- Lightning and IRS?
- RMD- Oops
- The New Supreme Court?
- The “New” Tax Law
- You may have noticed that it hasn’t rained in weeks. The reservoirs are getting dangerously low. But just as I started this bulletin a thunderstorm went over and dropped a good amount of rain. Now I hope you were safe at home sheltering from both the virus and lightning. If you were squeezing in a round of golf perhaps you were not using metal clubs or one of those big golf umbrellas supporting some candidate you got for free. The reason I ask is that your odds of being hit by lightning in any year is about 1 in 500,000. Now it does depend on where you live in this vast country of ours, but in our dear New Jersey there are more lightning deaths and injuries than almost 40 of the other states. Florida of course is considered the lightning capital of the country. Think about that should you be making retirement plans to the Sunshine State. By the way males are five times more likely than females to be struck by lightning. So says the CDC. The odds of being hit by lightning twice are 1 in 9 million. That is significantly better than the odds of winning the Powerball which I believe are about 1 in 19 million. About now you’re asking where is he going with this. So what about IRS audits? The overall audit rate has been heading downward for years and now the overall exam rate is about 0.4%. That translates into about 1 in 250 returns. Most all of those audits are conducted by mail and are not in depth or “line by line” but rather focus on one or two “sore thumb” issues. To be honest, sole proprietors and high earning taxpayers do have somewhat of a higher audit incident but not significantly so. But for the most part the 249 returns that are never selected by IRS win the IRS audit lottery. That is to say that these folks may be claiming their pet cockatoo as an exemption, reporting a tenth of their income and getting away with all of it. It can explain why some taxpayers have paid no taxes at all for the last 10 or 15 years. No one in Congress seems anxious to step up IRS funding and audit activity. That is easy to understand when some of the biggest offenders are actually running the government. But then again they still have to worry about that damn lightning.
- The virus is causing all kinds of financial issues. For 2020 the required minimum distributions (RMD) from IRAs, 401(k) plans and other pension plans were waived. Of course there is the person who took his taxable minimum distribution in January before the relief was passed. For those taxpayers who were fortunate enough to be well advised they could return their RMD to their friendly pension plan by August 31, 2020 and have it treated as a tax free rollover. Naturally if withholding taxes were taken from the distribution it is believed credit will be allowed for 2020. For others without the repayment they are stuck with the tax on their distribution. Hopefully your pension administrator let you know about the deadline since I was frankly sunning myself at the time. The real question may be what is likely to happen in 2021. This will depend on the election results and just how bad America’s economic recession/depression becomes reality. That economic disaster just around the corner you will hear and see without anyone having to tell you about it, least of all me.
- At the time this bulletin is being written lots of people are on the edge of their seat. Justice Ruth Bader Ginsburg the liberal icon and guardian of the rights of women and minority interests of all kinds was no sooner laid to rest in state as Pres. Trump began hunting for her antithetical counterpart: a conservative judge of Roman Catholic persuasion, clerk/student of the Scalia school of conservative justice, from a solid catholic university with seven kids to boot! Enter Judge Amy. And the fight is about to begin when hearings for confirmation start on October 24. But if my recollection is correct there is no requirement that a Supreme Court Justice actually be a lawyer and no matter your take on Judge Barrett be thankful that Steve Bannon, the president’s head man in his 2016 campaign is otherwise occupied with his trail for mail fraud and money laundering in the “We Build the Wall” campaign. Justice Ginsburg will long be remembered for her wisdom, her contribution to the law and as she who tried to outlive the 2020 presidential election and spare the rest of us the torment that is sure to follow waiting for the New Supreme Court.
- My friend Pat told me I should have a stiff drink before watching the first presidential debate. Frankly, I was disappointed in the tonic water that went into my vodka and ice. But nothing stronger could have prepared me for the display that followed. Was the TV set to the World Wrestling Channel? I told Pat that I would be looking for clues to the future tax law, but now I have no idea what that could be. So I report only that it sounds like a Biden win will mean a change in the tax law and that Trump either paid “millions” in taxes in 2017, which is open for IRS audit until 2021, or he paid $750. This part could be cleared up instantly by ordering an IRS transcript which shows what was paid on what amount of taxable income. That transcript does not show all the schedules and positions taken but only the amounts involved. But I write for a sophisticated crowd of lawyers and such and I know you already knew that since you have been reading this bulletin for the last few decades.