TaxMamas TaxQuips

Tax On Used Car

Eva Rosenberg — Thu, 17 May 2012 07:48:00 -0500

Today TaxMama® hears from Blake in the TaxQuips Forum who is upset. “I bought a used car last December for $8,000. The car was owned by an individual who apparently had a business bank account where he deposited the money. The bill of sale just says his name on it, no company. How can the state of Georgia charge me $700 in taxes plus a $115 penalty on a car I bought from an individual? I don’t have the coins laying around for this kind of “surprise” expense. I was fully under the impression the car was bought from an individual and so were the two witnesses who were there when bill of sale was written up.”

Dear Blake

I don’t think this has anything to do with whether the seller was a business or an individual. It has more to do with your registering the car and transferring title to you.

I don’t know specifically about GA, but in most states any purchase of a vehicle triggers either a sales tax (if a dealer sells it) or a use tax (if a private party sells it). When the dealer sells a big ticket item like a car, he collects it from the buyer and sends it to the state. When a private party sells the car, the buyer needs to pay the state himself.

You could certainly try to get the penalties waived. Try talking to the Georgia Taxpayers Advocate office and see if they can help you. Clearly, you didn’t understand that you were responsible. Let’s face it, there are so many tax laws on the books, how is an average citizen supposed to know them all?

You won’t get the taxes waived, but good luck trying to get the penalties waived. Sometimes, asking nicely, politely and patiently, government officials will go out of their way to help you.

And remember, you can find answers to all kinds of questions about use tax issues and other tax issues, free. Where? Where else? At www.TaxMama.com.

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Gift from Father

Eva Rosenberg — Wed, 16 May 2012 08:12:00 -0500

Today TaxMama® hears from Ada in the TaxQuips Forum with a deceptively difficult question. “My father is a non-resident alien with a non-business U.S. checking account that he opened over 15 years ago. He wants to give me and another sibling (both resident US citizens) the money from that account (split equally to about $20k each). What are the reporting requirements and tax liabilities for him, my sibling and myself?

Dear Ada,

I asked Roger B. Adams, EA, our resident international tax expert, to research this for you. After researching this Mr. Adams’ has determined the following:

According to IRC sec. 2501(a) and Reg Sec. 25.2501-1 a nonresident alien donor is subject to gift tax on the transfer of real or tangible property situated in the US. The question is whether or not a bank account is “tangible” property and the answer seems to be, NO it is not. Cash, on the other hand, is tangible property.

Gifts are not taxable to you since they are not considered income. So you and your sibling are not liable to pay tax on the gift. It seems your father’s best option is to transfer his interest in the account to both of you. Thereafter, you would do with the money as you wished.

Ada responds that the bank won’t allow them to be added to the account. Since they must open a new account, wouldn’t this end up costing Father gift taxes?

TaxMama has way around this problem. Do open the new accounts, if you must. However, set up the new accounts in your FATHER’S name, with you and your sister as co-signers. That way, it’s his account. You’ve now been added to the account – not given cash. You can each use the cash in the account under whatever agreement you sibling and your father decide.

And remember, you can find answers to all kinds of questions about non-resident alien tax issues and other tax issues, free. Where? Where else? At www.TaxMama.com.

Please post all Comments and Replies in the new TaxQuips Forum .

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Homebuyer Credit Repayment

Eva Rosenberg — Tue, 15 May 2012 03:00:00 -0500

Today TaxMama® hears from Kelly in the TaxQuips Forum who cares about her friend. “A friend’s home will soon be going into foreclosure. He’s owned the home for 2.5 years and we’re trying to figure out if he’ll have to repay the $8,000 tax credit he received as a first time homebuyer. I’ve read that if the house sells and there’s no gain you’ll owe nothing. If the home is in foreclosure how is a gain calculated? Would it be of any benefit to try to do a short sale on the home versus the foreclosure? He’s planning to file for bankruptcy as well. I’m just wondering if there’s any legal way around the $8,000 repayment?”

Hi Kelly,

Good question.

Let’s see – to avoid paying back the Homebuyers Credit, you must live in the place for three years. So, one of the nice things about filing bankruptcy is – you can stay in your house for quite a while longer. If the BK can keep him in the house until the three years are up

1) No worries about repaying $8,000.
2) Free rent for as long as the BK continues.

However, if they don’t stay in the house for three years and end up owing the repayment, the bankruptcy will not help them since the tax return won’t even have been filed yet.

When it comes to selling and short sales, you need to be SURE there is no profit. Remember, you have two things happening when you run short sales, foreclosure or just signing over the property with a deed in lieu of foreclosure.

1) You have the sale – which may be the amount of the loan, or it may include some accrued interest, depending on whether the lender has modified the loan and added interest at the end. That might result in a profit. The profit would mean that some or all of the $8,000 might have to be repaid.
2) You have cancellation of debt income – (perhaps not, if it’s the original loan) which is subject to ordinary taxation.

