Ask TaxMama Issue 605 Happy Summer
June 24, 2011 by Tax Blog
Filed under Questions & Answers
Dear Family,
This week is officially the beginning of summer! Don’t you love this time of year?
Our legislators leave the Capitol and run home to their constituents to see what we want them to do. They pass fewer tax laws to distract and confuse us. Considering there were over 500 changes to the U.S. Tax Code last year…we certainly could use a break.
Teaching about casualty losses last night, I flat out couldn’t remember if folks in disaster areas still had to reduce their personal losses by 10% or not. Even though the most current publication I looked at included the 10% reduction, I wasn’t sure if the publication was correct. Some years, that was waived (Katrina); now, I guess that 10% reduction is back.
Oh, didn’t you know that many of the 2010 IRS publications you’re using are all wrong? Yup. They were published before Congress passed the last-minute extender bills. Yes indeedy. That means I usually have to check two or three sources to be certain I am teaching the most current information.
Please, someone, please, simplify, simplify, simplify!
In today’s Money Funnies & Inspiration, we learn how the Internet and this whole brave new world got started.
In IRS News, we get new mileage rates for the second half of 2011. And we are treated to a special article by W. Murray Bradford, CPA, about writing off your scuba diving. May you?
A Week of TaxMama’s TaxQuips
We start the week with Tiffany who owns a home with her boyfriend. And H&R Block won’t let them split the depreciation any way they choose? Is H&R Block correct? Scott wants to know how bonus depreciation works. TaxMama starts out just fine – but rethinks herself – then posts mistaken information. Mike Reed and DA catch the error! Nancy is getting married, but wants to file separately from her new husband. What should she be considering when thinking of MFS? We end the week with Barb who has a client wanting to sell his farm to his son for $1. Just how exactly do you report a sale like that?
Lower taxes, achieved ethically = higher profits and increased joy
Small Business Taxes Made Easy
The new, award-winning Small Business Taxes Made Easy is getting lots of attention. Andrew collected some of the reviews and awards generated by this book.
Sandra just read the book and said:
I am amazed at how simple, straightforward and easy to understand it is. I wish I had known about your book when I had my [tax] practice. I know it will help a great deal when I start teaching small business seminars for the IRS.
This week’s question for you – Do you have employees without realizing it?
Read Chapter 9 of Small Business Taxes Made Easy for more details.
TaxMama’s EA Exam Review Class
Do you want to know more about the IRS Special Enrollment Examination? Please replay Everything you Ever Wanted to Know about the EA Exam.
Last night, TaxMama’s students learned all about installment sales and barter.
Tomorrow, we’re going to learn more secrets about how to pass Part 1 of the EA Exam. TaxMama teaches the secret to answering questions, when you simply don’t have a clue!
There is still time to sign up for TaxMama’s EA Exam Review Course.
There is a Family Member discount of 10%.
IRS Practice Series Continues
The next session is about Practice Series: Representing Your Client at a 1040 Audit – Office or Field
IRS Practice Series: Curing the Addicted Tax Delinquent – A 12-step program
Remember to sign up for the whole IRS Practice Series. The 5 classes this summer will run from May through July. There’s a discount if you sign up for the whole series at once.
Incidentally, if there is anything else you’d like to learn more about, please let me know. We’ll develop the classes for you.
TaxMama Interviews
Adrienne Mitchell – MarketWatch radio
Nasty Surprise Awaits 401k Borrowers
Paul Petillo, in the Business Insider
Your Retirement Lifetime: Longevity and Investing
http://www.businessinsider.com/your-retirement-lifetime-longevity-and-investing-2011-6
Radio with Jim Blasingame, the Small Business Advocate
- How is an enrolled agent different from a CPA? What is the roll of an enrolled agent? Eva Rosenberg joins Jim Blasingame to define “enrolled agent” and reveal how they serve clients with tax and financial services.
- The career of an enrolled agent (EA) How can you make a career of being an enrolled agent? Eva Rosenberg joins Jim Blasingame to discuss how to become a professional enrolled agent (EA), what an EA does for his or her clients, plus the earnings potential of an EA.
- Two tax deductions to not overlook What are some tax deductions and credits you can still get? Eva Rosenberg joins Jim Blasingame to report on the health care tax credit and the SEP IRA that you can still fund and deduct through the extension period.
