Ask TaxMama Issue 529 - Lucky Friday the 13th
9:38 AM PST, November 13, 2009
 Dear Family, Welcome to Friday the 13th. It’s a beautiful day. The sun is bursting with happy light. The birds are busy tweeting away; the squirrels chittering and racing around their jungle jim (my trellis). And I’ve been alternating between working on Ask TaxMama, answering questions at TaxQueries, and playing Dynomite and Mystery P.I. at Worldwinner.com. I think the games are winning. Once you start, it just gets so addicting. There you have it – now you know how I squander my time! Right at this point, there’s not a lot going on with new tax information. There will be as IRS starts pumping out interpretations of the recent laws – and the news ones coming up. In the meantime, IRS is offering online and live classes and workshops around the country. You can find information below (in the emailed newsletter) and at the IRS Webinar site. In IRS News this week you learn about $123.5 Million worth of undeliverable refunds sitting in IRS coffers. If you’re missing your refund, read the article and follow the instructions. Remember, when you file a tax return with a refund, it really helps if you put the address where you’ll be living when the refund arrives. What a concept! One of the things you’ll be finding in my AllVoices column are some of the longer question and answer sets that TaxQuips doesn’t allow me to publish. TaxQuips is limited to about 3 minutes. Most of my questions are longer than that – even before I answer them. This week’s question is about the expanded First Time Homebuyers Credit and how it works for someone who is selling an existing home and buying a new one. You will find some interesting questions, including TaxMama’s answers at the TaxQueries site. In this week’s AccountingWeb.com blog – TaxMama shares a story with you about someone who threw away her records prematurely. Avoid this nightmare! In today’s Money Funny we learn where babies come from. In TaxQuips this week we learn about the benefits of cafeteria plans when it comes to child care expenses. Have you signed up for your company’s plan for next year? We learn about the taxability of divorce settlements. Is Dad entitled to any tax breaks when his son moves back home with a pregnant girlfriend in tow. And we answer the question about the best business structure for Norm’s home-based consulting business. As always, we love your feedback, opinions and ideas. Please use the Comments link online. TaxNerd gear makes a bold statement during tax season. Hugs from your favorite TaxNerd, Eva Rosenberg, EA Your TaxMama is watching…out for you. www.TaxMama.com 12.15.2009 Employers Make monthly Payroll tax deposit Keep your Resolutions: Download the book here (just use your e-mail address in this e-mail, so you can avoid subscribing to Feel free to share this link with your friends, your clients and your mailing list. Audio and Video Training Join SuccessNet.org for free and learn the 10 Essential Success Keys You Need to Know for You ThinkGeek has some wonderful, unusual stuff, including something very like a Dick Tracy watch – a touchscreen cell phone PDA watch. They also have the USB Memory watch that holds 2GB of data. Open your own Zazzle account and create personalized Need a Corp, LLC, Registered Agent Incorp Services Inc. in Nevada – DISCOUNT Customised Personal or Businesswear – 3 Choices: Zazzle – Cafe Press – Queensboro It costs much less than you think to be creative, and to develop your own look and identity. Use your art or others – and customize it Zazzle your Imagination. Are you a TaxNerd? Create your own customized Zazzle Apparel, bags or more. Get volume discounts on orders of 2 or more. Get extra discounts for yourself and friends after you order. Stuff for business, travel and fun Cafe Press is the home of TaxMama’s shops But you can upload your own art and graphics and unify your family – even your pets. Get extra discounts for yourself and friends after you order. WOW DEAL! Embroidery Wouldn’t you love to get your logo or family crest, or picture or whatever, EMBROIDERED on hats and T-Shirts? Well, it costs a heck of a lot less than you think. (They have a lot more than shirts – and all sizes)
This is syndicated from TaxMamas TaxQuips: AskTaxMama, and written by Eva Rosenberg.
