Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 690 other subscribers
  • Blog Stats

    • 340,622 hits
  • Posts By Day

    April 2026
    M T W T F S S
     12345
    6789101112
    13141516171819
    20212223242526
    27282930  
  • Subscribe

  • Special Pages

Let’s all try 71% worth…

Posted by taxguru on January 7, 2010

It’s long been a stupid cliche when athletes and others promise to give an impossible 110 or more percent effort towards their goals.  I found it funny that IRS is only promising to try to answer 71 percent of calls from the tax paying public and that is considered a great goal. 

If you are lucky enough to have your phone call answered after their expected average wait time of 12 minutes, there is then the issue of whether you will get the correct answers.  The odds of that happening are most likely going to be the same as in the past; 33% to 50%.  It’s like a lottery.

Of course, the double standard is firmly in place.  If you were to file a tax return with the stated goal of being 71% accurate in your figures, guess what hell you will be faced with.

If that were acceptable, the fine print info above the taxpayer’s signature on Page 2 of the 1040 would need to be modified to read as follows.

Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are 71% true, correct, and complete. Declaration of preparer (other than taxpayer) is based on 71% of all information of which preparer has any knowledge.

There are a couple of lessons to be learned from this IRS announcement.

1.  Those people who foolishly try to save a few bucks by not utilizing the services of professional tax preparers will be risking their necks even more than ever.

2.  This same philosophy of striving for a 71% rate of answering the phone is what we can expect for our health-care after that entire segment of our society is socialized and IRS employees are put in charge of administering our medical treatment. A 29% death rate will be considered as a success.

 

TaxCoach Software: Finally! Plain-English Tax Planning That Builds Your Business!

 

Posted in IRS | Comments Off on Let’s all try 71% worth…

IRS Regulating More Tax Preparers

Posted by taxguru on January 6, 2010

H&R Blockheads. The IRS wants to save you from your rogue tax accountant. – Being subject to extensive regulation and continuing education requirements as a CPA, I can’t share this writer’s sentiment that IRS is overstepping its bounds by requiring other “mom and pop” tax preparers to be regulated and take update courses.

I do share the writer’s sentiment that the trend towards having the State and Federal governments prepare tax returns for people is not a positive development because of the extreme conflict of interest that entails.

Posted in IRS, preparers | Comments Off on IRS Regulating More Tax Preparers

Urban legend still floating around…

Posted by taxguru on January 5, 2010

I have addressed this hoax previously, but it is still being passed around the net, as in this email I recently received from a client in the PRC.

Subject: Senate Bill 2099

Kerry
Senate bill 2099 will require us to put on our 1040 federal tax form all firearms that we have or own. Do you know anything about this?

My Reply:

That’s a hoax that’s been floating around the net for about a year now. The 2009 forms are in place and they don’t have anything for reporting firearms.

Snopes.com has a good explanation of it.

In case you haven’t seen a copy of the actual 2009 1040, here is a blank one you can look at. You’ll see that there is absolutely nothing about firearms.

Kerry

Follow-Up:

Thank you for the info.



Posted in scams, TaxForms | Comments Off on Urban legend still floating around…

Changing a corp tax year

Posted by taxguru on January 3, 2010

I’ve been teaching myself how to improve the vidcasts, and here is the first one with the semi-new style.  The built-in hyper-link to my article on corp fiscal years doesn’t seem to be working, so here it is.

 

 

 

Posted in corp, video | Comments Off on Changing a corp tax year

Posted by taxguru on January 3, 2010

Cash-rich real estate investors trigger bidding wars, frustrate other buyers – I knew that this eventually had to happen, as the large pools of investor money moved from the intangible and often phony assets in the stock markets to the real tangible assets such as precious metals and real property.  This is a very good sign during these extremely confusing economic times.

 

Posted in realty | Comments Off on

Posted by taxguru on January 2, 2010

Lack of Estate Tax in 2010: Now Cheaper to Die? – Others are picking up on what I predicted back in 2001; that unless the law is changed, there will be a lot of mysterious deaths in 2010 as some heirs become overly aggressive in their desire to avoid the Death Tax.

