid or required by a State or local government is not counted as wages paid by the employer. Employers must be generous on their own.

What does count other than straight up wages? Wages paid under a short-term disability program.

Show me the math! The minimum percentage is 12.5%. The credit is increased by 0.25% for each percentage point by which the amount paid exceeds 50% of the employee’s wages. The maximum percentage is 25%. No more than 12 weeks of FML can be used for the credit.

(Shameless Plug). We’re really good at this part: “All general business credits combined, including the family medical leave credit, may not exceed the taxpayer’s net income tax over the greater of the tentative minimum tax (which is zero for C corporations after 2017), or 25% of the taxpayer’s net regular tax liability that exceeds $25,000 (Sec. 38(c)(1)). However, if the sum of general business credits does exceed these amounts, the excess can be carried back one year and carried forward 20 years (Secs. 39(a)(1)(A) and (B)).”

Employers may claim the credit by filing Form 8994, Employer Credit for Paid Family and Medical Leave (drafted), Form 8994 and Form 3800, General Business Credit, with their tax return. If you remember from last week’s blog, We Are, After All, IRS Customers, there are 450 or so forms and instructions the IRS needs to create or change resulting from the TCJA.

WHAT ELSE SHOULD I KNOW?

 ⇒ 1 in 4 women return to work less than two weeks after giving birth because the Family cannot afford to miss a paycheck.

Having a paid Family and Medical Leave policy is a great way to not only recruit and retain top talent but to also stand out in your community. We can help, #CallCarolFirst.

[email protected] OR 727-327-1999.

Check back here next week for a Christmas blog. And be sure to like us on FaceBook and follow us on Twitter ; for whatever it is we’ll be posting.

 

Posted in Business Taxes, Taxes | Tagged , | 193 Comments

We are, After All, IRS Customers

Posted on December 4, 2018 by Carol

Here’s what’s up! The IRS is patting its own back on how great they did customer service-wise during the 2017 tax season. The reviews are mixed but today’s blog is to introduce the IRS’ customer service platforms, should you need customer service.

REINFORCING THE BASICS.

What is customer service? It is taking care of taxpayers’ needs by providing professional and helpful high-quality assistance before during and after the taxpayer’s requirements are met. Those requirements being taxpayers self-report their income annually and submit income tax payments.

What is an assistor? An IRS customer service rep.

CUSTOMER SERVICE.

Here’s a fun fact; in the last five years the IRS has downsized 10,876 fulltime employees, which was a 12.7% percent reduction in the fulltime workforce. Now, true, that could be fewer auditors, but it could also be fewer computer technicians and assistors to taxpayer inquiries. And that is not good for America’s taxpayers. Last year the IRS processed 245.4 million tax returns; each return is a customer.

IRS Notices/Correspondence. You can write an old-fashioned letter (paper correspondence) and snail mail it to the IRS. Most of these letters are in response to IRS requests for information, giving the IRS even more information, or disagreeing with them about something (taxpayer dispute). IRS assistors answer these letters which also include procedural questions, amended returns, and duplicate filings. The goal is to answer each letter within 45 days. Day 46, if unanswered, your correspondence becomes “overage”. The IRS received 17.5 million pieces of correspondence last year.

The National Taxpayer Advocate, (in short IRS watchdog for taxpayers), reports that in 2017 the IRS had 35% overage. That is 6,125,000 pieces of unanswered mail. Holy heck, where do they put it all?

The IRS, was like, uh no and called this finding BS because at year-end they claim 35% of open inventory was only 1.3 million pieces, not 6.1 million pieces and of which only 514,000 pieces were our unanswered taxpayer-initiated correspondence. With this math the IRS had 786,00 unfinished internally generated documents associated with account maintenance operations. And blahblahblah.

Online Services. The IRS Website

You can do a number of things online. View your account, get your tax record/transcript, make a payment, check your refund status, check on an amended return, and get tax forms and instructions.

Last year there were 495.6 million visits to IRS.gov and 278.6 million inquiries to “Where’s My Refund?”

There is a ton of information on the website and we do mean a ton. The “Frequently Asked Questions and Answers Search” and “The Interactive Tax Assistant Search” are great tools to find answers to questions and navigate through topics and categories:

Frequently Asked Questions

Interactive Tax Assistant

Tax Cuts and Jobs Act (TCJA) or Public Law 11597. Of course, the IRS has been worried this past year about messing up because of the broad scope and complexity of the law and all there is to mess up which includes extensive changes to tax forms, publications, and computer systems. All in all, there are about 120 provisions requiring the creation or revision of nearly 450 forms, publications, and sets of instructions. And approximately 140 IT systems need modifications in order to process returns and monitor compliance.

In a strategy not to mess up, the IRS set up a centralized office to coordinate implementation across the agency’s offices and divisions and even developed their very own project planning tool. The IRS also hit up Congress for an additional $397M to fund the TCJA’s implementation costs and they got 320.

We hope they did a good job with less money because it is anticipated that there will be four million TCJA-related, taxpayer-initiated letters, phone calls, and in-person visits to tax centers.

Telephone Service.  Phone operators will assist callers year-round with obtaining account information and answering basic tax law questions. The telephone service also has recorded tax information and a bunch of automated services. You can call them up and find out the status of your refund, how much you owe, and a bunch of other stuff.

If you ever wondered why the IRS isn’t answering your call; you are not the only one. Between 2013 and 2017, the IRS averaged 107 million telephone calls from taxpayers each year. According to them, a couple of years ago they only answered 37.5% of calls and the average wait time was 23 minutes. Supposedly, as of last year they answered 80% of live assistance seeking calls and reduced wait times to about 5 minutes. Independent audits show those numbers to be much lower.

Currently, their website says 15-minute wait time during tax season and 27-minutes the rest of the year.  We all know that’s fake news because we all know someone who has complained they were on hold for 45 minutes or an hour or even longer.  To amuse yourself while on hold we recommend streaming Amazon’s original series Sneaky Pete or even old episodes of American Horror Story because well, isn’t that what dealing with the IRS is.

This is super important to know: The IRS will NEVER, NEVER, NEVER call you up on the phone out of the blue. And they will NEVER, NEVER, NEVER text you. NEVER, EVER!

If you are calling about your own account make sure you have all this stuff ready: Social security number or Individual Taxpayer Identification Number; birthdate, filing status, last year’s tax return, the return you are calling about, and any notices the IRS sent you. It would suck to have to call back.

Business 800-829-4933
Disaster or Combat Zone Special Hotline 866-562-5227
Individual 800-829-1040 (Cute!)
Refund Hotline 800-825-1954
TTY/TTD 800-829-4059

Visits to Taxpayer Assistance Centers (The Last Resort). Fortunately, nearly every tax challenge we have can be resolved either by correspondence, online or by telephone. If all else fails and you have to go in person, use this cool IRS tool to find out where to go, office hours, and to schedule an appointment. For an added bonus, the local telephone number is provided too.

Taxpayer Assistance Center Office Locator

WHAT ELSE SHOULD I KNOW?

 ⇒ The IRS is required to pay interest on amended return refunds if not processed within 45 days.
 ⇒ Telephone service wait times tend to be higher on Monday and Tuesday, during President’s Day weekend, and of course, right around the April filing deadline.
 ⇒ Our client service is so much better than the IRS’ customer service.

So #CallCarolFirst!

[email protected] OR 727-327-1999.

Check back here next week for a new and entertaining blog. And be sure to like us on FaceBook and follow us on Twitter; for whatever it is we’ll be posting.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.




Posted in General Interest, IRS | Tagged , , , | 1 Comment