From the Late Show’s Top Ten Dumb Guy Ways to Boost the Economy

10.   Rummage through rich folks' trash to see if they've tossed any cash

 4.   Give tax refunds in Cheetos (I'm not sure how that would help the economy, but boy am I hungry for some Cheetos)

 1.   Put Chuck Norris in charge of collecting money from deadbeat taxpayers

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/31/2008 05:23:00 PM Send this post:

Labels: comix, SSA

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/30/2008 10:27:00 PM Send this post:

Q:

Subject:  Does your information on C corporation vs. S corps apply to Personal Services providers?

Hi,

I've been reading a lot of your pages and I'm thankful for all of the great info. I even purchased a NOLO book ('Deduct it!'). However, I've talked to 3 accountants, in my search for one to help us with our new company and not one has agreed with our decision to create a C corp. For the reasons you said most CPA's steer clients wrong, the double taxation and extra paperwork. One even went so far to say that everything that's deductible in a C-corp is deductible in an S-corp. and that I was paying the max. tax rate because we are a personal services corp.
The hubby will be a sub-contractor for a gov't project providing consulting services, so would that make a difference?
Thanks for any help! If you don't have time, a book recommendation that would have the answer is perfect, too!

A:

There are far too many options to consider and possible scenarios that can be used to achieve your goals for me to even begin giving you specific advice via this medium.  You will need to work directly with an experienced tax pro who can analyze your unique circumstances.

In regard to the problem with conflicting advice from different tax pros you speak with, I would ignore anything from anyone who proposes any strategy without asking you a ton of probing questions first.  Anyone who relies on "one size fits all" solutions is not competent to work with.

In addition, any recommendations should be accompanied with a reasoned and complete explanation of the specific reasons why that particular approach is best for your unique circumstances and why the other possible alternatives are not.  Any tax pro who cannot defend his/her recommendations properly should be avoided. Any tax pro giving any indication of reaching a conclusion for your situation without thoroughly evaluating all of your unique circumstances should also be avoided.

I wish I could be more help; but I already have too many clients to take care of properly; so we are still trimming back on the difficult clients and are not accepting any new ones at this time.

Unfortunately, we don't have anyone specific to whom we could refer you. I did recently post some names and links for some like-minded tax pros around the country.   

If you haven't already done so, you should check out my tips on how to select the right tax preparer for you.  
You should note that geographic location should not be the main criterion for selecting a tax pro.

I wish I could be of more assistance; and I wish you the best of luck.

Kerry Kerstetter

Labels: corp

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/30/2008 04:52:00 PM Send this post:

Q:

Subject:  Tax question

Hello
I closed my short lived business at the end of 2007.  I opened it in August of 2006. I sold the business at a cost that I used to pay off my creditors. How do I report (which forms do I use) that the moneys I received for the sale of my business was used to pay off a debt.  The debt was originally created from purchasing equipment that I used for my business.

A:

This is far too complicated an issue for you to attempt to report on your own, especially in regard to the proper treatment of recaptured depreciation.

You need to work with a qualified professional tax preparer, who can ensure that everything is reported properly on your tax returns.

Good luck.

Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/30/2008 04:38:00 PM Send this post:

Q:

Subject:  Primary residence tax question

This morning I was speaking to a friend who is a local REALTOR.  She is suggesting that some people seem to be under the impression that if the Democrats win this election, this tax law could be changed or eliminated.  What is your impression or awares on this subject.

 

Thank you for your time,

A:

If you're referring to the Section 121 $250,000 tax free gain rule, I haven't noticed any discussion of anyone suggesting repealing this.

The Dems are seriously discussing several other huge tax hikes, such as allowing the Bush tax cuts to expire in a few years, removing the special lower tax rates for long term capital gains, and no repeal of the Estate Tax.

As I posted in my blog recently, in California, the Dems are attempting to remove the deduction for home mortgage interest, which could be an indication of how DC Dems might move.  There's always a chance that they could scale back the limit on how large deductible home mortgages could be from the current million dollar level.

It's all speculation and conjecture at this point, but as much as I fear the Dems' tax hiking urges, I'm not very worried about them removing the tax free home sale rule.  Luckily, it's not part of the Bush temporary tax cuts, so it will live on until enough of our rulers in DC decide to attack it.

Worst case scenario that I could imagine would be for them to scale its savings opportunities back a bit, such as by making it a once in a lifetime deal, as the previous law was, instead of the current ability to use it every two years.

There's also the possibility that they could reduce the amount of tax free gain from the $250,000 per person level.  However, since that amount was established in 1997 and has no provisions for any inflation adjustments, I don't see that happening either.

That's how I see it.  Thanks for writing.

Kerry Kerstetter

Labels: 121

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/30/2008 04:29:00 PM Send this post:

Courtesy of RiffTrax:

Labels: humor, video

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/30/2008 04:03:00 PM Send this post:

Labels: comix, TaxHikes

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/29/2008 10:39:00 PM Send this post:

As a means of saving huge amounts on taxes, 1031 exchanges of real estate have always been in the cross-hairs of our rulers looking to generate more tax revenue.  Rather than completely repeal Section 1031, the more likely approach is to whittle away at its usage.  I recently came across two such attempts that are in the works.

Federal regarding farm land:   1031 Proposal In The Farm Bill Update

In California, a frequently proposed idea has resurfaced, to disallow referral of gain on the disposal of Calif. property when the replacement property is not also in Calif.  Some other states have already implemented this kind of restriction, and if Calif does this, we can only expect many more states to follow.

We recently received the following news item in an email from Wachovia Exchange Services: 

Hello friends,

I recently received some information about California that might interest some of you.  Hopefully, we will never see this proposal get
enacted.  And I would hate to think that it might give any other states the same idea.

California, like a number of states, is faced with a severe budget shortfall. The legislature is therefore looking at a number of proposals
to raise revenues and reduce expenditures. As part of this effort, the California Legislative Administrative Office has proposed a revenue
raiser wherein an exchange of California property for out-of-state commercial property would not be eligible for deferral as a like-kind
exchange.

California currently has a claw-back regime where California property is exchanged for non-California property. In such case, while the gain is deferred, if the replacement property is subsequently sold, the deferred gain is subject to California tax. The reason for the proposal is the administrative difficulty in taxing the gains once the property has left the state.

This is just a proposal at this time; however, it should be noted that California has a history of non-conformity with the federal tax rules,
so it would not be out of character for it to have different rules for like-kind exchanges.

Labels: 1031

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/29/2008 06:42:00 PM Send this post:

From DribbleGlass:

ACCOUNTANTS

Q: When does a person decide to become an accountant?
A: When he realizes he doesn't have the charisma to succeed as an undertaker.

(Click on image for full size)

Labels: comix, humor

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/29/2008 01:22:00 PM Send this post:

A Tax McCain Could Cut – The key operative word here is “Could.”  The real world word is “Won’t.” A RINO like McCain, who cares more about the approval of Ted Kennedy than of Rush Limbaugh, would never even consider reducing the payroll taxes.

It’s actually much more likely that he will continue to adopt DemonRat policies as his own and push for an elimination of the ceiling on the amount of earned income subject to the 12.4% SS tax. 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/28/2008 03:19:00 PM Send this post:

Labels: comix, SSA

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/28/2008 12:11:00 PM Send this post:

Obama’s 1040 -- 2 EZ 4 Me. The easy way to overpay. – Interesting look at a plan by one of Obama’s advisors to have the IRS compute the taxes for 1040EZ filers.  Taxpayers would still have the option to file their own tax returns to challenge the IRS’s calculations. 

That’s similar to what we have now with non-filers being at the mercy of IRS’s super high tax calculations with no deductions or dependents. 

If this plan were to become reality, it would decimate the assembly line tax prep outfits.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/27/2008 10:25:00 PM Send this post:

Labels: comix, media, stocks

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/27/2008 04:28:00 PM Send this post:

Self-directed IRAs offer alternatives to the stock market – A good way to accumulate more reliable and less volatile wealth, such as with real estate.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/26/2008 08:46:00 PM Send this post:

Labels: audits, comix

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/26/2008 02:55:00 PM Send this post:

Labels: comix, TaxHikes

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/26/2008 12:27:00 AM Send this post:

For those who like to take a peek at what are normally private documents concerning celebrities, the Obama campaign has released this PDF file with copies of the Obamas’ 2000 through 2006 income tax returns.  The file is over 67 mb in size and contains 103 pages.  I just skimmed through some of them and will leave it to others with more time on their hands to provide more detailed analyses.  What may be interesting to those who are already sick and tired of Michelle Obama’s attempts to portray herself as being poor and financially struggling are the AGI figures on these tax returns: 

2000:  $240,505
2001:  $272,759
2002:  $259,394
2003:  $238,327
2004:  $207,647
2005:  $1,655,106
2006:  $983,826

Thanks to Byron York at NRO for the link to this. 

Of course, nobody is holding their breath waiting for a similar disclosure from the Clintons.  The latest I recall on this topic was a promise to release copies of their past tax returns after they have moved back into the White House, when it’s obviously too late to have any effect on the election.  Knowing how the Clinton Family works, I’m actually expecting an earlier release, but with most of the details left out such as back up schedules identifying sources of income.  It would also be in their character to have a set of innocent looking dummy tax returns prepared for public consumption.  It would be illegal for anyone in the IRS or their tax preparer’s office to publicly dispute the authenticity of the released documents.  

