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

Current Items:
1) Who Was That Masked Man?
2) Lawyer Well Being?

1. I still have an antenna on my roof. I’m sure passers-bye in my neighborhood scratch their heads in wonder why have I not taken the thing down. Little do they know the reason is simple: It still works. I know even as you read this you’re in disbelief. We’ve grown so accustomed to cable and Internet that the thought that free television would arrive by a silly-looking metal contraption is hard to imagine. I was talking to a good friend of mine who was beside themselves about the cable company that was ripping him, like the rest of us, off. I simply said “George, why not use an antenna?” He looked at me as if I had two heads. An antenna? Now granted you will not get the hundred-plus stations and all the fancy other Internet apps either but you won’t pay a dime and should the cable go out in your neighborhood and your Internet fails to work real TV from your antenna may then make you quite happy. And you never know what is going to pop up on the screen. There is no guide button. Last Saturday for example out of nowhere the Lone Ranger and Tonto in black-and-white leaped out of my set. It’s amazing how quickly we can go back in time to the 1950s when Clayton Moore, who was actually Jack Carlton Moore born in Chicago, Illinois, donned the mask of the Lone Ranger and Harold Jay Smith an indigenous Canadian from the Mohawk tribe had been born in Ontario, Canada became Tonto. If you were around in the 50s you may have caught one of the 221 episodes of The Lone Ranger. You may know that Tonto named the Lone Ranger’s horse Silver when he spoke the sentence “like a mountain with snow, silver white” in describing a horse he and his partner Lone Ranger had found in a canyon suffering from injuries. Tonto did not seem to be at all disturbed by playing second fiddle to the Lone Ranger. They were a team that wandered about Texas doing good and chasing evil. Harold took the name Jay Silverheels but before he was Tonto, Harry Smith was actually a lacrosse player for the Toronto Tecumsehs. He also played on teams around the country as well as right here in Atlantic City. In 1938 he was second placed Golden Gloves Middleweight champion. By the way, he was inducted into the Canadian Lacrosse Hall of Fame in 1997. Tonto got to wear that suede fringed jacket that hippies thought they invented in the 60’s. The show ran from 1949 through 1957 on ABC. It was the highest-rated TV program in the early 1950s and ABC’s first true hit. Even as a kid I wondered how was it that he and his partner seemed so well-clothed and fed with no apparent source of income. Recently I learned it had to do with the Lone Ranger finding a silver mine which then financed his wanderings. So here was a hero risking his life without pay. I warn that the 50’s vocabulary as it was used on the Lone Ranger may offend these days where mere words can be so upsetting. Tonto was referred to as an “Indian” and at times “Injun.” Women were “gals” or “girls” and senior citizens were “old-timers.” And just about every female in every episode was a damsel in distress. The producers probably never heard of Yardville, New Jersey’s own straight-shooting Annie Oakley who like women today needed no male savior. But it was the 1950’s after all and a much different view of the world. They say the show was inspired by a real Texas Ranger named John Hughes in the old Wild West but there is also another possible inspiration in the more likely Bass Reeves the first black deputy marshal west of the Mississippi. Reeves wore disguises and worked with a Native American as a partner. In the show, it was always clear who the good guys and bad guys were. Where are the Lone Rangers these days? They are out there. Like some of the IRS criminal agents that I met along the way. They seemed to be working for a higher purpose. Chasing the bad guys. The FBI says there are about 4000 known gangsters in the states. Mostly centralized in New York and New Jersey. I remember there being less than 200 IRS criminal agents in all of New Jersey with a population of nine-plus million people. That’s 45,000 per agent. They must feel at times like well…the Lone Ranger. IRS announced recently that the Chief of the Criminal Investigation Division, Jim Lee, will retire effective April 6. He has led the criminal division since October 2020 with a staff of more than 3200 criminal investigation employees which includes 2200 special agents. Another Lone Ranger rides into the sunset Kemosabe. So who was that masked man? Hi-Yo Silver! Away!
   2). The New Jersey Lawyer magazine, No. 346, February 2024 caught my eye with a cover “Lawyer Well-Being.” In the course of my 50 years in law, I had published more than 52 professional articles. Frankly, some were so esoteric and boring as to make your eyes bleed. But the one I got the most feedback on was called “Can Lawyers Learn to be Happy”. That one may still be out there in cyberspace. But the article in this February journal about “Stress” written by the Hon. Kevin G Callahan JSC (ret) provides 20 suggestions that may make the job of lawyering a lot more tolerable. It is equally valuable for any stressed-out professional in any field. I won’t rattle off all twenty and they are all fairly obvious. It’s their application that is the problem. The judge says: find quiet time; remember your family and friends; check your spending habits; have a long-term plan or goal; don’t lawyer 24/7; change careers within the law if it is truly driving you crazy; avoid excesses; watch for signs of burnout; stay organized and if your new to the business of law find a mentor. I’ll add: Money won’t really make you happy; try to be more Lone Ranger than Perry Mason.

