It is timefor my annual tax year in review post.Thetax filing season went relatively smoothly. Due to the idiots in Congress’ inability to think or act there wasnothing new in actual tax law – what is taxable and what is deductible – and nounnecessary processing delays for 2011 returns (except for early returns filedelectronically – which did not affect me). The expiring Bush Tax cuts, the usual extenders, and BO’s AmericanOpportunity Credit had all been extended through at least the end of 2011 in arelatively timely manner. Ihad been concerned before the season officially began (for me February 1st)that the major tax forms (1040, 1040A, Schedules A + B) were no longeravailable at local Post Offices – but soon discovered that the forms were nowavailable (although in a bit less “bulk) at local libraries. As a pleasant surprise I found that, whilethe libraries did not have NJ-1040 forms, they did have New York IT-201s andIT-203s!
Themajor issue of this tax season involved the new requirements for cost basisreporting, and the resulting new Form 8949 and the revised Schedule D. For tax year 2011 brokers were required toreport to client taxpayers, and to the IRS, the cost basis of most stocks,including foreign stocks, acquired on or after January 1, 2011 (“covered”securities) on Form 1099-B.
TheForm 8949 was used to report the individual short-term and long-termtransactions in three separate categories – sales where the cost basis wasreported to the IRS on Form 1099-B, sales where the cost basis was not reportedto the IRS on Form 1099-B, and sales that were not reported on a Form1099-B. A separate Form 8949 wasrequired for each of the three categories. The Schedule D served as a summary of the 8949s.
Thevarious brokerage and mutual fund houses all responded to the new reportingrequirements differently, some excellently and a few poorly. This new system required some additionaltime, but only a few cases generated additional agita.
Thealso new requirement of credit and debit card merchants and third-party payerslike PayPal to report transactions to the IRS, and to the recipient, turnedout, despite initial concerns, to be a non-issue, as taxpayers did not have toseparately report this income on 2011 Schedules C, E, F and entity returns.
Theonly other major reporting change was in the format of Page 1 of the Schedule E(rental and royalty income and deductions). This was a PITA at first (I really saw no need for the revisions), but Isoon got used to it.
Therewere no major problems within my own practice during the season. My new, faster, laptop, its cable access, andmy copy machine ran smoothly throughout the 2½ months. The printer, while deciding it would onlyprint colored pages in pink, and the black printing being less than perfect,did not slow down operations. There wereno issues with my car or any personal concerns to distract and take time awayfrom the job at hand. And there were noindividual client issues.
TheInternal Revenue Service lost two of the major architects of the current taxreturn preparer regime in 2012 via resignation. David R. Williams, first head of the Return Preparer Office, resigned atthe end of August, replaced by Carol A. Campbell. And Commissioner Doug Shulman stepped down onNovember 9th. IRS Deputy Commissionerfor Services and Enforcement Steven Miller, a 25-year veteran of the agency,took over as Acting Commissioner
Davidwill certainly be missed. While he and Idisagreed on some of the details of the regulation regime, specificallyexempting CPAs, attorneys, and “supervised employees” from the samerequirements as other PTIN-holders and a grandfathering exemption from the testfor experienced preparers, he did a good job as the face of tax pro regulation.
2012was the first year that non-exempt PTIN-holders were required to take at least15 hours of CPE in federal taxation, including 3 hours of updates and 2 hoursof ethics. As David predicted, many newCPE providers jumped on the bandwagon. Anumber of tax preparer “quasi-membership” organizations sprang up during theyear, most of them solely for the purpose of promoting for-profit companies’CPE classes. My email in-box has beenchock-a-block with CPE offerings for the past few months. I had considered becoming a CPE provider, butdecided against it for now.
Ihave always taken more than the required 15 credits each year, most, if notall, being classes offered by the National Association of TaxProfessionals. 2012 was no different – Iended the year with 24 credits of federal CPE (and 8 more of state tax CPE).
