But you didn’t need me to tell you that.

Anyone that knows me knows I’m a geek. Not only when it comes to taxes, but I have a true fondess for math and numbers in general. What’s the only thing I like more than numbers? Any kind of visual representation of numbers. So when this blog post from Neil Patel was forwarded to me, it quickly became one of my favorite posts. Yes, simply for the graphic. So I thought I’d share.

I’m not sure whether or not he made it himself, but what matters is that it does a pretty good job of showing just how complex the U.S. tax system really is.

So complex it takes the average person 24.2 hours to complete their return.

Also, if you haven’t seen Jess Bachman’s Death & Taxes poster as yet, it’s definitely worth seeing, if not owning.

The American Recovery and Reinvestment Act of 2009 (ARRA), which was enacted in February 2009, made provisions for the Making Work Pay Credit that allows working individuals to claim a credit of either 6.2% of earned income or $400, whichever is lesser. Instead of receiving a check or having to wait to claim the credit on your 2009 or 2010 tax return, the withholding tables were adjusted so most of the credit could be distributed through a decrease in income tax withholding.  So, yes, this meant that you saw a slight increase in your take-home pay. Now, because ARRA was enacted in February, the withholding tables weren’t adjusted until March, so the credit was spread out over 9 months.

In 2010, the $400 credit is actually spread out over 12 months instead of 9.  So a little less credit in each paycheck, you’ve guessed it, means increased income tax withholding. It’ll all add up in the end.

I should note that some individuals, especially those with multiple jobs, should pay close attention to their withholding. Here’s why: If you have multiple employers, each employer will deduct withholding tax from each paycheck as if you were eligible for the credit. Now, if you have 3 employers all using the adjusted tables, they’re essentially withholding taxes from your check as if you were eligible for a $1,200 credit (400 x 3). In which case you may want to complete a new Form W-4 to increased your payroll withholdings so you don’t have any nasty surprises come time to file your 2010 income tax return.

I obtained my license
After months of toting around review books and studying during lunch breaks, I did it.  Becoming an Enrolled Agent has definitely been one of my most significant accomplishments to date. Let’s just hope having a license actually helps to differentiate me from those “other” tax preparers.

I met an amazing guy
Easily one of the best things that has happened to me in 2009. I met, and quickly became good friends with this guy. Somehow he managed to woo me, and almost a year later, here we are… together… happy.

Finally went on that European Vacation
I’ve always planned on going to Europe, but for some reason or another, it just never worked out. The main culprit being work. Finally, In mid-December, Davide & I travelled to Italy to spend Christmas with his family.  We also spent two days in Paris before returning home right before the new year.  Though I didn’t get to see as much of Italy as I would have liked to, it was the best vacation I’ve ever been on.  Ever.  And, honestly, I’m just grateful for the experience. More about this in a later post.

Met a few amazing people
Some of the people I now consider good friends are people I met in 2009.  There’s Willie who spends so much time with us he may or may not have moved into our apartment without us knowing.  It’s an extremel rare occurrence for me  to meet someone that I can hang out with just to hang out, doing nothing in particular, just to be in their presence.  Willie’s one of those people.

And then there’s Steph Rose & Robert Murray who are both awesome. I met them a week apart from each other and both through Twitter.  What’s unique about these two is the simple fact that their friendships don’t require work, it just is.  We’ll go for weeks, even months, of not speaking to each other, and pickup right where we left off.

In 2010, there are tons that I want to do, big and small, personal and professional, but unlike most, I won’t be making any resolutions. I know every year most people resolve to do lots of things: lose weight, eat better, work out more, spend less money, etc. Who are they kidding? Aren’t most resolutions forgotten by mid-April anyway? I don’t plan on setting myself up for disappointment. There are things I’d like to happen, things I’d like to do, things that I’d like to change, but those will all happen in due time.

So, here’s what I’m looking forward to in 2010:

• Going to SXSW for the first time
• Travelling more
• Improving my photography skills
• Brewing my own beer

And just like that, I do away with 2009 (albeit a month late) and welcome 2010.

photo courtesy of Hawkexpress

For the last few weeks I’ve been feeling as if I’ve been getting absolutely nothing accomplished. More tasks get added to my to-do list than are actually being completed. I’ve been sleeping a lot more than I used to. And now I’m at the point where I feel like I need to somehow get everything under control before it, well, get’s out of control and that feeling of being overwhelmed starts to sink in.

My biggest problem is the fact that I spend a whole lot of time doing absolutely nothing. Sure, I’m always in front of the computer, and while this may seem like I’m actually working or doing things that are productive, that’s not always the case. I’m a geek, so for me, my computer is used for both work and play.

