Category Archives: Bergen Bar Tax Bulletin

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

Current Items: 

• What’s in a Name?
• A Billion Dollars Gone?

I know this bulletin is late—I’m writing it on March 31. There’s a reason. Okay, part of it is that I’ve been relaxing in the sand while my colleagues have been buried in snow this winter. But the real reason is that I waited until the very end of March to see if I might be named the next Commissioner of the IRS.

I waited in vain.

In fact, as of today, there is no Commissioner of the IRS. The last one just wrapped up, and no replacement has been named. The chair is empty. Perhaps everyone’s been a bit busy with other priorities—renaming things, reorganizing things, or just generally doing important things that, apparently, do not include filling that particular seat.

So now what?

Don’t fret—federal law has it covered.

Consistent with applicable law and longstanding practice, the Secretary of the Treasury oversees the operations of all Treasury offices and bureaus, including the Internal Revenue Service. Secretary Scott Bessent’s service as Acting Commissioner of the IRS under the Federal Vacancies Reform Act has expired, and he has not served in that capacity since that time.

In accordance with the Federal Vacancies Reform Act, the Secretary retains the authority and responsibility to perform the functions and duties of vacant Treasury offices that are not filled on an acting basis. The IRS continues to operate without interruption, with Chief Executive Officer Frank J. Bisignano successfully leading day-to-day operations and reporting directly to the Secretary.

So, there you have it—not a word about appointing a retired lawyer from New Jersey, even for a few days. But I’ll remain on standby, just in case.

There’s a funny little game hidden in the federal tax law. It’s called Watch Your Refund Disappear. Anyone can play.

Here’s how it works: imagine you haven’t filed your 2022 tax return. You think, “So what? I’m owed a refund.” So you put it off and move on to more enjoyable things.

Now here’s the magic part: even though that refund is yours, three years after the due date—it disappears. Gone forever. It quietly slips into that black hole known as the federal fisc, a.k.a. the public treasury.

So, you have until April 15 to file that return and reunite yourself with your own money.

And you wouldn’t be alone—there’s about $1.2 billion in unclaimed refunds from 2022, owed to roughly 1.3 million taxpayers.

The game goes on.

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

Written by: Theodore M. David, Chairman Emeritus, Tax Law Committee

Current Items: 1-A Again?

Now there is somebody at IRS with a morbid sense of humor. It could be that the agency has shrunk down 27% to just 74,000 souls. With about 175 million individual returns filed annually that’s about 2300 returns for each. So, with morale in the toilet and agents disgusted with all the cuts it is not really surprising that a nod to a new form number is designed to bring back a glimpse of the good old days. Now it was a warm day in July 1965 when about to go off to Rutgers I presented myself to my local draft board and as I recall was given the magical deferment 11-S then available for college students. The catch was simple enough: Remain a full time student with satisfactory academic progress. Until 1967 grad students were also safe from an imposed military career as well. But all bets were off when graduation came along and the 11-S turned into…1-A. “A” as in Available for military service. Now the scramble began. Many signed up for more pleasant surroundings in Viet Nam, others kissed loved ones and headed off to the welcoming woods of Canada and other places all over the planet. My roommate traded the Banks of the Ole Raritan for a post on the Delta when his grades got away from him. If you the reader are of a certain age you know how you felt when that 1-A arrived for you. I carried that card for 25 years or more as a souvenir of a very close call. But this is a tax bulletin and the filing season is under way and perhaps you have already met NEW Form1-A. This time from IRS not your draft board. So what is it for and who gets to file it? Here’s what IRS has to say: The Internal Revenue Service published, for tax year 2025, a new schedule that taxpayers will use to realize important tax benefits of the One, Big, Beautiful Bill, including no tax on tips, no tax on overtime, no tax on car loans, and no tax on seniors.

Schedule 1-A and its related instructions (included in the Form 1040 Instructions) allow taxpayers to deduct amounts for tips, overtime, car loans, and the enhanced deduction for seniors.