IRS Seeks to Return $123.5 Million in Undeliverable Refunds to Taxpayers
9:17 AM PST, November 13, 2009
WASHINGTON — The Internal Revenue Service is looking for taxpayers who are due to receive a combined $123.5 million in the form of 107,831 refund checks that were returned to the IRS by the U.S. Postal Service due to mailing address errors. “We are eager to get this money into the hands of taxpayers, so don’t delay if you think you are missing a refund,” said IRS Commissioner Doug Shulman. “The sooner you update your address information, the quicker you can get your refund.” All a taxpayer has to do is update his or her address once. The IRS will then send out all checks due. Undeliverable refund checks average $1,148 this year, compared to $990 last year. Some taxpayers are due more than one check. Average undeliverable refunds rose by 16 percent this year, which is in line with the 16 percent rise in average refunds for all tax returns in the latest filing season. Several changes in tax law likely played a role in boosting refunds, including the First-Time Homebuyer’s Credit and the Recovery Rebate Credit, among others. The vast majority of checks mailed out by the IRS each year reach their rightful owner. Only a very small percent are returned by the U.S. Postal Service as undeliverable. If a refund check is returned to the IRS as undeliverable, taxpayers can generally update their addresses with the “Where’s My Refund?” tool on IRS.gov. The tool enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2008 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems. Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954. The IRS encourages taxpayers to choose direct deposit when they file their returns because it puts an end to lost, stolen or undeliverable checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct deposit is available for filers of both paper and electronic returns. The IRS also encourages taxpayers to file their tax returns electronically because e-file eliminates the risk of lost paper returns. E-file also reduces errors on tax returns and speeds up refunds. E-file coupled with direct deposit is your best option; it’s easy, fast and safe.
This is syndicated from TaxMamas TaxQuips: IRS News, and written by Eva Rosenberg.
Daddy, How Was I Born?
7:24 AM PST, November 13, 2009
A little boy goes to his father and asks ‘Daddy, how was I born?’ The father answers, ‘Well, son, I guess one day you will need to find out anyway! Your Mom and I first got together in a chat room on Yahoo. Then I set up a date via e-mail with your Mom and we met at a cyber-cafe. We sneaked into a secluded room, and googled each other. There your mother agreed to a download from my hard drive. As soon as I was ready to upload, we discovered that neither one of us had used a firewall, and since it was too late to hit the delete button, nine months later a little Pop-Up appeared that said: Scroll down…You’ll love this ….
Courtesy of Rita Veen, EA in Castaic, CA Please remember to send us your humor.
This is syndicated from TaxMamas TaxQuips: Money Funnies, and written by Eva Rosenberg.
Son's Girlfriend's Baby
7:19 AM PST, November 12, 2009
Today TaxMama hears from Anthony in North Carolina with this story. “My son’s pregnant girlfriend moved in, back in May and the baby was just born. My question is, will I be able to claim both of them, girlfriend and baby, on my 2009 taxes? If so will I get the child tax credit for the baby?”
Dear Anthony, That’s an interesting question…and has twists that took some thought. If the baby is your son’s child, that makes it your grandchild. So, you would be able to use Head of Household filing (if you’re not already filing as married). If the baby is your grandchild, you’re entitled to the child tax credit, if you are the one providing more than half the support. And, of course, the dependency exemption. However, the girlfriend, since she is no relation to you, must have lived in your home for all 12 months before you could take her as a dependent. Of course, if your son married her…you could claim her as a dependent, again, if you provided more than one half of her support. As to your son? If he earned more than $3700 for the year – no exemption. And if they got married, and you wanted to claim the bride, he’d have to file as married filing separately. Read Chapters 2 and 3 in IRS Publication 17 for more detail – and the dependency and support tests. And remember, you can find answers to all kinds of questions about dependents, credits, and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
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This is syndicated from TaxMamas TaxQuips: Tax Quips, and written by Eva Rosenberg.
LLC and Business Structure
6:42 AM PST, November 11, 2009
Today TaxMama hears from Norm in California with a common question. “What is the best tax set up for in home consulting business. Is it LLC or? I have seen and heard so many different comments.”