Back to the Homebuyers Credit. If the house is sold at a loss, or with no profit at all, there won’t be a repayment of the tax credit. More details -

And remember, you can find answers to all kinds of questions about repaying the homebuyers tax credit and other tax issues, free. Where? Where else? At www.TaxMama.com.

Please post all Comments and Replies in the new TaxQuips Forum .

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How Old is Too Old?

Eva Rosenberg — Mon, 14 May 2012 08:03:00 -0500

Today TaxMama® hears from Saroj in the TaxQuips Forum with a valid concern. “I have been doing taxes for last 20 years or so. I was thinking of taking the EA exam. But I added Financial Advising to the practice (HD Vest) and QuickBooks, also. I am 62 years old; so I don’t know how long I will be doing taxes. With all the regulations and continuing education requirements, what do you think is more beneficial? Should I still get my EA or just pass the Registered Tax Return Preparer Exam (RTRP) and keep doing what I am doing?”

Hi Saroj,

That’s a good question. And the concept applies to any senior who is contemplating a career change or upgrade. So let me give you my perspective on the issue, starting with a key question.

Are you feeling particularly feeble, mortal, or in imminent danger of dementia?

If you are like most 60-year-olds these days, you’re in the prime of your life. You still look great in jeans, and you can hike for miles. You can expect a good, solid healthy 20+ years of lucidity and functionality.

How do you want to spend it?

Yes, you can take the RTRP exam and continue doing what you’re doing – and be just fine.

Or you can add some services to your practice – like being able to get a signed power of attorney from your clients and help them with their tax problems. You won’t have to refer them to others when they face tax audits or collections problems.

So what do you think?

And remember, you can find answers to all kinds of questions about career issues and other tax issues, free. Where? Where else? At www.TaxMama.com.

Please post all Comments and Replies in the new TaxQuips Forum .

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TaxQuips :: The number ONE free tax podcast online
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Ask TaxMama Issue 641 - Happy Mothers Day Weekend

Eva Rosenberg — Fri, 11 May 2012 10:30:00 -0500

Dear Family,

Another blink, another week goes by. We’ve been busy trying to get the classes set up – and teaching classes this week. The Overview of IRS Collections course was terrific. I am really enjoying teaching with Michael Rozbruch CEO of Tax Resolution Services.

more->

One of the things he is involved with is to help establish national standards for companies that provide tax representation services for folks in trouble with IRS. You’ve probably heard a lot about certain companies being prosecuted by IRS, and a variety of states, for ripping of their clients, or not delivering on claims to be able to slash taxes. Oh, you haven’t heard? Let’s see…TaxMasters recently filed for bankruptcy as a result of the prosecutions. JK Harris shut down in January after a flood of complaints to consumer affairs offices. Last year, we lost Roni Deutch, among others. So yes, we do need some standards in this industry. And it’s generally better if we can self-regulate, than to have IRS step in. Anyone interested in attending the first meeting of the 2012 Legislative & Regulatory Conference, it will take place on May 20-21^st in Washington, DC.

This week’s Money Funnies is in honor of Mothers Day. It’s all about child-rearing. Enjoy!

Also, speaking of Mothers Day, Susan Holtgrefe, EA had a great idea for mom. She gathered together some special family pictures, put them into a photobook. You may have already thought of that. Susan’s contribution? WalMart will print it in a day. So, procrastinators – you still have time to produce something unique and lovely for Mom. So, Happy Mother’s Day Weekend!

In today’s IRS News, the IRS provides information for community property taxpayers and domestic partners. This is especially important, in light of recent legislation in North Carolina. And CCH, a Wolters-Kluwers Company, sheds some light on the future of certain legislation – like capital gains, alternative minimum taxes, and more – in More Questions Than Answers for 2013.

This week’s Equifax Blog topic is all about After Filing Taxes: Responding to Letters from IRS. You’ll be getting some of those soon, if they haven’t already started. This will help you avoid tax-fright. Instead, you can get into the tax-fight – since most of those notices are somewhat wrong.

We held the last session of Everything You Want to Know About the EA Exam last night. There were some excellent questions about continuing education requirements for PTIN-holding tax professionals. You can replay this week’s session – right here.

If you want to see all the TaxQuips from earlier in the week, drop by here. Topics include Audit Risk, Zero Tax on Capital Gain, Opps, Missed a W-2 ! and Taxable Retirement Income .

The TaxMama SunShades arrived last week. I love it! This is so much better than the clunky accordian fold ones. You can just fold it in half when you take it off (or scrunch it back down to about 5 inches) – and then pop it back up when you park. Although I got them for presents to the students, I like my SunShade so much that I’ll give you a chance to buy them, too. (Quantity discounts are built into the shopping cart, if you want more of them for your friends or clients.)

