May 232017

Wash. D.C.

With the tax deduction in question, millions of taxpayers who deduct medical expenses each year are right to be concerned. Congress is attempting to make massive changes to both America’s health care system and tax code. With those changes in mind, worried readers of Tax Report have written to ask what the impact will be on the one issue that is common to both: the medical expense deduction.

The simple answer is there is a range of possible otcomes due to conflicts in the proposals. And users of this tax deduction can’t do much in the meantime other than write to Congress and avoid stratetic mistakes. The uncertainty shifted into high gear on April 26th, when President Donald Trump released tax proposals strongly suggesting the health care deduction should be eliminated. The one page handout from the White House called for protecting only the write offs for home ownership and charitable gifts, and for cutting “targeted tax breaks that mainly beneift the wealthiest taxpayers”.

While this language seems to aim squarely at the tax deduction for state and local taxes, it also describes the one for medical costs. In both, the tax benefit is proportional to the filer’s rate–and that typically rises with income. Yet two days later, the House of Representatives passed a health care bill with a little noticed provision that goes int he opposite direction. Instead of cutting the medical tax deduction,the House expanded it by lowering the income threshold from 10% to 5.8%, beginning in 2017. Under this rule, more people would be able to claim the write off, and those who already do could deduct more.

Experts say the House’s expansion of the break may just be a temporary budget tactic. The more generous write off could be replaced by the Senate with another provision such as a larger tax break for older Americans who purchase individual health insurance. The medical tax deduction could also survive intact for 2017, especially if Congress doesn’t finish major tax changes this year.


May 222017

Omaha, Ne.

If you want tax relief, concentrate on healthcare. “The tax system is not crippling our business around the world.” That was Warren Buffett, the chairman and CIP of Berkshire Hathaway, over the weekend at the company’w annaul meeting, know as the “Wodstock of Capitalism.” Mr. Buffett, in a remarkably blunt and pointed remark, implicitly rebuked his fellow chief executives, who have been lobbying the Trump administration and Washington lawmaers to lower corporate taxes to obtain tax relief.

In truth, Mr. Buffett said, a specter much more sinister than corporate taxes in looming over American businesses: health care costs. ANd chief exectives who have been maniacally focused on seeking relief from thier tax bills would be smart to shift their attention to these costs, which are sweilling and swallinging their profits. It was larifying to hear Mr. Buffett frame things this way. The need for corporate tax relief has become the lodestar of the corner office, with CEO’s rhappsodizing over President Trump’s planto try to stimulate growth by cutting tax rates for businesses.

“If you go back to 1960 or thereabouts, corporate taxes were about 4 percent of GDP,” Mr. Buffett said. “I mean, they bounced around some. And now, they’re about 2 percent of GDP.” By contrast he said, while tax rates have fallen as a share of gross domestic product, health care costs have ballooned. About 50 years ao, he said, “health care was 5 percent of GDP, and now it’s about 17 percent.” His is one of the most cogent arguments for renewing attention on the underlying costs of our health care system–an issue far beyond the debate around the Affordable Care Act and what it is going to look like if itis repealed and replaced.

Mr. Buffett said our global competitiveness had fallen largely because our businesses were paying fora more for health care–a tax by another name–than those in other countries. “When American business talks about strangling our competitiveness, of that sort of thing, they’re talking about something that as a percentage of GDP has gone down,” Mr. Buffett said. “While medical costs, which are borne to a great extent by buinsess,” have swelled. Tax relief should be obtained by addressing the increases in medical costs.seen on

May 212017

Wash. D.C.

President Trumps plan where he offered corporate America a sweeping tax vision whose ultimate promise of lower rates and more global competiveness depends on one thing:longevity. Given the plan’s uncertain costs, longevity may be one thing the proposal can’t deliver. Trumps plan released by economic advisor Gary Cohn and Treasury Secreatary Steven Mnuchin provided much for multinational corprations to rejoice over–it calls for slashing the corporate income tax rate to 15 percent from 35 percent and applying a one time, low rate to an estimated $2.6 trillion in offshore profits that have so far avoided U.S. taxes.

