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Tax Bar Bulletin: Volume 37, No. 3

Current Items:                                                             

  • Pass the Check
  • Cash is Still King
  • Tax by the Numbers
  • Why Use the Mail?

1). Okay, it’s time to fess up. I took the winter off. I don’t mean a three vacation. I mean the whole winter. I have not seen a single snowflake. In fact very few days have been below 60°. And it gets worse. This part of the Sunshine State is one of the wealthiest in the country. They say the air here is the cleanest in the country as well. You can swim just about every day in your heated pool and go bike riding under the bluest of skies. Golf is not a dying sport here and neither is tennis. I’m not complaining, just observing. The virus for the most part is treated here as just a passing fad. Some observe the mask rule and others pay no attention. They say the vaccine was sent over here first because it is Ground Zero for big-time political contributors. While being neither of them I too got the juice in January while my pals in New Jersey are still waiting. Housing here is in the multi-multi-multi-million-dollar range with what would amount to a Cape Cod selling for what they pay NBA basketball players. This is not a travelogue but here the cars are beyond the normal realm. Rolls and Bentleys are issued with residency it appears. Where is this going?  Have patience. Now, the restaurants. They are packed. I’m not talking about partially clad coeds and tattooed land sharks doing tequila shots. These are the same folks who valet park the family zillion dollar wheels. I have noticed that since January the restaurants are bulging at the seams. So does the tax law bear any responsibility? Perhaps you have been living under a rock the last 25 or 30 years so let me inform you that most of those fancy cars are not owned by the people driving them. They are owned or leased by the rest of us taxpayers. Their businesses whatever they may be provide these means of transportation at our expense. Sure the accountants will tell you that the tax law prevents such luxury vehicles. Don’t believe it for a second. Not only is IRS asleep at the switch… There is no switch. As to the restaurants it is no accident that for 2021 and 2022 business taxpayers will be able to deduct 100% of their business meals. In years before that time they were limited to 50%. I have known business people who have claimed they have never had a nondeductible meal. Think about what a tax savings it would be if you could eat all of your meals and have them tax-deductible. BTW the reduction in the excise tax on wine, beer and liquor has been made permanent. So when next you see a fancy automobile or see a group ordering expensive wine and dinner with the works realize that you are in fact paying for it. In enclaves like this, one IRS agent could probably collect enough tax to balance the budget with a trip to the local marina with a pencil and a yellow pad. It is amazing to me that ordinary folk stand in awe with mouths open gazing at all of this stuff, but never ask : Where does all this stuff come from and who pays for it? Trust me, it didn’t come from saving their nickels and dimes in a mason jar.

2) One of the more ridiculous things that IRS does is to warn businesses of the requirement to report large cash transactions by filing form 8300. Is there a taxpayer living and breathing who is not aware of the cash reporting rules? Do drug dealers and other criminals live in a cave? Does someone in government actually believe that these criminals walk into a bank and hand over $10,000 in cash and ask the teller to open a Christmas Club for them? There are so many ways to avoid the cash transaction net that it would seem a waste of valuable time to suggest these forms should be filed. Nonetheless IRS has a video on how to complete the form 8300 and encourages businesses to electronically file the completed form. The reporting deadline is 15 days after the transaction. This whole business of cash reporting is not in the Internal Revenue Code but in the Bank Secrecy Act.

3) Every now and then it’s interesting to take a look at the tax rates themselves. Are you aware that a married couple with taxable income of $19,900 pays 10% or $1990 to the feds and a single person with taxable income of just $9950 pays $995? That seems like a pretty hefty extraction from such a low income. Though to be fair, tax credits may reduce this bite to zero and put money in their pockets when all is said and done. But for taxpayers with taxable income of $628,000, they pay $168,993 which leaves a hefty sum left over for fun and games. A single taxpayer pays 37% of his $523,600 or $157,804. Again not a bad take. Add to this that many wealthy taxpayers get a lot of their income at capital gains rates which remain at a 20% maximum. And they have also figured out how to deduct many, if not all, of their personal expenses. I’m convinced the reason we have not had a tax revolution is that people earning so little are not aware of just how much money is going untaxed to the wealthy. And a chunk of that wealth can be passed on tax free as well. Consider that the estate tax exclusion has now reached $11,700,000. Double that if married. Certainly not a concern for those in the 10% bracket. But should it be?

4) Finally tax administration has reached the 21st century. Taxpayers who file petitions in the United States Tax Court can now do so electronically. For those unfamiliar with the problem, a great deal of time is spent annually arguing over whether a petition has been filed timely in the Tax Court. Very few circumstances allow the required 90 day period to be extended. Dragging in evidence of mailing takes valuable time on both sides. Now with electronic filing the whole requirement of proving the actual mailing date may be history due to the digital revolution. Why use the Snail Mail?