TaxMamas TaxQuips

Time Limit For Taxes

Eva Rosenberg — Thu, 02 Jul 2009 06:05:00 -0700

Today TaxMama hears from James in Arizona with a quick question. “Is there a statute of limitations on collecting back taxes?”

Dear James,

There are several limits – or no limits, depending on how you look at it.

In general, the federal limit (IRS) is 10 years after the tax has been assessed.

But that 10 years can be expanded, if you’ve filed for an offer in compromise, Tax Court petition, bankruptcy… It can start over if you’ve filed an amended return, or if IRS has reassessed the balance due via a correction letter or audit.

It can also be extended if you sign an agreement to give IRS more time to collect. Believe it or not there are times when that is wise.

And there is no statute of limitations if you’ve never filed the tax return at all.

Then there are state limits. Each state has their own rules. In some cases, the statute of limitations can be 30 years – practically an entire adult lifetime for some folks.

What can you do to find out the statute of limitations on your balance due? Easy, call your taxing authority and ask them. They will tell you.

I’ll bet this a lot more than you wanted to know!

And remember, you can find answers to all kinds of questions about tax debt 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.]

Ask TaxMama :: Where taxes are fun and answers are free
www.TaxQuips.com :: The number ONE free tax podcast online

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Small Business Software

Eva Rosenberg — Wed, 01 Jul 2009 06:28:00 -0700

Today TaxMama hears from Leah in Georgia who wants to know. “What is the best small business tax software? I have doubts about QuickBooks and Quicken for business.”

Dear Leah,

Hmm…I can understand your doubts about QuickBooks and Quicken as tax software, since neither of them are. They are bookkeeping programs. Tax programs, for professional use, include software like ProSeries, Pro fx, Drake, ATX and more, programs you can find here: http://taxsites.com/software.html

Are you asking about the best software to use for bookkeeping? That’s a different matter. The best software depends on the level and complexity of information a company needs. You can get accounting programs costing several thousand dollars, or just a couple of hundred dollars. http://taxsites.com/software2.html

You’re right about Quicken. I see it used for business. But the reports are a total pain. Too much personal stuff gets mixed into it. It is terrific for managing and understanding personal finances. And it has some nice features I particularly like. But..no – not for business.

Personally, for working with small business offsite, I prefer QuickBooks online.
http://www.taxquips.com/index.php?id=552

Why? Without having to visit the client’s office or business location, I can do all the bookkeeping from my office. We can get on the phone and look at the same information at the same time. They don’t have to stop working, while I have their books – and I am not limited to the accounting adjustments in the accounting back up of QuickBooks.

Besides, everyone seems to be traveling for business these days. My clients can log in from anywhere in the world and enter their daily cash expenses, or issue checks.

It’s gotten much faster and more versatile than it used to be. AND, now you can convert a regular QuickBooks file to the online version when you set it up. That was not a possibility in the past.

The software has always been flexible. You can always make entries for prior periods, out of order – so you don’t have to wait until you have all the check information or invoice information. You can correct entries when you reconcile the checkbook. And if you learn all the capabilities of the system, you can use QuickBooks for just about any kind of business and generate just about any kind of reports. Those are just some of the reasons why I prefer it.

Stay tune to TaxQuips #1269 the comments from other tax and accounting professionals for their favorite software.
http://taxquips.com/index.php?id=1269

And remember, you can find answers to all kinds of questions about bookkeeping 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.]

Ask TaxMama :: Where taxes are fun and answers are free
www.TaxQuips.com :: The number ONE free tax podcast online
TaxSites.com :: List of Tax Software
TaxSites.com :: List of Accounting Software
TaxQuips #552 :: Review of QuickBooks

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Racing Sponsorship

Eva Rosenberg — Tue, 30 Jun 2009 06:03:00 -0700

Today TaxMama hears from Craig in California with this question. “I’m a kart driver, who is going to be doing a lot of racing in Europe in 2010. My budget and sponsorship money that I’m expecting to receive is in the 5 to 6 digits. Do I have to pay taxes on the sponsorship money I receive from companies or corporations? I receive it only once, and it covers the whole year. How does that work?”

