Tax Attic

THE TAX ATTIC with Jerry Coon

July 5, 2012 // 0 Comments

History of Social Security Three weeks ago, my youngest daughter, Kimberly, received her master’s degree from the Department of Writing, Rhetoric and Discourse from Chicago’s DePaul University. At the department’s awards banquet, Dr. Deborah Brandt, professor emerita of English at the University of Wisconsin-Madison, gave the keynote speech, titled “Taking Writing Seriously.” DePaul couldn’t have picked a more appropriate speaker or topic for a group of writing, rhetoric and discourse journalism students who take writing very seriously. The gist of her speech was that writing has traditionally taken a back seat to reading in the public’s battle to obtain literacy. Dr. Brandt espoused the theory that while teaching students to read can open the student’s world to reading other people’s written words, teaching students to write can tap into the student’s inner world. I’m paraphrasing here since I was sitting in an auditorium without the ability to take notes, but she basically asked a question in the terms of “Is it more valuable to be able to read what others think or is it more valuable to be able to write what others may read?” That’s a darned good question. Are we putting too much emphasis on reading and not enough emphasis on writing? I have read that some schools with the advent of computers are no longer teaching penmanship. Will this then de-emphasize writing even more? I believe that literacy is important and my definition of literacy is being able to read and to write. Throughout history, being able to wield the influence of the written word has proven to be almost as valuable as wielding a sword. Of course, it’s only valuable if the people you are trying to influence can read and understand what you are writing. Perhaps this is one of those chicken and egg things. Neither is less or more valuable than the other; a literate person can do both. Dr. Brandt would agree with that, I am quite sure. This is third article on the Social Security Administration (SSA). Let’s talk about some SSA history this week. Prior to the implementation of the Social Security Act on January 1, 1937, there were no federal programs to help the elderly. The nation was still in the throes of the Great […]

THE TAX ATTIC with Jerry Coon

June 28, 2012 // 0 Comments

How the SSA calculates benefits Last week, I began a discussion on our Social Security system. The annual statement, beginning in May of this year, can only be accessed online. We went over the procedure for creating an account and accessing that online statement. An important part of the annual statement is the data entered on page 3 titled “Your Earnings Record.” The record itemizes the earnings that the Social Security Administration (SSA) has on file for a taxpayer on a yearly basis. In my case, I started working in 1970 and earned a grand total of $873 that year. I worked for a farmer that summer. The pay wasn’t that good but the fringes, especially the food, were excellent. The meals we ate were always “all you can eat;” heavy on the beef and potatoes. It was perfect for some hardworking farmhands plus it was a dairy farm, so fresh milk was always in supply. No one left the table hungry or thirsty! The last year posted on my record was 2010; 2011 had the note “Not yet recorded” instead of a dollar amount. It’s important to look at the yearly wage figures and compare what your records show you earned versus what the SSA records say that you earned. Why is this important? The SSA calculates your monthly benefit based on what the SSA has for your earnings. If they are missing a year or missing a W-2 amount for one of the years, quite possibly this will affect the calculation of your monthly benefit. Remember that the SSA annually is processing millions upon millions of documents, both paper and the electronic versions. It’s not realistic to think there won’t be posting errors either by the SSA or by the employers. The error rate is estimated to be six to eight percent. I would bet that 100% of those errors are on the lower side of earnings, as opposed to overstating someone’s earnings. It pays to check. The SSA uses these annual earnings to calculate a taxpayer’s monthly benefit. Let’s see if we can remove some of the mystery of how they decide what a monthly benefit should be. For the initial calculation, the SSA looks at the annual earnings between the ages […]

THE TAX ATTIC with Jerry Coon

June 21, 2012 // 0 Comments

What happened to the Social Security statement? Let’s talk about Social Security this week and for the next few weeks as well. I authored a short series of articles on Social Security a few years ago, but enough procedures have changed that I feel it warrants taking another look at the system. One of the changed items involves the personal statement that the Social Security Administration (SSA) prepares annually for each one of us. This annual statement includes a letter from the commissioner, currently Michael J. Astrue; a table spelling out estimated benefits to be received upon applying for benefits; a short discourse on how those benefits are calculated; a schedule of earnings received as recorded by the SSA; and finally a page of information about Social Security. Until last year, the statement was mailed to taxpayers on an annual basis just prior to the taxpayer’s birthday. It was decided, however, that it was cost prohibitive to continue mailing statements. The only viable alternative put forth was to create an online Social Security statement and allow taxpayers to access the statement through SSA’s website. I like it because there is actually some good logic here. Almost everyone in the USA today has a computer, and those who do not, likely have access through a relative, friend or the library. It saves SSA a good deal of money and is accessible to all interested parties. Sounds like a winner to me. On May 1, 2012, the SSA opened the new online Social Security statement to the public. In a news release from Commissioner Astrue dated May 7, he noted that in those first six days, 130,000 taxpayers had created online accounts to access their statement. SSA recommends checking the information on the statement at least once a year. Since it previously was mailed just prior to the taxpayer’s birthday, it might still work to check the statement around that date each year. My birthday is in September, so I haven’t received a statement since 2010. I decided to check out the online process. I think I was number 130,001. I started by going to the SSA’s public website at On the left side I clicked on a tab to get a statement online and to […]

THE TAX ATTIC with Jerry Coon

June 14, 2012 // 0 Comments

Giving up a rental to foreclosure “Be well… Do good things… Keep in touch.” This is one of Garrison Keillor’s more famous, if not the most famous, quotes from “The Writer’s Almanac.” It’s short, but it sure does say a mouthful. I have a nephew, Andrew Veenstra, who graduated from Sparta High School last week. One of the speakers used this quote as the central point of her speech. The three points of the quote should apply to us all year long and are timeless, but they can be especially applied to those graduates who are just starting on their life’s journey. While it’s true that getting through high school is a big step, in reality it is just a step in the right direction. There are bigger steps to be taken down the road, such as perhaps graduating from college, getting married and perhaps raising a family, and hopefully finding an occupational field that you enjoy working in. High school can definitely set the tone. Doing what Mr. Keillor suggests over the long term can also set the tone of a lifestyle. Think of the words as you say them to yourself: “Be well… Do good things… Keep in touch.” That’s timeless advice to give to someone and for each of us to follow. You are wishing them good health and well-being. You are advising them to do good because the human spirit and psyche is positively empowered by doing good things. By keeping in touch with loved ones, friends and acquaintances, we let them know they are important to us. Thank you, Garrison Keillor for your genius in putting these eight words together in a quote that we can all use to live by. The final situation I would like to discuss in our ongoing series on the topic of foreclosures involves having rental property. Giving a rental up to foreclosure is one of the more complicated tax situations that we as tax professionals get to deal with. Let’s go through an example: Joe buys a rental in 1990 for $110,000. In 2005, it was appraised at $205,000 without Joe having made any appreciable improvements to the property. Joe needed a car and his two daughters were in college, so he was in […]

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 […]

1 3 4 5 6 7 33