Me sleeping more could just be my body trying to send me a not-so-subtle message that I need to slow down a bit and get more rest. But, anyone who knows me knows that I’m not really a lie-in-bed-all-day kind of person. Sleeping more than needed is basically a waste of time, in my opinion. It may seem silly, but I feel like if I sleep-in or go to bed too early, I’m going to miss something.

In an effort to increase my productivity and get rid of that I’ve-accomplished-nothing-today feeling, I’m going to start scheduling my days, hour by hour if need be. This will include making a list of tasks that I want to complete on a daily basis and having an approximate schedule of when each task should be completed. I’ve made several attempts at doing this, but nothing ever sticks. I use both OmniFocus and David Seah’s Emergent Task Planner, and while I love them both, I’m not consistent.

Since I already have the tools I need to do this, it should be relatively easy to implement. For them to actually be effective, my use has to be consistent. I’m not superwoman, so if I want this to work, I’m going to have to be realistic and only schedule tasks that I truly believe I can complete that day.

I came across a post a while back (though I can’t remember where) that basically said you can get lots more accomplished if you actually take short breaks throughout the day. Make sense, right? I think so. So, every hour, I plan on working for 45-50 minutes, and taking a 10-15 minutes break to do anything of my choosing; whether it’s simply catching up on post in my RSS reader, taking a walk, or just kicking back and reading my Kindle. Taking that many, albeit short, breaks through the day will not only help me focus and actually work for 45-50 minutes, but it will also help break things up a bit, and will hopefully help with procrastination.

As far as me sleeping too much, I can either adjust my sleep pattern, or just wake up when the alarm goes off instead of hitting the snooze button. If that doesn’t work, I’m buying this, and set it to donate money to Michael Steele and the GOP, or some other organization equally undeserving of my hard-earned money. I’m serious. If that doesn’t get me out of bed in the morning, nothing will.

McCarthy was one of about 300 UBS clients whose names were turned over to the federal authorities this year as part of the federal court settlement. In this settlement, the bank agreed to provide financial data for clients whose accounts showed signs of tax evasion.

Since Mr. McCarthy agreed to plead gulity at his Sept. 14 hearing, he faces a maximum sentence of five years in prison and $250,000 in fines. He is still be liable for back taxes and penalties due on the unreported income.

With that being said, I think this is as good a time as any for other tax evaders to come clean using the IRS’ voluntary disclosure program.

Let’s take a look at the basic details surrounding this voluntary disclosure program. It essentially allows US taxpayers who are not currently under investigation (let’s face it, you can’t be under investigation and then decide to voluntarily disclose your offshore income) and have not reported taxable income in the past to come forward to avoid criminal prosecution and severe penalties. The tax liability relating to unreported offshore income that is voluntarily disclosed will be settled as follows:

• Taxes and interest due for the prior six years (2003 through 2008) will be assessed. The taxpayer must file or amend all returns and Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). I realize at this point, if you’re aware of the statute of limitations when it comes to tax matters, you may be asking yourself, just how can the IRS assess taxes and interest for a six-year period, isn’t there a three-year statute of limitations? Simple; it’s one of the resolutions offered by the IRS in resolving the offshore voluntary disclosures. Also, if the IRS can prove fraud, then there is no statue of limitations. Oh joy!

• The IRS will assess an accuracy or delinquent penalty for all affected years.

• The IRS will assess a penalty equal to 20 percent of the amount in a foreign bank account or asset value. Under certain circumstances, the penalty can be reduced to five percent.

Apparently, some taxpayers have been doing what the IRS refers to as “quiet disclosures.” They are filing amended returns, reporting the previously unreported offshore income and are paying the related tax and interest on this income all while avoiding penalties. Of course, the IRS warns against this and also states that if the return is selected for examination, the 20 percent penalty offer would not be available. It should also be said that the IRS has identified and will continue to identify amended returns that have been filed with increased income.

Sept 23, 2009 is the last day the program’s settlement offer will be in effect. Taxpayers have until that date to enter into voluntary disclosure agreements. I’ve heard talks of the IRS possibly extending that deadline, but dare I say don’t count on it.

Please see here for a list of FAQs provided by the IRS.

During the course of our conversation, I learned a few things about him: he was in the business of tax preparation for 12 years, he relied very little on tax reference material and relied greatly on his tax software to detect errors, and he had absolutely no idea what an enrolled agent is. All of those things bothered me deeply, but the last one really crushed me. Now, admittedly, maybe I’m just a little biased because I’m an EA, but how can anyone be a tax professional nowadays, and not know what an EA is? That’s the equivalent of saying you’re a general dentist, but you have idea what an endodontist is.