The plan also calls for shifting to a territorial system for corporate taxes in which, going forward, most foreign profits would be exempt from U.S. levies. Currently, the U.S. taxes corporate income no matter where its earned. But it’s unlcear whether or how the corporate tax proposals would be paid for. Mnuchin has said economic growth resulting from tax cuts would cover much of the cost, but economists question that assertion. The issue is more than just academic: in order to clear the Senate without any Democratic votes, any tax plan can’t add to the deficit outside a 10 year budget window. So if the legislation isn’t revenue neutral in the long run, its tax cuts would have to be temporary–set to expire at least within a decade, and perhaps sooner.

Economist Kyle Polerleau of the conservative Tax Foundation said in a Twitter message Wednesday that there wasn’t enough detail to provide a cost estimate for Trumps plan, while the nonpartisan Center for a Responsible Federal Budget released a rough estimate that it could cost $3 trillion to $7 trillion over the next decade–potentially “harning economic growth instead of boosting it.”

Moving to a territorial system would put the U.S. on even footing with other developed nations which don’t  tax corporate income offshore. It would also end the so-called “lockout” effect, under which companies hold billions of dollars in earnings offshore to avoid U.S. taxes.

May 202017

Wash. D.C.

U.S. Treasury Secretary Steven Mnuchin has taken pains to stress that the Trump plan isn’t out to kill Americans beloved mortgage interest tax deduction–but a side effect of the plan could turn it into a perk for only the wealthy. Predisent Donald Trump has proposed rewriting the tax code to raise the standard federal deduction to a level where about 25 million homeowners would no longer take advantage of the century old break. A Married couple would need a home loan balance of about $608,000–almost triple the mortgage on a median priced U.S. home–before using it would make sense, according to a new analysis by property data provider Trulia. That would be up from about $322,000 today.

Without the incentives, along with a proposed end to local property tax deductions, home sales may be hurt in cities where prices are rising quickly and buyers are stretching to afford their purchases, from Denver and Portland, Oregon, to Boston and Washington. Reduced demand would weigh on values, causing prices declines nationwide, according to the National Association of Realtors, which opposes the Trump plan changes. The proposal “is a backdoor way of rendering the mortgage interest deduction close to worthless”, said Mark Zandi, chief economist for Moody’s Analytics Inc.

Americans filing their taxes can either subtract a fixed amount from their incomes, called the standard deduction, or itemize write offs, including mortgage interest as welll as state and local taxes. The administration wants to raise the standard allowance–to $24,000 from $12,700 for a married couple filing jointly–and allow deductions for only home loans and charitable donations, greatly reducing the chances that itemizing would pay off for average taxpayers. White House spokeswoman, Natalie Strom, said average families would be better off under the Trump plan. Low and middle income households would effectively get a tax cut, putting more disposable income in their pockets for them to invest in a home, purchase a car, save for their children’s college–or any other expense.

May 172017

Wash. D.C.

The Comey firing “diminishes our confidence in the administration’s ability to tackle tax reform” wrote Brian Gardner, Washington analyst for Keefe, Bruyette & Woods, in a note to investors. He described a “pattern in which the White House ricochets from controversy to controversy, does not lay the groundwork for major announcements and fails to coordinate with its political allies before making major political moves.” As a result, the best that might result is a pared down version of tax reform, focused on businesses. James Brockway, a partner at the New York based Withers Bergman law firm, who specializes in taxation, forecasts that tax reform-lite will feature a reduction in the corporate rate to 25 percent from the current 35 percent and repatriation of U.S. corporate cash parked overseas, where rates are lower.

But there won’t be tax cuts for individuals, Brockway said, predicting that “comprehensive tax reform won’t happen,” at least not soon. The legislative tug of war, complicated by legions of lobbyists and bucets of campaign contributions, tends to be more difficult for individual taxes than for corporate ones. That’s because individuals vote. For instance, one omission from the Trump tax plan unvieled in April was continued deductions for state and local taxes. That ignited a firestorm of criticism from lawmakers representing the more populated states, which typically levy higher taxes.

Putting off the question of individual taxes coud be tricky for Mr. Trump, who campaigned on a promise of a lighter tax load for people, not just businesses. Even before Comey’s removal, expectations of a delay in tax reform were rife, mainly because the effort needed to repeal and replace Obamacare showed the difficulty of getting anything through a fractious Congress. Tax reform expections were not realistic at that point.

