Some interesting articles from the latest Intuit newsletter:
New Tax Preparer Penalty Standards on Hold
Year-End Strategies Can Boost Clients’ IRA Benefits
Posted by taxguru on October 11, 2007
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Posted by taxguru on October 10, 2007
House backs bill to end private tax collections – But the Senate doesn’t appear to agree; so this program will most likely continue. I haven’t had any clients encounter these free-lance bounty hunters; so I would be interested in any real life comments from tax pros or taxpayers who would like to share their experiences.
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Section 179 not safe for do it yourselfers…
Posted by taxguru on October 6, 2007
Q:
Subject: please help
can you give me he formula on how to figure the 179 tax deduction of a 6,000 lb suv
let’s say that I purchase this year (2007) a new H2 for $70,000 dollars
can you walk me thru the total deduction?
any help would be great – thank you
A:
The amount of your Section 179 deduction will depend on the business usage of the vehicle based on miles driven, as well as your qualifying earned income. This kind of calculation is not something that can or should be done on your own.
If you seriously need to know the tax benefits before you buy your new H2, you should have your personal professional tax advisor crunch the numbers for you.
If you don’t have a personal professional tax advisor, you need to get one ASAP. Any business making enough money to afford a vehicles as expensive as that H2 is in serious trouble if you are trying to handle all of the tax and financial matters on your own.
Good luck.
Kerry Kerstetter
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2008 Taxes On Dividends
Posted by taxguru on October 6, 2007
Q:
Subject: ’08 tax rate scheds
Thanks for info on the new bracket breaks. I have one comment on your page. I believe dividend income that would otherwise be in the 10-15% brackets (pre-JGTRRA) is taxed at 0% (just like LTCG) not 5%. That’s what the CBO says, but please let me know if the 5% on dividends is new information (for instance, I may have stale information).
A:
While that CCH article I quoted on the new inflation adjusted tax rate schedules didn’t specifically mention the rate for qualified dividends, you are correct that they receive the same Zero tax rate as do long term capital gains for people in the lowest tax brackets. In fact, here is how QuickFinder Online describes it:
“Tax on qualified dividends is the same rate as long-term capital gains for dividends received after 2002 and before 2011 (5% for taxpayers in the 10% and 15% tax brackets, and 15% for taxpayers in the 25% and above tax brackets). A zero percent rate applies to taxpayers in the 10% and 15% brackets for 2008 – 2010.”
I will add this info to the 2008 tax rate page on my website.
I appreciate your bringing this item to my attention.
Kerry Kerstetter
Posted in CapGains | Comments Off on 2008 Taxes On Dividends
Both sides of the Fair Tax debate
Posted by taxguru on October 4, 2007
The Lies:
FairTax is anything but – From a nut job in Kansas City
FairTax Is Pure Fantasy – More spurious attacks from Bruce Bartlett, who has yet to apologize for his idiotic claims that the FairTax is a Scientology plot.
The Truth:
A 59 minute video of a presentation by John Linder and Neal Boortz. I just finished listening to the entire thing. John Linder mentions that we CPAs are strongly in favor of this idea so that we can use our skills for more useful purposes than protecting clients from the IRS, something I have long been saying.
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Vehicle Weights
Posted by taxguru on October 4, 2007
Q:
Subject: Question on 179Hi,I am a financial advisor and was wondering if you could answer whether or not section 179 (for the suv’s) means “gross vehicle weight” or “gross vehicle weight rating (GVWR)”???? My understanding is that one can use the GVWR for the 6,000 lb. suv minimum. I am wondering if I am correct? Or is it “curb weight”?Thanks for your time.Sincerely,
A:
Here is a quote from Page 10-2 of the 2006 TaxBook that covers this point:
Passenger autos rated at more than 6,000 pounds unloaded gross vehicle weight, or trucks and vans rated at more than 6,000 pounds loaded gross vehicle weight are not subject to the Section 280F depreciation limits.
Kerry Kerstetter
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State Section 179 Rules
Posted by taxguru on October 4, 2007
Q:
Subject: Listing of States conformity to Section 179I was just viewing your website and was wondering if you had an updated list of each state and it’s conformity/non-conformity to Section 179?
A:
I’m not aware of any such list. That sounds like an interesting project for one of the tax reference publishers.
In the meantime, we have to continue researching this on a state by state basis.
Thanks for writing.
Kerry
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Changing Corp Tax Years
Posted by taxguru on October 4, 2007
Q:
Subject: S Corps
If a corp has been using a fiscal year that ends in a month other than December, it will have to change to a 12/31 fiscal year end if it changes to an S status. If the S status is later revoked, you will not be allowed to change from the 12/31 year end.
Regarding the above statement if you have sent in a 2553 for S corp. status with a F/Y/E of 3/31 and it is denied what happens to the years you have functioned at a F/Y/E of 3/31. Do you have to amend the tax return with a F/Y/E of 12/31 even if it becomes a financial disaster. The corp. functioned as 3/31 and cleared out the income etc at 3/31 and now at 12/31 there is a lot of net income. Any recourse?
A:
As I constantly advise, you should be working with an experienced tax pro before undertaking something as major as changing from a C corp to an S.
From the logistics side, your corp would file regular C corp 1120s for the entire time period until the effective date of the S election as specified in the letter you will receive from IRS. The income and expenses from the effective date onward will be reported on an S corp 1120S.
Because of the required change in fiscal year, there will have to be at least one tax return covering less than 12 full months. Unless the effective date of the election is either January 1 or April 1, it’s more likely that both the final 1120 and the initial 1120S will be for less than 12 months.
Again, an experienced tax pro can give you more specifics on how such a change would affect your business.
Good luck.
Kerry Kerstetter
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Tax Guru - Ker$tetter Letter 