Jerry Coon

THE TAX ATTIC with Jerry Coon

June 7, 2012 // 0 Comments

Foreclosures, home equity loans The tax return preparation business is a whole lot more complicated today than it was when I started preparing taxes back in 1978. The Internal Revenue Service has to deal with many more preparers today than in 1978. Of course, we probably have to deal with more IRS people today than were employed in 1978. There have been thousands upon thousands of pages of regulations, publications, rules, and clarifying instructions added since 1978. The technology of preparing returns is more complicated today. Back then, we used pencils, carbon paper, and predominantly one publication called Pub. 17. Today, the process is all computerized with fully interactive software. I can access all of the publications, regulations, rules, court cases, and commentary right from my software. It’s great. I only use a pencil to keep notes and a pen to sign items. Carbon paper? I doubt if kids of today even know what carbon paper is. There is not one piece of carbon paper in any tax office today. Some things don’t change, though. There are preparers who didn’t follow the rules then and there are preparers who don’t follow the rules now. However, I believe today the IRS has a better handle on preparers as a whole. All preparers who sign returns today are required to apply for and receive a Preparer Tax Identification Number (PTIN). For information purposes, anyone who receives compensation for preparing a return is required to sign that return. Along with the application for the PTIN is a $63 fee that allows the IRS to maintain a database of preparers. This is not a bad thing for the thousands of legitimate tax preparers nationwide who are preparing good returns based on the tax laws as written. In conjunction with the PTIN is a requirement that all preparers, other than CPAs, Enrolled Agents (EAs), and attorneys, must pass a Registered Tax Return Preparer (RTRP) test by December 31, 2013. All preparers must also take a minimum of 15 hours of continuing education annually with at least two of the hours based on the subject of ethics. This sounds very fair to me. The way things change in the field of taxation, even 15 hours might not be enough. An area […]

THE TAX ATTIC with Jerry Coon

May 31, 2012 // 0 Comments

What is debt forgiveness, COD income? Debt forgiveness that may result in Cancellation of Debt (COD) income to taxpayers has been a hot topic on the tax circuit for a while, but it seems to be getting more attention today. The reasons are varied and include the fact that more taxpayers are filing for bankruptcy; credit card companies seem to be more willing to settle a debt and take what they can get; and taxpayers are still letting substantial amounts of houses go through the foreclosure process. Each of these examples creates debt forgiveness and possibly COD income. For example, a taxpayer files for bankruptcy with $200,000 of debt from all sources including house mortgage, credit cards, automobile loans, and personal loans. Total assets equal $130,000. He is insolvent by $70,000. The taxpayer has debt forgiveness equal to that difference. Another example is the taxpayer has an outstanding balance on a credit card debt of $15,000. He negotiates the pay-off down to $10,000. The $5,000 difference between the original debt and the negotiated pay-off amount is debt forgiveness. A third example is the pay-off on an auto is $20,000. The car is repossessed and then auctioned off for $12,000. The $8,000 difference would be considered debt forgiveness. The tricky part comes in applying the correct rules to determine whether the debt forgiveness creates COD income to the taxpayer. Let’s go through the three examples above. In the first example, the taxpayer files for bankruptcy. His debts are remanded to the bankruptcy trustee and an agreed-upon payment plan is set up. The taxpayer pays into the plan over a number of years. At the end of the period, any remaining outstanding debts are forgiven. There are a tremendous number of exceptions and intricate rules that must be followed, but the bottom line is at the end of the payment period, outstanding debt is forgiven. Because this occurred within the framework of a bankruptcy, the debt forgiveness will not create COD income to the taxpayer. Bankruptcy is the trump card in these instances that doesn’t allow the debt forgiveness to become COD income. In the second example, credit card debt of $15,000 is settled with a $10,000 payment. The $5,000 of debt forgiveness, in almost every instance […]