Gather ye Rosebuds while ye may
Old time is still a-flying
And this same Flower that smiles today
Tomorrow will be a- dying.
Robert Herrick (1591-1674)

Questions or Comments   should be sent to:

Theodore M. David                        

e-mail: Tdavidlawyer@gmail.com.

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

Current Items:                                                                                    

1) Here Come the Love Letters   

2) Happy Filing Season

3) IRS Report Card       

1). Pat Boone did “Love Letters in the Sand.” A sweet reflection on the very essence of the Love Thrill. Now, I’ve seen grown men weep with a love letter from the IRS. What do they want? “ I’m from the IRS and I am here to help you??? A friend of mine, out of nowhere, got a letter with an enclosed check with no explanation at all. He loved it. But most don’t provide a free dinner and there is no BOGO. So, what do you do when a pandemic hits and tons of taxes are due? Perhaps stop the letters for a while. But wait, this just recently from the IRS: Due to the unprecedented effects of the COVID-19 pandemic, the IRS temporarily suspended the mailing of automated reminders to pay overdue tax bills starting in February 2022. These reminders would have normally been issued as a follow-up after the initial notice. Although these reminder notices were suspended, the failure-to-pay penalty continues to accrue for taxpayers who did not fully pay their bills in response to the initial balance-due notice.

Given this unusual situation, the IRS is taking several steps in advance of resuming normal collection notices for tax years 2020 and 2021 to help taxpayers with unpaid tax bills, including some people who have not received a notice from the IRS in more than a year.

To help taxpayers as the normal processes resume, the IRS will be issuing a special reminder letter starting next month. The letter will alert the taxpayer of their liability, easy ways to pay and the amount of penalty relief, if applied. The IRS urges taxpayers who are unable to pay their full balance-due to visit IRS.gov/payments to make arrangements to resolve their bill.

2). So when can you file and get the 2023 tax refund you so justly deserve? The Internal Revenue Service today announced Monday, Jan. 29, 2024, as the official start date of the nation’s 2024 tax season when the agency will begin accepting and processing 2023 tax returns.

The IRS expects more than 128.7 million individual tax returns to be filed by the April 15, 2024, tax deadline.

Although the IRS will not officially begin accepting and processing tax returns until Jan. 29, people do not need to wait until then to work on their taxes if they’re using software companies or tax professionals. For example, most software companies accept electronic submissions and then hold them until the IRS is ready to begin processing later this month. IRS Free File will also be available on IRS.gov starting Jan. 12 in advance of the filing season opening. The IRS Direct File pilot will be rolled out in phases as final testing is completed and is expected to be widely available in mid-March to eligible taxpayers in the participating states.

Taxpayers will continue to see helpful changes at the IRS following ongoing transformation work. Building off the success of the 2023 tax season, which saw significant improvements following the passage of the Inflation Reduction Act, the 2024 filing season will continue reflecting the focus on improving services to taxpayers.

