Your Invisible Impact

Next week, I have a high school reunion coming up. (Never mind what number it is – know that it is a big number!) I was privileged to attend the best public high school in Los Angeles (at least in my opinion) – Fairfax High School. Looking at the notes from my classmates brings back memories of significant people who made enormous impacts on our lives.

I bring this up because I want you to know that you make an impact on the lives of people, too. Often, you have no idea of the impression you make on someone – especially when it’s a good impression. (We have a tendency to think less of ourselves than others do.)

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When you smile, when you listen, when you do something considerate, you never know how deeply you affect the life of the person you touch. Sometimes, you go through life and never learn just how much you’ve enhanced someone’s like – or even that your kindness has saved a life.

I was privileged to learn that early, when I was 18 years old. The lesson has stayed with me a lifetime. An elderly man I smiled at every morning on the way to the bus stop once gave me a poem he had written for me. Essentially, it was about how that (to me) insignificant, polite smile and nod had become the bright point of his daily life.

It was little overwhelming for a self-absorbed teen-ager to be given responsibility for an elderly stranger’s happiness. But getting to know him, I came to understand the loneliness he had experienced – and how he had built this smile into an entire relationship (not in a creepy way) – that helped him do something to overcome the isolation he had been feeling. He started getting back in touch with friends, and writing and directing again. Because of a smile.

I was lucky enough to learn about it.

But, YOU? You never know how you impact people.

Let’s meet Wayne, and Information Please.

When I was a young boy, my father had one of the first telephones in our neighborhood.. I remember the polished, old case fastened to the wall. The shiny receiver hung on the side of the box. I was too little to reach the telephone, but used to listen with fascination when my mother talked to it.

Then I discovered that somewhere inside the wonderful device lived an amazing person. Her name was “Information Please” and there was nothing she did not know. Information Please could supply anyone’s number and the correct time.

My personal experience with the voice-in-a-box came one day while my mother was visiting a neighbor. Amusing myself at the tool bench in the basement, I whacked my finger with a hammer, the pain was terrible, but there seemed no point in crying because there was no one home to give sympathy.

I walked around the house sucking my throbbing finger, finally arriving at the stairway. The telephone! Quickly, I ran for the footstool in the parlor and dragged it to the landing. Climbing up, I unhooked the receiver in the parlor and held it to my ear.

“Information, please” I said into the mouthpiece just above my head.

A click or two and a small clear voice spoke into my ear.

“Information.”

“I hurt my finger…” I wailed into the phone, the tears came readily enough now that I had an audience.

“Isn’t your mother home?” came the question.

“Nobody’s home but me,” I blubbered.

“Are you bleeding?” the voice asked.

“No,” I replied. “I hit my finger with the hammer and it hurts.”

“Can you open the icebox?” she asked.

I said I could.

“Then chip off a little bit of ice and hold it to your finger,” said the voice..

After that, I called “Information Please” for everything.. I asked her for help with my geography, and she told me where Philadelphia was. She helped me with my math.

She told me my pet chipmunk that I had caught in the park just the day before, would eat fruit and nuts.
Then, there was the time Petey, our pet canary, died. I called, Information Please,” and told her the sad story.. She listened, and then said things grown-ups say to soothe a child. But I was not consoled. I asked her, “Why is it that birds should sing so beautifully and bring joy to all families, only to end up as a heap of feathers on the bottom of a cage?”

She must have sensed my deep concern, for she said quietly, ” Wayne , always remember that there are other worlds to sing in.”

Somehow I felt better.

Another day I was on the telephone, “Information Please.”

“Information,” said in the now familiar voice. “How do I spell fix?” I asked.

All this took place in a small town in the Pacific Northwest . When I was nine years old, we moved across the country to Boston .. I missed my friend very much. “Information Please” belonged in that old wooden box back home and I somehow never thought of trying the shiny new phone that sat on the table in the hall. As I grew into my teens, the memories of those childhood conversations never really left me..

Often, in moments of doubt and perplexity I would recall the serene sense of security I had then. I appreciated now how patient, understanding, and kind she was to have spent her time on a little boy.

A few years later, on my way west to college, my plane put down in Seattle . I had about a half-hour or so between planes. I spent 15 minutes or so on the phone with my sister, who lived there now.

Then without thinking what I was doing, I dialed my hometown operator and said, “Information Please.”