TaxMama Writing:
AccountingWeb.com blog – June is Strut Your Stuff Month
http://www.accountingweb.com/blogs/taxmama/talk-taxmama/june-strut-your-stuff-month
This week’s Equifax article is – How to Avoid Getting Taxed for Phantom Income and Debt Forgiveness
This week’s Suze Orman article will be about Natural Victims – Seniors are Targets of Scam Artists
http://www.moneymindedmoms.com/articles/
You can find daily TaxQuips into YouTube videos
http://www.youtube.com/taxmama1#p/u
As always, we love your feedback, opinions and ideas.
You are what makes all this fun – and interesting!
Please use the Comments link online.
http://taxmama.com/asktaxmama/ask-taxmama-issue-605
TaxNerd gear makes a bold statement year-round.
It helps attract the opposite sex!
Shop at www.taxnerd.net or http://www.zazzle.com/taxmama*
Hugs from your favorite TaxNerd,
http://www.zazzle.com/taxmama*
Eva Rosenberg, EA
Your TaxMama®
Your TaxMama® is watching…out for you.
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TAX CALENDAR
http://taxmama.com/tax-calendar-2011/
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06/30/2011 File Form TDF 90-22.1 – Report of Foreign Banks with $10,000 anytime during year
07/15/2011 Employers Make Monthly Payroll tax deposit on the 15th of each month
08/01/2011 2nd Quarter Payroll Taxes Due
08/01/2011 Deposit FUTA tax if more than $500 was paid through June 30th
08/01/2011 Employer’s Deposit Federal Unemployment (FUTA)
08/01/2011 Employers File Annual Return for Employee Benefits Plan 5500
08/01/2011 Employers File Annual Return for Employee Benefits Plan 5500-EZ
08/01/2011 Employers File request for Extension filing Employee Benefits Plan Return
08/01/2011 2nd Quarter Federal Excise Tax Return & Payment Voucher
08/15/2011 Employers Make Monthly Payroll tax deposit on the 15th of each month
08/30/2011 Time for businesses to consider setting up retirement plans
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From TaxMama® to You!
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Follow TaxMama®’s Tweets – http://twitter.com/TaxMama
You are invited to put a TaxQuips Widget on your phone, social networking page, website, or… You’ll get the TaxQuips as soon as they published – long before they are distributed in by e-mail. It’s a nifty gadget. Just pick up the code and paste into your site or application.
http://www.widgetbox.com/widget/taxmamas-taxquips-daily-tax-podcasts
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SPECIAL DEALS
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=> Do it Yourself Legal Material
NOLO answers the question –
What can I do if my spouse gets into debt – do I owe his/her debts?
(disclosure – TaxMama receives a commission)
=> Need a Corp, LLC, Registered Agent
Incorp Services Inc. in Nevada – DISCOUNT
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Similar discounts on Registered Agent services.
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EA EXAM NEWS & SOLVING THE TAX PUZZLE
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Take TaxMama®’s 2011 EA Exam Review Class
New class starts on May 17th
– sign up now – and join the FUN!
http://irsexams.com/registration/
A flood of Tax Professionals are interested in taking
the EA Exam. We still have a few handy dandy totes
to hold all your books, notes and discs.
http://irsexams.com/registration/
Replay the session –
Everything You Wanted to Know About the EA Exam
=== CPA Exam Review
Looking for a great course?
You can’t do any better than this!
Phil Yaeger’s CPA Exam Review Course
http://www.yaegercpareview.com/
- Ask TaxMama :: Where taxes are fun and answers are free
- TaxQuips :: The number ONE free tax podcast online
Tax Deductions for Scuba Diving
June 24, 2011 by Tax Blog
Filed under Questions & Answers
Article reprinted with the permission of W. Murray Bradford, CPA
QUESTION: I sell property and casualty insurance in Florida. I also like to scuba dive. I would like your opinion on whether or not the following is deductible. I spent five hours with a prospect. First we went on a dive, then we spent two hours at dinner, where I asked the prospect to buy his car insurance and homeowners insurance from me. May I deduct the cost of the dive and the dinner? (S.D., Vero Beach, FL)
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ANSWER : Yes. Both are deductible.