“As our transformation efforts take hold, taxpayers will continue to see a marked improvement in IRS operations in the upcoming filing season,” said IRS Commissioner Danny Werfel. “IRS employees are working hard to make sure that new funding is used to help taxpayers by making the process of preparing and filing taxes easier.”

3). Every year IRS gets a report card showing how it is doing. Ed Koch started it all when he was Mayor of NYC. He’d asked, “So, how am I doing?” IRS latched on to the idea. National Taxpayer Advocate Erin M. Collins today released her 2023 Annual Report to Congress, describing 2023 as a year of “extraordinary transition for the IRS and therefore for taxpayers.”

The report credits the Internal Revenue Service with substantially improving taxpayer services and developing plans to transform the taxpayer experience in the coming years, but it identifies paper processing as an area of continuing weakness.

By law, the Advocate’s report is required to identify the 10 most serious problems taxpayers are experiencing in their dealings with the IRS and to make administrative and legislative recommendations to address those problems. Before cataloging taxpayer challenges, however, Collins praised the IRS for taking notable strides forward.

“Overall, the magnitude of successes exceeded the areas of weakness in 2023, and most metrics showed significant improvement from the depths of the [COVID-19] pandemic,” Collins wrote in the report’s preface. The report says the IRS virtually eliminated its backlog of unprocessed original individual income tax returns (Forms 1040) and substantially improved telephone service.

Many thanks to IRS for providing the stuff for this Bull this month, while I sit under a palm tree.

 

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.

Questions or comments should be emailed to: Tdavidlawyer@gmail.com.

WRITTEN BY: THEODORE M. DAVID, ESQ., CHAIR, TAX LAW COMMITTEE

Current Items:                                                             

• Garage Sale 1099-K… Wha?
• IRS Interest Rates
• Digital Signatures                                                                    

1) Everybody likes going to a garage sale now and then. You’ve see that Antique Road Show where some lady bought a picture for four dollars and it turns out to be worth $50,000. Most times it’s just junk. But there are those who make a living at buying and selling what could otherwise be called “old crap.” Now IRS, always looking for an additional buck, knows damn well that those sellers are not properly reporting their transactions. So to make life even more complicated a recent addition to the tax law (The American Rescue Plan) requires that taxpayers send form 1099-K to alert the IRS of those sale transactions. According to the IRS: The ARP required third party settlement organizations (TPSOs), which include popular payment apps and online marketplaces, to report payments of more than $600 for the sale of goods and services on a Form 1099-K starting in 2022. These forms would go to the IRS and to taxpayers and would help taxpayers fill out their tax returns. Before the ARP, the reporting requirement applied only to the sale of goods and services involving more than 200 transactions per year totaling over $20,000.

Unable to deal with the tsunami of forms, the IRS temporarily delayed the new requirement last year.

Reporting requirements do not apply to personal transactions such as birthday or holiday gifts, sharing the cost of a car ride or meal, or paying a family member or another for a household bill. These payments are not taxable and should not be reported on Form 1099-K.

However, the given the complexity of the new provision, the large number of individual taxpayers affected and the need for stakeholders to have certainty with enough lead time, the IRS is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold enacted under the American Rescue Plan (ARP).The casual sale of goods and services, including selling used personal items like clothing, furniture and other household items for a loss, could generate a Form 1099-K for many people, even if the seller has no tax liability from those sales. That’s where your garage sale comes in. Granted most times people are paying a dollar or two for most items but when the sale transaction gets larger there is now this filing requirement which has been enacted. Whenever IRS resorts to having somebody send a form 1099 it is actually making taxpayers private IRS agents. Once the IRS gets its hands on this information it is a hop skip and a jump for it to compare the seller’s tax return with the 1099s that have been generated. The scary part about all this is there could be millions of transactions that would qualify under the new law and require taxpayers to file forms 1099-K! Needless to say with penalties for failing to do so as well. Think about that the next time you are browsing your neighbors junk pile they call a garage sale.

2)  The Internal Revenue Service has announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2024.

