A new requirement is going to give the IRS another tool in finding unreported cash.
The Housing and Economic Recovery Act of 2008 added a requirement for banks and other processors of merchant payment card transactions (credit and debit cards and Internet payments systems) to report a merchant's annual gross payment card receipts to the IRS and to the merchant. The reporting threshold is an aggregate value of third-party network transactions for a merchant of $20,000 or more for the calendar year and aggregate transactions of 200 or more. This reporting requirement is effective for sales made on or after January 1, 2011. The information is to be reported on Form 1099-K.
Now the IRS computers will be able to look at the 1099-K and compare to gross sales to determine cash sales. I would presume that there will be some ratio that they will be using to find “red flags.”
This is something that we will have to watch because of tips that might be run through the credit card and possible cash back.
Tuesday, August 30, 2011
Monday, August 29, 2011
DOCUMENT MONEY BORROWED FROM THE CORPORATION
It is important to keep document loans from your corporation. This is shown by a recent court case. The Tax Court has concluded that a husband and wife failed to report constructive distributions from their respective wholly owned corporations, rejecting their claim that these amounts represented shareholder loans. The taxpayers took funds from their corporations' operating accounts (via checks, withdrawals, and transfers) to pay their own and their children's living expenses.
The taxpayer had to pay income taxes on the money taken out of the corporation.
The taxpayer had to pay income taxes on the money taken out of the corporation.
Saturday, August 27, 2011
AM I A WIDOW?
Q. I had a friend of the family who does tax returns file my 2010 return. My dear husband passed away in 2009. Tony, the guy that did my return, filed me as a widow. I thought that was correct. We were married for 55 wonderful years so I thought I was a widow. I was at coffee with the girls the other day and Mable one of my friends whose husband passed away at the same time said that she was told that she was not a widow and she had to file as single. I have not been able to sleep worrying about the IRS coming to get me. Who is right.
Olive
A. First of all Olive don’t worry too much. My best guess is that you are going to owe some money to the IRS and to the state but they are not going to throw you into jail or get audited. This is a good example of why someone should use a “qualified tax professional.” The key to this is that although you are a widow the actual IRS wording is “qualified widow or widower.” In order to meet that definition you must have a child that lives with you. In addition the qualification is only for two years after the death of the spouse. For the 2010 returns this would mean that the spouse died is 2008 or 2009 and you had a child living with you during those two years.
What should you do? I would recommend that you hire a qualified professional to amend your 2010 federal and, don’t forget your state return. I would also ask them to look at your 2009 return. Even though your husband died in 2009 you can still file a joint return. Make sure that a joint return was filed.
It is a pleasure serving you.
FOLLOWUP
Thank you so much. I am now sleeping better. How much would you charge to fix my problem?
Olive
I would be happy to help. Amending your federal and state returns would cost $225. This includes looking at your 2008 and 2009 returns to see if there are any other errors.
Let me know.
Olive
A. First of all Olive don’t worry too much. My best guess is that you are going to owe some money to the IRS and to the state but they are not going to throw you into jail or get audited. This is a good example of why someone should use a “qualified tax professional.” The key to this is that although you are a widow the actual IRS wording is “qualified widow or widower.” In order to meet that definition you must have a child that lives with you. In addition the qualification is only for two years after the death of the spouse. For the 2010 returns this would mean that the spouse died is 2008 or 2009 and you had a child living with you during those two years.
What should you do? I would recommend that you hire a qualified professional to amend your 2010 federal and, don’t forget your state return. I would also ask them to look at your 2009 return. Even though your husband died in 2009 you can still file a joint return. Make sure that a joint return was filed.
It is a pleasure serving you.
FOLLOWUP
Thank you so much. I am now sleeping better. How much would you charge to fix my problem?
Olive
I would be happy to help. Amending your federal and state returns would cost $225. This includes looking at your 2008 and 2009 returns to see if there are any other errors.
Let me know.
Friday, August 26, 2011
ACCOUNTANTS IN THE MOVIES
In Hollywood, accounting can seem like a pretty glamorous profession, or not.
May 17, 2011 - The Producers
Gene Wilder co-starred as accountant Leo Bloom in "The Producers," the 1968 Mel Brooks madcap comedy. Teamed with Zero Mostel (left) as Max Bialystock, the womanizing theatrical impresario, they try to create the biggest flop ever to hit Broadway, a musical tribute to Adolf Hitler. Their roles were later reprised by Matthew Broderick and Nathan Lane in a hit Broadway musical and a 2005 remake.
May 17, 2011 - The Producers
Gene Wilder co-starred as accountant Leo Bloom in "The Producers," the 1968 Mel Brooks madcap comedy. Teamed with Zero Mostel (left) as Max Bialystock, the womanizing theatrical impresario, they try to create the biggest flop ever to hit Broadway, a musical tribute to Adolf Hitler. Their roles were later reprised by Matthew Broderick and Nathan Lane in a hit Broadway musical and a 2005 remake.
