Tax Guru – Ker$tetter Letter

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Playing the Race Card in tax scam case

Posted by taxguru on November 11, 2007

I’ve commented a number of times on how stupid Wesley Snipes was to fall for the Tax Protestor scam that income taxes are voluntary. As these latest legal documents provided by The Smoking Gun show, he and his legal defense team obviously realize they have no chance of succeeding on the merits of their ridiculous argument; so they have spent a huge amount of time, money and energy conducting an opinion survey to try to prove that the area in which his trial is scheduled to be held is too racist to be fair to Mr. Snipes.

It’s too bad Snipes didn’t spend as much energy earlier on researching the validity of this tax evasion scheme before he jumped full bore into it. He could have avoided this entire mess and possible future stay in the Club Fed gray bar hotel.

Posted in scams | Comments Off on Playing the Race Card in tax scam case

Arkansas’ Section 179 Limit

Posted by taxguru on November 10, 2007

Subject: Arkansas Section 179 Depreciation

Hi, Mr. Kerstetter –

Does Arkansas tax code recognize Section 179 Depreciation the same as the US IRS, i.e., can the depreciation be taken in the same year in the same amount, AR=US?

Thanks for considering my question.

Like a lot of states, Arkansas has never conformed with the big jump in the Federal Section 179 deduction that took effect in 2003. Since 1/1/03, the maximum annual Section 179 deduction for Arkansas income tax purposes has been steady at $25,000. It’s not even adjusted for inflation, as the IRS maximum is.

When we deduct more than $25,000 as Section 179 expensing on a Federal return, an adjustment must be made to the Arkansas amount. This requires us to have two separate sets of tax depreciation schedules; one for IRS and another for DFA. It also means that the adjusted cost bases for assets on which Section 179 has been claimed are probably different for Federal and State tax purposes, affecting future depreciation deductions, as well as any gain or loss calculations on the sale of those assets.

To make matters even more complicated, the carryover bases of traded assets on which Section 179 has been claimed, such as vehicles, becomes ever more divergent between Federal and State with each trade.

Kerry Kerstetter

Follow-Up:

Hi, Kerry –

excellent

thank you, sir!

Posted in 179 | Comments Off on Arkansas’ Section 179 Limit

Big CPA firm mergers have gone too far…

Posted by taxguru on November 9, 2007

Posted in comix, cpa | Comments Off on Big CPA firm mergers have gone too far…

66.7 Inch Truck Bed…

Posted by taxguru on November 9, 2007

Subject: section 179…..Truck has less than 6 foot cargo bed

Thanks for your expertise!!

I am thinking of buying a 2008 Toyoto Tundra for my business. Over 6,000 gross weight but the cargo bed is less than 6 feet long…..can I still take section 179 on the full purchase price of $40,000???

Thanks

Checking the Tundra website, you are obviously looking at the CrewMax model, because that is the only one with an inside bed length of less than 72 inches.

Unfortunately, that vehicle does appear to fall under the SUV limit of a maximum of $25,000 Section 179 deduction, with the rest of the purchase price being depreciated over its class life of five years.

If you are truly desperate for maximum first year deductions, you should work with your personal professional tax advisor to see if it would be worth your while to take some more creative and aggressive steps, such as splitting the purchase between two entities, such as a C corp and a Schedule C business, where each could then claim up to $25,000 per SUV.

Good luck. I hope this helps.

Kerry Kerstetter

Follow-Up:

thanks for the help Kerry!! I was afraid I was right on the limitation due to less than 6 foot bed.. I “assume ” the worst case is IF I took the full 40k 179 deduction in 2007 and got audited…..would still get the $25k deduction but be required to depreciate the remaining 15k over 3-5 years..plus penalty and interest of course:(

thanks again….will consider the 2 entity concept.

My reply:

You really need to be working directly with your very own professional tax advisor because thinking like that (claiming Section 179 for the full $40,000 and praying for no IRS audit) is ridiculously reckless and can get you into serious trouble. Any good creative tax pro will be able to save you hundreds of times more than his/her fee in taxes, as well as keep you out of trouble with the IRS.

Good luck.

Kerry

Posted in 179, Vehicles | Comments Off on 66.7 Inch Truck Bed…

Finding good tax help…

Posted by taxguru on November 9, 2007

Hello Kerry,

Can you give me some examples of what I can pay my corp. for to transfer income as you mention. I am in the roofing and remodeling business and yes I am am working with a tax pro. I need help with ideas to get me thinking in the right direction.

Is the sample chart of accounts in the industry specific quick books pretty close to what I need to use?

Thanks,

As I have discussed on numerous occasions, there are several very easy ways by which to shift income between your corp and yourself. What is best for your particular situation is something your personal tax pro should be helping you determine. If your tax pro is unfamiliar with how to do this, you obviously have the wrong tax pro and need to find one who is more well versed in this very common and useful strategy for reducing taxes. The fact that you feel a need to ask a stranger this question instead of your own personal tax advisor is disconcerting.

The standard chart of accounts that comes with QuickBooks is the best place to start; but then should be modified to suit your needs, as well as those of your professional tax preparer. My personal style is to make the QB income statements match as closely as possible their tax return schedules, so I do a bit of tweaking to the charts of accounts my clients send me in order to achieve this.

I realize that I may sound like a shill for QuickBooks, but it is the easiest and fastest accounting program I have ever worked with in regard to making any kinds of modifications to the chart of accounts. Your personal tax pro should be part of your design process for the chart of accounts that will work best for your particular situation.

Remember that you will have one company QBW file for your corp and a separate one for your personal info; each coordinated to match up with your tax returns. An experienced tax pro should have no problem in helping you set both of them up properly.

Good luck.

Kerry Kerstetter

Follow-Up:

Kerry,

Thanks for answering me back so soon. Yes it is disconcerting I have to ask you a net guy, but I’ve learned a lot from the internet and from your site. I’ve spent $thousands on accountants/CPA’s and lawyers, it’s frustrating. You probably know from talking to so many people about this, but there are more bad tax pro’s than good one’s at least in my experience. But I’m searching for a better tax man/woman now. Another thing where your site and your answers help, is helping educate us to know what to talk to our tax guys about. After sleeping on shifting income idea I came up with a couple ways that are specific to my situation and I’ll speak to my current accountant about these.

Thanks again Kerry, keep up the good work.