Dear Craig,

Congratulations! How wonderful for you that you were able to raise the money to cover your expenses for a whole year.

Basically, sponsorship money is for advertising rights. Your sponsors want to see their logos all over your uniform and/or vehicles. It’s income. Naturally, you have to pay tax on it.

However, first you get to deduct all your expenses. For instance, all the maintenance and tires and parts on the vehicle that get expended with each race. Your staff, if you have permanent American staff, should be on payroll. If you pick up local staff, keep meticulous records about how much you pay them – and the dates. You will need to convert the local currency to US dollars for tax purposes. There are online tools you can use, as long as you have the dates – or an average conversion rate for the year – like OANDA – http://www.oanda.com/

Keep track of all your travel and meals via a log that spells out just where you are each day. By tracking the dates, you may be able to take advantage of per diem rates for hotels and meals that might turn out to be higher than what you actually spent. Be sure to track meals separately, since only 50% of meals dollars are deductible.

Track all the tips and other cash expenses you incur. Don’t forget transportation, shuttles, cabs, etc. If you track every dime, date and location of your trip, by the time the year ends, you won’t be showing much profit. You only pay taxes on the profit – not the full sponsorship money. Note: The Tax MiniMiser in The 100% Home-Based Business Tax Solution would be perfect for you.

Incidentally, since all the expenses are in 2010, see if they can hold off paying you the bulk of the amount until after January 1, 2010. In 2009, collect only what you will be spending during 2009 to set up the car and the races.

Good luck in your races!

And remember, you can find answers to all kinds of questions about racing income 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.]

Ask TaxMama :: Where taxes are fun and answers are free
www.TaxQuips.com :: The number ONE free tax podcast online
OANDA :: The currency conversion and information site
The Tax MiniMiser :: Included with the 100% Home-Based Business Tax Solution

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Expiring Homeowners Credit

Eva Rosenberg — Fri, 26 Jun 2009 07:54:00 -0700

Today TaxMama hears from Penny in Kansas who is confused. “Have you heard anything about the new home tax credit having to be used by Monday, June 29, 2009? A couple of realtors have told clients that the money’s running out. If we are going to get the credit, they must get it by Monday.”

Dear Penny,

That’s utter nonsense.

They’re just trying to accelerate their sales, perhaps to win monthly bonuses at their offices…or just to pressure people to make offers and close escrows. Who knows what goes on in the minds of real estate agents who have to stoop to lying to generate a sale?

Relax. Take your time and find the perfect house. It is, after all, a buyers market this year. You can use the credit for any first-time home purchase until November 30, 2009. In fact, there is even talk on Capitol Hill about expanding the credit to $15,000 and removing the first-time homebuyer stipulation. That’s just talk so far. So don’t bank on it.

Now, perhaps there is a STATE credit in Kansas that’s expiring?

Though, I cannot find one.

And remember, you can find answers to all kinds of questions about the first time homebuyers credit 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.]

Ask TaxMama :: Where taxes are fun and answers are free
www.TaxQuips.com :: The number ONE free tax podcast online

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Ask TaxMama Issue 510 - Dying to Plan

Eva Rosenberg — Fri, 26 Jun 2009 06:55:00 -0700

Dear Family,

Just as we were starting last night’s EA Exam Review Class, someone announced that Michael Jackson (age 50)had died. Despite all the controversy surrounding this man-child, he has remained steadfastly popular. In fact, he had a series of 50 concerts scheduled in London that had already sold over $85m(£52m) worth of tickets. Aside from any personal mourning, Jackson’s death will serious impact the London economy.

And then there’s Farrah Fawcett. Clearly, this death was expected. Farrah (age 62)had been battling cancer for some. Last night ABC aired a Barbara Walters special about Fawcett with her close friends Ryan O’Neal, Alana Stewart and Jaclyn Smith. The International Movie Database is already updated with the date of her death.