Thursday, August 25, 2011
DEBT DEAL TALK
It seems like a lot of the talk these days is about the Congressional Committee that is to come up with a deficit plan to present to Congress and the President. On top of that, the President has been saying on his bus tour that he has a plan that he is going to unveil in September. How is this going to impact income taxes? Here are my thoughts:
First of all, I don’t think that anybody thinks that the committee will offer a plan that will be passed so we will default (bad choice of words), to the 1% cutback called for in the deficit bill.
Right now, House Republicans appear to have blocked any new taxes. And all seven Republican candidates participating in the recent presidential debate pledged to oppose new taxes even if they were accompanied by ten times that amount in spending cuts. So, new taxes appear off the table for now.
But look out! The Bush tax cuts expire right after the 2012 election, and rates on ordinary income, capital gains, and qualified dividends will automatically go up unless Congress gets their act together to extend them. Democrats and Republicans are united in wanting to preserve them for "middle class" taxpayers. But the White House has pledged not to extend those cuts for single taxpayers making above $200,000 or joint filers above $250,000. If Obama wins in November, he may have the leverage to pass "enhanced revenues."
A final comment.
I love how the spin doctors in Washington use terms like "enhanced revenues" to mask new taxes. My favorite is the 3.8% "Unearned Income Medicare Contribution" imposed on investment income by last year's legislation that Washington laughingly refers to as “Healthcare Reform.” I swear, those guys have more euphemisms for "tax hikes" than Eskimos have words for snow.
First of all, I don’t think that anybody thinks that the committee will offer a plan that will be passed so we will default (bad choice of words), to the 1% cutback called for in the deficit bill.
Right now, House Republicans appear to have blocked any new taxes. And all seven Republican candidates participating in the recent presidential debate pledged to oppose new taxes even if they were accompanied by ten times that amount in spending cuts. So, new taxes appear off the table for now.
But look out! The Bush tax cuts expire right after the 2012 election, and rates on ordinary income, capital gains, and qualified dividends will automatically go up unless Congress gets their act together to extend them. Democrats and Republicans are united in wanting to preserve them for "middle class" taxpayers. But the White House has pledged not to extend those cuts for single taxpayers making above $200,000 or joint filers above $250,000. If Obama wins in November, he may have the leverage to pass "enhanced revenues."
A final comment.
I love how the spin doctors in Washington use terms like "enhanced revenues" to mask new taxes. My favorite is the 3.8% "Unearned Income Medicare Contribution" imposed on investment income by last year's legislation that Washington laughingly refers to as “Healthcare Reform.” I swear, those guys have more euphemisms for "tax hikes" than Eskimos have words for snow.
Wednesday, August 24, 2011
13 ESSENTIAL TALKING POINTS FOR THE EARTHQUAKE ENTHUSIAST
Since Virginia had a 5.9 magnitude earthquake and Colorado was also hit with earthquakes yesterday, I thought you might want some earthquake talking points.
1. The first recorded earthquake was in China in 1177 B.C.E.
2. China is also the birthplace of the first seismograph. Built in 132 C.E. by a man named Cheng Heng, it consisted of eight metal dragons holding eight carved balls over eight frog figurines. If an earthquake made the ground vibrate, the dragon facing the quake’s source would (naturally) drop a ball into the mouth of its corresponding frog.
3. Of course, it didn’t really work.
4. But it did look cool.
5. While dragons aren’t that good at predicting earthquakes, other animals might be. According to ancient reports, critters in the Greek city of Helice headed for the hills just before a massive quake leveled the city in 373 B.C.E.
6. There’s some modern evidence, as well. In 1975, Chinese officials evacuated Haicheng days before a massive earthquake, based both on warnings from seismologists and the strange behavior of local pets.
7. Before leaving Alabama, Shawnee leader Tecumseh told a Creek chief, “I … shall go straight to Detroit. When I arrive there, I will stamp on the ground with my foot, and shake down every house in Tuckhabatchee.” Coincidentally (or was it?), he arrived in Detroit on December 16, 1811, the day of the New Madrid earthquake—the largest ever recorded in the contiguous United States.
8. The most violent earthquake ever measured in the world hit Chile in 1960, coming in at a terrifying 9.5 on the Richter scale.
9. The atomic bomb dropped on Nagasaki, Japan, was “only” considered a 5 on the Richter scale.
10. In theory, a quake can actually measure 11, or even higher. The formula for the Richter scale has no upper limit.
11. Speaking of Charles Richter, the American scientist was supposedly an avid nudist. Rumors persist that his wife was so distressed by his penchant for hanging out in the buff that she divorced him.
