http://www.odeo.com/channels/6586-TaxMamas-TaxQuips-Tax-Quips Wcardinal no Tax podcast and small business podcast. Tax and small business news tidbits, tips and tax loopholes, covering investment, inheritance, real estate and more from www.taxquips.com - Subscribers are welcome to submit questions. Tax podcast and small business podcast. Tax and small business news tidbits, tips and tax loopholes, covering investment, inheritance, real estate and more from www.taxquips.com - Subscribers are welcome to submit questions. The number one tax podcast online - receive a daily TaxQuips that answers a reader's tax question using real life tax strategies and recommends resources to help you either solve your own tax problems, or at least helps you communicate with your tax pro. en-us 40 Thu, 12 Nov 2009 06:18:00 -0800 Thu, 12 Nov 2009 06:18:00 -0800 Finance http://www.odeo.com/episodes/25442577-Son-s-Girlfriend-s-Baby Today TaxMama hears from Anthony in North Carolina with this story. “My son’s pregnant girlfriend moved in, back in May and the baby was just born. My question is, will I be able to claim both of them, girlfriend and baby, on my 2009 taxes? If so will I get the child tax credit for the baby?” Dear Anthony, That’s an interesting question…and has twists that took some thought. If the baby is your son’s child, that makes it your grandchild. So, you would be able to use Head of Household filing (if you’re not already filing as married). If the baby is your grandchild, you’re entitled to the child tax credit, if you are the one providing more than half the support. And, of course, the dependency exemption. However, the girlfriend, since she is no relation to you, must have lived in your home for all 12 months before you could take her as a dependent. Of course, if your son married her…you could claim her as a dependent, again, if you ... Today TaxMama hears from Anthony in North Carolina with this story. “My son’s pregnant girlfriend moved in, back in May and the baby was just born. My question is, will I be able to claim both of them, girlfriend and baby, on my 2009 taxes? If so will I get the child tax credit for the baby?” Dear Anthony, That’s an interesting question…and has twists that took some thought. If the baby is your son’s child, that makes it your grandchild. So, you would be able to use Head of Household filing (if you’re not already filing as married). If the baby is your grandchild, you’re entitled to the child tax credit, if you are the one providing more than half the support. And, of course, the dependency exemption. However, the girlfriend, since she is no relation to you, must have lived in your home for all 12 months before you could take her as a dependent. Of course, if your son married her…you could claim her as a dependent, again, if you provided more than one half of her support. As to your son? If he earned more than $3700 for the year – no exemption. And if they got married, and you wanted to claim the bride, he’d have to file as married filing separately. Read Chapters 2 and 3 in IRS Publication 17 for more detail – and the dependency and support tests. http://www.irs.gov/publications/p17/index.html Congratulations on your new grandbaby! And remember, you can find answers to all kinds of questions about dependents, credits, and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Publication 17 :: Look for the the dependency and support tests File Download (0:00 min / 0 MB) Today TaxMama hears from Anthony in North Carolina with this story. “My son’s pregnant girlfriend moved in, back in May and the baby was just born. My question is, will I be able to claim both of them, girlfriend and baby, on my 2009 taxes? If so will I get the child tax credit for the baby?” Dear Anthony, That’s an interesting question…and has twists that took some thought. If the baby is your son’s child, that makes it your grandchild. So, you would be able to use Head of Household filing (if you’re not already filing as married). If the baby is your grandchild, you’re entitled to the child tax credit, if you are the one providing more than half the support. And, of course, the dependency exemption. However, the girlfriend, since she is no relation to you, must have lived in your home for all 12 months before you could take her as a dependent. Of course, if your son married her…you could claim her as a dependent, again, if you provided more than one half of her support. As to your son? If he earned more than $3700 for the year – no exemption. And if they got married, and you wanted to claim the bride, he’d have to file as married filing separately. Read Chapters 2 and 3 in IRS Publication 17 for more detail – and the dependency and support tests. http://www.irs.gov/publications/p17/index.html Congratulations on your new grandbaby! And remember, you can find answers to all kinds of questions about dependents, credits, and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Publication 17 :: Look for the the dependency and support tests File Download (0:00 min / 0 MB) tag:odeo.com,2009-11-12,25442577 Thu, 12 Nov 2009 06:18:00 -0800 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25437621-LLC-and-Business-Structure Today TaxMama hears from Norm in California with a common question. “What is the best tax set up for in home consulting business. Is it LLC or? I have seen and heard so many different comments.” Dear Norm, There’s a reason you’ve heard so many different comments. There is no BEST structure. The structure of your business depends on your short-term needs, your long-term goals and your exit strategy. That’s why, even though I outline the pros and cons of each business structure in Chapter 3 of Small Business Taxes Made Easy, I also advise you to consult with your tax professional. http://www.taxmama.com/AskTaxMama/book/ I could spend about two hours outlining all the considerations you need to take into account in order to make the right decision. But there’s just not enough room here. Read Chapter 3. One thing I will tell you, though. As long as you live and work in California, the last thing you want is an LLC. In addition to the annual minimum ta... Today TaxMama hears from Norm in California with a common question. “What is the best tax set up for in home consulting business. Is it LLC or? I have seen and heard so many different comments.” Dear Norm, There’s a reason you’ve heard so many different comments. There is no BEST structure. The structure of your business depends on your short-term needs, your long-term goals and your exit strategy. That’s why, even though I outline the pros and cons of each business structure in Chapter 3 of Small Business Taxes Made Easy, I also advise you to consult with your tax professional. http://www.taxmama.com/AskTaxMama/book/ I could spend about two hours outlining all the considerations you need to take into account in order to make the right decision. But there’s just not enough room here. Read Chapter 3. One thing I will tell you, though. As long as you live and work in California, the last thing you want is an LLC. In addition to the annual minimum tax of $800, there is a gross receipts fee of $900 and up. That means, even if your net profit is $2, or even if it’s a loss,...if your gross revenue started out at $250,000 or above, you pay an extra tax of at least $900. http://www.ftb.ca.gov/forms/02_forms/02_3556.pdf So forget the LLC in California. They may be the perfect choice in some other state. And remember, you can find answers to all kinds of questions about business structures and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online TaxMama's Book :: Small Business Taxes Made Easy FTB FAQs :: All about California LLCs, including the Gross Receipts Fee chart File Download (0:00 min / 0 MB) Today TaxMama hears from Norm in California with a common question. “What is the best tax set up for in home consulting business. Is it LLC or? I have seen and heard so many different comments.” Dear Norm, There’s a reason you’ve heard so many different comments. There is no BEST structure. The structure of your business depends on your short-term needs, your long-term goals and your exit strategy. That’s why, even though I outline the pros and cons of each business structure in Chapter 3 of Small Business Taxes Made Easy, I also advise you to consult with your tax professional. http://www.taxmama.com/AskTaxMama/book/ I could spend about two hours outlining all the considerations you need to take into account in order to make the right decision. But there’s just not enough room here. Read Chapter 3. One thing I will tell you, though. As long as you live and work in California, the last thing you want is an LLC. In addition to the annual minimum tax of $800, there is a gross receipts fee of $900 and up. That means, even if your net profit is $2, or even if it’s a loss,...if your gross revenue started out at $250,000 or above, you pay an extra tax of at least $900. http://www.ftb.ca.gov/forms/02_forms/02_3556.pdf So forget the LLC in California. They may be the perfect choice in some other state. And remember, you can find answers to all kinds of questions about business structures and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online TaxMama's Book :: Small Business Taxes Made Easy FTB FAQs :: All about California LLCs, including the Gross Receipts Fee chart File Download (0:00 min / 0 MB) tag:odeo.com,2009-11-11,25437621 Wed, 11 Nov 2009 06:17:00 -0800 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25432085-Divorce-Settlement Today TaxMama hears from Misty in Missouri who wants validation. “I received a settlement in my divorce for half the equity in our home. It was $15,000. I think in reading this is not going to be taxable. Is that correct? I’m keeping my fingers crossed that it isn’t!” Dear Misty, Great news! You’re right. Getting cashed out for half the equity in your home is not a taxable event. In this case, it would not be taxable even you and your ex husband sold the house first and then split the money. Why? Because the profits are under $250,000 each. Beware, though. If you and your ex have been refinancing and drawing out cash – and your real profits are over $500,000…there could be a taxable event. You sound too smart for that. Just so you know, most property splits in a divorce are not taxable. About the only things that might be taxable are splits of IRAs and other retirement accounts. Even then, if you roll the funds over to your own IRA, they wou... Today TaxMama hears from Misty in Missouri who wants validation. “I received a settlement in my divorce for half the equity in our home. It was $15,000. I think in reading this is not going to be taxable. Is that correct? I’m keeping my fingers crossed that it isn’t!” Dear Misty, Great news! You’re right. Getting cashed out for half the equity in your home is not a taxable event. In this case, it would not be taxable even you and your ex husband sold the house first and then split the money. Why? Because the profits are under $250,000 each. Beware, though. If you and your ex have been refinancing and drawing out cash – and your real profits are over $500,000…there could be a taxable event. You sound too smart for that. Just so you know, most property splits in a divorce are not taxable. About the only things that might be taxable are splits of IRAs and other retirement accounts. Even then, if you roll the funds over to your own IRA, they would not be taxable until you actually were to draw the money. You can read more about tax issues relevant to divorced or separated folks in IRS Publication 504. http://www.irs.gov/publications/p504/ Congratulations on your new life! And remember, you can find answers to all kinds of questions about divorces and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Publication 504 :: Divorced or Separated Individuals File Download (0:00 min / 0 MB) Today TaxMama hears from Misty in Missouri who wants validation. “I received a settlement in my divorce for half the equity in our home. It was $15,000. I think in reading this is not going to be taxable. Is that correct? I’m keeping my fingers crossed that it isn’t!” Dear Misty, Great news! You’re right. Getting cashed out for half the equity in your home is not a taxable event. In this case, it would not be taxable even you and your ex husband sold the house first and then split the money. Why? Because the profits are under $250,000 each. Beware, though. If you and your ex have been refinancing and drawing out cash – and your real profits are over $500,000…there could be a taxable event. You sound too smart for that. Just so you know, most property splits in a divorce are not taxable. About the only things that might be taxable are splits of IRAs and other retirement accounts. Even then, if you roll the funds over to your own IRA, they would not be taxable until you actually were to draw the money. You can read more about tax issues relevant to divorced or separated folks in IRS Publication 504. http://www.irs.gov/publications/p504/ Congratulations on your new life! And remember, you can find answers to all kinds of questions about divorces and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Publication 504 :: Divorced or Separated Individuals File Download (0:00 min / 0 MB) tag:odeo.com,2009-11-10,25432085 Tue, 10 Nov 2009 06:02:00 -0800 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25426562-Child-Care-Benefits Today TaxMama hears from Melissa in Texas with this question. “ I would like to sign up for my employer’s cafeteria plan for the preschool child care expenses. It will allow me to pay for about $5,000 of the child care tax free. But my son’s daycare is over $11,000 a year. Can I claim the child care credit for the remaining $6,000+ on my itemized 1040? If I can only do one or the other, with which one I would come out ahead?” Dear Melissa, I was just looking at the Form 2441, page 2, to see what would happen if you used the $5,000 flexible spending allowance. http://www.irs.gov/pub/irs-pdf/f2441.pdf Yup, it would wipe out your child and dependent care credit. That’s OK. The credit is only worth $600 to you, for one child ($1200 for two children). But not paying any taxes at all is worth much more! ...$375 – You save your share of Social Security 7.5% $1,250 – Your share of your IRS taxes 25% ...-0- – State taxes in Texas – 0% &#8... Today TaxMama hears from Melissa in Texas with this question. “ I would like to sign up for my employer’s cafeteria plan for the preschool child care expenses. It will allow me to pay for about $5,000 of the child care tax free. But my son’s daycare is over $11,000 a year. Can I claim the child care credit for the remaining $6,000+ on my itemized 1040? If I can only do one or the other, with which one I would come out ahead?” Dear Melissa, I was just looking at the Form 2441, page 2, to see what would happen if you used the $5,000 flexible spending allowance. http://www.irs.gov/pub/irs-pdf/f2441.pdf Yup, it would wipe out your child and dependent care credit. That’s OK. The credit is only worth $600 to you, for one child ($1200 for two children). But not paying any taxes at all is worth much more! ...$375 – You save your share of Social Security 7.5% $1,250 – Your share of your IRS taxes 25% ...-0- – State taxes in Texas – 0% ————$1,625.00 – Total – So, personally, I’d opt for the cafeteria plan. But, when you file your tax return next year, try to enter the data into Form 2441 anyway. Who knows what laws will have changed by then, possibly allowing you to use some additional expenses. And remember, you can find answers to all kinds of questions about cafeteria plans and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form 2441 :: Child and Dependent Care Credit File Download (0:00 min / 0 MB) Today TaxMama hears from Melissa in Texas with this question. “ I would like to sign up for my employer’s cafeteria plan for the preschool child care expenses. It will allow me to pay for about $5,000 of the child care tax free. But my son’s daycare is over $11,000 a year. Can I claim the child care credit for the remaining $6,000+ on my itemized 1040? If I can only do one or the other, with which one I would come out ahead?” Dear Melissa, I was just looking at the Form 2441, page 2, to see what would happen if you used the $5,000 flexible spending allowance. http://www.irs.gov/pub/irs-pdf/f2441.pdf Yup, it would wipe out your child and dependent care credit. That’s OK. The credit is only worth $600 to you, for one child ($1200 for two children). But not paying any taxes at all is worth much more! ...$375 – You save your share of Social Security 7.5% $1,250 – Your share of your IRS taxes 25% ...-0- – State taxes in Texas – 0% ————$1,625.00 – Total – So, personally, I’d opt for the cafeteria plan. But, when you file your tax return next year, try to enter the data into Form 2441 anyway. Who knows what laws will have changed by then, possibly allowing you to use some additional expenses. And remember, you can find answers to all kinds of questions about cafeteria plans and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form 2441 :: Child and Dependent Care Credit File Download (0:00 min / 0 MB) tag:odeo.com,2009-11-09,25426562 Mon, 09 Nov 2009 06:15:00 -0800 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25407486-Sale-of-Inherited-Home Today TaxMama hears from Dottie in Massachusetts with this question. “Does the maximum personal residence exclusion apply to someone who inherited a home, had it for 370 days, sold it for a long-term capital gain and received a K-1? He and his dad had lived in the home for 10 yrs previously.” Dear Dottie, First of all, you don’t receive a K-1 when you sell a home. Possibly, the escrow company sends you a 1099. If you are receiving a K-1, that means there’s an estate. The estate sold the home, not the heir. If that’s the case, the tax professional handling the estate should have provided enough information for the heir to be able to file a tax return. If they didn’t, ask them for the details. Secondly, when someone dies, there is a step-up in the basis of the home. What does that mean? The tax cost of the home becomes the current fair market value. (See Alannah Kern’s comments to yesterday’s TaxQuip – http://www.taxquips.com/index... Today TaxMama hears from Dottie in Massachusetts with this question. “Does the maximum personal residence exclusion apply to someone who inherited a home, had it for 370 days, sold it for a long-term capital gain and received a K-1? He and his dad had lived in the home for 10 yrs previously.” Dear Dottie, First of all, you don’t receive a K-1 when you sell a home. Possibly, the escrow company sends you a 1099. If you are receiving a K-1, that means there’s an estate. The estate sold the home, not the heir. If that’s the case, the tax professional handling the estate should have provided enough information for the heir to be able to file a tax return. If they didn’t, ask them for the details. Secondly, when someone dies, there is a step-up in the basis of the home. What does that mean? The tax cost of the home becomes the current fair market value. (See Alannah Kern’s comments to yesterday’s TaxQuip – http://www.taxquips.com/index.php?id=1394 ) When you sell the house within a year or so of the death, especially in the current real estate market, odds are that there will be no gain. Even when the value has risen a bit since the death, you will find that commissions and selling costs will eat up that profit. Take this year’s tax return and information to a tax professional. I suspect there will be no tax due at all. Once they see the information the tax pros will know what else to ask you to clarify the whole transaction. And remember, you can find answers to all kinds of questions about death-related tax matters and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online TaxQuip #1394 :: See Alannah Kern’s comments File Download (0:00 min / 0 MB) Today TaxMama hears from Dottie in Massachusetts with this question. “Does the maximum personal residence exclusion apply to someone who inherited a home, had it for 370 days, sold it for a long-term capital gain and received a K-1? He and his dad had lived in the home for 10 yrs previously.” Dear Dottie, First of all, you don’t receive a K-1 when you sell a home. Possibly, the escrow company sends you a 1099. If you are receiving a K-1, that means there’s an estate. The estate sold the home, not the heir. If that’s the case, the tax professional handling the estate should have provided enough information for the heir to be able to file a tax return. If they didn’t, ask them for the details. Secondly, when someone dies, there is a step-up in the basis of the home. What does that mean? The tax cost of the home becomes the current fair market value. (See Alannah Kern’s comments to yesterday’s TaxQuip – http://www.taxquips.com/index.php?id=1394 ) When you sell the house within a year or so of the death, especially in the current real estate market, odds are that there will be no gain. Even when the value has risen a bit since the death, you will find that commissions and selling costs will eat up that profit. Take this year’s tax return and information to a tax professional. I suspect there will be no tax due at all. Once they see the information the tax pros will know what else to ask you to clarify the whole transaction. And remember, you can find answers to all kinds of questions about death-related tax matters and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online TaxQuip #1394 :: See Alannah Kern’s comments File Download (0:00 min / 0 MB) tag:odeo.com,2009-11-05,25407486 Thu, 05 Nov 2009 06:06:00 -0800 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25395550-Personal-Residence-Exclusion Today TaxMama hears from Nony in California who wants to know. “My parents recently moved to a retirement community and were preparing their house for sale. Mom just died – the house was not yet on the market. Does Dad still get the $500K capital gains exemption or only $250K since Mom died before the house sold. Her name is still on the deed since her death was just a few days ago.” Dear Nony, Oh, that’s so sad. That same thing happened to my friends several years ago. Just when they were able to retire and have fun! Oh well. If there’s any way that you can sell the house this year, Dad will get the full $500,000 personal residence exclusion on their final joint tax return. However, no need to rush. California is a community property state. Odds are that the whole house got a stepped-up basis on the day your mother died. That means, that for tax purposes, the cost basis of the house is the fair market value on that day. So, even if Dad sells it next ye... Today TaxMama hears from Nony in California who wants to know. “My parents recently moved to a retirement community and were preparing their house for sale. Mom just died – the house was not yet on the market. Does Dad still get the $500K capital gains exemption or only $250K since Mom died before the house sold. Her name is still on the deed since her death was just a few days ago.” Dear Nony, Oh, that’s so sad. That same thing happened to my friends several years ago. Just when they were able to retire and have fun! Oh well. If there’s any way that you can sell the house this year, Dad will get the full $500,000 personal residence exclusion on their final joint tax return. However, no need to rush. California is a community property state. Odds are that the whole house got a stepped-up basis on the day your mother died. That means, that for tax purposes, the cost basis of the house is the fair market value on that day. So, even if Dad sells it next year, there probably won’t be any gain. If there is, his own $250,000 personal residence exclusion will absorb it. Here’s more information for folks in other states. http://www.irs.gov/publications/p523/ar02.html#en_US_publink100027542 And remember, you can find answers to all kinds of questions about death-related tax matters and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Publication 523 :: Sale of home after death of spouse File Download (0:00 min / 0 MB) Today TaxMama hears from Nony in California who wants to know. “My parents recently moved to a retirement community and were preparing their house for sale. Mom just died – the house was not yet on the market. Does Dad still get the $500K capital gains exemption or only $250K since Mom died before the house sold. Her name is still on the deed since her death was just a few days ago.” Dear Nony, Oh, that’s so sad. That same thing happened to my friends several years ago. Just when they were able to retire and have fun! Oh well. If there’s any way that you can sell the house this year, Dad will get the full $500,000 personal residence exclusion on their final joint tax return. However, no need to rush. California is a community property state. Odds are that the whole house got a stepped-up basis on the day your mother died. That means, that for tax purposes, the cost basis of the house is the fair market value on that day. So, even if Dad sells it next year, there probably won’t be any gain. If there is, his own $250,000 personal residence exclusion will absorb it. Here’s more information for folks in other states. http://www.irs.gov/publications/p523/ar02.html#en_US_publink100027542 And remember, you can find answers to all kinds of questions about death-related tax matters and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Publication 523 :: Sale of home after death of spouse File Download (0:00 min / 0 MB) tag:odeo.com,2009-11-04,25395550 Wed, 04 Nov 2009 06:20:00 -0800 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25395551-Living-in-the-UK Today TaxMama hears from Catherine in the United Kingdom. “I am a US citizen, employed by a UK employer and living and working in the UK where I pay taxes. I own an apartment in NY which I rent out. I report the rental income on my US tax return. Must I report my UK income as well?” Dear Catherine, Well that sounds like a delightful place to live. Yes, you should be reporting the UK income. Americans must report all their worldwide income. You have two ways of reporting the income: 1) Report the full income and deduct the UK taxes you pay as a credit to offset all or part of the US taxes. Remember, if you are still a NYS resident, you have to report all the income for New York State, too. And I don’t know if NYS allows for foreign tax credits or deductions. So, if you’re not planning to return to live in NY, be sure to establish yourself as a non-NYS resident. Look up their rules for residency. http://www.tax.state.ny.us/ 2) You can use the foreign earned inc... Today TaxMama hears from Catherine in the United Kingdom. “I am a US citizen, employed by a UK employer and living and working in the UK where I