Dear Norm, There’s a reason you’ve heard so many different comments. There is no BEST structure. The structure of your business depends on your short-term needs, your long-term goals and your exit strategy. That’s why, even though I outline the pros and cons of each business structure in Chapter 3 of Small Business Taxes Made Easy, I also advise you to consult with your tax professional. I could spend about two hours outlining all the considerations you need to take into account in order to make the right decision. But there’s just not enough room here. Read Chapter 3. One thing I will tell you, though. As long as you live and work in California, the last thing you want is an LLC. In addition to the annual minimum tax of $800, there is a gross receipts fee of $900 and up. That means, even if your net profit is $2, or even if it’s a loss,...if your gross revenue started out at $250,000 or above, you pay an extra tax of at least $900. http://www.ftb.ca.gov/forms/02_forms/02_3556.pdf So forget the LLC in California. They may be the perfect choice in some other state. And remember, you can find answers to all kinds of questions about business structures and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
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This is syndicated from TaxMamas TaxQuips: Tax Quips, and written by Eva Rosenberg.
Divorce Settlement
6:10 AM PST, November 10, 2009
Today TaxMama hears from Misty in Missouri who wants validation. “I received a settlement in my divorce for half the equity in our home. It was $15,000. I think in reading this is not going to be taxable. Is that correct? I’m keeping my fingers crossed that it isn’t!”
Dear Misty, Great news! You’re right. Getting cashed out for half the equity in your home is not a taxable event. In this case, it would not be taxable even you and your ex husband sold the house first and then split the money. Why? Because the profits are under $250,000 each. Beware, though. If you and your ex have been refinancing and drawing out cash – and your real profits are over $500,000…there could be a taxable event. You sound too smart for that. Just so you know, most property splits in a divorce are not taxable. About the only things that might be taxable are splits of IRAs and other retirement accounts. Even then, if you roll the funds over to your own IRA, they would not be taxable until you actually were to draw the money. You can read more about tax issues relevant to divorced or separated folks in IRS Publication 504. Congratulations on your new life! And remember, you can find answers to all kinds of questions about divorces and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
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This is syndicated from TaxMamas TaxQuips: Tax Quips, and written by Eva Rosenberg.
Child Care Benefits
7:09 AM PST, November 9, 2009
Today TaxMama hears from Melissa in Texas with this question. “ I would like to sign up for my employer’s cafeteria plan for the preschool child care expenses. It will allow me to pay for about $5,000 of the child care tax free. But my son’s daycare is over $11,000 a year. Can I claim the child care credit for the remaining $6,000+ on my itemized 1040? If I can only do one or the other, with which one I would come out ahead?”
Dear Melissa, I was just looking at the Form 2441, page 2, to see what would happen if you used the $5,000 flexible spending allowance. http://www.irs.gov/pub/irs-pdf/f2441.pdf Yup, it would wipe out your child and dependent care credit. That’s OK. The credit is only worth $600 to you, for one child ($1200 for two children). But not paying any taxes at all is worth much more! ...$375 – You save your share of Social Security 7.5% So, personally, I’d opt for the cafeteria plan. But, when you file your tax return next year, try to enter the data into Form 2441 anyway. Who knows what laws will have changed by then, possibly allowing you to use some additional expenses. And remember, you can find answers to all kinds of questions about cafeteria plans and other tax issues, free. Where? Where else? At TaxMama.com. [Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
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This is syndicated from TaxMamas TaxQuips: Tax Quips, and written by Eva Rosenberg.
