2007 Changes

[BulldogTom]

I have been looking around for new laws for 2007 and not really seeing anything. I was wondering if I am missing something. Is this just a real quite year for new tax legislation?

Tom

Lodi, CA

[MAMalody]

Some of the 2007 changes are listed in the 2006 version of Publication 553 at www.irs.gov.

Mike

[Wayne Brasch]

I have been looking around for new laws for 2007 and not really seeing anything. I was wondering if I am missing something. Is this just a real quite year for new tax legislation?

Tom

Lodi, CA

Tom,

You might want to look at http://www.taxalmanac.org/index.php/Highli...007_Tax_Changes.

Wayne

[BulldogTom]

Tom,

You might want to look at http://www.taxalmanac.org/index.php/Highli...007_Tax_Changes.

Wayne

Thanks Wayne. That is what I was looking for. Nothing new or earth shaking, mostly just inflation adjustments. The MIP deduction is going to be a pain when the clients don't know it only applies to loans originated in 2007.

Tom

Lodi, CA

[Jake]

One thing that you might want to look at for your clients is the new AMT partialy refundable credit. I was reviewing a couple of my clients returns and it appears that we might finally get some of that allusive AMT credit. This really applies to people who got burned on qualified ISO's over the past few years.

[jainen]

>>Nothing new or earth shaking, mostly just inflation adjustments<<

Better look again, my friend. I guess you can say that subjecting non-dependent 23-year-olds to kiddie tax is next year's problem, but you just might want to mention it to your clients ahead of time.

The Small Business & Work Opportunity Act has a ton of changes other than extensions and COLA's. How about putting spousal partnerships on Schedule C? That's a retroactive change so you can use it immediately. I'm not sure what you would consider earth shaking if such a complete restructuring of the way a business is taxed doesn't count.

I hope we can just assume without any personal experience, but those new preparer penalties seem a tad more than simple inflation adjustments. They are so hot even the IRS chickened out on the subject in the new version of Circular 230 released today (September 26).

[BulldogTom]

Better look again, my friend. I guess you can say that subjecting non-dependent 23-year-olds to kiddie tax is next year's problem, but you just might want to mention it to your clients ahead of time.

The Small Business & Work Opportunity Act has a ton of changes other than extensions and COLA's. How about putting spousal partnerships on Schedule C? That's a retroactive change so you can use it immediately. I'm not sure what you would consider earth shaking if such a complete restructuring of the way a business is taxed doesn't count.

I hope we can just assume without any personal experience, but those new preparer penalties seem a tad more than simple inflation adjustments. They are so hot even the IRS chickened out on the subject in the new version of Circular 230 released today (September 26).

I guess I have seen all of this in previous material so I am not really suprised. But your point is well taken. I have a client who may get the AMT credit, and a client who has a son in college who might get a suprise on the kiddie tax. I have no spousal partnerships, only Schedule C's. And I am ready to prepare a California Domestic Partnership return if it walks in the door.

But I don't have to worry about preparer penalties because I never give bad advice and never miss on the tax law. All my clients are honest and every return I prepare is accurate. NO WORRIES - MON!

Tom

Lodi, CA

[jainen]

>>I have seen all of this in previous material so I am not really surprised<<

You haven't seen the new Circular 230 before, because it just came out today. You haven't seen the mortgage debt forgiveness relief before, because Congress hasn't even voted on it yet. You haven't seen the final word on that Davis case down in Kentucky, where non-state muni bonds are tax free, because the Supreme Court just picked it up. And you are NOT ready to file California domestic partners because not even the FTB knows how to figure AGI for Schedule A limits.

I declare, don't skip the Spidell update class this year. There's bound to be something surprising there.

[joanmcq]

I did just take the Spidell estate tax seminar and the whole afternoon was spent on RDPs and unmarried couples. SB105 (I think that is the number) is ready to be signed by the governator to determine just what method we are going to use to compute the RDP returns. Their consensus was that the bill would pass and we would start with adding the fed AGI from the two federal single returns, and then use a worksheet to make all the adjustments (cap gain and passive loss limitations and such). Fun fun fun. and hopefully, the software will keep track of passive loss c/fs that may exist for state and not for fed and cap loss c/fs that may exist for fed but not for state.....good thing I like spreadsheets! If you do RDPs and there is one of these seminars in your area that has not taken place yet, I heartily recommend it. There is also an hour phone seminar today on the subject.

