Pension gap divides public and private workers – Government employees do seem to have much more set aside in their retirement accounts than those in private enterprise companies.  Not that all private company plans are like Enron’s; but the fact that governments don’t go bankrupt (they just raise taxes) makes their pensions funds a lot more secure than with private companies.  Who will be surprised to see the auto workers’ pension funds disappear?

Q:

Subject: Taxes

 

Hi Kerry,

 

My fiancee and I are thinking about attempting to do our own taxes with tax software. Have you had any experience with it? I am worried about things like how to show the house and interest from our joint checking account. Also, I switched jobs last year and was on unemployment for a couple months… not to mention I received financial aide and paid some tuition. Do you think we should just go get them done or attempt it on our own with the tax software.

 

Thanks for your help. I’m sure you’re really busy with tax season. Hope things are going well for you guys.

A:

Nowhere is the term GIGO (Garbage In, Garbage Out) more relevant than with tax prep software.  This applies as much to consumer programs like TurboTax  as it does to the very powerful and expensive programs we tax pros use.

You absolutely need to work with an experienced tax pro who can locate all of your tax deductions, including the many that are right on the settlement statement for your home purchase.  It can also get tricky when you split the house payments and the bank’s 1098 only has one of your SSNs on it.  An experienced tax pro will know how to show the deductions on both owners’ tax returns without creating a problem with IRS’s document matching system.

A good tax pro should have no problem saving you much more than his/her fee; to say nothing of the peace of mind in not having to worry about screwing things up and having problems down the road from IRS; which would almost definitely happen if you try to prepare your own tax returns.

This means you need to work with a tax pro who will spend the time necessary to properly understand your situation and not just do your return as fast as possible, as is the case with the big assembly line franchise operations (H&R Block, Jackson Hewitt, Liberty Tax, etc).

Besides the fact that I am still too back-logged to accept any new clients at all, we learned a number of years ago not to mix business with family and friends; so I don’t want to get too specific with tax tips for you. If you haven’t already done so, you should check out my tips on how to select the right tax preparer for you.

Good luck. 

Kerry

 

Q:

Hi Kerry,

 

Sorry to bother you, but could you answer one more question for me? I’m

working on selling my machine tool in California and I would like to

print out the sales tax law regarding collecting sales tax on the sale

of capital equipment. A lot of people are surprised when you tell them

there is sales tax on the sale.

 

Thanks for your help, I really do appreciate your time.

A:

Basically, any sale of an item is subject to sales tax unless it is specifically exempted.  For Calif. sales tax purposes, the exemptions are detailed in Publication 61, which can be downloaded from the BOE.

Depending on where and how the equipment will be used by the buyer, there may be an exemption.  Unless you can find a specific reason to exempt the sale from sales tax, you need to collect it and pay it to BOE.  If a buyer feels s/he qualifies for some kind of obscure exemption, you should make that person document that fact either in the BOE regs or by obtaining a written statement from the BOE stating that fact.  The regs are also on the BOE website.

If you were to not charge sales tax and the BOE ever checks you out and discovers that you should have charged it; they will require you to pay it plus penalties and interest.

Your personal professional tax advisor should be able to give you more specific advice.

Good luck.

Kerry Kerstetter

Follow-Up:

Hi Kerry,

 

Thank you.