February 2021 Newsletter
Local news: Our new book Stocks, Bonds & Taxes has won three awards this year. The Book Authority named it Best Tax Law Book, it received a N. N. Light Book Award for Best Nonfiction book, and it won the Feathered Quill Informational Book Award for 2021.
China has accepted our application to sell the Stocks book there. The official directory shows it as “DF 432.2 Regulations for the Implementation of the Income Tax Law of the People’s Republic of China for Enterprises with Foreign Investment; F83 financial, banks.” No Chinese language copies are planned or intended. We have had scattered sales internationally.
Northern California News: A recent announcement provided information that San Francisco had solved part of their homeless problem by building low-income affordable units and taking people off the streets, especially in Pershing Square. The 450 sq. ft. single family units only cost $1,200,000 each to build including land costs. Their local School Board has disowned most of our former Presidents, Thomas Jefferson, Daniel Webster, and Paul Revere. They are currently renaming the 44 schools, which remain closed indefinitely. They have a new City wealthy executive income tax rate to cover costs.
Sacramento State News: The latest in increased taxes, fostered by the outflux of people moving out of state, was a proposal called Hotel California. This proposal would tax people who stay in the state for 60 days in a year for that year and elsewhere for the next decade. You can check out anytime but stay here for taxes. A new bill calls for hiking the top rate to 16.8% for wealthy residents. We have lost many clients these past years, but they are rarely millionaires. Just ordinary people who need affordable living. I do believe that Texas, once a high-tech destination, will no longer be on the list after the electricity shortage that brings memories of the Enron fiasco locally some years back.
Environmental News: Our new government has shut down the Keystone pipeline again and stopped oil/gas drilling on Federal lands which is half of the energy producing land. Now, the oil from Canada will continue to arrive by tanker train, trucks, and barges. Coincidentally, with the election results Saudi Arabia curtailed oil production and is again the dominant world producer of crude oil. Gasoline prices this year have risen from $3 per gallon to over four and will continue to $5 by summer’s end.
World Paris Climate Accord: This year we have rejoined the WPCA to eliminate global warming.
Unfortunately, the US has already reduced fossil fuel emissions with the substitution of gas for coal and oil and now windmills and solar. China was awarded a waiver and has been increasing coal burning electrical generating plants at a rate exceeding two new plants per week. If everybody else completed the proposed reduction of emissions, there would be no overall change because of China.
Now, Tax Season: This year was off to a slow start in February. The IRS has had people problems because they were home avoiding COVID-19, short staffed because of Stimulus reprogramming, with mail stuck in truck trailers from lack of people to handle them. After shutting-down facilities [entire offices closed] and Congress cutting back funding after the politization of the non-profit sections near Washington, they have had problems in every administration from compliance, processing, and audits.
At this time, they are now processing old returns and problem filers from the 2019 tax year. The 2020 electronically filed returns are flawlessly handled but anything else such as amended returns, problems with matched data, and fraudulent returns require human intervention. Many of the senior auditors have retired and I will miss them because they knew what they were doing. Many new auditors are in training now and will be difficult to work with for years to come.
We had a fraudulent 1099 G for last year Unemployment Insurance payments. A $40,000 form was received by a client who was not unemployed and didn’t receive any UI benefits at all. There is a huge billion-dollar California nightmare unfolding which will affect many people. Please check any forms you receive to be sure the amounts are really yours because it is taxable income.
A client received a phone call from his prior tax preparer who had just been released from prison. Some years back this preparer took his client’s tax returns, created tax credits, changed the deposit address to his bank and filed away. IRS audits large refunds and sends their CID people out to arrest him. He was smart enough to manipulate tax returns but not smart enough to know not to call the same people back to do their taxes.
Our returns are taking longer to prepare, and we also have a checklist for signature. The stimulus payments are part of this form because the IRS is matching payments to income. The first stimulus was based on old 2019 filed data. The turn of the year second stimulus will be matched to the 2020 returns. People who didn’t receive one or the other distributions will have a second chance when the returns are matched in the IRS’s computer system. Other items are Obamacare health insurance, foreign bank accounts, and cybercurrency. All of these items have penalties for preparers and clients if ignored or not prepared correctly. We have raised many of our fees accordingly.
California has a new Obamacare penalty [political word for tax] for people who should have been covered. IRS did away with the unpopular tax several years ago, but California didn’t get the word. The IRS wouldn’t accept returns until February 12th this year, but California took until the end of the month to complete their software revisions.
We are very busy and hope for an extension to mid-year but if not, please make your appointment ASAP so we can tackle the work. It is truly wonderful to meet with my clients and friends again at this time.
Best wishes,
Phil, Nett, Leslie, Erin, George, Sarah