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Monday, October 31, 2011

1099 for 2010

AskTaxGuru.com Junior Member, blindsay, asked:

We sent a 1099 to a subcontractor for $14k and deferred doing our taxes. Upon completing our taxes, noticed that we should have done the 1099 for $19k. What can be done about this, since I am sure the subcontractor has already filed his taxes? Thank you.


Sunday, October 30, 2011

iPhone app income and taxes - new developer

AskTaxGuru.com Junior Member, DrBeak1, asked:
Greetings forum members,

Sorry if this thread is placed in the wrong forum but I wasn't sure where it fit in.

I have been collecting income from Apple for iPhone apps that I developed since January of this year (2011). Up until today's date (October 11th, 2011) I have collected nearly $4000.00. Apple does NOT withhold taxes and therefore it is up to me to report this income. I have also come to be aware that Apple does not provide any tax forms, just sales reports, to developers.

Saturday, October 29, 2011

S Corporation Distributions

AskTaxGuru.com Junior Member, Tebow2259, asked:

What effect will S corporation distributions have on shareholders? Cash & Non-Cash

Friday, October 28, 2011

Claiming depr when property was left off return

AskTaxGuru.com Junior Member, sthornton117, asked:
I am reviewing tax returns from 2007-2010 for a client that knows the depreciation on his rental properties is not right. The CPA that prepared them has me uncertain on how to correct them. There are 2 properties however the Schedule E only shows 1 property with expenses and income for both properties listed under tChe 1. Depreciation was taken in 2007 for the property listed, none taken in 2008. Depreciation was taken in 2009 and 2010 however the amounts are incorrect. The depreciation schedule I requested reports using a 29 Yr SL. Obviously it should've been 27.5 Yrs.

Wednesday, October 26, 2011

Any Tax Pro Here SMARTER THAN A 5TH GRADER?

AskTaxGuru.com Junior Member, mimiy2k, asked:
Okay, okay . . . I know you're all SMARTER THAN A 5TH GRADER or you wouldn't be on Tax Guru! But, nonetheless, I cannot find a single CPA or Tax Expert after 4 months of searching online and in my area who can answer this question! I don't believe this question requires rocket science level knowledge, however.

Can You answer this for me? I'd be eternally grateful! Here goes:

I cannot find any CPA who knows the answer to this in my area. Hoping a Tax Guru here can help!

I am forming a 527 tax-exempt political committee in Arizona. This is a state committee, not a federal committee. I would like liability protection so the suggestion was made that I form an LLC or unincorporated association that in turn forms the 527. AZ does not recognize Unincorporated Associations so that option is out. As to the LLC, if it elects to file as a C Corp or S Corp, am I correct that I would have to take my fees for managing the 527. (may be full time job) as a salary subject to quarterly estimates and withholdings, and that I would need to set a reasonable salary in accordance with industry standards (in otherwords, if a Sub S, it would not fly to take a very low salary and the rest as distributions as this might open me up to IRS challenges).

If I am correct about the above, this structure does nor work for me because, having run a 527 previously ( with no liability shield), fundraising results vary from month to month and can be highly unpredictable. It is not a situation that can necessarily support a set salary. It is a situation where you may
have zero to pay yourself one month, enough to pay yourself a little another month and maybe enough to pay a decent amount another month. I defintely do not want to get into a situation of payroll tax reporting and withholding. I would also prefer to avoid the time involved with keeping corporate formalities.


Monday, October 24, 2011

Tax Checklist for Sole Proprietorships/Schedule-C Filers

1. Auto Expenses:
i. The standard mileage rate for determining your deduction for the business use of a car has increased to 44.5 cents per mile in 2006. Therefore, it is important to maintain a business log to claim the correct allowable mileage.

ii. It is important to keep a good vehicle log for business miles. CPA’s are now asking clients to produce these logs during the tax interviews. This would determine the business usage percentage to be used in (iv) below.

iii. Also, get in the habit of having these logs as part of your official permanent tax records, especially in case of an audit.