Part II of the new instructions explains how to determine the amount of qualified tips, how to claim the deduction, up to $25,000, and the phaseout for modified adjusted gross income greater than $150,000 ($300,000 for married taxpayers filing joint returns). Workers can claim this deduction whether they claim the standard deduction or itemize. To claim the deduction, tips must be reported, and married taxpayers must file a joint return. The new instructions also provide examples of different scenarios for tipped workers, worksheets to help tipped workers calculate their tipped income, and information on lists and categories of occupations where workers customarily and regularly receive tips, as well as definitions of qualified tips.

Part III of the new instructions explains how certain workers can claim a deduction for overtime compensation they received. Married taxpayers must file a joint return to claim this deduction. Workers can claim this deduction whether they claim the standard deduction or itemize.

The new instructions describe how taxpayers can claim a deduction of up to $12,500 ($25,000 if married filing jointly) and explain how the deduction is reduced when MAGI exceeds $150,000 ($300,000 if married filing jointly).

The instructions define qualified overtime compensation as overtime compensation that is paid as required under section 7 of the Fair Labor Standards Act of 1938, and more than the amount of the regular rate of pay. The instructions provide illustrative examples and worksheets.

Part IV of the new instructions explains how taxpayers can claim a deduction for car loan interest. Taxpayers can deduct qualified passenger vehicle loan interest whether they claim the standard deduction or itemize.

The instructions define the terms “qualified passenger vehicle loan interest,” “applicable passenger vehicle,” “final assembly in the United States,” and “personal use,” and provide an example.

Part V describes the enhanced deduction for seniors, which can be claimed whether they take the standard deduction or itemize; to claim the deduction, married couples must file jointly.

To qualify for the enhanced deduction, the taxpayer (and/or the taxpayer’s spouse, if filing a joint return) must have been born before Jan. 2, 1961. The taxpayer must have a valid Social Security number; if married filing jointly, each spouse who is claiming the enhanced deduction for seniors must have a valid SSN.

The maximum enhanced deduction for seniors is $6,000 per person. For married filing jointly, if both spouses were born before Jan. 2, 1961, and both have a valid SSN, the enhanced deduction for seniors is $12,000. The $6,000-per-person amount is reduced if the MAGI exceeds $75,000 ($150,000 for married couples filing jointly).

Nice, it’s a 1-A you don’t have to dodge.

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

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

Current Items:

1) IRS Work from Home?
2) Kiss Your Refund Check Goodbye

1) With all the local traffic on roads in New Jersey, it’s hard to imagine that the work-at-home ethic is still prevalent. I know a number of employers are requiring their employees to come and sit at their desks mindlessly. It seems silly. I have myself been thinking of a work-from-home gig. Psychologists say that we actually have to interact with human beings. Rubbish. You know as well as I do that when you used to go to the office all the time you are just as miserable as you are when you are home. So the question becomes what should be your work from home activity? Naturally a good friend of mine has figured out a way to make his 52 foot boat as good as his office and having a dock in Key Largo adds to its work ambience. Practicing law dockside is certainly attractive. But what should be its emphasis?

Now those who know me will remember I made a career in representing individuals and businesses with IRS tax problems. And I have stayed somewhat up to date on this IRS practice stuff. And it is with great pride that I wish to introduce you to Snitch LLC. Don’t go shaking your head about what a waste these bulletins are. I wish to point out that this side gig is almost too good to be true and is in conformance with IRS rules and regulations. I can even quote right from an IRS announcement: Whistleblowers help ensure fairness in our tax system and have made a significant positive impact to our nation by providing information regarding noncompliance and fraudulent activity resulting in billions of tax dollars collected.” It almost makes me want to stand and salute.

Now here is the gravy. Since 2007, the IRS whistleblower office has awarded more than $1.4 billion to whistleblowers, based on the collection of more than $7.8 billion attributable to whistleblower-provided information. What they are looking for is information that is specific, timely, credible and relevant as an important component of effective tax administration. There you have it. IRS says “America’s tax system is built on the principle of voluntary compliance where taxpayers file tax returns and pay their taxes in a timely and accurate manner. Voluntary compliance is improved by the knowledge that noncompliance with tax laws will be addressed through examinations, collection activities and criminal investigations.

