Why I Don't Advise E-Filing

IRS has been very aggressively pushing its electronic tax return filing program. I receive a lot of criticism for my refusal to participate; so this is another explanation of my reasoning.

Some people take my refusal to endorse E-filing as a Luddite position. That's completely wrong because I use computers & the Internet more than most people. However, for this particular task, the system isn't ready for prime time with the clients I serve.

It has been my experience that we can avoid IRS audits and problems by breaking items on tax returns out into much more detail than is shown on the preprinted forms and also attaching additional explanations for anything out of the ordinary. I prepare very complicated tax returns and have almost a zero percentage audit selection rate due to this policy.

The electronically filed format requires too many things to be combined and has no room for the extra explanations and exhibits I like to attach. If this is ever expanded to allow more of a free form tax return, so that I can protect my clients' best interest, I will be more likely to support the concept of electronically filing returns. Until then, I see it as exposing them to too many potential problems

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/20/2001 03:20:00 PM Send this post:

 
Handiest Tax Resource

For at least the past 15 years, part of my annual preparation for upcoming tax seasons was the ordering of the QuickFinder 1040 and Small Business handbooks from TMI Tax Services in Minnesota. Back when I had the big offices in the S.F. Bay area, I would order a copy for each of my accounting staff. I now only have to order one copy of each; but those get a ton of usage. I keep them right under my desk and refer to them at least a dozen times a day, especially when answering questions on the various websites I participate in. [You didn't think I knew all of those bits of tax minutiae off the top of my head did you?] Whenever I leave the office to meet with clients or give a speech, both books are always in my briefcase.

Both books have grown in usefulness over the years, inlcuding more info that I used to have to find in other sources, and keeping up with changes in business entities. The LLC section has grown from just a short paragraph a few years ago to a large section of its own.

A few years ago, TMI started offering a CD-ROM version of the books, including IRS forms & publications. This was a good idea. However, since I already receive those from other sources, I haven't found the $90 price justifiable yet. Also, not having a laptop computer, the old fashioned books are stilll the best way for me to take the info with me.

For anyone in the tax business, these are indispensable. For about $40 each, they are actually bargains for "normal non-tax people" who may want to look various things up. Considering that I charge $195 per hour for explaining many of the same topics that are covered in these books, they can pay for themselves pretty quickly.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/18/2001 04:46:00 PM Send this post:

 
Propaganda Alert

The fans of big government and high taxes are in panic mode that a tax cut may actually get through Congress and have stepped up their propaganda efforts. All news sources are filled with two big efforts to convince you that taxes are too low.

IRS Audits
There are stories spreading that IRS has been auditing too few tax returns. The goal of these is to give more money to IRS to terrorize and harrass people. As I have explained on several occasions, the underlying themes that everyone is a tax cheat and that the IRS has ceased its aggressive tactics are both complete lies.

Karl Marx Lives
There is a lot of coverage to the statements by some super rich people who claim that the estate tax should not be eliminated. Their love for Karl Marx is supposedly because they care for the little people who would be harmed by the government having a little less money. The truth is very different. It is the same reason that other super rich hypocrites like Ted Kennedy can support high taxes. These people have sheltered their assets in trusts that will escape the same taxes that they support for the little people. These enemies of capitalism make me sick.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/16/2001 01:19:00 PM Send this post:

 
The Big Lie

Opponents of the concept of reducing taxes are perfectly entitled to their opinion that our rulers in D.C. know better how to spend our money than we mere peons do.

However, they have very little credibility when their main argument relies on the outright lie that the Reagan tax rate cuts of 1981 caused the growth in the deficit.

The truth is that revenues to the Federal government more than doubled after the top rate was reduced from 70% to 28% because people were able to keep more of their own money and had more incentive to earn more taxable income.

The deficits of the 1980s were completely caused by out of control spending by the Democrat controlled Congress.

Anyone who tells you that the Reagan tax cuts caused the deficit is not to be trusted. That person is either a liar or an idiot, neither of which is somebody you want to rely on.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/09/2001 05:21:00 PM Send this post:

 
Bush Tax Cut Plan

I will be analyzing & explaining the tax cut proposals in more depth over the next few weeks. In the meantime, if you are like most people and mostly concerned about "what's in it for you," you can check out this calculator on the Bush website. I haven't verified the calculations, but trust it will be close to an accurate representation.

In fact, I would trust anything from the Bush people 100% more than the lies and distortions from the members of the JackAss Party and their accomplices in the mainstream media who never tire of falsely portraying any tax reduction as "fiscally irresponsible " & a "windfall for the evil rich."


KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/04/2001 05:58:00 PM Send this post:

 
Donating Items To Charity

You are allowed to claim a deduction on Sch. A of your 1040 for the fair market value of assets that you contribute, unless they are depreciated business assets (used computers, etc.). If the total value claimed for a year is less than $500, you don't have to give any details. If the total is over $500, you need to include some general details on Form 8283.

It never ceases to amaze me how many people claim zero for this deduction because they forgot to keep receipts. IRS auditors are taught to allow $500 with no questions asked; so when you skip this deduction, you are giving a gift of $200 to the IRS.

Also, many people don't claim perfectly legitimate deductions because they want to avoid IRS scrutiny. Unfortunately, this stratgy often backfires. Anyone in law enforcement knows that a tell-tale sign of a drunk driver is someone who goes overboard trying to look inconspicuous; driving slowly, full long stops at intersections. Rather than decrease one's profile, this has the opposite effect. Not claiming legitimate deductions has the same effect with IRS. It increases their suspicion as to what you are trying to hide and can trigger an audit.

For clothes & personal furniture, there are some guides you can use, such as this one from the Chicago Salvation Army. There are also software programs that prepare the 8283 for you, such as this one.

For larger things, you can use an official price guide, such as the Kelly Blue Book.

If there is no such guide for the item you donated, you can come up with valuations by contacting dealers or by checking classified ads.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/04/2001 01:29:00 PM Send this post:

 
Speak Up For Tax Cuts

The time has probably never been better for a real reduction in the tax burden, both with income and estate taxes, with the GOP controlling both the Congress and the White House. However, the outcry from the knee-jerk opponents of any tax reduction is growing louder by the day. The JackAss Party and their allies in the media continue to hammer their mantra that the majority of people don't want a tax cut and that any tax cut would be a windfall for the evil rich people in this country.

Both of these arguments are complete garbage, as well as the one that Ronald Reagan's 1982 tax cut caused the huge deficit. However, the longer these lies are repeated without any opposition, the more they will sink into the national consciousness. Silence equals consent. When you say nothing to contradict even the most inane statement, it is perceived as agreement on your part.

I encourage you to contact your elected representatives in Washington and write letters to the editors of your local papers to let them know that you do think it's long overdue that our income and estate taxes are reduced.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/03/2001 05:18:00 PM Send this post: