Mobile App: Where Tax Research Roams

Bob Scott the Progressive Accountant writes:  In the last few years, the question about tax research has been as much about where the work gets done and what is available via research. That question is about to what degree tax professionals are interested in conducting research via mobile devices.

“I don’t see that someone is going to do all their work from the phone,” says Steve Zelman, SVP for the Checkpoint platform at Thomson Reuters.

“Mobile is the first go-to source for users,” says Tina Rajski, a CCH product manager

And it depends on which mobile device is in the user’s hands.

“The research with customers leads us to believe they are not going to do the same thing on the phone that they do on a desktop,” says Zelman.

There are some fine distinctions at work here. But how these views are interpreted both agree that mobile devices are now being used routinely within the office, not just when accountants are on the road. Zelman describes what’s happening in offices as a multi-screen issue, not just a mobile issue.

“I am walking around in a meeting room. I have my tablet, or I am researching while I am sitting and talking to other people,” he says. And what users want to be able to do is move from device to device and continue to access the information that they need for their jobs.

Thomson has multiple mobile avenues. One is its ProView ebook platform, which has had tax and accounting titles available for more than a year. The company has made content easier to print and email.

The company also has a Smartphone version of checkpoint, a browser utility, which enables the user to access Checkpoint without downloading the application itself. “Checkpoint senses if you are using a smart phone,” says Zelman. SmartPhone users get a different interface than those on a desktop computer. For tablets, the system is optimized to support touch-screen technology.

In terms of appearance, the tablet interface is similar to the desktop, but the smartphone interface is not.

“The research with customers leads us to believe they are not going to do the same thing on the phone that they do on a desktop,” says Zelman.

A more recent approach is the new Checkpoint Pocket Assistant, a free app that serves as a hub for the sale of apps with specific functions. The product hit the market with two free apps, the 2013 Income, Gift and Estate Tax Rate card, and the 2013 Pension and Profit-Sharing Plans Dollar Limitations Reflecting Cost-of-Living Adjustments card.

There are three apps that can be purchased for the pocket assistant: Like-Kind Exchange Calculator and Required Minimum Distribution (RMD) Look-up, priced at $1.99 each; and the Health Care Reform Act - Individual Shared Responsibility Penalty Estimator for $2.90.

Designed for the iPhone initially, the product will be available for other platforms later.

A major emphasis at CCH has been to refine the search capabilities for its research platform, IntelliConnect. The goals, says Rajski, is to provide a method that fits the user’s preference “Whether you use the browse tree, key word search or you prefer to look up by citations.”

But this year, the company is focused on a macro approach. “What 2013 and beyond is about is focusing on the entire research workflow,” she says Users, she continues, are “not just looking for answer, they are reviewing, they are consulting, they are sharing information, they are collaborating with peers and clients.

Recent changes in that area included the ability to share research folders. “I could share one folder with you and a different folder with another person,” Rajski says. Access rights can also be controlled a person viewing a share folder might have view-only rights or the ability to make notes and annotate documents. A time and date stamp will shoe who entered the notes.

Users are now also able to email several documents simultaneously. “You can email as many documents as you want,” says Rajski. “Now you no longer have to send them one at a time.”

The next phase comes next month when those enhancements are extended to the CCH mobile platform. Shared folders can be accessed and users will also no longer have in IntelliConnect to see the notes.

And mobile is no longer a side act. “Mobile is the first go-to-source for users,” she says. She agrees with Zelman’s assessment that mobile is being used routinely in the office “right next to their desktops.”

Mobile capabilities are important in the area of collaboration. Users must “get up to speed on a new or potential client,” she says. In a midsize firm, a staff might be assigned to someone whose experience “Isn’t day to day on the account.” All users need to be able to access documents and information from wherever they area.

Keeping It Simple While the two major players continue developing their platform, Parker Tax Publishing focuses on offering a simpler and less-expensive product for small firms and sole practitioners.

“We stick to the basics. but we try to make it in depth, practical and readable,” says Tracy Shannon Levey, Parker’s co-founder and VP of communications. The company also continues to develop the search engine, developed by founder James Levey. “It goes right to what they need,” she says.

Recently the company added free content to its website, including articles, weekly bulletins and client letters. Parker has also added content, especially in the areas of S Corps and C Corps; international taxes and has greatly expanded information about estate and gift taxes.

Thomson Reuters Checkpoint Pocket Assistant App brings the quick reference information you need right to your finger tips. Key Federal Tax Rates are immediately available on your iPhone. Learn about additional quick reference utilities, tables and rates, or calculators

Thomson Reuters has released Checkpoint Pocket Assistant, a new mobile app that helps tax and accounting professionals perform routine tasks from anywhere on their Apple iPhones. The app serves as a hub for additional apps available for download, including commonly used reference information and calculations. The Checkpoint Pocket Assistant is available to download from the Apple App Store at no cost.

"Our Pocket Assistant is another example of our commitment to helping our customers increase their productivity and efficiency so they can spend more time on strategic planning and business development," said Steve Zelman, senior vice president of Checkpoint Platforms, Thomson Reuters. "These apps further expand our mobile research offerings which include: Thomson Reuters Checkpoint for tablets and smart phones, Thomson Reuters ProView eBooks for tablets, and now our Checkpoint Pocket Assistant apps for iPhones."

New apps available through Checkpoint Pocket Assistant include:

         -
         2013 Tax Rate Guide -- lists key federal income, gift, and estate tax rates. (Included at no cost.)
         -

         COLA Profit-Sharing Plans -- displays pension and profit-sharing plan dollar limitations reflecting cost-of living adjustments as of 2013. (Included
   at no cost.)

         -
         Like Kind Exchange Calculator -- quickly determines the realized gain, recognized gain, and basis of the like-kind property received for most like-kind
   exchanges, including exchanges of real estate or property that is held for business or investment.(Available separately at $1.99.)

         -
         Maximum Required Gain Calculator -- calculates the Maximum Required Distribution for inherited IRAs, Roth IRAs, defined benefit plans, and plans holding
   longevity annuities. (Available separately at $1.99.)

         -
         Individual Shared Responsibility Calculator -- estimates the cost of meeting the Affordable Care Act requirements for maintaining minimum essential
   health insurance coverage, which is effective January 1, 2013. The app helps determine the penalty amount for most scenarios. (Available separately
   at $2.99.)
        

"These free and nominally priced apps are the first in a series available in the Checkpoint Pocket Assistant app," said Zelman. "Watch for more to come out during the year."

Checkpoint Pocket Assistant

Download Link: https://itunes.apple.com/us/app/checkpoint-pocket-assistant/id640773393?mt=8

Supported OS: iPadThirdGen4G, iPadFourthGen4G, iPodTouchourthGen, iPodTouchFifthGen, iPadThirdGen, iPad3G, iPadMini, iPadMini4G, iPadWifi, iPad2Wifi, iPad23G, iPadFourthGen, iPhone-3GS, iPhone4S, iPhone5, iPhone4, iPodTouchThirdGen

What Americans living in Canada need to know about filing taxes

BRENDA SHANAHAN, SPECIAL TO THE GAZETTE writes: Question: I just heard about an upcoming U.S. law that will penalize Americans who are residents of Canada for not having filed U.S. tax forms. I am an 80-year-old American citizen and Canadian resident for 50 years and I have always been told it was not necessary to file due to low income. I am quite concerned and would appreciate some clarification on this matter.

Answer: The short answer is yes; you must file a U.S. federal tax return, and maybe even a state tax return, in spite of having been in Canada the last 50 years. This has technically always been the case for U.S. citizens abroad but in recent years the IRS has become much tougher in enforcing filing rules for its expats, including those who mistakenly thought they were exempt because of low income. And unfortunately, depending on the rules of your home state, you may not be absolved from filing a state return.

