The MTBiking Tax Pro

Sunday Highlights

2009-08-16T17:51:00.000-07:00

Hope all have enjoy this past week.

Only a couple of things popping up in the tax world, one is that the IRS just continues to make sure they have work to do, as they have introduced a new form to be filled out - Schedule L... Oh yippee!!!! Besides my usual tin-foil hat theory, why this form is needed I don't have a clue, but you can bet it has to do with the governments need to know everything that goes on in your life including what brand of underwear you use...

You will be filing this along with your 1040 and 1040A if any of you are increasing your standard deduction by certain state or local real estate taxes, new motor vehicle
taxes, or a net disaster loss.

So I guess we're still along ways away from my dream world of flat tax and postcard filing, which is a whole other topic I should write about some day...

For a look see at the new form CLICK HERE

This Cash for Clunker 'Tip of the day' comes from Small Business Taxes & Management

Make sure you understand the program before you rush to the dealer. The voucher is essentially money for your trade in. Thus, if you're trying to get rid of a 7-year old car valued at $10,000, you'll get no more than the maximum voucher--$4,500. Clearly, not a good deal. Sell it or trade it in as you would in the past. On the other hand, that 15-year old car you kept for emergencies could get you a $4,500 voucher, even if the blue book is only $1,000. Check the rules carefully. And, when you get to the dealer, read the fine print even more carefully. There are numerous deals that can make a purchase even more attractive now, but the dealer isn't giving the cars away. Bargain carefully, avoid high cost options, and remember that financing is part of the cost. If you can afford it, it could be a long time before you'll find a better deal on a new car. Finally, some dealers are requiring buyers to sign a waiver in case they don't get the $3,500 or $4,500 from the government. That's not required.

So instead of people saying "Junk it" I take it the new 21st century saying will be "Clunk it"

Also the health care reform legislation, that once was going to be approved in the House and Senate before Congress’ left for their town hall meetings, has been moved to the fall as supporters continue to explore ways to pay for the estimated $1 trillion price tag.

Why does my gut say to me HIGHER TAXES ARE COMING, HIGHER TAXES ARE COMING... MORE FORMS NEEDED, MORE FORMS NEEDED...

Things of other interest - Lance Armstrong won the Leadville 100 over the weekend while riding a flat tire across the finish line in record breaking time...

Tiger Woods lost the lead he held for 3 days at the PGA championship and ended up losing the match completely...

I continue to get more riding in myself, not as much as years past like when I finished 4th in my category in the State MTBiking Championship in 2006, but that was before illness and other happenings stuck... I continue to push on and plan on riding next spring my dirt road ride I have mapped out. Still also waiting for a couple of charities to get back with me on having donations made to them while I ride...

Thank you & lets be careful out there...

Tom

Sunday Snip-its

2009-08-09T12:30:00.000-07:00

Hello,

I haven't been around to post much this week due to some sickness, death of a acquaintance and otherwise just busy.

I do want to say though from some first hand experience this week that if you don't have already, that please make sure your estate is all up to date. Make sure beneficiaries are up to date on life ins. policies and your will or have a will made out. Don't leave a financial mess for someone else to clean up after you're gone... It just becomes un-due stress in an allready stressful time for surviving spouses or children...

The other thing is due to my schedule I will be putting up new posts only on Sunday nights between now and end of September. If by chance you need some information, advice, etc. please e-mail me or call me Monday - Friday

Thank you and lets be careful out there,

Tom

Monday Mixture

2009-08-03T04:16:00.000-07:00

Did some needed cycling this weekend, between Saturday & Sunday total mileage came to a little over 25 miles. I’m working on more, just have to get out more. Can’t believe how good it feels to get out and ride, except for one thing.

When I ride around my Southern Michigan home area, which is where I was this weekend, if I don’t get out early (6 or 7am) the roads start congesting up with them nasty automobiles and trucks. At times it can make for a harrowing experience.

