There has got to be a better way
It's not even the end of February, and already it's turning into the tax season from — as my dad used to say — H-E-double-toothpicks.
- Is PPP loan forgiveness excludable COD income? Yes, federal. Yes, California.
- Are EIDL advance grants excludable COD income? Yes, federal. No, California ... but wait, this may be changing.
- What about those SBA subsidy payments? Are they excludable? Yes, federal. No, California.
- Are expenses paid with PPP/EIDL/SBA subsidies deductible? Yes, federal. No, California, but that may be changing too, at least partially?
- Are wages reduced for the Employee Retention Credit? Yes, federal. No, California.
- Are wages reduced for the Families First Coronavirus Response Act (FFCRA) credits? No for federal (you increase income by the amount of the credit claimed). No for California (but you reduce income for any income increased on the federal return).
- Can I deduct contributions made to an IRA after I'm 70½ years old? Yes, federal. No, California, but California is not going to make it easy to make this adjustment (see the March issue of Spidell's California Taxletter®).
- What's the new Form 7702? The FTB Form 3849?
- What do you report on Schedule 1 that's attached to the federal "postcard" sized return? Oh, that's right, the postcard-sized return only lasted one year.
Feeling like things are a bit out of control?
The other day when I was complaining about the next 591-page proposed federal law that's coming our way and how it always feels like I'm playing a game of darts when I'm trying to analyze California's conformity/nonconformity issues, my wise-beyond-her-years 19-year-old daughter asked how folks in other countries compute their taxes.
We took a look, and I've decided we're definitely moving to the Netherlands ... or possibly Japan. From a PBS Newshour interview with J.R. Reid, an economist who wrote "A Fine Mess":1
"I was in the Netherlands on March 31, the day before their taxes are due.
I was with an executive who makes $200,000 a year, two mortgages, a lot of investments. He'd have to fill out 12 forms in America. I said, Michael, how do you pay your taxes? He pops a beer. He goes online. The government's filled in every line. If the numbers look right, he clicks OK. It takes five minutes.
And, in Japan, you get a postcard from the IRS that says, we think you made this much. We withheld this much. We owe you a refund of that much. We will put it in your bank on April 1. It takes one minute, if you think the numbers are right."
True, this would put a lot of us out of work, but think of how less stressful our lives would be! I for one have always had fantasies of starting an organic farm ... ohmmmmmm.