Tax Guru – Ker$tetter Letter

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Archive for February 15th, 2006

Posted by taxguru on February 15, 2006

A comparison of three do-it-yourself tax prep programs: TaxCut, TurboTax, TaxAct.– As with all postings on such programs, I must add my warning that these programs epitomize the term GIGO (garbage in, garbage out).


Static tax scoring at the Treasury Department may soon be a thing of the past – The fact that our rulers have relied on the concept that changes in tax policy have no effect on taxpayer behavior for so many decades is the big scandal that nobody on the Left wants to address. 


 Everson Says IRS Could Collect Up to $100 Billion More Per Year If they were only given more power and money.  Can anyone say “biased tax gap analysis?”



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W-2 Problems

Posted by taxguru on February 15, 2006


Subject: question for blog
Someone (my girlfriend) had the poor sense  to work in a start-up and the start-up fails (all within the tax year) and the business is closed and the  owner (who registered with the IRS via an EIN) did not report/deposit all withholdings (this is probable as there is no W-2 to be had) :
I know how to file her tax return using the last paystub and the appropriate IRS self reporting form in lieu of a W-2; but my question is will she be liable for payroll and withholding taxes deducted but not remitted by this so-called fiduciary/agent  employer (if of course all wages were not appropriately reported/deposited)


Unless your girlfriend was in a position within the company to have some control over the payment of bills, she shouldn’t have any problem with IRS.  It is the responsible parties within the company, those who chose to use the money for other things than paying IRS, who will receive the wrath of the IRS and be hit with major penalties.  IRS considers those people to be thieves, who stole the employees’ tax money, and will act very aggressively to recover it from them.  The powerless employees whose money was stolen will not be penalized, and will receive the same credits with the government as if the full amount of the taxes had been forwarded to IRS.

If your GF did have any power over the company checkbook, she should retain the services of an attorney and work on negotiating the scope of her liability with IRS.

If she attaches Form 4852 (Substitute For W-2) and includes an explanation of what happened and how her figures were determined, she shouldn’t have any problem and her 1040 will be processed just as if she had her actual W-2. 

Kerry Kerstetter


Thanks Kerry



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Family Employee Benefits

Posted by taxguru on February 15, 2006

Employer-Reimbursed Medical Benefits Excludable by Employee, Deductible by Employer; Burden of Proof Shifted to IRS – I have long worked with small business owners and explained many of the lucrative tax benefits of hiring their own kids and spouses, such as employee benefits, including medical costs and education assistance which are deductible on the business schedule, but not income to the family employees.  This case is a good example of how that works, including a common misconception that I have had to fight with IRS over on a number of occasions, that benefits can be in lieu of actual wages.

The amounts paid to the husband, which were in lieu of compensation, were reasonable because they were substantially less than the wife would have had to pay someone else to perform the same duties.



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Posted by taxguru on February 15, 2006

Tools That May Make Tax Time Easier for Property Owners – While this article from the WSJ speaks highly of the Quicken Rental Property Manager program, I am still adamant that QuickBooks is a much better double entry accounting system for keeping track of all kinds of business activity, especially rentals.  I prepare hundreds of tax returns a year for clients who use the Class function in QB to easily get a P&L for each separate property, making it a very easy task for me to enter the details into Schedule E and Form 8825.


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