pay taxes. I own an apartment in NY which I rent out. I report the rental income on my US tax return. Must I report my UK income as well?” Dear Catherine, Well that sounds like a delightful place to live. Yes, you should be reporting the UK income. Americans must report all their worldwide income. You have two ways of reporting the income: 1) Report the full income and deduct the UK taxes you pay as a credit to offset all or part of the US taxes. Remember, if you are still a NYS resident, you have to report all the income for New York State, too. And I don’t know if NYS allows for foreign tax credits or deductions. So, if you’re not planning to return to live in NY, be sure to establish yourself as a non-NYS resident. Look up their rules for residency. http://www.tax.state.ny.us/ 2) You can use the foreign earned income exclusion of $91,400 (2009) That is reported on Form 2555 http://www.irs.gov/pub/irs-pdf/f2555.pdf Of course, NYS does not offer the same benefit. For more information about federal tax breaks, read this: http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html And remember, you can find answers to all kinds of questions about living overseas and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online New York State Tax website :: IRS Form 2555 :: Foreign Earned Income Exclusion IRS FAQs :: Americans Living Overseas Roger B. Adams, EA :: TaxMama's International Expert File Download (0:00 min / 0 MB) Today TaxMama hears from Catherine in the United Kingdom. “I am a US citizen, employed by a UK employer and living and working in the UK where I pay taxes. I own an apartment in NY which I rent out. I report the rental income on my US tax return. Must I report my UK income as well?” Dear Catherine, Well that sounds like a delightful place to live. Yes, you should be reporting the UK income. Americans must report all their worldwide income. You have two ways of reporting the income: 1) Report the full income and deduct the UK taxes you pay as a credit to offset all or part of the US taxes. Remember, if you are still a NYS resident, you have to report all the income for New York State, too. And I don’t know if NYS allows for foreign tax credits or deductions. So, if you’re not planning to return to live in NY, be sure to establish yourself as a non-NYS resident. Look up their rules for residency. http://www.tax.state.ny.us/ 2) You can use the foreign earned income exclusion of $91,400 (2009) That is reported on Form 2555 http://www.irs.gov/pub/irs-pdf/f2555.pdf Of course, NYS does not offer the same benefit. For more information about federal tax breaks, read this: http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html And remember, you can find answers to all kinds of questions about living overseas and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online New York State Tax website :: IRS Form 2555 :: Foreign Earned Income Exclusion IRS FAQs :: Americans Living Overseas Roger B. Adams, EA :: TaxMama's International Expert File Download (0:00 min / 0 MB) tag:odeo.com,2009-11-03,25395551 Tue, 03 Nov 2009 06:31:00 -0800 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25395552-Equitable-Owner Today TaxMama hears from Sean in North Carolina. “As I understand it you must be an owner and be liable to claim the home mortgage interest and property tax as deductions on schedule A. Now I hear you can be an equitable owner whose name is not on the mortgage and also whose name is not on the deed. Can you explain?” Hi Sean, Good question. And one that affects many people. In essence, an equitable owner is the real owner of the house, despite the fact that tile and the loan may be in someone else’s name. This is usually the case when someone doesn’t have enough credit to qualify for their own loan. A close relative or friend qualifies on their behalf. But the person or couple who have inadequate credit are the ones who live in the home and make all the payments and take care of all the upkeep. For all intents and purposes, they are the real owners of the home. They just don’t have the title to prove it. Case after case in Tax Court supports the taxpaye... Today TaxMama hears from Sean in North Carolina. “As I understand it you must be an owner and be liable to claim the home mortgage interest and property tax as deductions on schedule A. Now I hear you can be an equitable owner whose name is not on the mortgage and also whose name is not on the deed. Can you explain?” Hi Sean, Good question. And one that affects many people. In essence, an equitable owner is the real owner of the house, despite the fact that tile and the loan may be in someone else’s name. This is usually the case when someone doesn’t have enough credit to qualify for their own loan. A close relative or friend qualifies on their behalf. But the person or couple who have inadequate credit are the ones who live in the home and make all the payments and take care of all the upkeep. For all intents and purposes, they are the real owners of the home. They just don’t have the title to prove it. Case after case in Tax Court supports the taxpayer in this situation. Here is an article in the Journal of Accountancy that explains the concept more fully. They are discussing a Tax Court case where the taxpayer won. But there’s no need to drag this to Tax Court. Just get the proper paperwork done to prove your claim. You need to have title documents drawn up in the real owners’ names. And you need to have a loan document drawn up between the buyer on title and on the loan, and the real borrowers. If you didn’t do that in the beginning, you can have your attorney draw up memorialized contracts. That means you don’t back date documents illegally. You produce contracts that explain that this was the intention at the date of the purchase, and use the current dates for the signatures. And remember, you can find answers to all kinds of questions about equitable ownership and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online Journal of Accountancy Article :: Equitable Owner Equals Deduction File Download (0:00 min / 1 MB) Today TaxMama hears from Sean in North Carolina. “As I understand it you must be an owner and be liable to claim the home mortgage interest and property tax as deductions on schedule A. Now I hear you can be an equitable owner whose name is not on the mortgage and also whose name is not on the deed. Can you explain?” Hi Sean, Good question. And one that affects many people. In essence, an equitable owner is the real owner of the house, despite the fact that tile and the loan may be in someone else’s name. This is usually the case when someone doesn’t have enough credit to qualify for their own loan. A close relative or friend qualifies on their behalf. But the person or couple who have inadequate credit are the ones who live in the home and make all the payments and take care of all the upkeep. For all intents and purposes, they are the real owners of the home. They just don’t have the title to prove it. Case after case in Tax Court supports the taxpayer in this situation. Here is an article in the Journal of Accountancy that explains the concept more fully. They are discussing a Tax Court case where the taxpayer won. But there’s no need to drag this to Tax Court. Just get the proper paperwork done to prove your claim. You need to have title documents drawn up in the real owners’ names. And you need to have a loan document drawn up between the buyer on title and on the loan, and the real borrowers. If you didn’t do that in the beginning, you can have your attorney draw up memorialized contracts. That means you don’t back date documents illegally. You produce contracts that explain that this was the intention at the date of the purchase, and use the current dates for the signatures. And remember, you can find answers to all kinds of questions about equitable ownership and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online Journal of Accountancy Article :: Equitable Owner Equals Deduction File Download (0:00 min / 1 MB) tag:odeo.com,2009-11-02,25395552 Mon, 02 Nov 2009 06:03:00 -0800 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25395553-Qualifying-Person-for-HOH Today TaxMama hears from Orla in Colorado. “I have a friend who has provided full support for his girl friend who is unemployed, and her daughter who is 18 and in high school. They both have lived with him for the full year. He should be able to file head of household but can he claim them as dependents?” Dear Orla, Actually, you have it a bit backwards. He can claim them as dependents. But he cannot use head of household status. They don’t qualify as either family or qualified relatives for HOH. Sorry. BUT, since they are dependents, he can use medical deductions, education expenses, etc. [See working links in the Resource Box below] HOH rules http://www.irs.gov/publications/p17/ch02.html Qualifying Person http://www.irs.gov/publications/p17/ch02.html And remember, you can find answers to all kinds of questions about being head of household and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you&#8... Today TaxMama hears from Orla in Colorado. “I have a friend who has provided full support for his girl friend who is unemployed, and her daughter who is 18 and in high school. They both have lived with him for the full year. He should be able to file head of household but can he claim them as dependents?” Dear Orla, Actually, you have it a bit backwards. He can claim them as dependents. But he cannot use head of household status. They don’t qualify as either family or qualified relatives for HOH. Sorry. BUT, since they are dependents, he can use medical deductions, education expenses, etc. [See working links in the Resource Box below] HOH rules http://www.irs.gov/publications/p17/ch02.html Qualifying Person http://www.irs.gov/publications/p17/ch02.html And remember, you can find answers to all kinds of questions about being head of household and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Publication 17 :: Head of Household rules IRS Publication 17 :: Who Qualifies for Head of Household File Download (0:00 min / 0 MB) Today TaxMama hears from Orla in Colorado. “I have a friend who has provided full support for his girl friend who is unemployed, and her daughter who is 18 and in high school. They both have lived with him for the full year. He should be able to file head of household but can he claim them as dependents?” Dear Orla, Actually, you have it a bit backwards. He can claim them as dependents. But he cannot use head of household status. They don’t qualify as either family or qualified relatives for HOH. Sorry. BUT, since they are dependents, he can use medical deductions, education expenses, etc. [See working links in the Resource Box below] HOH rules http://www.irs.gov/publications/p17/ch02.html Qualifying Person http://www.irs.gov/publications/p17/ch02.html And remember, you can find answers to all kinds of questions about being head of household and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Publication 17 :: Head of Household rules IRS Publication 17 :: Who Qualifies for Head of Household File Download (0:00 min / 0 MB) tag:odeo.com,2009-10-29,25395553 Thu, 29 Oct 2009 06:25:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25395554-529-Contributions Today TaxMama hears from Rick in New Jersey with this stroke of genius. “I am a salaried employee for ABC company and will be doing a separate consulting engagement for another company in my spare time. I’d like to take the entire $55,000 I will earn and put it directly into a 529 college plan for my son, who is a senior and will be attending college in the fall of 2010. Do I need to report the $55K income to the IRS?” Dear Rick, That’s a brilliant strategy! Now, if only the tax code would support it. Of course you’re going to have to pay income taxes on the consulting fees. Heck, you’re even going to have to pay self-employment taxes on that money. That’s going to cost you an extra 15.3% on top of your 32% – 35% federal and state tax bracket. If you’re going to be earning that kind of money freelancing, you really need to invest in a good tax professional who can help you structure your business so that you can take the best adv... Today TaxMama hears from Rick in New Jersey with this stroke of genius. “I am a salaried employee for ABC company and will be doing a separate consulting engagement for another company in my spare time. I’d like to take the entire $55,000 I will earn and put it directly into a 529 college plan for my son, who is a senior and will be attending college in the fall of 2010. Do I need to report the $55K income to the IRS?” Dear Rick, That’s a brilliant strategy! Now, if only the tax code would support it. Of course you’re going to have to pay income taxes on the consulting fees. Heck, you’re even going to have to pay self-employment taxes on that money. That’s going to cost you an extra 15.3% on top of your 32% – 35% federal and state tax bracket. If you’re going to be earning that kind of money freelancing, you really need to invest in a good tax professional who can help you structure your business so that you can take the best advantage of deductions available to you. With a bit of good planning, you can really minimize your taxable profits and maximize the money you can set aside for your son’s college. Incidentally, contributions to IRC Sec. 529 plans are not deductible. http://www.irs.gov/newsroom/article/0,,id=213034,00.html They are simply exempt from gift tax. If your son is starting college so soon, there’s no need for the complexities and restrictions of the 529 plan. You’re better off paying his tuition and taking advantage of some of the higher education deductions or credits in the ARRA. http://www.irs.gov/newsroom/article/0,,id=213044,00.html And remember, you can find answers to all kinds of questions about being self-employed, 529 plans and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Information :: abou 529 Plans - video and audio available IRS Information :: Tax Benefits for Education: Information Center -- video and audio available File Download (0:00 min / 1 MB) Today TaxMama hears from Rick in New Jersey with this stroke of genius. “I am a salaried employee for ABC company and will be doing a separate consulting engagement for another company in my spare time. I’d like to take the entire $55,000 I will earn and put it directly into a 529 college plan for my son, who is a senior and will be attending college in the fall of 2010. Do I need to report the $55K income to the IRS?” Dear Rick, That’s a brilliant strategy! Now, if only the tax code would support it. Of course you’re going to have to pay income taxes on the consulting fees. Heck, you’re even going to have to pay self-employment taxes on that money. That’s going to cost you an extra 15.3% on top of your 32% – 35% federal and state tax bracket. If you’re going to be earning that kind of money freelancing, you really need to invest in a good tax professional who can help you structure your business so that you can take the best advantage of deductions available to you. With a bit of good planning, you can really minimize your taxable profits and maximize the money you can set aside for your son’s college. Incidentally, contributions to IRC Sec. 529 plans are not deductible. http://www.irs.gov/newsroom/article/0,,id=213034,00.html They are simply exempt from gift tax. If your son is starting college so soon, there’s no need for the complexities and restrictions of the 529 plan. You’re better off paying his tuition and taking advantage of some of the higher education deductions or credits in the ARRA. http://www.irs.gov/newsroom/article/0,,id=213044,00.html And remember, you can find answers to all kinds of questions about being self-employed, 529 plans and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Information :: abou 529 Plans - video and audio available IRS Information :: Tax Benefits for Education: Information Center -- video and audio available File Download (0:00 min / 1 MB) tag:odeo.com,2009-10-28,25395554 Wed, 28 Oct 2009 06:20:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25395555-Cashing-Out-Retirement Today TaxMama hears from Jessie in California, who’s broke. “ I am 22 years old and unemployed. I recently hit a financial snag and am really considering cashing out my 401(k) plans. In total it would amount to $4,995.85. Because of state and federal taxes as well as the fee for cashing out early, how much of that money would I actually see once its deposited into my account?” Dear Jessie, Surely, you can find some work, however beneath you, to cover your fixed living expenses? I cannot imagine being 22, healthy, and smart and not finding anything at all – even if it’s as onerous as phone soliciting or washing dishes. I know the market’s rough out there. But if you want to work, there is always something to find. Just knock on doors at local businesses. You’d be surprised. Sometimes, you’ve knocked at exactly the right moment! Of course, if you’re collecting unemployment, there’s no incentive to look for menial work. Unempl... Today TaxMama hears from Jessie in California, who’s broke. “ I am 22 years old and unemployed. I recently hit a financial snag and am really considering cashing out my 401(k) plans. In total it would amount to $4,995.85. Because of state and federal taxes as well as the fee for cashing out early, how much of that money would I actually see once its deposited into my account?” Dear Jessie, Surely, you can find some work, however beneath you, to cover your fixed living expenses? I cannot imagine being 22, healthy, and smart and not finding anything at all – even if it’s as onerous as phone soliciting or washing dishes. I know the market’s rough out there. But if you want to work, there is always something to find. Just knock on doors at local businesses. You’d be surprised. Sometimes, you’ve knocked at exactly the right moment! Of course, if you’re collecting unemployment, there’s no incentive to look for menial work. Unemployment pays better. So, how much will drawing the 401(k) prematurely cost you? I don’t know. That will depend on your tax bracket this year. However, this I know for sure. Your early withdrawal penalties will be 12.5% (IRS 10% – CA 2.5%) – that’s about $625.00 (rounded) . Your income taxes on the funds will be higher than you think for IRS. You see, the unemployment you collect is taxable on your federal tax return. It’s not taxable for California. But let’s say you are only in a 10% bracket for IRS. You probably won’t owe any state taxes at that level. So your income tax would be an additional $500.00. Expect to lose about $1125.00 + whatever fees your investment company charges. If you’re in higher tax bracket, the taxes could run as high as 30% – so you would lose over 42% of your money – nearly half of it! Is it still worth it? If not, consider using a 0% credit card – if your credit is still good. They will charge you about 3% as a cash advance fee. But that’s still far less than 25% – 42%, don’t you think? Check with your own credit card company to see if they can offer you a cash advance or balance transfer at 0%. If not, visit TaxMama’s Credit Card Center. http://www.cardoffers.com/partners/links/cpa/all.asp?tempid=339850 Use the search tool at the bottom of the page to search for cards with 0% interest. Besides losing 25% of your savings, if you can somehow manage to leave your retirement savings alone, they will continue to grow, in the long run. If you start making a habit of tapping into retirement funds every time life hits a snag, you’ll never have anything left when you retire. You’re young. Find work. Good luck! And remember, you can find answers to all kinds of questions about drawing on retirement funds and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online TaxMama's Credit Card Center :: Use the search tool at the bottom of the page to search for cards with 0% interest. File Download (0:00 min / 1 MB) Today TaxMama hears from Jessie in California, who’s broke. “ I am 22 years old and unemployed. I recently hit a financial snag and am really considering cashing out my 401(k) plans. In total it would amount to $4,995.85. Because of state and federal taxes as well as the fee for cashing out early, how much of that money would I actually see once its deposited into my account?” Dear Jessie, Surely, you can find some work, however beneath you, to cover your fixed living expenses? I cannot imagine being 22, healthy, and smart and not finding anything at all – even if it’s as onerous as phone soliciting or washing dishes. I know the market’s rough out there. But if you want to work, there is always something to find. Just knock on doors at local businesses. You’d be surprised. Sometimes, you’ve knocked at exactly the right moment! Of course, if you’re collecting unemployment, there’s no incentive to look for menial work. Unemployment pays better. So, how much will drawing the 401(k) prematurely cost you? I don’t know. That will depend on your tax bracket this year. However, this I know for sure. Your early withdrawal penalties will be 12.5% (IRS 10% – CA 2.5%) – that’s about $625.00 (rounded) . Your income taxes on the funds will be higher than you think for IRS. You see, the unemployment you collect is taxable on your federal tax return. It’s not taxable for California. But let’s say you are only in a 10% bracket for IRS. You probably won’t owe any state taxes at that level. So your income tax would be an additional $500.00. Expect to lose about $1125.00 + whatever fees your investment company charges. If you’re in higher tax bracket, the taxes could run as high as 30% – so you would lose over 42% of your money – nearly half of it! Is it still worth it? If not, consider using a 0% credit card – if your credit is still good. They will charge you about 3% as a cash advance fee. But that’s still far less than 25% – 42%, don’t you think? Check with your own credit card company to see if they can offer you a cash advance or balance transfer at 0%. If not, visit TaxMama’s Credit Card Center. http://www.cardoffers.com/partners/links/cpa/all.asp?tempid=339850 Use the search tool at the bottom of the page to search for cards with 0% interest. Besides losing 25% of your savings, if you can somehow manage to leave your retirement savings alone, they will continue to grow, in the long run. If you start making a habit of tapping into retirement funds every time life hits a snag, you’ll never have anything left when you retire. You’re young. Find work. Good luck! And remember, you can find answers to all kinds of questions about drawing on retirement funds and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online TaxMama's Credit Card Center :: Use the search tool at the bottom of the page to search for cards with 0% interest. File Download (0:00 min / 1 MB) tag:odeo.com,2009-10-27,25395555 Tue, 27 Oct 2009 05:25:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25377041-Husband-co-signed Today TaxMama hears from Nancy in Florida with this problem. “I am a first time home buyer. My husband co-signed for someone 4 years ago. That house was never his primary residence. We can prove it with lease papers from our apartment. My house mortgage is only on my name. My husband is in the deed because we are married. Can I get the first time homebuyer credit?” Dear Nancy, Life is so much more complicated than the Legislature could have imagined. But, yes, you and your husband are qualified for the full first-time homebuyers credit. Your husband is a brave and generous fellow. He has never lived in the home. The provisions of the law allow you to own other real estate, including rentals, vacation homes, offices – even to co-sign for someone. As long as the house was never your husband’s primary residence, no problem. So, do save the proof you had. Before you file for it, read today’s TaxWatch column in MarketWatch.com. It should go live on the site ... Today TaxMama hears from Nancy in Florida with this problem. “I am a first time home buyer. My husband co-signed for someone 4 years ago. That house was never his primary residence. We can prove it with lease papers from our apartment. My house mortgage is only on my name. My husband is in the deed because we are married. Can I get the first time homebuyer credit?” Dear Nancy, Life is so much more complicated than the Legislature could have imagined. But, yes, you and your husband are qualified for the full first-time homebuyers credit. Your husband is a brave and generous fellow. He has never lived in the home. The provisions of the law allow you to own other real estate, including rentals, vacation homes, offices – even to co-sign for someone. As long as the house was never your husband’s primary residence, no problem. So, do save the proof you had. Before you file for it, read today’s TaxWatch column in MarketWatch.com. It should go live on the site by 11:00 am EST today. You can either subscribe to TaxWatch, or just go to my columns. http://www.marketwatch.com/Journalists/Eva_Rosenberg And remember, you can find answers to all kinds of questions about the first time homebuyers credit and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online TaxMama's MarketWatch Column :: Look for the first time home buyer credit article today File Download (0:00 min / 0.3 MB) Today TaxMama hears from Nancy in Florida with this problem. “I am a first time home buyer. My husband co-signed for someone 4 years ago. That house was never his primary residence. We can prove it with lease papers from our apartment. My house mortgage is only on my name. My husband is in the deed because we are married. Can I get the first time homebuyer credit?” Dear Nancy, Life is so much more complicated than the Legislature could have imagined. But, yes, you and your husband are qualified for the full first-time homebuyers credit. Your husband is a brave and generous fellow. He has never lived in the home. The provisions of the law allow you to own other real estate, including rentals, vacation homes, offices – even to co-sign for someone. As long as the house was never your husband’s primary residence, no problem. So, do save the proof you had. Before you file for it, read today’s TaxWatch column in MarketWatch.com. It should go live on the site by 11:00 am EST today. You can either subscribe to TaxWatch, or just go to my columns. http://www.marketwatch.com/Journalists/Eva_Rosenberg And remember, you can find answers to all kinds of questions about the first time homebuyers credit and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online TaxMama's MarketWatch Column :: Look for the first time home buyer credit article today File Download (0:00 min / 0.3 MB) tag:odeo.com,2009-10-26,25377041 Mon, 26 Oct 2009 06:11:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25347440-2009-Home-Purchase Today TaxMama hears from Ray in Kansas who tells us. “My wife and I were first time home buyers on 08/20/09. We have been informed that if we amend our 2008 taxes, the first time home buyers credit will be treated as an interest-free loan that will have to be paid back. But if we claim it on our 2009 taxes it will not have to be paid back. Can you help clarify this question?” Dear Ray, Whoever you spoke to gave you ridiculous information. If you bought a home this year, you get 10% of the purchase price, up to $8000 as a tax-free gift. It’s not a loan. Yes, you may amend your 2008 tax return to get the refund – and it will still be tax-free. Not a loan. Good thing you asked, though. I don’t advise you to amend your 2008 tax return. IRS is now taking about 20 weeks to process the amended returns. You’ll get the money faster if you just file for it on your 2009 tax return. Be sure to file early. For more information, watch for this month’s Tax... Today TaxMama hears from Ray in Kansas who tells us. “My wife and I were first time home buyers on 08/20/09. We have been informed that if we amend our 2008 taxes, the first time home buyers credit will be treated as an interest-free loan that will have to be paid back. But if we claim it on our 2009 taxes it will not have to be paid back. Can you help clarify this question?” Dear Ray, Whoever you spoke to gave you ridiculous information. If you bought a home this year, you get 10% of the purchase price, up to $8000 as a tax-free gift. It’s not a loan. Yes, you may amend your 2008 tax return to get the refund – and it will still be tax-free. Not a loan. Good thing you asked, though. I don’t advise you to amend your 2008 tax return. IRS is now taking about 20 weeks to process the amended returns. You’ll get the money faster if you just file for it on your 2009 tax return. Be sure to file early. For more information, watch for this month’s TaxWatch article on MarketWatch.com And remember, you can find answers to all kinds of questions about the first time homebuyers credit and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online MarketWatch.com :: TaxMama's TaxWatch column File Download (0:00 min / 0 MB) Today TaxMama hears from Ray in Kansas who tells us. “My wife and I were first time home buyers on 08/20/09. We have been informed that if we amend our 2008 taxes, the first time home buyers credit will be treated as an interest-free loan that will have to be paid back. But if we claim it on our 2009 taxes it will not have to be paid back. Can you help clarify this question?” Dear Ray, Whoever you spoke to gave you ridiculous information. If you bought a home this year, you get 10% of the purchase price, up to $8000 as a tax-free gift. It’s not a loan. Yes, you may amend your 2008 tax return to get the refund – and it will still be tax-free. Not a loan. Good thing you asked, though. I don’t advise you to amend your 2008 tax return. IRS is now taking about 20 weeks to process the amended returns. You’ll get the money faster if you just file for it on your 2009 tax return. Be sure to file early. For more information, watch for this month’s TaxWatch article on MarketWatch.com And remember, you can find answers to all kinds of questions about the first time homebuyers credit and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online MarketWatch.com :: TaxMama's TaxWatch column File Download (0:00 min / 0 MB) tag:odeo.com,2009-10-22,25347440 Thu, 22 Oct 2009 06:09:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25325038-IPO-profits Today TaxMama hears from Sam in New Jersey with this question. “My company did an IPO this year and I will quadruple my income based on my sale of stocks. These were options I exercised years ago, before the IPO. The exercise price was 1/20th of the sales price. How do I minimize my taxes on this windfall?” Dear Sam, Well, I’ve got good news for you. You already did the best thing you could have – you exercised the options and turned the profits from the IPO sales into long-term capital gains. The current LTCG rates range from 0% – 15% for IRS. (I don’t know what they are for NJ). So your taxes are already relatively low. What you may want to do – and should have done before selling the shares during the IPO, was to meet with your own tax advisor. There’s a lot of money at stake. You still have time to do some planning. If you don’t already have someone, you can find a someone terrific by using the Find an Enrolled Agent tool at ... Today TaxMama hears from Sam in New Jersey with this question. “My company did an IPO this year and I will quadruple my income based on my sale of stocks. These were options I exercised years ago, before the IPO. The exercise price was 1/20th of the sales price. How do I minimize my taxes on this windfall?” Dear Sam, Well, I’ve got good news for you. You already did the best thing you could have – you exercised the options and turned the profits from the IPO sales into long-term capital gains. The current LTCG rates range from 0% – 15% for IRS. (I don’t know what they are for NJ). So your taxes are already relatively low. What you may want to do – and should have done before selling the shares during the IPO, was to meet with your own tax advisor. There’s a lot of money at stake. You still have time to do some planning. If you don’t already have someone, you can find a someone terrific by using the Find an Enrolled Agent tool at www.naea.org or the Find a CPA tool buried in Consumer Information at www.aicpa.org . Someone should sit down with you and look at your overall finances, investments and tax issues to help you take some actions to reduce the tax impact. Incidentally, you may need to make an estimated tax payment to cover the additional taxes. Of course, if the sale was months ago, you maybe able to change your withholding dramatically for the next few pay periods to make up for this. Your tax advisor can help. One last note – your sale may qualify for some of the special treatment for gains on Qualified Small Business Stocks. http://www.irs.gov/publications/p550/ch04.html#en_US_publink100010688 Your tax pro may want to take advantage of this for you. Before using it, run the numbers, including the alternative minimum tax, on the transaction. You may be better off not using this tax benefit. And remember, you can find answers to all kinds of questions about employee stock options and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 1 MB) Today TaxMama hears from Sam in New Jersey with this question. “My company did an IPO this year and I will quadruple my income based on my sale of stocks. These were options I exercised years ago, before the IPO. The exercise price was 1/20th of the sales price. How do I minimize my taxes on this windfall?” Dear Sam, Well, I’ve got good news for you. You already did the best thing you could have – you exercised the options and turned the profits from the IPO sales into long-term capital gains. The current LTCG rates range from 0% – 15% for IRS. (I don’t know what they are for NJ). So your taxes are already relatively low. What you may want to do – and should have done before selling the shares during the IPO, was to meet with your own tax advisor. There’s a lot of money at stake. You still have time to do some planning. If you don’t already have someone, you can find a someone terrific by using the Find an Enrolled Agent tool at www.naea.org or the Find a CPA tool buried in Consumer Information at www.aicpa.org . Someone should sit down with you and look at your overall finances, investments and tax issues to help you take some actions to reduce the tax impact. Incidentally, you may need to make an estimated tax payment to cover the additional taxes. Of course, if the sale was months ago, you maybe able to change your withholding dramatically for the next few pay periods to make up for this. Your tax advisor can help. One last note – your sale may qualify for some of the special treatment for gains on Qualified Small Business Stocks. http://www.irs.gov/publications/p550/ch04.html#en_US_publink100010688 Your tax pro may want to take advantage of this for you. Before using it, run the numbers, including the alternative minimum tax, on the transaction. You may be better off not using this tax benefit. And remember, you can find answers to all kinds of questions about employee stock options and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 1 MB) tag:odeo.com,2009-10-21,25325038 Wed, 21 Oct 2009 06:03:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25317056-Video-Rentals Today TaxMama hears from A.H. in California who is frustrated. “How does one classify video rental inventory in accounting software? This is inventory that depreciates very quickly – the cost of a DVD from a distributor is $17 on average, to have it the day it comes out; but after just 3 months they are worth less than $1. I can’t find any IRS rule specifically for video rental stores.” Dear A.H., Ah, then you’re not looking hard enough. You’re not the only one running a business like this. In fact, IRS has an audit guide for your specific industry. http://www.irs.gov/businesses/small/article/0,,id=141492,00.html This link to expenses, describes the depreciation life and method IRS will accept for your videos – straight line over 3 to 5 years. http://www.irs.gov/businesses/small/article/0,,id=141492,00.html#expenses To learn more about how IRS sees your business, take the time to read the entire audit guide. It’s not that long. And it ... Today TaxMama hears from A.H. in California who is frustrated. “How does one classify video rental inventory in accounting software? This is inventory that depreciates very quickly – the cost of a DVD from a distributor is $17 on average, to have it the day it comes out; but after just 3 months they are worth less than $1. I can’t find any IRS rule specifically for video rental stores.” Dear A.H., Ah, then you’re not looking hard enough. You’re not the only one running a business like this. In fact, IRS has an audit guide for your specific industry. http://www.irs.gov/businesses/small/article/0,,id=141492,00.html This link to expenses, describes the depreciation life and method IRS will accept for your videos – straight line over 3 to 5 years. http://www.irs.gov/businesses/small/article/0,,id=141492,00.html#expenses To learn more about how IRS sees your business, take the time to read the entire audit guide. It’s not that long. And it will give you some special insights on how to stay out of trouble. Did you know that IRS publishes audit guides for several industries? You can look up yours here: http://www.irs.gov/businesses/small/article/0,,id=141373,00.html And remember, you can find answers to all kinds of questions about your industry and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Audit Guide :: Video Rental Businesses IRS guidelines :: Depreciating Videos in a rental business IRS Audit Guides for more industries :: File Download (0:00 min / 0 MB) Today TaxMama hears from A.H. in California who is frustrated. “How does one classify video rental inventory in accounting software? This is inventory that depreciates very quickly – the cost of a DVD from a distributor is $17 on average, to have it the day it comes out; but after just 3 months they are worth less than $1. I can’t find any IRS rule specifically for video rental stores.” Dear A.H., Ah, then you’re not looking hard enough. You’re not the only one running a business like this. In fact, IRS has an audit guide for your specific industry. http://www.irs.gov/businesses/small/article/0,,id=141492,00.html This link to expenses, describes the depreciation life and method IRS will accept for your videos – straight line over 3 to 5 years. http://www.irs.gov/businesses/small/article/0,,id=141492,00.html#expenses To learn more about how IRS sees your business, take the time to read the entire audit guide. It’s not that long. And it will give you some special insights on how to stay out of trouble. Did you know that IRS publishes audit guides for several industries? You can look up yours here: http://www.irs.gov/businesses/small/article/0,,id=141373,00.html And remember, you can find answers to all kinds of questions about your industry and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Audit Guide :: Video Rental Businesses IRS guidelines :: Depreciating Videos in a rental business IRS Audit Guides for more industries :: File Download (0:00 min / 0 MB) tag:odeo.com,2009-10-20,25317056 Tue, 20 Oct 2009 05:53:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25313056-Investment-Advice Today TaxMama hears from Anne in Minnesota with this question. “With a $10,000 CD maturing, am I better off paying down the $40,000 mortgage on my condo; or to reinvest in some other vehicle? I am almost 70 years old and do not have much more than an additional few thousand dollars saved for whenever I retire, which I have no plans of doing.” Dear Anne, I can understand the temptation to pay down your mortgage. And since anything you invest in will probably not pay as much as the interest on your mortgage loan, it’s even more tempting. So let’s look at your benefit from doing that. 1) You pay less interest on your mortgage overall. 2) You effectively earn an extra percent or two or three on your money. On $10,000 that could be worth as much as $300 per year. That’s enough to pay for dinner for two at a modestly priced restaurant each month. Disadvantages? 1) Your mortgage payment does not go down. So you don’t really get the extra $300 in your poc... Today TaxMama hears from Anne in Minnesota with this question. “With a $10,000 CD maturing, am I better off paying down the $40,000 mortgage on my condo; or to reinvest in some other vehicle? I am almost 70 years old and do not have much more than an additional few thousand dollars saved for whenever I retire, which I have no plans of doing.” Dear Anne, I can understand the temptation to pay down your mortgage. And since anything you invest in will probably not pay as much as the interest on your mortgage loan, it’s even more tempting. So let’s look at your benefit from doing that. 1) You pay less interest on your mortgage overall. 2) You effectively earn an extra percent or two or three on your money. On $10,000 that could be worth as much as $300 per year. That’s enough to pay for dinner for two at a modestly priced restaurant each month. Disadvantages? 1) Your mortgage payment does not go down. So you don’t really get the extra $300 in your pocket for the year. 2) If you need money in an emergency, at your age, in this bizarre banking economy, it’s not going to be easy to get a loan, even against a home with a great deal of equity. What would I do at your age? If I were on a fixed income with no prospects of the income increasing, I’d stay liquid. I’d rather have access to my money more quickly and easily, than reduce a mortgage, without reducing the monthly payment. Of course, when I reach your age, I expect to still be productive and earning money, like you. In that case, I’d pay off the mortgage in full as soon as I could. But I would do it all off in one lump sum so the payments stop entirely. In the meantime, I would increase my monthly payment, so the loan pays off more quickly. In fact, that’s what we’re doing. As a result, our 30-year mortgage will be paid off in about 17 years. What would I do with the savings, though? Like you, I’d probably keep it in something insured, providing a fixed rate of return – or Blue Chip stocks. Although the market is improving, mutual funds are still surprisingly volatile, considering they are managed by ‘experts’ getting paid really well to stay informed about their investment choices. You might consider speaking with a financial advisor to see if you can get a higher rate of return somewhere, with security. Or stick with what you know and be safe. Take care of yourself – and enjoy every day. And remember, you can find answers to all kinds of questions about using money and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Disclaimer: TaxMama does not offer specific investment advice. That’s what stockbrokers and Certified Financial Planners do. Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 1 MB) Today TaxMama hears from Anne in Minnesota with this question. “With a $10,000 CD maturing, am I better off paying down the $40,000 mortgage on my condo; or to reinvest in some other vehicle? I am almost 70 years old and do not have much more than an additional few thousand dollars saved for whenever I retire, which I have no plans of doing.” Dear Anne, I can understand the temptation to pay down your mortgage. And since anything you invest in will probably not pay as much as the interest on your mortgage loan, it’s even more tempting. So let’s look at your benefit from doing that. 1) You pay less interest on your mortgage overall. 2) You effectively earn an extra percent or two or three on your money. On $10,000 that could be worth as much as $300 per year. That’s enough to pay for dinner for two at a modestly priced restaurant each month. Disadvantages? 1) Your mortgage payment does not go down. So you don’t really get the extra $300 in your pocket for the year. 2) If you need money in an emergency, at your age, in this bizarre banking economy, it’s not going to be easy to get a loan, even against a home with a great deal of equity. What would I do at your age? If I were on a fixed income with no prospects of the income increasing, I’d stay liquid. I’d rather have access to my money more quickly and easily, than reduce a mortgage, without reducing the monthly payment. Of course, when I reach your age, I expect to still be productive and earning money, like you. In that case, I’d pay off the mortgage in full as soon as I could. But I would do it all off in one lump sum so the payments stop entirely. In the meantime, I would increase my monthly payment, so the loan pays off more quickly. In fact, that’s what we’re doing. As a result, our 30-year mortgage will be paid off in about 17 years. What would I do with the savings, though? Like you, I’d probably keep it in something insured, providing a fixed rate of return – or Blue Chip stocks. Although the market is improving, mutual funds are still surprisingly volatile, considering they are managed by ‘experts’ getting paid really well to stay informed about their investment choices. You might consider speaking with a financial advisor to see if you can get a higher rate of return somewhere, with security. Or stick with what you know and be safe. Take care of yourself – and enjoy every day. And remember, you can find answers to all kinds of questions about using money and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Disclaimer: TaxMama does not offer specific investment advice. That’s what stockbrokers and Certified Financial Planners do. Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 1 MB) tag:odeo.com,2009-10-19,25313056 Mon, 19 Oct 2009 06:21:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25290390-Roth-Basis-of-Worthless-Stock Today TaxMama hears from Gary in Oregon who wants to know. “I have asked 2-3 tax professionals the same question with different answers. So mama help me! I have 2 IRA’s. In one IRA I bought a stock 4 years ago that is now worthless. I do believe that some day this could become a performing asset. If I transfer the stock to a ROTH in 2010. Do I use the basis or FMV of the stock for the conversion?” Hi Gary, What are you doing, taking a poll? You’ll use the answer you want – or the one you get most frequently… or? That’s an interesting idea. Transfer a stock worth little or nothing to your Roth – and have it rebound. Hmmm…It’s an excellent idea. However, I don’t think you can transfer stock. Don’t you have to sell it, then re-buy it? Either way, you’re looking at the fair market value, not the basis, when you are looking at distributions from the IRA. The 1099-R that your administrator will issue will be bas... Today TaxMama hears from Gary in Oregon who wants to know. “I have asked 2-3 tax professionals the same question with different answers. So mama help me! I have 2 IRA’s. In one IRA I bought a stock 4 years ago that is now worthless. I do believe that some day this could become a performing asset. If I transfer the stock to a ROTH in 2010. Do I use the basis or FMV of the stock for the conversion?” Hi Gary, What are you doing, taking a poll? You’ll use the answer you want – or the one you get most frequently… or? That’s an interesting idea. Transfer a stock worth little or nothing to your Roth – and have it rebound. Hmmm…It’s an excellent idea. However, I don’t think you can transfer stock. Don’t you have to sell it, then re-buy it? Either way, you’re looking at the fair market value, not the basis, when you are looking at distributions from the IRA. The 1099-R that your administrator will issue will be based on the FMV. Call them and ask them what they will do. Wouldn’t that give you the most definitive answer? And remember, you can find answers to all kinds of questions about Roth conversions and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) Today TaxMama hears from Gary in Oregon who wants to know. “I have asked 2-3 tax professionals the same question with different answers. So mama help me! I have 2 IRA’s. In one IRA I bought a stock 4 years ago that is now worthless. I do believe that some day this could become a performing asset. If I transfer the stock to a ROTH in 2010. Do I use the basis or FMV of the stock for the conversion?” Hi Gary, What are you doing, taking a poll? You’ll use the answer you want – or the one you get most frequently… or? That’s an interesting idea. Transfer a stock worth little or nothing to your Roth – and have it rebound. Hmmm…It’s an excellent idea. However, I don’t think you can transfer stock. Don’t you have to sell it, then re-buy it? Either way, you’re looking at the fair market value, not the basis, when you are looking at distributions from the IRA. The 1099-R that your administrator will issue will be based on the FMV. Call them and ask them what they will do. Wouldn’t that give you the most definitive answer? And remember, you can find answers to all kinds of questions about Roth conversions and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) tag:odeo.com,2009-10-15,25290390 Thu, 15 Oct 2009 05:58:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25284509-Online-Investing Today TaxMama hears from Mike in New York City who wants to know. “Is online investing safe for buying CDs, Money Market accounts, or an IRA based CD?” Dear Michael, It’s as safe any offline investing. If you pick the wrong company, you will lose your money. If you pick reputable companies, you won’t. So be sure not invest online with anyone you’ve never heard of. And remember, you can find answers to all kinds of questions about online shopping and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online Certified Financial Planners :: Where you can find trained investment advisors File Download (0:00 min / 0 MB) Today TaxMama hears from Mike in New York City who wants to know. “Is online investing safe for buying CDs, Money Market accounts, or an IRA based CD?” Dear Michael, It’s as safe any offline investing. If you pick the wrong company, you will lose your money. If you pick reputable companies, you won’t. So be sure not invest online with anyone you’ve never heard of. And remember, you can find answers to all kinds of questions about online shopping and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online Certified Financial Planners :: Where you can find trained investment advisors File Download (0:00 min / 0 MB) Today TaxMama hears from Mike in New York City who wants to know. “Is online investing safe for buying CDs, Money Market accounts, or an IRA based CD?” Dear Michael, It’s as safe any offline investing. If you pick the wrong company, you will lose your money. If you pick reputable companies, you won’t. So be sure not invest online with anyone you’ve never heard of. And remember, you can find answers to all kinds of questions about online shopping and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online Certified Financial Planners :: Where you can find trained investment advisors File Download (0:00 min / 0 MB) tag:odeo.com,2009-10-14,25284509 Wed, 14 Oct 2009 06:09:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25297330-Change-in-Accounting-Method Today TaxMama hears from Rick in South Carolina with this question. “We have a small business producing conveyor replacement parts. We believe our physical inventory is grossly under valued. How can we re-evaluate this inventory and what permission do we need from the IRS?” Hi Rick, Personally, I’ve never done this before. So, if I were you, I’d look for someone who has. In this case, it’s likely to be a CPA, rather than an Enrolled Agent, since this is more of an accounting issue than a tax issue. Visit www.aicpa.org to find a CPA locally. You would use Form 3115 to request approval http://www.irs.gov/pub/irs-pdf/f3115.pdf . You can find the instructions here. http://www.irs.gov/pub/irs-pdf/i3115.pdf . There may be a fee for this from IRS, I am not sure. Who knows, if you read the instructions, perhaps you can figure out how to do this yourself? Good luck! And remember, you can find answers to all kinds of questions about changing accounting methods an... Today TaxMama hears from Rick in South Carolina with this question. “We have a small business producing conveyor replacement parts. We believe our physical inventory is grossly under valued. How can we re-evaluate this inventory and what permission do we need from the IRS?” Hi Rick, Personally, I’ve never done this before. So, if I were you, I’d look for someone who has. In this case, it’s likely to be a CPA, rather than an Enrolled Agent, since this is more of an accounting issue than a tax issue. Visit www.aicpa.org to find a CPA locally. You would use Form 3115 to request approval http://www.irs.gov/pub/irs-pdf/f3115.pdf . You can find the instructions here. http://www.irs.gov/pub/irs-pdf/i3115.pdf . There may be a fee for this from IRS, I am not sure. Who knows, if you read the instructions, perhaps you can figure out how to do this yourself? Good luck! And remember, you can find answers to all kinds of questions about changing accounting methods and periods and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form 3115 :: Application for Change in Accounting Method Instructions for IRS Form 3115 :: AICPA :: To find a local CPA NAEA :: To find a local Enrolled Agent CSEA :: To find an Enrolled Agent in California File Download (0:00 min / 0 MB) Today TaxMama hears from Rick in South Carolina with this question. “We have a small business producing conveyor replacement parts. We believe our physical inventory is grossly under valued. How can we re-evaluate this inventory and what permission do we need from the IRS?” Hi Rick, Personally, I’ve never done this before. So, if I were you, I’d look for someone who has. In this case, it’s likely to be a CPA, rather than an Enrolled Agent, since this is more of an accounting issue than a tax issue. Visit www.aicpa.org to find a CPA locally. You would use Form 3115 to request approval http://www.irs.gov/pub/irs-pdf/f3115.pdf . You can find the instructions here. http://www.irs.gov/pub/irs-pdf/i3115.pdf . There may be a fee for this from IRS, I am not sure. Who knows, if you read the instructions, perhaps you can figure out how to do this yourself? Good luck! And remember, you can find answers to all kinds of questions about changing accounting methods and periods and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form 3115 :: Application for Change in Accounting Method Instructions for IRS Form 3115 :: AICPA :: To find a local CPA NAEA :: To find a local Enrolled Agent CSEA :: To find an Enrolled Agent in California File Download (0:00 min / 0 MB) tag:odeo.com,2009-10-13,25297330 Tue, 13 Oct 2009 06:18:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25273839-Penalties-are-not-Taxes Today TaxMama hears from Mike in North Carolina who just won – nothing. “ I recently got the penalties for a 1999 tax return abated. The IRS claims that any penalties over two years old are not refundable and referred to IRS publication 556. I contend penalties are not overpaid taxes and therefore are refundable. Who is right?” Dear Mike, Congratulations on getting your penalties abated. That’s not the easiest thing to do. But what took you so long? It’s 10 years later? Why would you think IRS is lying to you about the refundability of your payment? They are not. You can get refunds on taxes, penalties or interest paid for up to two years after you pay them, or up to three years after the return, amendment or revision is made. You could have gotten around that by: a) Not paying the penalty and keeping the collections actions on hold until the issue was resolved. b) Paying the penalty, but as a deposit, instead of a payment. Deposits are always refundabl... Today TaxMama hears from Mike in North Carolina who just won – nothing. “ I recently got the penalties for a 1999 tax return abated. The IRS claims that any penalties over two years old are not refundable and referred to IRS publication 556. I contend penalties are not overpaid taxes and therefore are refundable. Who is right?” Dear Mike, Congratulations on getting your penalties abated. That’s not the easiest thing to do. But what took you so long? It’s 10 years later? Why would you think IRS is lying to you about the refundability of your payment? They are not. You can get refunds on taxes, penalties or interest paid for up to two years after you pay them, or up to three years after the return, amendment or revision is made. You could have gotten around that by: a) Not paying the penalty and keeping the collections actions on hold until the issue was resolved. b) Paying the penalty, but as a deposit, instead of a payment. Deposits are always refundable. But you don’t earn interest on the money. c) Filing a protective claim for refund, every two years, until the case was resolved. I don’t think you will succeed, but you can always try to file a claim for refund on those penalties, using Form 843. http://www.irs.gov/pub/irs-pdf/f843.pdf Read the instructions to Form 843 carefully. Perhaps you will find some extenuating circumstances that will allow IRS to issue your refund. http://www.irs.gov/pub/irs-pdf/i843.pdf Good luck! And remember, you can find answers to all kinds of questions about getting refunds and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form 843 :: Claim for Refund Instructions for IRS Form 843 :: IRS Publication 556 :: Examination of Returns, Appeals Rights and Claims for Refunds File Download (0:00 min / 0 MB) Today TaxMama hears from Mike in North Carolina who just won – nothing. “ I recently got the penalties for a 1999 tax return abated. The IRS claims that any penalties over two years old are not refundable and referred to IRS publication 556. I contend penalties are not overpaid taxes and therefore are refundable. Who is right?” Dear Mike, Congratulations on getting your penalties abated. That’s not the easiest thing to do. But what took you so long? It’s 10 years later? Why would you think IRS is lying to you about the refundability of your payment? They are not. You can get refunds on taxes, penalties or interest paid for up to two years after you pay them, or up to three years after the return, amendment or revision is made. You could have gotten around that by: a) Not paying the penalty and keeping the collections actions on hold until the issue was resolved. b) Paying the penalty, but as a deposit, instead of a payment. Deposits are always refundable. But you don’t earn interest on the money. c) Filing a protective claim for refund, every two years, until the case was resolved. I don’t think you will succeed, but you can always try to file a claim for refund on those penalties, using Form 843. http://www.irs.gov/pub/irs-pdf/f843.pdf Read the instructions to Form 843 carefully. Perhaps you will find some extenuating circumstances that will allow IRS to issue your refund. http://www.irs.gov/pub/irs-pdf/i843.pdf Good luck! And remember, you can find answers to all kinds of questions about getting refunds and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form 843 :: Claim for Refund Instructions for IRS Form 843 :: IRS Publication 556 :: Examination of Returns, Appeals Rights and Claims for Refunds File Download (0:00 min / 0 MB) tag:odeo.com,2009-10-12,25273839 Mon, 12 Oct 2009 06:15:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25254233-COBRA-Assistance-Repayment Today TaxMama hears from Dan in Massachusetts with this question. “The new COBRA premium assistance is phased out if the employee’s AGI is greater then $145K. It must be paid back when the employee files their taxes. How does the employee know what the premium assistance was?” Hi Dan, When the whole COBRA thing came into being, I was wondering things like that, too. It turns out, that to get the benefit of the employer payment, you have to sign up directly with the former employer when you leave. And you are required to send your insurance checks directly to your employer to ensure all the premiums are covered. As a result, you know exactly how much assistance you are getting. Here is one Department of Labor Fact Sheet that helps explain the benefit: COBRA Premium Reduction http://www.dol.gov/ebsa/newsroom/fsCOBRApremiumreduction.html The Department of Labor has an FAQ page with 25 frequently asked questions, here: http://www.dol.gov/ebsa/faqs/faq-cobra-premiumredu... Today TaxMama hears from Dan in Massachusetts with this question. “The new COBRA premium assistance is phased out if the employee’s AGI is greater then $145K. It must be paid back when the employee files their taxes. How does the employee know what the premium assistance was?” Hi Dan, When the whole COBRA thing came into being, I was wondering things like that, too. It turns out, that to get the benefit of the employer payment, you have to sign up directly with the former employer when you leave. And you are required to send your insurance checks directly to your employer to ensure all the premiums are covered. As a result, you know exactly how much assistance you are getting. Here is one Department of Labor Fact Sheet that helps explain the benefit: COBRA Premium Reduction http://www.dol.gov/ebsa/newsroom/fsCOBRApremiumreduction.html The Department of Labor has an FAQ page with 25 frequently asked questions, here: http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html Incidentally, for folks who were laid off before the law was passed, there was an opportunity to opt into this benefit after the fact. That’s explained in the first Fact Sheet, above. And remember, you can find answers to all kinds of questions about COBRA repayments and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) Today TaxMama hears from Dan in Massachusetts with this question. “The new COBRA premium assistance is phased out if the employee’s AGI is greater then $145K. It must be paid back when the employee files their taxes. How does the employee know what the premium assistance was?” Hi Dan, When the whole COBRA thing came into being, I was wondering things like that, too. It turns out, that to get the benefit of the employer payment, you have to sign up directly with the former employer when you leave. And you are required to send your insurance checks directly to your employer to ensure all the premiums are covered. As a result, you know exactly how much assistance you are getting. Here is one Department of Labor Fact Sheet that helps explain the benefit: COBRA Premium Reduction http://www.dol.gov/ebsa/newsroom/fsCOBRApremiumreduction.html The Department of Labor has an FAQ page with 25 frequently asked questions, here: http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html Incidentally, for folks who were laid off before the law was passed, there was an opportunity to opt into this benefit after the fact. That’s explained in the first Fact Sheet, above. And remember, you can find answers to all kinds of questions about COBRA repayments and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) tag:odeo.com,2009-10-08,25254233 Thu, 08 Oct 2009 06:29:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25248533-Child-Care-Decision Today TaxMama hears from Brad in Missouri who needs to decide. “I’ve got a question about childcare while we work. I can either pay a local teen $60/week cash or a mom $75/week. The teen doesn’t file taxes and thus I don’t think I can deduct it without forcing her to file, correct? The $75/week will let us declare it. Is it that big of a credit to worry about?” Dear Brad, If I were a parent of a small child, the first thing I’d look for in a caregiver is – honesty. Do I really want to leave my child, all day, in the hands of a liar? If they will lie to someone as frightening as IRS, why wouldn’t they lie to someone sweet and harmless, like me? And will they be teaching my children that it’s OK to lie to me, too? But it’s your child or children. You need to decide on the importance of ethics in your caregivers. As to the tax consideration – use Form 2441 Child and Dependent Care Credit. http://www.irs.gov/pub/irs-pdf/f... Today TaxMama hears from Brad in Missouri who needs to decide. “I’ve got a question about childcare while we work. I can either pay a local teen $60/week cash or a mom $75/week. The teen doesn’t file taxes and thus I don’t think I can deduct it without forcing her to file, correct? The $75/week will let us declare it. Is it that big of a credit to worry about?” Dear Brad, If I were a parent of a small child, the first thing I’d look for in a caregiver is – honesty. Do I really want to leave my child, all day, in the hands of a liar? If they will lie to someone as frightening as IRS, why wouldn’t they lie to someone sweet and harmless, like me? And will they be teaching my children that it’s OK to lie to me, too? But it’s your child or children. You need to decide on the importance of ethics in your caregivers. As to the tax consideration – use Form 2441 Child and Dependent Care Credit. http://www.irs.gov/pub/irs-pdf/f2441.pdf The maximum credit for one child when your household income is over $43,000 is $600 . It’s $1,200 for two children. That’s worth about $12 per week, per child, for 50 weeks a year. This means the $75 per week honest caretaker will cost you an extra $3 per week, after using the credit. The credit can be as high as $1,050 per child if your household income was only $15,000 – but then you would not likely need any credit at all anyway. Your taxes would be wiped out by your standard deduction and exemptions. So that rate is meaningless. Incidentally, if you have no taxable income, but have self-employment taxes from business profits, the credit will not reduce self-employment taxes. So, now you have the tax tools to help you decide. And remember, you can find answers to all kinds of questions about child care credits and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online Form 2441 :: Child and Dependent Care Credit. File Download (0:00 min / 1 MB) Today TaxMama hears from Brad in Missouri who needs to decide. “I’ve got a question about childcare while we work. I can either pay a local teen $60/week cash or a mom $75/week. The teen doesn’t file taxes and thus I don’t think I can deduct it without forcing her to file, correct? The $75/week will let us declare it. Is it that big of a credit to worry about?” Dear Brad, If I were a parent of a small child, the first thing I’d look for in a caregiver is – honesty. Do I really want to leave my child, all day, in the hands of a liar? If they will lie to someone as frightening as IRS, why wouldn’t they lie to someone sweet and harmless, like me? And will they be teaching my children that it’s OK to lie to me, too? But it’s your child or children. You need to decide on the importance of ethics in your caregivers. As to the tax consideration – use Form 2441 Child and Dependent Care Credit. http://www.irs.gov/pub/irs-pdf/f2441.pdf The maximum credit for one child when your household income is over $43,000 is $600 . It’s $1,200 for two children. That’s worth about $12 per week, per child, for 50 weeks a year. This means the $75 per week honest caretaker will cost you an extra $3 per week, after using the credit. The credit can be as high as $1,050 per child if your household income was only $15,000 – but then you would not likely need any credit at all anyway. Your taxes would be wiped out by your standard deduction and exemptions. So that rate is meaningless. Incidentally, if you have no taxable income, but have self-employment taxes from business profits, the credit will not reduce self-employment taxes. So, now you have the tax tools to help you decide. And remember, you can find answers to all kinds of questions about child care credits and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online Form 2441 :: Child and Dependent Care Credit. File Download (0:00 min / 1 MB) tag:odeo.com,2009-10-07,25248533 Wed, 07 Oct 2009 06:36:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25242432-Short-Sales-et-al Today TaxMama hears from Lori in Florida with a depressing question. “Can you please tell me where I would find more info on the tax implications from doing a short sale of primary residence? I have quite a few Florida clients that are doing this vs foreclosure. I know that it is cancelled debt, but due to the Economic Relief, is it exempt from income?” [See Resource Box below for working links.] Hi Lori, Sorry to see that you are faced with many of these cases in your community. I wish that could have been prevented. The answer is, the cancelled debt may or may not be income depending on whether it is the original loan on the property, or if it was refinanced. Mostly, the various legislations to help didn’t really help any of those folks who refinanced. Here’s a starting point – IRS has a page with information and links to other resources for the Mortgage Debt Relief Act of 2007 : http://www.irs.gov/individuals/article/0,,id=179414,00.html There’... Today TaxMama hears from Lori in Florida with a depressing question. “Can you please tell me where I would find more info on the tax implications from doing a short sale of primary residence? I have quite a few Florida clients that are doing this vs foreclosure. I know that it is cancelled debt, but due to the Economic Relief, is it exempt from income?” [See Resource Box below for working links.] Hi Lori, Sorry to see that you are faced with many of these cases in your community. I wish that could have been prevented. The answer is, the cancelled debt may or may not be income depending on whether it is the original loan on the property, or if it was refinanced. Mostly, the various legislations to help didn’t really help any of those folks who refinanced. Here’s a starting point – IRS has a page with information and links to other resources for the Mortgage Debt Relief Act of 2007 : http://www.irs.gov/individuals/article/0,,id=179414,00.html There’s more information here talking about – Home Foreclosure and Debt Cancellation http://www.irs.gov/newsroom/article/0,,id=174034,00.html And IRS held a phone forum on cancelled debt a while back. I found the transcript of that session. Voila! http://www.irs.gov/businesses/small/article/0,,id=207042,00.html If you can find a workshop to give you some hands-on tips and some good worksheets, that would be ideal. OK, I found a syllabus from the California Society of Enrolled Agents’ 2009 Super Seminar – Session 21 – Foreclosures, Repossesions and Cancellation of Debt . Call up the CSEA office to request it – 916/366-6646 . It’s only under $15.00 . I hope this helps. And remember, you can find answers to all kinds of questions about cancelled debt and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS page for :: the Mortgage Debt Relief Act of 2007 IRS site about :: Home Foreclosure and Debt Cancellation IRS Phone Forum Transcript :: Canceled Debt (Tax Consequences) File Download (0:00 min / 0 MB) Today TaxMama hears from Lori in Florida with a depressing question. “Can you please tell me where I would find more info on the tax implications from doing a short sale of primary residence? I have quite a few Florida clients that are doing this vs foreclosure. I know that it is cancelled debt, but due to the Economic Relief, is it exempt from income?” [See Resource Box below for working links.] Hi Lori, Sorry to see that you are faced with many of these cases in your community. I wish that could have been prevented. The answer is, the cancelled debt may or may not be income depending on whether it is the original loan on the property, or if it was refinanced. Mostly, the various legislations to help didn’t really help any of those folks who refinanced. Here’s a starting point – IRS has a page with information and links to other resources for the Mortgage Debt Relief Act of 2007 : http://www.irs.gov/individuals/article/0,,id=179414,00.html There’s more information here talking about – Home Foreclosure and Debt Cancellation http://www.irs.gov/newsroom/article/0,,id=174034,00.html And IRS held a phone forum on cancelled debt a while back. I found the transcript of that session. Voila! http://www.irs.gov/businesses/small/article/0,,id=207042,00.html If you can find a workshop to give you some hands-on tips and some good worksheets, that would be ideal. OK, I found a syllabus from the California Society of Enrolled Agents’ 2009 Super Seminar – Session 21 – Foreclosures, Repossesions and Cancellation of Debt . Call up the CSEA office to request it – 916/366-6646 . It’s only under $15.00 . I hope this helps. And remember, you can find answers to all kinds of questions about cancelled debt and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS page for :: the Mortgage Debt Relief Act of 2007 IRS site about :: Home Foreclosure and Debt Cancellation IRS Phone Forum Transcript :: Canceled Debt (Tax Consequences) File Download (0:00 min / 0 MB) tag:odeo.com,2009-10-06,25242432 Tue, 06 Oct 2009 06:42:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25236340-Moving-Out-of-State Today TaxMama hears from Cindy in Hood River, Oregon with a good question. “I’m self-employed and planning to move to another state. Can I deduct my moving expenses? What if I were an LLC or S Corp? Would that make a difference?” Dear Cindy, Are you moving someplace wonderful? It looks as if you’re already in a terrific place. Regardless of the kind of entity your business is, you can deduct your business moving expenses. So see if you can separate out the cost of the business vs personal items that need to be moved. If not, do it based on either the percentage of time or space they take up. I say time, because sometimes, to get some items out of or into a facility, doors have to be removed, or furniture must be taken apart, or… So pick up the extra hourly cost for that kind of time. Don’t create an entity now. LLCs, etc. are formed in the state you’re in. You would need to re-incorporate in the new state. Or at least register in the new sta... Today TaxMama hears from Cindy in Hood River, Oregon with a good question. “I’m self-employed and planning to move to another state. Can I deduct my moving expenses? What if I were an LLC or S Corp? Would that make a difference?” Dear Cindy, Are you moving someplace wonderful? It looks as if you’re already in a terrific place. Regardless of the kind of entity your business is, you can deduct your business moving expenses. So see if you can separate out the cost of the business vs personal items that need to be moved. If not, do it based on either the percentage of time or space they take up. I say time, because sometimes, to get some items out of or into a facility, doors have to be removed, or furniture must be taken apart, or… So pick up the extra hourly cost for that kind of time. Don’t create an entity now. LLCs, etc. are formed in the state you’re in. You would need to re-incorporate in the new state. Or at least register in the new state. But, you’d still have to file tax returns in Oregon, if you set up the LLC or S corp there. Incidentally, on your state return, you’ll need to check with someone who knows Oregon tax laws. All states let you deduct moving expenses coming in. I don’t know about moving expenses going out. Have fun, wherever you’re going! And much success in your business. And remember, you can find answers to all kinds of questions about moving expenses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) Today TaxMama hears from Cindy in Hood River, Oregon with a good question. “I’m self-employed and planning to move to another state. Can I deduct my moving expenses? What if I were an LLC or S Corp? Would that make a difference?” Dear Cindy, Are you moving someplace wonderful? It looks as if you’re already in a terrific place. Regardless of the kind of entity your business is, you can deduct your business moving expenses. So see if you can separate out the cost of the business vs personal items that need to be moved. If not, do it based on either the percentage of time or space they take up. I say time, because sometimes, to get some items out of or into a facility, doors have to be removed, or furniture must be taken apart, or… So pick up the extra hourly cost for that kind of time. Don’t create an entity now. LLCs, etc. are formed in the state you’re in. You would need to re-incorporate in the new state. Or at least register in the new state. But, you’d still have to file tax returns in Oregon, if you set up the LLC or S corp there. Incidentally, on your state return, you’ll need to check with someone who knows Oregon tax laws. All states let you deduct moving expenses coming in. I don’t know about moving expenses going out. Have fun, wherever you’re going! And much success in your business. And remember, you can find answers to all kinds of questions about moving expenses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) tag:odeo.com,2009-10-05,25236340 Mon, 05 Oct 2009 06:11:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25216650-New-Taxpayer Today TaxMama hears from Jerad in California who wants to know. “What would you advise someone who is a 23 year-old student who never had a job until late 2008, but didn’t pay taxes until today? I would like to get things straight and have it done.” Hi Jerad, Welcome to the world of taxpayers. Sorry you have to join. It’s nice to be able to avoid the working and taxpaying world as long as possible. What should you do about 2008? Simple. File the tax return. If you didn’t put the tax return on extension, you may face some penalties. But if you don’t owe any money, there won’t be any penalties. File ASAP. If you need a good tax professional, you can find one by using the Find an Enrolled Agent link at www.naea.org or the Find a Professional link at www.natptax.com . And do a little reading. Call IRS at 800 TAX FORM and ask for a copy of Publication 17 or download it from the site http://www.irs.gov/pub/irs-pdf/p17.pdf . It will give you a good... Today TaxMama hears from Jerad in California who wants to know. “What would you advise someone who is a 23 year-old student who never had a job until late 2008, but didn’t pay taxes until today? I would like to get things straight and have it done.” Hi Jerad, Welcome to the world of taxpayers. Sorry you have to join. It’s nice to be able to avoid the working and taxpaying world as long as possible. What should you do about 2008? Simple. File the tax return. If you didn’t put the tax return on extension, you may face some penalties. But if you don’t owe any money, there won’t be any penalties. File ASAP. If you need a good tax professional, you can find one by using the Find an Enrolled Agent link at www.naea.org or the Find a Professional link at www.natptax.com . And do a little reading. Call IRS at 800 TAX FORM and ask for a copy of Publication 17 or download it from the site http://www.irs.gov/pub/irs-pdf/p17.pdf . It will give you a good idea about what your responsibilities and deductions are! And remember, you can find answers to all kinds of questions about catching up and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online National Association of Enrolled Agents :: To find enrolled agents who can d your tax return and represent you before the IRS National Assocation of Tax Professionals :: To find all kinds of tax professionals, EAs, CPAs, attorneys etc IRS Publication 17 :: Your Income Tax Guide File Download (0:00 min / 0 MB) Today TaxMama hears from Jerad in California who wants to know. “What would you advise someone who is a 23 year-old student who never had a job until late 2008, but didn’t pay taxes until today? I would like to get things straight and have it done.” Hi Jerad, Welcome to the world of taxpayers. Sorry you have to join. It’s nice to be able to avoid the working and taxpaying world as long as possible. What should you do about 2008? Simple. File the tax return. If you didn’t put the tax return on extension, you may face some penalties. But if you don’t owe any money, there won’t be any penalties. File ASAP. If you need a good tax professional, you can find one by using the Find an Enrolled Agent link at www.naea.org or the Find a Professional link at www.natptax.com . And do a little reading. Call IRS at 800 TAX FORM and ask for a copy of Publication 17 or download it from the site http://www.irs.gov/pub/irs-pdf/p17.pdf . It will give you a good idea about what your responsibilities and deductions are! And remember, you can find answers to all kinds of questions about catching up and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online National Association of Enrolled Agents :: To find enrolled agents who can d your tax return and represent you before the IRS National Assocation of Tax Professionals :: To find all kinds of tax professionals, EAs, CPAs, attorneys etc IRS Publication 17 :: Your Income Tax Guide File Download (0:00 min / 0 MB) tag:odeo.com,2009-10-01,25216650 Thu, 01 Oct 2009 06:03:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25210296-California-Wildfire-Tax-Relief Today TaxMama hears from Teri in California with this question. “Do you know if there is authority for relief from the 10% penalty on early distribution of IRAs due to the California wildfires?” [Note: For working links, please see the Resource Box below.] Hi Teri, That’s a good question. I could have sworn I saw a press release about that earlier this month. It’s not up on the IRS site now. This is all they are showing for Los Angeles to Santa Barbara and Inland Counties – 2003-2007 fires. http://www.irs.gov/newsroom/article/0,,id=99114,00.html Doing several searches, I cannot find a thing. Not even on the White House site http://www.whitehouse.gov/search/?keywords=wildfire&F_All=Y California FTB is showing the 2008 relief http://www.ftb.ca.gov/professionals/taxnews/2008/1208/1208_2.shtml There is apt to be relief. But I don’t see it yet. I have asked IRS to look into this to find out when they expect to see a Presidential declaration to gran... Today TaxMama hears from Teri in California with this question. “Do you know if there is authority for relief from the 10% penalty on early distribution of IRAs due to the California wildfires?” [Note: For working links, please see the Resource Box below.] Hi Teri, That’s a good question. I could have sworn I saw a press release about that earlier this month. It’s not up on the IRS site now. This is all they are showing for Los Angeles to Santa Barbara and Inland Counties – 2003-2007 fires. http://www.irs.gov/newsroom/article/0,,id=99114,00.html Doing several searches, I cannot find a thing. Not even on the White House site http://www.whitehouse.gov/search/?keywords=wildfire&F_All=Y California FTB is showing the 2008 relief http://www.ftb.ca.gov/professionals/taxnews/2008/1208/1208_2.shtml There is apt to be relief. But I don’t see it yet. I have asked IRS to look into this to find out when they expect to see a Presidential declaration to grant relief. And remember, you can find answers to all kinds of questions about disaster relief and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS disaster area information :: Southern California reports The White House website :: searching for Presidential declarationson California wildfires California Franchise Tax Board :: Searching for 2009 wildfire relief - only found 2008 data FEMA :: Master List of Declared Disasters File Download (0:00 min / 0 MB) Today TaxMama hears from Teri in California with this question. “Do you know if there is authority for relief from the 10% penalty on early distribution of IRAs due to the California wildfires?” [Note: For working links, please see the Resource Box below.] Hi Teri, That’s a good question. I could have sworn I saw a press release about that earlier this month. It’s not up on the IRS site now. This is all they are showing for Los Angeles to Santa Barbara and Inland Counties – 2003-2007 fires. http://www.irs.gov/newsroom/article/0,,id=99114,00.html Doing several searches, I cannot find a thing. Not even on the White House site http://www.whitehouse.gov/search/?keywords=wildfire&F_All=Y California FTB is showing the 2008 relief http://www.ftb.ca.gov/professionals/taxnews/2008/1208/1208_2.shtml There is apt to be relief. But I don’t see it yet. I have asked IRS to look into this to find out when they expect to see a Presidential declaration to grant relief. And remember, you can find answers to all kinds of questions about disaster relief and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS disaster area information :: Southern California reports The White House website :: searching for Presidential declarationson California wildfires California Franchise Tax Board :: Searching for 2009 wildfire relief - only found 2008 data FEMA :: Master List of Declared Disasters File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-30,25210296 Wed, 30 Sep 2009 05:33:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25204499-Incorporated-Out-of-State Today TaxMama hears from Barry in New York, who wants to know. “I have an LLC incorporated in a different state than the one I reside in. I will run an Web-based business under this LLC. Does having the company incorporated in a different state create any tax complications or costs?” Dear Barry, You bet it does! Especially in the State of New York. They are among the most aggressive states when it comes to collecting money that is due to them. I just can’t understand why someone would set up an LLC or corporation without consulting with their business attorney and tax professional first. Let’s face it, you may be running a web-based business. But you are running it from your home in New York. Heck, in your case, BOTH New York State AND New York City want a piece of your pie. You have to register your out-of-state corporation in New York with the Secretary of State’s office. http://www.dos.state.ny.us/corp/corpwww.html You will have to file all sorts of ... Today TaxMama hears from Barry in New York, who wants to know. “I have an LLC incorporated in a different state than the one I reside in. I will run an Web-based business under this LLC. Does having the company incorporated in a different state create any tax complications or costs?” Dear Barry, You bet it does! Especially in the State of New York. They are among the most aggressive states when it comes to collecting money that is due to them. I just can’t understand why someone would set up an LLC or corporation without consulting with their business attorney and tax professional first. Let’s face it, you may be running a web-based business. But you are running it from your home in New York. Heck, in your case, BOTH New York State AND New York City want a piece of your pie. You have to register your out-of-state corporation in New York with the Secretary of State’s office. http://www.dos.state.ny.us/corp/corpwww.html You will have to file all sorts of tax returns – sales taxes, income taxes and perhaps even payroll taxes, depending on how you have set up your LLC. http://www.tax.state.ny.us/ Please meet with a good, local tax professional who can help you catch up with prior year filings in New York, set up the current year properly. Then stay in touch with your tax pro on a regular basis to help you minimize your taxes and stay out of trouble. And remember, you can find answers to all kinds of questions about where to incorporate and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online New York Secretary of State's Site :: Information for corporations New York Department of Revenue and Taxation :: For information about sales taxes, income taxes and payroll taxes File Download (0:00 min / 0 MB) Today TaxMama hears from Barry in New York, who wants to know. “I have an LLC incorporated in a different state than the one I reside in. I will run an Web-based business under this LLC. Does having the company incorporated in a different state create any tax complications or costs?” Dear Barry, You bet it does! Especially in the State of New York. They are among the most aggressive states when it comes to collecting money that is due to them. I just can’t understand why someone would set up an LLC or corporation without consulting with their business attorney and tax professional first. Let’s face it, you may be running a web-based business. But you are running it from your home in New York. Heck, in your case, BOTH New York State AND New York City want a piece of your pie. You have to register your out-of-state corporation in New York with the Secretary of State’s office. http://www.dos.state.ny.us/corp/corpwww.html You will have to file all sorts of tax returns – sales taxes, income taxes and perhaps even payroll taxes, depending on how you have set up your LLC. http://www.tax.state.ny.us/ Please meet with a good, local tax professional who can help you catch up with prior year filings in New York, set up the current year properly. Then stay in touch with your tax pro on a regular basis to help you minimize your taxes and stay out of trouble. And remember, you can find answers to all kinds of questions about where to incorporate and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online New York Secretary of State's Site :: Information for corporations New York Department of Revenue and Taxation :: For information about sales taxes, income taxes and payroll taxes File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-29,25204499 Tue, 29 Sep 2009 06:02:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25178048-PTA-Book-Sales Today TaxMama hears from Guy in Connecticut, with this question. “Our local PTA, a 501c3, runs book fairs with a book company. We collect the receipts in full, then pay the invoice from the book company. Is the income from these activities the gross or net?” Dear Guy, The answer is yes, absolutely. You pick up the gross income on the PTA’s Form 990EZ, as revenues. Then, you deduct the costs on line 16 of the Form 990EZ other expenses. http://www.irs.gov/pub/irs-pdf/f990ez.pdf So, while you report the gross revenues, your “Excess or (deficit) for the year” will take into account the costs of the fundraising events. And remember, you can find answers to all kinds of questions about non profit organizations and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and j... Today TaxMama hears from Guy in Connecticut, with this question. “Our local PTA, a 501c3, runs book fairs with a book company. We collect the receipts in full, then pay the invoice from the book company. Is the income from these activities the gross or net?” Dear Guy, The answer is yes, absolutely. You pick up the gross income on the PTA’s Form 990EZ, as revenues. Then, you deduct the costs on line 16 of the Form 990EZ other expenses. http://www.irs.gov/pub/irs-pdf/f990ez.pdf So, while you report the gross revenues, your “Excess or (deficit) for the year” will take into account the costs of the fundraising events. And remember, you can find answers to all kinds of questions about non profit organizations and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form 990EZ :: For exempt organizations with gross receipts under $1 million File Download (0:00 min / 0 MB) Today TaxMama hears from Guy in Connecticut, with this question. “Our local PTA, a 501c3, runs book fairs with a book company. We collect the receipts in full, then pay the invoice from the book company. Is the income from these activities the gross or net?” Dear Guy, The answer is yes, absolutely. You pick up the gross income on the PTA’s Form 990EZ, as revenues. Then, you deduct the costs on line 16 of the Form 990EZ other expenses. http://www.irs.gov/pub/irs-pdf/f990ez.pdf So, while you report the gross revenues, your “Excess or (deficit) for the year” will take into account the costs of the fundraising events. And remember, you can find answers to all kinds of questions about non profit organizations and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form 990EZ :: For exempt organizations with gross receipts under $1 million File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-24,25178048 Thu, 24 Sep 2009 06:20:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25170999-Joint-Venture-or-Partnership Today TaxMama hears from Simon in California, who tells us. “I have two friends operating a home-based business out of one of their homes. This is a part time operation. They agreed to share expenses and profits. Rather than file a 1065 can they just file individual Schedule C’s? This does not appear to be an official partnership.” Hi Simon, If the business isn’t really generating much in the way of gross income, it may be easier to do a spreadsheet and split it. Treat it as a joint venture until it starts to generate a little income. But, did the business file a DBA? What did it say on the DBA publication notice – who is running the business? Two individuals, or a partnership? Did they open a bank account for the business? What does it say on the signature card? Is this a partnership or two guys sharing a bank account? Personally, I’d follow the paper trail they’ve left. For the current year, if they are still running the business, suggest ... Today TaxMama hears from Simon in California, who tells us. “I have two friends operating a home-based business out of one of their homes. This is a part time operation. They agreed to share expenses and profits. Rather than file a 1065 can they just file individual Schedule C’s? This does not appear to be an official partnership.” Hi Simon, If the business isn’t really generating much in the way of gross income, it may be easier to do a spreadsheet and split it. Treat it as a joint venture until it starts to generate a little income. But, did the business file a DBA? What did it say on the DBA publication notice – who is running the business? Two individuals, or a partnership? Did they open a bank account for the business? What does it say on the signature card? Is this a partnership or two guys sharing a bank account? Personally, I’d follow the paper trail they’ve left. For the current year, if they are still running the business, suggest that they set it all up properly if they want to take it seriously. This year, perhaps it’s time to make the entity decision. The fact that they are only running it part-time, around a job, does not mean it’s not making some serious money. And remember, you can find answers to all kinds of questions about new businesses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) Today TaxMama hears from Simon in California, who tells us. “I have two friends operating a home-based business out of one of their homes. This is a part time operation. They agreed to share expenses and profits. Rather than file a 1065 can they just file individual Schedule C’s? This does not appear to be an official partnership.” Hi Simon, If the business isn’t really generating much in the way of gross income, it may be easier to do a spreadsheet and split it. Treat it as a joint venture until it starts to generate a little income. But, did the business file a DBA? What did it say on the DBA publication notice – who is running the business? Two individuals, or a partnership? Did they open a bank account for the business? What does it say on the signature card? Is this a partnership or two guys sharing a bank account? Personally, I’d follow the paper trail they’ve left. For the current year, if they are still running the business, suggest that they set it all up properly if they want to take it seriously. This year, perhaps it’s time to make the entity decision. The fact that they are only running it part-time, around a job, does not mean it’s not making some serious money. And remember, you can find answers to all kinds of questions about new businesses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-23,25170999 Wed, 23 Sep 2009 05:54:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25165384-Storing-Dad-s-stuff Today TaxMama hears from Sandra in California, who tells us. “I have a client that inherited a house from her father. She kept it as a rental income property. She cleared out all of his possessions from the property and put them in storage. Now she wants me to categorize the on-going storage expense as a rental income deduction. It’s my belief that the initial removal of the property was a legitimate expense, but the continuing storage costs is not a Schedule E expense. Is that correct?” Dear Sandra, You’re right. Presently, the storage has nothing to do with the rental operation. This is strictly her dad’s stuff. If the rental is still part of an open estate (Form 1041), it would be an estate expense. If not, if the rental property has been distributed to the heir(s), it’s strictly personal. And remember, you can find answers to all kinds of questions about rental expenses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If y... Today TaxMama hears from Sandra in California, who tells us. “I have a client that inherited a house from her father. She kept it as a rental income property. She cleared out all of his possessions from the property and put them in storage. Now she wants me to categorize the on-going storage expense as a rental income deduction. It’s my belief that the initial removal of the property was a legitimate expense, but the continuing storage costs is not a Schedule E expense. Is that correct?” Dear Sandra, You’re right. Presently, the storage has nothing to do with the rental operation. This is strictly her dad’s stuff. If the rental is still part of an open estate (Form 1041), it would be an estate expense. If not, if the rental property has been distributed to the heir(s), it’s strictly personal. And remember, you can find answers to all kinds of questions about rental expenses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) Today TaxMama hears from Sandra in California, who tells us. “I have a client that inherited a house from her father. She kept it as a rental income property. She cleared out all of his possessions from the property and put them in storage. Now she wants me to categorize the on-going storage expense as a rental income deduction. It’s my belief that the initial removal of the property was a legitimate expense, but the continuing storage costs is not a Schedule E expense. Is that correct?” Dear Sandra, You’re right. Presently, the storage has nothing to do with the rental operation. This is strictly her dad’s stuff. If the rental is still part of an open estate (Form 1041), it would be an estate expense. If not, if the rental property has been distributed to the heir(s), it’s strictly personal. And remember, you can find answers to all kinds of questions about rental expenses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-22,25165384 Tue, 22 Sep 2009 06:00:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25159756-Winning-Sweepstakes-Scams Today TaxMama hears from Roki in Michigan, who wants to know. “I have people calling me telling me I won sweepstakes. But the thing is they say that I have to pay a sum to get my winnings. Is that true or a scam? Also what is the best way to find out if it’s a scam or not?” Dear Roki, That’s an interesting question. And while it’s not a tax question, the practice is disturbing. So let me try to answer you. Frankly, you must know they can’t possibly be true, or you wouldn’t be asking me. Anyone that asks you to pay any money in order to collect your winnings is a scam. When you look at real sweepstakes, like the Publishers Clearinghouse, or Readers Digest – when they tell you’ve won, you simply get the prize. How else can you tell it’s a scam? Ask them for a return phone number and their mailing address. Odds are, they won’t give you their phone number. And I’ll bet it doesn’t show up on your caller ID, eit... Today TaxMama hears from Roki in Michigan, who wants to know. “I have people calling me telling me I won sweepstakes. But the thing is they say that I have to pay a sum to get my winnings. Is that true or a scam? Also what is the best way to find out if it’s a scam or not?” Dear Roki, That’s an interesting question. And while it’s not a tax question, the practice is disturbing. So let me try to answer you. Frankly, you must know they can’t possibly be true, or you wouldn’t be asking me. Anyone that asks you to pay any money in order to collect your winnings is a scam. When you look at real sweepstakes, like the Publishers Clearinghouse, or Readers Digest – when they tell you’ve won, you simply get the prize. How else can you tell it’s a scam? Ask them for a return phone number and their mailing address. Odds are, they won’t give you their phone number. And I’ll bet it doesn’t show up on your caller ID, either. When a stranger calls you on the phone about anything – be sure NOT to give them any information about yourself. Do not give them your address, or your phone number. After all, they called you. And never, ever, ever, give them your Social Security Number or bank account. If they do give you a phone number or address, put that information into your favorite search engine. the e-mail address, or the name of the sweepstakes, or the name of the person calling you. Most likely, you’ll find some results talking about the scam. Do the same kind of thing if you get an e-mail. You can find more information on the Federal Trade Commission’s website. It also includes a link to report the fraud. http://www.ftc.gov/bcp/edu/microsites/phonefraud/sweepstakes.shtml . You’ll find some more tips and info on how to get on the do-not-call registry at www.scambusters.com http://www.scambusters.org/do-not-call-list.html . Personally, when I get calls like that, I don’t even get sucked into the conversation. I simply hang up. It avoids conflict – and theft. And remember, you can find answers to all kinds of questions about scams and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online FTC site :: Sweepstakes scams Scambusters :: do-not-call-list and phone scams File Download (0:00 min / 1 MB) Today TaxMama hears from Roki in Michigan, who wants to know. “I have people calling me telling me I won sweepstakes. But the thing is they say that I have to pay a sum to get my winnings. Is that true or a scam? Also what is the best way to find out if it’s a scam or not?” Dear Roki, That’s an interesting question. And while it’s not a tax question, the practice is disturbing. So let me try to answer you. Frankly, you must know they can’t possibly be true, or you wouldn’t be asking me. Anyone that asks you to pay any money in order to collect your winnings is a scam. When you look at real sweepstakes, like the Publishers Clearinghouse, or Readers Digest – when they tell you’ve won, you simply get the prize. How else can you tell it’s a scam? Ask them for a return phone number and their mailing address. Odds are, they won’t give you their phone number. And I’ll bet it doesn’t show up on your caller ID, either. When a stranger calls you on the phone about anything – be sure NOT to give them any information about yourself. Do not give them your address, or your phone number. After all, they called you. And never, ever, ever, give them your Social Security Number or bank account. If they do give you a phone number or address, put that information into your favorite search engine. the e-mail address, or the name of the sweepstakes, or the name of the person calling you. Most likely, you’ll find some results talking about the scam. Do the same kind of thing if you get an e-mail. You can find more information on the Federal Trade Commission’s website. It also includes a link to report the fraud. http://www.ftc.gov/bcp/edu/microsites/phonefraud/sweepstakes.shtml . You’ll find some more tips and info on how to get on the do-not-call registry at www.scambusters.com http://www.scambusters.org/do-not-call-list.html . Personally, when I get calls like that, I don’t even get sucked into the conversation. I simply hang up. It avoids conflict – and theft. And remember, you can find answers to all kinds of questions about scams and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online FTC site :: Sweepstakes scams Scambusters :: do-not-call-list and phone scams File Download (0:00 min / 1 MB) tag:odeo.com,2009-09-21,25159756 Mon, 21 Sep 2009 06:18:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25140324-NJ-Executors-Fee Today TaxMama hears from Barbara in New Jersey, who says. “I am the executor of my mother’s estate in NJ. I would like to take the executor’s fee that I am entitled to. I am trying to find out if her home that was just sold is considered an estate asset (that I can include in my executor’s fee). Most CPA’s told me yes. My CPA that’s helping me settle her estate has told me no. I am getting conflicting answers. Is there a reason you know of why her home would not be considered an asset in the estate?” Dear Barbara, My condolences on the death of your mother. That’s got to be tough – and then to have to deal with all these details. What I don’t understand though is, are you taking a poll? Will you take the answer given most often? Or the one you like best? The CPAs may not be experts about the executor’s fee? That would be a legal matter, not a tax matter. And the rules are specific to New Jersey. Each state has their o... Today TaxMama hears from Barbara in New Jersey, who says. “I am the executor of my mother’s estate in NJ. I would like to take the executor’s fee that I am entitled to. I am trying to find out if her home that was just sold is considered an estate asset (that I can include in my executor’s fee). Most CPA’s told me yes. My CPA that’s helping me settle her estate has told me no. I am getting conflicting answers. Is there a reason you know of why her home would not be considered an asset in the estate?” Dear Barbara, My condolences on the death of your mother. That’s got to be tough – and then to have to deal with all these details. What I don’t understand though is, are you taking a poll? Will you take the answer given most often? Or the one you like best? The CPAs may not be experts about the executor’s fee? That would be a legal matter, not a tax matter. And the rules are specific to New Jersey. Each state has their own rules. Ask the estate’s attorney to give you the answer. And if you want confirmation, have the attorney give you the citation in the NJ legal code. Or devote a few minutes to looking it up yourself. Googling “new jersey executor fees” turned this up on the first page. http://www.njleg.state.nj.us/2000/Bills/s1000/952_i1.pdf You’re right. Generally, when executor’s fees are based on the value of the assets of the estate, the house is included in the total value, if it’s a part of the estate – unless the state law specifically excludes the house. But ask your attorney for the definitive answer. And remember, you can find answers to all kinds of questions about estate taxes and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online SENATE, No. 952 :: Clarifies law with regard to commissions of executors of estates File Download (0:00 min / 0 MB) Today TaxMama hears from Barbara in New Jersey, who says. “I am the executor of my mother’s estate in NJ. I would like to take the executor’s fee that I am entitled to. I am trying to find out