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Leather Briefcase

January 2023



GOOD NEWS FOR A CHANGE:  Our client who was lost in the U.S. Tax Court maize finally received a check back from the IRS with a NO CHANGE conclusion of our 27-month-old petition after his audit results.  It was a combination of great record keeping by the client who had completed and correctly filed his tax returns five years ago, and endless endurance. The IRS audited and disallowed the many miles he drove as an Uber driver to earn a living.  Here was a case of an ordinary taxpayer who was treated with malice and incompetence. IRS was hoping he would pay the big bill [$30K with penalties and interest] and disappear.  The client and I hung on by answering the repetitious telephone inquiries and responding to their demanding communications until we finally won our case.  A thousand hoops and whistles to get through the circus of needless bureaucracy.  During the whole period, we never met a human behind a desk or telephone, ever. We communicated with people in at least six states. It is a faceless and mindless experience.


First, the auditor ignored our documents which were sent certified mail with required signature.  How could they not receive a 125 pages carefully prepared set of documents which was referenced and summarized in the attached response letter?  They had trashed it. We sent another and they refused it. Instead, they sent the bill with a 90-day letter. We petitioned the U.S. Tax Court in Washington, D.C. as a Small Tax Court Case. The venue was shuffled to the Court in San Diego.   After a year the Tax Court somehow failed to put a stay on the collection from the audit. The IRS kept ignoring and sending threatening letters while we were in proceedings. The client paid the full amount to save his credit and property to get them off his back.  There should have been no need to do this if the IRS had followed the law and waited for the conclusion and settlement.  It took 18 months to win the case, and almost another year to return the funds the client overpaid to the IRS.  I hate to think of this as an example of what to expect with 87,000 INEXPERIENCED new hires coming on board this year.


This was our seventh U.S. Tax Court Case and another winner.


We are aware of tax preparers who now prepare tax returns without ever meeting their clients.  And we know there are services overseas which prepare those taxes.  It may not be a good experience because many of these are ghost preparers who are not legally authorized to do returns.


This is the main reason why all these years, our practice is to face the clients in an interview to first get to know them and input their data correctly in the computer. We get better answers to questions and a good way of knowing our clients better.  We become personally accountable, too. Then, for later years, if they wish, they can just send their data by mail or computer. I have always preferred the one-on-one interview each year unless you now live out- of-state. When I was a Stockbroker-Principal the first law of the N.A.S.D. was to know your client.  It still works well.




  • Charitable contributions for non-itemizers were eliminated.

  • The dreaded new 1099-K form annual threshold of $600 from third-party payors has been put on hold until next year.  The old limit of $20,000/200 transactions are still applied.

  • The maximum amount of childcare expenses is now $3,000 for one and $6,000 for two or more qualified persons. This phases out when AGI exceeds $15,000.

  • The maximum refundable Additional Child Tax Credit amount is now $1,500 per child.

  • The Nonbusiness Energy Property Credit now renamed Energy Efficient Home Improvement Credit, has been extended to property placed in service thru 12/31/2011. It appears that we have a very insecure bureaucracy dedicated to changing the names of all past legislation and popular human beings.

  • The Residential Energy Efficient Property Credit renamed Residential Clean Credit is upped to 30%.

  • Child Tax Credit age limits reverted from age 18 to under 17 and the amount changed to $2,000 per child.  Phaseout begins when M.A.G.I. exceeds $2,000/$4,000 joint.

  • Pension Required Mandatory Dividends, aka R.M.D., changed from age 72 to 73 beginning 01/01/2023.

  • Mileage rates for charitable driving remains a lousy $.14 per mile. Mileage for business beginning January 1 thru June 30 is $.585 per mile and from July 1 thru 12-31-2022 is $.626.  Mileage for medical or moving is $.18 for the first half of the year and $.22 for the second half.

  • Section 179 for business use of new sports utility vehicles must not exceed cost of $27,000.  If you can find one.

  • Subchapter S corporations can now apply for the Qualified Plug-In Electric Drive Motor Vehicle Credit [aka QPIEDMVC] subject to the newly debated laundry list of qualifications.

  • Taxpayers who are employees cannot deduct unreimbursed employee expenses unless they are one of the following:

*Armed Forces reservist.

*Qualified performing artist.

*Fee-based state or local government official

*Employee with impairment-related work expenses.

Exceptions for home office do not exist and will cause audits.




