Latest Blogs

David is a Certified Financial Planner and a Certified Quickbooks Pro Advisor.
David holds the designations of Certified Financial Planner™ and is an Enrolled Agent licensed to practice before the IRS. He is listed in Who’s Who in Finance & Industry and Who’s Who in America, and has been interviewed and quoted in The Wall Street Journal, Crane’s Investment News, and National Underwriters. David serves on the Tennessee...
David holds the designations of Certified Financial Planner™ and is an Enrolled Agent licensed to practice before the IRS. He is listed in Who’s Who in Finance & Industry and Who’s Who in America, and has been interviewed and quoted in The Wall Street Journal, Crane’s Investment News, and National Underwriters. David serves on the Tennessee Department of Labor and Workforce Development Board and the board of the Arts Alliance of Middle Tennessee. He has been a member of the Mount Juliet Chamber of Commerce since 1989 and has served on that organization’s board.

Taxpayer Advocacy Panel - An NFL Athlete Gets Help

One area where TAP gets involved is where there are problems with reporting income and expenses correctly. This example is an NFL player who also played in Canada.

Taxpayer is a professional athlete who is under contract to a team in the NFL. He did not play for the team during the 2012 tax year. Under terms of his contract, he was not permitted to play for another NFL team but he was allowed to play for a team outside the NFL. He chose to play for a team in the Canadian Football League.

In playing for the CFL, he was not operating as an employee of the NFL team (like say an accountant would who is sent by his or her employer to work at a company overseas). He was an employee of the Canadian team and received the Canadian equivalent of form W-2. He lived and worked in Canada for 5 ½ months from July – November.

Question: what income does he report and where? What expenses does he report and where? Answer: That’s a very good question.

A reading of publications and forms instructions indicates that if the person had been there all year or had played as a self-employed person, his tax preparer would have had specific instructions. But, that was not the case. Clearly, the income has to go somewhere. But where? And are there any deductions? What about travel, room and board while living there?

The tax preparer contacted the IRS for instructions. (TAP does not get involved in whether income should be taxed or expenses deducted – only whether or not taxpayers and their advisors can easily understand what to do and how to do it.) The professional preparer then contacted TAP so that this might be avoided in the future.

Going forward, though, shouldn’t there be information in the publications and/or forms instructions that cover this situation? There is ample content that deals with full-year employment and self-employed persons. It would seem – at least to the man’s tax preparer - that a note should be placed there to cover this contingency. Besides, in today’s global economy, you don’t have to be a professional athlete to have overseas income.

David Hayes, CFP

Continue reading
  1798 Hits
1798 Hits

IRS Advisory Committees

David W Hayes, EA, CFP®

Volunteer Member

IRS Advisory Committees

Most taxpayers, including many professional advisors, are not aware of how many advisory committees there are which work with the Internal Revenue Service on their behalf. It is easy for an organization as large and as complex as the IRS to loose contact with its client base. We see it in how our suppliers in business and stores where we shop may seem not relate to us. If that happens in commerce, the company may go out of business. When it happens in government, our lives get more complex and our frustration level rises.

The primary contact point for a taxpayer who needs help relating to the IRS in administrative manners is the Taxpayer Advocacy Panel. When taxpayers have problems relating to the correct reporting of data or calculation of tax payable, there are separate avenues where help is available.

Typical situations where TAP can be helpful include requests for information or other correspondence from the IRS are difficult to understand; where tax forms, instructions, and publications are either confusing or incomplete; or where letters and notices sent to taxpayers are confusing. The problem may well be with the IRS, not the taxpayer.

There should be at least one member of TAP for each state, the District of Columbia, and Puerto Rico. Tennessee has two members, myself here in Mount Juliet, and another in East Tennessee. We are not restricted by geography and can assist anyone with any issue. If you ever need help, I hope you will let me help you.

In addition to TAP, there are six additional groups including those which deal with issues involving electronic reporting, reporting for tax exempt and government entities, and art appraisals.

Come by the Chamber office this Friday, November 8, and pay me a visit – or contact me anytime.

Continue reading
  2393 Hits
2393 Hits

Gift & Estate Taxes for 2013, The Insecurity of Living in Tennessee

I hope this doesn’t surprise you, but until January 1, 2012, there was a state limit to how much you could give to anyone, other than a spouse, who is also a US citizen without paying a tax. (This is also true for federal tax reporting. See below.) The amount was only $13,000, which may sound like a lot until you consider buying your child a car or paying for their education. The only exceptions available to most taxpayers were payments made directly to an institution of higher learning or a medical services provider for the benefit of the other person, or contributions to a section 529 educational plan. All that changed on January 1, 2012, but only for gifts made after that date. If you made gifts before then without reporting them, you need to go back and do so. Federal tax law is somewhat different. The limit is the same, but you have a lifetime exemption of over $5 million of gifts and estate taxes, an amount large enough to cover most taxpayers. One thing, though, even if you don’t owe federal taxes on your gifts, you must report them when you file your tax return.

At the same time, the state replaced its old system of taxing estates with a new one which matches the federal tax code. The main reason the state legislature voted to repeal the state gift tax and modify its estate tax (which until then had been on all amounts over $1 million) was to keep money in the state. Before its repeal, assets were being transferred to other states and the gifts made and wills probated there.