In all fairness, while these appear to be legitimate, there’s no real way of telling if these copies of the Obamas’ tax returns are exact replicas of what they actually sent to IRS.  They are still relatively new on the national political scene and the levels of their dishonesty are just beginning to be revealed to those of us outside of Chicagoland.

Labels: politics

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/25/2008 12:23:00 PM Send this post:

Labels: comix, taxes

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/23/2008 08:03:00 PM Send this post:

Labels: comix, preparers

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/23/2008 03:54:00 PM Send this post:

Labels: comix, Rebates

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/22/2008 07:43:00 PM Send this post:

Q:

Subject: Tax Free Gift

The maximum tax free gift for 2007 was $12,000 per individual. Is this the same for 2008?

 

Thank You.

A:

 Yes it is.

By law, this figure is only allowed to be increased in even $1,000 increments; so it takes a number of years' worth of cumulative inflation before it is bumped up.

Kerry Kerstetter

Labels: Gifting

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/22/2008 12:29:00 PM Send this post:

Q:

Subject: TAX MATTERS

MR KERSTETTER,

 I AM LOOKING FOR DIRECTIONS ON 2 SUBJECTS .

 1. THE SAME FOLKS OPERATING MULTIPLE "C" CORPORATIONS WITH OUT  FOLDING INTO  ONE CORPORATION BRINGING ON HIGHER TAX RATES,  BECAUSE ALL CORPORATIONS ARE GENERATING TAXABLE INCOME.

 2.  WORK AROUNDS FOR PROFESSIONAL SERVICE CORPORATIONS.

 I WOULD APPRECIATE YOUR THOUGHTS ON THE ABOVE SUBJECTS OR POINT ME IN THE RIGHT DIRECTION FOR ASSISTANCE.

 I AM A TAX  PREPARER LOCATED IN THE MIDWEST AND FOUND YOUR WEB SITE

TO BE JUST WHAT THE SMALL BUSINESSMAN NEEDS.

 SINCERELY,

A:

I still highly recommend the reference materials from QuickFinders, TMI and TaxCoach, as I mentioned in this recent blog post.

I hope these help.

Kerry Kerstetter

 

Labels: Reference

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/22/2008 12:24:00 PM Send this post:

Q:

Subject: C Corp

Hi Kerry:

I just read your article on the web as I am researching what to do. Here is my situation I am withdrawing funds from my old 401k to invest in a franchise.  The company Benetrends and or Guidant indicate that they would form a C corp for me which would buy stock in the new company.

Some people have brought up the “double taxation” issue with C corps. The cash flow from one franchise is about 25 K on a 60-85k Invetsmnent. The other location which I might get is is a 15k cash flow based on a 45-55k investment.

What would be your advice?  I plan  put in some amount into 401 k with the new corporation to reduce taxes but I need to withraw funds ( that wont be taxed again on my tax return)  to reduce debt elsewhere,

Do you know of accountants in the dallas area who would be able to keep the books for my new corp?

Thanks in advance for your time.

A:

There are so many very easy ways to pull money out of a C corp in a tax deductible manner that any good tax consultant can help you avoid any double taxation.

There are far too many options to consider and possible scenarios that can be used to achieve your goals for me to even begin giving you specific advice via this medium.  You will need to work directly with an experienced tax pro who can analyze your unique circumstances.

I wish I could be more help; but I already have too many clients to take care of properly; so we are still trimming back on the difficult clients and are not accepting any new ones at this time.

Unfortunately, we don't have anyone specific to whom we could refer you. I did recently post some names and links for some like-minded tax pros around the country.  

If you haven't already done so, you should check out my tips on how to select the right tax preparer for you.   

You should note that geographic location should not be the main criterion for selecting a tax pro.

I wish I could be of more assistance; and I wish you the best of luck.

Kerry Kerstetter

Labels: corp

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/22/2008 12:17:00 PM Send this post:

Q:

Subject:  Transfers from personal checking into a business shown as income ???

Kerry

I read your tips on Taxguru.org

I have quicken 2008

I have a business in florida selling equipment.  I get paid a salary.

I also have a farm in Tennessee which a rent out  

the problem is every month the farm loses money.
I ever overdraft or pull money from a line of credit or my checking account

This shows as income in cash flow reports.

how can the transfer go from my checking account >  to the "Shareholder Loans." to the farm,  and if its not income or expeses
what is it   (a liability)?

I guess thats what gets it off the the income statement

If (should) the farm should have its own Quicken file

How does the income flow in and out of my personal checking into the farm when it needs money?