Miraculously, I heard the small, clear voice I knew so well.

“Information.”

I hadn’t planned this, but I heard myself saying,

“Could you please tell me how to spell fix?”

There was a long pause. Then came the soft spoken answer, “I guess your finger must have healed by now.”

I laughed, “So it’s really you,” I said. “I wonder if you have any idea how much you meant to me during that time?”

I wonder,” she said, “if you know how much your call meant to me. I never had any children and I used to look forward to your calls.”

I told her how often I had thought of her over the years and I asked if I could call her again when I came back to visit my sister.

“Please do”, she said. “Just ask for Sally.”

Three months later I was back in Seattle . A different voice answered,

“Information.” I asked for Sally.

“Are you a friend?” she said.

“Yes, a very old friend,” I answered.

“I’m sorry to have to tell you this,”She said. “Sally had been working part time the last few years because she was sick. She died five weeks ago.”

Before I could hang up, she said, “Wait a minute, did you say your name was Wayne ?” ”

“Yes.” I answered.

“Well, Sally left a message for you. She wrote it down in case you called. Let me read it to you.” The note said, “Tell him “there are other worlds to sing in. He’ll know what I mean.”

I thanked her and hung up. I knew what Sally meant.

Never underestimate the impression you may make on others.

Whose life have you touched today? Lifting you on eagle’s wings. May you find the joy and peace you long for.

Life is a journey… NOT a guided tour.

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What is Half of the Homebuyers Credit?

Today TaxMama has been fighting the good fight for the rights of homeowners who filed for the homebuyers credit. The latest issue? When a married person files a separate tax return, how much is half the homebuyer’s credit? Is it based on half the purchase price of the house? Or half of $8,000? (or $6,500, or $7,500, depending on the credit.)

Here’s the story:

Our client was married. As much as she may have loved her husband, he wasn’t terrific with finances. So she kept her funds and tax returns separate from his. (Smart woman!) When she bought a new home in 2009, she bought it in her own name.

Without question, she qualified for the first time homebuyer’s credit. When you’re married, filing a separate tax return, your homebuyer’s credit is limited to half of $8,000. That means she could get no more than $4,000.

The cost of the home was quite low – let’s say $35,000. 10% of $35,000 is only $3,500. That sounds like it’s below $4,000 to me. How about you?

Of course, the IRS managed to make us fight for it, so it took a very long time to get her credit approved. When she got the approval letter and the check, it was for only half the $3,500 – or $1,750. That was a surprise.

We filed an appeal, and included a copy of each of the Tax Acts relevant to the definition of the homebuyer’s credit, highlighting the relevant passages. IRS made their decision last month, in May. The Appeals Officer agreed with the IRS clerk who processed the original check. She said essentially, yup – the woman is married, so she only gets a credit for half the purchase price. Case closed. Good bye. Get on with your life.

During a friendly chat last week (within 30 days of the Appeals decision), we clarified several points with the Appeals Officer.

1) The woman bought the house herself, with her own funds, and in her own name.

2) She is living in the home and qualifies for the credit.

3) The husband is not on title and not on the loan.

4) Even if he were, when multiple buyers buy a home, any ONE of them is entitled to the full credit, as long as no one claims more than $8,000. Therefore, she is entitled to claim the credit on the full value of the house – up to the MFS limit.

5) The MFS limit is $4,000. The $3,750 she claimed less than $4,000. She is entitled to the other half of her credit.

The Appeals Officer called yesterday. After discussing it with her boss and doing some research, they decided the interpretation of the law is – half the credit is $4,000 – not half the purchase price. The check is (will be) in the mail!

See, it pays to do your research. And it pays to be stubborn – when you know the law is on your side!

And remember, you can find answers to all kinds of questions about homebuyer’s credits and other tax issues, free. Where? Where else? At www.TaxMama.com.

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Coaching Expenses

Today TaxMama hears from Mimi in the TaxQuips Forum who tells us. “My husband coaches my son’s Little League and travel basketball team. Occasionally, he buys equipment for the team’s use and hosts an after-season party, complete with pizza, cake and beverage. Some of these expenses are not reimbursed by the league. Are these deductible? How about gas mileage to check on the fields or going to games and practices?”

Hi Mimi,

Is this a job? Or is it volunteer work? Is the League a non-profit organization?