Ask TaxMama Issue 528 - A Victory for the Aspiring Homeowner
8:52 AM PST, November 6, 2009
 Dear Family, The Worker, Homeownership, and Business Assistance Act of 2009 (WHBAA) passed nearly unanimously in the House today. HR 3548 is about to be signed by President Barack Obama. I’ve been tracking the progress of this all week, using a new media source to post my notes. All Voices is an interesting concept. When you write your article, it links it to all related information, videos, photos and audios. Really nifty. I’ll be using this for regular, spur of the moment updates. If you want to stay informed in more than 140 characters (Twitter), just click on the heart on my profile page. A girl can always use fans. ;~) Back to the WHBAA – Included in the bill were the provisions we exhorted our legislators to add, so IRS has the power to get documentation when the claim for the refund is filed. I want to thank all of you who went to the trouble to contact your legislators to encourage them to add these provisions! In IRS News this week you are invited to Solutions Saturday. If you’re having problems paying your tax bills, you WANT to read about this! We also learn the details of the The Worker, Homeownership, and Business Assistance Act of 2009 Incidentally, you might want to visit a new site where tax professionals are getting into discussions. You will find some of TaxMama’s answers there, too. In this week’s AccountingWeb.com blog – TaxMama explains how to handle the $2,400 tax-free unemployment income when it comes to computing your dependent’s gross income for support purposes. In today’s Money Funny we learn how to achieve Inner Peace. In TaxQuips this week we learn about the concept of being an “equitable owner” of a home; whether someone working overseas has to report their overseas income; how long the $500,000 personal residence exclusion is usable after a spouse dies – and about how to title your residence; and if the personal residence exclusion applies to someone who has inherited a home. As always, we love your feedback, opinions and ideas. Please use the Comments link online. TaxNerd gear makes a bold statement during tax season. Hugs from your favorite TaxNerd, Eva Rosenberg, EA Your TaxMama is watching…out for you. www.TaxMama.com 12.15.2009 Employers Make monthly Payroll tax deposit Keep your Resolutions: Download the book here (just use your e-mail address in this e-mail, so you can avoid subscribing to Feel free to share this link with your friends, your clients and your mailing list. Audio and Video Training Join SuccessNet.org for free and learn the 10 Essential Success Keys You Need to Know for You ThinkGeek has some wonderful, unusual stuff, including something very like a Dick Tracy watch – a touchscreen cell phone PDA watch. They also have the USB Memory watch that holds 2GB of data. Open your own Zazzle account and create personalized Need a Corp, LLC, Registered Agent Incorp Services Inc. in Nevada – DISCOUNT Customised Personal or Businesswear – 3 Choices: Zazzle – Cafe Press – Queensboro It costs much less than you think to be creative, and to develop your own look and identity. Use your art or others – and customize it Zazzle your Imagination. Are you a TaxNerd? Create your own customized Zazzle Apparel, bags or more. Get volume discounts on orders of 2 or more. Get extra discounts for yourself and friends after you order. Stuff for business, travel and fun Cafe Press is the home of TaxMama’s shops But you can upload your own art and graphics and unify your family – even your pets. Get extra discounts for yourself and friends after you order. WOW DEAL! Embroidery Wouldn’t you love to get your logo or family crest, or picture or whatever, EMBROIDERED on hats and T-Shirts? Well, it costs a heck of a lot less than you think. (They have a lot more than shirts – and all sizes)
This is syndicated from TaxMamas TaxQuips: AskTaxMama, and written by Eva Rosenberg.
Worker, Homeownership, and Business Assistance Act of 2009
7:50 AM PST, November 6, 2009
Key provisions in the bill: First Time Homebuyers Credit 1) The credit is renewed to home purchases under contract as of April 30th, as long as the purchase closes within 60 days. (That means you don’t have to rush to close escrow by the end of this month. Whew!) 2) Other homeowners qualify for a $6,500 credit if they have lived in their residence for five years. (That means they have lived in their last owned residence for 5 years out of the last 8 years. In other words, no house flippers.) This credit applies to homes purchased after November 30, 2009. 3) A variety of special rules for military. The key benefit is that they have until April 30, 2011 to finish their purchase, if they are deployed overseas for at least 90 days after December 31, 2008, and ending before May 1, 2010. 4) There is an increase in the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers, from the current $75,000 and $150,000. 5) The maximum home purchase price is $800,000. Modification of Penalty for Failure to File Partnership or S Corporation Returns Expansion of Electronic Filing by Return Preparers
more individual income tax returns in a calendar year. The term “individual income tax return” is defined to include returns for estates and trusts as well as individuals. The provision is effective for tax returns filed after December 31, 2010. Time for Payment of Corporate Estimated Taxes Note: There are some additional provisions related to worldwide interest and military housing. You can read the entire summary using the link below.
This is syndicated from TaxMamas TaxQuips: AskTaxMama, and written by Eva Rosenberg.
