Above the Line

Of all the questions I get asked, that’s one of the most popular (the other starts “Can I deduct…?”)

In today’s economy, debt settlement is a big issue, and tax debt is no different. If you’ve failed to file a return, that debt can be quite large. There’s failure to file penalties, failure to pay penalties, late payment penalties, negligence penalties…the list goes on and on, and it’s not uncommon to owe more in penalties than you do in tax. And ...

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If you’re a business owner in California, you might feel a bit overwhelmed with all the tax returns and documents you file. There’s income tax returns, sales tax returns (or use tax returns, if you’re a service provider with over $100,000.00 in gross receipts), business property tax returns, e-waste returns….

And, of course, the ubiquitous 1099. Not that there’s anything wrong with that, except when you have a bunch of small-dollar forms to complete at year end, and poor records ...

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From the IRS newsroom….

Those of you who enjoy the ‘fake bake’ may soon be paying more for the privilege:

IR-2010-73, June 11, 2010

WASHINGTON — The Internal Revenue Service today issued regulations outlining the administration of a 10-percent excise tax on indoor tanning services that goes into effect on July 1.

The regulations were published today in the Federal Register.

In general, providers of indoor tanning services will collect the tax at the time the purchaser pays for the tanning ...

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Riddle: When does a divorce not follow a marriage ceremony?

Answer: When the marriage is a common law marriage.

Seem weird? Or maybe you didn’t know that 10 states still allow you to form a common law marriage?

It’s true: in Alabama, Colorado, DC, Iowa, Kansas, Montana, Rhode Island, SouthCarolina, Texas and Utah, it’s still possible to form a common law marriage. Oklahoma’s tried to ban them after 1998, but there’s a question of whether that ban is valid. And Ohio (1991), Idaho ...

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For some odd reason, this tax season I’ve run across a number of tax returns which fail to calculate depreciation (and it’s only February!).

My suspicion is that the prior preparer (not in my office) thought that they’d be clever and not claim depreciation, knowing that it’s recaptured when the property is sold. You can’t recapture what you haven’t taken, right?

Wrong.

The IRS has a principle called ‘allowed or allowable’. Here’s their take on it:

“You must reduce the basis of ...

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Eavesdrop on any number of conversations, and you’d think that this country’s biggest focus is Friday night. After all, back in the 80’s, the band Loverboy sang about how ‘everybody’s working for the weekend,’ and The Kings sang about how ‘nothing matters but the weekend…from a Tuesday point of view.” But, if you ask most people what they’d do if they won the lottery, they’d respond “retire.” For most people, work is a means to an end – with the ...

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The IRS recently announced proposed changes to the Qualified Intermediary (QI) program to address what happens when a QI goes under.

Among rental property owners, a Section 1031 exchange offers the major tax benefit of deferring capital gain recognition. For the unfamiliar, this type of exchange permits a property owner to use like-kind exchange rules to sell a property they no longer want. It allows a property owner 45 days to identify a replacement property, and 180 days to close on ...

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As a lawyer, I am often reminded by the bar associations I belong to how important it is to pro bono work. “Equal access to the law” is the catchphrase, and in Illinois (though not yet in California) you have to report the number of hours you spend doing such work (or, in lieu of pro bono work, how much money you donated to legal aid groups). Although the information collected is not shared with the ...

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Stock which is worthless results in a capital loss. However, the devil lies in the details, and in this instance, the details are important

Say a long-time client comes to your office, with a stack of yellowed papers and tells you that he ‘found these while cleaning out some boxes in the attic over the summer,’ and his ‘co-worker/neighbor/friend told him that he could write these off as a loss’. He also tells you that the papers are the ...

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Given the current economic situation, a taxpayer selling their home may not be a frequent occurrence, but tax preparers should still be vigilant. It’s all too easy to look a the current mortgage rules – exempting the first $250,000.00 to $500,000.00 of capital gain – and forget that these rules have only been in force since May, 2007. Prior to May 2007, the old rules – allowing a deferral of gain, provided reinvestment of the funds within two years – ...

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