Sorry for the conveluted questions?

Thanks

A:

All of those questions involve very basic bookkeeping procedures.

You are way out of your depth in trying to set up and keep your own books without professional guidance.  You should have a professional bookkeeper set up the Quicken, or better still QuickBooks, files to coincide with each of your tax returns and then either train you how to make the entries for your transactions or take on that task on an ongoing basis.

Your personal professional tax preparer should also be involved in the design of your books to ensure the ability to easily obtain the info s/he needs for each of the related tax returns.

Good luck.

Kerry Kerstetter

Labels: Accounting

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/22/2008 12:04:00 PM Send this post:

Q:

A:

There is no such thing as a standard business use percentage.  It depends on how many business miles were driven for each individual vehicle.

As I said before, you need to calculate the business miles in such a way that you would feel comfortable defending that if IRS were to ever question it.

A very commonly used method for reconstructing annual mileage is to estimate the business miles in a standard day or week and extrapolate that for the entire year based on the number of days or weeks you worked that year.  This methodology is accepted by most IRS auditors.

I hate to be such a pain with this; but I can't just pull numbers and percentages out of the air for you. That is your responsibility.

Kerry

Labels: Vehicles

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/22/2008 11:50:00 AM Send this post:

Labels: comix, IRS

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/20/2008 12:11:00 PM Send this post:

Q:

Subject:  Question on Selling Investment Property (Land)

Kerry, in '07 I sold a vacant lot that I had owned for 2+ years.  Originally, I intended to build on it, but a job took me elsewhere and I sold.  Can I book a deduction for all the mortgage interest paid to date as part of the adjusted cost basis to offset the net proceeds?  This wasn't clear for me as I read through the IRS documents.

 

Regards,

A:

You really should be discussing this kind of thing with your own personal professional tax advisor who can assist you better than I possibly could. You shouldn't be trying to interpret the tax laws in matters such as this.  That is what tax pros are for.

There are a number of ways in which to handle the interest paid on investment property.  It can be deducted on Schedule A as investment interest via Form 4952.

Another option is to capitalize it as part of the cost of the property and thus later on reduce the capital gain when it is sold.  Here is how this is explained on Page 4-14 of The TaxBook via their WebCD:

Carrying Charges—Election to Capitalize Interest and Taxes

A taxpayer may elect to add real estate taxes and interest to the cost basis of unimproved land rather than claim a current deduction.
Situations where this election might benefit the taxpayer include:

Standard deduction. If a taxpayer claims the standard deduction, the deduction for interest and taxes is lost. The taxpayer will benefit from the election to capitalize the amounts, which will increase the basis of the property.

AMT. If taxes reported on Schedule A would be added back to income as a preference item for AMT, the taxpayer may not realize a benefit from the deduction. In this case the election to capitalize and add the amounts to basis would benefit the taxpayer.

A statement listing the expenses capitalized must be attached to the original return for the year the election is made. The election is made on a year-by-year basis. (Reg. §1.266-1)

This is for background info only and should be applied in your case consistently with your previous years' tax returns and with the assistance of a professional tax advisor.

It looks like you may have screwed up the treatment of the interest on the earlier tax returns and amended returns may be required.  Again, a professional tax advisor should be used to help you with this.  Don't compound your mistakes by continuing to try to stumble your own way though the tax maze.

Good luck.

Kerry Kerstetter

Labels: CapGains

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/16/2008 03:09:00 PM Send this post:

Q:

Subject:  C corp to S corp

Hello,

 

I am an investor/shareholder in a California "C" Corp.  The President of the corporation just informed me that he was going to convert to "S" Corp.  He advised me the stock certificate (issued under the C corp) which is in the name of my living trust would have to be reissued into the name of an individual(s).

 

Why would one change the status of the corporation.  Does this work in my (the shareholder's) benefit?  What about the inability to hold this asset in my trust.

 

After reading your article...I'm uncertain of why he would make this change.  Sounds a bit fishy.

 

I have a call into my CPA...but it is tax time and I just wanted a quick review if you have time.

 

Thanks a bunch,

A:

There must be more to this story than you've recounted here because some of it is literally impossible to do.

Specifically, one person can't unilaterally change a C  corp to an S unless he is the sole 100% owner.  The election form requires the signed consent by every single stockholder because this election obligates each stockholder to report his/her share of the corporate income on his/her own 1040. How is the president of a corp of which you are part owner forcing you to sign the election form without your being able to analyze its impact on your unique situation?

After discussing the pros and cons of making the S election with your own personal professional tax advisor, you can decide whether to go along with it or not.  I have no way of knowing if it makes sense for you or not.  There are too many issues to consider.