if her home that was just sold is considered an estate asset (that I can include in my executor’s fee). Most CPA’s told me yes. My CPA that’s helping me settle her estate has told me no. I am getting conflicting answers. Is there a reason you know of why her home would not be considered an asset in the estate?” Dear Barbara, My condolences on the death of your mother. That’s got to be tough – and then to have to deal with all these details. What I don’t understand though is, are you taking a poll? Will you take the answer given most often? Or the one you like best? The CPAs may not be experts about the executor’s fee? That would be a legal matter, not a tax matter. And the rules are specific to New Jersey. Each state has their own rules. Ask the estate’s attorney to give you the answer. And if you want confirmation, have the attorney give you the citation in the NJ legal code. Or devote a few minutes to looking it up yourself. Googling “new jersey executor fees” turned this up on the first page. http://www.njleg.state.nj.us/2000/Bills/s1000/952_i1.pdf You’re right. Generally, when executor’s fees are based on the value of the assets of the estate, the house is included in the total value, if it’s a part of the estate – unless the state law specifically excludes the house. But ask your attorney for the definitive answer. And remember, you can find answers to all kinds of questions about estate taxes and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online SENATE, No. 952 :: Clarifies law with regard to commissions of executors of estates File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-17,25140324 Thu, 17 Sep 2009 06:05:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25134706-Depreciation-Catch-Up Today TaxMama hears from Betty in Arizona, with this question. “ I realized that I didn’t deduct depreciation at all in my past 8 years tax returns. So I will use Form 3115 to capture all the depreciation. But this will create a big loss on Schedule E. Is this loss limited by Form 8582 for the total loss on rental of $25,000?” Dear Betty, How astute of you to realize that you can use Form 3115 to catch up on all the unused depreciation. http://answers.google.com/answers/threadview/id/499620.html Sadly yes, your Schedule E rental property deductions will be limited to $25,000 per year. But don’t despair! All is not lost. The suspended losses will still be there for you to use when the property starts showing profits. And if there are still suspended losses sitting there, when you sell the property you will be able to offset the gain with these losses – even if you sell the property at a loss. In fact, you can use up these losses each year, to bring you t... Today TaxMama hears from Betty in Arizona, with this question. “ I realized that I didn’t deduct depreciation at all in my past 8 years tax returns. So I will use Form 3115 to capture all the depreciation. But this will create a big loss on Schedule E. Is this loss limited by Form 8582 for the total loss on rental of $25,000?” Dear Betty, How astute of you to realize that you can use Form 3115 to catch up on all the unused depreciation. http://answers.google.com/answers/threadview/id/499620.html Sadly yes, your Schedule E rental property deductions will be limited to $25,000 per year. But don’t despair! All is not lost. The suspended losses will still be there for you to use when the property starts showing profits. And if there are still suspended losses sitting there, when you sell the property you will be able to offset the gain with these losses – even if you sell the property at a loss. In fact, you can use up these losses each year, to bring you to the $25,000 loss level. You can read more about Passive Loss rules in IRS Publication 925. http://www.irs.gov/publications/p925/index.html And remember, you can find answers to all kinds of questions about special tax loopholes and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online Google Answers :: Income Tax from Selling a Home IRS Publication 925 :: Passive Loss rules File Download (0:00 min / 0 MB) Today TaxMama hears from Betty in Arizona, with this question. “ I realized that I didn’t deduct depreciation at all in my past 8 years tax returns. So I will use Form 3115 to capture all the depreciation. But this will create a big loss on Schedule E. Is this loss limited by Form 8582 for the total loss on rental of $25,000?” Dear Betty, How astute of you to realize that you can use Form 3115 to catch up on all the unused depreciation. http://answers.google.com/answers/threadview/id/499620.html Sadly yes, your Schedule E rental property deductions will be limited to $25,000 per year. But don’t despair! All is not lost. The suspended losses will still be there for you to use when the property starts showing profits. And if there are still suspended losses sitting there, when you sell the property you will be able to offset the gain with these losses – even if you sell the property at a loss. In fact, you can use up these losses each year, to bring you to the $25,000 loss level. You can read more about Passive Loss rules in IRS Publication 925. http://www.irs.gov/publications/p925/index.html And remember, you can find answers to all kinds of questions about special tax loopholes and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online Google Answers :: Income Tax from Selling a Home IRS Publication 925 :: Passive Loss rules File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-16,25134706 Wed, 16 Sep 2009 06:21:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25129598-Double-Taxed-Pension Today TaxMama hears from Marilyn in California, who tells us. “ I have a client who is a resident of Maine and receives retirement income from CA (PERS or STRS). Does he have to pay state tax on that in CA and in Maine?” Dear Marilyn, Once upon a time, states, especially California, aggressively pursued collecting taxes on pensions earned within their borders. All that changed with one of the tax acts in 1995 (Public Law 104-95). States are no longer permitted to tax the pensions of folks who do not live there. They may not do that anymore. States may tax pensions received within their borders, though. Here’s a table I found that lists how states treat out of state government pensions received by their residents. The link is in the Resource Box below. Incidentally, Maine actually has a $6,000 exemption on out of state pensions. And remember, you can find answers to all kinds of questions about retirement income and other tax issues, free. Where? Where else? At TaxM... Today TaxMama hears from Marilyn in California, who tells us. “ I have a client who is a resident of Maine and receives retirement income from CA (PERS or STRS). Does he have to pay state tax on that in CA and in Maine?” Dear Marilyn, Once upon a time, states, especially California, aggressively pursued collecting taxes on pensions earned within their borders. All that changed with one of the tax acts in 1995 (Public Law 104-95). States are no longer permitted to tax the pensions of folks who do not live there. They may not do that anymore. States may tax pensions received within their borders, though. Here’s a table I found that lists how states treat out of state government pensions received by their residents. The link is in the Resource Box below. Incidentally, Maine actually has a $6,000 exemption on out of state pensions. And remember, you can find answers to all kinds of questions about retirement income and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online State of Mass :: They put together a table showing how states treat government pensions Pillsbury Madison & Sutro llp article :: Public Law 104-95 File Download (0:00 min / 0 MB) Today TaxMama hears from Marilyn in California, who tells us. “ I have a client who is a resident of Maine and receives retirement income from CA (PERS or STRS). Does he have to pay state tax on that in CA and in Maine?” Dear Marilyn, Once upon a time, states, especially California, aggressively pursued collecting taxes on pensions earned within their borders. All that changed with one of the tax acts in 1995 (Public Law 104-95). States are no longer permitted to tax the pensions of folks who do not live there. They may not do that anymore. States may tax pensions received within their borders, though. Here’s a table I found that lists how states treat out of state government pensions received by their residents. The link is in the Resource Box below. Incidentally, Maine actually has a $6,000 exemption on out of state pensions. And remember, you can find answers to all kinds of questions about retirement income and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online State of Mass :: They put together a table showing how states treat government pensions Pillsbury Madison & Sutro llp article :: Public Law 104-95 File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-15,25129598 Tue, 15 Sep 2009 06:29:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25123891-Timing-ES-Payments Today TaxMama hears from Sue in Nevada with this question. “I am retired and working part-time as a consultant. All of my income is reported via ‘’1099’’ (not W-2). I must pay quarterly ‘’estimated taxes’’ (Form 1040-ES). If I pay the majority of my estimated taxes in December, will I be penalized?” Dear Sue, If you’ve been earning money all year and not making estimated tax payments, you certainly will face underpayment penalties. The question is, how much are those penalties? And is it worth it to pay them for the benefit of using that extra money all year? The penalties are fairly low – about half a percent per month. You can see the rates on page 3 of the Form 2210. http://www.irs.gov/pub/irs-pdf/f2210.pdf This may be a lot lower than the interest rates on your credit cards or home equity lines, if you would have had to borrow to cover the estimated payments. As long as you file and pay all your taxes by Apr... Today TaxMama hears from Sue in Nevada with this question. “I am retired and working part-time as a consultant. All of my income is reported via ‘’1099’’ (not W-2). I must pay quarterly ‘’estimated taxes’’ (Form 1040-ES). If I pay the majority of my estimated taxes in December, will I be penalized?” Dear Sue, If you’ve been earning money all year and not making estimated tax payments, you certainly will face underpayment penalties. The question is, how much are those penalties? And is it worth it to pay them for the benefit of using that extra money all year? The penalties are fairly low – about half a percent per month. You can see the rates on page 3 of the Form 2210. http://www.irs.gov/pub/irs-pdf/f2210.pdf This may be a lot lower than the interest rates on your credit cards or home equity lines, if you would have had to borrow to cover the estimated payments. As long as you file and pay all your taxes by April 15th, you won’t be paying interest on that as well. Incidentally, if your income was earned in uneven clumps during the year, considering using the penalty computation on page 3. It charges interest on each quarter, as you earn the money. Sometimes, that can reduce your penalties. Here’s a link to the 2009 Form 1040-ES so you can make your estimated payments when you’re ready. http://www.irs.gov/pub/irs-pdf/f1040esn.pdf Don’t forget to use every deduction you’re entitled to, to reduce your taxes. And remember, you can find answers to all kinds of questions about estimated tax payments and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form 2210 :: Underpayment Penalties IRS Form 1040-ES :: Estimated Tax Payments File Download (0:00 min / 0 MB) Today TaxMama hears from Sue in Nevada with this question. “I am retired and working part-time as a consultant. All of my income is reported via ‘’1099’’ (not W-2). I must pay quarterly ‘’estimated taxes’’ (Form 1040-ES). If I pay the majority of my estimated taxes in December, will I be penalized?” Dear Sue, If you’ve been earning money all year and not making estimated tax payments, you certainly will face underpayment penalties. The question is, how much are those penalties? And is it worth it to pay them for the benefit of using that extra money all year? The penalties are fairly low – about half a percent per month. You can see the rates on page 3 of the Form 2210. http://www.irs.gov/pub/irs-pdf/f2210.pdf This may be a lot lower than the interest rates on your credit cards or home equity lines, if you would have had to borrow to cover the estimated payments. As long as you file and pay all your taxes by April 15th, you won’t be paying interest on that as well. Incidentally, if your income was earned in uneven clumps during the year, considering using the penalty computation on page 3. It charges interest on each quarter, as you earn the money. Sometimes, that can reduce your penalties. Here’s a link to the 2009 Form 1040-ES so you can make your estimated payments when you’re ready. http://www.irs.gov/pub/irs-pdf/f1040esn.pdf Don’t forget to use every deduction you’re entitled to, to reduce your taxes. And remember, you can find answers to all kinds of questions about estimated tax payments and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form 2210 :: Underpayment Penalties IRS Form 1040-ES :: Estimated Tax Payments File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-14,25123891 Mon, 14 Sep 2009 06:39:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25102762-Obama-and-His-Health-Care-Plan Today TaxMama wants to summarize the high points of President Obama’s Health Care speech last night. Dear Family, You can read the text of the President’s speech using the link in the Resource Box below. Print it out and analyze it to your heart’s content . Obama has three basic goals: · To provide more security and stability to those who have health insurance. · To provide insurance for those who don’t. · To slow the growth of health care costs for our families, our businesses, and our government. Details: · If you have insurance coverage through your job, that will not change: ... o Insurance companies will not be able to deny you coverage because of pre-existing conditions, or presently being ill. ... o Insurance companies will not be permitted to water down your coverage in the middle of treatment for critical illnesses – which has caused the death of some people in the past. ... o Businesses will be required to either offer thei... Today TaxMama wants to summarize the high points of President Obama’s Health Care speech last night. Dear Family, You can read the text of the President’s speech using the link in the Resource Box below. Print it out and analyze it to your heart’s content . Obama has three basic goals: · To provide more security and stability to those who have health insurance. · To provide insurance for those who don’t. · To slow the growth of health care costs for our families, our businesses, and our government. Details: · If you have insurance coverage through your job, that will not change: ... o Insurance companies will not be able to deny you coverage because of pre-existing conditions, or presently being ill. ... o Insurance companies will not be permitted to water down your coverage in the middle of treatment for critical illnesses – which has caused the death of some people in the past. ... o Businesses will be required to either offer their workers health care, or chip in to help cover the cost of their workers. ......§ 95 percent of all small businesses, because of their size and narrow profit margin, would be exempt from these requirements. That’s nice, but it won’t help their employees much, wil it? · Folks who don’t presently have health insurance will have affordable choices: ... o There will a health insurance exchange offering competitive prices. ... o There will be tax credits to help those who cannot afford even those lower rates. (How will we be paying for this?) ... o However, just as with auto insurance, buying coverage will be mandatory for all Americans. ... o Those who still cannot afford any coverage whatsoever and cannot get it work will get a hardship waiver. ·The overall plan will take 4 years to implement. ... o In the meantime, there will be low cost coverage for those with pre-existing conditions to cover the costs of catastrophic illnesses without bankrupting individuals. The President did not specifically mention portability as part of the plan – being able to take your coverage with you when you leave a job. He implied it. But when you don’t specify something, it may not end up in the plan. He insists that this will be revenue neutral, that the plan will pay for itself through cost savings, the reduction of waste and the focus on wellness care, rather than wasteful procedures recommended simply to avoid malpractice issues. Read the President’s remarks, using the link in the Resource Box below, and tell us what do you think? Can it be done? And remember, you can find answers to all kinds of questions about health care and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online President Obama's Speech on Health Care Reform :: File Download (0:00 min / 1 MB) Today TaxMama wants to summarize the high points of President Obama’s Health Care speech last night. Dear Family, You can read the text of the President’s speech using the link in the Resource Box below. Print it out and analyze it to your heart’s content . Obama has three basic goals: · To provide more security and stability to those who have health insurance. · To provide insurance for those who don’t. · To slow the growth of health care costs for our families, our businesses, and our government. Details: · If you have insurance coverage through your job, that will not change: ... o Insurance companies will not be able to deny you coverage because of pre-existing conditions, or presently being ill. ... o Insurance companies will not be permitted to water down your coverage in the middle of treatment for critical illnesses – which has caused the death of some people in the past. ... o Businesses will be required to either offer their workers health care, or chip in to help cover the cost of their workers. ......§ 95 percent of all small businesses, because of their size and narrow profit margin, would be exempt from these requirements. That’s nice, but it won’t help their employees much, wil it? · Folks who don’t presently have health insurance will have affordable choices: ... o There will a health insurance exchange offering competitive prices. ... o There will be tax credits to help those who cannot afford even those lower rates. (How will we be paying for this?) ... o However, just as with auto insurance, buying coverage will be mandatory for all Americans. ... o Those who still cannot afford any coverage whatsoever and cannot get it work will get a hardship waiver. ·The overall plan will take 4 years to implement. ... o In the meantime, there will be low cost coverage for those with pre-existing conditions to cover the costs of catastrophic illnesses without bankrupting individuals. The President did not specifically mention portability as part of the plan – being able to take your coverage with you when you leave a job. He implied it. But when you don’t specify something, it may not end up in the plan. He insists that this will be revenue neutral, that the plan will pay for itself through cost savings, the reduction of waste and the focus on wellness care, rather than wasteful procedures recommended simply to avoid malpractice issues. Read the President’s remarks, using the link in the Resource Box below, and tell us what do you think? Can it be done? And remember, you can find answers to all kinds of questions about health care and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online President Obama's Speech on Health Care Reform :: File Download (0:00 min / 1 MB) tag:odeo.com,2009-09-10,25102762 Thu, 10 Sep 2009 05:59:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25097512-Cancellation-of-Debt Today TaxMama hears from Anna in Virginia who is upset. “I just received a letter from the IRS for my 2007 tax return saying I owe $1600 because of a cancellation of debt that I didn’t claim. I didn’t know that I was supposed to. I don’t have $1600. What am I supposed to do?” Dear Anna, Don’t you just hate those notices from out of the blue? Or are they really unexpected? You probably got a 1099-C from the lender who cancelled your debt. You didn’t really know what to do with it, so you didn’t include it in your tax return. You really should have asked someone. After all, if you owe about $1600, how could you not know that you managed to get let off of about $10,000 worth of debt? You had to do something to get that debt cancelled, didn’t you? So, what should you do now? Take that IRS notice to a good local tax professional who understands how to handle cancellation of debt income. You might be able to file an amended return to r... Today TaxMama hears from Anna in Virginia who is upset. “I just received a letter from the IRS for my 2007 tax return saying I owe $1600 because of a cancellation of debt that I didn’t claim. I didn’t know that I was supposed to. I don’t have $1600. What am I supposed to do?” Dear Anna, Don’t you just hate those notices from out of the blue? Or are they really unexpected? You probably got a 1099-C from the lender who cancelled your debt. You didn’t really know what to do with it, so you didn’t include it in your tax return. You really should have asked someone. After all, if you owe about $1600, how could you not know that you managed to get let off of about $10,000 worth of debt? You had to do something to get that debt cancelled, didn’t you? So, what should you do now? Take that IRS notice to a good local tax professional who understands how to handle cancellation of debt income. You might be able to file an amended return to reduce the taxability of that cancelled debt. There is some information here about how all this works: http://www.marketwatch.com/story/debt-cancelation-feels-good-until-tax-bill-comes If there’s no way to reduce the taxes, you’ll simply have to request an installment payment plan. You can do that online without any help. http://www.irs.gov/businesses/small/article/0,,id=108347,00.html Good luck! And remember, you can find answers to all kinds of questions about 1099-Cs and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online TaxMama's MarketWatch Article :: Debt cancellation feels good -- until the tax bill comes IRS Articles :: Payment Plans, Installment Agreements File Download (0:00 min / 0 MB) Today TaxMama hears from Anna in Virginia who is upset. “I just received a letter from the IRS for my 2007 tax return saying I owe $1600 because of a cancellation of debt that I didn’t claim. I didn’t know that I was supposed to. I don’t have $1600. What am I supposed to do?” Dear Anna, Don’t you just hate those notices from out of the blue? Or are they really unexpected? You probably got a 1099-C from the lender who cancelled your debt. You didn’t really know what to do with it, so you didn’t include it in your tax return. You really should have asked someone. After all, if you owe about $1600, how could you not know that you managed to get let off of about $10,000 worth of debt? You had to do something to get that debt cancelled, didn’t you? So, what should you do now? Take that IRS notice to a good local tax professional who understands how to handle cancellation of debt income. You might be able to file an amended return to reduce the taxability of that cancelled debt. There is some information here about how all this works: http://www.marketwatch.com/story/debt-cancelation-feels-good-until-tax-bill-comes If there’s no way to reduce the taxes, you’ll simply have to request an installment payment plan. You can do that online without any help. http://www.irs.gov/businesses/small/article/0,,id=108347,00.html Good luck! And remember, you can find answers to all kinds of questions about 1099-Cs and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online TaxMama's MarketWatch Article :: Debt cancellation feels good -- until the tax bill comes IRS Articles :: Payment Plans, Installment Agreements File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-09,25097512 Wed, 09 Sep 2009 06:28:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25090828-Interest-and-Penalties Today TaxMama hears from Gary in Arizona with this question. “I am making payments to the IRS, and they charge interest and a penalty. Can I deduct these two from my income tax?” Dear Gary, That’s an excellent question. And I am surprised it’s not asked more often. When it comes to penalties, you can never deduct penalties at all. Not IRS penalties, not traffic tickets, not fines, etc. You can’t deduct them on your personal tax return or your business tax return. Then there’s the interest. Personal interest deductions disappeared with the Tax Reform Act of 1986. So sorry, there’s no deduction there. Now, if the interest were strictly on taxes on business profits…you should be able to deduct the interest on your Schedule C. Sorry to be the bearer of bad news. And remember, you can find answers to all kinds of questions about interest and penalties and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscrib... Today TaxMama hears from Gary in Arizona with this question. “I am making payments to the IRS, and they charge interest and a penalty. Can I deduct these two from my income tax?” Dear Gary, That’s an excellent question. And I am surprised it’s not asked more often. When it comes to penalties, you can never deduct penalties at all. Not IRS penalties, not traffic tickets, not fines, etc. You can’t deduct them on your personal tax return or your business tax return. Then there’s the interest. Personal interest deductions disappeared with the Tax Reform Act of 1986. So sorry, there’s no deduction there. Now, if the interest were strictly on taxes on business profits…you should be able to deduct the interest on your Schedule C. Sorry to be the bearer of bad news. And remember, you can find answers to all kinds of questions about interest and penalties and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) Today TaxMama hears from Gary in Arizona with this question. “I am making payments to the IRS, and they charge interest and a penalty. Can I deduct these two from my income tax?” Dear Gary, That’s an excellent question. And I am surprised it’s not asked more often. When it comes to penalties, you can never deduct penalties at all. Not IRS penalties, not traffic tickets, not fines, etc. You can’t deduct them on your personal tax return or your business tax return. Then there’s the interest. Personal interest deductions disappeared with the Tax Reform Act of 1986. So sorry, there’s no deduction there. Now, if the interest were strictly on taxes on business profits…you should be able to deduct the interest on your Schedule C. Sorry to be the bearer of bad news. And remember, you can find answers to all kinds of questions about interest and penalties and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-08,25090828 Tue, 08 Sep 2009 06:42:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25066833-Filing-Separately-Consequences Today TaxMama hears from Greta in New York with this question. “I am thinking of filing a separate tax, without my husband. I pay most of the bills. Can I claim the house; or do we have to divide it?” Dear Greta, That question is more complex than you might realize. You may want to meet with a good, tax professional who is familiar with your particular situation, as well as New York state laws. Some issues that impact your decision: 1) New York is not a community property state. http://www.fairmark.com/spousal/comprop.htm a) So, if he made some of the mortgage payments, you probably may not deduct the interest expense on those payments. b) If he paid any of the property taxes, again, you may not be able to deduct those payments. 