Another tragedy. Both of these people were wildly popular and loved by fans. Both made a variety of major career mistakes. Ironic that two such popular icons die on the same day.

Earlier in the week, Ed McMahon died at age 86. Here’s a man who made a career of playing second fiddle. He managed to do everything right, career-wise – and had lots of devoted friends. Yet, when he died, he had wiped out his entire financial holdings and was living on the kindness of friends.

While I don’t know anything at all about Farrah’s finances, there’s probably not much of an estate left for Michael Jackson or Ed McMahon’s families to address. No doubt, though Farrah and McMahon had done their planning, knowing death was imminent…or inevitable. Since Jackson died suddenly of a heart attack…it’s quite possible he did’t quite have an estate plan in place.

We heard from someone recently whose father passed away peacefully in his sleep. (Sad…but a nice way to go.) They had just moved all his accounts and had not listed any beneficiaries on those accounts. Which means they will be facing probate. Depending on the state you’re in and the size of the estate, that could be quite costly. Take a moment over the coming weekend to look over your estate. Do you have a list of your assets and insurance policies so your survivors can find things quickly? Do you have your beneficiaries properly identified on your accounts? Have you updated your will (if you have one) in the last decade or so? Did you specify who would become your childrens’ guardian if you should die?

Nolo Press has some tools to help you.

Also, remember to have this conversation with your parents – and perhaps with yourself. Sally Dalton, EA provides a list of talking points

Sheesh, I didn’t mean to start out so morbidly. But there is a fascinating draw when it comes to the lives of people like this. You grew up, probably knowing more about them and their lives than the lives of some people close to you. In fact, how well do you know those closest to you?

For instance, your parents. Do you know what they wanted to be when they grew up? Who were their best friends in school or college? (Or are those folks still in their lives?) What would they have done if they had not been your parents? What do they really wish they could do right now? Just some thoughts to open up new lines for conversations with people you take for granted every day…

Aaahhh well…let’s move on to taxes and today’s issue of Ask TaxMama.

In IRS News this week, you get to see the updated Form 941 – the Employer’s QUARTERLY Federal Tax Return (revised in April 2009) as we learn about how to treat seasonal employees. There’s also a tip on how to stay out of trouble if you don’t need to file the Form 941 each quarter.
http://taxquips.com/index.php?cat=IRSNews

In today’s Money Funny – you will learn how to build up lucrative retirement savings.
http://taxquips.com/index.php?cat=MoneyFunnies

In TaxQuips this week, we learn how to avoid paying California taxes on a corporation that’s never been used; how to contact legislators when you have an urgent concern about a pressing issue; what to tell an employee who stirs up trouble insisting he wants to be paid as an independent contractor…when he’s clearly an employee; and where to get a complete list of deductions for your business.
http://taxquips.com/index.php?cat=TaxQuips

As always, we love your feedback, opinions and ideas.
You are what makes all this fun – and interesting!

Please use the Comments link online.
http://taxquips.com/index.php?id=1266

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Hugs from your favorite TaxNerd,

Eva Rosenberg, EA

Your TaxMama is watching…out for you.

www.TaxMama.com
www.TaxQuips.com
www.IRSExams.com
www.taxnerd.net
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TAX CALENDAR 2009
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07.15.2009 Employers Make monthly Payroll tax deposit

07.31.2009 2nd Quarterly Payroll Returns and Pay Taxes Due

07.31.2009 2nd Quarterly Sales Tax Returns and Pay Taxes Due

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Ask TaxMama :: Where taxes are fun and answers are free
www.TaxQuips.com :: The number ONE free tax podcast online
Money Funnies & Inspiration :: Great Retirement Plan
IRS News :: Hiring Seasonal Help
Prepare your own tax return :: $19.95 includes IRS, State, e-filing and tech support
The 100% Home-Based Business Tax Solution :: The evolving e-book and Tax MiniMiser
Pass the IRS Special Enrollment Examination :: Becoming an EA is more than a job, it's a recession-proof career
iTaxMama - ipod Application :: Download your own TaxMama Tax Calendar
Follow TaxMama on Twitter :: Follow me
Put a TaxMama Widget on your site or phone ::

Proper Employment Tax Treatment of Part-Time or Seasonal Workers

Eva Rosenberg — Fri, 26 Jun 2009 06:45:00 -0700

Courtesy of the Internal Revenue Service

June 04, 2009

For many businesses, summer traditionally brings an influx of part time or seasonal workers into the work force. Employers must ensure they are treating these workers properly for employment tax purposes.

