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Archive for January 2nd, 2007
Recording Reinvested Dividends
Posted by taxguru on January 2, 2007
Q:
Subject: StocksKerry,I am trying to straighten out a stock account that my dad gave me in 2004.He says with Quicken and Microsoft Money he can enter a dividend payment showing the number of shares and the price paid for them and the entire shares held are updated to that price. Thereby keeping it up to date of the last purchase. Is there a way to do that on Quickbooks?
A:
For reinvested dividends in QB, you need to use the general journal to make entries where you credit the Dividend Income account and debit the asset account for the stock. This will keep a running tally of the total amount you have invested in those shares and accurately reflect your actual cost basis.
If you sell all of the shares at one time, we can just apply the total amount in that account against the sales price to get your gain or loss.
If you only sell part of your holdings, we have to manually take the total amount in the account and divide it by the total number of shares you owned before selling some off to compute the average price per share and then make the appropriate journal entry for the number of shares you sold.
QB isn’t as automated as Quicken is in regard to tracking stocks; but it is actually a lot more accurate in keeping the proper documentation of the correct cost basis. Quicken too frequently inflates the book values of stocks to their market values, which is wrong to do before you actually sell the stock. This is one of the many reasons why I prefer QuickBooks over Quicken.
I hope this isn’t too confusing. Let me know if you need any more help in understanding this.
Kerry
Follow-Up:
Thanks. I will do my best!
Posted in QB | Comments Off on Recording Reinvested Dividends
S Corp Confusion
Posted by taxguru on January 2, 2007
Q:
Subject: S Corp Advice
Mr. Kerry Kerstetter
I am writing because I need a little bit of advice/consultation. Me and my wife are still working to support ourselves. We have file and received our S Corp with State of Nevada. Also received our FEIN with the IRS. We trade stocks on our spare time. We filed for this S Corp. to cover our rearends for tax implications if whenever we would have any gains (even so small) when we trade. We have invested as stocks to the corp. some of our funds (Approx. $10,000) and bought a company car (paid in full). Probably others like lodging and transportation, lap top to support our business, among others. With all of this investments as company stocks, do we file as a S Corp on 1120 or use the 1040 on out joint return? BTW, we are still very ignorant on these taxes thing. But are willing to learn. We know, we will have to consult and file with our local tax consultant. We just like to make sure that we are on the right path and if would be willing to share some of your wisdom. Also, do have something that what we can claim and what can’t for tax implications? Thank you very much for your time and wisdom.
A:
Setting up an S corp without knowing what that entailed was your first very big mistake. Don’t make things any worse by continuing to try to handle tax matters without the assistance of a professional tax advisor. Cruising the web, searching for info is no substitute for the services of an experienced tax professional who can ask you the right questions.
There are far too many options to consider and possible scenarios that can be used to achieve your goals for me to even begin giving you specific advice via this medium.
You will need to work directly with an experienced tax pro who can analyze your unique circumstances. 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 specific to whom we could refer you. I did recently post some names and links for some like-minded tax pros around the country.
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; and I wish you the best of luck.Kerry Kerstetter
Posted in Uncategorized | Comments Off on S Corp Confusion
Phase-Out of Section 179
Posted by taxguru on January 2, 2007
Q:
Subject: sec 179I was reading your article and want to be clear with a couple of your answers as I interpret.If I buy a used motorhome I can still write off $112,000 in 2007 if the motorhome costs at least $112,000?If I go over $450,000 in gross receipts ,I will not be able to Take this deduction?thank you
A:
This is a perfect example of why the Tax Game is not for do it yourselfers.
You are seriously misinterpreting the concept behind the phase-out for Section 179. It has nothing to do with a business’s gross income. It has everything to do with the dollar amount of qualifying property that is acquired during the tax year in order to limit Sec. 179 to smaller businesses. Businesses that acquire more than $450,000 of qualifying equipment during 2007 will have plenty of normal depreciation deductions, so their Sec 179 will be phased out.
Before you do anything as major as buying a $100,000 plus motor home for your business, you need to work with a professional tax advisor to make sure you understand exactly what the tax ramifications will be, as well as whether a particular ownership strategy (personal, corp, LLC, etc) will make more sense for your unique circumstances.
Good luck.
Kerry Kerstetter
Posted in 179 | Comments Off on Phase-Out of Section 179
Fine vs. tax
Posted by taxguru on January 2, 2007
I was just listening to today’s Rush Limbaugh podcast, and substitute host Roger Hedgecock started the show off with these excellent definitions:
A fine is a tax for doing wrong.
A tax is a fine for doing well.
Posted in Uncategorized | Comments Off on Fine vs. tax
Tax Guru - Ker$tetter Letter 