Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

IRS still not secure

Posted by taxguru on December 25, 2015

Over the next few months, as we and everyone associated with us (banks, employers, stockbrokers, etc.) are forced to reveal all of our personal financial details to IRS, this has to make you nervous as to who will get ahold of that info.

IRS Still Working on the Hack of the Year

Posted in IRS | Comments Off on IRS still not secure

2016 IRS Mileage Rates

Posted by taxguru on December 18, 2015

IRS has released its standard mileage rates for 2016, down from the 2015 rates due to the lower fuel prices.  These are useful for employee reimbursement plans.

2016 Standard Mileage Rates for Business, Medical and Moving Announced

Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 54 cents per mile for business miles driven, down from 57.5 cents for 2015
  • 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
  • 14 cents per mile driven in service of charitable organizations

Posted in IRS, Vehicles | Comments Off on 2016 IRS Mileage Rates

Gifting Via Loan Forgiveness

Posted by taxguru on November 27, 2015

A very common technique for gifting large amounts of money to kids or other persons without needing to file Gift Tax returns is to loan the money to the kids and then forgive the debt in annual installments that are equivalent to the exclusion amounts.  A client was a little confused as to how this works.

From Client:

Subject: Annual Payback Note and Mortgage (Our Children)

Hi Kerry:

We loaned our kids and recorded a Real Property $140,000. Mortgage @ 2% Interest for 10 Years.  Minimum annual payment $14,000. (Equal One Gift of $14,000. to our daughter or her husband)

QUESTION:  If we gift $14,000 X 2 = $28,000. for 2015, do they in turn write back a $28,000 check plus 2% interest in 2015?  Or does time need to pass for a repayment amount? 

How will the IRS view this?  Or how do we comply with IRS laws and regulations?  You have convinced me that that IRS Clerk sitting behind that desk may be unable to get a family loan and for sure not receive a dollar gift each year. She may have grounded her experiences in a chick flick void of real life stuff. Plus she may have a Bill Clinton definition of "is". Yes Sherry, it’s a woman! (haha) Men are nice:).

The $140 K mortgage is established in our Quick Books.  I will need to calculate the exact amount of daily interest at the time the kids pay.

Appearing simple is why there is fear and trepidation.  Plus, I’ve learned it’s the little things that will get you.

Being Very Cautious


My Reply:

While using actual money back and forth is possible and would give a good audit trail, that is not how this is normally handled.

While not the only way to handle this, normally the donors (you and your wife) give the recipients (your daughter  & her husband) a Gift Letter that announces that you have forgiven a certain amount of the principal of the loan, and then show what the new balance of the loan is.

This can be posted into QB just like a monetary transaction.  In your QB, you would use the General Journal to debit the Gift expense account and credit the Loan Receivable account.
In the QB for the kids, they would make a similar entry; a credit to the Gift Income account and a debit to the loan’s liability account.

For the interest you are charging, that would be cleaner all around if it were handled with a check from the kids to you and your wife.  They can deduct it as home mortgage interest on their Schedule A and you would report it as interest income on your Schedule B.

The annual tax return free gift exclusion for 2015 and 2016 is $14,000 per donor per donee and is calculated on a calendar year basis (Jan 1 to Dec 31).  Depending how much you want to gift, you and your wife are allowed to each gift up to $14,000 to each other person without needing to file any Gift Tax returns.  That actually works out to as much as $56,000 per year for you two to gift to your daughter and her husband.  You don’t have to gift that much, but it’s more than the $28,000 figure you were using in your question.

There is no time delay required for the first Gift Letter.  If you haven’t already used up your $14,000 allowance for 2015, you can make that gift any time before the end of the day on December 31, 2015.  You can then make the second Gift Letter as of January 1, 2016 because that would be in a new calendar year.  Obviously, the earlier you make the gift, the less interest you will be charging them.

In another year or two, the annual exclusion will be bumped up to $15,000.  It only goes up in $1,000 increments when the cumulative inflation factor is high enough. You will then be able to gift up to $60,000 per year to them.

I hope I haven’t made this too confusing for you.  Let me know if you want to discuss any aspect of this on the phone.


TaxCoach Software: Are you giving your clients what they really want?

Posted in Gifting | Comments Off on Gifting Via Loan Forgiveness

You can’t sue Big Brother

Posted by taxguru on November 19, 2015

More and more each day, all aspects of our lives are controlled by unelected bureaucrats who are never held accountable for their actions or the dire consequences that result. 