Assuming the election makes sense for you and you are going to sign the  IRS form, the next issue seems to be whether your shares can be titled in the name of your living trust.  This depends on exactly what kind of trust you have.  If it's a normal revocable living trust, which is generally considered to be a disregarded entity for tax purposes while you are alive, it shouldn't make any difference whether the shares are in your own personal name or the name of your living trust because both will be using your SSN for identification purposes.

If it is a different kind of trust, especially one that has its own FEIN and files its own 1041 tax returns, there are limits and restrictions on S corp ownership.  There are also special kinds of trusts that can own S corp stock if that is appropriate for your situation.  Your personal professional tax advisor can help you with that issue.

Good luck.  I hope this helps.

Kerry Kerstetter

Labels: corp

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/16/2008 02:40:00 PM Send this post:

Q:

Subject:  minimizing overall tax liabilities among related entities

Kerry,

I am a CPA practicing in Texas and I am interested in an issue you have discussed on your blog.  It involves the legal shifting of income and deductions between at least three (or more) entities, say a C corp with a fiscal year-end, an S corp with a calendar year-end, and an individual owner of both corporations.  I understand the why, the timing, and the benefits of the shifting.  My philosophy in dealing with clients and the IRS is similar to yours.  I am not afraid of taking an aggressive position on my clients' tax returns, even in light of the changes to the Circular 230 rules and the IRC Section 6694 penalty provisions.  But the hesitancy in using this strategy is my possible inability to have enough solid reasons to convince the IRS that there is a valid business purpose for the arrangement.  I am a bit nervous about the IRS asserting that the entire arrangement is a sham thereby collapsing the two corporations into one and destroying my tax planning.  It would be helpful if you could reveal at least a portion of your strategy for developing the rationale for using this method of tax planning.  If that would be too intrusive and not something you would like to divulge, would I get some of my answers by using TAX Coach?  At your recommendation, I subscribed to their service but have not run an analysis for a client yet.  How successful have you been in defending your clients who are using this tax planning strategy when they were audited? 

 

Thank you, have a good tax season, and I hope you won't tell me "I really should be working with my own professional advisor on this matter" (ha).

   

A:

As you'll see in an upcoming post, there seems to be a lot of self censoring by tax pros whose imaginations have obviously gone wild about encountering the nastiest IRS auditors who will disallow anything that could have possibly saved the clients money on their taxes.  The result is a fear to recommend very basic tax savings strategies, such as multiple entities, and thus forcing their clients to pay more in taxes.

Having encountered every possible kind of IRS auditor there is over the past 30+ years, from real hard-asses to wimpy ones who literally allowed me to have my own way with everything, this fear is crazy and smells of professional paranoia.

As long as a valid business connection is there, such as leases, commissions, royalties, salaries, etc., and the amounts being passed between the owners and the entities are consistent, IRS will have to accept the figures.

I have had cases where IRS auditors have seen monies being passed around different entities, and they only cared that all entities were using the Cash basis of accounting and that the amounts were consistent.

As part of the Clinton Family's attack on me for being critical of them in my newsletters, IRS came after Sherry and my personal tax returns and had no problems with the monies we shuffle around our different corps when I showed the figures were consistently treated on our 1040 and the 1120s.

About four or five years ago, a client's 1040 was selected for audit based on huge interest expense deductions. When the auditor saw a lot of money passing back and forth among the client and his several wholly owned C and S corps, all he asked me was whether the corps were all on the Cash basis.  When I explained that they were all using the Cash basis the auditor said that was good and he wouldn't need to look at the books for any of the corps.  He said that if any of the corps had been on the Accrual basis, he would have had to perform a full blown audit on the corp as well.

Using corps to shift money around to minimize the overall tax burden has been around for longer than I have and will always be a perfectly valid technique.  I guess I was lucky in the fact that one of the CPAs I worked for at the beginning of my career was using this strategy for his own and his clients' finances; so I got an early start with it and have been working with it ever since.  It is a shame that there are too many tax pros today who are afraid of it.

While I haven't used them for any of my clients, TaxCoach does have some nice reports that you can generate to show clients how using corps can work to reduce their overall tax burden.

Good luck.  I hope this helps.

Kerry Kerstetter

Follow-Up:

Kerry,
Thanks very much for your reply.  It was just what I needed to hear in order to boost my confidence enough to begin recommending this strategy to my clients.

