Tax system now 3 pages more complex; yet more will claim standard deduction

Annually, the Joint Committee on Taxation releases a report entitled – “Overview Of The Federal Tax System As In Effect For [current tax year].” The report for 2018 (JCX-3-18) was released February 7, 2018 and is 38 pages long. The last report for 2017 (JCX-17-17; 3/15/17) was only 35 pages long! And the 2018 report was issued two days before more tax legislation was enacted that mostly affects 2017 – the Bipartisan Budget Act of 2018 (H.R. 1892; P.L. 115-123 (2/9/18)). This new legislation mostly is the concurrent budget resolution but also extends 33 tax items that expired at 12/31/16, mostly through 12/31/17 (retroactively that is!). These expiring provisions are generally not covered in these 30+-page overview reports by JCT. P.L. 115-123 also includes some disaster relief tax provisions and several miscellaneous items such as regarding whistleblower awards and the user fee for installment agreements to pay taxes.

Why is the 2018 report longer? It appears to be due to brief descriptions of new items added by the Tax Cuts and Jobs Act P.L. 115-97; 12/22/17) such as half a page for new Section 199A on the qualified business income deduction that is a 7-page long, temporary provision in the law, plus a few more data tables. These overview reports include interesting data and graphs, such as on sources of revenue, the make-up of income reported by individuals, and distribution of income and taxes.

A few interesting items from the reports:

  • Projected for 2018, 1% of individual filers have income over $500,000. For this purpose, AGI is increased by tax-exempt interest, employer contributions for health insurance, employer share of FICA tax, worker’s comp, nontaxable Social Security benefits, AMT preference items, Section 911 foreign earned income exclusion and a few other items.
  • For 2017, JCT estimates that 31.7% of individual filers will itemize deductions rather than claim the standard deduction. For 2018, their estimate is that 13.1% will itemize.  This is a significant drop due to the increase in the standard deduction by the TCJA as well as removal of several itemized deductions.

What do you think?



IRS criminal agents had another good year

Elmer Irey_IRS investigator helped capture Al Capone_Mob Museum

Elmer Irey headed the Internal Revenue Bureau’s Intelligence Unit in the 1930s. It was under Irey’s direction that evidence was gathered leading to the conviction of Al Capone for failure to pay his income tax. Read more about Irey and Capone at The Mob Museum.

I’m a big sports fan. But sometimes I need a break. So in my channel flipping today to find something other than the Olympics, soccer/futbol, NHL hockey and part 1 of NASCAR’s 83-step Daytona 500 qualifying process, I ran across one of my favorite movies, “The Untouchables.”

I’m talking the 2007 version, with Kevin Costner as Eliot Ness and the incomparable Sean Connery doing James Bond in the guise of a street-wise Chicago police officer.

I love this flick for many reasons, one of which is, of course, it’s about how tax evasion led to the capture of Al Capone (played in this film by Robert DeNiro).

That fun tax fact also earned the movie a mention in an old piece I did on the money messages in movies.

And the movie, on the heels of yesterday’s post on the Internal Revenue Service’s new effort to go after those using cryptocurrency to escape taxes, got me thinking about the agency’s wide range of law enforcement activities.

Special tax investigators: The IRS’ Criminal Investigation (CI) division’s annual report provides a good overview of what these T-for-Treasury men accomplished in fiscal year 2017.

Sticking with the bitcoin focus, I looked at the other specialized IRS CI units already in place. There were three last year. Here’s a brief look at what they do and did last year.

The Global Illicit Financial Team (GIFT) task force, led by IRS CI, investigates organizations involved in the illegal movement of money used to support international crime organizations. Since its creation in 2010, GIFT has initiated over 80 cases and seized assets valued at over $4.4 billion. Recently, GIFT resolved a global foreign bribery case that produced a total penalty of more than $965 million against a Swedish-based firm and its subsidiary in Uzbekistan.

The Alcohol and Tobacco Tax and Trade Bureau (TTB) is described in CI’s annual report as the reunion of Eliot Ness and Elmer Irey’s T-Men. Irey, in case you’re not a vintage lawman follower, was director of the IRS’ lead investigative unit during Capone’s federal tax evasion prosecution. TTB’s partnership between the IRS’ criminal investigators and what used to known as the ATF (for alcohol, tobacco and firearms; explosives was added later) began in 2003. Since then, TTB has initiated more than 139 investigations into illicit tobacco and alcohol transactions.

The Swiss Bank Program was started in 2013. IRC CI special agents in Washington, D.C., working with attorneys from the Department of Justice, have been instrumental in getting 80 Switzerland-based banks to cooperate in tracking assets hidden from the IRS. The banks’ non-prosecution agreements have resulted in collection of more than $1.3 billion in penalties. In addition, 58 potential tax evasion leads have been sent to CI field offices for further investigation and more than 18,000 leads that did not meet criminal criteria have been forwarded to the IRS for civil tax compliance action.

Success for CI: Overall, IRS CI last fiscal year boasted a conviction rate rivaling all federal law enforcement at 91.5 percent while working tax cases in more than 72 percent of the division’s time.

That conviction rate speaks to the thoroughness of the investigations, noted CI chief Don Fort. That’s why, he added, “CI agents are routinely called upon by prosecutors across the country to lead financial investigations on a wide variety of financial crimes including international tax evasion, identity theft, terrorist financing and transnational organized crime.”

And all that work is being done, said Fort, with the same number of special agents — around 2,200 — as the IRS had 50 years ago.

That’s pretty amazing, which is why those 2,200 CI staffers earn not only my kudos, but also recognition as this week’s By the Numbers honorees.

“Financial crime has not diminished during that time; in fact, it has proliferated in the age of the Internet, international financial crimes and virtual currency,” added Fort. “Despite these challenges, we continue to do amazing work, investigating some of the most complicated cases in the agency’s history. Criminals would be foolish to mistake declining resources for a lack of commitment in this area.”

I know the IRS got in trouble a few years ago for some of its in-house videos, but with all of today’s streaming options and viewers’ love of quasi-reality programming, I’m thinking that it could be time to not only rewatch the 2007 Untouchables movie, but yet again revive the television show.

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IRS cops going after tax evading cryptocurrency accounts

Bitcoin batch (2)

While most investors have been closely following the recent gyrations of the stock market, fans of cryptocurrency also have been on their own frenzied financial journey.

One bitcoin, as of this morning, was worth almost $8,433. I’d be happy with that value, but that’s less than half what the cryptocurrency was worth in mid-December. On Dec. 16, 2017, the digital currency topped out at more $19,000.

The cryptocurrency can be spent like real money — don’t email me bitcoin et al fans; it will always be just one step above Monopoly money to me — but many tax collectors worldwide consider it an investment vehicle.

That’s the Internal Revenue Service’s position.

In a 2014 notice, the IRS announced that for tax purposes cryptocurrency is treated as property. That means the Internal Revenue Code provisions that apply to property transactions apply to transactions using virtual currency.

So selling, spending and exchanging one digital currency for another (there are myriad versions) have capital gain implications. That means when you hold an asset for more than a year, it will be taxed at a generally lower capital gains tax rate of 0 percent, 15 percent or 20 percent.

But the IRS hasn’t forgotten about folks who use the digital currency like money. If you get bitcoin as compensation or by other means, it is considered ordinary income taxed at one of the existing income tax brackets, which are different for 2017 and, due to the new tax laws, 2018 tax years.

Basically, what the IRS is trying to ensure is that folks can’t switch from U.S. dollars to bitcoin or one of the hundreds of other cryptocurrencies (which for ease of reference, let’s just use bitcoin for everything; yes, it’s the Kleenex of digital currency) and escape Uncle Sam’s tax collector.

That’s even more true now that the IRS has formed a new team to track down bitcoin tax evaders.

This weekend’s Shout Out Saturday goes to Bloomberg Technology for its report on that cryptocurrency tax investigation. According to David Voreacos’ story:

“A new team of 10 investigators is focusing on international crimes. In addition to following undeclared assets that are flowing out of Swiss banks after a crackdown, it will also build cases against tax evaders who use cryptocurrency. The promise of anonymity that has drawn money launderers and drug dealers to virtual coins is also attracting tax cheats, the IRS has said.”

Don Fort, chief of the IRS Criminal Investigation Division, told Voreacos that while the tax agency hasn’t charged anyone yet, the cases will come.

“It’s possible to use bitcoin and other cryptocurrencies in the same fashion as foreign bank accounts to facilitate tax evasion,” Fort said.