IRS Sets Solution Saturday for Nov. 7; Effort Provides Tax Help in Tough Times
7:33 AM PST, November 6, 2009
The Internal Revenue Service is holding a special event to help you called Solution Saturday. This program offers personalized tax help to millions of taxpayers arond the country. This is a pilot program, being tested in 5 cities. So taxpayers are encouraged to schedule appointments as soon as possible by calling the phone number on the list below. Appointment lines are open today from 8:30 a.m. to 4 p.m. While appointments are recommended, individuals without an appointment can also visit your nearest IRS location listed on the Solution Saturday roster below. What kind of help can you expect to get? Essentially, this event is designed to help people who have problems paying balances due this year. It’s also designed to help taxpayers who’ve gotten lost in the installment agreement, offer in compromise, bankruptcy loop without getting their tax situations settled. In addition to the specialized tax help on Solution Saturday, IRS employees will set up information booths at each location. These booths will offer information on getting the most out of the new tax credits created by the American Recovery and Reinvestment Act of 2009, starting a new business, dealing with difficult tax issues, and navigating the many helpful IRS programs. “We need to stay in touch with taxpayers and keep the lines of communication open for people who need tax help,” said IRS Wage and Investment Commissioner, Rick Byrd. “Solution Saturday will be another way taxpayers can get access to the help they need to solve their unique issues.” Foreclosure, bankruptcy, payment plans, penalties, past-due tax returns and other complex tax issues can be a challenge for taxpayers. Many of these issues require contact with specific IRS departments and tax experts. Solution Saturday brings together IRS employees from across the agency to work face-to-face with taxpayers to address unique tax problems or issues. “People can get help from the IRS website at IRS.gov, and they can call us at 1-800-TAX-1040,” Byrd said. “Our goal with Solution Saturday is to offer people dealing with difficult financial situations another way to get help from the IRS.” Your nearest Solution Saturday location will be open from 9 a.m. to 2 p.m. on November 7. IRS Solution Saturday locations and phone numbers: Atlanta – 401 West Peachtree St. N.W., Atlanta, GA – 404-588-5444 Dallas – 4050 Alpha Road, Farmers Branch, TX – 972-308-7997 Detroit – 477 Michigan Ave., Detroit, MI – 313-628-3120 Los Angeles – 300 North Los Angeles St., Los Angeles, CA – 213-576-4130 Philadelphia – 600 Arch St., Philadelphia, PA – 215-861-1902 Taxpayers who have been losing sleep, who have been faced with wage garnishments or worse should be taking advantage of this opportunities. Tax professionals who feel they are getting nowhere in the system, or who have been getting the run-around, call up and schedule an appointment. Be sure to bring all the relevant files and a signed, current, valid power of attorney, Form 2848. Folks, if you don’t have an event near you, don’t despair. According to IRS spokesman Chris Kerns, even after Solution Saturday, you will be able to get help from IRS. Kerns says that IRS staff on the phone and at offices in your area are prepared to help anyone who comes in. So, if you can’t afford a tax professional, don’t ignore your problem. Go in and talk to IRS.
This is syndicated from TaxMamas TaxQuips: IRS News, and written by Eva Rosenberg.
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Bio
I've a passion for fixing things. For solving problems where no one else could. For seeing to the heart of a problem or situation and finding a twist - that actually works.
This isn't a developed skill. It comes naturally. I remember when I was three...do you remember when you were three? That too, a memory for useless details. Visual memory, seeing things in a setting and filling in the space around the focal point. That was always a good talent when taking exams. It made it easy. And you know how good it looks when you can finish exams quickly. But this talent somehow found it's way into solving tax puzzles. It's fun, when someone who's been struggling to resolve a major tax debt for many years comes to me. And I notice, in a few minutes, that it isn't her signature on the tax return causing all the grief. All the attorneys, CPAs and IRS staff who actually tried to help, never noticed. It's fun when an auditor is about to make a determination that would cost my client hundreds of thousands of dollars - and I ask, Isn't there anything in the tax code that would work to prevent this assessment? And I toss out some totally ridiculous ideas - only to have him pause and say...yes - that just might work. And we save the client from total financial ruin, together. Tax planning and tax savings involves teamwork. So TaxMama has no competitors in her field. She simply have colleagues and friends who all share information and help bring about solutions for each other. Life ought to be that way, don't you think?
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