Labels: corp

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/16/2008 02:34:00 PM Send this post:

Labels: comix, PropertyTax

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/14/2008 06:25:00 PM Send this post:

Labels: Accounting, comix

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/14/2008 05:45:00 PM Send this post:

Labels: comix, Kids

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/14/2008 01:58:00 PM Send this post:

Labels: comix, politics, taxes

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/13/2008 11:00:00 PM Send this post:

Labels: comix, taxes

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/13/2008 10:56:00 PM Send this post:

Labels: comix, IRS

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/13/2008 10:52:00 PM Send this post:

From a reader:

Subject: Kroll's Top Tips for Tax Season ID Theft Prevention

Hi, Kerry -

Hope this note finds you well.

I'm reaching out on behalf of Kroll Fraud Solutions which just released a great tip sheet on how consumers can protect themselves from identity theft this tax season. I just read your post on Tax Preparer Danger Signs and wanted to share with you as I thought your Tax Guru readers might appreciate the quick refresher course? I'm happy to provide additional information should you need on Brian Lapidus and his tips below. Thanks, Kerry – I look forward to hearing from you.

Best,

Rachelle Lacroix

For Kroll Fraud Solutions

Keep Identity Thieves at Bay during the 2008 Tax Season

The U.S. economy may not be the only beneficiary of the recently passed federal economic stimulus package – identity thieves are getting a boost, too. Why? In the wake of the recent IRS announcement that more than 130 million Americans will receive tax rebates this year, identity thieves are using the promise of extra cash to lure Americans into disclosing their sensitive personal information.

These “phishing” schemes can take a variety of forms, the most common of which involves an identity thief who calls or e-mails a consumer pretending to be an IRS employee. The consumer is promised a sizable rebate if they file their taxes early. All the caller needs in exchange is the consumer’s bank account number to deposit the check.

The bad news is that schemes like the one described above are common; the good news is that falling victim to one is avoidable – as long as consumers get smart on the facts and follow the proper precautions.

Below ID theft expert Brian Lapidus, chief operating officer of Kroll’s Fraud Solutions, offers some important advice that every consumer should know about protecting their personal information during tax season. At Kroll, Lapidus oversees a highly-skilled team that includes veteran licensed investigators who meet regularly with IRS agents to stay apprised of emergent tax fraud issues – bolstering the team’s specialized work supporting breach victims and restoring individuals' compromised identities to pre-theft status.

Preparing your taxes?

• Beware of phishing schemes. The IRS never contacts consumers by e-mail or phone to request sensitive personal information (SSN, checking account information, etc.). If you receive a phone call or e-mail that you suspect may be a “phishing” scam, file a complaint with the Anti-Phishing Working Group and contact the IRS immediately.


• Avoid shopping mall kiosks or pop-up preparers who offer to assist you with tax preparation. Considering the amount of sensitive personal information involved in the tax preparation process, you probably don’t want to hand over your files to someone whose experience and background are unfamiliar to you. Ask a trusted friend to introduce you to his/her tax preparer or consult a local CPA association for trustworthy members.

Filing electronically?

• Avoid using wireless networks. Use of wireless networks means your data is being transmitted over open airwaves, similar to a radio transmission. If not properly secured, data can easily be picked up by an uninvited party.


• Don't prepare your taxes on a public computer. Public computers can contain “keylogger” spyware, which records every keystroke including passwords and account information. Keyloggers make it possible for an identity thief to steal any information entered into the computer during your session. Preparing your taxes on a public computer also increases your vulnerability to “shoulder surfers” – individuals who look over your shoulder to observe what you are doing and, more importantly, collect the sensitive data you’re entering.


• Only keep a record of your tax claims as long as necessary. Thieves can't steal what you don't have. Purge the data once the need for it has expired. Suggested guidelines for individual recordkeeping are available online through the IRS at: http://www.irs.gov/publications/p552/ar02.html#d0e617.

Filing by mail?

• Don't put your completed claim in an unlocked mailbox for pick-up. Instead, deposit outgoing mail at a post office.


• Take it one step further and opt for delivery tracking. That way you can be certain that your information has gotten to the IRS safely.


• Waiting for your tax rebate? Promptly remove mail from your mailbox after delivery. The longer your mail sits in an unsecured mailbox, the greater your chances of it falling into the wrong hands.


• You may also choose to have the IRS deposit your tax rebate directly into your bank account, further minimizing the risk of theft.

My reply:

Rachelle:

That is a very well written and interesting piece.

Do you have a URL where I could link to it from my blog? I couldn't find it on your website.

Thanks for your help.

Kerry Kerstetter

From Rachelle:

Hi, Kerry -

Great to hear from you!

Unfortunately, this not on our web site at the present time though I
hope you still consider sharing with your readers. If I can help
further, please let me know.

Rachelle

I received this follow-up today:

Hi, Kerry -

Hope all is well. Wanted to quickly touch base with you on Kroll's tax
season ID theft tips. We recently had a great article in the Wall Street Journal on the topic.  

Thanks, Kerry - I look forward to your reply.