2) There are a variety of deductions and credits you lose when you use the married, filing separately (MFS) status. 3) If you itemize, he will have to itemize, as well – even if he has no deductions to take. 4) If one or both of you are on ... Today TaxMama hears from Greta in New York with this question. “I am thinking of filing a separate tax, without my husband. I pay most of the bills. Can I claim the house; or do we have to divide it?” Dear Greta, That question is more complex than you might realize. You may want to meet with a good, tax professional who is familiar with your particular situation, as well as New York state laws. Some issues that impact your decision: 1) New York is not a community property state. http://www.fairmark.com/spousal/comprop.htm a) So, if he made some of the mortgage payments, you probably may not deduct the interest expense on those payments. b) If he paid any of the property taxes, again, you may not be able to deduct those payments. 2) There are a variety of deductions and credits you lose when you use the married, filing separately (MFS) status. 3) If you itemize, he will have to itemize, as well – even if he has no deductions to take. 4) If one or both of you are on Social Security, you lose the $32,000 exclusion for Social Security benefits. 85% of the benefits become immediately taxable. http://www.irs.gov/newsroom/article/0,,id=179091,00.html There are other issues as well. The important thing to consider, of course, is why you want to file separately. Your reasons may override all my objections. Some good reasons to file separately: 1) He can’t get his act together and is preventing you from filing on time. Definitely, do NOT wait for him – file! 2) He has a business and you’re not sure he’s reporting all his income. You do not want to be signing a joint return with him. You would be held liable for his unreported income when IRS catches him. 3) He has a balance due because he didn’t withhold enough or make his estimated tax payments. Filing jointly makes you liable for his carelessness. 4) You pay all the bills anyway. But, make sure he doesn’t also take deductions for the same expenses! Just some things to think about – or to discuss with your own tax professional. Good luck! And remember, you can find answers to all kinds of questions about marital problems and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online FairMark.com :: Listing of Community Property States IRS Tax Tip :: Are Your Social Security Benefits Taxable? File Download (0:00 min / 1 MB) Today TaxMama hears from Greta in New York with this question. “I am thinking of filing a separate tax, without my husband. I pay most of the bills. Can I claim the house; or do we have to divide it?” Dear Greta, That question is more complex than you might realize. You may want to meet with a good, tax professional who is familiar with your particular situation, as well as New York state laws. Some issues that impact your decision: 1) New York is not a community property state. http://www.fairmark.com/spousal/comprop.htm a) So, if he made some of the mortgage payments, you probably may not deduct the interest expense on those payments. b) If he paid any of the property taxes, again, you may not be able to deduct those payments. 2) There are a variety of deductions and credits you lose when you use the married, filing separately (MFS) status. 3) If you itemize, he will have to itemize, as well – even if he has no deductions to take. 4) If one or both of you are on Social Security, you lose the $32,000 exclusion for Social Security benefits. 85% of the benefits become immediately taxable. http://www.irs.gov/newsroom/article/0,,id=179091,00.html There are other issues as well. The important thing to consider, of course, is why you want to file separately. Your reasons may override all my objections. Some good reasons to file separately: 1) He can’t get his act together and is preventing you from filing on time. Definitely, do NOT wait for him – file! 2) He has a business and you’re not sure he’s reporting all his income. You do not want to be signing a joint return with him. You would be held liable for his unreported income when IRS catches him. 3) He has a balance due because he didn’t withhold enough or make his estimated tax payments. Filing jointly makes you liable for his carelessness. 4) You pay all the bills anyway. But, make sure he doesn’t also take deductions for the same expenses! Just some things to think about – or to discuss with your own tax professional. Good luck! And remember, you can find answers to all kinds of questions about marital problems and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online FairMark.com :: Listing of Community Property States IRS Tax Tip :: Are Your Social Security Benefits Taxable? File Download (0:00 min / 1 MB) tag:odeo.com,2009-09-03,25066833 Thu, 03 Sep 2009 06:26:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips, MFS http://www.odeo.com/episodes/25061735-Job-and-Business Today TaxMama hears from Jessica in Texas with a sensible question. “I have a full-time job that collects taxes, etc. I am considering starting a small business on the side. If I do, will I need to file separately from the full-time gig taxes on a quarterly basis? I can’t seem to find a good guide/site for those who are trying to do a business while still employed.” Dear Jessica, Practically every site and book and IRS publication that deals with small businesses, also applies to those who have jobs as well. The fundamental advantage that you have when you are also employed is that you can adjust the withholding on your paycheck to cover the taxes you will owe on your business profits. That way, you can avoid the burden of paying quarterly estimated taxes. In fact, depending on your business profits, you can even wait until September or October to withhold the extra taxes without facing any penalties for late payment. You’re asking a sensible question. And I&... Today TaxMama hears from Jessica in Texas with a sensible question. “I have a full-time job that collects taxes, etc. I am considering starting a small business on the side. If I do, will I need to file separately from the full-time gig taxes on a quarterly basis? I can’t seem to find a good guide/site for those who are trying to do a business while still employed.” Dear Jessica, Practically every site and book and IRS publication that deals with small businesses, also applies to those who have jobs as well. The fundamental advantage that you have when you are also employed is that you can adjust the withholding on your paycheck to cover the taxes you will owe on your business profits. That way, you can avoid the burden of paying quarterly estimated taxes. In fact, depending on your business profits, you can even wait until September or October to withhold the extra taxes without facing any penalties for late payment. You’re asking a sensible question. And I’ll bet you have dozens more. This is when you want to schedule some time with a good tax professional and start doing some planning to ensure your business is successful – and stays that way. My book, Small Business Taxes Made Easy will give you a good foundation and help give you a list of things to discuss with your tax professional. http://www.taxmama.com/AskTaxMama/book/ It will also help you develop a business plan and give you a checklist to use when you start a business Other useful resources include William Perez, EA’s About.com tax site http://taxes.about.com/ Jan Zobel, EA’s site and her book – http://www.janztax.com/ Frederick W. Daily’s site and books – http://www.taxattorneydaily.com/ And remember, you can find answers to all kinds of questions about small businesses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online TaxMama's Book :: Small Business Taxes Made Easy William Perez, EA's About.com tax site :: Jan Zobel, EA's site :: Frederick W. Daily's site and books :: File Download (0:00 min / 0 MB) Today TaxMama hears from Jessica in Texas with a sensible question. “I have a full-time job that collects taxes, etc. I am considering starting a small business on the side. If I do, will I need to file separately from the full-time gig taxes on a quarterly basis? I can’t seem to find a good guide/site for those who are trying to do a business while still employed.” Dear Jessica, Practically every site and book and IRS publication that deals with small businesses, also applies to those who have jobs as well. The fundamental advantage that you have when you are also employed is that you can adjust the withholding on your paycheck to cover the taxes you will owe on your business profits. That way, you can avoid the burden of paying quarterly estimated taxes. In fact, depending on your business profits, you can even wait until September or October to withhold the extra taxes without facing any penalties for late payment. You’re asking a sensible question. And I’ll bet you have dozens more. This is when you want to schedule some time with a good tax professional and start doing some planning to ensure your business is successful – and stays that way. My book, Small Business Taxes Made Easy will give you a good foundation and help give you a list of things to discuss with your tax professional. http://www.taxmama.com/AskTaxMama/book/ It will also help you develop a business plan and give you a checklist to use when you start a business Other useful resources include William Perez, EA’s About.com tax site http://taxes.about.com/ Jan Zobel, EA’s site and her book – http://www.janztax.com/ Frederick W. Daily’s site and books – http://www.taxattorneydaily.com/ And remember, you can find answers to all kinds of questions about small businesses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online TaxMama's Book :: Small Business Taxes Made Easy William Perez, EA's About.com tax site :: Jan Zobel, EA's site :: Frederick W. Daily's site and books :: File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-02,25061735 Wed, 02 Sep 2009 06:33:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25056218-Filing-on-Extension Today TaxMama hears from Jaleh in Delaware with this concern. “When you file an extension with the IRS for your business and personal tax returns, and you owe taxes that year, do you have to pay penalty and interest on the money once it is paid? I received a bill and I’m not sure if it’s because my accountant did not file the extension or this is just the way it is and your accountant can cost you more by not getting your returns done in a timely manner.” Dear Jaleh, From what you tell me, it does seem that your accountant did file your extension. When did you give your accountant the data with which to prepare your return? The penalty does not come because your accountant didn’t prepare your tax returns in a timely manner. The penalties are for not paying your taxes by April 15th – or for not having made estimated tax payments during the year. When you have a business, and you’re living on the income from the business, you most likely have ... Today TaxMama hears from Jaleh in Delaware with this concern. “When you file an extension with the IRS for your business and personal tax returns, and you owe taxes that year, do you have to pay penalty and interest on the money once it is paid? I received a bill and I’m not sure if it’s because my accountant did not file the extension or this is just the way it is and your accountant can cost you more by not getting your returns done in a timely manner.” Dear Jaleh, From what you tell me, it does seem that your accountant did file your extension. When did you give your accountant the data with which to prepare your return? The penalty does not come because your accountant didn’t prepare your tax returns in a timely manner. The penalties are for not paying your taxes by April 15th – or for not having made estimated tax payments during the year. When you have a business, and you’re living on the income from the business, you most likely have a taxable profit. You should be meeting with your tax professional each quarter to review your profits and to determine how much your quarterly estimated tax payment should be. Your penalties should be pretty low. The rate is 1/2% per month until you file your return, within the extension period. And the interest on it is quite low as well. I recommend that you stay in better touch with your tax pro throughout the year and make your quarterly estimated payments. If your tax pro doesn’t have time for you, find someone who does. And remember, you can find answers to all kinds of questions about small businesses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) Today TaxMama hears from Jaleh in Delaware with this concern. “When you file an extension with the IRS for your business and personal tax returns, and you owe taxes that year, do you have to pay penalty and interest on the money once it is paid? I received a bill and I’m not sure if it’s because my accountant did not file the extension or this is just the way it is and your accountant can cost you more by not getting your returns done in a timely manner.” Dear Jaleh, From what you tell me, it does seem that your accountant did file your extension. When did you give your accountant the data with which to prepare your return? The penalty does not come because your accountant didn’t prepare your tax returns in a timely manner. The penalties are for not paying your taxes by April 15th – or for not having made estimated tax payments during the year. When you have a business, and you’re living on the income from the business, you most likely have a taxable profit. You should be meeting with your tax professional each quarter to review your profits and to determine how much your quarterly estimated tax payment should be. Your penalties should be pretty low. The rate is 1/2% per month until you file your return, within the extension period. And the interest on it is quite low as well. I recommend that you stay in better touch with your tax pro throughout the year and make your quarterly estimated payments. If your tax pro doesn’t have time for you, find someone who does. And remember, you can find answers to all kinds of questions about small businesses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) tag:odeo.com,2009-09-01,25056218 Tue, 01 Sep 2009 06:39:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/25050267-DCAA-audit-requirements Today TaxMama hears from Virginia in Maryland who wants to know. “Can QuickBooks be used for government contractors who need to meet DCAA audit requirements? If so, is there anything specific that needs to be done when setting up the chart of accounts to make it DCAA compliant?” Dear Virginia, That’s an excellent question. I don’t know the answer. No doubt, you should be able to use QuickBooks. You should be able to find the answer if you read through the link relating to your, or your client’s, business here in the Defense Contract Audit Agency audit manual. http://www.dcaa.mil/cam.htm Or you might find some guidance here on their main site: http://www.dcaa.mil/ Of course, you could always call them directly, or e-mail them to get a direct answer. Incidentally, the SBA might be able to help, too: http://www.federaltimes.com/index.php?S=4241031 Good luck! And remember, you can find answers to all kinds of questions about government contract audits and o... Today TaxMama hears from Virginia in Maryland who wants to know. “Can QuickBooks be used for government contractors who need to meet DCAA audit requirements? If so, is there anything specific that needs to be done when setting up the chart of accounts to make it DCAA compliant?” Dear Virginia, That’s an excellent question. I don’t know the answer. No doubt, you should be able to use QuickBooks. You should be able to find the answer if you read through the link relating to your, or your client’s, business here in the Defense Contract Audit Agency audit manual. http://www.dcaa.mil/cam.htm Or you might find some guidance here on their main site: http://www.dcaa.mil/ Of course, you could always call them directly, or e-mail them to get a direct answer. Incidentally, the SBA might be able to help, too: http://www.federaltimes.com/index.php?S=4241031 Good luck! And remember, you can find answers to all kinds of questions about government contract audits and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online Defense Contract Audit Agency :: audit manual Defense Contract Audit Agency website :: The Federal Times :: article about SBA helping small businesses get government contracts File Download (0:00 min / 0 MB) Today TaxMama hears from Virginia in Maryland who wants to know. “Can QuickBooks be used for government contractors who need to meet DCAA audit requirements? If so, is there anything specific that needs to be done when setting up the chart of accounts to make it DCAA compliant?” Dear Virginia, That’s an excellent question. I don’t know the answer. No doubt, you should be able to use QuickBooks. You should be able to find the answer if you read through the link relating to your, or your client’s, business here in the Defense Contract Audit Agency audit manual. http://www.dcaa.mil/cam.htm Or you might find some guidance here on their main site: http://www.dcaa.mil/ Of course, you could always call them directly, or e-mail them to get a direct answer. Incidentally, the SBA might be able to help, too: http://www.federaltimes.com/index.php?S=4241031 Good luck! And remember, you can find answers to all kinds of questions about government contract audits and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online Defense Contract Audit Agency :: audit manual Defense Contract Audit Agency website :: The Federal Times :: article about SBA helping small businesses get government contracts File Download (0:00 min / 0 MB) tag:odeo.com,2009-08-31,25050267 Mon, 31 Aug 2009 06:27:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/24993021-Need-Truly-Passive-Income Today TaxMama hears from Barb in San Diego, who needs advice. “I have Passive Activity Loss carryforwards. Are there any types (REITs, MLPs, etc) of publicly traded companies that have Passive Activity Income to offset those carryforwards? I don’t want to personally own income generating real estate and have to do all that work.” Hi Barb, Yup, I can understand all that. Look for investments that are structured as partnerships – and that produce a profit. Obviously, it’s not losses you’re looking to generate. Though, generally, those passive investments are designed to generate paper losses (through depreciation, etc.).I don’t know why. After all, most of the people investing in them have incomes too high to permit deductions of passive losses. These days, the promoters should be looking for investments that generate passive income – or credits. Investments structured as S Corporations would also work. However, due to the limitation of ... Today TaxMama hears from Barb in San Diego, who needs advice. “I have Passive Activity Loss carryforwards. Are there any types (REITs, MLPs, etc) of publicly traded companies that have Passive Activity Income to offset those carryforwards? I don’t want to personally own income generating real estate and have to do all that work.” Hi Barb, Yup, I can understand all that. Look for investments that are structured as partnerships – and that produce a profit. Obviously, it’s not losses you’re looking to generate. Though, generally, those passive investments are designed to generate paper losses (through depreciation, etc.).I don’t know why. After all, most of the people investing in them have incomes too high to permit deductions of passive losses. These days, the promoters should be looking for investments that generate passive income – or credits. Investments structured as S Corporations would also work. However, due to the limitation of 100 shareholders, you can generally only find those investments through personal contacts. As to your passive loss carryforwards, you can use them if you sell the investments with which they are associated. How did you generate the passive losses? From real estate you owned? If you no longer own the properties, you should have been able to use the losses when you sold them. And remember, you can find answers to all kinds of questions about using passive losses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) Today TaxMama hears from Barb in San Diego, who needs advice. “I have Passive Activity Loss carryforwards. Are there any types (REITs, MLPs, etc) of publicly traded companies that have Passive Activity Income to offset those carryforwards? I don’t want to personally own income generating real estate and have to do all that work.” Hi Barb, Yup, I can understand all that. Look for investments that are structured as partnerships – and that produce a profit. Obviously, it’s not losses you’re looking to generate. Though, generally, those passive investments are designed to generate paper losses (through depreciation, etc.).I don’t know why. After all, most of the people investing in them have incomes too high to permit deductions of passive losses. These days, the promoters should be looking for investments that generate passive income – or credits. Investments structured as S Corporations would also work. However, due to the limitation of 100 shareholders, you can generally only find those investments through personal contacts. As to your passive loss carryforwards, you can use them if you sell the investments with which they are associated. How did you generate the passive losses? From real estate you owned? If you no longer own the properties, you should have been able to use the losses when you sold them. And remember, you can find answers to all kinds of questions about using passive losses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) tag:odeo.com,2009-08-20,24993021 Thu, 20 Aug 2009 06:33:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/24987209-Home-Office-Expense-Carryover Today TaxMama hears from Mark in Illinois, with this problem. “Taxpayer has claimed the home office deduction for a couple of years. There is a build up of carryover expenses. During 2008 taxpayer quit doing business from his home. Taxpayer continued in the same line of business for the remainder of the year from a location where he signed a rental agreement. Are the carryover expenses lost forever? Is there any way this taxpayer can claim these expenses?” Dear Mark, Have I got great news for you. As long as your client stays in business, he can use that expense carryover. Ideally, since he has now signed a lease and made more of a commitment to work at this business, he is now turning a profit – or starting to. All he has to do is attach the Form 8829, Office in Home Expenses, to his Schedule C. Don’t fill out the top section. Just use the bottom part, which shows the carryovers. Use the carryovers to reduce his Schedule C profits until they are all used up.... Today TaxMama hears from Mark in Illinois, with this problem. “Taxpayer has claimed the home office deduction for a couple of years. There is a build up of carryover expenses. During 2008 taxpayer quit doing business from his home. Taxpayer continued in the same line of business for the remainder of the year from a location where he signed a rental agreement. Are the carryover expenses lost forever? Is there any way this taxpayer can claim these expenses?” Dear Mark, Have I got great news for you. As long as your client stays in business, he can use that expense carryover. Ideally, since he has now signed a lease and made more of a commitment to work at this business, he is now turning a profit – or starting to. All he has to do is attach the Form 8829, Office in Home Expenses, to his Schedule C. Don’t fill out the top section. Just use the bottom part, which shows the carryovers. Use the carryovers to reduce his Schedule C profits until they are all used up. More good news – these expenses will reduce his Schedule C profits – and his self employment taxes, too. And remember, you can find answers to all kinds of questions about office in home expenses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form 8829 :: Office in Home File Download (0:00 min / 0 MB) Today TaxMama hears from Mark in Illinois, with this problem. “Taxpayer has claimed the home office deduction for a couple of years. There is a build up of carryover expenses. During 2008 taxpayer quit doing business from his home. Taxpayer continued in the same line of business for the remainder of the year from a location where he signed a rental agreement. Are the carryover expenses lost forever? Is there any way this taxpayer can claim these expenses?” Dear Mark, Have I got great news for you. As long as your client stays in business, he can use that expense carryover. Ideally, since he has now signed a lease and made more of a commitment to work at this business, he is now turning a profit – or starting to. All he has to do is attach the Form 8829, Office in Home Expenses, to his Schedule C. Don’t fill out the top section. Just use the bottom part, which shows the carryovers. Use the carryovers to reduce his Schedule C profits until they are all used up. More good news – these expenses will reduce his Schedule C profits – and his self employment taxes, too. And remember, you can find answers to all kinds of questions about office in home expenses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form 8829 :: Office in Home File Download (0:00 min / 0 MB) tag:odeo.com,2009-08-19,24987209 Wed, 19 Aug 2009 06:16:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/24981273-North-Fork-CP-2000s Today TaxMama hears from Stanley in New Jersey, with a universal problem. “Those people who had North Fork Bank accounts in 2007 received a 1099-INT showing North Fork as the payer. Capital One acquired North Fork Bank as of 3/10/2008. It appears Capital One modified their records to show they were the payer of interest earned for 2007. This is causing massive CP 2000 Notices. How can we get this corrected?” Dear Stanley, That’s a really annoying problem. No doubt, this will have happened to customers of other banks taken over by Capital One, Wells Fargo, Bank of America, or Chase. And I just wonder how many people will get those and not know what to do – and will freeze up and do nothing? This is a tough problem. Once the notices have already gone out, the only thing to do is to respond. Anyone working with a tax professional, like you, will be able to respond correctly and avert the ‘proposed assessment.’ Many folks handling this on their own wi... Today TaxMama hears from Stanley in New Jersey, with a universal problem. “Those people who had North Fork Bank accounts in 2007 received a 1099-INT showing North Fork as the payer. Capital One acquired North Fork Bank as of 3/10/2008. It appears Capital One modified their records to show they were the payer of interest earned for 2007. This is causing massive CP 2000 Notices. How can we get this corrected?” Dear Stanley, That’s a really annoying problem. No doubt, this will have happened to customers of other banks taken over by Capital One, Wells Fargo, Bank of America, or Chase. And I just wonder how many people will get those and not know what to do – and will freeze up and do nothing? This is a tough problem. Once the notices have already gone out, the only thing to do is to respond. Anyone working with a tax professional, like you, will be able to respond correctly and avert the ‘proposed assessment.’ Many folks handling this on their own will mess it up. Some won’t respond and the assessment will be posted – and turned over to collections. Perhaps putting this out there will help people find this in a search. If you get a CP-2000 letter – a letter telling you that IRS has found specific unreported income and is offering you a chance to correct the error – respond to it. If you don’t know how to do it in writing, and are not working with a tax professional – CALL IRS. Call the phone number on the notice. They will help you. Thank you for bringing this to my attention. I have alerted IRS about the problem. Let’s see what kind of a solution they can develop? On the other hand, I have to wonder. Typically, CP-2000’s are sent out, not because names don’t match; but because the total income reported in a given category doesn’t match. For instance, if total interest on the tax return was $2,500, but total 1099-INTs were $3,000, a CP-2000 would have been issued. But I don’t remember seeing CP-2000s when total interest was $2,500 and the 1099-INTs added up to $2,500. That seems odd to me. And remember, you can find answers to all kinds of questions about proposed assessments and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS FAQs page :: CP 2000 Frequently Asked Questions (FAQs) File Download (0:00 min / 1 MB) Today TaxMama hears from Stanley in New Jersey, with a universal problem. “Those people who had North Fork Bank accounts in 2007 received a 1099-INT showing North Fork as the payer. Capital One acquired North Fork Bank as of 3/10/2008. It appears Capital One modified their records to show they were the payer of interest earned for 2007. This is causing massive CP 2000 Notices. How can we get this corrected?” Dear Stanley, That’s a really annoying problem. No doubt, this will have happened to customers of other banks taken over by Capital One, Wells Fargo, Bank of America, or Chase. And I just wonder how many people will get those and not know what to do – and will freeze up and do nothing? This is a tough problem. Once the notices have already gone out, the only thing to do is to respond. Anyone working with a tax professional, like you, will be able to respond correctly and avert the ‘proposed assessment.’ Many folks handling this on their own will mess it up. Some won’t respond and the assessment will be posted – and turned over to collections. Perhaps putting this out there will help people find this in a search. If you get a CP-2000 letter – a letter telling you that IRS has found specific unreported income and is offering you a chance to correct the error – respond to it. If you don’t know how to do it in writing, and are not working with a tax professional – CALL IRS. Call the phone number on the notice. They will help you. Thank you for bringing this to my attention. I have alerted IRS about the problem. Let’s see what kind of a solution they can develop? On the other hand, I have to wonder. Typically, CP-2000’s are sent out, not because names don’t match; but because the total income reported in a given category doesn’t match. For instance, if total interest on the tax return was $2,500, but total 1099-INTs were $3,000, a CP-2000 would have been issued. But I don’t remember seeing CP-2000s when total interest was $2,500 and the 1099-INTs added up to $2,500. That seems odd to me. And remember, you can find answers to all kinds of questions about proposed assessments and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS FAQs page :: CP 2000 Frequently Asked Questions (FAQs) File Download (0:00 min / 1 MB) tag:odeo.com,2009-08-18,24981273 Tue, 18 Aug 2009 06:21:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/24974797-Landlord-Asking-For-W-9 Today TaxMama hears from Joseph in New York, with this odd question. “In what situation would a landlord ask a tenant, who is on public assistance, to sign a ‘’Form W9’’ in the process of a lease for an apartment when the landlord is going to get paid from the city?” Dear Joseph, Well, that’s an interesting question. And a rather odd practice. You’re right to question it. Personally, I would ask the landlord why he needs it – and what he is going to do with the form? The purpose of the Form W-9 is to gather the taxpayer identification information, the address and the business entity’s formation from people to whom you PAY money in the course of your business. You do not gather this information from people who pay you money. In the case of a landlord, he’s already got this information on the rental application. So, you’re absolutely right to question this practice. There is no legal reason I can think of for him ... Today TaxMama hears from Joseph in New York, with this odd question. “In what situation would a landlord ask a tenant, who is on public assistance, to sign a ‘’Form W9’’ in the process of a lease for an apartment when the landlord is going to get paid from the city?” Dear Joseph, Well, that’s an interesting question. And a rather odd practice. You’re right to question it. Personally, I would ask the landlord why he needs it – and what he is going to do with the form? The purpose of the Form W-9 is to gather the taxpayer identification information, the address and the business entity’s formation from people to whom you PAY money in the course of your business. You do not gather this information from people who pay you money. In the case of a landlord, he’s already got this information on the rental application. So, you’re absolutely right to question this practice. There is no legal reason I can think of for him to have you provide him with a signed W-9 form. If he refuses to explain and insists on getting the form, report him to the City agency that pays the rent. They will review his contract. Good luck! And remember, you can find answers to all kinds of questions about W-9 forms and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form W-9 :: Request for Taxpayer Identification Number and Certification File Download (0:00 min / 0 MB) Today TaxMama hears from Joseph in New York, with this odd question. “In what situation would a landlord ask a tenant, who is on public assistance, to sign a ‘’Form W9’’ in the process of a lease for an apartment when the landlord is going to get paid from the city?” Dear Joseph, Well, that’s an interesting question. And a rather odd practice. You’re right to question it. Personally, I would ask the landlord why he needs it – and what he is going to do with the form? The purpose of the Form W-9 is to gather the taxpayer identification information, the address and the business entity’s formation from people to whom you PAY money in the course of your business. You do not gather this information from people who pay you money. In the case of a landlord, he’s already got this information on the rental application. So, you’re absolutely right to question this practice. There is no legal reason I can think of for him to have you provide him with a signed W-9 form. If he refuses to explain and insists on getting the form, report him to the City agency that pays the rent. They will review his contract. Good luck! And remember, you can find answers to all kinds of questions about W-9 forms and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Form W-9 :: Request for Taxpayer Identification Number and Certification File Download (0:00 min / 0 MB) tag:odeo.com,2009-08-17,24974797 Mon, 17 Aug 2009 06:39:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/24954391-Theft-Loss Today TaxMama hears from James in Delaware, with this problem. “We were robbed in January and the cost of items stolen well exceeded the insurance companies total reimbursement of (10%). Can we claim any of the non covered loss in the 2009 tax year and how?” Dear James, That must have been a terrible experience! And naturally, policies have deductibles. Unfortunately, so has IRS. Before you can take a deduction for casualty loss (thefts are included), you have to reduce the total loss by two factors: 1) 10% of your adjusted gross income (AGI), which is the last line on page 1 of your Form 1040. 2) Plus an additional $100. In the EA class this week, one of my students asked, why the $100? Who knows. Ask your legislators why they dream up this nonsense! Let me give you an example of how this works. Suppose your insurance company didn’t reimburse you for $5,000. Let’s say you are a couple, both working. Your combined wages are $60,000 and you have no other incom... Today TaxMama hears from James in Delaware, with this problem. “We were robbed in January and the cost of items stolen well exceeded the insurance companies total reimbursement of (10%). Can we claim any of the non covered loss in the 2009 tax year and how?” Dear James, That must have been a terrible experience! And naturally, policies have deductibles. Unfortunately, so has IRS. Before you can take a deduction for casualty loss (thefts are included), you have to reduce the total loss by two factors: 1) 10% of your adjusted gross income (AGI), which is the last line on page 1 of your Form 1040. 2) Plus an additional $100. In the EA class this week, one of my students asked, why the $100? Who knows. Ask your legislators why they dream up this nonsense! Let me give you an example of how this works. Suppose your insurance company didn’t reimburse you for $5,000. Let’s say you are a couple, both working. Your combined wages are $60,000 and you have no other income or adjustment. 10% of AGI is $6,000. So you would have to reduce your theft loss by $6,100 before you could deduct a single penny. So if the loss is only $5,000, there’s no point in going through the exercise. Here are some resources to help you (Look for working links in the Resource Box below): IRS Publication 547 can explain all the details. http://www.irs.gov/publications/p547/index.html IRS Publication 584 is a workbook you can use for personal losses http://www.irs.gov/pub/irs-pdf/p584.pdf Use Section A of Form 4684 to report the losses. http://www.irs.gov/pub/irs-pdf/f4684.pdf Incidentally, if the theft loss had been for business items, there are no limitations on business losses. Those are reported on Section B of the Form 4684. I do hope this helps. And remember, you can find answers to all kinds of questions about casualty losses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Publication 547 :: Casualty, Theft and Disaster Losses IRS Publication 584 :: Workbook for personal Casualty, Theft and Disaster Losses IRS Form 4684 :: Reporting Casualty, Theft and Disaster Losses File Download (0:00 min / 1 MB) Today TaxMama hears from James in Delaware, with this problem. “We were robbed in January and the cost of items stolen well exceeded the insurance companies total reimbursement of (10%). Can we claim any of the non covered loss in the 2009 tax year and how?” Dear James, That must have been a terrible experience! And naturally, policies have deductibles. Unfortunately, so has IRS. Before you can take a deduction for casualty loss (thefts are included), you have to reduce the total loss by two factors: 1) 10% of your adjusted gross income (AGI), which is the last line on page 1 of your Form 1040. 2) Plus an additional $100. In the EA class this week, one of my students asked, why the $100? Who knows. Ask your legislators why they dream up this nonsense! Let me give you an example of how this works. Suppose your insurance company didn’t reimburse you for $5,000. Let’s say you are a couple, both working. Your combined wages are $60,000 and you have no other income or adjustment. 10% of AGI is $6,000. So you would have to reduce your theft loss by $6,100 before you could deduct a single penny. So if the loss is only $5,000, there’s no point in going through the exercise. Here are some resources to help you (Look for working links in the Resource Box below): IRS Publication 547 can explain all the details. http://www.irs.gov/publications/p547/index.html IRS Publication 584 is a workbook you can use for personal losses http://www.irs.gov/pub/irs-pdf/p584.pdf Use Section A of Form 4684 to report the losses. http://www.irs.gov/pub/irs-pdf/f4684.pdf Incidentally, if the theft loss had been for business items, there are no limitations on business losses. Those are reported on Section B of the Form 4684. I do hope this helps. And remember, you can find answers to all kinds of questions about casualty losses and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Publication 547 :: Casualty, Theft and Disaster Losses IRS Publication 584 :: Workbook for personal Casualty, Theft and Disaster Losses IRS Form 4684 :: Reporting Casualty, Theft and Disaster Losses File Download (0:00 min / 1 MB) tag:odeo.com,2009-08-13,24954391 Thu, 13 Aug 2009 06:28:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips, AGI http://www.odeo.com/episodes/24948315-Claiming-my-Parents Today TaxMama hears from April in California, who’s done some research. “I’d like to include my parents as qualifying dependents on my 2009 personal tax return (single). My father has been out of luck in the job market since late 2008, and has been collecting unemployment insurance. Their interest income plus unemployment would be over $3500 (no earned income at all). To confirm what I read from IRS publication, if their AGI is over $3500, I cannot use their exemptions, but I can still file as HOH (to get higher deductions) if I pay over half of upkeep expenses for their residence?” Hi April, This is really a tough time. And it is time for Dad to face up to the fact that he’s not going to find a job in his field at his old salary any time soon. It’s time to take something else, or to train for something else – before the unemployment runs out. In fact, it may be time for Mom to look at getting some training – just for self-preservation... Today TaxMama hears from April in California, who’s done some research. “I’d like to include my parents as qualifying dependents on my 2009 personal tax return (single). My father has been out of luck in the job market since late 2008, and has been collecting unemployment insurance. Their interest income plus unemployment would be over $3500 (no earned income at all). To confirm what I read from IRS publication, if their AGI is over $3500, I cannot use their exemptions, but I can still file as HOH (to get higher deductions) if I pay over half of upkeep expenses for their residence?” Hi April, This is really a tough time. And it is time for Dad to face up to the fact that he’s not going to find a job in his field at his old salary any time soon. It’s time to take something else, or to train for something else – before the unemployment runs out. In fact, it may be time for Mom to look at getting some training – just for self-preservation. As to whether or not you can claim your parents as dependents? Or for you to qualify as head of household (HOH)? 1) For HOH, you must pay more than half the total cost of keeping up their household. Here’s a worksheet to use. http://www.irs.gov/publications/p17/ch02.html#en_US_publink100032149 2) For the exemption: http://www.irs.gov/publications/p17/ch02.html#en_US_publink100032152 You have to qualify on TWO counts: a) You have to pay more than half the cost of keeping up their household. AND b) they have to qualify as your dependents. If (b) doesn’t happen, you can’t use the HOH status. So, your parents have to meet the Gross Income Test. Gross Income Test – To meet this test, a person’s gross income for the year must be less than $3,500. That’s per person, not total for both of them! Here are two ways to see if you can meet this test: 1) California is a community property state. Add up your parents’ income and see if the total comes to less than $7,000. If it does, you can claim both your parents. Then you’d have head of household status and two dependents. 2) If Dad has all the income and Mom only has some interest… see if you qualify to support Mom – and let Dad file his own separate return. Then you’d have head of household status and one dependent. And remember, you can find answers to all kinds of questions about claiming your parents and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Publication 17 :: Head of Household support worksheet IRS Publication 17 :: Exemption information File Download (0:00 min / 1 MB) Today TaxMama hears from April in California, who’s done some research. “I’d like to include my parents as qualifying dependents on my 2009 personal tax return (single). My father has been out of luck in the job market since late 2008, and has been collecting unemployment insurance. Their interest income plus unemployment would be over $3500 (no earned income at all). To confirm what I read from IRS publication, if their AGI is over $3500, I cannot use their exemptions, but I can still file as HOH (to get higher deductions) if I pay over half of upkeep expenses for their residence?” Hi April, This is really a tough time. And it is time for Dad to face up to the fact that he’s not going to find a job in his field at his old salary any time soon. It’s time to take something else, or to train for something else – before the unemployment runs out. In fact, it may be time for Mom to look at getting some training – just for self-preservation. As to whether or not you can claim your parents as dependents? Or for you to qualify as head of household (HOH)? 1) For HOH, you must pay more than half the total cost of keeping up their household. Here’s a worksheet to use. http://www.irs.gov/publications/p17/ch02.html#en_US_publink100032149 2) For the exemption: http://www.irs.gov/publications/p17/ch02.html#en_US_publink100032152 You have to qualify on TWO counts: a) You have to pay more than half the cost of keeping up their household. AND b) they have to qualify as your dependents. If (b) doesn’t happen, you can’t use the HOH status. So, your parents have to meet the Gross Income Test. Gross Income Test – To meet this test, a person’s gross income for the year must be less than $3,500. That’s per person, not total for both of them! Here are two ways to see if you can meet this test: 1) California is a community property state. Add up your parents’ income and see if the total comes to less than $7,000. If it does, you can claim both your parents. Then you’d have head of household status and two dependents. 2) If Dad has all the income and Mom only has some interest… see if you qualify to support Mom – and let Dad file his own separate return. Then you’d have head of household status and one dependent. And remember, you can find answers to all kinds of questions about claiming your parents and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online IRS Publication 17 :: Head of Household support worksheet IRS Publication 17 :: Exemption information File Download (0:00 min / 1 MB) tag:odeo.com,2009-08-12,24948315 Wed, 12 Aug 2009 06:29:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips, HOH http://www.odeo.com/episodes/24944393-On-Parents-Account Today TaxMama hears from Sherri in Montana with this question. “Are there tax consequences to being a signer on your elderly parents’ checking account in case something happens to them?” Dear Sherri, Do you mean will anything bad happen to if you have been added to your parents’ signature card? No. In fact, that’s a good thing. If you also sign on the account, it might not be frozen upon the death of one or both of your parents. Your hands won’t be tied when it comes to paying expenses for your surviving parent. It doesn’t obligate you to anything. There are no taxes involved – unless, of course, you draw out more than $13,000 per year for your own personal use. Then there might be gift taxes your parents might have to pay. And remember, you can find answers to all kinds of questions about signing on your parents’ accounts and other tax issues, free. Where? Where else? At TaxMama.com [Note: If you were subscribed to the e-mailed ... Today TaxMama hears from Sherri in Montana with this question. “Are there tax consequences to being a signer on your elderly parents’ checking account in case something happens to them?” Dear Sherri, Do you mean will anything bad happen to if you have been added to your parents’ signature card? No. In fact, that’s a good thing. If you also sign on the account, it might not be frozen upon the death of one or both of your parents. Your hands won’t be tied when it comes to paying expenses for your surviving parent. It doesn’t obligate you to anything. There are no taxes involved – unless, of course, you draw out more than $13,000 per year for your own personal use. Then there might be gift taxes your parents might have to pay. And remember, you can find answers to all kinds of questions about signing on your parents’ accounts and other tax issues, free. Where? Where else? At TaxMama.com [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) Today TaxMama hears from Sherri in Montana with this question. “Are there tax consequences to being a signer on your elderly parents’ checking account in case something happens to them?” Dear Sherri, Do you mean will anything bad happen to if you have been added to your parents’ signature card? No. In fact, that’s a good thing. If you also sign on the account, it might not be frozen upon the death of one or both of your parents. Your hands won’t be tied when it comes to paying expenses for your surviving parent. It doesn’t obligate you to anything. There are no taxes involved – unless, of course, you draw out more than $13,000 per year for your own personal use. Then there might be gift taxes your parents might have to pay. And remember, you can find answers to all kinds of questions about signing on your parents’ accounts and other tax issues, free. Where? Where else? At TaxMama.com [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) tag:odeo.com,2009-08-11,24944393 Tue, 11 Aug 2009 06:03:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips http://www.odeo.com/episodes/24942664-On-Parents-Account Today TaxMama hears from Sherri in Montana with this question. “Are there tax consequences to being a signer on your elderly parents’ checking account in case something happens to them?” Dear Sherri, Do you mean will anything bad happen to if you have been added to your parents’ signature card? No. In fact, that’s a good thing. If you also sign on the account, it might not be frozen upon the death of one or both of your parents. Your hands won’t be tied when it comes to paying expenses for your surviving parent. It doesn’t obligate you to anything. There are no taxes involved – unless, of course, you draw out more than $13,000 per year for your own personal use. Then there might be gift taxes your parents might have to pay. And remember, you can find answers to all kinds of questions about signing on your parents’ accounts and other tax issues, free. Where? Where else? At TaxMama.com [Note: If you were subscribed to the e-mailed ... Today TaxMama hears from Sherri in Montana with this question. “Are there tax consequences to being a signer on your elderly parents’ checking account in case something happens to them?” Dear Sherri, Do you mean will anything bad happen to if you have been added to your parents’ signature card? No. In fact, that’s a good thing. If you also sign on the account, it might not be frozen upon the death of one or both of your parents. Your hands won’t be tied when it comes to paying expenses for your surviving parent. It doesn’t obligate you to anything. There are no taxes involved – unless, of course, you draw out more than $13,000 per year for your own personal use. Then there might be gift taxes your parents might have to pay. And remember, you can find answers to all kinds of questions about signing on your parents’ accounts and other tax issues, free. Where? Where else? At TaxMama.com [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) Today TaxMama hears from Sherri in Montana with this question. “Are there tax consequences to being a signer on your elderly parents’ checking account in case something happens to them?” Dear Sherri, Do you mean will anything bad happen to if you have been added to your parents’ signature card? No. In fact, that’s a good thing. If you also sign on the account, it might not be frozen upon the death of one or both of your parents. Your hands won’t be tied when it comes to paying expenses for your surviving parent. It doesn’t obligate you to anything. There are no taxes involved – unless, of course, you draw out more than $13,000 per year for your own personal use. Then there might be gift taxes your parents might have to pay. And remember, you can find answers to all kinds of questions about signing on your parents’ accounts and other tax issues, free. Where? Where else? At TaxMama.com [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.] Ask TaxMama :: Where taxes are fun and answers are free www.TaxQuips.com :: The number ONE free tax podcast online File Download (0:00 min / 0 MB) tag:odeo.com,2009-08-11,24942664 Tue, 11 Aug 2009 06:03:00 -0700 no TaxMamas TaxQuips: Tax Quips Tax Quips