May 092018

Douglas Tax Blog. U.S.A. IR-2017-107

The Internal Revenue Service has warned people to beware of new irs summer phone scams linked to the Electronic Federal Tax Payment system or EFTPS for short, where fraudsters call to demand an immediate tax payment through a prepaid debit card. This scam is being reported across the country, so taxpayers should be alert to the details. Such fraud can lead to identity theft, to tax refund fraud, economic loss, or tax debts.

In the latest twist, the scammer claims to be from the IRS and tells the victim about two certified letters purportedly sent to the taxpayer in the mail but returned as undeliverable. The scam artist then threatens arrest if a payment is not made through a prepaid debit card. The scammer also tells the victim that the card is linked to the EFTPS system when, in fact, it is entirely controlled by the scammer. The victim is also warned not to contact their tax preparer, an attorney or their local IRS off, police until after the tax payment is made. This can lead to further tax debt or economic loss.

IRS summer phone scams are not new, but this is a new twist. EFTPS is an automated system for paying federal taxes, using the internet or by phone using the EFTPS voice system. It is offered by the U.S. Department of the Treasury and does not require the purchase of a prepaid debit card.  Since EFTPS is an automated system, taxpayers won’t receive a call from the IRS, and should be wary of anyone that in fact calls them. Remember, only scammers would in fact be calling you asking you for money.

The IRS will never call to demand immediate payment over the phone, or ask you for a debit or credit card over the phone. They will never ask for any type of payment over the phone by check, money order to cashiers check either. They will not threaten to bring in the police or other law enforcement  to question you about the amount you owe over the phone. If you think a scammer is calling in an irs summer phone scams after receiving such a call, call the Treasury Inspector General or TIGTA., or 1-800-366-4484. You don’t want to fall into one of these traps and end up with economic loss or a false tax debt.

  •  05/09
Jan 292018

msnbcDouglas Blog. U.S.A.

The recently passed tax bill is a real mixed review when it comes to constituencies trying to figure out if they are winners or losers under the bill. Once the bill was thoroughly analyzed it became apparent that not every group was going to be happy, and some might be quite upset. Some would actually owe more in tax, and possibly need tax help as a result.

Four individual changes to the individual rate start this year, but then expire in 2025. They are the individual tax cuts, the increase in the exemption for the alternative minimum tax, the increase for the child tax credit, and a larger estate taxes exemption. A deduction for medical expenses takes effect, going retroactive back to 2017 and again for one year in 2018. In 2019 the Obamacare repeal of the individual mandate happens.

The tax bill also impacts business taxes. The tax rate drops to 21 percent, from the existing rate of 35 percent. Also,  businesses can fully deduct business expenses used to purchase equipment immediately. Companies that want to repatriate money form overseas will have an 8 year window to do so, with a 9 percent rate applied to the money brought back into the U.S. The tax help The anti abuse tax goes into effect in 2018, in an attempt to prevent companies form parking any additional money offshore, making it harder and more costly to do so.

The tax bill  gives a $61 billion tax cut to the middle class by the year 2019, which represents about 24% pf the total in tax cuts in the tax bill. The tax help given to the middle class, scorned by some, but welcomed by others, is now law and we will have to wait and see how it impacts the economy in the long run. The tax bill gives nearly $61 billion to the top 1% in the first year alone. Whether that gets invested back into the economy, only time will tell. Then we will truly be able to gauge whether this tax bill gave real tax help to the American people

  •  01/29
Jan 082018

National Society of Tax Professionals

Douglas Tax Blog. U.S.A.

With the recently passed  tax bill, alot of work stands in front of the IRS and tax resolution industry.  Changing the Internal Revenue Code involves more than just changing some forms. It involves changes to IRS computer programs, changes to tax tables, and deductions, along with expenses to figure out what is owed. It is also a daunting task for the tax preparation industry, in trying to figure out all the changes in time to prepare the 2017 tax returns, which begin in earnest in January.

It also impacts the tax resolution industry, as many of the changes in tax preparation can alter how tax resolution is determined by the IRS. Making sense of all of these changes takes time, and in some cases it takes clarification in any grey areas, or guidance from the IRS, so that the rule changes are crystal clear to both the tax preparation and tax resolution services industries. Getting guidance from the IRS in January will be crucial to this effort.

Some changes in the tax bill are retroactive to 2017, such as a lower amount needed for a medical expense deduction. The IRS will have to put these changes into the new forms for this next tax filing season. Many of the new changes will start in 2018, which will allow the tax preparation and tax resolution industry to wade thru the Internal Revenue Code to determine what those changes are, and obtain guidance when needed.

It seems the area that will be hardest to digest and will need the most attention moving forward is regarding pass thru income and entities, such as partnerships where income comes from pass thru, taxed thru the individual rate. The new law creates a 20% deduction for pass thru income and includes changes to prevent people from wiggling out under false circumstances. The regulations are extensive and will certainly need guidance for clarification. Expect cases that go to court over differing opinions as well. A new tax bill may be difficult at first, but with effort , it can be managed just as the prior tax act was.


  •  01/08
Jul 212017

Wash. D.C.