Rachelle 

I wrote back:

Rachelle:

Thanks for the link to that article. It's very interesting.

I've been too busy working on tax returns and extensions to do much reading on the web for the past several days, so I appreciate your passing that along.

Kerry

Follow-Up:

You're very welcome, my pleasure!

Rachelle

Labels: Fraud

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/13/2008 09:50:00 PM Send this post:

On a number of occasions, I’ve mentioned the extremely useful TaxTools program from CFS Tax Software that I have been using for decades to fill in the gaps for items that the Lacerte tax programs didn't handle, including quick loan amortization schedules.

During the most recent update a few weeks ago, I noticed they had added a module to calculate the expected amount clients will be receiving in the upcoming rebates that the Feds will be mailing out. I just received an email from CFS announcing the availability of this module for free directly from their website.

Labels: comix, Rebates

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/13/2008 08:39:00 PM Send this post:

Labels: comix, IRS

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/11/2008 08:17:00 PM Send this post:

Labels: comix, taxes

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/10/2008 01:06:00 PM Send this post:

Labels: comix, Turbotax

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/10/2008 12:59:00 PM Send this post:

Labels: comix, IRS

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/10/2008 12:50:00 PM Send this post:

Labels: comix

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/08/2008 01:52:00 PM Send this post:

Like-Kind Exchanges Under IRC Code Section 1031 - Handy Fact Sheet from IRS covering the basics of 1031 exchanges. Amazingly, we never stop encountering people whose tax and real estate advisors are completely unaware of the existence of this perfectly simple way to defer taxes on property sales.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/07/2008 01:03:00 PM Send this post:

Q:

Subject: Quick Quicken question

Hi Kerry,

I ran across one of your web pages giving hints on how to use Quicken more effectively while searching for an answer to the following question:

How do you make expenses flow from one Quicken category to multiple Schedule Cs in TurboTax?

I have multiple Schedule C businesses, and some of them share similar expenses, for example, supplies. However, I'm unable to figure out how to separate the expenses for Business 1 and Business 2, and then make them flow to their respective Schedule Cs.

From consulting Quicken's help and a Quicken Bible book I have here at home, it says to set up classes -- and I did that -- but how do I tell Quicken that "supplies expenses for the Business 1 class should flow to the Business 1 Schedule C, and supplies expenses for the Business 2 class should flow to the Business 2 Schedule C?"

Your web page gave me a partial answer -- to run a P&L -- and I appreciate that; it gave me a better answer than either Quicken's online help or my Quicken Bible. However, I still don't see how to make expenses/classes flow to specific Schedule Cs.

Is there any way to do that?

Thanks,

Using Classes for each of your income and expense entries and then running a P&L with the columns set to show by Class is the best way to obtain accurate info to enter into each of your Schedule C forms.

As I've said on several occasions, I no longer use Quicken nor recommend it for small business owners. QuickBooks, which can import pre-existing Quicken data, is a much more reliable accounting program than is Quicken.

Even though there are some capabilities to export data directly from QuickBooks into tax prep programs, I have never felt that they were reliable enough to use. My clients send me their QB files and I have the class column P&L on one computer screen, while I have my Lacerte tax program on another screen, where I manually enter the data into each appropriate schedule.

You are making a huge mistake in trying to do your own tax returns and would be much better off by providing your Quicken or QuickBooks data files to your own professional tax preparer to enter into the tax program s/he uses.

As I've said since the beginning of consumer tax software, there is no better example of G-I-G-O (garbage in, garbage out) than programs like TurboTax.

I realize this isn't the answer you were looking for; but I do not believe in the practice of people trying to prepare their own tax returns; so I can't advise on how to do that.

Good luck.

Kerry Kerstetter

Thanks Kerry for responding. I appreciate your reply and advice. I did figure out the classes after writing to you.

Labels: Quicken, Turbotax

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/06/2008 09:34:00 PM Send this post:

Labels: comix, Forms

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/06/2008 09:12:00 PM Send this post:

There are other people who share my “hobby” of collecting different versions of the George Harrison classic “TaxMan” song. It’s been a while since I’ve posted a new version; but I just received this from a reader.

Subject: taxman

Hi Kerry,

Here's another Beatles "Taxman" cover by the Smashing Pumpkins:

http://www.archive.org/details/tsp2007-11-13.dsm6s

Track #20.

Thanks for the great website. I read it every morning.

I wrote back:

Thanks for the heads-up on that song.

I downloaded it and it's a good take on the classic song that never goes out of style.

I chopped off the last three minutes of the file, after the TaxMan song ends, and will be uploading it to my blog.

Let me know if you come across any more.