If it’s a job, he can take the deductions as employee business expenses on Form 2106. However, I’ll bet he doesn’t spend enough money to exceed 2% of your adjusted gross income. So that won’t help.

If he is getting paid via 1099, he’s self-employed. I’ve seen some coaches get paid that way. He can claim the deductions on his Schedule C.

He doesn’t qualify as an educator unless he’s coaching, essentially, full-time. So he can’t use the first $250 as adjustments to income on the front page of the tax return.

If this a non-profit organization, and he is volunteering, he should be able to deduct mileage at 14 cents per mile. And for the out-of-pocket expenses, I suggest that he save the receipts and put together an expense report each quarter – and ask the League to issue him a receipt for his donations to the League. They should institute this procedure for all the coaches. I hope this helps.

And remember, you can find answers to all kinds of questions about coaching expenses and other tax issues, free. Where? Where else? At www.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 join TaxMama.com link – it’s free!]

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Vacation to Orlando

Today TaxMama hears from Shaun in the TaxQuips Forum who wants to write off his vacation. “My son and I are traveling to Florida. I have a property in Jacksonville, FL that I need to check on. Can I fly in and out of Jacksonville to take care of business? Then drive to Orlando for a two-day visit? What can I claim as business expense and how much? (ex; airfare, rent a car, hotel, food, gas etc.)

Hi Shaun

If your entire trip to Jacksonville is about checking on the property, all your expenses are deductible.

However, if you’re going to fly in to Jacksonville, spend a couple of hours checking on the property, then drive to Orlando for two days and return to Jacksonville for the flight home…What do you think?

Proportionately, how much of your time was spent in Jacksonville? Not a heck of a lot. It looks more like your primary purpose was a vacation in Orlando, with a stop in Jacksonville on the way.

I’d say about the only thing deductible on this trip is the mileage from the airport to property – and perhaps equivalent mileage back to the airport. For couple of hours of inspection time, do you even need to stay overnight? Perhaps you could stretch it and get one night and meals for a day. But I’d say, from your itinerary, you’re on thin ice.

On the other hand, if you come in a Friday and spend the whole day working on the property, you could spend the night there. Take the weekend off, drive to Orlando (none of this part is deductible), and return to Jacksonville – finish up some things on the property – and fly out. Now you DO have deductible airfare. The one night in Jacksonville and your meals for about a day or day and half. If your son is old enough to work with you on the property, his meals and airfare, too. And the use of the car and fuel for a day.

Does that clarify the logic for the trip deduction? Have fun! And say “Hello” to Harry Potter.

And remember, you can find answers to all kinds of questions about writing off vacations and other tax issues, free. Where? Where else? At www.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 join TaxMama.com link – it’s free!]

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Phooey on FUTA

Today TaxMama hears from Terri in the TaxQuips Forum with a question. “I am a California business. Each year we did an annual return for Federal Unemployment tax (FUTA) taxes as a reconciliation for the payments we make each quarter. We did the same annual return for CA SUI. Beginning in 2011 The State of California requires us to report the CA State Unemployment (SUI) payments quarterly with our personal income tax withheld and state disability. Has the reporting stayed the same for the Federal Unemployment Tax Return?”

Hi Terry,

Nothing has changed for IRS. In fact, I don’t think anything really changed for EDD, either. Your payroll probably increased.

Bear in mind that even though FUTA wages are limited to $7,000, There’s a big difference between IRS and California’s EDD. You may have noticed that your FUTA rate for IRS is .8% (or .008). That amounts to a maximum cost of only $56 per employee, per year.

However, EDD’s SUTA starts around 4.5% and goes up. That’s over 5 x the IRS rate. So each employee costs you over $300 per year. California has a lot at stake. Especially in a tough economy with such a high unemployment rate. The unemployment they are paying out has to come from somewhere.

As your wages and the number of employees in your business increase, you find yourself paying much more money in SUTA, so California wants it before you end up spending it. Believe it or not, that’s a common practice with small employers – spending the payroll money instead of paying it in. Not that you would ever do that, of course!

And remember, you can find answers to all kinds of questions about employer taxes and other tax issues, free. Where? Where else? At www.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 join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

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Ask TaxMama Issue 603 – Success and Failure

Dear Family,

You’ve heard the old Chinese (or is it Jewish) curse – may you live in interesting times!

This week, I am.

