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Archive for August 19th, 2006
Catching Up On Tax Returns
Posted by taxguru on August 19, 2006
Q:
Subject: need to file back taxesDear Mr. Kerstetter,My husband and I have not filed taxes for several years and are being counseled to file the last five years tax returns.We have lived the entire time in Tulsa, Ok and have participated in numerous home-based (network marketing) businesses during these years. Mostly just breaking even but a couple of good years. I am currently sorting all my receipts and documents by years. We need someone to prepare our tax returns. I like your philosophy and wonder
- if you are available for hire,
- what is your rate,
- are you familiar with clients who want to “get back in the system”,
- what steps I am to take to get our paperwork in order for your prepartion?
Thank you,
A:
You are definitely making the right move in trying to get caught up with your income tax returns. It sounds as if you might have fallen for one of the very common misconceptions people have; that if they didn’t have a net profit in their business, they aren’t required to file a tax return. That is dangerously wrong, because if IRS were to check on you, they would assume every penny of gross revenue you received was pure profit if you failed to file a tax return disclosing your operating expenses.
In addition, even if you are overpaid for the past years, IRS has a penalty for procrastinators and will refuse to refund anything for any tax return more than three years delinquent. However, if you owe money for any year, even five years ago, IRS will demand payment of that tax, along with substantial interest and penalty charges. It’s a double standard that IRS is very fond of.
Working on five years worth of info is a large undertaking. Since you are obviously familiar with computers, you would be well advised to use QuickBooks to organize your data for the past years, as well as the current and future ones. Having your data on QB will make it much more efficient for you to submit that data to your tax preparer. I have tons of info on using QuickBooks on my website.
In regard to my being able to prepare your tax returns, I wish I could help; but I already have too many clients to take care of properly; so we are still trimming back on the difficult clients and are not accepting any new ones at this time.Unfortunately, we don’t have anyone to whom we could refer you. If you haven’t already done so, you should check out my tips on how to select the right tax preparer for you.
I wish I could be of more assistance; but I wish you the best of luck.Kerry Kerstetter
Follow-Up:
Thanks for your response!We’re awfully close to Arkansas…are you sure you dont know anyone over this way…starts with a _ ends with a _?=) An acquaintance recommended Charlie Chung then when we went to find him and found out he had been indicted for tax fraud!! Yikes.Anyway, sure appreciate the info and the so very helpful website of yours.
Posted in Uncategorized | Comments Off on Catching Up On Tax Returns
Timing of Sec. 179 Deduction
Posted by taxguru on August 19, 2006
Q:
Subject: Sect 179 Question
Kerry,
I love your site. Very informative. I had another question on Sect 179. I am looking at purchasing an automation piece of equipment for my pharmacy. While I need the asset now, I don’t need the Sect 179 deduction until 2007. The company has offered to install now and rent it to me until 2007 where I can convert it to a capital lease. Would this allow me to take the Section 179 deduction in 2007?Thanks,
A:
As always, this is the kind of decision process that you should be working on with your own professional tax advisor.
However, as an illustrative example, I can address your situation in general.
First is the lease then buy scenario. That would not fly with IRS because the Sec. 179 is only available for the first year the asset is acquired and placed into service. In your case, you would be placing it into service in 2006 and buying it in 2007, making it eligible for the Sec. 179 in neither year.
Next is your assumption that you don’t need to claim it in 2006. You are most likely being short-sighted with this conclusion.
If you already have plenty of deductions, and are thus going to show a low taxable income for 2006, a large Sec. 179 deduction wouldn’t even be possible due to the taxable income limitations. However, if you were to buy the asset and start using it in 2006, you could claim the full maximum Sec. 179 on your 2006 4562. The excess above the deductible amount would be automatically carried over to your 2007 tax return, where it would be compared against your 2007 taxable income. It sounds as if this is what you are really after, so that might work out best for you without the need to play any short term leasing games.
Your personal tax pro should be able to run some pro-forma tax returns for 2006 and 2007 to show you how this scenario would work for you.
Good luck. I hope this helps.
Kerry Kerstetter
Posted in 179 | Comments Off on Timing of Sec. 179 Deduction
Keep QuickBooks Up To Date
Posted by taxguru on August 19, 2006
Q:
Subject: BACKUP RESTORE PROBLEMPLEASE CAN YOU HELP ME WITH THIS PROBLEM THAT I AM HAVING WITH MY BACK UP QBB FILE,I RECENTLY HAD TO DO A COMPLETE INSTALL OF MY OS AND HAD TO INSTALL QBOOKS 2006 AGAIN NOW I CANT RESTORE MY BACKUP FILE IT SAYS UNABLE TO DERTERMINE VERSION ON QBB FILE AND WILL NOT RESTORE BACK UP PLEASE HELP THANK YOU
A:
It sounds as if you didn’t run the “Update QuickBooks” function after you reinstalled the program.
If the QBB file had been made with an up to date version of QB 2006, it might not be accessible with an un-updated version. Some of the changes they make during a version’s year on the market are major enough to cause problems like the one you have.
After you have the program install all of its to-date updates, try to restore the QBB file and you should have better luck.
Let me know if this works for you.
Kerry Kerstetter
Posted in QB | Comments Off on Keep QuickBooks Up To Date
Tax Guru - Ker$tetter Letter 