If you have never filed U.S. taxes, you will likely have to submit at least three years retroactively as well as separate filings of the U.S. Treasury’s recently instituted informational form “TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR)” that outlines foreign bank and investment accounts you currently own. The enforcement of these potentially onerous filing requirements is certainly bad news for the numerous Americans living in Canada, dual American/Canadian citizens and others considered potential U.S. taxpayers such as Green Card holders and non-resident owners of U.S. property, so it is not surprising that these developments are causing much concern among those finding themselves caught up in the IRS net.

The incoming legislation I believe you are referring to is the Foreign Account Tax Compliance Act (FATCA) requiring foreign financial institutions to report on the financial interests of their U.S. clients directly to the IRS as of Jan. 1, 2014 or suffer severe tax penalties. Fair or not fair, the U.S. is using whatever tools it can to get tough on large scale tax evasion and international money laundering.

The good news is the IRS is not out to unduly penalize globetrotting Americans. While not known for their benevolence, the IRS allows non-resident U.S. citizens an automatic two-month extension of the annual filing date from April 15 to June 15 with possible further extension to Oct. 15 upon completion of IRS Form 4868 (although any tax payable is still due April 15). With easy-to-use tax filing tools available online at a nominal cost or free for those with income under $57,000, there are fewer reasons not to file. Go to the IRS website at http://1.usa.gov/14zlU1xfor complete details on how to file as an expat U.S. citizen.

The IRS has also acknowledged the plight of long time non-filing Americans abroad in announcing a voluntary program allowing people to get up to date. According to the IRS website at http://1.usa.gov/1bXiS8T, taxpayers taking advantage of this procedure must file at least three years of delinquent tax returns, with appropriate related information returns and six years of delinquent FBARs. Payment for the tax and interest, if applicable, must be remitted along with delinquent tax returns but no late filing penalties will be applied.

While it was difficult and expensive in the past to get even simple U.S. returns prepared in Montreal, the IRS crackdown has prompted local tax preparation offices to offer more U.S. tax filing services for Canadian residents. For low-income and straightforward tax situations, do contact any well-known American tax preparation company with Canadian offices, but if you need more complex tax and estate-planning advice, consult a professional tax accountant with the appropriate expertise in U.S. cross-border tax issues.

Estate taxes, Roth IRAs and beneficiaries / What are the rules for taking distributions from inherited Roths?

Karin Price Mueller/The Star-Ledger  writes: Question. My husband and I have a trust set up to be funded at the death of the first spouse and disbursed equally to our two children at the death of the second spouse. The purpose of the trust is to keep $675,000 — the New Jersey estate tax exemption — out of the second spouse’s estate. Our question is what to do about Roth IRAs. The primary beneficiary is the spouse. Should the secondary beneficiary be the trust, or the two children? What are the rules for taking distributions from inherited Roths?

Answer: The Brain hopes you have many years to go.

And we’re also glad you’re asking these questions now, before it’s too late to make any changes to your plan.

A Roth IRA must be in existence for at least five years before earnings can be withdrawn tax-free, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

She said there are two important rules for distributions of inherited Roth IRAs.

"The beneficiary of a Roth IRA must receive the entire distribution by Dec. 31 of the fifth year following the year of the owner’s death or the beneficiary must receive the entire distribution over his or her life or over a period not extending beyond the life of the beneficiary," she said.

If the beneficiary chooses the first option, then distribution can be delayed if necessary until the fifth year after the year the IRA was established to avoid paying a tax on the distribution of the earnings, she said. Alternatively, the beneficiary can withdraw all amounts other than earnings before that time without paying tax.

If the second option is chosen, Whitenack said, then the beneficiary may be required to receive some distributions before the Roth IRA has existed for five years.

"That may not result in any tax, however, because the distributions will not be deemed as coming from earnings until all of the contributions are withdrawn," she said. "These rules do not apply to Roth IRAs inherited by a spouse if the spouse elects to treat it has his or her own IRA."

To the trust: yes, the trust can be named as an IRA beneficiary. This may make sense when the beneficiaries are minors, have special needs, are spendthrifts or are children of a first marriage, she said.

