Tax Tips Blog

Answers to your Federal income tax questions
                     
                          TaxTipsBlog.com

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• Welcome

  I am David Greenslit, an active licensed CPA in Mound, Minnesota. Since 1989 I have helped people with their Federal form 1040 income tax returns at my firm, Tulberg & Greenslit, CPAs.

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• Tulberg & Greenslit, CPAs

  Taxes and Accounting since 1961. Our primary service is Federal form 1040 and state income tax return preparation. TulbergandGreenslit.com

• Recent Comments

  1. David Greenslit CPA on The IRS has issued the 2007 standard mileage rates
     9/5/2008
  2. David Greenslit CPA on The IRS has issued the 2007 standard mileage rates
     9/5/2008
  3. David Greenslit CPA on The IRS has issued the 2007 standard mileage rates
     9/5/2008
  4. David Greenslit CPA on Hobby Losses
     9/5/2008
  5. David Greenslit CPA on Pre-paying a mortgage?
     9/5/2008
  6. David Greenslit CPA on The IRS has issued the 2007 standard mileage rates
     9/5/2008
  7. Heidi on The IRS has issued the 2007 standard mileage rates
     6/3/2008
  8. BIGGUY on Stimulus Rebate and Dependents
     5/22/2008
  9. WD Kebschull on Taxable Refunds and the AMT
     5/9/2008
  10. Ellen on Child and Dependent Care Credit and Single Parent Students
      4/22/2008

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• Monthly Archives

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• Recent Entries

  1. Required Minimum Distributions
     Friday, March 21, 2008
  2. Stimulus Rebate and Dependents
     Tuesday, March 18, 2008
  3. Lease with Option to Buy Real Estate
     Tuesday, March 18, 2008
  4. Unrecovered costs at death in annuities and retirement plans
     Sunday, March 16, 2008
  5. Reporting Sales of Covered Calls
     Saturday, March 15, 2008
  6. Child and Dependent Care Credit and Single Parent Students
     Saturday, March 15, 2008
  7. Sale of an Inherited House
     Tuesday, March 11, 2008
  8. Don't Mess With Taxes
     Tuesday, March 11, 2008
  9. Babysitters and Newspaper Carriers under the age of 18
     Monday, March 10, 2008
  10. Online Sales - Here comes the IRS
      Saturday, March 08, 2008

• Content for Your web site

  You can place on your web site an RSS feed from this web-log(blog) It will provide your site with fresh content through out the year. If you have someone besides yourself managing your web site, simply show your provider this site, and ask them to grab an RSS feed from it.

• Your Tax Questions

  If you have a question you would like answered, send me an email or just comment on one of my entries. Though I am busy this time of year, I'll see what I can do, and Thank You for visiting this blog. : )

• College Students

  If you have children in college, it is important that their and your returns are done to save you as a family, the most money. Who claims the child’s exemption, can cause a big difference in total taxes paid. Education Deductions and Credits generally follow the child's exemption. The parent’s tax rate will usually be higher, meaning that they will benefit more by claiming the exemption. Full time students under 24 can usually be claimed by their parents.

• Family Wages

  "Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child." - The IRS

• IRS Forms

  • Forms

• Sheplers

  

• Impairment Related Work Expenses

  If you are disabled and have expenses which are necessary for you to be able to work, you can take a business deduction for these expenses, rather than a medical deduction. For employees, this means deduct them on schedule A, without reducing them by 2% of your adjusted gross income.

• Residential Telephone Service

  You cannot deduct any charge for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business.

• Annual Gift Exclusion

  The annual gift exclusion for 2006 and 2007 is $12,000. You can give an individual up to this amount each year and not have to file a return.

• Hobby Losses

  Losses resulting from a Hobby are not deductible. A taxpayer can take the position that if they made money at their "hobby" in 3 of the last 5 years, the losses in other years are allowed. But this "3 of 5" test is not the final word. The IRS may look at other factors as well. For horse breeding, racing, training, or showing, the test is for profits in 2 of the past 7 years.

• Taxable Refunds

  "None of your state income tax refund is taxable if, in the year you paid the tax, you either (a) did not itemize deductions, or (b) elected to deduct state and local general sales taxes instead of state and local income taxes." - from the IRS

• IRA Rollovers to HSAs

  The Tax Relief and Health Care Act of 2006 allows a one time, once in a lifetime, rollover of funds from an IRA into an Health Spending Account, for tax years beginning after 12/31/06.

• Buy.com

  

• Musical Works

  Under the Tax Increase Prevention and Reconciliation Act of 2005, Musicians can now treat the sale of their self created compositions as falling under the capital gains rates. This is generally better than having the income taxed as ordinary income.

• Client Confidentiality

  A CPA cannot release confidential client information without the specific consent of the client unless the CPA receives a subpoena or summons.

• Credit Card Rewards

  It is generally accepted by most CPAs that Credit Card Rewards and their Cash Rebates are not taxable income if they relate to personal purchases. Rewards relating to the use of a Business Credit Card would generally result in either taxable income, and/or a reduction of business deductions.