Generally, workers are either employees or independent contractors, based upon the facts and circumstances of the relationship between the business and the worker.

For federal income tax withholding, Social Security, Medicare, and federal unemployment tax purposes, neither the number of hours worked nor amount earned alone determines the status of an individual as independent contractor or employee. For example, an individual can be an employee even though the individual works one hour a week or one day a year.

Furthermore, businesses must remember that part-time or seasonal workers who are employees are subject to the same tax withholding rules that apply to other employees.

Employers who only hire seasonal workers and do not have payroll in each quarter of the year may check the box on line 19 of the Form 941 – “If you are a seasonal employer and you do not have to file a return for every quarter of the year.”

More information about treating these workers properly is on the Part Time or Seasonal Help Web page on IRS.gov. The page contains helpful tips for filing Form 941, Employer’s Quarterly Federal Tax Return, other information about seasonal/part-time workers and links to other resources to help businesses with employees.

Ask TaxMama :: Where taxes are fun and answers are free
www.TaxQuips.com :: The number ONE free tax podcast online
IRS FAQs :: Part Time or Seasonal Help
IRS FAQs :: Businesses with Employees
IRS Audios :: Seasonal business income and recordkeeping.
IRS Publication 15, Circular E :: Employer's Tax Guide.
IRS Publication 51, Circular A :: Agricultural Employer's Tax Guide.
IRS Form 941 :: Employer’s QUARTERLY Federal Tax Return
The REAL IRS Site ::

Well Planned Retirement

Eva Rosenberg — Fri, 26 Jun 2009 06:41:00 -0700

From The London Times:

Outside the Bristol Zoo, In England, there is a parking lot for 150 cars and eight coaches, or buses. It was manned by a very pleasant attendant with a ticket machine charging cars £1 (about $1.40) and coaches £5 (about $7). This parking attendant worked there uninterrupted for all of 25 years. Then, one day, he didn’t turn up for work. “Oh well,”, said Bristol Zoo management, “we’d better phone up the city council and get them to send a new parking attendant.”

“Err, no”, said the council, “that parking lot is your responsibility.”

“Err, no”, said Bristol Zoo management, “the attendant was employed by the City Council, wasn’t he?”

“Actually, NO!” insisted the Council.

Sitting in a villa somewhere on the coast of Spain, is a bloke who had been taking the parking lot fees, estimated at £400 (about $560) per day at Bristol Zoo for the last 25 years.

Assuming seven days a week, this amounts to just over £3.6 million ($7 million)!

And no one even knows his name.

Courtesy of Floyd T Greenman EA in Northridge, CA

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

Read more Money Funnies here:
http://taxquips.com/index.php?cat=MoneyFunnies

Ask TaxMama :: Where taxes are fun and answers are free
www.TaxQuips.com :: The number ONE free tax podcast online
Money Funnies & Inspiration :: More Money Funnies at TaxMama.com

Unused Corporation

Eva Rosenberg — Thu, 25 Jun 2009 06:34:00 -0700

Today TaxMama hears from Luz in California with this problem. “I opened a corporation in 2001 but I never used it. I never filed tax returns. I didn’t even know how it works! Now I just learned that the state charges a fee for year that it is open. Is there a way or a law that I can reference to close the corporation and dismiss the past years?”