At my home up in the thumb area I don’t have to contend with all the traffic in a lot of areas. Shoot with only 38.8 people per square mile the roads our MINE!!!!

Just as long as I don’t run into the back of a manure truck…

Contacted a couple of charities to find out what is required for me to accept donations & pledges for them when I do my North to South bike ride, next Spring. Ohio/Michigan border to Mackinaw City using about 85% dirt roads.

Got it mapped out on my Atlas and I am working on a digital version of it. Right now as it stands it looks like about 300 to 330 miles distance and I’m shooting for 7 days total riding.

Tax Chat:

These come from the Kiplinger Tax Letter:

If you plan to use the government’s “cash for clunkers” program...
You may lose a bit of your deduction for sales tax paid on the vehicle.
Many states impose sales tax on the price of the new vehicle net of any trade-in.
Since participants in the program end up receiving more than the actual value
of the trade in, filers in those states will pay, and deduct, less tax on the vehicle.

For new vehicles bought after Feb. 16, 2009, purchasers can deduct the sales tax
on up to $49,500 of the cost. Except for buyers who elect to deduct state sales tax
in lieu of any income tax paid, this sales tax break starts phasing out for marrieds
with adjusted gross incomes over $250,000 and singles with AGIs over $125,000.

Noncustodial parents:

Bad news on claiming dependency exemptions.
Any conditions in the divorce agreement nix the exemption if the parent
with custody hasn’t signed Form 8332 to waive his or her right to the exemption.
For divorces before July 3, 2008, a signed divorce decree awarding the exemption
to the noncustodial parent is OK in lieu of the 8332.

But now, the Service says that it will reject signed decrees that have conditions, such as requiring payment of a settlement, that must be satisfied before the noncustodial parent gets the break. This is so even if the parent has documentation showing that the condition was met.
That’s even more reason to ensure the custodial parent provides a signed Form 8332.

Oh and if you think all these bail-outs and health coverage and cash for clunkers programs and who knows what else is FREE – HAHAHA better think again. Somewhere, sometime, someplace all us little people are going to pay for it all…

Obama Officials Don't Dismiss Possibility of New Taxes
The word in Washington Sunday is that the economic train is emerging from the tunnel of recession, but Obama administration officials could not explain why few jobs are waiting in the station and suggested new taxes may be around the bend.

CLICK HERE FOR THE REST OF THE STORY

Hope all of you have a great week ahead and lets be careful out there.

Tom

Saturday Shorts

2009-08-01T09:23:00.000-07:00

Busy, busy busy this morning. Meetings, children, etc.,etc....

A couple short things here that I don't know if any of you out there are aware of.

First short: is one that deals with the FTC ( federal trade commission) this is from about a month ago but it seems like they want to or are going to start monitoring blogs for claims, payments. so this kinda gos hand-in-hand with my past post a week ago or so on blog donations...

READ THE FULL ARTICLE HERE

Second short: has to do with another person trying their best to get extravagant business deductions allow by tax court...LOL!!! And guess what? it's an accountant no less! The jest of it is they made less than $75,000 and was claiming $46,000 in rent payments with no written proof...HA HA HA Boy that would want to make me go to them for my accounting and tax needs - NOT!

PLEASE! If you want to sustain your deductions, the best evidence is always written. Your tax preparer or tax software can only put in what you supply and what is legal. Its getting rougher and rougher out there with modern technology to scam the government anymore and it's just not worth it...

READ THE FULL US TAX COURT BRIEF HERE

Thank you, have a wonderful weekend & lets be careful out there

Tom

Thursday Evening Stuffing

2009-07-30T14:37:00.000-07:00

Still under the weather, not flu, remnants of last years illness I think, just pushing myself to hard again...

At this rate I won't be getting in any real cycling till winter, wearing muk-luks and snowsuit. Wee doggies that sounds like fun all ready. Any joiners???

