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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.

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

Current Items:                                                             

• No IRS Fun
• IRS Interest Rates
• Nickels and Dimes for Teachers

Boy, how things have changed. I started my career in the tax world as an IRS agent trained in Newark, New Jersey, and assigned to an IRS office on Ellison St., Paterson, NJ. It was one of the least sophisticated places you can imagine. The same door that led to a staircase to the second floor where the IRS offices were located made you walk past the barstools in the rather seedy bar downstairs. The big windows overlooking Ellison Street had gold lettering announcing Internal Revenue Service. I absolutely loved the place. It had a down-home environment and a certain esprit de corps among the agents who worked there. No one had cubicles everyone had the same government-issue gray metal desks in a big, wide open space. Those of us who were in the examination division also had a side chair designed for the poor taxpayers we dragged in for audit. I remember the light fixtures were oversized frosted glass bowls hanging from metal supports on the ceiling that reminded me of my days in grammar school at St. Joseph’s. But it was the people who worked there that really made the place special. For a relatively small office, we had representation in all three branches: examination, collection, and criminal division. I immediately started fantasizing about becoming an IRS special agent. They were the fraud investigators authorized to carry guns on special occasions and assigned to assist Secret Service should the need arise to protect the president. They were a pretty intense bunch. While I am sure they loved their work, it was serious going. On the other hand revenue officers assigned to the collection branch seemed to be having a damn good time. Way back then there were few women who became revenue officers. It was a tough job. These folks are unarmed and go out visiting taxpayers trying to wring additional dollars out of them for the taxes they owe. Whenever you see an IRS agent is assaulted or even killed the odds are it is a revenue officer. We’re talking ancient history now when IRS officers had the right to seize the taxpayer’s assets with little advance notice. These guys would leave the Ellison Street office on what amounted to a tax treasure hunt. I can recall one man carrying what looked like an oversized doctor’s bag with his various tools for snipping and cutting wires, locks and things of that sort. There was one story that circulated at our office that one unfortunate taxpayer called the police as his brand-new truck had been stolen right from his driveway. The police eventually got to us and the revenue officer assigned was pleased to tell them it was a federal seizure and that the truck would be offered for sale. Personally, I’ve always thought that this style of tax-enforced collection procedures produced the correct result. But like all things, many instances of abuse existed and led to the drawn-out procedures that now exist for revenue officers to complete the seizure process. Working on this side of things for the last forty years, it was my job to see to it that the seizure process was done correctly with perhaps as much difficulty as possible for IRS. Many revenue officers grew tired and frustrated and opted for retirement when the new statutes allowed collection due process hearings drastically taking the fun out of being a revenue officer. But it is about to get worse. As part of a larger transformation effort the IRS is now ending unannounced visits to taxpayers by agency revenue officers. They say the purpose is to reduce public confusion and enhance overall safety measures for taxpayers and employees. So a mailing advising that the revenue officer is coming must be given. Advance notice. Oh, Heck. I’m sure the guy with the doctor’s bag has already retired. If not this would certainly be the last straw.

• Interest rates that IRS charges for underpayments that is amounts taxpayers owe, as well as for overpayments for refunds that are due will rise to 8% for the quarter starting October 1.
• Demonstrating once again how teachers get the short end of the tax stick, the IRS issued a new school year reminder for educators. The maximum educator expense deduction is $300 for 2023. A whopping $50.00 increase. They can claim this miserable pittance even if they also claim the standard deduction. We should all be embarrassed.

Questions or Comments should be sent to:
Theodore M. David, Tdavidlawyer@gmail.com

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

Current Items:

1) IRS “Vacation”
2) Summer Reading

1) I woke up this morning and made the mistake of asking Alexa what was the news. I was frankly poking around looking for a hook for this bar bulletin. Apparently, a young and eager meteorologist was laying out what Americans could anticipate this summer. While he said millions and millions of people will take to the roads like never before, he warned of extreme heat rising into the hundreds with tornadoes, hurricanes and smoke from Canadian wildfires. I could just imagine the havoc trying to find that perfect family vacation. Now if you were around in 1983, you may remember one of the greatest comedy films of all time. It was the same year that Gandhi, Star Wars and Flashdance appeared. It ended up having five sequels earning about $60 million in its first year. How could anyone forget National Lampoon Vacation? There was Chevy Chase as Clark Griswold driving his family from Chicago to Southern California to visit Wally World. Their mishaps and near-death experiences, including cranky Aunt Edna strapped to the roof, is a storyline that is hard to forget. Anyone who is trying to do the same thing with their kids knows how close it is to reality. So maybe it’s time for you to consider something truly different and indoors as well, away from all that nasty weather. Besides, you can stuff the family station wagon and drive to these vacations. I know by this point, I’ve lost most of you. Where the hell is he going with this? This week the IRS released its seminar lineup for the 2023 nationwide tax forms! These meetings provide tax professionals with multiple opportunities to learn more about changes to tax law and IRS transformation efforts. Who needs Wally World? It gets even better. Forty seminars will be offered for which tax professionals can earn up to 18 continuing education credits. Each forum is a three-day session that will be held in one of five cities picked, I am sure, as family dream vacation itineraries: New Orleans, Atlanta, Washington DC, San Diego and finally Orlando. Just imagine dragging the kiddies to some of these seminars where they will learn soon enough just how lousy a tax system we have. Forgive me for not getting this to you sooner, as those who registered by June 15 could take advantage of the low early bird rate of $245 per person. Better yet all of this could be tax-deductible and not even Clark Griswold could claim that.
2) If instead of taking a summer road trip, you decide to plop yourself down, whether at the beach or in your own backyard, nothing is better than a good book to cozy up to. I just downloaded one called “The Wager,” a true story of high seas adventure. The subtitle is “a tale of shipwreck, mutiny and murder.” It’s the story of the boat which set sail from Portsmouth, England in 1740 on a mission as part of an ongoing conflict with Spain. The book jacket shows a square rigger being tossed about in an angry sea. It’s by David Grann. Stranded on an uninhabited island, it’s got a Robinson Crusoe appeal. And the reviews have been dazzling. But there are many tax professionals who instead may enjoy reading the Internal Revenue Service electronic tax administration advisory committee report. This page-turner features recommendations to Congress and the IRS that focus on electronic tax administration and cyber security. Among its 26 recommendations, the report advises Congress to provide timely tax legislation and consistent multiyear funding while it urges the IRS to prioritize modernization and search engine optimization. It’s not available on Amazon but on IRS.gov for free. So you decide. I’d rather sink with the “Wager.”

To my Faithful readers: No Bull for July and August. Taking a vacation with the Griswolds.

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