Good to see the IRS try to get a bit ahead of this situation.

If you own and/or use bitcoin, you need to get tax proactive, too. As evidenced by its Offshore Voluntary Disclosure Program (OVDP) to crack down on taxable money hidden in overseas tax haven accounts, the IRS tends to be much more lenient with taxpayers who come forward on their own accord rather than those that get discovered.

By accurately reporting and paying tax on your bitcoin transactions now, you can avoid added financial penalties and possible criminal charges.

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Filing 1040X if you now can claim an unexpectedly renewed 2017 tax break

Since Congress decided to slip some expired tax breaks into the budget bill enacted earlier today and make them retroactive to the 2017 tax year, some folks will be amending the 1040 forms they’ve already filed.


Ignore that smirking sound loud enough to make it onto the internet. It’s the perpetually procrastinating hubby being all smug about how sometimes it does pay to put things off for a while.

However, if, unlike the hubby, you don’t defer tasks and were an early tax filer who now can claim, for example, the tuition and fees above-the-line tax deduction, you’re probably already working on amending your original 2017 return.

I hate to say this, but whoa up.

When to file: The first question most folks have when considering amending a tax return is, how soon is too soon to file Form 1040X?

While the Internal Revenue Service has a time limit on how long you can take to amend a filing — you must file Form 1040X within three years (including extensions) after the date you filed your original return or within two years after the date you paid the tax — it doesn’t limit how quickly you send in an amended form.

You can, for example, file your original tax return on Monday and then send in an amended return on Tuesday. But that could cause some confusion.

That’s why tax pros and the IRS itself recommend that if you’re filing Form 1040X because you’re claiming a tax break you overlooked — or that wasn’t available when you filed! Thanks, Congress! — and it will get you a bigger refund than you got on your original filing, then wait.

Specifically, wait until after you get your original filing’s refund amount before filing your 1040X to get even more.

You don’t have to wait, however, to cash the first tax refund check or spend the cash that Treasury directly deposited into your bank account.

How to file: And you don’t have to wait to get your 1040X ready to send. Go ahead and fill out the form so you can drop it in a U.S. Postal Service box as soon as your get your refund.

Today’s Daily Tax Tip has more on filling out your Form 1040X.

And yes, you read right. You must send an amended return the old-fashioned, snail mail way.

The IRS promises that one day that we will be able to e-file Form 1040X, but that’s not an option yet.

Then wait some more: Getting your Form 1040X is ready to mail the minute your original filing refund arrives is a good idea.

You want the amended filing on its way as soon as possible because the IRS says it could take up to 16 weeks for it to process your revised return.

Yep, 16 weeks.

At least you can track its status online during that time by using the IRS’ Where’s My Amended Return? app.

While you’re waiting, you can let your members of Congress know how happy (you noticed that sarcasm font, right?) you are about having to re-do your taxes and waiting for up to four months for your additional tax refund.




Some 2017 expired tax breaks are back!

The-capitol-building-at-night-TripAdvisorDuring an overnight session, Congress ended a brief government shutdown and retroactively approved some expired tax breaks.

Remember those tax breaks that expired at the end of 2016? Most of them, including four were claimed by many individual taxpayers, are back.

But just for the 2017 tax year.

That’s good and bad news for filers who last tax year:

  • paid college tuition and fees,
  • had a mortgage payment that included private mortgage insurance (PMI),
  • made certain energy efficient improvement to their homes or
  • reworked their home loan and in that process had some of the debt forgiven.

Yep, those tax breaks, among many others, that expired on Dec. 31, 2016, are back. They were approved overnight as part of the two-year budget deal that ended the brief second government shutdown of 2018.

That’s the good news.

The bad news is if you didn’t do any of these things in 2017, there’s no way to go back in time (sorry H.G. Wells and Marty McFly fans) and change things so that you can claim them now.

The further bad news is that if you can claim any of these tax breaks and already filed your 2017 tax return, you’re going to need to amend that Form 1040. Joy. Not.

And finally, while some tax provisions approved overnight are longer-term, these four components were OK’ed retroactively for the one tax year.

That’s right. They apply just to the 2017 tax return you’re working on now (or will amend when you stop shaking your head), not to the 2018 tax year. Yet.

So hold off for now on tax planning in these areas.

