Unread Content 30 Days

I prepared returns with pen in the late 80s while volunteering on the VITA program. Those days people were claiming dependents that didn't exist or that were in other countries because the rules didn't require SS numbers. I remember that I prepared taxes when full credit card interest was deductible if you itemized deductions. The next year only 2/3 were allowed and the last year only 1/3 of interest was allowed before it was eliminated as itemizable. A couple of years later, SS number were required but you could right something like 205(c) in the social security. The following year, you could write "applied for" and the next year you were required SS number without any excuses. Those were years when Papa Bush was president. I remember one time that I pen prepared a return and when ready to sign, the tax payer pulled out credit card statements and qualified to itemize. You guessed it, I had to start from scratch. I stopped preparing taxes for some years because I knew too many people were lying on their returns. I only did my own return and about 5 returns from my friends who wanted to report correctly and I know their situation. When I came back everything was computer prepared. When the IRS open the gates to efiling, I was the first one to embrace it and I efiled all returns except the ones that cannot be efiled. Even though, everything was printed from a computer program, the IRS was giving paper EA exams. You had to pass 4 exams which were administered once a year. On day one you took two exams, and the next day you took the other two. If you missed any of the them, you had to wait a whole year to retake. Luckily for me, I passed them, but I didn't pay the "$35" for the form and I didn't become enrolled agent. two years later, I took the exams on computers which is much easy because you can take one at a time and your convenience. I was about to retire when the current standard deduction was going to revert back and personals exemptions were going to kick in but luckily for me, the current tax credits and standard deduction will stay. A lot of things have changed and I don't miss most of the things that are gone. The only one I don't like coming down the pipe is "deductibility of interest paid on American cars". I also don't like "no tax on overtime" because people will not understand that the only portion not taxable the .5 of the 1.5 received on overtime hours worked. I wonder if the fact that tips will not be taxable will make the server position more attractive... that will be perfect since ICE will hit that position the most.

This was (and is) a one-way trend for document corroboration. Before 1987 a taxpayer could pretty well claim any itemized deductions with no documents required. Even before then, the "TEFRA" act (1982) began the issuance of 1099s to recipients for services rendered. Nowadays look at the itemized deductions. Mortgage interest deductions are supported by 1098s, education credits supported by 1098-T, student interest supported by 1098-E, etc. Not to mention the standard deductions are so large most people cannot itemize anyway. Also, in earlier days, tax rates were higher, such that tighter control of expenses could justify lower rates (which were broadly announced to delight the public) And we also have the thinly disguised effort to make auditors of taxpayers via the 8867. Although the IRS denies it - the mechanics of correctly navigating through the 8867 really means much of the busiwork of an audit has been transferred to the preparer. Self-prepared returns don't require an 8867. And the legislation making its way through congress does nothing to reverse the trends.

"Before 1987, taxpayers could claim dependents by simply listing their names. The Tax Reform Act of 1986 changed that, requiring taxpayers to include the SSNs of dependents over the age of five when filing their taxes. The following year, seven million FEWER dependents were claimed on individual federal income tax returns, resulting in a $2.8 billion increase in tax revenue."

This is a copy of a post on the OSCPA Board from Tuesday: "I have a client that received an IRS notice dated April 30, 2025, regarding not filing their 2025 tax return. It is LTR 112C. This is frankly baffling Have others received this notice? Is this a harbinger of things to come with the IRS going forward? Are we going to have to be constantly responding to notices that are totally bogus, while the IRS customer service declines due to a reduction in force? Is this what AI will look like at the IRS?"

Wow!

Client whose spouse died in 2024 and for which we filed a final joint return showing the husband's date of death. She received a letter this week saying they have no record of receiving the tax return for the tax period ending Dec. 31, 2025. It also refers to payments or credits for 2025 of $XXX. ???

The AICPA says that you shouldn't give investment advice. They listed a number of cases where CPA's were sued and lost for giving investment advice or for recommending specific investment advisors. I know my Professional Liability Insurance Carrier specifically excludes investment advice.

I agree with Abby Normal on the crypto investing. As for your second question, if you are simply suggesting that the client considers an IRA and are explaining the effects it would have on their tax return, then you are not giving investment advice.