"A trust beneficiary of an IRA should be structured to qualify as a ‘see through trust’ so that its individual beneficiaries will be treated as ‘designated beneficiaries,’" Whitenack said.

She said such trusts must satisfy four requirements: 1) the trust must be a valid trust under state law, 2) the trust must be irrevocable or become irrevocable upon the death of the account owner, 3) the beneficiaries must be "identifiable from the trust instrument," and 4) certain documentation must be provided to the plan administrator.

She said the minimum required distributions are based on either the life expectancy of the oldest beneficiary of the trust if the trust is a designated beneficiary, or the five-year rule if the trust beneficiary is not a "designated beneficiary."

"Since distributions from a Roth IRA are generally tax free to the beneficiary, which is not the case with a traditional IRA, the acceleration of minimum required distributions is not as significant as it would be with a traditional IRA," she said.

You should consult with an estate planning attorney to see if your trust qualifies as a "see through trust" and whether it makes sense to name the trust as a beneficiary of the Roth IRAs.

Single Out Charitable Volunteers for Tax Breaks

Ken Berry for AccountingWeb writes: Do some of your clients serve on the boards of private foundations or work in the trenches for public charities? Whether they're jetting around the country to secure funding for a worthy cause or dishing out hot meals at a soup kitchen, charitable volunteers are entitled to deduct their unreimbursed expenses incurred on behalf of qualified charitable organizations. To provide more clarity in this area, the IRS has just posted a list of five tips for taxpayers who travel while working for charities during the summer months (see sidebar).

IRS Gives Five Tips to Volunteers

The IRS has offered the following advice to taxpayers who travel on behalf of charity (IRS Summertime Tax Tip 2013-05, July 12, 2013).

1. You must volunteer to work for a qualified organization. Ask the charity about its tax-exempt status. You can also visit IRS.gov and use theSelect Check tool to see if the group is qualified.

2. You may be able to deduct unreimbursed travel expenses you pay while serving as a volunteer, but you can't deduct the value of your time or services.

3. The deduction qualifies only if there is no significant element of personal pleasure, recreation, or vacation in the travel; however, the deduction will qualify even if you enjoy the trip.

4. You can deduct your travel expenses if your work is real and substantial throughout the trip. You can't deduct expenses if you only have nominal duties or don't have any duties for significant parts of the trip.

5. Deductible travel expenses may include air, rail, and bus transportation; car expenses; lodging costs; cost of meals; and taxi fares or other transportation costs between the airport or station and your hotel.

To learn more, the IRS advises taxpayers to see Publication 526, Charitable Contributions. The booklet is available online or by calling 800-TAX-FORM (800-829-3676).

What sort of expenses can taxpayers deduct? The list may be more extensive than many clients think. Here are several examples of deductible expenses that have been approved in the past:

• The cost of air, rail, bus, or taxicab fare spent while performing services for a charity are deductible. Furthermore, you may deduct meals and lodging expenses on a charitable trip. But remember, there can't be any significant element of personal pleasure, recreation, or vacation in the travel.
• If you use your own vehicle to drive to charitable events or functions, you can deduct the expenses attributable to those trips – gas, oil, insurance, and repairs – or use a flat-rate deduction of fourteen cents per mile (plus related parking fees and tolls).
• If you're required to wear a uniform or other special clothing during certain activities – such as troop leaders for the Boy Scouts or Girl Scouts – you may deduct the cost as long as it's not suitable for everyday wear). In addition, the cost of cleaning the clothing counts toward the deduction for miscellaneous expenses.
• Although you can't deduct basic landline or cell phone charges, additional costs for long-distance telephone calls are deductible. Similarly, you may write off the cost of a separate phone or fax line installed in your home solely for charitable activities.
• When you host a gathering at your home to promote charitable fundraising, you can deduct the cost as a charitable expense without regard to the usual 50 percent limit on entertainment deductions.
• You can deduct the costs associated with attending a convention on behalf of a charitable organization if you've been designated as an official delegate to the convention. This includes meals and lodging while you're staying at the convention.
• If you house a nonrelative foreign exchange student, you can deduct up to $50 per month of your expenses for each month the child attends school; however, the student must be residing in your home under a written agreement with a qualified charitable organization.
• A taxpayer can deduct the cost of paper, postage, and other out-of-pocket costs incurred while sending out mailings on behalf of a charity – even amounts spent on paper clips and staples.

