Those would be the new Medicare taxes on both earned and investment income, occasioned by Obama’s health care “reform” law – unless the Supreme Court strikes the mess down, that is.

Remember that effective for tax years beginning after December 31, 2012, an additional 0.9% “hospital insurance” tax will tag wages in excess of $250,000 for married folk who file jointly.  Not to mention that higher income taxpayers will also get clipped for a new 3.8% “unearned income Medicare contributions tax” on their investment income!  And this latter new exaction will be a nasty one, hitting:

• Gross income (less applicable deductions) from interest, dividends, annuities, royalties and rents;
• Income from a trade or business to which the tax applies (such as a trade or business which may be classified as a “passive activity;” and
• Net gains attributable to the disposition of property (such as your house, your investment assets, and other “capital gains.”

Thank goodness for small blessings – retirement plan distributions (including

distributions from your IRAs) aren’t included (yet!) in the definition of investment income.

And if all of this isn’t enough to just make you want to throw up, consider the results of a recent study by the Tax Foundation, which indicates that in 2012, Americans will pay something over $4 trillion in taxes, which is $152 billion, or 3.9% more than they will spend on housing, food, and clothing combined!

“Transfer payments, or government social benefits, have grown to represent a substantial portion of money spent on living expenses, encompassing housing, food, clothing, healthcare and transportation” quoth Tax Foundation Adjunct Scholar Kevin Duncan recently.  “This means the government is picking up an increasing portion of the tab for these essential goods.”

But not to worry – California rides to the rescue on all of this bad tax news.  We hear that Assembly Bill 2540, which would have added a sales tax on services, has been stalled in favor of the notion that the Legislative Analysis Office perform a study on the matter.  Hooray!  We can hardly wait for the results of this latest in the seemingly endless parade of tax issue “studies” when it emerges in mid 2013 – just as we’re writing the checks to pay the new Medicare taxes…..

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at  http://blog.nolo.com/taxes.

In the recent Reesink decision, the Tax Court determined that, although a married couple ultimately used the replacement property in a like kind exchange as their personal residence, they did have the requisite investment intent with respect to the property at the time they acquired it and thus did qualify for nonrecognition treatment under Section 1031.

The Court smacked down the IRS, which built its case against Reesink on concepts embodied in another Tax Court decision (Goolsby).  But the Court found several factual distinctions – in Goolsby, the taxpayers made the purchase of the replacement property contingent on the sale of their former personal residence, sought advice on whether they could move into the replacement property if renters could not be found, made minimal rental efforts, and moved in within two months of acquisition!

The Reesinks were a bit more circumspect, engaging in more extensive advertising efforts, showing the house to potential renters, and waiting almost eight months before moving in (though still a rather short period of time).

And from our “statute of limitations department” came word from on high – the U.S. Supreme Court – that an overstatement of a taxpayer’s basis in an asset (for purposes of measuring gain or loss on disposition) isn’t tantamount to omission of income.  A seemingly nitpicking question, but of great significance when it comes to the amount of time IRS has to audit a transaction.  The normal audit statute is three years, but if IRS can show significant omission of income, they get six years to come after the taxpayer.

This question has been batted around the courts (including a bunch of the circuit courts of appeal) with mixed and differing conclusions in various cases.  But now consider it settled, thanks to Home Concrete & Supply, LLC.

And in conclusion this week comes word from The Wall Street Journal that the number of folks departing the good old U.S. of A. is on the rise.  The number of Americans renouncing citizenship has grown from an average of 482 per year in the Dubya era to 1,788 in 2011.

Would Barack, perhaps, have anything to do with this picture?

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.

The Tax Foundation’s “tax freedom day” was a welcome occasion to all of us, last week, coming this year on April 17.  But as the Foundation recently noted, if Congress fails to act (more about that later), the roughly  $500 billion in tax increases presently scheduled to occur January 1, 2013, could push next year’s “tax freedom day” to April 30 or possibly even later!

Recall that the infamous “Bush tax cuts,” recently extended for a couple of more years, will hit the skids this coming New Year’s Eve.  Along with, of course, the now famous “payroll tax holiday,” and the annual circus surrounding the alternative minimum tax (AMT) patch.

And don’t forget, of course, the new exactions coming into the law next year as a result of the national health care legislation – a new tax on investment income, and yet another tax intended to try to salvage the slipping Medicare program.