This is just one small example.

IRS: You Can’t Sue Us Unless We Say You Can

Posted in Crooks, IRS | Comments Off on You can’t sue Big Brother

Stay away from MyRA plans

Posted by taxguru on November 7, 2015

Excellent article from IPI explaining how ridiculous the new bHo sponsored retirement plan for some workers is.

Don’t Bother with myRA

Posted in Retire | Comments Off on Stay away from MyRA plans

Doing the job DOJ refuses to do…

Posted by taxguru on October 27, 2015

Who knows how far this will get; but it just feels good to see someone trying to punish IRS execs for their crimes.

Yes, the IRS chief has earned impeachment

Articles of Impeachment Issued Against IRS Commissioner

Impeachment drags IRS scandal into the spotlight

Lois Lerner and the IRS: Why we need a special counsel now more than ever

House Republicans introduce measure to impeach IRS Commissioner Koskinen

Lawmakers grill Koskinen over IRS targeting scandal, after DOJ ends probe

Posted in Crooks, IRS | Comments Off on Doing the job DOJ refuses to do…

IRS Attacks on Conservatives Approved by DOJ

Posted by taxguru on October 23, 2015

It comes as no surprise that the corrupt bHo Regime Department of Justice would support the IRS attacks on opponents of Our Supreme Imperial Ruler. 

Justice Department Declares Lois Lerner Innocent in IRS Targeting Scandal (The New American)

IRS’ Lois Lerner Skates; An Ugly Precedent Is Set (IBD)

Justice Department: No criminal charges for Lerner, others in IRS scandal  (FoxNews)

DOJ closes IRS investigation with no charges (CNN)

More IRS attacks on bHo critics are now guaranteed to happen with more frequency.

Posted in Crooks, IRS | Comments Off on IRS Attacks on Conservatives Approved by DOJ

2016 Federal Tax Inflation Adjustments

Posted by taxguru on October 15, 2015

Every year around this time, different tax scholars apply the past year’s annual inflation rate to those parts of the IRC that require annual adjustments. 

The first such announcement that I have learned about for 2016 is from The Tax Foundation. Here is the summary of their calculations:

Web – HTML

PDF (4 pages)

Update: IRS Has released its own calculations of the inflation adjustments for 2016:

In 2016, Some Tax Benefits Increase Slightly Due to Inflation Adjustments, Others Are Unchanged

Revenue Procedure 2015-53 with more details (27 page PDF)

IRS Announces 2016 Pension Plan Limitations; 401(k) Contribution Limit Remains Unchanged at $18,000 for 2016

Posted in inflation, IRS | Comments Off on 2016 Federal Tax Inflation Adjustments

Impeaching the IRS Commish?

Posted by taxguru on October 7, 2015

This would definitely be a very significant first and a good warning to others in the IRS. 

Rep. Jim Jordan Says House Will Impeach Head of IRS

Unfortunately, the IRS criminals are really just pawns for the masterminds of the plots to use government power, bHo and his number one partner in crime, Valerie Jarrett, who have already been given immunity from impeachment by our gutless GOP rulers.  

Who knows if impeaching Koskinen for his very obvious and blatant acts of perjury and obstruction of justice will make any real difference in the big scheme of things.  If he is actually convicted for his crimes, it’s safe to say that he will receive a pardon from the White House.

Posted in Crooks, IRS | Comments Off on Impeaching the IRS Commish?

Trump Flunks Basic Taxation Knowledge

Posted by taxguru on September 17, 2015

As I have pointed out for decades, the progressive tax rate structure that punishes (and thus discourages)success in this country has always been a plank in Karl Marx’s Communist Manifesto

Plank 2. A heavy progressive or graduated income tax.

For Donald Trump to not know that fact and in fact, defend this punitive tax rate structure, is unconscionable for someone who claims to be the country’s most powerful and knowledgeable capitalist.

Trump explains to GOP rivals that taxing rich is not socialism

Trump’s claim that because we have had graduated tax rates in this country for a long time automatically means that it isn’t socialistic is ridiculous.  Ben Carson most definitely wins this portion of the debate by calling out the socialist nature of graduated (aka progressive) tax rates. 

Posted in Commies, TaxRates, Trump | Comments Off on Trump Flunks Basic Taxation Knowledge


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