Finally, the usual rules for charitable deductions apply to volunteers, including annual limits and the reduction of tax benefits for certain upper-income taxpayers. Keep these rules in mind when offering advice to clients.

Stretch IRAs will likely lose estate planning appeal

 WILLIAM H. BYRNES AND ROBERT BLOINK for Life Health Pro writes:  As Congressional budget negotiations over the need for increased tax revenue heat up, some of the tools that your clients have grown accustomed to including in their estate planning strategies are taking center stage once again.

The popularity of the Obama administration’s proposals to cap the value of tax-deferred retirement accounts is fading — and the focus has shifted to proposals that would eliminate the “stretch” IRA instead. With widespread support gathering behind eliminating the extended tax deferral associated with stretch IRAs, preparing clients today can prevent surprises in the future. There are a few simple steps these clients can take to minimize the fallout should the death of the stretch IRA be near.

Stretch IRAs in estate planning

Under today’s tax rules, the beneficiary of an inherited IRA can usually elect to withdraw the funds in one lump sum or receive payments over a number of years, based on his or her life expectancy. The tax benefits are substantial if the beneficiary “stretches” the withdrawals out over his or her lifetime because the value of the IRA continues to grow tax-deferred. (Or, in the case of a Roth IRA, the growth is tax-free.)

Each year, the IRS requires the beneficiary of an inherited IRA to take a required minimum distribution (RMD) from the account. Because the RMD can be based on the beneficiary’s age, rather than the original account owner’s age, the stretch IRA has become a valuable estate planning tool for transferring tax-deferred wealth to younger generations.

Proposals to kill the stretch IRA

However, these valuable estate planning tax benefits have put the stretch IRA on the Congressional chopping block today. Many argue that, because IRAs are afforded tax benefits as a part of the tax policy behind encouraging retirement income planning, they should not be entitled to the same benefits when used as wealth transfer vehicles. And, while the administration's proposal to cap tax-deferred accounts at $3 million would have deterred the use of IRAs to transfer wealth, many have criticized that method as discouraging retirement savings.

As such, proposals that would limit the stretch period for a non-spousal inherited IRA to five years are gaining widespread support. This proposal is perceived as a way to limit the IRA to its intended use while still encouraging clients to save to fund their own retirement expenses — with the added bonus that the five-year limitation period would speed up the recognition of the IRA funds for tax purposes.

Preparing your clients

With these proposals on the table, it is important your clients prepare. They may want to examine their beneficiary designations — naming any children or grandchildren as secondary beneficiaries to a spouse can allow a surviving spouse to decide whether he or she wishes to continue the IRA. (The proposals would not eliminate a spousal stretch IRA.) This also allows the spouse to decide whether the funds should pass directly to the non-spousal beneficiary despite the possible five-year limitation — perhaps a child is in college and could use the funds over a five-year period to pay for related expenses.

Further, a Roth conversion might not be attractive if the IRA is going to be subject to a complete distribution within five years of the client’s death — especially if it is possible the beneficiary will be in a lower income tax bracket than the client’s bracket at the time of conversion.

Conclusion

While it is far from certain that any of the administration’s proposals with regard to IRAs will become law, the growing popularity of these plans means it is important to prepare your clients with an alternate plan. If the rules do change, having a backup plan in place will allow for an orderly reshuffling of your clients’ estate plans.

Second-Home Deduction Future Depends on Congress Using It

Richard Rubin for Bloomberg writes: Only a small percentage of U.S. taxpayers benefit from the ability to deduct mortgage interest on a second home. That group just happens to include many of the people who craft the nation’s tax laws.

Members of the congressional tax-writing committees are eight times more likely than the average American to own a second home with a mortgage, casting doubt on their eagerness to curb the tax break, according to data compiled by Bloomberg.