One of the things I write about in the very first chapter of Small Business Taxes Made Easy is failing because of success. It’s a warning to business-owners to make provisions in case the business suddenly spikes and sales go through the roof. I also warn about having contingencies in place in case website activities spike and go through the roof.

So I keep monitoring my sites and activities to watch for just that eventuality. Even so, sometimes, you’re just not prepared. That’s what happened to our EA Exam class this week. Due to the overwhelming enthusiasm of the class, we overloaded the server! Our host is in the process of moving it to a bigger, better, faster, brighter, prettier server. It should be ready by Sunday, perhaps sooner.

Depending on your perspective, that’s either a good thing or a bad thing. If you have a sense of humor, it’s a funny thing. Considering chapter 1.

Do you want to know the most terrific thing that I’ve learned during this trying move?

People can be wonderful. Everyone at our host company has been going out of their way to be helpful. Even more so, the students who have been inconvenienced have been (is there a better word than wonderful?) SENSATIONAL! Patience, consideration, and trust. I can’t thank you enough.

Naturally, I have fallen behind on everything else I had planned to do this week, working on this project and working through the arrangements. But, by next week, life will be running smoothly and we’ll have forgotten all about it.

Meanwhile, today’s IRS News alerts us that IRS has revoked the exempt status of 275,000 exempt organizations – that means charities to which you may have made contributions, counting on the deductions. You will want to look at the list to see if you’re affected. If you are, you may not have totally lost those deductions just yet.

IRS has provided guidelines giving them instructions on how to get reinstated. Light a fire under your charity and get them to file the missing paperwork!

And you’ll find information about this summer’s National Tax Practice Institute® courses put on by NAEA. They are held in conjunction with the NAEA National Conference. This is THE best program in the country to train someone to represent taxpayers before the IRS. And for folks looking for a live, in-person EA Exam Review class, you’ll find one of those there, too.

In today’s Money Funnies we learn why Texas ladies feel pretty safe!

A Week of TaxMama’s TaxQuips

We start the week with Tawfiq, who was smart enough to use the tax benefits offered by using a Health Savings Account – but how does he set up the insurance component? Richard’s dad left quite a valuable baseball card collection to Mom. But since Richard is selling it for her, how does he get out of paying her taxes? SB had to kick back some commissions to a homebuyer recently – and didn’t want to get stuck paying taxes on the $4,000 he never got to keep. We end the week with Susan who makes people laugh uproariously with her question about taking care of her son’s class’ pet snake for the summer.

Lower taxes, achieved ethically = higher profits and increased joySmall 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. Here is a glowing review from a reader named Candace.

Eva,

Thank you for a wonderful book “Small Business Taxes Made Easy”.

I read it in one sitting and as dry as accounting and taxes can be just

by virtue of your humor and the information I learned with your easy

style of writing I didn’t have any problems understanding.

This week’s question for you – How do you fail in the face of success?

Read Chapter 1 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 the strange estate tax options for people who died last year.

Tomorrow, we’re going to learn more secrets about how to pass the EA Exam and to how to answer questions, when you simply don’t have a clue! There’s still time to join us.

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

This week’s Equifax article is – Renting vs Buying
http://tax.equifax.com/2011/06/tax-differences-between-buying-and.html

This week’s Suze Orman article will be about Natural Victims – Seniors are Targets of Scam Artists

You can find daily TaxQuips into YouTube videos
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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-603

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It helps attract the opposite sex!

Shop at www.taxnerd.net or http://www.zazzle.com/taxmama*

Hugs from your favorite TaxNerd,

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Eva Rosenberg, EA

Your TaxMama®

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Your TaxMama® is watching…out for you.

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TAX CALENDAR

http://taxmama.com/tax-calendar-2011/
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06/15/2011 Individuals, Farmers & Fishermen Pay 2nd Quarter Estimated Tax Payment

06/15/2011 Corporations – 2nd Quarter Estimate Tax payment Due

06/15/2011 Estates & Trusts 2nd Estimated Tax Payment

06/15/2011 Employers Make Monthly Payroll tax deposit on the 15th of each month

06/15/2011 US Taxpayers Overseas Individual Personal Returns due

06/15/2011 US Taxpayers Overseas Claim Foreign Earned Income

06/30/2011 File Form TDF 90-22.1 – Report of Foreign Banks with $10,000 anytime during year

06/15/2011 US Individuals Overseas Personal Return Extensions due
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From TaxMama® to You!
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Follow TaxMama®’s Tweets – http://twitter.com/TaxMama