• Employer Provided Cars

  If an employer provides a car to an employee, the personal use of the vehicle is usually a taxable noncash fringe benefit.

• Education Credits

  If you claim an exemption on your tax return for an eligible student who is your dependent, you can treat any expenses paid by the student as if you had paid them when calculating either the Hope or Lifetime Learning Credit.

• How long to keep tax records?

  You must keep your records for as long as they are important to federal and state tax law. For most cases that is 3 years from when the return is filed, or 2 years from when the tax is paid, whichever is later. Most states expect you keep them longer so you should add on another year to cover that. The statute of limitations is longer still if you materially understate your income. Certain records relating to costs should be kept as long as you own the asset. Examples of these types of assets are: Personal residences (improvements too), Stock and mutual fund costs (after tax accounts), investment and rental real estate, and business assets.

• Depreciating Horses

  "Racehorses more than 2 years old, and breeding horses more than 12 years old, are depreciated using a three-year recovery period. Racehorses 2 years old or less, breeding horses and other horses 12 years old or less, are depreciated using a seven-year recovery period." - from: USTrotting.com

• Hiring Your Children

  If you are self employed, consider hiring your children and deduct their wages from your generally higher income, and have it taxed at their generally lower rate. You can also use their wages as a basis to contribute to a Roth IRA of theirs.

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• Stock Surrender

  A surrender of stock by a dominant shareholder who retains control of a corporation is treated as a contribution of capital rather than as an immediate loss deductible from taxable income.

• CheapPetStore.com

  

• Charitable Uniforms

  You can deduct the cost and upkeep of uniforms that are not suitable for everyday use and that you must wear while performing donated services for a charitable organization.

• Donating Appreciated Stock

  If you donate appreciated stock to charity instead of selling it first and then donating the cash you'll generally come out ahead on your taxes. You get a charitable deduction for the fair market value of the donated stock but do not have to pay tax on the appreciation of the stock.

• Health Spa Expenses

  You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer.

• Q and A

  Q. What is the difference between tax avoidance and tax evasion? A. Jail.

• The Earned Income Credit

  The earned income credit, or EIC, is a refundable credit for workers who meet certain requirements and file a tax return. Persons with or without a qualifying child may claim the EIC. The maximum credit you can get will depend on whether you have no qualifying children, one qualifying child, or more than one qualifying child. Additionally, the maximum credit possible can change each year due to inflationary adjustments.

• Direct Deposits

  If you are getting an income tax refund, a direct deposit makes sense. We simply enter your bank routing and account numbers onto your return. The refunds are then deposited into your bank account rather than being mailed. On average this gets you your refunds a week earlier. There are no fees or charges associated with a direct deposit for our clients. Many of our clients use direct deposit and they have been pleased with the security, convenience, and faster refunds.

• Review Courses

  Review courses to prepare for a certified public accountant (CPA) examination are not qualifying work-related education expenses. They are part of a study that can qualify one for a new profession.

• Giving Appreciated Securities to Children

  You might be able to gift stock or other securities to your children or grandchildren and not be taxed on the gain. Under the Kiddie Tax rules, your child or grandchild can hold the stock until they are 18 and then sell it, and perhaps use the lowest 5 percent tax bracket.

• Employee's Health Insurance

  Our clients who are employees often ask us if they can deduct their health insurance premiums? If your premiums are deducted from your wages, the answer is often no. Most larger employers have in place a plan that in effect gives you your deduction upfront, and this is what you want. Employers with qualified benefit plans have done the extra paper work that gives you the best tax deal.

• Flexible Spending Accounts

  Probably the best tax break invented is the Flexible Spending account (FSA). If your employer offers you this option, take it. Money is set aside from each paycheck to pay for such things as medical and child-care costs. This same money is then reimbursed to you throughout the year. The tax saving can be dramatic. For someone in the 25% federal tax bracket, the total savings can amount to 39%. In other words, the government picks up almost 40% of the cost for you. Of course there are dollar limits on how much you can put into an FSA each year. And FSA’s biggest drawbacks are their use it or lose it requirement.

• Six months to live

  A patient was at her doctor's office after undergoing a complete physical exam. The doctor said, "I have some very grave news for you. You only have six months to live." The patient asked, "Oh doctor, what should I do?" The doctor replied, "Marry an accountant." "Will that make me live longer?" asked the patient. "No," said the doctor, "but it will SEEM longer."

• Lost Refund Checks

  From the IRS: "Call the IRS at (800)829-1954. If your refund check has not been cashed, we can normally provide a replacement within six to eight weeks. If your refund check has been cashed, the Financial Management Service (FMS) will provide a copy of the check and a Form 3911 (PDF) Taxpayer Statement Regarding Refund, to initiate a claim. The signature on the cancelled check will be reviewed before determining whether another refund can be issued."

• Missing W-2 or 1099

  All taxable income is required to be reported on form 1040. If someone fails to send you a W-2, 1099, or any other similar document, you are still required to report the income.

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