[BulldogTom]

You haven't seen the new Circular 230 before, because it just came out today. You haven't seen the mortgage debt forgiveness relief before, because Congress hasn't even voted on it yet. You haven't seen the final word on that Davis case down in Kentucky, where non-state muni bonds are tax free, because the Supreme Court just picked it up. And you are NOT ready to file California domestic partners because not even the FTB knows how to figure AGI for Schedule A limits.

I declare, don't skip the Spidell update class this year. There's bound to be something surprising there.

I will take the Spidell update as I do every year.

Mortgage debt forgiveness is not a law yet, hence not to be fretted over. The Davis Case is still in the courts and we will not be able to do anything with it until the court rules. The RDP mess will be a mess no matter what the Governator signs. I don't think CA will even track down the RDP's who file single anyway.

As for the preparer penalties in Cir 230, see my earlier post - I don't worry about that. I don't make mistakes.

Tom

Lodi, CA

[joanmcq]

The FTB has been sending letters to registered RDPs letting them know about the new law. So I think they will know if they file single.

[jainen]

>>I don't worry about that. I don't make mistakes.<<

The penalties are not for preparers who make mistakes. They are for positions that you knew (or should have known) were improper. The principal defense on that "should have known" tag is to show you DID make a mistake but acted in good faith. So if these new penalties aren't changing the way you conduct your interviews, then you are indeed making a mistake.

Your original question was whether you were missing anything in not seeing much change. Apparently you have seen some changes, but you are still missing something if you don't recognize them as very important. At least something to store carefully in your mind if you don't currently have a client directly affected.

Even those pending things are really important. The President himself is fretting over that mortgage relief--he promised it in a recent speech--and since the idea originally came from the Democrats there is a good chance that WILL happen by December, which probably means that it will have been ALREADY effective (back to January 07). The Supreme Court case will move more slowly, so if you ignore it you will lose the chance to file a protective claim for prior years.

And if you think the domestic partner issue is going to slide under the radar, you guys in Lodi must not understand how the gay lobby works. As joanmcq pointed out, the Chief Body Builder is looking at that big thang right now.

[MAMalody]

<<<So if these new penalties aren't changing the way you conduct your interviews, then you are indeed making a mistake.>>>

The fact that your interviews must change does not mean that all others must change. My guess would be that some may already be conducting interviews or soliciting information and documentation that will protect them.

[jainen]

>>some may already be conducting interviews or soliciting information and documentation that will protect them<<

That may be. I guess. I don't know; it seems like a pretty weak statement to me. How can an interview not change when the legal environment under which it is conducted changes?

It is not just what you say and the documents. Your relationship has changed. The basic definition of who is a tax preparer has changed. Do you ever get an inquiry that potentially touches on gift tax? Now you have new rules about that.

Did you ever tell an extension client that they won't have an underpayment penalty if they don't owe any money? Well, that's not true any more.

But if you've got it all covered, just go on doing it the way you always have. I'm sure Congress won't come up with anything you haven't already -- oh, never mind.

[BulldogTom]

>>some may already be conducting interviews or soliciting information and documentation that will protect them<<

That may be. I guess. I don't know; it seems like a pretty weak statement to me. How can an interview not change when the legal environment under which it is conducted changes?

Do you have a guilty consience Jainen? I am not worried about my practices, but apparently the new 230 requirements have worried you.

I have always been very careful about my tax advice and my interview. I sleep well at night because of it. I am not worried about the new rules. I conduct my business with integrity, and I don't see a need to change my interview because the IRS might look at my practice. I am not afraid. I have nothing to hide.

Tom

Lodi, CA

[jainen]

>>Do you have a guilty conscience jainen?<<

You are missing my point. You can not possibly have an interview procedure that complies with both the old rules and the new.

For example, let me restate my concern about the underpayment penalty. You are REQUIRED to advise your client about potential penalties, besides it being good client service. That means last year (if the issue applied to the client) you explained that adequate withholding or estimated payments would prevent an underpayment penalty. This year, there is a new penalty that might call for a different payment strategy. So you need to consider whether it could affect any particular client and what to do about it.

The preparer penalties are part of what defines your obligations in the engagement. There is a whole NEW concept of "unreasonable position." Dja think your client just might care whether or not you know what constitutes an unreasonable position? Are you going to say, "Well, gee, I'm not really up to date on the current law. But I like the old rules better anyway!"? How can you say that dramatic changes in the law are not something you need to incorporate into your practice?