TaxMama’s EA Exam Review Course is open for registration. The early-bird discount is over. But if you want to join the class, please sign up now, so you can get the books and software in time.

1) Family members get a special 20% discount until May 31^st – only on the full course – Live or Self-Study

2) Live students course materials include a terrific resource – the TaxBook WebLibrary – which includes materials for the 1040, as well as all business taxes – plus the All States resource. There are three years worth of detailed guidance. Our self-study students can also buy it – at a discount.

Note: Present members of the class – do NOT re-register. You don’t have to pay for the class again. Here is the order form for 2012 books and software.(Must log into Board)

Remember to follow TaxMama®’s Tweets – http://twitter.com/TaxMama

Have you grabbed the TaxQuips Widget for your phone, social networking page, website, or…? You’ll get the TaxQuips as soon as they published – about an hour before they are distributed in by e-mail. It’s a fun gadget. Just pick up the code and paste into your site or phone app. http://www.widgetbox.com/widget/taxmamas-taxquips-daily-tax-podcasts

Let’s address a few tidbits of news – and go back to work!

Weekly Equifax blog is still going strong.
http://blog.equifax.com/tax/
Filing Taxes: Paperwork For Your Tax Professional
Avoid Paying Penalties on Estimated Taxes
Learning from Your Tax Filing Mistakes
After Filing Taxes: Responding to Letters from IRS

MarketWatch
http://www.marketwatch.com/Journalists/Eva_Rosenberg

BizFilings
What is the Best Entity for Your Business?
The Non-Profit as a Business Model
Tax Issues Regarding Copyrights and Trademarks
Business Licenses You Need and Trust
Now That You Have an LLC, it’s Time to Make Tax Decisions

ITS A WAHM THING
Home Based Business Accounting Software Options
Writing off your Family’s Vacation

You can find daily TaxQuips into YouTube videos http://www.youtube.com/taxmama1 http://www.youtube.com/taxmama1#p/u

As always, we love your feedback, opinions and ideas.

You are what makes all this fun – and interesting!

http://taxmama.com/asktaxmama/ask-taxmama-issue-641

TaxNerd gear makes a bold statement year-round.

Hugs from your favorite TaxNerd,

Eva Rosenberg, EA

Your TaxMama® www.TaxMama.com

Your TaxMama® is watching…out for you.

www.TaxMama.com

www.TaxMama.com/TaxQuips

www.IRSExams.com

www.TaxNerd.net

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TAX CALENDAR

http://taxmama.com/tax-calendar/

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05/15/2012 Employers Make Monthly Payroll tax deposit on the 15th of each month
06/15/2012 Individuals, Farmers & Fishermen Pay 2nd Quarter Estimated Tax Payment
06/15/2012 Corporations – 2nd Quarter Estimate Tax payment
Due 06/15/2012 Estates & Trusts 2nd Estimated Tax Payment
06/15/2012 Employers Make Monthly Payroll tax deposit on the 15th of each month
06/15/2012 US Taxpayers Overseas Individual Personal Returns due
06/15/2012 US Taxpayers Overseas Claim Foreign Earned Income
06/15/2012 US Individuals Overseas Personal Return Extensions due
06/30/2012 File Form TDF 90-22.1 – Report of Foreign Banks with $10,000 anytime during year

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EA EXAM NEWS & SOLVING THE TAX PUZZLE

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Take TaxMama®’s 2011 EA Exam Review Class

http://irsexams.com/

I’m geting notes from people who are passing their exams. How exciting!

Replay the session –
Everything You Wanted to Know About the EA Exam

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IRS Provides Answers to Community Property Filers

Eva Rosenberg — Fri, 11 May 2012 10:15:00 -0500

Courtesy of the Internal Revenue Service

The Internal Revenue Service today provided information in a question and answer format to individuals who are subject to their state’s community property laws. These questions and answers apply generally to same-sex spouses in California and to registered domestic partners in California, Nevada, and Washington.

Federal tax law generally defers to state law on matters relating to property. The questions and answers provided today will help certain taxpayers in three community property states understand how to properly file and pay federal income tax.

The IRS has previously included some information on the treatment of community property in Publication 555, Community Property, for same-sex spouses in California and registered domestic partners in California, Nevada and Washington. However, these questions and answers provide additional information to assist filers with the preparation of correct income tax returns.

These questions and answers address issues such as whether a registered domestic partner can use the head of household filing status. Other topics include claiming a registered domestic partner as a dependent for purposes of the dependency deduction and the exclusion for reimbursement of medical expenses, claiming children as dependents, and claiming adoption credits.

The questions and answers not only provide information about filing current and future tax returns, but also answer questions about amending prior year tax returns.