U.S. lawmakers are an ideal market for second homes: They’re wealthier than the typical person and they live and work in two places -- their home states and Washington. That will shape their approach to revising the tax code, said Bill Allison, editorial director of the Sunlight Foundation in Washington, which promotes government transparency.

“What you end up seeing out of Washington is a real disconnect between how Congress lives in Washington as one of the most affluent areas now, and how the rest of the country lives,” Allison said.

The Senate Finance and House Ways and Means committees are exploring the first rewrite of the U.S. tax code since 1986, and the chairmen of both panels have promised to scrutinize every tax break. That examination will include the estimated $8 billion a year that the second-home mortgage deduction costs, as lawmakers try to lower marginal rates.

Different Place

The lawmakers will start that process coming from a different financial place than many of their constituents. More than 40 percent of members of the House Ways and Means and Senate Finance committees have mortgages on homes other than their primary home-state residences.

Examples are Finance Chairman Max Baucus’s Capitol Hill townhouse, Representative Tom Reed’s cottage on Keuka Lake in upstate New York and Representative Sander Levin’s home on Martha’s Vineyard.

About 5 percent of all homes in the U.S. are second residences, according to the National Association of Home Builders.

“We’re like millions of Americans,” said Reed, a 41-year-old New York Republican. “I have been very sensitive to recognizing mortgage deduction as a policy, a good real estate policy for America. It doesn’t sway me from a personal perspective. It’s about good policy.”

Reed said he and his 11 siblings inherited the lake cottage in his district from his mother. That arrangement didn’t work well, and he borrowed money to buy them out. He now owes between $100,000 and $250,000 on the cottage and between $50,000 and $100,000 on his primary home in Corning, where he was mayor before coming to Congress in 2010.

“This longstanding tradition is something that if we move away from we should do it very carefully,” he said. “And we should do it in a very well-thought-out manner.”

Largest Breaks

The mortgage-interest deduction, with an estimated cost of $72 billion in forgone revenue in 2014, is one of the largest tax breaks in the Internal Revenue Code and the subject of a real-estate industry lobbying campaign to protect it.

Taxpayers can deduct interest on mortgages of up to $1.1 million on as many as two homes, a “main home” where they live most of the time and a second home. At least for voting purposes, lawmakers declare their primary residences in their home states. A rule that would constrain the deduction to primary residences would limit the break.

The Internal Revenue Service doesn’t require taxpayers to break out their mortgage interest by home, and the agency doesn’t have data on the cost of the break. The nonpartisan Tax Policy Center offers a rough estimate that repealing the deduction could generate $8 billion a year for the government.

The second-home break was one of the few that Mitt Romney, the 2012 Republican presidential candidate, suggested could be ended to pay for lower tax rates. It’s one of the specific ideas lawmakers offer when asked what breaks should disappear.

‘Heavy Lobbying’

“If you want to know why it’s there, it’s there because of heavy lobbying,” said Dennis Ventry, a tax law professor at the University of California, Davis, who cites the influence of lawmakers from resort areas and not any real benefit in promoting homeownership. “So much of our homeownership subsidy has this component to it, this visceral symbolic component.”

Jamie Gregory, deputy chief lobbyist for the National Association of Realtors, said the “light bulb finally goes off” for lawmakers when they’re presented with data showing that 900 of the approximately 3,100 counties in the U.S. have more than 10 percent of their housing stock as second homes, according to the realtors’ group.

“As you start walking members through that, there’s a realization that this isn’t just some flip throwaway,” he said. “I really do believe members make their decisions more based on their districts than on what’s personally best for them.”

In Jeopardy

The break is in more jeopardy than at any time in the 27 years since Congress last revamped the tax code.

Baucus, who doesn’t have a mortgage on his family’s home in Montana, wants lawmakers to examine every tax break and is asking senators to make suggestions by July 26.

“Every provision we put back in the code needs to have a reason for being there,” he said in a statement.

