Tax Guru – Ker$tetter Letter

Delay on Tax Breaks Affects Millions – Our lame duck rulers have better things to do during their last month in office, such as lining up million dollar lobbying gigs, to actually worry about doing something to help the taxpayers. 

Since I have always been a big fan of using tax years other than January through December for corporations, I have long encountered confusion with clients who see what they think is the wrong year on their tax forms. That’s to be expected; but with someone whose official job is to review tax returns for a bank’s lending department, that’s a little scary.  

Q:

Kerry ,

I need to know if the last tax return you did for me is for the year 2004 or 2005 on my business. The bank is wanting a copy of 2005 and I took them the last one you sent me back in September, but they said it was for 2004 . If it is for 2005 I guess I’m ready for 2006. I also need to know if you have anything showing my federal I.D. number . I know i should have a certificate of some sort, but all I have is what the bank filed which is a {Corporate Authorization Resolution }. 

Thank You ,

A:

I pulled your files and confirmed that we are actually completely up to date with both your personal and corporate income tax returns.

It sounds like your banker is inexperienced with how corporation taxes work.  They are required by IRS to use the forms for the year in which the corp tax year starts.  In your case, the year going from 12/1/04 through 11/30/05 is reported on tax forms designated as 2004.  If you look at the top of the first page of the 1120, you will see that it shows the tax year as 12/01/2004 through 11/30/2005.

After the current year is over (after 11/30/06), we will be able to do the corporation return on 2005 forms.  In other words, you already have the most current corporate tax returns possible.

The same thing goes for your 2006 individual income tax returns.  We can’t work on those until after your personal tax year ends, 12/31/06.

Your corporate Federal ID number is on every page of the corporate tax returns.

I hope this clears things up for you.  It sounds as if your bank needs to give its loan officers better training.

Let me know if you need anything else.

Kerry

Q:

Re www.taxguru.net/2006/10/more-corporate-confusion.html

 

I’m sure you realize this, but some of your readers may not – your statement that “Once a corp is established, it is not required to limit itself to its original type of business.  It can operate any kind of legal business enterprise.” is not technically correct, at least here in California (also where the questioner and corp in question were based), as general business corps cannot get into those lines of work, legal though they may be, where a professional corp is required.
 
That said, I wonder, since you apparently once lived/worked here in California, and I am small business attorney always on the lookout for a tax guru with your beliefs and approach here in Calif to recommend to my clients – if you have any such recommendations.  I see that your rec page lists none in Calif, but I thought I’d double check, given, like I said, your past history in this state, and the number of questions you seem to receive from here.  Perhaps there’s some you might recommend privately but are not ready to endorse on your web page?
 
I have worked with a number, and have not been too impressed so far.
 
Thanks, and keep up the good blogging work,

A:

Thanks for pointing out that distinction with PSCs.

Unfortunately, the number of tax pros that are on my recommended list is extremely small, only including Russell Fox out there in the PRC.  I wish I had some more names to add to my page; but hopefully I will learn of more over time.

Good luck.

Kerry Kerstetter

 

The Push to Close the Tax Gap: Will Small Businesses Pay?

Last Minute Tax Breaks for Parents of the College Bound

As mentioned previously, starting in 2007, the record-keeping requirements for being able to deduct charitable contributions are being tightened up. Some people donate to charities via having their employers withhold money from their paychecks and then send it on to the charity. Since the employee won’t have a canceled check for the actual charitable payment, there may be some confusion as to whether that person has proper documentation to be legally allowed to claim the contribution as a deduction on his/her tax return.

To the rescue, IRS has just announced what will suffice for proper records. It really isn’t hard.

For a charitable contribution made by payroll deduction, a pay stub, Form W-2, or other employer furnished document that sets forth the amount withheld for payment to a donee organization, along with a pledge card prepared by or at the direction of the donee organization, will be deemed to be a “written communication from the donee organization” that satisfies the requirements of § 170(f)(17).

Q:

 Subject: football lights

 I noticed your response to the Florida couple who bought a house and then the woods were cut down and football lights installed.

I would recommend they question their realtor and check their disclosure forms. Sellers (at least in CA) should have disclosed this change – I can’t imagine the neighbors didn’t know about it.  It might be why the sellers moved. It might also be grounds to sue the realtor and the rescind the sale.

A:

That is a very good point.  A change that large in the neighborhood doesn’t usually happen overnight without plenty of warning.  There are often environmental impact reports and neighborhood comment meetings.  It does sound as if the sellers weren’t very forthcoming about what they know of the impending changes.  If the Realtor was also aware of those plans, it seems s/he also has a potential liability if the buyer chooses to pursue legal action for misrepresentation and improper disclosure.

Thanks for writing.

Kerry Kerstetter
 

Q:

Subject: Query: Advertising on Your Blog?

I’m contacting you from Zecco.com, the new free financial trading portal.  We launched officially in October and are now seeking blogs on which to advertise.

If you’re interested, to initiate the process, I’d like to know some stats of your site. What is your monthly traffic? What is your current CPM revenue?  With this basic data we can start the ball rolling.

Thank you for your time and information.

 

By the way, if this isn’t something you’re interested in, would you consider an RSS feed in the future or perhaps blogging on the www.Zecco.com site (we do share advertising revenue with bloggers)?

Regards,

Trish Telesco
Zecco Research

A:

Trish:

I appreciate the offer to run ads on my blog.  Unfortunately, based on similar discussions with other potential advertisers, I have learned that I simply don’t have the detailed kinds of stats that you need.

You may want to use the Google AdWords service that I have, just as you have on your website.

You may also want to approach the suspiciously anonymous proprietor of the taxblogger.org website that has very obviously been developed for the express purpose of selling ad space.  I’m assuming that they are keeping much better records of traffic for the benefit of potential advertisers than I am currently set up to do.

I also appreciate the offer to blog for your website.  However, I barely have enough time to post the few things I want to for my own blog.

Good luck with your website.

Kerry Kerstetter