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IRS & Tax News :: Where you can read this week's issue
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Turtle Swoop

Eva Rosenberg — Fri, 11 May 2012 09:32:00 -0500

A baby turtle was standing at the bottom of a large tree and with a deep sigh, started to climb. About an hour later, he reached a very high branch and walked along to the end. He turned and spread all four flippers and launched himself off the branch.

On landing at the bottom in a pile of soft, dead leaves, he shook himself off, walked back to the bottom of the tree and with a sigh started to climb.

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About an hour later, he again reached the very high branch, walked along, turned, spread his flippers and flung himself off the branch. Again, he landed on the bottom, shook himself off, went to the bottom of the tree, sighed and started climbing.

Watching these proceedings from the end of the branch were two little birds.

Mummy bird turned to Daddy bird and said, “Don’t you think it’s time we told him he was adopted?”

Courtesy of The old I-HelpDesk & WebReview

Please remember to send us your humor and your inspiration. Clean jokes preferred.

Read more Money Funnies and Inspiration here: http://taxmama.com/category/asktaxmama/money-funnies/

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Audit Risk

Eva Rosenberg — Thu, 10 May 2012 07:54:00 -0500

Today TaxMama® hears from Hugh in the TaxQuips Forum with a long question. “To make his story short, he lays out his income and expenses and wants to know what his audit risk is – and what records to retain in case he’s ever audited.”

Hi Hugh,

In an example like yours, there’s no red flag to attract an audit. You’re odds of being audited are quite low.

You also asked about the materiality of a $50 expense. That depends on the whims of the auditor, whether they’ve had their coffee that morning, and their spouse or child/ren or bosses have been unpleasant that day. Also, if they have ever tried your business and failed.

Of course, some of it also depends on how well-organized your presentation is for the audit, and your own demeanor and behavior. But sometimes, even when you do everything right, and you’re low-key, pleasant, polite and delightful – the issues above will override.

You can never go wrong retaining records. Space, these days, is cheap. When I started out – a 640K Radio Shack TRS-80 cost $650. Now, a 500 GIGAbyte drive costs about $100.

And remember, you can find answers to all kinds of questions about audit risk, recordkeeping and other tax issues, free. Where? Where else? At www.TaxMama.com.

Please post all Comments and Replies in the new TaxQuips Forum .

Ask TaxMama :: Where taxes are fun and answers are free
TaxQuips :: The number ONE free tax podcast online
TaxQuips Forum :: When you can ask questions, too
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Zero Tax on Capital Gain

Eva Rosenberg — Wed, 09 May 2012 07:54:00 -0500

Today TaxMama® hears from Mazyar in the TaxQuips Forum with a good question. “I am planning for 2012 tax and am trying to find out what would be the maximum long-term capital gain I can have in order to still have it taxed at 0%. I use the Schedule D Tax Worksheet and enter the required information. To make the matter as simple as possible I assume that there is no short-term gain, no dividends and enter zero values for most of the lines. There are only three values I enter: (see the post for details)

Considering the simplified scenario, I think the max is (70700 less taxable income) and should match the value in Line 20 on the worksheet. Am I wrong?”

Dear Mazyar,

That’s a good question. And I am so glad you’re doing your planning early enough in the year to take advantage of this low rate. Odds are, when the 0% and 15% rates expire on 12/31/12, Congress will not extend it. So it IS a good idea for folks to start cashing in on capital gains this year.

Essentially, as long as your income, not including the capital gains, falls into the 15% tax bracket or below, your capital gains should be taxed at zero for 2012.

You don’t say if you’re single or married or head of household – and that determines your tax bracket. However, you can look up the limits on the 15% rate right here, at the SMBIZ site. Of course, if you were looking at $70,700, then I’m going to guess that you are married – and that is the correct limit. You’ve got the right idea.

Just to be sure, DO test the computation in a live tax program. Other things might come into play, like Alternative Minimum Taxes. And there might be an effect on your adjusted gross income that could affect your itemized deductions, if you have any, tax credits, etc.

And remember, you can find answers to all kinds of questions about tax planning, and other tax issues, free. Where? Where else? At www.TaxMama.com.

Please post all Comments and Replies in the new TaxQuips Forum .

Ask TaxMama :: Where taxes are fun and answers are free
TaxQuips :: The number ONE free tax podcast online
TaxQuips Forum :: When you can ask questions, too
TaxQuips Forum :: Where you can add your comments, too

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TaxMamas TaxQuips

Tax On Used Car

Gift from Father

Homebuyer Credit Repayment

How Old is Too Old?

Ask TaxMama Issue 641 - Happy Mothers Day Weekend

IRS Provides Answers to Community Property Filers

More Questions Than Answers for 2013 Tax Picture

About CCH, a Wolters Kluwer business

Turtle Swoop

Audit Risk

Zero Tax on Capital Gain