Our Taxing Times

Legislative Spam

A special thanks to Doug Lee for posting this on a tax forum.

This is a prime example what is wrong with how the tax code gets treated. H.R. 3501.

Rep. Thaddeus McCotter (R-MI) introduced the "Humanity and Pets Partnered Through the Years (HAPPY) Act on July 31, 2009 and it has been referred to the House Ways and Means Committee. If passed it would allow a deduction of up to $3500 in pet care expenses per qualified pet a year. This would include anything, including vet bill, except acquisition expenses. This would include any legally owned, domesticated, live animal except research animals, animals used in businesses or service animals. If passed, it would start in 2010.

I have a few questions:

1. How long does Spot have to live with you? Does he have to be in the house the whole year? This is especially important if Spot dies during the year because of illness or injury and there are vet bills. But will there any penalty if the family gets tired of Spot and gives him to the local shelter or will they get the whole $3500?
2. If a partial year counts (like with dependents) and Fluffy has kittens, are they each entitled to a $3500 deduction even if you give them away?
3. Are acquisition expenses just the adoption fees or purchase cost or do they include the initial purchase of beds, leases, clothes. And if the shelter requires spay or neutering, is that a vet cost or an acquisition cost?
4. Will there be Pet Mileage (like medical mileage)?  To the vet, groomer, to the store 50 miles away that has those treats Fluffy likes best.
5. Will this include entry fees for dog/cat shows or other competitions? Hotels for the pet and support staff or just the pet?
6. Can the deduction be split? If not who gets the deduction? For example, Spot is owned by Joe but he can't keep the dog where he lives so Spot is at Mom's house. Who gets the deduction?
7. Can replacement of carpets and furniture be included in the pet deduction when pet damage is the cause of replacement?
8. Will there be a Pet Tax Number? If not, how are you going to track which pet has been deducted?
9. Where will the deduction be taken? Will it come directly off income as an adjustment or will it be added to the itemized deductions.

I am sure more questions will pop into my head but I think I have made my point. The idea of a pet deduction is a fun diversion on a dreary Friday afternoon but it highlights a major problem with the US Tax Code. Congress and the Executive branch, both sides, have for too long used the tax code to reward, punish or encourage the behavior of individuals and businesses. The tax code should fairly raise money to run the country. It's nice to be assured of job security as taxpayers need help getting through the tax maze. However, the US has some major issues to deal with and bills such as this waste the time and resources. They are nothing more than Legislative Spam.

Where do the Paper Clips Go?

I just grabbed a new box of paper clips and realized that this is the fifth box I have opened since the first of the year. I use a lot of clips when working on a tax return. I use them to separate information and papers. But when I finish with a return, I replace the clips with staples. That leaves me with a stack of paper clips to go back into the dispenser. In an ideal world, I should get back all almost all the clips I put into a return. But this isn't happening. Yes, I do send some home with clients; holding the envelope to a return that has to be mailed (Oklahoma), or the payment voucher to the front where they can find it quickly. But that does not account for the massive losses especially taking into consideration the clips I get from clients with their information. May be we need a Paper Clip Taskforce to look into this. Are the being held with all the socks that don't comeback from the dryer? Or do I just need to stop procrastinating on a minor issue and start working on CPE?

Brokers Late Again

The IRS says that Brokers have to February 17, 2009 to send out composite 1099s. The Energy Improvement and Extension Act of 2008 gives Brokers until 2/15 to get out Form 1099-B. The Service has expanded this to include interest and dividends that are normally reported on composite statements with 1099-B.

Point Well Taken

Please check out this Don't Mess With Taxes post. I wish I was that sharp. (I had to read the post twice to get it.)

Very Creative Deductions

I have some very creative clients. Some are creative because of their jobs or hobbies. Others are creative in the way they try to reduce their taxes. But I have not seen any this creative.
Thanks to the TaxProf Blog for the link.

Comic

Just a tax cartoon to end the week.

Tax Time Humor

Just a quick link to Dave Barry's latest column which is on the topic of the hour-taxes. Hopefully, I will post more, or add a comment, if I can still think after the next client leaves.

Tax Humor