In 2017, the economic situation is solid, if uninspiring. To Greg Valliere, chief global strategist at Horizon Investments, the saving grace nowadays is that “moderate growth, low inflation, tolerable interest rates, good corporate earnings will persist.”

May 152017

Wash. D.C.

President Donald Trump’s tax plan

National Society of Tax Professionals

to slash the corporate tax rate to 15 percent is setting up a showdown with House Speaker Paul Ryan who has called for a tax plan to pay for itself. Trump intends to lay out broad tax principles , including cutting the federal corporate tax rate to 15 percent from 35 percent, a White House official said. A rate that low would make it difficult to find ways to increase revenue or eliminate deductions to offset it–that means a plan wouldn’t be revenue neutral, or permanent.

The Ryan backed House GOP tax plan released in June calls for replacing the 35 percent rate with a 20 percent rate applied to companies domestic sales and imported goods, while exempting their exports. Ryan has questioned whether a 15 percent rate can realistically be paid for, and he and Kevin Brady, chairman of the tax writing House Ways and means Committee, have said they’re committed to revenue neutrality. The Urban Brookings Tax Policy Center estimates that cutting the corporate rate to 20 percent would lower federal tax revenue by $1.8 trillion over a decade, while cutting it to 15 percent would decrease revenue by $2.4 trillion.

“It’s hard to imagine you’re going to make that revenue neutral,” Roberton Williams, an expert with the Tax Policy Center, said referring to a 15 percent corporate tax. “It’s a big number. The kind of changes you’d need to make to claw that much money back are not consistent with the kinds of things Trump has talked about,” Williams said. “They’d have to do something that raises taxes elsewhere.”  If a tax overhaul adds to the deficit after the initial 10 year window, it’s likely to run afoul of Senate budget rules for what can pass the Senate with a simple majority. Republicans have 52 members in the chamber; they can only spare two votes.

Mnuchin indicated that the in this tax plan, the administration is less concerned with tax cuts adding to the deficit. he said the president is “very determined” that the U.S. can achieve sustained annual economic growth of 3 percent or higher, which would pay for the tax cuts along with “trillions of dollars” brought in from offshore havens.


May 142017

Wash. D.C.

Tax professionals who offer irs tax help for audits

National Society of Tax Professionals

may be increasing in the future. The IRS may be auditing fewer tax returns these days, but that doesn’t mean you’re home free. The low audit rate is likely to reverse, now that the currently low audit rates have the Treasury Department’s attention. Generally, the IRS has three years to audit tax returns. If it finds a significant understatement of income, it could look back at more years returns, but not more than the past six. Returns filed in the past two to three years get the most attention. If you do get audited you may want to find a tax professional who can provide you with irs tax help.

What should you do if the IRS contacts you for an audit ? It’s natural to feel panic, but don’t. Here are a few things to keep in mind before you respond to the IRS. The first thing you should know is if your return is selected for an audit, the IRS will notify you by mail on official letterhead. You may want to seek irs tax help. The Agency will never call you to initiate an audit or to make a demand to collect taxes. Indeed, it continues to warn the  public that calls, texts, or emails from individuals claiming to work for the IRS demanding money for unpaid taxes are scams. You should simply hand up the phone and ignore such requests.

The IRS letter will tell you which returns it intends to audit and whether it will d so by mail or through an in person interview. An interview may be considered at an IRS office or at a field audit, in which the IRS meets you at your home, place  of business or your tax preparer’s office. The IRS letter will request information it wants to examine, such as bank deposits or proof of expenses and deductions. It will also provide instructions on how to contact the agency and a date by which your reply is required. You can proceed with an audit in three ways; attend it personally and speak to the IRS yourself, get irs tax help , have the tax pro go in your place.

May 132017


Taxpayers across the country breathed a sigh of relief after the arrest of Sagar Thakkar, a 24 year old Indian man accused of running an irs scam. Indian police arrested Thakkar, but according to local police, the lack of response from American Law Enforcement authorities familiar with the investigation has been deafening. The call centers at the center of the irs scam were headquartered in Thane, a suburb outside of Mumbai, India. In an interview with Forbes India, Thane Police Commissioner Param Bin Singh discussed Thakkar,s role in the irs scam, suggesting that he was more of a “greedy youngster than a hardened criminal”. Thakkar, known as “Shaggy” was said to be making more than a million dollars per week, at the irs scam’s peak.