So as you plan your schedule for 2013, don’t schedule any vacations during about the first five months of the new year.  As the Tax Foundation sees it, (and not counting the new Obamacare taxes) you can plan to work at least an additional 11 or 12 days in 2013 just to pay your share of the following:

Individual income taxes                      5.3 days

Corporate income taxes                      3.4 days

Payroll taxes                                        2.5 days

Estate taxes                                         0.2 days

Total                                      11.4 days

And while we’re on the subject, get ready for one of the all-time “three ringers” of a circus, come the Congressional “lame duck” session, to be conducted between the November election day and somewhere around Christmas Eve of 2012.  You all remember the last one of these at the end of 2010, when the Tea Partiers evicted a whole bunch of Congressional scofflaws in that year’s election.

With all of these tax measures on the table, we expect 2010 will pale by comparison to this year’s lame duck – regardless of which party makes the most inroads.  Hold on to your hats for this one.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.

All of this, probably because the Revenooers are feeling their oats, as indicated recently by Commissioner Shulman who tells us that something called the “American Customer Satisfaction Index” for his department has recently soared upward to 73 percent!

According to the GAO, the Revenooers want the $300 million so it can “continue the development of new systems and modifications of existing systems required to support the new tax credits.”

Notice the bafflegab – they need the dough so they can deal with all of those “credits” we are all going to be looking forward to.  We guess all of the new taxes coming down the pike (starting next year) will just take care of themselves.

So, “Where’s my reward?” wonders a former bank executive who has sued the IRS for stiffing him on the “whistleblower” reward he thinks he’s due.

Seems Joseph Insinga recently told the Washington Post that he had provided the IRS with a bunch of documentation regarding how his former employer assisted seven companies in avoidance of hundreds of millions of dollars in taxes by helping them set up offshore partnerships and other entities.  But since the filing of his whistleblower claim in 2007, he’s still waiting for his dough from the Revenooers.  Hence the recent filing of a lawsuit against the blokes.

And this IRS deportment in the face of the actual recent expansion of the whistleblower program – the Tax Relief and Health Care Act of 2006 allowed folks to receive an award of between 15 and 30 percent of the proceeds collected as a result of the info they provided!

Accountingtoday.com reports that IRS has been slow to process whistleblower claims of late, and in many cases just downright refused to acknowledge them, paying fewer than 100 whistleblowers in 2011 – or about half the number paid just two years earlier!

We guess the IRS is hung up on its ethics surrounding all of this – seems a former chief counsel has expressed the view that the whole whistleblower program is a bit “unseemly,” since it encourages folks to turn in their neighbors and employers.

How comforting.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He may be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes

We are always offended by use of words like “breaks” in a discussion of this sort, inasmuch as Congress over the decades has done its very best to accomplish its ever-changing social engineering goals, resulting in tax incentives which some view as “breaks,” and which others consider sound policy.

In any case, check out “The Challenge of Individual Income Tax Reform:  An Economic Analysis of Tax Base Broadening” if you want to learn more about all of these offensive-to-some tax provisions which might be on the chopping block – some of them may even be applicable to you.  Among the top ten:

~Exclusion from taxable income of employer provided health insurance (tax effect

of about $164 billion per year)

~Exclusion of employer pensions ($163 billion cost)

~Mortgage interest deduction ($100 billion)

And while you’re potentially waving bye-bye to some of your favorite tax incentives, get ready to also perhaps lose a little more control over your privacy in the name of IRS efforts to combat tax fraud.

That’s because such a big increase in tax refund fraud and identity theft, in recent years, has moved the Revenooers to conclude that they should “share” more tax return info with police, in a combined effort to catch more of the bad guys.

Seems IRS is considering a pilot program in the Tampa, Florida area, where identity theft and refund fraud run amok.

“We are limited in what we can supply to local law enforcement,” quoth Steven Miller, deputy IRS Commish for Services and Enforcement.  “There was a reason why we are limited in providing to local law enforcement, in an unfettered matter, tax returns.  Congress has treated tax return information as sacrosanct,” since 1976, when Congress made it a crime for IRS to share taxpayer information.

And the Taxpayer Advocate, Nina Olson, has also weighed in on this one – cautioning that once local law enforcement has access to taxpayers’ information, who knows where that info could ultimately land.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He may be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.

These are groups which are defined as “civic leagues” or organizations not organized for profit but operated exclusively for the promotion of social welfare.  They are exempt from income taxation if no part of their earnings inures to the benefit of any private individual.  They may engage in political campaign activities on behalf of or in opposition to candidates for public office, but in order to retain tax exempt status, the organization must ensure that its political campaign activities do not constitute its “primary” activity.

But the politicians are all worked up over the fact that IRS is apparently (in the eyes of some) unduly bugging some Tea Party groups, however, scrutinizing their activities to a degree which some  (Republcans) think is bordering on harassment.