Now getting back to Snitch LLC. A recent revenue ruling by IRS says that enhancing taxpayer experience is one of the top priorities of the IRS whistleblower office so said acting whistleblower office director Eric Martinez. His office has made a digital form for use by us snitches worldwide, I presume. With the launch of Form 211, says IRS, whistleblowers can easily share what they know with the IRS from their phones or laptops! So if you, like me, are looking for a work-from-home alternative, whistleblowing may be just the ticket. Nowhere does it say you have to be an attorney or an accountant or any kind of professional at all. You simply have to have the goods on another taxpayer or some business. I think you can get a cut of almost 20% to 30% of what the IRS collects. Perfect. Virtually no overhead to speak of. So send me your tax cheating spouses, your delinquent employers, and your double-dipping friends and neighbors. What say you? Interested in getting in on the ground floor with Snitches LLC?

2) I always like getting a check in the mail. Especially one in an envelope you can recognize and know it is not another bill. For most taxpayers, getting that beige colored envelope from the IRS that isn’t a scam sets their heart aflutter. But these days, everything is about change. For example, take Executive Order 14247. The IRS recently announced that paper tax refund checks for individual taxpayers will be phased out beginning on September 30. The IRS says this step marks the first step in the broader transition to electronic payments. Detailed guidance for 2025 tax returns will be provided before the 2026 filing season begins. Another bit of fun bites the dust.

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

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

1) It’s All About the SALT

Salt is not inherently “bad”—it is an essential electrolyte required for nerve impulses, muscle function, and fluid balance. However, it becomes harmful when consumed in excess, which is the case for approximately 90% of Americans.

The primary reasons excess salt is bad for your health include:

1. Increases Blood Pressure (Hypertension) Salt contains sodium, which attracts and holds water in your bloodstream. This increases the total volume of blood moving through your blood vessels, putting extra pressure on artery walls. Over time, this “silent killer” can injure blood vessel walls and lead to: Heart Disease and Heart Failure: The heart must work harder to pump the extra volume. Stroke: High blood pressure is a leading cause of strokes

2. Damages Vital Organs Kidneys: Excess sodium makes it harder for your kidneys to filter blood, which can lead to kidney disease, kidney stones, and scarring of the organ. Heart Muscle: High salt intake can lead to an enlarged heart muscle (left ventricular hypertrophy).Stomach: Some studies suggest a high-salt diet increases the risk of stomach cancer by encouraging the growth of H. pylori bacteria.

3. Affects Bone Health: High salt intake causes the body to excrete more calcium through urine. If blood calcium levels drop, the body may leach calcium from bones, increasing the risk of osteoporosis and bone thinning.

4. Immediate and Short-Term Effects Water Retention: This causes bloating and puffiness in the face, hands, ankles, and feet. Poor Sleep: Excessive salt intake, especially before bed, can trigger sudden urges to drink water or urinate, leading to restless sleep. Headaches: High sodium can cause blood vessels in the brain to expand, triggering headaches in some people. Even a single salty meal can trigger noticeable symptoms. Americans consume about 3,400 mg of sodium daily. The FDA and CDC recommend limiting daily sodium intake to 2,300 mg (about one teaspoon of salt).

Now you realize you must put your saltshaker in the dustbin. But not all SALT is harmful. Perhaps the most significant individual benefit of that big beautiful tax bill was increasing the SALT deduction for state and local taxes to $40,000 for 2025. What that means is your ability to deduct state and local taxes that have been paid during the tax year. Up to last year, the cap was $10,000. After much wrangling in Congress, it was increased to its current $40,000. It is scheduled to increase to $40,400 for 2026. Single people can deduct the same $40,000. Married filing separately are limited to $20,000.

