FISCAL CRISIS LOOMS FOR WINNER OF THE PRESIDENTIAL ELECTION

(Bloomberg Markets Magazine) After the election, either President Barack Obama or Mitt Romney will have to deal with a deficit that has topped $1 trillion every year for the past three years and is on an unsustainable trajectory. "We've made a lot of progress getting the private-sector balance sheet in order. Where we've got a lot of work to do is on the public side," says Mark Zandi, chief economist at Moody's Analytics.

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THIS TYPE OF CHARITABLE CONTRIBUTION DOES NOT WORK

I don’t know how many times I have been asked if this charitable strategy will work. Give money to a charitable organization and then have them give a scholarship to a related party. Someone apparently tried this and the IRS weighed in.

In a recent case, the IRS ruled that making a donation for one person’s benefit kills the tax deduction. In this situation, a donor who contributed to her church’s scholarship fund wanted the church to use the money she gave for the college tuition costs of the minister’s daughter. The contribution is recast as a gift from the donor to the minister’s daughter, and no deduction is permitted.

PAUL RYAN

Q: You seem like a pretty bright guy. What do you think about this? Some of my friends are critical of Paul Ryan because of his budget proposal that he put out a few years back. They say that he would take away a lot of benefits that the government gives us. I have heard others say it is better to do something.

Is his plan something I should vote for?

A:  Thanks for the compliment. My ex would not agree with you about me being such a bright guy.

Before I respond, I have a couple of comments about your question. First of all, when you vote for president there is really only so much they can do without the backing of Congress. Secondly, Paul Ryan is the vice presidential candidate. Romney will be the prime idea guy so voting for Romney/Ryan is not a vote for Paul Ryan's budget proposal.

I also have to make a comment about your friends statement that "he would take away a lot of benefits that the government gives us." You must realize that if the government gives us a benefit that cost money, they must either take money from others or print more money that puts us further in debt.

Now, finally to respond to your question - We have to go back to early 2011 when Paul Ryan was Chairman of the House Budget Committee. In the opinion of many economists, unlike the typical Congressional budget resolution, the Ryan plan was not only comprehensive in its scope, but it was presented in a refreshingly transparent manner.

Every proposal in this nearly 75-page document—from discretionary spending and Medicaid, to taxes and welfare spending—was explained and justified in a way that any taxpayer could understand.

The press and critics zeroed in on Ryan's bold proposals for reforming entitlements, such as Medicaid and Medicare. Unfortunately, serious attention was not given to the tax side of the plan. Making the tax system conducive to long-term economic growth is just as critical to solving the nation's fiscal crisis as is reining in uncontrolled spending.

I could go on and on about the plan, but let me say this - At least it was a starting point. In my opinion, at least he and his committee had the guts to start the process.

WHY DOESN'T THE PREACHER TALK POLITICS FROM THE PULPIT?

If nonprofits start talking politics, they could lose their tax exempt status.  Now the IRS is stepping up its scrutiny of nonprofits in this election year to ensure they are complying with the rules on intervening in political campaigns.

Charities are barred from participating in political campaigns. Social welfare groups may engage in some political activity, as long as that is not their primary activity.

The IRS has been sending questionnaires about political activities to some groups that are applying for a tax exemption, and leads are pouring in about organizations on both sides of the political spectrum that may be trying to get around the rules.

TIMOTHY GEITHNER, DAVE CAMP HUDDLE ON 'FISCAL CLIFF'

House Ways and Means Committee Chairman Dave Camp quietly huddled with Treasury Secretary Timothy Geithner Wednesday morning about the so-called 'Fiscal cliff'.

The meeting marks an uptick in discussions between the Obama administration and congressional Republicans in gaming out the year-end expiration of all income tax rates, the hiking of the nation’s borrowing cap and massive cuts to domestic and Pentagon spending set to kick in at the beginning of 2013.

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EMAIL SCAM NOT FROM IRS

We have been notified by several of our clients, that they have received an email that looks like this one below:

 Subject: Your IRS tax transfer is declined.

Your Income Tax remittance (ID: xxxxxxxxxxx), recently ordered for processing from your bank account was turned down by your Bank.

Rejected Tax transfer
Tax Transaction ID:	Row of numbers here
Reason of rejection	See details in the report below
Income Tax Transaction Report	tax_report_.doc (Microsoft Word Document)

Internal Revenue Service St. Davis 00343 NY

This is a SCAM. The IRS does not email you any type of notice in this manner. Please do not open the attachment. If you receive an email similar to this one, but are unsure of its reliability please contact the IRS or your accountant.

DID YOU GET A CHECK BACK FROM YOUR INSURANCE COMPANY

Some employers are receiving health insurance rebates. If you are one of those lucky employers you are required to act quickly.

Generally you have three months to pass the employees’ share back to the employee.

If you are wondering why you received the rebate, it is because the health reform law requires insurers that don’t spend enough of the premiums on medical care and quality improvement to rebate part of the premiums.

The rebates started going out in July. We are seeing some employers generating goodwill by giving the full amount to employees through premium reductions or cash payouts, even though businesses can generally keep the portion of rebates attributable to employer contributions.

A word of caution, there are complicted rules on the potential taxability of the rebates.