The latest minimum wage effective January 1st this year is $15.50.  The Federal minimum is only $15.00 but California is always at the top for everything. Wrong because New York City taxes added to their state beat California to become the highest taxed state in the nation.


Northern California produces most of the water supplies in the state from rain and snowfall during the Winter season.  Unfortunately, 95% of storm water is flushed into the Pacific Ocean due to a lack of storage reservoirs to store runoff and prevent flooding.  The state has authorized 8 water bonds since 2000 for water projects totaling almost $27 Billion, with most of the money going to ecosystem restoration and pet environmental clauses.  No new dams have been built since then.


Meanwhile, 531,000 acres were left unplanted in the Great Central Valley due to bad or lacking water concerns.  California State reimbursed the farmers $2,500,000 to leave the fields fallow. The Valley is also known for very high unemployment.


California’s New State Council Law to dictate wages, working conditions, and benefits for the benefit of the Service Employees International Union took effect on January 01, 2003.  A referendum, Save The Local Restaurants, petition has now gathered over a million signatures to qualify for the November election.  The state legislature has allowed the law to take effect, instead of holding the action, by declaring the votes must be verified first. This new law allows triple damages for lost wages and benefits, plus attorney’s fees for discrimination for workplace complaints.  That would be lawyer’s paradise. The law also allows mandated pay raises to $22 hourly which would be worker’s paradise.


California, Never a Slave State, Considers Reparations:  A State Reparations Commission discovered that slavery is the real issue of black poverty.  To settle accounts, they determined that California taxpayers owe each of their black neighbors $223,000. A method of collection was not given. [Wall Street Journal article.]


Governor Newsome’s New California Budget: This addresses shortfalls of $20 to 40 Billion (your city/county) dollars this coming fiscal year. Many social programs will be shifted to local accountability.  But Medicaid to all eligible residents, regardless of immigration status, and universal preschool, social safety net spending, will be maintained and reinforced.  What shortfall?


Other Miscellaneous Investment Concerns: The Biden’s Labor Department has a new rule that will permit pension money managers to play politics with trillions of retirement fund savings.  They want environmental, social, and governance investing instead of securing high returns on worker’s lifetime savings. “Simply put, retirement savings will be used as leverage to force companies to reduce their carbon emissions and establish racial and gender quotas and other social justice fads. [from the Washington Examiner] Big Brother has spoken.


Gas-fired stoves, water heaters, and home heating are under fire by the overseers of California Air Resources Board. A federal appeal won a case with the Ninth Circuit Court over resistance to the Berkley’s ban on gas usage which stated, “It is a hidden hazard.”  “Cities and states should be able to exercise police powers to prohibit the use of dangerous or unsafe items.”


New hookups for residences and some businesses are now not approved in many counties.  For some unknown reasons natural gas is detrimental to our health and we must send it all overseas to Europe which had been shut down from Russian supplies. A recent WSJ article reported that the Biden appointed Consumer Product Safety Commissioner recently announced that “Banning gas stoves are in the works because of public health harm.  They are a hidden hazard and products that can’t be made safe can be banned.” Same for gas-powered autos in the future. A new gas increase notice was just mailed to state residents recently to cap the whole situation.  At least we can lead the nation in home gas prices again.


Lastly, Education News: Fairfax County Virginia High School gives us the latest War On Merit aka W.O.M. article.  The National Merit Commended Students in the top 3% of their high school sent certificates of honor students to the Superintendent’s Office on 9/16/2022.  Their cover note asked that the letters of commendation should be presented ASAP since it is the student’s ONLY notification.  The Administration held the certificates and did not notify parents until over a month had passed and the time for students to apply for colleges had passed.  When they finally were, the Superintendent’s Office issued the statement that “There was a plan for equal outcomes for every student, without exception, with equitable grading, giving students 50% for just showing up.”  An administrator later admitted that the honors were hidden on purpose stating, “We want to recognize students for who they are as individuals, not focus on their achievements.  They don’t want to hurt the feelings of kids who don’t get the award.”  Equal outcomes over academic excellence sounds like perverted Communism. [The City Journal has provided this information over Twitter.] Are we all created equal?


Best News of All:  The IRS is now accepting electronically filed tax returns and we have added additional staff to cope with the business this year. At least we have survived another year and will be happy to see old friends and clients returning.

Best regards to all,


Phillip B Chute, EA & Staff

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