Theconstitutionality of “Obamacare” had been in question since its passage. In June of this year the Supreme Court upheldthe law. The Supreme Court’s decision, combined with President Obama’s re-election,ensured that Obamacare is here to stay, at least for a while, and its tax hikeswill kick in next year.
Thebiggest tax story for 2012, once again (the 3rd year in a row thishas been the biggest tax story!), was the continued inability of the idiots inCongress to accomplish anything. Thepopular package of “extenders”, including the temporary AMT patch, expired onDecember 31, 2011, and the various Bush and Obama tax cuts and benefits arescheduled to expire on December 31, 2012. As of this writing nothing has been done by the idiots in Washington toextend anything. The result - the startof the upcoming tax filing season, and the processing of refunds, will bedelayed, and the country faces what has been called “Taxmagedden” on January 1,2013, as it tumbles over the “fiscal cliff”.
Havingdone nothing all year, the idiots shouldhave just extended everything expired and expiring through 2013 (similar towhat they did in 2011) after the election and begin 2013 with serious work onserious tax reform. At the very leastthey should have extended the AMT patch through the end of 2012. But then again – they are idiots!
Overthe past years the members of Congress have proven that they are incompetentand ineffective dolts with no concern for the American public, and areincapable of compromise or of independent thought. The current Congress has one of the lowestapproval ratings in history, although despite this fact most incumbents who ranin November were re-elected. As I saidearlier, I guess the thinking was the incompetent idiot you know is better thanthe incompetent idiot you don’t.
And, according to the NBC report “Congressto Make History -- But for the Wrong Reason” (highlight is mine) -
“By passing just 196 bills into law so far, it is in the running to become the least productive Congress since the1940s.
In fact, that amount is 710 fewer public laws than was producedby the 80th Congress (from 1947-48), which first earned the moniker‘Do-Nothing’ Congress.”
Christopher Bergin of THETAX ANALYSTS BLOG read the minds of the idiots in Congress and quoted theirChristmas message to America in his recent post “Tin Ear Tinhorns” –
“MerryChristmas from Washington, D.C. Here’s your bag of coal.
It’schilly here in Washington. We don’t care how it is where you are. We don’t careabout your 401k plan. We don’t care about whether you have to pay theAlternative Minimum Tax for this year. We don’t care if you don’t get your taxrefund on time or if you have to wait to file your tax return until July. Wejust don’t care.
InWashington, all we see is ourselves. We drive around in our self-importanthaze, yapping on our cell phones and cutting people off on I-66 because what weare doing is all that matters and is certainly more important than anythingyou’re doing.”
The 2011 Tax Offender ofthe Year Award, presented each year by Russ Fox of TAXABLE TALK, wasCongress. The criteria for the award – “it really needs to be a Bozo-like action oractions”. Chances are very good thatthe idiots in Congress will be the recipient of this designation again for2012.
There is nothing toindicate that the new Congress to be seated in January of 2013 will be any lessincompetent or ineffective, or will have any more concern for the Americanpublic, than the current, retiring one.
And let us not forget that 2012 wasa Presidential election year – which only further motivated the inaction of theidiots in Congress. While the two-yearcampaign did highlight the need for tax reform, the result was a blow to thehopes for a substantive rewriting of the Code. BO’s tax plank called for more complexity and confusion and continuedmisuse of the Code.
Atthe end of my 2011 tax year in review post I predicted –
“As2012 is an election year it is expected that nothing of any consequence will beaccomplished in the tax arena (or any other arena). Next February the idiots in Congress willprobably extend the payroll tax cut for the rest of the year, and, as Isuggested above, next December they will pass the usual year-end extenders billand also continue the ‘Bush’ tax cuts for another year or two.”
I was almost 100% on the money,except for the idiots extending everything in December.
Let us hope that 2013 will see thepassage of real tax reform – although I won’t hold my breath!
So, as I ask each year at the end ofthe post, did I forget anything?
TTFN
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