This is the second year that lawmakers have required themselves to disclose the terms of their mortgages, a demand prompted in part by reports that Countrywide Financial Corp. had a “Friends of Angelo” program named for co-founder Angelo Mozilo that offered below-market rates to politicians.

Members of Congress must report mortgages on any property they own, regardless of whether it produces income. They must report only the value of homes that generate income, which means that those who own their second homes outright and don’t rent them don’t have to disclose them.

Tax Returns

The lawmakers also don’t have to disclose their tax returns, making it impossible to know how much any of them benefit from the break.

Of the 63 members of the Ways and Means and Finance committees, 26 report mortgages on second homes, mostly in the Washington area. All except six members have filed forms covering 2012 that were due May 15; the others received extensions of the deadline.

The list of second-home owners with mortgages includes 13 of the 24 senators, who serve six-year terms, giving them an incentive to find permanent housing in the Washington area.

For example, Democrat Michael Bennet of Colorado, who has been in the Senate since 2009, has paid off the mortgage on his primary residence in Denver. He owes between $250,000 and $500,000 on a 30-year, 4.75 percent fixed-rate mortgage he took out in 2011 for a home in Washington.

No Vacation

Some have multiple mortgages. Representative Adrian Smith, a Republican, owes between $265,000 and $550,000 on his Washington home and as much as $50,000 on his residence in Gering, Nebraska.

Smith “believes everything must be on the table as the committee works to review the current code,” the congressman’s spokesman, Rick VanMeter, said in a statement.

Representative Jim McDermott, a Democrat from Seattle, said there should be a distinction between vacation homes and homes needed for work.

“When you have to live in two different places for your work, you really are in a difficult situation if you’re buying a place in each place, if you can’t deduct both of them,” said McDermott, who owes between $250,000 and $500,000 on his home in Washington. “It’s not a vacation home here in Washington, D.C.”

Levin’s Home

Representative Levin of Michigan, the top Democrat on Ways and Means, backed the second-home break during an April hearing, saying many residents of his suburban district have “small second homes” in the rural northern part of the state. Levin owes $405,802 on a home in West Tisbury, Massachusetts, on Martha’s Vineyard.

“This is a very wealthy class of people for the most part,” said Allison, citing 2011 data from the Center for Responsive Politics that puts the average wealth of senators at $11.9 million and House members at $6.5 million. “If the idea of Congress was that you have the butcher, baker, candlestick maker representing the people, we’ve come to a system where we certainly don’t have that anymore.”

Six Tips on Gambling Income and Losses

Whether you roll the dice, play cards or bet on the ponies, all your winnings are taxable. The IRS offers these six tax tips for the casual gambler.

1. Gambling income includes winnings from lotteries, raffles, horse races and casinos. It also includes cash and the fair market value of prizes you receive, such as cars and trips.

2. If you win, you may receive a Form W-2G, Certain Gambling Winnings, from the payer. The form reports the amount of your winnings to you and the IRS. The payer issues the form depending on the type of gambling, the amount of winnings, and other factors. You’ll also receive a Form W-2G if the payer withholds federal income tax from your winnings.

3. You must report all your gambling winnings as income on your federal income tax return. This is true even if you do not receive a Form W-2G.

4. If you’re a casual gambler, report your winnings on the “Other Income” line of your Form 1040, U. S. Individual Income Tax Return.

5. You may deduct your gambling losses on Schedule A, Itemized Deductions. The deduction is limited to the amount of your winnings. You must report your winnings as income and claim your allowable losses separately. You cannot reduce your winnings by your losses and report the difference.

6. You must keep accurate records of your gambling activity. This includes items such as receipts, tickets or other documentation. You should also keep a diary or similar record of your activity. Your records should show your winnings separately from your losses.

To learn more about this topic, see Publication 525, Taxable and Nontaxable Income. Also, see Publication 529, Miscellaneous Deductions. Both are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Publication 525, Taxable and Nontaxable Income
• Publication 529, Miscellaneous Deductions
• Tax Topic 419, Gambling Income and Expenses
• Form W-2G, Certain Gambling Winnings