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EA EXAM NEWS & SOLVING THE TAX PUZZLE
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Take TaxMama®’s 2011 EA Exam Review Class

http://irsexams.com/

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/

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275,000 Organizations No Longer Tax Exempt

Courtesy of IRS:

IRS Identifies Organizations that Have Lost Tax-Exempt Status; Announces Special Steps to Help Revoked Organizations

WASHINGTON –– The Internal Revenue Service today announced that approximately 275,000 organizations under the law have automatically lost their tax-exempt status because they did not file legally required annual reports for three consecutive years. The IRS believes the vast majority of these organizations are defunct, but it also announced special steps to help any existing organizations to apply for reinstatement of their tax-exempt status.

Congress passed the Pension Protection Act (PPA) in 2006, requiring most tax-exempt organizations to file an annual information return or notice with the IRS. For small organizations, the law imposed a filing requirement for the first time in 2007. In addition, the law automatically revokes the tax-exempt status of any organization that does not file required returns or notices for three consecutive years.

For several years, the IRS has made an extensive effort to inform organizations of the changes in the law through multiple outreach and education avenues, including mailing more than 1 million notices to organizations that had not filed. In addition, last year the IRS published a list of at-risk groups and gave smaller organizations an additional five months to file required notices and come into compliance. About 50,000 organizations filed during this extension period. Overall, the IRS believes the vast majority of small tax-exempt organizations are now in compliance with the 2006 law.

“During the past several years, the IRS has gone the extra mile to help make tax-exempt groups aware of their legal filing requirement and allow them additional time to file,” IRS Commissioner Doug Shulman said. “Still, we realize there may be some legitimate organizations, especially very small ones, that were unaware of their new filing requirement. We are taking additional steps for these groups to maintain their tax-exempt status without jeopardizing their operations or harming their donors.”

As part of this, the IRS issued guidance today on how organizations can apply for reinstatement of their tax-exempt status, including retroactive reinstatement. In addition, the IRS announced transition relief for certain small tax-exempt organizations – those with annual gross receipts of $50,000 or less for 2010 – that were made subject to the new “postcard” filing under the PPA. The relief allows eligible small organizations to regain their tax-exempt status retroactive to the date of revocation and pay a reduced application fee of $100 rather than the typical $400 or $850 fee. Full details are available in Notice 2011-43, Notice 2011-44 and Revenue Procedure 2011-36, issued today.

If an organization appears on the list of organizations whose tax-exempt status has been automatically revoked it is because IRS records indicate the organization had a filing requirement and did not file the required returns or notices for 2007, 2008 and 2009.

The list of organizations whose tax-exempt status has been revoked for failing to meet their filing requirement, which will be available on the IRS website at www.IRS.gov, includes each organization’s name, Employer Identification Number (EIN) and last known address. It is searchable by state. It also includes the effective date of the automatic revocation and the date it was posted to the list. The IRS will update the list monthly to include additional organizations that lose their tax-exempt status.

The vast majority of tax-exempt groups file their required returns and are unaffected by the revocation listing. In addition, the IRS believes the vast majority of the newly revoked groups are no longer in existence and need to be removed from the tax-exempt listing as the 2006 law requires.

This listing should have little, if any, impact on donors who previously made deductible contributions to auto-revoked organizations because donations made prior to the publication of an organization’s name on the list remain tax-deductible. Going forward, however, organizations that are on the auto-revocation list that do not receive reinstatement are no longer eligible to receive tax-deductible contributions, and any income they receive may be taxable.

Publication on the list of organizations whose tax-exempt status has been revoked serves as notice to donors and others that they may no longer rely on a prior listing in IRS Publication 78, Cumulative List of Organizations, as an indication of an organization’s tax-exempt status or its eligibility to receive tax-deductible contributions. An updated version of Publication 78 with current listings will be published on the IRS website later this week. Nor can donors rely on an IRS determination letter issued to the organization prior to the date of automatic revocation.

Existing organizations that seek to have their tax-exempt status reinstated must complete an application and pay a user fee regardless of whether they were originally required to file such an application. More information on the reinstatement process, including retroactive reinstatement, can be found on IRS.gov.
Additional Resources:

• Announcement 2011-35, Publication of the Auto-Revocation List
• Revenue Procedure 2011-33

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Texas Ladies Feel Safe

While out running errands, an elderly lady was stopped by a highway patrolman.