So, several Republican Senators wrote to IRS Commish Shulman, last week, and in no uncertain terms passed on to him a bit of their ire, noting that “We have received reports and reviewed information from nonprofit civic organizations in Kentucky, Ohio, Tennessee, and Texas concerning recent IRS inquiries perceived to be excessive.”

Among other things, therefore, these Senators want IRS to explain exactly which IRS officials (by name) are involved in developing and approving the questions being put before the Tea Partiers, and why IRS letters recently sent to these organizations specifically ask for the names of all donors (not just those giving more than $5,000, which is the general requirement of the law) and amounts of their donations, with the notification that such info will be made public.

Not to be outdone, of course, some Senate Democrats (including Shumer, Franken and others) also wrote to the Commish, noting that the lack of clarity in the IRS rules has allowed political groups to improperly claim 501(c)(4) status, and may even be allowing donors to these groups to wrongly claim tax deductions for their contributions.

“We urge the IRS to take these steps immediately to prevent abuse of the tax code by political groups focused on federal election activities.  But if the IRS is unable to issue administrative guidance in this area then we plan to introduce legislation to accomplish these important changes.”

Clearly we haven’t heard the last on this one.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He may be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.

The Revenooers recently issued Tax Tip 2012-39 which folks facing debt restructuring ought to check out.  That Tip makes note of ten facts about mortgage debt forgiveness.

1. Generally, debt forgiveness results in taxable income, but under the “Mortgage Forgiveness Debt Relief Act of 2007,” folks may be able to exclude up to $2 million of debt forgiven on their principal residence.
2. If you’re a married bloke, filing a separate return, the exclusion is limited to $1 million.
3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt actually “forgiven” in a foreclosure.
4. A basic requirement under these rules is that the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualifies for exclusion.
6. But refi proceeds used for other purposes (such as to pay off all of that credit card debt you have racked up) do not qualify for exclusion.
7. Check out IRS Form 982 and carefully follow its instructions if you qualify for exclusion, and attach that form to your 1040 for the tax year in which the debt was forgiven.
8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify, though in some cases there may be other provisions of the law which could allow you an excuse – most commonly, these provisions apply if you are “insolvent.”
9. And if your lender is kind enough to excuse your debt, he will undoubtedly send you a Form 1099-C, which means the Revenooers (who will also get a copy) will be checking your return for proper reporting of the debt relief under the rules.

10.  Therefore, check our Form 1099-C carefully and make sure it’s accurate – its contents will have a significant impact on the tax treatment of your debt relief!

This area of the tax law is not for do-it-yourselfers.  The rules are tricky, and even if you

insist on doing your own returns on Turbo Tax, check with a tax pro.  Also, don’t automatically assume that the state(s) in which you file agree with the IRS rules all the way down the line!

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.

The Revenooers recently issued Tax Tip 2012-39 which folks facing debt restructuring ought to check out.  That Tip makes note of ten facts about mortgage debt forgiveness.

1. Generally, debt forgiveness results in taxable income, but under the “Mortgage Forgiveness Debt Relief Act of 2007,” folks may be able to exclude up to $2 million of debt forgiven on their principal residence.
2. If you’re a married bloke, filing a separate return, the exclusion is limited to $1 million.
3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt actually “forgiven” in a foreclosure.
4. A basic requirement under these rules is that the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualifies for exclusion.
6. But refi proceeds used for other purposes (such as to pay off all of that credit card debt you have racked up) do not qualify for exclusion.
7. Check out IRS Form 982 and carefully follow its instructions if you qualify for exclusion, and attach that form to your 1040 for the tax year in which the debt was forgiven.
8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify, though in some cases there may be other provisions of the law which could allow you an excuse – most commonly, these provisions apply if you are “insolvent.”
9. And if your lender is kind enough to excuse your debt, he will undoubtedly send you a Form 1099-C, which means the Revenooers (who will also get a copy) will be checking your return for proper reporting of the debt relief under the rules.

10.  Therefore, check our Form 1099-C carefully and make sure it’s accurate – its contents will have a significant impact on the tax treatment of your debt relief!

This area of the tax law is not for do-it-yourselfers.  The rules are tricky, and even if you

insist on doing your own returns on Turbo Tax, check with a tax pro.  Also, don’t automatically assume that the state(s) in which you file agree with the IRS rules all the way down the line!

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.

If you’re having trouble sleeping these days, consider grabbing a copy of “General Explanations of the Administration’s Fiscal Year 2013 Revenue Proposals,” recently published by the Treasury Department.  Also known as the “Green Book,” this annual document dovetails with the President’s budget – a “laugher” in and of itself, and was the subject of recent testimony before Congress by Treasury Secretary Geithner.