The dinner is deductible as directly related entertainment—this is a technical term in tax law for business entertainment that qualifies for the entertainment deduction because you had the business discussion in a business setting (the restaurant). The scuba diving is deductible as associated entertainment—entertainment that is associated with a business discussion qualifies as deductible entertainment.
You did not mention who paid for what. If you paid for both yourself and your prospect, you deduct for both. If you paid only for yourself, you deduct that amount. Either way, you qualify for the deduction.
REPLY: That’s great!
QUESTION: If our spouses were to scuba dive, how would that change the deductions? (S.D., Vero Beach, FL)
ANSWER : You could deduct the cost of having the spouses scuba dive under the closely connected rule that allows deductions for the costs of entertaining spouses even when the spouses are not involved in the business discussions.
Sincerely,
W. Murray Bradford, CPA
Publisher
Tax Reduction Letter
www.bradfordtaxinstitute.com
P.S. Subscribers to Tax Reduction Letter have access to tax planning tips every day at the Bradford Tax Institute’s archives. Not yet a subscriber? Find out more. Take a no-obligation 7-day FREE trial so that you can sample the helpful tips in the last two issues of Tax Reduction Letter. This trial is absolutely free with no obligations and no strings attached. That’s a personal promise. CLICK HERE.
Bradford Tax Institute |
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- Bradford Institute :: For more interesting tax guidance
IRS Increases 2011 Mileage Rates
Courtesy of IRS http://www.irs.gov/pub/irs-drop/a-11-40.pdf
The following standard mileage rates will apply:
- January 1 – June 30: 51 cents per mile for business miles driven
- July 1 – December 31: 55.5 cents per mile for business miles driven
- January 1 – June 30: 19 cents per mile driven for medical or moving purposes
- July 1 – December 31: 23.5 cents per mile driven for medical or moving purposes
- January 1 – December 31: 14 cents per mile driven in service of charitable organizations.
- This can only be changed by an Act of Congress. So it rarely changes
These rates apply to the use of cars, vans, pickups, or panel trucks.
- Ask TaxMama :: Where taxes are fun and answers are free
- TaxQuips :: The number ONE free tax podcast online
- IRS News :: Where you can read this week's issue
- IRS News :: Where you can add your comments, too
IRS Increases 2011 Mileage Rates
June 24, 2011 by Tax Blog
Filed under Questions & Answers
Courtesy of IRS http://www.irs.gov/pub/irs-drop/a-11-40.pdf
The following standard mileage rates will apply:
- January 1 – June 30: 51 cents per mile for business miles driven
- July 1 – December 31: 55.5 cents per mile for business miles driven
- January 1 – June 30: 19 cents per mile driven for medical or moving purposes
- July 1 – December 31: 23.5 cents per mile driven for medical or moving purposes
- January 1 – December 31: 14 cents per mile driven in service of charitable organizations.
- This can only be changed by an Act of Congress. So it rarely changes
These rates apply to the use of cars, vans, pickups, or panel trucks.
- Ask TaxMama :: Where taxes are fun and answers are free
- TaxQuips :: The number ONE free tax podcast online
- IRS News :: Where you can read this week's issue
- IRS News :: Where you can add your comments, too
So…Who Should Pay Income Taxes?
David Walker, a former Government Accountability Office head, thinks it’s a problem that half of Americans don’t pay federal income taxes. At the June 22 IRS-Tax Policy Center Research Conference, he argued that more people ought to have “skin in the game” when it comes to paying these taxes so they will be invested in our country’s future. I happen to think almost all of those people he’s talking about do have skin in the game—more than he or I, in fact.
For starters, most people do pay taxes. As Walker recognizes, they pay payroll taxes, excise taxes, sales taxes, state income taxes–and more. Tax reform could easily involve some of these levies, so even people who don’t pay federal income taxes today could be affected by reform. And please don’t forget, while today’s credits and deductions do knock many low-income people off the tax rolls, those in the top brackets reap far greater benefits.
Also, as noted by my colleague Eric Toder, people don’t pay income taxes either because they have no taxable income (almost all of the elderly who don’t pay income tax, for instance), or because they qualify for credits that offset their tax liability. For the people in the second group, increases in tax rates could very well hit them in the wallet – either because they’ll owe net taxes or they’ll receive smaller refunds.