It’s likely they will be addressed again in yet another tax extenders package Congress is expected to take up later this year.

But the way our legislative body works, or doesn’t, who knows!

I’ve got a breakfast appointment I have to get to, but I’ll post more later on the brief government shutdown and other extenders approved while most of us slept.




8 Ways to Gain New Clients This Tax Season


It’s the start of a new tax season. Is your marketing plan in place and ready to go? Do you how you’re going to get new clients this year? Marketing plan or not, here are some ideas to help you get clients through the door.

It Pays to Pay Attention Tax-Business-Marketing-Ideas

Do you keep an eye on the business news in your area? Have you kept tabs on new businesses in the area? Reach out to those business owners and offer your services. Better yet, look up the owner on LinkedIn and see if you have any mutual connections. If you do, reach out to that person and ask for an email introduction. It’s always better to be referred than to cold call or email.

Speak Up!

This is the time of year people have taxes on their minds. And with all the changes to the tax code, people are confused and anxious. Reach out to the associations you are a member of – or even associations you are not a member of – and offer to speak at their next meeting or event. It’s a great way to show your expertise and a good networking opportunity.


Sponsoring a local association meeting or event is also a great way to get the word out about your business. Look for opportunities where you can have a booth, have your logo visible, and/or provide hand-outs to participants.

Direct Mail

Direct mail is a great way to reach people in the surrounding neighborhood. Post cards are good because they cost less to produce and the recipient will get the message without having to open an envelope.  However, a letter could have a “teaser” printed on the front, such as “Tax Reform Information Inside!”  This year, the letter approach would be especially effective. 

The ad you produce should also include a unique and compelling offer or proposal and not necessarily another discount like every other tax firm.  

Host a Seminar at Your Office

Another good approach to getting people in the door is to host a seminar at your office. Choose a topic you know is of interest to people – like the changes to the tax bill, or specific changes that will affect your core demographic. You could even host one for individuals and one for businesses.

Partner with a Charity

Another great way to promote your business is to partner with a charity. For example, our sister company, Peoples Tax, has been working with a non-profit called Connor’s Heroes for several years. Each year we host a supply drive that incentivizes people to drop off supplies. This year, we’re holding the drive on Valentine’s Day and giving out candy and coupons for everyone who participates.

Offer a Referral Program

Your current (happy) clients can be your biggest advocates and source of new business. So why not incentivize them by offering a referral program? At Peoples Tax, we offer a 25% discount for referrals. Decide on how you will incentivize your clients and then reach out to them via email to encourage referrals. You should also keep referral flyers on your desk and give them out to clients when they come to have their taxes prepared.

Be a Source of Information

This year is our year to shine as tax pros. With so much change coming, you really want to establish that 1. You know the new law and 2. Taxpayers need you. Reach out to local reporters who are writing about these topics and offer quotes, tips, and advice. Write about the new laws on your blog, in your newsletter and on your social media channels. You should also share your most informative blog posts with associations you are a member of for consideration in their newsletters, their blog, or social media sites.  

Want more ideas and an easy to execute marketing plan? Check out our Tax Business Marketing Manual.  




6 tax refund myths busted


Dealing with taxes is tough enough, but when folks get the wrong information, things can go really bad really fast.

That happens every filing season. Someone’s uncle who works down the hall from a tax attorney says this. A neighbor’s accountant brother says that.

And, of course, there’s the internet, probably the greatest single source of, to borrow a phrase, fake tax news.

The 2018 filing season is in full swing; it officially opened on Jan. 29, with Free File taking submissions since Jan. 12. Most of the folks who’ve already filed did so because they’re expecting refunds.

With those early filers already wondering where their tax cash is, the Internal Revenue Service and I want to clear up some of the more common tax myths regarding refunds that have cropped up yet again.

Some come from a recent announcement from the IRS. Others are from questions I’ve received either here at the ol’ blog, in person or through social media outlets.

All are myths, so don’t fall for them.

Myth 1: All tax refunds are delayed.
Yes, some refunds are delayed, but not every single one.

The 2018 filing season is the second year that the IRS has been abiding by a provision in the Protecting Americans from Tax Hikes, or PATH, Act that requires it to hold refunds connected to two tax credits until mid-February. The credits in question are the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC).

These two tax credits also are refundable, which means that even if you don’t owe taxes, they could get you a refund.