Regardless of how you view the chances of the President’s budget actually becoming enacted, the 215 page Green Book does include a few little nuggets which taxpaying folk will find to be of interest.

One “hot” topic of late is the matter of the estate and gift tax law, presently structured at a rate of 35% with a $5 million per person exemption limit.  Such is the rule for decedents passing before December 31, 2012, which Obama thinks “provide(s) a substantial tax cut to the most affluent taxpayers that we cannot afford to continue,” says the Green Book.  “We need a permanent estate tax law that provides certainty to taxpayers, is fair, and raises an appropriate amount of revenue.”

No argument from us on the matter of certainty – this entire area has been a moving target for more than a decade now.  But we’re not sure we like the administration’s proposal:  to make permanent the estate, GST and gift tax parameters as they applied during 2009.  The top tax rate would be 45 percent and the exclusion amount would be $3.5 million for estate and GST taxes, and $1 million for gift taxes.

And while we’re on the subject – another annoyance propounded in the Green Book:  modification of the rules governing “valuation discounts.”

For a while, now, planners have been successful in justifying valuation discounts in the measurement of the fair market values of certain forms of property gifted or bequeathed to family members.  Noting that judicial decisions over the years have in many cases been pro-taxpayer, Obama proposes new rules which would make it more difficult or maybe even impossible to justify the use of valuation discounts.  Result, of course, is more dough for the Treasury.  Not good for taxpayers.

On the other side of the ledger, however, you have to hand it to the Big O for coming up with some proposals which actually would appease some taxpayers, though at the expense of others, of course.  Such as the one which would provide a tax-free exclusion from income of debt forgiveness related to certain student loans.

Under current law, any debt forgiven under various extant student loan programs is considered gross income to the borrower and thus subject to individual income taxation.

But not any more, if this one flies – student loan borrowers who have been paying for at least 25 years will be able to call it quits with no tax hit because, of course, “For many of these individuals, paying the tax on the forgiven amounts will be difficult.”

Really.  And who ever said life was fair?

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult our CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.

Well, if you can’t convince the auditor of the error of his or her ways, you probably will want to appeal that person’s findings, and move up the ladder within the administrative confines of the Franchise Tax Board (FTB).  And you may even wish to detour over to the “Settlement Bureau,” hoping to find somebody there who’s willing to bargain with you, with the goal of just getting the darned argument resolved.

California’s Revenue and Taxation Code sections authorize the FTB to settle civil tax matters in dispute which are the subject of protests, appeals, or refund claims.  FTB’s Settlement Bureau is generally responsible for the negotiation of settlements of civil tax matters in dispute.

The purpose of the settlement program is to negotiate settlements of civil tax matters in dispute consistent with a reasonable evaluation of the costs and risks associated with the protest, appeal or refund claim of these matters.

Any taxpayer who wants to initiate settlement of a civil tax matter in dispute submits a written “good faith settlement offer” to get the ball rolling.  FTB procedures provide for a goal of resolving these settlement cases within nine months following the acceptance of the taxpayer’s request for settlement consideration.

Interesting stuff, this week, from the Obama bafflegab department, emanating from an Obama mouthpiece testifying before Congress on the “merits” (we use the term loosely) of the recently submitted “budget” (again – loose language).

Recall the inclusion within the “Obamacare” legislation of the so-called individual mandate penalties – payable by folks who choose not to purchase government health care coverage.  Would these exactions be “taxes” or wouldn’t they?

We hear that one of the underpinnings of the administration’s plea currently pending before the Supreme Court is that these items are, indeed, “taxes,” which is an argument designed to grease the skids toward convincing the Supremes of the constitutionality of the health care law, since imposition of “taxes” are within the purview of the government.

At the same time, however, Obama has recently been heard to bleat (repeatedly) that current fiscal policies call for no new taxes on the middle class.  So here comes White House Budget Director Jeff Zients, defending the Obama budget position, in this exchange with New Jersey Republican Scott Garrett who quizzed:

“So if I am part of a family that does not buy health insurance in violation

of the President’s health care program and I got to pay because of that, that is not

a tax increase–that is not a tax on me?”

Zeints:  “Well, this is—”

Garrett: “A moment ago you said there’s no tax increase.”

Zeints:  “There aren’t.”

Garrett:  “So that’s not a tax?”

Zeints:  “No.”

Garrett:  “That’s not a tax.  Okay.  I just want to be clear on that because that’s not

the argument the Administration is making before the Supreme Court.”

Whoops.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.