The Center on Budget and Policy Priorities recent analysis of those who don’t pay federal income taxes jibes with TPC’s. The conclusion? Most are elderly, poor, or unemployed (including people who are too disabled to work). Whom, I wonder, should the tax man put on the block? And how much money is there to be gained by doing so?
The Earned Income Tax Credit keeps many off the tax roles. But it’s not keeping wealthy people from paying income taxes. TPC estimates that in 2010, about 80 percent of its benefits went to households with income under $30,000.
Furthermore, people tend to receive the EITC for only a couple of years at a time. It might move people off the tax role in some years, but not all years. So even many people who temporarily aren’t paying income tax, likely will in the near future.
If the EITC were run as a spending program rather than a tax subsidy, government could separate its revenue and spending functions. This might diffuse some complaints about people who pay “no taxes.” But that sort of thinking overlooks the real advantages to delivering work incentives through the tax system. It is administratively efficient, is more accessible to workers than traditional spending programs, and has increased work, especially among single parents. Why fix something that isn’t broken?
Of course, as a spending program it would be targeted for cost cutting while as a tax subsidy it has—so far—remained immune.
At a time when we have a serious budget problem, tax breaks should face the same serious review as spending. But tax breaks for low-income families should not be at the top of anybody’s target list. No matter what happens with tax reform, I know where my next meal is coming from. At least some of those who avoid federal income tax thanks to programs such as the EITC don’t. Adding to their income tax burden will not help.
This is How it All Began, Really
June 24, 2011 by Tax Blog
Filed under Questions & Answers
In ancient Israel , it came to pass that a trader by the name of Abraham Com did take unto himself a young wife by the name of Dot.
And Dot Com was a comely woman, broad of shoulder and long of leg. Indeed, she was often called Amazon Dot Com.
And she said unto Abraham, her husband: “Why dost thou travel so far from town to town with thy goods when thou can trade without ever leaving thy tent?”
And Abraham did look at her – as though she were several saddle bags short of a camel load, but simply said: “How, dear?”
And Dot replied: “I will place drums in all the towns and drums in between to send messages saying what you have for sale, and they will reply telling you who is most willing to pay you the best price.
And the sale can be made on the drums and delivery made by Uriah’s Pony Stable (UPS).”
Abraham thought long and decided he would let Dot have her way with the drums. And the drums rang out and were an immediate success. Abraham sold all the goods he had at the top price, without ever having to move from his tent.
To prevent neighbouring countries from overhearing what the drums were saying, Dot devised a system that only she and the drummers knew.
It was called Must Send Drum Over Sound (MSDOS), and she also developed a language to transmit ideas and pictures – Hebrew To The People (HTTP)
But this success did arouse envy. A man named Benny Madoff did secrete himself inside Abraham’s drum and began to siphon off some of Abraham’s business. But he was soon discovered, arrested and prosecuted – for insider trading.
And the young men did take to Dot Com’s trading as doth the greedy horsefly take to camel dung.
They were called Nomadic Ecclesiastical Rich Dominican Sybarites, or NERDS.
And lo, the land was so feverish with joy at the new riches and the deafening sound of drums that no one noticed that the real riches were going to that enterprising drum dealer, Shiek William of Gates, who bought off every drum maker in the land.
And indeed did insist on drums to be made that would work only with Sheik Gates’ drumheads and drumsticks.
And Dot did say: “Oh, Abraham, what we have started is being taken over by others.”
And Abraham looked out over the Bay of Ezekiel, or eBay as it came to be known. He said: “We need a name that reflects what we are.”
And Dot replied: “Young Ambitious Hedonistic Owner Operators.” “YAHOO,” said Abraham. And because it was Dot’s idea, they named it YAHOO Dot Com.
Abraham’s cousin, Joshua, being the young Gumptious Enthusiastic Educated Kid (GEEK) that he was, soon started using Dot’s drums to locate things around the countryside.
It soon became known as Geek’s and Others’ Official Guide to Locating Everything (GOOGLE).
And that is how it all began.
Courtesy of Andrew McCluskey of http://simplyfriday.com/
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