IRA accounts aren’t limited to low-interest instruments - never have been. My tIRA and RothIRA accounts are held in IRA brokerage accounts with Fidelity and Vanguard. I can invest them in any manner I wish. For me, that is 50% fixed income (CDs, govt bonds, etc) and 50% equity (in the Vanguard Total Market Index ETF). And I rebalance periodically to maintain the 50-50 ratio as market conditions ebb and flow. So don’t fall into the trap of thinking IRA’s can only be held in bank Money Market accounts or other low-paying instruments. And I would never suggest that someone toss their money into a crypto scheme and call it an investment. By that’s just me …

Crypto is a pyramid scam that will come crashing down someday, and it's also very bad for the environment because of the huge amount of electricity it consumes. When summers get really hot and you have to cut back on cooling or even have a blackout, remember the strain that crypto puts on our electric grids. And IRAs only earn pennies in interest if you have them in cash investments. Although these days, interest rates are providing better returns on safe investments. I have some CDs in my IRAs, but stocks should eventually give better returns.

About 18 years ago, I was suggesting my clients to open IRAs when they came to do their taxes and in instances when lowering their taxable income would make other credits bigger... in addition to the lower tax liability as a result of contributing to an IRA. I also suggested when Obama care required a penalty or to return premium credit but I have stopped suggesting IRAs because they earned pennies in interest. I have been following and watching Lark's videos and for a couple of years I have seen he promotes Crypto IRAs. https://itrust.capital/LarkDavis and those look promising to me. I have two questions: 1.- Have you used crypto IRAs? if not, what do you think about them? 2.- If I suggest my clients to contribute to an IRA, am I giving financial advice? Thank you in advance for you comments.

I had one client receive a letter stating that the IRS could not apply their overpayment to their estimates for 2025. No reason was given. No money was refunded either.

I understand that and it would help many of my clients; buy personally, with both of us in our 80s and both still working, with meager SS, taxable income is not much of a problem.

This bill is an abomination and needs to die in the Senate.

Things like direct deposits of refunds, direct debits of balances due, application of overpayments to estimated taxes, are computerized functions that should and used to work almost seamlessly. And if they still are, the computers that spit out letters are getting the wrong information. The DOGE kids had gotten into the IRS systems at one point. Could they have somehow messed up the coding? I can't imagine why electronic transactions and/or automated responses have become unreliable. I have seen a number of know-it-alls mess up their computers by rapidly clicking away without reading what is on the screen. If the kids inadvertently broke something, they surely know enough to fix it so hopefully these odd letters will cease soon.

However your taxable income will go down due to the increased standard deduction and the increased Section 199 A deduction.

The increase in the standard deduction doesn't help those of us who have SE tax.

I use login.gov, but looks like I will have to create an ID.me account. Am dreading it. Why do they make everything so hard for us and what thanks do we get? I just got a letter saying that I owe them the amount that I had direct withdrawn the day that I filed. I have proof that it went to the IRS:USATAXPYMT., over a month prior to this letter.

I registered for login.gov and id.me, so looks like I'll need to be on the lookout for scams with either one. I don't think I'd fall for it since I never click on links unless I'm expecting them, but one never knows when there might be a lapse in attention. And that one has a fairly legitimate look to it (well, except for the big red arrow and the word "SCAM" )

I use e-services so infrequently that there is always some new requirement to get in. I hadn't bothered with it until yesterday and went through the ID.me process. I had opted for the login.gov to access EFTPS instead. Just watch, now it will probably change again in the near future!

Well, that's really sneaky

After passing in the Senate, it then has to be signed into law. After that it can take effect.

Eric Green of Tax Rep Network sent out a warning today about this. He got one yesterday, as did a local colleague. Here's what he sent out:

I really hate temporary provisions!! (Like built-in obsolescence in appliances.) More moving parts to account for when tax planning.

These items caught my attention: "The bill includes a temporary boost in the standard deduction — a $1,000 increase for individuals, bringing it to $16,000 for individual filers, and a $2,000 boost for joint filers, bringing it to $32,000." "There is also a temporary $500 increase in the child tax credit, bringing it to $2,500 for 2025 through 2028. It then returns to $2,000 and will increase to account for inflation." "The bill increases the “SALT” cap to $40,000 for incomes up to $500,000, with the cap phasing downward for those with higher incomes. Also, the cap and income threshold will increase 1% annually over 10 years." "The tax breaks for tips, overtime and car loan interest expire at the end of 2028. That’s also the case for a $4,000 increase in the standard deduction for seniors." "Among the various business tax provisions, small businesses, including partnerships and S corporations, will be able to subtract 23% of their qualified business income from their taxes. The deduction has been 20%"