The guy at Starbucks is what I would consider to be a tax preparer. Tax preparers are those that don’t keep up-to-date with new tax laws and changes. They don’t perform adequate research, they assume, and they don’t perform anything close to due diligence. They’re form-fillers, and they tend to be incompetent. There, I said it.

On the other hand, tax professionals are proficient. They’re involved. They’re passionate about their work, ensuring no detail is overlooked.

I’m by no means trying to disparage unlicensed tax accountants, nor do I think that you have to be licensed to be competent. Heck, even licensed preparers are incompetent. It’s simply my belief that when you’re a tax professional, to be good at what you do, and actually do your clients justice, you have to be involved, and possess a love for your profession.

With all that said, which one are you, tax preparer or tax professional?

I, like many tax practitioners, used to believe that taking this deduction would be an automatic audit trigger, but after doing research and talking to other tax pros, I’ve determined that that is no longer the case.  Nowadays, to get the IRS to take notice, you have to deduct expenses for a home office and have a loss on your schedule C in the same year. But, one should keep in mind that this is the IRS, and frankly, they can audit you for just about any reason they want.

What are the requirements to be able to take the home office deduction? First, the home office, which doesn’t have to be a whole room, it can be part of a room, has to be used:

a) Exclusively (Yes, this means that this space can only used as your home office; it can’t double as the family’s TV room!)
b) Regularly
c) For your trade or business

and (Of course there’s more, we’re talking about taxes here, you didn’t expect it to be that easy, did you?)

The part of your home that you use as your home office has to be used as:

a) Your principal place of business or
b) A place where you meet with clients, patients, or customers in the normal course of your trade or business or
c) A separate, free-standing structure, such as a guest house, studio, barn or garage.

Contrary to popular believe, the home office deduction can be utilized by business owners as well as employees. For an employee to be able to deduct expenses for a home office, the employee:

a) Must be using the home office for the employer’s convenience
b) Must itemize deductions on schedule A
c) Cannot be renting the home office to their employer

So, now that you know what the requirements are to be able to deduct expenses for a home office, exactly what can be deducted? You can deduct expenses for things such as:

a) Mortgage interest
b) Rent
c) Real estate taxes
d) Casualty losses
e) Homeowner’s or renter’s insurance
f) Utilities
g) Repairs (only if it directly benefits the area used for your home office)
h) Depreciation (if you own your home)
i) Telephone (but not for the first line coming into the home)

I should note that on June 25, 2009, the Home office Tax Deduction Simplification and Improvement Act of 2009 was announced. This act should help streamline the reporting requirements and ease the burden of proof in claiming this deduction.

There are other rules for those that use their home for storing inventory or product samples, rental activity, or running a daycare facility. But, in the sake of keeping this post relatively simple and uncomplicated, I’ve decided to leave those out. Don’t fret, should you have specific questions regarding the home office deduction, drop me an e-mail at stefani@stefaniwhylie.com, and I’ll try to answer your questions as soon as possible.

Disclaimer: (C’mon, you knew it was coming!) Since every tax situation is unique and I am in no way aware of what your exact situation is, please, please consult your tax professional before deducting expenses for your home office (or any other expense for that matter), especially if you’re unsure exactly what the requirements are and how they will affect you. Also, this post was meant to give you a very brief overview of the requirements surrounding this deduction. Depending on your specific situation, this can get much, much, much more complicated. So, again, please consult your tax professional beforehand. Of course, you can always read IRS pub 587 in its entirety.

How will this affect tax return preparers? Potentially, these recommendations could focus on a new model for regulation, service and outreach, education and training, and enforcement.

The first part of this effort will focus on fact finding and receiving input from a very large and diverse constituent community that includes those that are licensed by state and federal authorities, which includes enrolled agents, accountants, and lawyers, and even unlicensed preparers and software vendors. Input and dialog will also be sought from consumer groups and taxpayers.

The IRS plans to hold meetings in Washington and around the country later this year. The Commissioner is expected to submit his recommendations to the Treasury Secretary and the President by the end of the year.

Please see the “Tax Professionals” page of the IRS website for more information such as schedules and agendas for upcoming public meetings.

This news should come as no surprise to you since it is completely inline with the IRS’ initiatives to crack down on unethical and noncompliant tax return preparers; one of the first signs of this was the increased tax return preparer penalties. I suspect there will be more programs just like this one. I, for one, am anxious to see what the end result will be. Though I am anxious, I do have a few concerns; for starters, if taxpayers will have the ability to review tax return preparers, what exactly will their review be based on? Normally, taxpayers don’t know exactly what the IRS’ rules and regulations are, which, might I add, is why they employ us. In such a situation, would they simply be reviewing the services provided by the tax professional, just like a regular reviewer would on, say, yelp.com? With that said, what exactly will this review system be based on and who will be doing the review? What are your thoughts? Please share in the comments.