For individuals, the rate for overpayments and underpayments will be 8% per year, compounded daily. Here is a complete list of the new rates:

• 8% for overpayments (payments made in excess of the amount owed), 7% for corporations.
• 5.5% for the portion of a corporate overpayment exceeding $10,000.
• 8% for underpayments (taxes owed but not fully paid).
• 10% for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus three percentage points.

3) Many forms filed with IRS have in the past required handwritten signatures by taxpayers. In slowly joining the 21^st century, IRS has begun accepting digital signatures.  The Internal Revenue Service has announced that it has extended certain temporary flexibilities. The acceptance of digital signatures is extended indefinitely until more robust technical solutions are deployed, and encrypted email when working directly with IRS personnel has been extended until October 31, 2025. Nice to see the IRS using the same sophisticated methods as the server did at your last restaurant meal.

Questions or comments should be sent to: tdavidlawyer@gmail.com

 

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

Current Items:

1) Barbie Alternative
2) The Dreaded Direct File
3) Money into Enforcement

1) My old roommates from college started getting together a bunch of years ago to hang out for a weekend with our respective spouses. We call it the Big Chill. Maybe you saw the movie from 1983. The soundtrack included soul, R&B, and pop rock music from the ’60s and ’70s with the likes of Credence Clearwater Revival, Aretha Franklin, Marvin Gaye, the Temptations, the Rolling Stones, and Three Dog Night. It’s a Bar Bull-recommended flick. We’ve gathered in Milford, Pennsylvania, for many of these years. With a little bit of luck, the Scarlet Knights of Rutgers find us cozied up with Afghans and quilts snug in the living room. We no longer root from the stadium on the Banks of the Ole Raritan, beer sloshing all over are neatly pressed pants and jackets and ties. It is hard to imagine that a college football game was in fact, a dress-up occasion. I especially liked going to Princeton, where the men there dressed in 1920s skimmers for effect and women wore skirts and blouses.

You may remember the first collegiate football game was between dear old Rutgers and Princeton. As has become our custom, after dinner a movie is selected to be watched on a huge flat-screen TV. It seemed only fitting that this year’s selection should be Barbie. After all, we had actually lived through that bomb business in Oppenheimer. Barbie is not a kids’ movie. Though the kiddies will delight in seeing Barbie prance around in the overpriced pink outfits, their parents had once bought them for their own Barbie dolls. The pink Corvette and the pink Barbie Dream House are front and center, too. Pink is everywhere. The movie is really a commentary about the social mess we live in today. It’s got a playful way of showing just how silly we have been. It hurt to cough up $25 to rent from Prime, but all agreed it was worth it.

But if you can’t seem to sink your teeth into Barbie, rejoice that the IRS nationwide tax forums online have been launched and include 18 new self-study seminars that satisfy continuing education requirements in the categories of federal tax law, federal tax law update and ethics. You may want to pay attention to one called: “Circular 230: Ethics and Tax Practice: How You Can Stay Out of Trouble.” Best of all the forums are free. And there is nothing pink in any of them.

2) It won’t be long before the IRS takes a bite out of the tax preparation services both of accountants and lawyers with its innovative Direct File Project. The pilot program, which would allow taxpayers to file many types of tax returns directly with the IRS, is a pilot option projected to be available for eligible taxpayers in 13 states. New Jersey is not one of them. Accountants can relax for the time being. The project will begin during the 2024 filing season. So far, nine states have joined the effort. Arizona, California, Massachusetts and New York have decided to also work with the IRS to integrate their state taxes into the direct file pilot for filing season 2024. All of the states have been asked to join the project. Time to sell Intuit short?

3) In a recent announcement, the IRS said simply that: “Prior to the Inflation Reduction Act (IRA 2022) more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to hide income and evade paying their tax share.” But you may recall that millions of dollars were funneled to the IRS to strengthen enforcement with that IRA. So now the IRS, with the extra dough, will seek enforcement focused on high-income, high-wealth individuals as well as ensuring large corporations pay taxes owed. Full employment of tax controversy lawyers seems guaranteed.

Questions or Comments should be sent to Tdavidlawyer@gmail.com.