Tax Guru – Ker$tetter Letter

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Archive for April 8th, 2007

Tax on Gifts

Posted by taxguru on April 8, 2007

Actually, gifts are one of the very few types of income that are exempt from income tax on the recipient.

Posted in Uncategorized | Comments Off on Tax on Gifts

Truck Depreciation

Posted by taxguru on April 8, 2007

Q:

Subject: Section 179 truck depreciation question

Dear Kerry,
  I have a tax question I’m hoping you can help me with.
     We bought a truck in 2006 for our business and are going to section 179 depreciate it’s value for the next 5 years. If I deduct $5000 (depreciate) it’s value this year, can I deduct more next year, (in the event we make more money and I need more deductions.)
    Is the depreciation set once you place something in service? Is there anyway I can increase the amount on the second or third year?
        The truck cost 22,000 dollars, so it’s be nice to depreciate it just enough each year so as to not have to pay taxes. So maybe $5000 this year, and $6000 the next, but maybe only $3000 the third year. Is this possible?
         Please let me know ASAP as taxes are due soon.
                     Thank You,

 

A:

You can’t just change the depreciation methods and amounts each year.  There has to be a consistency.

That said, there are a number of ways in which you can depreciate the truck.  For example, you can use straight line or accelerated regular depreciation.  You can claim part or possibly all of the cost of the truck as Section 179.  If your taxable earned income rules out an actual current year full deduction, the excess Sec 179 can be carried over to be used on the 2007 4562, and so on.

You really need to be working with an experienced tax professional because it is obvious that you are guaranteed to make mistakes that could cost you tax dollars, as well as get you into trouble with IRS. Handling the tax matters on your own is absolutely crazy.

In regard to the tax returns deadline, you are not likely to find a good tax pro in the next two weeks because we are all already swamped.  You should do your best guesstimate of how much you will owe with the 2006 tax returns and send that in with an automatic four month extension in order to give yourself adequate time to locate and start working with a tax pro. 

Good luck.

Kerry Kerstetter

 

 

 

 

Posted in 179 | Comments Off on Truck Depreciation

Changing QB File Names

Posted by taxguru on April 8, 2007

Q:

Subject: I need to change a QuickBooks file name

Hey Kerry,

I have upgraded to QuickBooks Pro 2007 and loaded the files from 2002 and input all the checks from 2003 and 2004 to bring the file current. ( because I couldn’t find the updated file you sent back to me from the 2003 taxes)

Now, I have the 2004 stuff entered and the files have the names associated with 2002.  I would like to change them and can’t figure out how to do it and still keep them “on the radar” for QuickBooks.

If you think it’s easy enough, I would appreciate your help, sent to me at home tonight as I’m just about ready to close this place down and head home to my other job. 

Gracias senor~

 

A:

While you are not in the QB program, use Windows Explorer or whichever file manager program you prefer (we use PowerDesk), to go into the folder where you have your data files. QB 2007 uses three data files for each company, with extensions of QBW, QBW.ND, and QBW.TLG

You can right mouse click on each file and select “Rename” to change it to whatever you  prefer.  As long as the file’s extension is the same as before the change, the program will open it with no problem.

I hope this works for you.

Kerry

 

 

The best book on QuickBooks Premier Editions

 

Posted in QB | Comments Off on Changing QB File Names

Tax Research

Posted by taxguru on April 8, 2007

Q:

Subject: tax research
 
Dear Mr. Kerstetter,
 
Hello.  I am a CPA located in Miami, Florida.  This e-mail might sound a little strange but I found your web site, I think via Google, and it appears very informative so I was wondering if I might be able to pick your brain a little.
 
Background I have about 18 years experience as an accountant but I have not prepared taxes in many many years.  I worked for about 6 years at Coopers & Lybrand in the early/mid 1990s before they merged with PW.  However, I was an auditor the entire time at C&L and did not get a chance to learn corporate/partnership taxation.  I currently work as the CFO/Controller for a medium sized general aviation firm here in Miami.  However, I want to start doing tax returns to make additional income and transition out of the corporate world.  Initially, I would like to become qualified to prepare more complex personal, corporate and partnership returns and maybe eventually do some estate work.  I have purchased the Lacerte tax software and I am currently building a small base of clients.
 
Issues The main problem is that I have already run into some tax questions that I cannot readily answer.  One question regards a current cash basis C Corp that is interested in converting to a cash basis S Corp (I think this is how I found your company) Another question is an accrual basis S Corp that wants to convert to a cash basis S Corp.  Another issue that has been raised is how far back can the IRS go to request payroll data one of my clients lost most of their payroll records from 2002 and prior during a hurricane in 2005 and now the IRS is asking for records for 2000 and 2001.  These are just 3 examples of the questions that I have already run across and I have only been trying to build tax clients for a few months now.  Anyway, my main question is what is the best way for me to research these more complex issues?  How do you do your tax research and what resources do you use?
 
I would greatly appreciate any help and insight you can provide to me as I do not want to erroneously advise these new clients.  Thank you in advance for your help.
 

 

A:

I used to waste a lot of money subscribing to the expensive tax research services, only to use them maybe one or two times a year.  I have had much better success using the reference books from QuickFinders and the new TaxBook from the former QuickFinder writers.  I use those practically every day.

The message boards on both the QuickFinders and TaxBook websites are very active, with tax pros helping each other answer tricky issues.  You should be able to get a lot of help there.

For the past several months, I also have been subscribing to the TaxCoach Software online service and have found it to have a very useful and growing wealth of information for clients, as well as people to whom I am making presentations.

For the super difficult issues, you may want to consult with a more experienced tax pro.  I pay a tax attorney in Fayetteville his regular rate to help me on cases that go beyond my expertise. Likewise, I have some other tax pros as clients, who pay me my regular rate for advice on how to proceed on sticky cases.

Building up personal knowledge and expertise does take time; but these resources should reduce the learning curve by quite a bit.  I have links to the sites I mentioned in the blogroll on the right side of my blog.

Good luck.

Kerry Kerstetter

 

 

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

 

Posted in Uncategorized | Comments Off on Tax Research