He asked for her drivers license and insurance.

The lady took out the required papers and handed them to the patrolman.

As he was looking through the information, he was surprised to see that she a permit to carry a concealed weapon.

He looked at her and asked if she had a weapon in her possession at this time.

She responded that she indeed had a .45 automatic in her glove box.

This was an experienced officer and something about her response made him ask if she had any other firearms in the vehicle.

She admitted to also having a 9mm Glock in her center console.

Now he had to ask one more time if that was all, and she responded once again she did have just one more, a .38 special in her purse.

The officer then asked her what was she so afraid of?

She looked him right in the eye and said:

“Not a darn thing!”

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Deducting Class Snake

Today TaxMama hears from Susan in the TaxQuips Forum with a fun case. “Assuming that I won’t make my son pay for it out of his allowance, for volunteering me to take care of the class snake for the summer… Can I deduct the cost of the frozen rats it eats? And what about if it escapes and I have to buy a replacement?”

Dear Susan,

Kris Hix our TaxLady in Kentucky tells Susan, “You are a better mom than I will ever be.”

Kris says you are able to deduct the reptile’s food and God Forbid, ich, the replacement.

It will go onto your Schedule A,non cash items to your son’s school. I would do the down and dirty and put the dollar value of the cash to your son’s school under cash contributions.

Kris adds, that what ever else you may contribute to the school for the different drives that are done, the bags, the wipes, tissues, etc., are all deductible. Keep your receipts and yes, you may deduct those items under non-cash charitable deductions.

TaxMama suggests a good Tax Court case to read, Jan Elizabeth Van Dusen v IRS. The woman vas a volunteer for an exempt org helping feral cats. The Tax Court upheld her right to deduct her costs for expenses under $250 – and a variety of other expenses – and the concept. What they did not accept is the deduction for the costs of $250 or more. Why? She did not have contemporaneous receipts from the charity.

Lesson?

Keep detailed records and receipts for all the costs expended. Arrange with the school that, when school resumes, they give you a receipt for all your out-of-pocket expenses. In fact, if you can, teach your son to keep a log of the reptile’s costs, and perhaps, its condition, throughout the summer. Who knows, he might even start writing stories about his adventures with the snake. It could be a fun learning experience on several levels.

And remember, you can find answers to all kinds of questions about deducting volunteer expenses and other tax issues, free. Where? Where else? At www.TaxMama.com.

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Kicking Back Commissions

Today TaxMama hears from SB in the TaxQuips Forum with a common problem. “As a real estate professional, I had to kick back some commissions to a buyer to close a sale. But I am getting the 1099-MISC for the full commission. Can I give the buyer a 1099-MISC for the commission I paid her? Should I put the information in Box 7? How does all this work?”

Dear SB,

Kris Hix our TaxLady in Kentucky explains that the box- Box 7 is for nonemployee income. They were not your employees. Please put the dollar value into box 3 – Other Income. This way the clients don’t have to try to explain why it was not included on a Schedule C; or why they are not paying self-employment taxes on the money.

TaxMama understands your frustration, feeling that you might have to pay tax on income you didn’t receive. Will your broker be issuing you a 1099 for your full share of the commission, without deducting the $4,000? That’s most likely what he will do.

So, yes, include the full commission in your income. Then deduct the $4,000 as either a cost of goods sold, or as a selling cost. You may issue a 1099 to the buyer. (hmmm, not the seller? That’s unusual) But, be kind. Do what Kris suggested and do NOT use the box for nonemployee income. Use Box 3 for Other Income and be merciful.

(The buyer should pick it up as a reduction of the basis in the home.)

You will file that 1099-MISC with the buyer and IRS by January 31st (or as late as March 31st if you do it electronically). You can use FileTaxes.com to file just the one 1099 for this buyer, or a few, if you need more. 1099s are filed separately, not with your tax return. They go to a different address than the one where your tax return is filed.

You will use your address and your SSN. If you have an employer ID number, you can use that. If you don’t have one, don’t get one just for this purpose. Be sure the buyers know you’re going to be giving them the 1099. Otherwise, they’re going be very angry.

And remember, you can find answers to all kinds of questions about balancing out tax matters, 1099s, and other tax issues, free. Where? Where else? At www.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 join TaxMama.com link – it’s free!]

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