Written by: Theodore M. David, Chair, Tax Law Committee

Current Items:

1) Library Vig
2) Mileage Gig
3) Estimate Big

1) In the 1960s, the way I remember it, there was a loan shark in just about every town. It all started with Benjamin Franklin and his idea of spreading culture and knowledge through the idea of borrowing. Initially, you could only get part of the action if you bought it. That’s the way the Family worked. Eventually, any kid over five years old was automatically a member and it was free. You got a card that identified you as being in the acceptable group. The person who ran the local operation did not look like Tony Soprano instead it was a gray-haired lady with wire-rimmed glasses. She sat at a big wooden desk above, which was a sign in big letters: Be All You Can Be… Read. But my library card had been ink stamped with a dire warning: “Late fees of two cents per day will be enforced after the due date of this book.” I didn’t realize that society was grooming me for the zillion due dates that I would encounter as I crashed through adulthood. But I took that two-cent warning seriously. Looking back, I didn’t give it the real thought it deserved. The library was not interested in punishing me for forgetting to return a book. It was more interested in getting the book back so that it could be lent to the next person.

Now don’t fret, an overdue book charge will not destroy your credit rating. But there have been some real doozies. Take for instance, a history book written in German which was borrowed in 1667 by Col. Robert Walpole. It holds the Guinness world record for an open return and overdue library book from the Sidney Sussex College, Cambridge, England. And a woman in Illinois paid the largest fine for an overdue library book when she returned in 2020, a book she had borrowed in 1955. She paid $345. At a library in Carbondale, Pennsylvania, a book entitled “The Cruise of the Esmeralda” was returned in December 2023. It was 120 years late. Piling up late fees can result in the suspension of borrowing privileges and, in extreme cases, legal action!

But I have recently heard of a library in Boston that took the measured step of creating a book return amnesty. Hundreds of books showed up to take advantage of the policy. One, in particular, turned out to be a priceless manuscript borrowed in 1972 with no late fees. All very interesting, you say, but what does this have to do with tax law and tax administration? Here it comes. The federal tax system has billions upon billions of dollars that are not being contributed to the system because taxpayers are afraid of the penalties associated with coming clean. In particular are simple nonfilers who imagine incredible penalties, including jail time for their social misbehaving. So they simply do not file every year. We have never had a federal tax amnesty. We are in desperate need of one. A well-reasoned plan to get the library books back on the shelf. That is to welcome taxpayers back into the tax system. They say those who have properly met their tax obligations will feel slighted that their neighbors are getting such tax relief. But waving tax due, penalties and reducing or eliminating interest in the long run results in a much healthier tax system. Just like your local library. BTW there is a policy IRS calls “voluntary compliance” but you have to pay up to be in that one. It’s not an Amnesty.

2) I was talking to a guy in a gas station about the supersized Ford 150 pickup truck he was driving. He said he needed to tow stuff around. These massive pieces of machinery represent the ultimate in design gone mad. He told me his truck gets 7 miles to the gallon. I thought that has got to hurt when gasoline was approaching almost 5 dollars per gallon. But then it dawned on me that he wasn’t paying the same amount for his gas as I was. And I don’t mean lining up at a Costco service center to shave off five cents per gallon. No, it’s trickier than that. He is being allowed a tax deduction of $.67 per mile traveled for business purposes. That’s the new rate for 2024 IRS now allows. So if those are business miles .67/mile or charitable miles .14/mile or medical miles.21/mile, the taxpayer gets a break on their tax return. Please note IRS says you cannot claim these expenses as unreimbursed employee business expenses. A tax lesson to remember when a huge gas hog passes you by.

3) A friendly reminder. Now that the banks are offering 4% and 5% interest rates on CDs, that newfound wealth may be subject to the requirement to file estimated taxes. A taxpayer can avoid the estimated tax penalty by paying estimates equal to 100% of last year’s taxes or 90% of this year’s taxes. The last estimate for 2023 is due 1/16/24. The Banks give, and the IRS takes away.

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