Kerry

Here is the 4.8 mb MP3 file with the Smashing Pumpkins performing TaxMan

Labels: Music

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/06/2008 02:28:00 PM Send this post:

Piercing Some Common Tax Myths – Some interesting issues from the free WSJ.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/05/2008 09:59:00 PM Send this post:

Q-1:

Subject: pre-owned SUV and Section 179 tax code

Hello Kerry,

 

Thanks for posting a great forum on accounting. I have read so many of your articles and find it very clear. I guess it mine time to ask a question

Correct me if I’m wrong, but my understanding about Section 179 tax code is that we need to buy brand new SUV (6000 plus lb) to qualify for the $25K dedication plus the 20 % depreciation deductions for the first year

We are planning on buying pre-owned SUV (6000 plus lb) i.e. between 2005 – 2007 year model and will be using primarily for business purpose. Will we be able to depreciate 100% of the value of the pre-owned SUV i.e. in 3 to 5 yrs? Ad whether it will also qualify for the $25K dedication

Thanks

 
A-1:

You really should be discussing this kind of thing with your own professional tax advisor who can assist you better than I possibly could.

I have actually covered this point on several occasions in my blog and on my Section 179 web page.

The Section 179 deduction has never required that the asset be absolutely brand new. It just has to be new to you and not acquired from a related party.

First year bonus deprecation, which was just recently set at 50%, has always only been available for the very first owner of a business asset.

Good luck.  I hope this clears this up for you. Your own personal professional tax advisor can give you much more specific guidance on how these will affect your unique tax situation.

Kerry Kerstetter

Q-2:

thanks Kerry for your response to my question. If I understand you correct. The first year bonus deprecation only applies to brand new purchase of the SUV and not pre-owned SUV, but I should be able to  deduct 100% deprecation of the value
 
thanks

A-2:

Your personal professional tax advisor will be able to assist you in claiming the proper amount of Section 179 and normal depreciation on the SUV, taking into account the various limiting factors, such as your net earned taxable income and the percentage of business usage.

You said that it will be used "primarily" for business; which means that you won't be able to claim the cost of the personal usage percentage.

Again, a good professional tax advisor will help you work out the proper business mileage percentage, which can be much higher if you have an home office.

Good luck.

Kerry Kerstetter

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/05/2008 09:06:00 PM Send this post:

Q:

Subject: Exchange Question

Can I exchange a 4-unit income property for a personal property? Or might I be able to sell the income property and do an exchange for a
payoff of my personal residence and obtain a second residence as well.

A:

You really should be discussing this kind of thing with your own professional tax advisor who can assist you better than I possibly could.

I have actually covered these points on several occasions in my blog and on the TFEC website.

Basically, a qualified exchange for your rental property will require that the proceeds be used for the acquisition of one or more business, investment or rental properties within the statutory time-frames.

Using the proceeds to acquire personal use property will not be acceptable.  Nor will using the proceeds for payments on debt of currently owned property.  You need to acquire new (to you) property.

Good luck.  I hope this clears this up for you. Your own personal professional tax advisor can give you much more specific guidance on how these will affect your unique tax situation.

Kerry Kerstetter

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/05/2008 08:53:00 PM Send this post:

Labels: Accounting, comix

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/05/2008 05:54:00 PM Send this post:

The Internal Revenue Service announced that interest rates for the calendar quarter beginning April 1, 2008, will drop by one percentage point. The new rates will be:

six (6) percent for overpayments [five (5) percent in the case of a corporation] 

six (6) percent for underpayments

Labels: IRS

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/04/2008 03:38:00 PM Send this post:

It's looking like Willie Nelson is losing his crown as the most famous celebrity tax screw-up; at least according to the Late Show writers.

From their Top Ten Ralph Nader Campaign Promises:

Fund universal health care by making Wesley Snipes pay his taxes.

One of those things that happens every four years like Wesley Snipes paying his taxes.

Labels: humor, Morons

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/03/2008 04:56:00 PM Send this post:

According to this item from Los Angeles, there are some idiot rulers in Sacramento seriously considering killing the tax deduction for home mortgages in order to generate what they guesstimate to be five billion dollars of new tax revenue. 

While there is a very slim chance of that being the actual result for one year at the most, it doesn’t take a genius to follow the chain of events that would be triggered by such a ridiculous move.  Taking away this tax deduction would have a much more widespread impact than the infamous jump in sub-prime mortgage payments has. The resulting plummet in real estate values would hit income and property tax revenues by many times that amount. 

Of course, none of our rulers, in Sacto or DC, have a reputation for factoring in long term consequences of their actions.  Most of them can’t see beyond the next election and couldn’t care one bit less about what might happen after that.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/03/2008 03:13:00 PM Send this post: