Tax Attic

Tax Attic

July 16, 2015 // 0 Comments

A year ago, Deb and I went on a cruise to Alaska along with another local couple, Doug and Lyn Peterman. We had a wonderful time. The scenery was fantastic. We saw glaciers close-up with their blue, translucent ice. We took in mountains rising straight up out of the ocean and disappearing into the clouds thousands of feet above us. We encountered school-bus size whales feeding on bait fish so close we could almost reach out and touch them. We saw huge schools of salmon being harvested by a variety of methods. For the most part, those memories will be hard to duplicate anywhere else in the world. However, there were a couple of items that we managed to incorporate into our lives back here in Michigan. On our way back to the cruise’s home port of Seattle, we stopped to visit Victoria, British Columbia located on Vancouver Island. We had just enough time to eat at a local brew-pub and then take a tour of the Island. The cab driver who dropped us off at the brew-pub agreed to pick us up after dinner and give us that whirl-wind tour of the local sights. We won the lotto with that fellow. He was a fountain of knowledge about the Island and we were fully entertained going from sight to sight. I’m not sure he stopped talking during the whole ride. Some of most impressive places we took in were the various Governmental gardens. The size of the flowers on the Island, especially the hydrangeas, were huge and many of them were brilliant blue. The rose gardens were among the most gorgeous I have ever seen. Neither Deb nor I are rose growing people. However, hydrangeas are slightly easier to grow so upon getting back from Vancouver Island, we planted a couple more hydrangeas and concentrated on the few we had. This year we have a hydrangea with lots of big flowers. The flowers are a beautiful pink. Not quite at Vancouver Island Government Gardens level but good for The Coons level. The car we drove around Vancouver Island was a Toyota Prius. The cabbie owned his own car and had driven that Prius for 300,000 miles at 50 miles per gallon. He really bragged […]

Tax Attic

July 2, 2015 // 0 Comments

For the second week in a row, someone I went camping with ended up bringing home a different boat than they started out the trip with. Two weeks ago, my friend, Jason bought a 22′ Starcraft Islander because his 22′ Trophy just wouldn’t run without heating up to 260 degrees. The Trophy went up for sale after the second day in a row we went fishing and ended up fishing a lot closer to shore than we anticipated. Jason made a run up to Alpena and came back with a nice running Islander. Last week, Deb’s cousin, Brian found a 20′ S2 Tiara for sale up near Pellston. His other boat, a 36′ Chris Craft, hasn’t been in the water this year and went up for sale since Brian now owns the Tiara. Both guys bought nice replacement boats but might have trouble peddling those other boats in their possession. I, however, am quite happy with my 19 1/2 foot Thompson and am pleased that it has been performing flawlessly. Hopefully I haven’t jinxed it by talking about it. However, if it does start running poorly, I may start my search in the northern lower peninsula as that seems to be where the good used boats are all located. The Supreme Court ruled in the past week on two cases that will have a great influence on our tax system not just for today but for generations to come. The two cases involved the Affordable Care Act in King V. Burrwell, and the state of marriage in Obergefell v. Hodges. In King, the Supreme Court ruled that taxpayers may continue to receive premium tax credits whether or not they live in a state that instituted a health insurance exchange. Only 13 states and Washington DC actually created a health insurance exchange. The remainder of states, including Michigan, chose not to create an exchange. The federal government, therefore, created an exchange in these states. The problem was that the law as written and passed by Congress stated that premium tax credits are only available to taxpayers who purchase insurance through an exchange “established by the State”. In May 2012, the Internal Revenue Service issued regulations stating that the premium tax credit was available to taxpayers no […]

Tax Attic

June 25, 2015 // 0 Comments

Saginaw Bay is flat-out full of fish. Of course, only about half of them are keeper-size walleyes. The rest, from personal experience, are catfish, drum, gar-pike, northern pike, perch, and small walleyes. Last week, me and my old college buddies, Gary McCrimmon and his son Jason, Grant McCrimmon, and his son, Scott, and their friends Jeremy and Cade, that normally go to Canada walleye fishing, went to Linwood Beach and Marina Campground and tried our luck catching walleyes on Saginaw Bay. Fishing down here is certainly different that fishing up in Canada. Up there, we predominantly and successfully anchored over a weed bed or on the edge of a rock-pile and jigged a minnow or a small portion of a night crawler until we caught a fish. We had several spots to try depending upon the speed of the wind, the height of the waves, the cloud cover, the time of day, and if it was raining or not. We used some variation and size of white or green twister tails on a few select colored jig heads. Trolling was a poor final choice and by poor, I mean we never counting on catching many fish while trolling. Unfortunately, our expectations were usually met. On the other hand, on Saginaw Bay we exclusively troll, using planer boards pulling a night crawler harness. It doesn’t seem to matter quite so much what the conditions are. The variables are trolling speed, water depth, harness blade color, and distance of the harness behind the boat. The fish we caught, we were trolling at 1.2’ish miles per hour in 5’ish foot of water with a fire tiger tail blade 80’ish feet behind the boat. Well, let me say those were the variables that worked the best last week. Next week, it will probably be a different speed in a different water depth with a different blade color being pulled a different length behind the boat. But that’s what makes fishing interesting. I hope to make it back over to Saginaw Bay later this summer just to see how good we are at adapting to the change. It will be fun. In the meantime, the tax business continues on. I would like to discuss for another week the current developments […]

Tax Attic

May 28, 2015 // 0 Comments

Last week, I discussed four problem areas that tax professionals encountered this past season. 1. Education Credit Calculation Issues. 2. Issues with Identity Theft. 3. Contact Issues with the Internal Revenue Service. 4. Issues with the Affordable Care Act. Without changes, all four areas will remain problem areas in the future. Each has its own set of problems and solutions. Over the next four weeks, I will further discuss each issue. This week, please allow me to further discuss the Education Credit. The actual calculation is straight-forward. There are two credits and one deduction available to taxpayers. The Education Credit is claimed on Form 8863. The Tuition and Fees Deduction is claimed on Form 8917. Form 1098-T is used by a qualifying educational institution to report a student’s tuition billed or paid. First, the American Opportunity Tax Credit (AOTC) is the most desirable tax credit for a couple of reasons. It carries the largest dollar amount of credit. The maximum AOTC is $2,500. The $2,500 is calculated in two parts. 100% of the first $2,000 of qualifying expenses becomes a tentative credit. 25% of the next $2,000 of qualifying expenses or $500 brings the total credit available up to the $2,500 amount. The first $1,500 is used to off-set income tax liability while the remaining $1,000 is potentially refundable. The AOTC can be claimed only four times. The student must have attended a qualifying institution at least on a half-time basis for one marking period during the year and the student cannot have finished four years of higher education. Second, the Lifetime Learning Credit (LLC) can be claimed every year. 20% of up to $10,000 of tuition paid for a credit of $2,000 can only be claimed against income tax liability. None of the $2,000 is refundable. The LLC can be claimed after four years of higher education and can be claimed whether or not the student attends the institution on a half-time basis. The LLC is the credit of choice for taxpayers who have used the AOTC four times but are still attending a post-secondary educational institution. Third, the Tuition and Fees Deduction allows up to $4,000 to be deducted against total income as an adjustment to income. It is used in situations where […]

The Tax Attic

January 23, 2015 // 0 Comments

Deb & I went to “American Sniper” last weekend. What a great movie. The story of Chris Kyle, credited with over 160 enemy kills, was well-done by Producer Clint Eastwood and actor Bradley Cooper. Navy Seal Kyle possibly had another 95 but that additional number was not verified. Of course, the movie had a very sudden and very sad ending when he himself was shot at a range by a veteran he was trying to help. I wish there had been a better way to end it, but the fact is during any of Mr. Kyle’s 4 tours of duty in Iraq, similar to a number of his fellow soldiers, it could have ended just like that anyway. He had survived getting shot twice and lived through 6 IED explosions so he used up a few lives over there. Philosophically speaking, it makes one wonder how many lives does a person get on this earth before he moves on to the next one? I have used up a couple that I know of, but if I get as many as Chris, I might be writing The Tax Attic for another 62 years. Beth would be pleased but I don’t know about Deb.   Watching the movie brought up memories of Rockford’s only Congressional Medal of Honor winner, John Sjogren. Similar to Mr. Kyle, Mr. Sjogren was credited with a large number of enemy kills. It’s just that John’s all came within a few hours in one intense battle. On May 23, 1945, his unit of the 40th Division was charged with taking Hill 3155, better known to the soldiers as Suicide Knob. No matter, an assault was ordered on the hill so up the hill they went. During the battle, under great personal duress, John took on Japanese soldiers firmly entrenched in pill boxes. He had his men pass up their hand grenades and then John moved into position where he could stuff the grenades into the pill boxes one after another. By the time it was all over, he had taken out 9 pill boxes and was credited with ending the lives of 43 Japanese soldiers. That type of effort was enough to earn John the Medal of Honor and it was presented by […]

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