Dear Luz,

You’re in luck. You came to exactly the right person to help you.
The State of California wants you to believe that you must file each back year and pay the annual $800 fee AND all the penalties and interest related to that fee. However, in the Court’s discussion of the Ralite case, the Court made it clear that if the corporation is insolvent, it cannot be required to pay the back taxes. http://www.boe.ca.gov/legal/pdf/90_sbe_004.pdf

As to holding the owners liable?

In Ralite, the owners were held liable. But the Court said the owners can’t be held liable if the owners of the corporation did not get any money from the company without consideration. In other words, if the shareholders took loans out from the company without repaying them – or got paid without doing any work.

In your case, you never funded the corporation. And you never drew money out. So just write the Franchise Tax Board a nice letter, saying that under the Ralite case you are not obligated to pay the corporation’s debts.

File a final return showing zeroes on all the lines. Check the box as FINAL RETURN to stop any new assessments.

Do NOT file the dissolution paperwork with the State Franchise Tax Board or Secretary of State. The dissolutions papers require you to accept liability for the corporation’s debts. So just be patient. The notices will stop. Someday.

Though, you may want to have your tax professional help you with this. After all there is well over $6,000 at stake here.

And remember, you can find answers to all kinds of questions about dissolving corporations 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.]

Ask TaxMama :: Where taxes are fun and answers are free
www.TaxQuips.com :: The number ONE free tax podcast online
State Board of Equalization :: Ralite Case

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Complete List of Deductions

Eva Rosenberg — Wed, 24 Jun 2009 06:06:00 -0700

Today TaxMama hears from William in Florida with this request. “My wife is in school and doing her practicum in psychology. She is working for a nonprofit and considered a independent contractor. She was told she could take certain tax deductions such as mileage, cell phone etc. And I would like to get a complete list.”

Dear William,

There is no ‘complete list’ of business expenses.
What’s this complete list nonsense people keep asking about? Some people can take deductions that other people cannot based on the nature of their business and its activities.

What you can deduct, is based on what you spend that is business related. If what she spends is not for her business, it’s a personal expense. That’s pretty straightforward.

You can find more information about that in IRS Publication 334 the tax Guide for Small Business http://www.irs.gov/publications/p334/

But you’re asking the wrong question. It’s not the expenses that really matter. It’s all the loopholes, like ways to make it possible to deduct the cost of health insurance and medical care; education costs, pensions and more.

You can find that kind of guidance in Small Business Taxes Made Easy.
http://www.taxmama.com/AskTaxMama/book/

Even though the specific forms and limits in the book are far out of date, the concepts and strategies are not.

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

Ask TaxMama :: Where taxes are fun and answers are free
www.TaxQuips.com :: The number ONE free tax podcast online
IRS Publication 334 :: The Tax Guide To Small Business
TaxMama's Book :: Small Business Taxes Made Easy.

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Independent Contractor Option

Eva Rosenberg — Tue, 23 Jun 2009 06:25:00 -0700

Today TaxMama hears from Dianne in California with this question. “I am a contracted bookkeeper for a non-profit group in CA. One of my contractors has accepted employment with the same organization in a position that is typically paid through payroll, but wants to continue to be paid using the 1099 method. Is this going to cause a problem for the employer? It is already causing problems among the employees.”

Dear Dianne,

How charming of this fellow to think it’s his option! It’s not.

This is a job – not a freelance contract. He’s on payroll. Period.

If he wants to work badly enough, he’ll accept the position on those terms.

Your organization may want to be soft-hearted and give in to him. What will happen?

When and if he gets laid off, or gets ill or disabled, he will file a claim with California’s EDD. He will say he was an employee. EDD will review the case. They will agree. They will access back taxes, penalties and interest. They will assess those charges all the way back to the day he was employed.

And this will happen. It always happens. Really it does. He’s an employee. If he balks, cheerfully remind him how many other people are unemployed and just waiting for a shot at that position.

After all, he already knows he’s disrupting the workplace and it doesn’t bother him. What does that say about him?

And remember, you can find answers to all kinds of questions employment issues 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.]

Ask TaxMama :: Where taxes are fun and answers are free
www.TaxQuips.com :: The number ONE free tax podcast online

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