Beginning in 2030, the cap will revert to $10,000 unless legislation changes it. For us in New Jersey, this is big news since in most places the taxes on your two-car garage can approach the maximum! The deduction is phased out once modified adjusted gross income exceeds $500,000 for 2025. This MAGI is not your AGI on your Form 1040; it is a recomputation that includes items not taxable or allowable. By the way, a phaseout is a way for politicians to appear to grant a tax deduction on its face and then use a computation to take it away.

So how much can you deduct? The amount consists of property taxes plus local and state income taxes. You must claim itemized deductions on Schedule A on Form 1040. Some taxes don’t qualify: federal taxes, transfer taxes, inheritance taxes, stamp taxes, homeowner’s association fees, and service charges for water, sewer, or trash collection. Taxpayers and their representatives must calculate whether they are better off itemizing deductions, since in recent years they may have automatically used the standard deduction. Like the real salt, this stuff may give you a headache, but it is well worth the effort.

Best Wishes for a Bright and Peaceful Holiday Season and a 2026 with Lower Taxes and Higher Joy*

*Yes, this is my Xmas card substitute

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

 

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

Current Items: 

• Thanksgiving, Pardons and Tax Fraud

Thanksgiving Day holds a unique and enduring place in American culture, blending gratitude, history, and community into a single national celebration. Its importance today reaches far beyond the dinner table. For many, it represents a dedicated moment to pause, reflect, and appreciate the people and experiences that enrich their lives. Families gather from near and far, traditions are revisited, and a shared meal becomes a symbol of unity and thankfulness. Yet the modern holiday has deep historical roots that shape its meaning as much as the present-day customs do.

The origins of Thanksgiving trace back to 1621, when the Pilgrims at Plymouth Colony held a harvest feast after surviving their first challenging year in the New World. With help from the Wampanoag people—who taught them vital agricultural practices—the Pilgrims were able to produce enough food to sustain their community. The shared meal between the colonists and the Wampanoag is often cited as the “First Thanksgiving,” although it was not initially considered a national holiday. It was, instead, a regional gathering centered on gratitude for survival and blessing.

Thanksgiving evolved significantly over the centuries. During the American Revolution, the Continental Congress issued proclamations urging days of thanks for victory and resilience. Later, in the 19th century, writer Sarah Josepha Hale campaigned tirelessly to establish Thanksgiving as a national holiday, arguing that it would strengthen American unity. Her efforts succeeded when President Abraham Lincoln, seeking to heal a nation divided by civil war, declared Thanksgiving a national holiday in 1863. He emphasized its purpose as a day for Americans to come together in gratitude, despite hardship.

Today, Thanksgiving stands as both a cultural tradition and a reminder of America’s complex history. While the holiday celebrates ideals of generosity and togetherness, it also encourages reflection on the experiences of Indigenous peoples and the broader historical context surrounding early colonial encounters. This dual perspective enriches the meaning of the day, inviting gratitude that is thoughtful rather than superficial.

Ultimately, Thanksgiving endures because it speaks to universal human values. It invites people to slow down, recognize their blessings, acknowledge their history, and share meaningful moments with others. In a fast-paced world, that reminder remains as important as ever.

Okay, so I didn’t write that. Came right out of cyberspace. I had planned to write a historical essay on the role of Thanksgiving, but instead, I just asked ChatGPT to write it for me. It was way too good than anything I could have written. But it got me thinking about the kindness traditionally shown to various turkeys this time of year. There are, of course, the feathered kind that go gobble gobble—and then there are the other “turkeys,” the true birdbrains whose misdeeds are far more serious, yet who sometimes still manage to walk away unscathed.

Recently, the IRS Criminal Investigation Division, as it does every holiday season, posted on its website a roundup of tax cheaters who have been sentenced for their violations—an annual reminder meant to encourage the rest of us to stay on the straight and narrow. And I’m pleased to note that not one of the highlighted taxpayers is from New Jersey.

This year’s list included:

• In Louisiana, a Gonzales man sentenced to 18 years in federal prison for a multimillion-dollar scheme involving the COVID-19-era employee retention credit program.
• In California, convictions in a $25 million fraud scheme out of Bakersfield.
• In Maine, a tax return preparer found guilty of submitting false returns.
• In Massachusetts, a CPA who pleaded guilty to conspiring to defraud the IRS and participating in pandemic relief fraud.
• And in New Mexico, a Roswell woman sentenced for multiyear schemes targeting COVID relief funds and tax refunds.