12. One guy not to trust for earthquake predictions? British soldier William Bell. In 1761, right after two earthquakes uncannily hit England 28 days apart, Bell smelled opportunity. He claimed a follow-up quake would be hitting the country four weeks later. Accounts depict Bell running through the streets of London ranting about the impending destruction. Amazingly, it worked. Folks were so panicked that hundreds actually slept in boats on the Thames thinking it would be safer than their homes. Luckily, the quake never hit. But Bell quickly lost his street cred and eventually ended up in an insane asylum.
13. In early 2001, FEMA prophetically listed the three most likely disasters to hit America: a terrorist attack on New York City (check), a hurricane in New Orleans (check), and a massive earthquake in San Francisco. Nervous yet?
This article was written by Jeff Fleischer, and originally appeared in the May-June 2007 issue of Mental Floss magazine.
1. The first recorded earthquake was in China in 1177 B.C.E.
2. China is also the birthplace of the first seismograph. Built in 132 C.E. by a man named Cheng Heng, it consisted of eight metal dragons holding eight carved balls over eight frog figurines. If an earthquake made the ground vibrate, the dragon facing the quake’s source would (naturally) drop a ball into the mouth of its corresponding frog.
3. Of course, it didn’t really work.
4. But it did look cool.
5. While dragons aren’t that good at predicting earthquakes, other animals might be. According to ancient reports, critters in the Greek city of Helice headed for the hills just before a massive quake leveled the city in 373 B.C.E.
6. There’s some modern evidence, as well. In 1975, Chinese officials evacuated Haicheng days before a massive earthquake, based both on warnings from seismologists and the strange behavior of local pets.
7. Before leaving Alabama, Shawnee leader Tecumseh told a Creek chief, “I … shall go straight to Detroit. When I arrive there, I will stamp on the ground with my foot, and shake down every house in Tuckhabatchee.” Coincidentally (or was it?), he arrived in Detroit on December 16, 1811, the day of the New Madrid earthquake—the largest ever recorded in the contiguous United States.
8. The most violent earthquake ever measured in the world hit Chile in 1960, coming in at a terrifying 9.5 on the Richter scale.
9. The atomic bomb dropped on Nagasaki, Japan, was “only” considered a 5 on the Richter scale.
10. In theory, a quake can actually measure 11, or even higher. The formula for the Richter scale has no upper limit.
11. Speaking of Charles Richter, the American scientist was supposedly an avid nudist. Rumors persist that his wife was so distressed by his penchant for hanging out in the buff that she divorced him.
12. One guy not to trust for earthquake predictions? British soldier William Bell. In 1761, right after two earthquakes uncannily hit England 28 days apart, Bell smelled opportunity. He claimed a follow-up quake would be hitting the country four weeks later. Accounts depict Bell running through the streets of London ranting about the impending destruction. Amazingly, it worked. Folks were so panicked that hundreds actually slept in boats on the Thames thinking it would be safer than their homes. Luckily, the quake never hit. But Bell quickly lost his street cred and eventually ended up in an insane asylum.
13. In early 2001, FEMA prophetically listed the three most likely disasters to hit America: a terrorist attack on New York City (check), a hurricane in New Orleans (check), and a massive earthquake in San Francisco. Nervous yet?
This article was written by Jeff Fleischer, and originally appeared in the May-June 2007 issue of Mental Floss magazine.
Tuesday, August 23, 2011
WATCH OUT FOR SCAM TAX HELP SERVICES
Tax Masters Accused of Fraud and Deception
The California and New York Attorney Generals say that 'Tax Lady', Roni Deutch should be jailed for contempt. The “Tax Lady’ spent millions on advertising; hired people off the street with no training to work the telephones in a “sweat shop” type setting and had no intention on really helping the desperate taxpayers that contracted with her.
No sympathy me or other legitimate . It has been frustrating the past few years, seeing the growing number of scammers advertising their supposedly top secret and unique services for settling up past tax debts with IRS.
As anyone capable of using Google can easily see, these services take money from desperate people, do nothing to help them, and leave them even worse off with the tax agencies. Any competent professional tax advisor can help people work on arranging a payment plan or an Offer In Compromise with IRS for far less than the thousands these scam services charge. It's good to see these scammers being nailed by the authorities.
The California and New York Attorney Generals say that 'Tax Lady', Roni Deutch should be jailed for contempt. The “Tax Lady’ spent millions on advertising; hired people off the street with no training to work the telephones in a “sweat shop” type setting and had no intention on really helping the desperate taxpayers that contracted with her.
No sympathy me or other legitimate . It has been frustrating the past few years, seeing the growing number of scammers advertising their supposedly top secret and unique services for settling up past tax debts with IRS.
As anyone capable of using Google can easily see, these services take money from desperate people, do nothing to help them, and leave them even worse off with the tax agencies. Any competent professional tax advisor can help people work on arranging a payment plan or an Offer In Compromise with IRS for far less than the thousands these scam services charge. It's good to see these scammers being nailed by the authorities.
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