This leads us into our main topic: this may be the time to review your estate planning documents, especially trusts. While the legislature was changing the state’s gift and estate tax laws, it also passed new trust laws which greatly liberalized the language that can be used and permits modifying existing trusts in a way that before the new legislation was not permitted. I strongly urge you to meet with legal counsel to make sure your documents are current. You may also want to have your financial advisor review the components of your plan not only to make sure they are in the best possible form but so that you will have a plan for what to do when Congress starts writing tax law, something it must do a lot of this year.

Continue reading
  2023 Hits
2023 Hits

Tax Information You Need to Know!

TAX INFORMATION YOU NEED TO KNOW – Automatic Adjustments Effective January 1, 2013 (Source: IRS Bulletin RP-2021-41 dtd October 18, 2012.)

The news media are chocked full of information – mostly political – about what will happen on January 1. Try to ignore that for a moment and instead focus on what is scheduled to change just because it’s 2013. Here is a summary list of what will change with a few comments. These are by no means all of them. If you’d like to know the particulars, feel free to contact me.


  1. 1.“Kiddie Tax,” the amount used to reduce tax on unearned income for minors will adjust. This is important where your children have been given investments with income so that the taxes will be lower.
  2. 2.Income from US Savings Bonds used to pay for qualified education expenses is subject to a phase-out based on income.
  3. 3.The amount of annual premium deductible for long-term care insurance changes as do the tests to comply with high deductible requirements in Medical Savings Accounts.
  4. 4.The annual exclusion for gifts increases. This is important because people often violate gift tax rules unintentionally; for example, buying someone other than your spouse a car. The State of Tennessee’s rules are harsher than the IRS and if you are caught violating them, there are stiff fines.
  5. 5.There is a tax on the sale of any shaft used in the production of certain types of arrows. I doubt very many people care about this. It just gives me a chance to set up a joke about getting the shaft.
  6. 6.The maximum hourly rate for legal services where the attorney’s fees were awarded by the court is adjusted.
  7. 7.The income and contribution limits for all retirement plans adjust. Instead of automatically continuing what you’re doing, ask your investment advisor what else is available. Make sure you consider non-qualified plans as well as the traditional 401(k) and IRA-based programs.

Along these same lines but not included in the list of automatic adjustments are the potential changes to the health care insurance landscape coming online in 2013 and 2014. Don’t get caught waiting until the last minute. Meet with your insurance advisor now and look down the road together. You may be paying too much for personal and/or employer-based coverage and can start saving already. Make sure you understand what expenditures are deductible. People are missing a lot of deductions by assuming they understand the law.


Continue reading
  3030 Hits
3030 Hits

The Family-Owned Business Interest Deduction: Pending Changes in Tax Law and Recent Court Rulings

Owners of family businesses, including farms, are at a disadvantage when it comes to tax planning. Many of the deductions available for current income do not apply to smaller businesses, which lack the liquidity for larger, long-range investments. Their focus is on day-to-day operations and more short-range planning, often at the expense of critical planning components like who will own and run the business next. Business owners need to know that nothing happens automatically except confusion and cost. Here’s a summary of the current situation.
Current federal tax law provides each individual with a $5,000,000 lifetime exemption from their taxable estate. It also provides that a married couple can intentionally combine their amounts through a “portability” feature. There are many reasons to be cautious about depending on the portability feature, which needs to be reviewed on an individual basis; but there are two reasons to be nervous about depending on the $5,000,000 exemption at all. First, your business assets are combined with other personal assets to arrive at the total estate value (with some adjustments) that increase it. It is surprisingly easy to be above the $5,000,000 threshold. Second, and most important, is that the whole thing changes at the end of this year unless Congress acts to extend it, going back to a $1,000,00 exemption. Best wisdom is that even if Congress extends the current level, estate tax laws will be completely rewritten during the next Congress.
Recent Tax Court rulings have upheld specific planning strategies, which can lock in the current exemption amount. Although it is good to know the IRS will work with you to keep your business intact, you will need to implement them before the current law changes.
Pending legislation with the working title, Family Farm and Small Business Tax Relief Act of 2012 (H.R.6271), would provide substantial relief to farm and business owners. If enacted, it would improve on the old Qualified Family-Owned Business Interest (QFOBI) exemption, which was repealed effective in 2004–2012. Under the proposed legislation, qualifying farms and businesses would not have their values included in estate tax calculations provided certain conditions were met. This late in a congressional year and during an election period, this bill is probably politically motivated but does give owners and their advisors some insight into how Congress may rewrite the tax laws in the coming year.
State tax laws like those in Tennessee can make a big difference, which is too often not considered. Tennessee is phasing out its inheritance tax laws, but until then, the state amounts are considerably below the federal level. The current exemption amount is $1,000,000, increasing to $1,250,000 in 2013, and incrementally thereafter until disappearing altogether in 2016.
Seek planning with your business succession strategy. Farm and small business owners, more than any other group, need to be proactive and intentional in their planning if they want to pass their business on to the next generation or sell it at a good price.
David W. Hayes is a Certified Financial Planner™ and IRS Enrolled Agent. This article is not a solicitation for business and is not intended to replace advice provided by Certified Public Accountants, Attorneys at Law, or other professionals. IRS Circular 230 requires that you be informed that any statements contained herein are not intended or written to be used, and cannot be used, by you or any other taxpayer, for the purpose of avoiding any penalties that may be imposed by federal tax law.

Continue reading
  2243 Hits
2243 Hits