Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Archive for February, 2012

Posted by taxguru on February 28, 2012

Is the IRS Attempting to Intimidate Local Tea Parties? – And this surprises anyone?  As I well know personally from the Clinton years, vocal critics of the regime in power are frequently subjected to persecution and harassment by the IRS.

 

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Posted by taxguru on February 27, 2012

 

 

 

 

 

 

 

 

 

How some people become accountants?

 

 

If only this were true…

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

While Hitlary is front and center, this pic is missing the head Marxist  Mob Wife, Moochelle. 
She was probably on one of her taxpayer paid multi-million dollar vacations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From Blog Comix

 

 

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Recapturing Depreciation

Posted by taxguru on February 27, 2012

 

Q:

Subject: Section 179 deduction question

Hi Kerry, I hope you’re doing well today. I came across one of your tax guru web pages (http://www.taxguru.org/incometax/Rates/Sec179.htm) as I was seeking some tax advice. Thank you in advance for providing the information. I do have a question and wondering if you wouldn’t mind assisting me as it pertains to section 179.

I had purchased and placed in service a 2010 Cadillac Escalade (shorter model) on Sept. 9, 2010 as I am a self-employed individual and had utilized the vehicle for my consulting business (sole proprietor) the day of inception thru the remainder of year 2010 and all of year 2011. I had taken the section 179 deduction for tax year 2010 of $25,000 plus the allowable bonus depreciation of $11,855 for a total of $36,855 deprecation deduction in tax year 2010.

At this time, I hit extremely difficult income times as my income has decreased over 70% starting from the beginning of October 2011 to present as my consulting contracts have just about dried up and now I have to look at getting rid of assets. Unfortunately, I can’t afford the Escalade at this time and need to dispose of it immediately. If I were to sell it outright today and not trade it for any like-kind exchange, what tax implications would I be looking at for tax year 2012 meaning, what estimated tax do you think I would have to pay in the disposition of the Escalade? Additional information is I claimed the 5 year recovery period using the 200 DB-HY method/conversion and entered the cost basis of the esclade as $61,855 (that’s what I paid for it).

I’m only asking for an estimate, if you can provide one, and thank you very, very much in advance, if you’re able to provide an answer. I really appreciate it.

best regards,

 

A:

Calculating the taxable gain is pretty straight forward.

Add up all of the Section 179 and depreciation deductions you have claimed for the vehicle and then subtract that from your original purchase price. That will give you the adjusted cost basis (aka Book Value) of your vehicle. Anything above that amount that you sell it for will be your gain.

This gain, which is technically depreciation recapture, will be taxed as ordinary income on your 1040. The actual rate you will be paying for it will depend on your other income and deductions and what tax bracket you are in.

A professional tax advisor can work with your specific numbers to get you a more precise estimation of the tax effect of the sale. Another way to do this, if you are taking the risky approach of preparing your own tax returns, is to use whatever software you have for the 2011 returns and prepare a proforma 2012 with the sale of your Escalade and your other estimated 2012 figures.

You didn’t say whether you paid cash for the Escalade or financed it. The gain calculation is the same either way. However, you need to remember that the debt relief from the pay-off or assumption of any loan you may still have on the vehicle is considered to be the same as receiving cash by IRS. The total sale price will be the loan balance paid off plus any cash you receive.

Good luck. I hope this helps.

Kerry Kerstetter

 

 

Posted in 179, 4562, Vehicles | Comments Off

Posted by taxguru on February 27, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From Blog Comix

 

 

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Posted by taxguru on February 27, 2012

Beware the pitfalls of tax season, CPAs warn – Too many ways to screw up a tax return to do it yourself.

 

 

Posted in TaxReturns, TaxSeason | Comments Off

Interest on Back Taxes

Posted by taxguru on February 24, 2012

IRS Interest Rates Remain the Same for the Second Quarter of 2012

The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning April 1, 2012.  The rates will be:  

  • three (3) percent for overpayments (two (2) percent in the case of a corporation);
  • three (3) percent for underpayments;
  • five (5) percent for large corporate underpayments; and
  • one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

With the record low interest rates in the market, it would be nice if some of the States also brought their interest rates into line with everyone else. For example, Arkansas has always charged 10%.  As you can see in this chart from the TaxInterest program, some states even charge much more than that.

 

From Tax Info

TaxCoach Software: Finally! Plain-English Tax Planning That Builds Your Business!

Posted in IRS | Comments Off

Posted by taxguru on February 24, 2012

IRS still experiencing delays in sending tax refunds – I have been hearing about a lot of snags in the IRS’s electronic filing system from other tax preparers.  It just makes me glad I have stuck to my policy of only preparing paper tax returns.

 

Posted in E-Filing, IRS | Comments Off

Tax scams according to IRS…

Posted by taxguru on February 17, 2012

IRS Releases the Dirty Dozen Tax Scams for 2012

1. Identity Theft

2. Phishing

3. Return Preparer Fraud

4. Hiding Income Offshore

5. “Free Money” from the IRS & Tax Scams Involving Social Security

6. False/Inflated Income and Expenses

7. False Form 1099 Refund Claims

8. Frivolous Arguments –  listed here

9. Falsely Claiming Zero Wages

10. Abuse of Charitable Organizations and Deductions

11. Disguised Corporate Ownership

12. Misuse of Trusts

 

  

Posted in IRS, scams | 1 Comment »

Posted by taxguru on February 16, 2012

Washington DC financial and accounting principles are literally from
a different planet because they make no sense whatsoever for those
of us who live and work here on Earth
.

 

 Governor MoonBeam is up to his old tricks:

 

 

 

 

 

 

Marxism is a religion as well…

 

 

 

 

 

 

From Blog Comix

 

 

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Posted by taxguru on February 12, 2012

Ten New Tax Laws That May Affect 2011 Return – Just some of the changes that keep taxes a moving target and not something for do-it-yourselfers.

 

Posted in NewTaxLaws, TaxReturns | Comments Off

 
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