But that’s where the truth stops and the refund myth starts.

Only returns that have either or both the EITC or ACTC will have their refund issuance slowed. In all other tax refund cases, the IRS says that the money will go out to more than 90 percent of filers in less than 21 days.

And while it’s not a tax-law mandated hold, some other non EITC/ACTC returns also might take a bit longer to be processed because they are getting additional attention for a variety of reasons. The most common reason for regular refund delays is extra security reviews to prevent tax identity theft and refund fraud.

Myth 2: EITC and ACTC related refunds will be delivered on Feb. 15.
Just like with myth #1, this one takes a real tax situation and mangles it.

While I’m sure the IRS appreciates the believers of this myth’s confidence in the agency’s efficiency, such hopefulness is misguided.

The IRS expects to handle 155 million tax returns this filing season, with millions already filed by refund-anticipating taxpayers. The sheer logistics means that not every refund from a tax return claiming the EITC or ACTC can go out at the same time.

The IRS expects the earliest that EITC/ACTC-related refunds will be available in taxpayer bank accounts or on refund debit cards is Feb. 27. And that’s just the first batch.

And if those filers chose direct deposit. And if there are no other issues with their tax returns.

So be patient.

Myth 3: Refund inquiry workarounds will help.
Have you heard that if you order a tax transcript it will tell you when to expect your refund?

Or if you call the IRS help hotline or your tax professional, who has a special line to the IRS, you’ll get a firm refund delivery date?

Wrong, wrong and wrong. These touted refund inquiry workarounds won’t work.

The information on a tax transcript does not necessarily reflect the amount or timing of a refund.

As for calling your tax pro, that’s a good way to get dropped as a client. Yes, tax preparers do have special avenues to contact the IRS, but not to track down the delivery dates for all their clients.

And definitely don’t try to get refund delivery information by calling the IRS directly. The help hotline is for folks trying to file their returns, not for those waiting for a refund. Plus, this time of year, you’ll be on hold for a while.

Instead, the IRS says use its Where’s My Refund? search tool, which is scheduled to be available by Feb. 17. You can access it online at or through the IRS2Go mobile app.

Myth 4: A tax refund means my return is fine.
You filed. You got your refund. You and the IRS are both happy, right?

That’s usually the case. But that cash back from the U.S. Treasury doesn’t necessarily mean you’re in the clear.

The IRS generally has up to three years to take a closer look at your filing. If the agency finds an issue during that time, you’ll be hearing from an agent.

Myth 5: Since the IRS accepted my return, my state filing also is OK.
Again, this usually is true. Most of the states that do collect income taxes use filers’ federal returns as the basis for the state and/or local filing.

But anyone who’s filled out a state tax return (ah, fond memories of our tax seasons in Maryland) knows that there are some tweaks of your federal data on those more local tax forms.

And as states continue to scrap for every dollar they can get, state tax departments are looking more closely at their residents’ filings.

This could get even trickier in the next few years under the federal tax law changes in the newly enacted Tax Cuts and Jobs Act. States are going to have to reassess their connection to the Internal Revenue Code and decide which of their state tax provisions they want to change so they conform with the federal law.

Myth 6: The IRS will call or email me about my refund.
Stop me if you’ve heard this before. Wait, don’t stop me or the IRS. We both want to remind you that the IRS doesn’t initiate contact with taxpayers by email, text messages or social media to request your personal, tax or financial information.

If you are contacted in one of these ways regarding your refund — either a caller saying you owe more or an email promising a bigger refund — the communication isn’t from the IRS, even if the caller or emailer says they are agents. They are crooks looking to assume your tax identity and take your money.

Remember, the Internal Revenue Service will NEVER (emphasis by Uncle Sam):

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill if taxes are owed.
  • Threaten to immediately bring in local police or other law enforcement groups to have people arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.

And while an IRS agent does sometimes come to taxpayer homes or businesses, before your let him or her through the door, check out these ways to know that it’s really an IRS agent knocking.

Finally, while tax crooks are more active during the main tax filing season, tax ID theft and refund fraud is a year-round crime. So don’t let down your guard even after you’ve filed your return and cashed your refund check.

For now, though, as you anxiously await your refund, you at least now know the real deal about that tax cash, rather than the myths that have been circulating.

And with each new day that passes since you filed, you’re closer to getting your refund.

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