Very few tax evaders receive any reprieve. One exception was Rev. Darryl Strawberry, who was convicted of tax evasion in 1995 for failing to report $350,000 in income from appearances and autograph shows between 1986 and 1990. He served six months of home confinement and was recently granted a pardon.

There are others, of course—but unless you’re unusually fortunate, it’s best not to count on any holiday-season mercy if you’ve been bending the tax laws.

Wishing You and Yours a Tax-Free Thanksgiving and the Start of the Tax Filing Season Soon to Come.

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

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

Current Items:

1. What is the Matter Alice?
2. Just Do It
3. New NSA Man at IRS

1. I’m late, I’m late, for a very important date! No time to say Hello, Goodbye, I’m late, I’m late, I’m late. If you care to remember your childhood, somewhere in your gray matter you will recall the White Rabbit in Alice in Wonderland whose obsession with time is a prominent symbol in the story. Read More

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

Current Items:

1) Call the Midwife?
2) The Dirty Dozen, Again?
3) IRS Side Gig

1) Now, I am not going to ask you what you did last week. Heaven knows I didn’t do much myself, but certainly, there has been a swirl of activity affecting our tax administration system and the rest of the world. I’ll take it back: if you are a practicing lawyer, you probably do know what you did last week and at least who you will bill for all that time. The old tired joke goes that the young lawyer dies prematurely, goes to heaven, and meets St. Peter at the pearly gates. St. Peter says to him, “We were expecting a much older person.” The lawyer says, “I’m barely 45.” St. Peter responds, “Oh, we were judging from your billing time records.” If you are one of the hundreds of thousands of federal employees, you may have a tougher time deciding whether you are staying or going and what you did last week. And the IRS is no exception. Apparently, the same offer has been made to the Internal Revenue Service to trim the fat of our bloated government. Helping the trimming, the former Commissioner took off on January 20, 2025. And of course, the question then came up of who would replace him. Now, there is no cause for alarm because we now have an Acting (soon to be fired, retired, let go or downsized) Commissioner. IRS Chief Operating Officer Melanie Krause will become the Acting IRS Commissioner. The deputy commissioner who could have become Commissioner “retired” two weeks ago. What a coincidence. So Krause has moved into the new acting position. She is relatively new to the IRS, having joined in October 2021. But no matter, she spent 12 years in the federal oversight community in the Government Accountability Office.

Now, all of this would be ordinary, except that Krause also maintains an active license as a registered nurse. That is just perfect. Everyone knows these days that nurses are far more important than doctors. If you don’t believe me, catch the PBS series called “Call the Midwife.” It will make you glad that you went to law school instead of medical school. Someone at the IRS has realized that the system is currently sick. So, it’s time to call the midwife or at least a registered nurse. By the way, IRS employees have been prevented from skipping and grabbing eight months of free pay until the end of tax season. Come May 15, I am sure thousands, some with great relief, will find employment elsewhere. What effect this will have long-term on tax administration remains to be seen. Thousands of robots coming?

2) Annually, the Internal Revenue Service publishes the Dirty Dozen list. The IRS warns that these things are common schemes that threaten taxpayers’ tax and financial information. It is not a formal listing of agency enforcement priorities. But it has become somewhat of a tradition. So I list here the notorious dozen: email scams of all varieties; bad social media advice: online account help from scammers; fake charities; false fuel tax credit claims; credits for sick leave and family leave; bogus self-employment tax credits; improper household employment taxes; overstated withholding scam; misleading offers in compromise; ghost tax return preparers and lastly, new client scams where cyber criminals impersonate new potential clients to trick tax professionals into responding to their emails. Be on alert as well for those false emails asking what you did last week. IRS would like taxpayers who have been involved as a victim in any of these to file form 14242 with the Internal Revenue Service at 24000 Avila Rd., Laguna Niguel CA 92677.

