Archive for February, 2016

Why You Need to Stop Making Charitable Contributions

February 23rd, 2016 No comments

Let’s assume you find yourself in a position where you no longer itemize your tax deductions on Schedule A of Form 1040 but you wish to make donations to your favorite charities. You are philanthropically minded so you continue to make your charitable contributions, but wish you could receive a tax deduction for your contributions.

If you are a retiree you can have your cake and eat it too! Here’s how . . . Read more…


More Bad News About the IRS

February 16th, 2016 No comments

The IRS has again failed the American taxpayer!

Tax preparers are required to obtain a Preparer Tax Identification Number (PTIN) from the IRS. PTINs, if used effectively, can be a very valuable resource used by the IRS to help it identify unscrupulous taxpayers and tax preparers.

The IRS has an office called the “Return Preparer Office” (RPO) whose mission is “To improve taxpayer compliance by providing comprehensive oversight and support of tax professionals.” One of RPO’s goals is to “Register and promote a qualified tax professional community.”

The Treasury Inspector General for Tax Administration (TIGTA) reported on Oct. 9 that 19,496 tax preparers who were given PTIN numbers by the IRS and allowed to practice in 2015 may have not filed their own tax returns and may have owed more than $367 million in taxes. The report focused on the IRS RPO’s practice of issuing and renewing PTINs first and asking questions about tax compliance later. Read more…


A Life-Long Process – Planning for Retirement

February 9th, 2016 No comments

Everyone is very busy. Why do something today when you can put it off until tomorrow? Are you one of those who defer planning for your retirement until the year of your retirement? Are you qualified to plan for your retirement?

The American College of Financial Services (ACFS) conducted a Study which focused on the need for Americans to increase their retirement income literacy. It is your ultimate responsibility to know how much money you need to accumulate to retire comfortably and how to manage your money during retirement.

Today’s retirees are faced with changes that earlier generations did not. For example,

  • Whereas most Americans in the past received a life-time pension from their employer, today’s retirees are likely dependent upon how well they managed their 401(k) plan.
  • The Social Security Administration (SSA) recently announced that there would be no cost-of-living increase (COLI) for 2016.

NOTE: It is very possible in future years retirees who receive Social Security benefits will continue to see a decrease in their monthly benefit check. Why? The increases in the Medicare premium taken out of SS retirement benefits each year (to keep pace with the cost of health care) will likely be greater than the COLI adjustment to SS.

The ACFS Study is worth reading as it discusses such findings as .  .  . Read more…


PA Disallowing Losses from Partnerships & S Corporations

February 2nd, 2016 No comments

The PA Dept. of Revenue (DOR) is disallowing individuals to claim losses from out-of-state partnerships and S Corporations that do not file a partnership (or S Corp) tax return with PA. For example, let’s say you invest in 2 out-of-state partnerships. Let’s assume that neither partnership is required to file a tax return with PA as no taxable activities were performed in PA by either partnership.

To illustrate the affect on a PA individual taxpayer, assume you receive a K-1 from partnership #1 showing $10,000 of partnership income.  You receive a K-1 from partnership #2 showing an $8,000 loss. Your PA-40 tax return is prepared and the $8,000 loss is offset against the $10,000 income, resulting in $2,000 of income on your PA-40. This is the correct way to compute your taxable income.

However, the PA DOR will deny your netting the two K-1s and will send you a tax deficiency letter saying that you underpaid your PA personal income taxes. The PA notice will show that you have $10,000 of income from out-of-state partnerships. While PA is happy to accept the K-1 that shows income, it will not accept the K-1 showing an $8,000 loss because it has no way of verifying the loss since partnership #2 does not file a partnership return with PA.

While PA residents investing in partnerships/S Corps that generate losses and that conduct no activities in PA can request the partnership/S Corp to file a partnership/corporate return with PA, that request will likely fall on deaf ears. Why? Because most taxpayers are loathe filing tax returns in tax jurisdictions if none are due.

Thus, what are PA residents to do? A possible alternative Read more…

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