iv. Have actual expenses for the auto handy during the tax interview, these would be car insurance, gas and oil expenses, car repair expenses, along with the business % usage determined in (ii) above, and then let the CPA determine which method actual expenses or mileage method generates the greatest deduction.
2. Depreciation deduction:
i. For tax year 2006, don’t forget to elect this special IRS election to write-off new equipment and furniture purchased for use exclusively for business. This election is available provided the taxpayer has taxable income that exceeds the total amount written off as Section 179 deduction up to the allowable amount $108,000 for 2006.

ii. Don’t forget to capitalize and amortize organization and startup expenses in the year you start the business. An election is available to immediately to the extent of the first $5,000, certain conditions have to be met, however, and once again

Discuss with your Accountant to determine whether your taxable income meets that qualifications required in (I) and conditions are met in (ii).

Tip: You can start depreciating your fixed assets including taking a section 179 deduction the year they are placed in service, even if you operate on the cash basis and you do not pay for the assets until next year. In other words, if you paid via credit card at year-end it is considered purchased in 2006 rather on date you actually paid for these assets.

Friday, October 21, 2011

How to Avoid a Tax Audit for Sole Proprietorships

IRS has found that taxpayers with Schedule C filers have been both overstating expenses and understating income. Here are some the areas that have been typically sited as overstating expenses, and the IRS has specially targeted these for audits

1. Taxpayer has included personal telephone and cell phone calls on his or her Schedule C.

2. Taxpayer has included personal home and life insurance as part of business insurance expense on his or her Schedule C.

3. Taxpayer has expensed his or her spouses travel expense even though she was not actively involved in the Schedule C business.

Wednesday, October 19, 2011

Benefits of LLC’s over S-Corporations

The Limited Liability Companies (LLC’s) are now one of the most popular choices for incorporations over the sub-Chapter S Corporations.

Features of an LLC

  • This type of entity is a form of business ownership that has several attributes of corporation and partnership structures.
  • An LLC is neither a corporation nor a partnership.
  • An LLC may be called a limited liability corporation, but the correct accepted terminology is Limited Liability Company.
  • The LLC’s owners are generally referred to as members not partners or shareholders.
  • The number of members of an LLC is unlimited and may be individuals, corporations, or other LLC.

Monday, October 17, 2011

What are the business records and documents that need be to be kept for 6 Years?

The IRS has required that some business records and documents need to be kept for a minimum of 6 years. These are as follows;

-Accounts Payable Ledgers and Schedules
-Accounts Receivable Ledgers and Schedules
-Cancelled Checks
-Cancelled Stock and Bond Certificates
-Employment Tax Records
-Expense Analysis and Expense Distribution Schedules
-Expired Contracts, Leases

Saturday, October 15, 2011

New IRS Retirement Plan Navigator Aims to Help Small Businesses

The Internal Revenue Service has created a new Web-based tool to help small business owners determine which tax-favored pension plan best suits their needs and how to keep their plans in compliance.

The IRS Retirement Plan Navigator is intended to provide employers with an easy-to-use guide that focuses on three areas: choosing a plan, maintaining a plan and correcting a plan.

By using the navigator, employers may find that choosing and maintaining a pension plan is not as daunting as they thought. Some plan types are less costly and easier to establish than others.

The navigator does not suggest which plan may be best for a specific employer but it does lay out the options to allow them to choose one that best fits their situations. The navigator includes a side-by-side comparison of pension plans and their requirements.

Wednesday, October 12, 2011

Five Facts about the Foreign Earned Income Exclusion

If you are living and working abroad you may be entitled to the Foreign Earned Income Exclusion. Here are some important facts about the exclusion:

1. The Foreign Earned Income Exclusion: United States Citizens and resident aliens who live and work abroad may be able to exclude all or part of their foreign salary or wages from their income when filing their U.S. federal tax return. They may also qualify to exclude compensation for their personal services or certain foreign housing costs.

2. The General Rules: To qualify for the foreign earned income exclusion, a U.S. citizen or resident alien must have a tax home in a foreign country and income received for working in a foreign country, otherwise known as foreign earned income. The taxpayer must also meet one of two tests: the bona fide residence test or the physical presence test.

