Leaderboard

The complaint argues that those who drafted the Sixteenth Amendment understood that "the SALT deduction is essential to prevent the federal tax power from interfering with the States’ sovereign authority —authority that is guaranteed by the Tenth Amendment and foundational principles of federalism." https://www.forbes.com/sites/kellyphillipserb/2018/07/17/states-sue-irs-treasury-to-strike-down-salt-cap-under-new-tax-law/#4bedf2915303

Bart and Gail have it right, its a disregarded entity and you file as if there wasn't an entity thus sch D and B.

While I agree with @Evan S. Golar that this AFFECTS the states, that is far different from the claim that it is an unConstitutional law because of state effects. Changes to bankruptcy law (authority given to the feds in Article I, Section 8 ) also affect the states - but that is a power given to the feds by the Constitution. All the states to be affected could decide to cancel their income tax immediately and instead impose a state sales tax to fund their operations. Or expand their lottery programs. Whatever. That is an area reserved for state control. The high-tax states could be said to have been subsidized by the feds all these years because they allowed state taxes to be deducted, in full, from income (for itemizers). Wasn't that the reason the no-income-tax states fussed until the IRS added state sales taxes in to the mix of what could be deducted? Because it wasn't "fair" to deduct income tax but not sales tax, when a state chose the latter method for raising funds? As for @Edsel's comments in his first paragraph - I happen to agree. The federal system has been subsidizing both high-income-tax states AND private home ownership. The original intention was to encourage home ownership and relieve some local tax burdens. But as is usual for any government program with social content, no matter how good (and pure) the intent, eventually it has the opposite affect from what was intended. Home ownership, because of the deduction for mortgage interest and property taxes, ultimately made it harder for people to buy, because prices increased. Remember when credit card interest was a deduction? When that went away, people started refinancing their houses to pay off their credit cards (turning short term fun like clothes and trips into thirty-year debt obligations), and we now have the task of teasing apart actual house (purchase or improvement) debt from what was used for the new car or the fancy vacation. Even the charitable deduction - yes it rewards people for being kind (by lowering the cost of so doing) but it also tricks people into thinking that the government should be involved (even obliquely) in a decision to donate to a charity. Hence the year-end "get your deduction!" drives every December. As for changes to the law in the future - what was it Mark Twain used to say? Something about Congress being in session means we're all in danger.... We can only be certain that the law WILL be changed. All other considerations are up for grabs.

This IS a state issue because the restriction in the amount a taxpayer is entitled to deduct for state income taxes and real estate taxes is greatly restricted, and will reduce the real estate values of taxpayers' homes. As well - unless the state legislatures act - it will increase the taxable income to the states (for those that follow the Federal format) by reducing the deductible real estate taxes on the state returns. THAT'S HOW it's a STATE ISSUE!!!!!!!!!!!!!!!!!

Not with my esteemed colleagues Jack and Catherine this time. I would agree that the very states involved are those with ridiculously high taxes with fat governments, but that is the very core of the issue. I would be happier if the new law denied the deduction for any taxes whatsoever than to ostensibly single out some states. Constitutional law notwithstanding, I'm sure nothing in the constitution allowed for picking and choosing which states to favor or disfavor with regard to treatment. I ought to be happy as a pig in slop. My state has no income tax. And I dislike governments in those states who delight in high taxes and fat governments determined to live off the public largesse. But fair is fair. Socially speaking, the even bigger losers in the new law are charities. One thing I've noticed consistently during my career: The govt has declared war on itemized deductions for 30+ years. The standard deduction has moved upward with the cost of living, and numerous times the standard deduction has been legislated upward by leaps and bounds. Add that to the number of deductions that have been disallowed (personal interest and ALL taxes prior to 1987, plus the fact that the 2% haircut was unheard of before 1986 code). I would estimate in 1980 that 85% of all taxpayers itemized, and the latest projections for 2018 indicate only 8% of taxpayers will itemize. And the future of itemized deductions? I am told by some that the $24,000 std deduction will NOT increase with inflation, and that after 2023 the std deduction will revert back to 2017 levels. I'm sure the writers of this law had a certainly that between now and then, congress will not leave the situation alone. And they won't.

Thanks to all - I will cease on the subject. Roberts, they should not be subject to SE tax - this is the very thing I seek to avoid.

I go with Jack on this one. The 16th amendment authorized the federal government to "collect taxes on incomes, from whatever source derived, without apportionment..." (apportionment was required under Article I of the Constitution, so had to be specifically addressed). This amendment affects only the FEDERAL government. For the states speciously to claim this affects them points only to desperation and grasping at straws. (NOT political; speaking truth about Constitutional issues as that is my other full-time job. Please note the lack of smart-aleck comments about state spending. But I thought them!)

I have gotten a very similar letter if they payment was made after 8:00 p.m. ET on the day before the payment was due. In other words, if payment was due on 4/17, and I made the payment after 8:00 on 4/16 they send a letter saying that they are going to waive the penalty but I screwed up. I ignore it as long as they keep waiving the penalty.

In my experience, the use of the phrase "failure to deposit correctly" is only used when a deposit which should have been made via EFTPS or other electronic means was made by check or cash. Your letter may actually be due to a IRS computer glitch.

I use the one in ATX and efile the Form thru ATX.

The gift tax exclusion for 2018 is $15k. The donor can contribute $75k and elect to have it considered donated over a 5-year period, thus avoiding gift tax. The custodian is the firm that runs the 529 plan; your clients are likely the owners and the family member is the beneficiary. The school will not issue a 1099, only the custodian will. It is up to the taxpayers to reconcile the distribution on their tax return. This is an area of audit. As long as you have the financial statement from the school showing what was paid for what, no problem. Note that 529 plan distributions can be used for room and board, which the education credits cannot. I've had clients who have gotten into trouble because they paid the entire bill from the college from the 529. If they are eligible for the AOC, $4k is used for the credit and can't be counted as a qualified education expense from the 529 (no double dipping). Example: Tuition is $20k and room and board is $8k, so $28k is taken from the 529. For the AOC, $4k is used. Thus the qualified ed expenses for the 529 are $24k--but they took out $28k, so the earnings portion of the $4k is taxable.

The IRS system insists I should be a semi-weekly depositor but by their own rules and that of the IRS person on the phone I qualify for monthly. Since we used to be a semi-weekly I just go ahead and pay it semi-weekly now. During tax season I missed a semi-weekly payment (made it at the end of the month) and they sent me a letter and a penalty.