 

Posted in DeathTax | Comments Off on

S Corp Vehicle Purchase

Posted by taxguru on December 31, 2009

Q:

Subject:  Section 179

Can the two shareholders of an s-corporation take a loan to purchase a company vehicle and be able to get the 179 deduction?  The lender will not lend to the company but will personally to the 100% shareholders.
Time is of the essence to buy today or tomorrow
Thanks

A:

That is a very similar situation to the one I discussed in one of my earliest vidcasts regarding an LLC. 

LLCs and S corps are very similar for tax purposes, so this should help you.

As always, you should be working with an experienced professional tax advisor to make sure you set everything up properly.

Good luck.

Kerry Kerstetter

 

 

Posted in 179 | Comments Off on S Corp Vehicle Purchase

Sec 179 – Cash Same As Loan

Posted by taxguru on December 30, 2009

These last few days of the year are historically very busy at car dealers, as people try to get their hands on a new business vehicle before New Year’s Day and thus qualify for the lucrative Section 179 deduction, especially for heavier (over 6,000 pounds) vehicles.

Amazingly, there are still a lot of people who believe that the Section 179 deduction is based on the amount of actual cash paid out for the new business equipment, as in this vidcast.  This is just one more of an endless stream of emails from small business owners who think they can handle their own tax affairs. Anyone working with an experienced tax pro would know that the Section 179 deduction is the same whether you pay cash for the full price or take out a loan for the full amount, or use a credit card. 

Likewise, credit card charges as of 12/31/09 are treated the same as 2009 cash payments for tax purposes.  These are almost always missed by taxpayers acting under the misguided assumption that they can come out ahead by avoiding the cost of a professional tax preparer.

 

 

 

Posted in 179 | Comments Off on Sec 179 – Cash Same As Loan

Deducting Forfeited Down Payment

Posted by taxguru on December 30, 2009

Q:

Subject:  Forfeited Earnest Money – Tax Help

Hello Kerry/Tax Guru,

I am an avid follower of your blog for all the tax help – I made a down payment on a condo in FL as part of an investment in Jan of ’06. However due to the slump of the real estate, the value of condo is really down that its worth like 40% of the original value. I hired a lawyer to negotiate with the developer on the price, but the developer recently filed for bankruptcy and it looks like at this stage the earnest money is forfeited.

Is there anyway I can use this as capital gains loss for my ’09 filing – It’s a huge amount (41,500), so it is kind of a big blow on my investments.

Thanks in advance for all your help!

 

A:

It sounds as if you would have a capital loss for the amount of your down payment if you will be receiving no property or claim on property for that money and no part of the down payment in cash as part of the bankruptcy settlement.

You should be working with a professional tax advisor, who can explain the rules regarding deducting an uncollectible debt, especially in regard to the proper timing of that deduction.

If the bankruptcy case is still ongoing and there is a chance of your receiving something back from your down payment, you will have to wait until that is completed before you can claim the loss on Schedule D, which can possibly take several years.

If that kind of uncertainly is part of the equation, it may be possible to lock your loss up as being in 2009 if you were to sell your claim to the down payment to an unrelated party before 1/1/10 for a nominal amount, such as one dollar.  You would then have a valid completed disposition to report on Sch. D.

Again, your own personal tax pro should be able to offer more specific assistance for your situation.

Good luck.

Kerry Kerstetter

 

Posted in CapGains | Comments Off on Deducting Forfeited Down Payment

Gifting based on calendar year

Posted by taxguru on December 30, 2009

Q:

Subject:  Question about gifting

My dad passed away this year and my mom is now interested in gifting to have some money in my name only. The non taxable amount this year I know is $13,000. Does the 2009 contribution need to be written out (dated before dec 31st) or do we have until April and the end of the tax season to have the gift given? I know after Jan 1st she can gift again for 2010. I believe this is how it works according to an accountant friend of mine. Do you know if these gifts are excluded from the 5 year look back rule which applies to turning over ownership of a house?

Thanks

A:

For Gift Tax purposes, gifts are totaled up on a strict calendar year basis from January 1 through December 31.  The Gift Tax return (709), if applicable, is due on the same schedule as 1040s are, April 15 plus extensions.

So, to be a valid 2009 gift, you do have to receive the actual money before midnight New Year’s Eve.

The look-back rules in regard to impoverishment planning for elderly Medicaid eligibility are state specific; so you all need to be working with an elderly law specialist in your area.

Good luck.  I hope this helps.

Kerry Kerstetter

 

Posted in Gifting | Comments Off on Gifting based on calendar year