3. The Exclusion Amount: The foreign earned income exclusion is adjusted annually for inflation. For 2008, the maximum exclusion is up to $87,600 per qualifying person.

What records does an Employer need to maintain to comply with the Federal Statutes?

Federal statutes require that employers should maintain certain paperwork for all their employees. These laws require that all employers should maintain the following records as follows;

1. certain employee pre-hire paperwork,
2. employee health and safety logs,
3. retain employee payroll records,
4. employee I-9 forms.

In addition to the records that are required by law, employers should also be maintaining personnel files on all employees that include the following;

Monday, October 10, 2011

Question About Filing Singe Or Married

AskTaxGuru.com Junior Member, bulls2030, asked:
Hi,
I got married overseas and my spouse and child at the moment live abroad.
My spouse does not have a green card or anything and we are currently waiting for her immigration.
Well for my past two tax returns, I have been filing my taxes as married filing separately with my spouses name, but haven't got a TIN or whatever that is called.

I have been searching online for this issue if I can file my taxes as single because my spouse and child have not immigrated to the USA.

So I have two questions.

1) Based on my situation described above, can I file my taxes as "Single" or do I have to file as "Married Filing Separately"?
2) If I can file as single, will the IRS say something since I already filed my past two returns as married filing separately with my spouses name and none EIN or TIN or whatever that is called?

Anyone's help would be much appreciated
Thanks

Sunday, October 09, 2011

International marriage, untaxed income, income in two states

AskTaxGuru.com Junior Member, mwolfe, asked:
Hello,

I am filing myself instead of using turbotax for the first time in 6 years because I'm unemployed and can't afford the fee for tax preparation. I'm not sure how complicated my situation is, however, so I wanted some help and advice before continuing.

I made income in two different states (Oregon, which takes out state taxes but doesn't file federal, it seems, and Michigan, which does the opposite). The bulk of my income was made in Michigan, and half of it was untaxed because I was considered a political consultant/non employee. When I moved to Oregon, I did not establish residence and my legal address is still in Michigan.

I was also married (which is the reason I am not establishing legal residence in Oregon) and am in the process of obtaining permanent residency in Canada (outland application process, so I am still living in the states). My wife is Canadian and has supported me during my spotty employment in Oregon, though her employment doesn't really "count" for my US taxes. She lives in Canada and her income is Canadian. Should I still apply as married, but filing separately? For these purposes, I assume I count as "single" because she is not my dependent, but we were legally married in September and I'd like to claim it as such (if I file my taxes as single, it could jeopardize the genuineness of my application of permanent residence should the Canadian government look into my tax history).

I did not utilize any governmental living assistance programs, I am no longer a student (as of December 2009), and I am not on unemployment. I do not own a home or property. As far as I'm aware, I don't have any deductions.

All in all, I made a meagre amount of money in 2010, I'll probably have to pay in, but I'm still unemployed. I just don't want to be audited.

Thanks for your help,

Miranda

Summertime Child Care Expenses May Qualify for a Tax Credit

Did you know that your summer day care expenses may qualify for an income tax credit? Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation. Those expenses may help you get a credit on next year’s tax return.

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the lazy hazy days of summer and throughout the rest of the year.

Saturday, October 08, 2011

qualifying relative gross income test

AskTaxGuru.com Junior Member, judyannf, asked:
I'm trying to determiine how to figure my son's gross income. (for the purpose of determining if he can be claimed as a dependent) He earned $4175 in wages, $142 in dividends, but had $1265 in long term realized losses from the sale of mutual funds. Do I include the losses in determining his gross income? If I can include the loss, then his income will be below $3650. He meets the other criteria for a qualifying relative.

How Long can a Self Employed Person get Unemployment Benefits?

Generally speaking, unemployment benefits are paid for a maximum of 26 weeks in most states. "Disaster Unemployment Assistance is again available to victims starting with the first week of unemployment and continuing up to a period of 26 weeks provided the catastrophic event was declared as a disaster by the President. Benefits may be extended for an additional period of time if deemed necessary."