If you are looking forward to a retirement spent paying hefty tax bills, a trend called the Roth 401 K has developed to help buy your ticket to happiness.k Once you turn age 70 and a half, you are forced to start taking money out of your retirement plan, the terminology is “required minimum distributions” and every penny you take is taxable income.

Vanguard reports that nearly two thirds of 401 k plans it administers now have the option of saving in a Roth 401 k, rather than the standard traditional 401 k. With a Roth, contributions are made with after tax income. The payoff comes in retirement when you can either skip RMD’s completely or take distributions without owing a penny in tax.Yet less than 15 percent of retirement savers with the ability to save in a Roth 401 k are taking advantage of the Roth option. “I’m from the Midwest, so I use a farm analogy: Do you want to pay tax on the seed or on the harvest,” said David Hays, president of Comprehensive Financial Consultants in Bloomington, Indiana. “The only rational answer is that you pay it on the seed.” That is, take your tax hit early, by using a Roth 401 k is funded with after tax dollars, paying tax on the seed contribution–with the eventual payoff that you will not owe a penny of tax when it’s time to harvest your savings, in retirement.

While Roth 401 k plans are positioned as ideal for millennials who have yet to hit their peak earnings, 40 and 50 somethings who’ve been using a traditional 401 k for a few decades can add valuable tax diversification by switching over and doing some Roth saving. “Taxes are the most expensive thing in retirement,” said Hays. “Think about it, you pay 30 percent or so every time you want to access your money.” For the record, anyone can contribute to a Roth 401 k. There are no limits. Employer matching contributions will continue to be made into a traditonal 401 k account.

  •  07/21
Jun 282017

Wash. D.C.

The GOP is supposed to be really good at cutting taxes. President George W. Bush cut taxes. So did President Roanld Reagan, though he also raised them. So why are Republicans now struggling mightily to reach a consensus on how to overhaul the nation’ tax system ? And why is Presidnet Donald Trump, who has promised the largest tax cut ever, having so mcuh trouble accomplishing one of his main initiatives ? Here are some reasons why tax overhaul is hrd and why Republicans have been unable to reach a consensus. What’s the holdup ?

After weeks of private negotiations, the White House and congressional Republicans still don’t agree on exactly what they want to accomplish. House Republican leaders are firm that they want to completely overhaul the tax system for businesses and individuals. They want to make the tax law simpler and more efficient, and they want the changes to endure beyond the next decade. They want to cut tax rates, but they don’t wnat the changes to add to the federal government’s long term debt. That means Congress would have to eliminate a lot of exemptions, deductions and credits, and probably come up with a new source of revenue.

The White House is all about tax cuts. Administration officials have talked about simplifying the tax system and getting rid of deductions, but have offered few specifics. Republicans are working to pass a tax plan under a procedure that requires only a simple majority in the Senate, preventing Democrats from blocking it. But to use this procedure the package cannot add to the government’s long term debt. That means simple tax cuts would have to be temporary, like the ones passed under Bush. So cutting taxes is not as simple as it seems.

Why is Ryan pushing for a tax on imports ?  Ryan is pushing a plan that would increase taxes on imports and cut taxes on exports. It’s called a border adjustment tax. One reason he likes it is because it would raise enough revenue–aobut $1 trillion over the next decade–to lower the corporate tax rate from 35% to 20% without adding to the government’s debt. Cutting taxes can be quite complicated, but the border adjustment tax is a part of Ryan’s plan.

  •  06/28
Jun 262017

Vancouver, Wa. NSTP

In looking at tax reform, the White House has proposed radical changes to the tax code which include both individual and business tax reform. This proposal would eliminate the estate tax and the alternative minimum tax. COrporations would not have to pay taxes on their foreign profits and would be able to take advantage of a special, one time opportunity to bring back cash intothe U.S. that is currently retained overseas. While the next days and months will see significant discussion and changes to the initial proposal this is the first effort at tax reform put forward by the Administration.

The goals of tax reform include, to grow the economy and create millions of new jobs. Simplify our burdensome tax code and provide tax relief to American families, especially middle income families. Lower the business tax rate from one of the highest in the world to one of the lowest. The tax relief for American families includes reducing the 7 tax brackets to 3 tax brackets of 10%, 25%, and 35%. Doubling the standard deduction and providing tax relief for families with child and dependent care expenses.

Tax reform also includes simplification by eliminating targeted tax breaks that mainly benefit the wealthiest taxpayers. Protect the home ownership and charitable gift tax deductions. Repeal the Alternative Minimum Tax. Repeal the death tax.  repeal the 3.*% Obamacare tax that hits small businesses and investment income. It also includes business tax reform by lowering the business tax rate to 15%. It includes a territorial tax system to level the playing field for American companies, and has a one time tax on trillions of dollars held overseas. Eliminate the the tax breaks for special interests.

The Office of Management and Budget released President Trump’s proposed FY 2018 budget for the federal government on May 23rd. Included is a proposal to authorize the IRS to regulate all paid tax return preparers. This was done because a federal court in 2013 struck down an attempt by the IRS to regulate unenrolled tax return preparers.


  •  06/26