When police finally zeroed in on the call centers, Thakkar fled to Dubai. At the time, police arrested 70 call center employees for their alleged roles in the tax related scams and detained hundreds more. Calls to the United States were typically made using VoIP technology which allowed the scammers to “spoof” the phone numbers, making it appear that the calls were coming from the IRS or other government agencies. As part of the irs scam, taxpayers were told to pay bogus tax bills or face arrest, deportation, or other legal action.

The irs scam was the largest scam of its kind. By the end of 2016, according to the BBB, the scam accounted for 1 in 4 reported phone scams. But that appears to be where interest in the case stops. Despite a series of high-profile announcements from American authorities, vowing more action and arrests against scammers, Indian authorities say that American authorities have largely gone silent. There has been no interest form the United States, Singh said. “We had a visit from one FBI agent from Delhi some time ago, but there was no follow up.” Additionally, Singh says that “people from the IRS were expected to visit us and there were some people from Hong Knog who were to get in touch with us. Nothing has happened.”



May 112017

Wash. D.C.

President Trump plans to mark National Day of Prayer issuing an executive order that makes it easier for churches and other religious groups to actively participate in politics without risking their tax exempt status several administration officials said. Taking action as he hosts conservative religious leaders, Mr. Trump’s executive order would attempt to overcome a provision in the federal tax code that prohibits religious organizations like churches from directly opposing or supporting political candidates. The move is likely to be hailed by some faith leaders, who have long complained that the law stifles their freedom of expression. But the order falls short of a more sweeping effort to protect religious liberties that has been pushed by conservative religious leaders since Mr. Trump’s election.

Many clergy members say they do not want to endorse political candidates from the pulpit because it could split their congregations and distract from their religious messages. This appears to be the case even among evangelicals, although it is Mr. Trump’s conservative evangelical advisers who encouraged him to address the issue. A coalition of evangelicals, Roman Catholics, Mormons, and Orthodox Jews has been eagerly awaiting a so-called religious liberty order, which they also hope will exempt religious entities from providing their employees with coverage for contraception in their health care plans.

If is unclear how the executive order will get around the tax code provision for churches, since eliminating it would require legislation by Congress. But faith leaders who have had discussions with White House officials about the issue said Mr. Trump could direct the Internal Revenue Service not to actively investigate or pursue cases of political activism by members of the clergy in churches. Such a directive might be challenged in court. But in the meantime, pastors could feel freer to actively participate in coming elections without fear of being investigated and having their tax exempt status revoked by the federal government.

Churches and clergy are free to speak out on political and social issues–and many do–but the Johnson amendment served to inhibit them from endorsing or opposing political candidates.

May 072017

Los Angeles.

If you’re still laboring over your irs seen on tax forms, here’s a comforting thought: Unless you made well over $1 million–and unless your financial life is as complicated as, say, Donald Trump’s–your chances of being audited are getting closer to zero. The IRS says it will process 152 million individual tax returns this year; only about a million returns will trigger an audit. That’s roughly two-thirds of 1%, the lowest rate in more than a decade. There’s a simple reason for the decline: since 2010, Congress has reduced the tax agency’s budget by roughly 17% in real dollars. Spending on tax enforcement, including audits, has been cut even more deeply–almost 30%.

As a result the federal government is losing at least $7 billion in revenue each year, according to tax expert William G. Gale of the Brookings Institution. A smart businessman would look at those numbers and say: That’s nuts. “Every dollar spent on tax enforcement will produce at least $6 in revenue. That’s a return on investment any businessman would love.” That’s what Steven Mnuchin, the Los Angeles banker who became Trump’s treasury secretary, concluded when he took his first look at the IRS. A stronger IRS, Mnuchin said, could reduce the federal budget deficit by closing the “tax gap”, the more than $450 billion difference between what the federal government is owed and what it actually collects.

“This is one of the areas where I think we will all agree: to the extent we add resources, we can collect more money,: he said. And he was sure the president, another hardheaded businessman, would agree. “We add people and we make money-he’ll get that completely. That’s a very quick conversation with Donald Trump.” If Trump is thinking clearly about the wrenching changes he’s seeking in the federal budget–large scale tax cuts, domestic spending cuts, and a big increase in defense spending–he’ll listen to Mnuchin’s argument about revenue.