Friday, October 07, 2011

Filing California 540 or 540NR?

AskTaxGuru.com Junior Member, dhurandhar, asked:
Hi,
My wife and I are filing our taxes jointly for 2010. I was a resident of California in 2010. However, my wife was not a resident and all her income was from a different state. My question is:

1) Should I use Form 540 or 540NR for California tax return?
2) I should be able to deduct her income from California taxable income, shouldn't I? (we are already paying taxes in the other state for her portion of the income)

Thanks!

Thursday, October 06, 2011

Can I claim my husband since we are separated

AskTaxGuru.com Junior Member, akennedy, asked:
My husband and I separated in June of 2010. We have one child. He did not have a job in 2010. Since he can not claim himself I was wondering if I could claim him on my taxes. 

Six Facts About the American Opportunity Tax Credit

Many parents and college students will be able to offset the cost of college over the next two years under the new American Opportunity Tax Credit. This tax credit is part of the American Recovery and Reinvestment Act of 2009.

Here are six important facts the IRS wants you to know about the new American Opportunity Tax Credit:
  1. This credit, which expands and renames the existing Hope Credit, can be claimed for qualified tuition and related expenses that you pay for higher education in 2009 and 2010. Qualified tuition and related expenses include tuition, related fees, books and other required course Materials.
  2. The credit is equal to 100 percent of the first $2,000 spent and 25 percent of the next $2,000 per student each year. Therefore, the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.

Wednesday, October 05, 2011

Head of Household December Marriage?

AskTaxGuru.com Junior Member, LadyBug06445, asked:
If we did not marry or live together until December 11, 2010 AND we both have custody of our children from previous relationships can we each file separate tax returns as "Head of Household" for 2010?

Tuesday, October 04, 2011

How do I deduct payroll donations?

AskTaxGuru.com Junior Member, Kurple, asked:

Hi, we had $1000 deducted from my husband's payroll in 2010 to go to charities (after tax donations). At this point I have no idea what the individual charities were. Is there any way to take the tax deduction?
Thanks.

Monday, October 03, 2011

At what level of income besides SS am I required to file a return?

AskTaxGuru.com Junior Member, rowena1, asked:
I have SS income of $13800 and a small pension of 800 per year. I have no other income and file single. Am I required to file a tax return even though I don't owe any taxes?

Deduct VA mortage insurance (VA funding fee)

AskTaxGuru.com Junior Member, randystoker, asked:
I deducted a VA funding fee I paid in '09 on my 2009 tax return. According to publication 936, VA mortgage insurance is known as a funding fee and is fully deductible in the year paid as qualified mortgage insurance. However, this year I received a letter from the IRS stating that my mortgage insurance deduction for '09 was corrected to $0 and that I owed more than $4K in back taxes for 2009. I replied with a copy of my HUD-1 showing the VA funding fee paid and the page from IRS pub. 936 showing that the VA fee paid was considered mortgage insurance and was fully deductible in the year paid. The IRS replied back with a letter requesting to see a copy of my "corrected" 1098 showing the mortgage insurance paid. However, my bank (Chase) replied in an e-mail that they do not put VA funding fees on their 1098's (even though I referenced IRS instructions for 1098 that these fees should be included in box 4 if over $600). Chase said they were sorry and could not comply with my request for a corrected 1098. My question, can the deduction for mortgage insurance be taken if not on the 1098? 

Sunday, October 02, 2011

When to file Form 5471?

AskTaxGuru.com Junior Member, zenjk, asked:
Hello,

I hope I am adding this thread under the right topic, I apologize if I am not.
I have a question related to Form 5471 filling and hope that the experts here will be able to help me.

We started a offshore dev center in India in 2006 with local initial capital investment. In 2009 the US company wired the investment to buy 70% stake in the India company. For various reasons, the India company reflected the investment to the RBI and Ministry of company affairs in 2011 and that's when the share certificate was provided to the US company.

The question:
When should the US company file the Form 5471? 2009 year end or 2011 year end?

Thanks in advance

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