3) The US District Court for the Southern District of Florida issued a permanent injunction against a Miami tax return preparer named Jean-Lewis. It appears Mr. Lewis had simply started a side gig involving filing tax returns for taxpayers. It was simple: he would prepare a tax return for the clients and give them a copy. He would then create a phony tax return file it with IRS requesting a larger refund. When the refund was received he would make sure the client got that which was set forth on the return he had provided. The difference was Jean-Louis’ profit. So he has been banned from doing most anything having to do with federal income tax returns and has been ordered to pay up $245,275 in ill-gotten gains from his side gig. He has also declined the position of Acting, Acting Commissioner of Internal Revenue as he said, “it is not my type of gig and besides, it lacks job security.”

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

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

Current Items:

• IRS Gone?
• Tax Season Internal and External?
• IRS “Buy-Out”

1) This is going to be a short bar bulletin. In fact, I’m getting this ready even before our new President takes office on January 20. Those who know me realize I am a first-class procrastinator but this time I hope to have my feet in the sand when this bar bulletin actually gets sent. So, I thought I’d take the time right now on a rainy, chilly, dismal kind of New Jersey day to bring you some frightening news about the likelihood of a mess in tax administration about to happen. Now, you may recall that Congress actually funded the Internal Revenue Service in a meaningful way after many years of delay. But now that is one of the areas the President will be looking at to cut and if rumors are to be believed, eliminate. Now, your guess is as good as mine as to what will actually happen after January 20. Tax law is wed to politics. It’s not like a science with immutable rules and results. Even the great Einstein said he couldn’t make sense of it. The problem is, it is whatever Congress says it is. If the Congress is married to the Executive branch, the potential for disruption is present. It’s a shame as the IRS has recently gotten its computers working reasonably well, and its website is simply first class. But any plan to reduce funding and make the IRS and DOJ an arm of the executive is complicated, messy, as well as, I’d guess unconstitutional. “If they can’t follow the agenda, they should leave.” And they have started to do just that. The Commissioner of IRS, Dan Werfel, announced the other day that he will resign on January 20. His term was to go until 2027. IRS top brass always stay through at least a year or two to ease a transition. So, the world of tax administration that we lawyers and accountants contend with will be something as yet unseen. The promise to eliminate the income tax is more concerning but highly unlikely. All this does not seem to add up to a successful Trump term in office with pandemonium in tax administration. So, cutting and firing senior officials at the Internal Revenue Service and losing senior lawyers at DOJ makes no sense and claiming to eliminate the agency altogether sounds truly ridiculous. Or does it? See Item #3. Needless to say, 2025 will be an interesting year.

Among tax ideas floated these days are: eliminate the income tax; make tips tax free; acquire Canada and Greenland (will they be tax havens?); restore the Salt deduction (We in NJ would love that one). Once details seem “real”, if there will be any, I will be glad to let you know. These are strange times in many ways and the tax world is no exception.

By the way, far from being early this Bull ended up late. Typical.

2) An annoying fact of life is that tax season starts in January. But not to fret. You can always visit the IRS website at the Get Ready Page to view key information such as steps to make filing easier, gathering and organizing tax records and life changes that could affect a refund. Or instead you could simply board a plane to somewhere warmer and put this stuff off until the very last minute. Oh, by the way, we will have a brand-new Federal agency on Jan 21. That will have all kinds of fun things to do. The External Revenue Service. It will collect all the Tariff money from Canada and Mexico and the rest of the world too without passing any cost to us citizens, so there will be another tax season coming. An External Tax Season. I’ll let you know when.

3) Where will the ax fall at IRS? The federal “buy-out “may result in whole sections of IRS deciding to grab 8 months of severance and run. You may want to get your 2024 tax return in asap. The idea of eliminating the IRS as an agency sounds beyond the realm. But why not just privatize it? Have a bidding for the job. Like what NASA did to the space race. Maybe even let that high bidder get a cut of the action as well. It’s not a new idea just another complicated and messy one.

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