THE TAX ATTIC with Jerry Coon

May 24, 2012 // 0 Comments

How to calculate depreciation on inherited property One of my favorite movies of all time, “Midway,” will undoubtedly be shown this Memorial Day weekend. The 1976 war movie has a tremendous cast of characters with Glenn Ford, Henry Fonda, Charlton Heston, Hal Holbrook, Cliff Robertson, Edward Albert Jr., and other stars telling the story of the June 4-7, 1942 battle of Midway Island. It was the largest battle ever fought exclusively between aircraft carriers and fighter planes. Throughout history, there had been many maritime battles where the ships of one nation fought close-up with the ships of another power. This one was different in that the ships of neither power ever got close to each other. The aircraft of the United States Navy successfully sank four aircraft carriers of the Japanese Navy. We lost one carrier. Perhaps we got a bit lucky in that our planes found their ships before their planes found our ships. But we needed some good luck. The Japanese had ruled the Pacific Ocean from December 7, 1941, as President Roosevelt famously said “a day that will live in infamy,” when the dastardly Japanese surprised and decimated our fleet at Pearl Harbor. That rule lasted a grand total of seven months. This may be the greatest example of what goes around, comes around. It usually happens. It doesn’t usually happen in seven months. They got lucky when we were surprised by the sound of Japanese dive-bombers, torpedo planes, and fighters filling the skies over Pearl Harbor. We lost over 2,000 soldiers and sailors. We got lucky at Midway a mere seven months later when our dive-bombers, torpedo planes, and fighters filled the skies over the Japanese carriers. They lost over 3,000 soldiers and sailors. From this battle on, we ruled the Pacific Ocean and the Japanese steadily were beaten back and ultimately defeated. Granted, it took a few years, but it started at Midway. I love this story because it illustrates American perseverance and courage. Being the underdog only made them fight harder. We are fortunate today to live in a country that can celebrate these accomplishments. My heartfelt “Thanks” goes out to all of those who have served or are serving now in the military so that we can continue […]

THE TAX ATTIC with Jerry Coon

May 10, 2012 // 0 Comments

Doing business in Michigan Our Michigan State Senator Mark Jansen came to town last week to meet with concerned Rockford residents and business owners over a topic of concern. That topic was fairness in our sales tax system. I know that seldom are the words “fairness” and “tax” used in the same sentence, but it is appropriate in this situation. Allow me to explain. Michigan assesses sales tax of 6% on purchases of most types of goods. The tax is collected by the retailer and the money is submitted to the Michigan Department of Treasury in Lansing. A total of approximately $8 billion dollars in collected. About $5.4 billion of those dollars go the school aid fund and the rest goes into the general treasury. The City of Rockford gets a small part of those remaining dollars and we are thankful that for what we do get. Where the fairness issue comes into play is that only retailers with a physical presence in Michigan are required to charge sales tax and pay it to Lansing. Retailers without a physical presence, like Web-based companies such as Amazon and Dell, are not required to charge sales tax and most of them don’t. This is patently unfair to the retailers in Michigan, such as brick-and-mortar businesses like Great Northern Trading Co. and Kimberly’s Boutique in downtown Rockford, Rockford Ace Hardware, or even larger companies like Meijer, that are trying to compete with the Web-based companies of the world. The Michigan businesses previously noted spend substantial amounts of money on their physical location. They pay property taxes, utilities and upkeep on that physical location. By employing people in Michigan, they keep the economy going. Currently, over 406,000 Michigan residents are employed in the retail industry. That means one in 10 of every person working is employed in retail trade. Where it all becomes unfair to the Michigan retailers is that the Web-based retailers may not only undercut the Great Northern Trading Co. businesses of Michigan based on not having a physical retail location, but also because they don’t have to charge the 6% sales tax. Not having to charge the 6% sales tax is what is unfair. When the sales tax was instituted, the physical presence test was a […]

THE TAX ATTIC with Jerry Coon

May 3, 2012 // 0 Comments

Early tax-saving tips As many of you know, last Tuesday the Environmental Protection Agency (EPA) held a meeting at Rockford Public School’s ninth-grade facility to discuss their involvement in the potential cleanup of Wolverine World Wide’s Tannery property. This is a wonderful and valuable piece of property along the Rogue River directly north of downtown and along the White Pine Trail. There is a question, however, as to whether the property will require an environmental cleanup or how much cleanup will be required before it can become a factor in the future success of downtown Rockford. The answer to that question was not answered last Tuesday night. I work in the income tax system. That system of laws can be very confusing and the numbers within that system can tend to make the system even more confusing. Basically, I make a living by being able to interpret and apply those laws and numbers. However, I have to admit that Tuesday’s presentation via the liberal usage of charts, test result numbers, and the accompanying explanations, at certain points, was able to confuse me. The presenters were masters at not tipping their hands, so to speak. Glen Blackwood of Great Lakes Fly Fishing Co. tried his level best in an attempt to get the EPA presenters to give an answer on a 1-10 scale of where the property stood. Even Glen, who is also a very good auctioneer, couldn’t get any type of commitment. They did pass on a ton of information, however, and listened to many people provide their opinions. The opinions varied from supporting Wolverine as a good corporate citizen, to not trusting Wolverine because it is a big corporation citizen, to just trying to get the presenters to clarify the volume of information they were presenting. I happen to support Wolverine as a good corporate citizen and feel they will do what is proper to allow Wolverine and the public to use the property. My opinion is to let Wolverine and the Michigan Department of Environmental Quality put together an appropriate plan of action with the EPA having oversight approval. It appears, however, the bottom line is this: the EPA has until June 21 to make a decision as to how they will deal […]

1 4 5 6 7 8 35