THE TAX ATTIC

This past November, I was re-elected for a second four-year term to the Rockford City Council. Due to the fact that I had been the Mayor Pro-tem for the previous two years, at the next City Council meeting, I became a member of a rather small group of Rockford residents. In a unanimous vote, the four other City Council members elected me to be the 24th Mayor of the City of Rockford. The first Mayor was a fellow by the name of Crawford Young. I will have to ask Rockford’s historian, Terry Konkle, to tell me about Mr. Young sometime. Mr. Young served as Mayor for the first 10 years of the City of Rockford’s existence, 1935-1945. He must have been a real mover and shaker in his day. The rule now is that we serve for two years and it is then time for the next person to step up. Currently, fellow Council Member Tamra Bergstrom is the Mayor Pro-tem who is in line to be the 25th Mayor of Rockford.

Rockford was incorporated in 1935 as a Home Rule City. We use a Council-Manager form of government. The Council is elected by the residents. The Mayor is then elected by the Council. To compare this set-up to a business, the Council is the Board of Directors and the Mayor is the Chairman of the Board. The Council performs Board of Director functions. It establishes policy. It passes local ordinances. It is responsible for approving appropriations and setting the tax rates. The Council is also responsible for developing and implementing an overall vision for the community. One of its most important functions is hiring; giving direction; and working with the City Manager. 20 years ago, the Council made a strategic hire when they picked Michael Young to be the new City Manager. What role does the City Manager play in the Council-Manager form of government? If the Council is the Board of Directors, the City Manager is the Chief Executive Officer. He is the professional manager to the Council’s civilian members. The Manager serves at the pleasure of the Council. In effect, he is the Council’s only employee. The Manager is then responsible for hiring and managing all city staff. He implements the policies set by the Council. He enforces the city ordinances. The City Manager also, and in my mind, very importantly, is expected to provide vision for the community. In this regard, the City Council and the City Manager are both responsible for looking forward 10, 15, 20 years and doing their best to determine what is best for the City and its residents now and then. What can we do in 2015 that will result in a better Rockford in 2035? What did the Council and Manager do back in 1995 or 2005 that made the Rockford of today a better place? For your answer, take a look around and look at the improvements that have happened in the last 20 years. Perhaps the toughest part of the Mayor’s and the City Council’s job and Michael Young’s job is determining what can be done now to make Rockford better in the future. We are fortunate that Michael is a visionary and we have him as our City Manager. I have a few short-term and a few long-term goals in mind that I would like to see get worked on in the next two years. Each of the Council members has a list of Council goals. My experience is that Michael, as City Manager, also has tremendous ideas and projects to work on, both short and long term. As Mayor, I have a feeling that the next two years will be exciting.

Something else that is getting exciting is the current tax season. I have previously written about the effect that the Affordable Care Act is having on tax professionals and the Internal Revenue Service. Five new forms and numerous new worksheets and calculations adds up to extra work for all of us. At least we can blame Congress for that extra work. However, another situation that has developed is solely the result of actions taken by the IRS. They have nobody else to blame but themselves. Recently, the IRS released new final regulations concerning the rules for writing off the repair and maintenance of equipment and buildings as well as small units of equipment such as scanners and copiers. These rules are incredibly complicated and they seem to be getting adjusted almost daily. The new rules apply to all Sole Proprietor type businesses filing a Schedule C; all rentals filing a Schedule E; and all farms filing a Schedule F. In addition all corporations and partnerships are affected. That takes in a substantial amount of returns filed by all tax professionals. The new rules intend to limit the amount of money written off on the above classifications of expenditures. However, there are up to three elections that most taxpayers qualify to file that will make life easier. A “small business taxpayer” defined as a taxpayer with total assets of $10 million or average annual gross receipts of $10 million or less can file an election to deduct up to $200 of supplies. Other taxpayers may make a de minimis “safe harbor” election to deduct up to $500 of repairs and maintenance expenditures. Other taxpayers can elect to treat all repairs and maintenance as capital expenditures. To further complicate the situation, there are a number of other elections available. Preparing tax returns for taxpayers owning property who spend money on the repair and maintenance of that property got substantially more complicated as of this year. I wonder if the IRS considers this pay-back for Congress cutting its budget. This is Jerry Coon signing off.

Jerry Coon is an Enrolled Agent and a Registered Tax Return Preparer.

He owns Action Tax Service on Northland Dr in Rockford.

Contact Jerry at www.actiontaxservice.com