TAX STUFF;

Yesterday - (IR-2009-69, July 29, 2009) The Internal Revenue Service announced its first successful prosecution related to fraud involving the first-time homebuyer credit and warned taxpayers to beware of this type of scheme.

On Thursday July 23, 2009, a Jacksonville, Fla.-tax preparer, James Otto Price III, pled guilty to falsely claiming the first-time homebuyer credit on a client’s federal tax return. Price faces the possibility of up to three years in jail, a fine of as much as $250,000, or both.

To date, the IRS has executed seven search warrants and currently has 24 open criminal investigations in pursuit of potential instances of fraud involving the credit. The agency has a number of sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time homebuyer credit.

“We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,” said Eileen Mayer, Chief, IRS Criminal Investigation. “The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.”

And please remember this folks - Whether a taxpayer prepares his or her own return or uses the services of a paid preparer, it is the taxpayer who is ultimately responsible for the accuracy of the return. Fraudulent returns may result not only in the required payment of back taxes but also in penalties and interest.

Also - (IR-2009-68, July 24, 2009) IRS Seeks Public Comment for Proposals to Boost Tax Preparer Performance Standards.

The Internal Revenue Service is inviting the public to contribute ideas as part of an effort to ensure high performance standards for all tax preparers.

Last month, IRS Commissioner Doug Shulman announced plans to develop by year-end a comprehensive set of proposals to ensure consistent standards for tax preparer qualifications, ethics and service. Subsequently, the IRS announced a series of public forums, beginning in Washington, D.C., on July 30, to gather input from various stakeholder groups and organizations.

Two panel discussions involving representatives of consumer groups and tax professional organizations will take place at the Ronald Reagan Building amphitheater in Washington starting at 9 a.m. on July 30. Anyone interested in attending should confirm attendance by sending an e-mail message to: CL.NPL.Communications@irs.gov.

Notice 2009-60 issued today is an additional call for public comments and helps guarantee that all interested individuals and entities have the opportunity to contribute ideas.

“We are casting the widest net possible by seeking comment from not only tax preparers and the industry but also from the general public,” Shulman said. “All ideas are welcome at the table.”

More than 80 percent of taxpayers use either a paid-preparer or third-party software to prepare their annual tax returns. Professionals who represent clients before the IRS, including attorneys, accountants and enrolled agents are already subject to IRS oversight. But under current law, a much larger group of return preparers are not.

Written comments must be received by Aug. 31, 2009. They should be submitted to CCPA:LPD:PR (Notice 2009-60), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044.

Comments may also be e-mailed to: Notice.Comments@irscounsel.treas.gov
Please include “Notice 2009-60” in the subject line of any e-mail messages.

From my blog buddy @ 'The Wandering Tax Pro' writes - THE APPLICATIONS ARE IN THE MAIL
Non-senior homeowners with incomes of $75,000 or less who were under 65 years of age and not disabled on December 31, 2008, will begin to receive their 2008 homestead rebate applications this week. These homeowners will qualify for a 2008 rebate if they owned a home that was their principal residence on October 1, 2008, and paid property taxes on that home.

Click on the link above to continue reading more...

Alot of changes are taking place in this world, with more to come. I know many,many people out there are hurting. I just want to say that if you are on unemployment now or if you by sad chance have to file in the coming months - PLEASE have Federal & State taxes withheld from your checks - I know your wanting/needing all you can get, but I had several people last year come to me and owe taxes because -1. of their circumstances and 2. because they got $10, $14, even $22,000 unemployment and no taxes taken out. Needless to say they were not happy campers...

Thank you & lets be careful out there

Tom

Tax Talk - Part 2

2009-07-28T16:14:00.000-07:00

Good Tuesday evening to all…

This is later then what I planned on, but not feeling well today…

In Mondays post I gave some background to the possible people that could do tax preparation work. A few links to read and a brief sentence on what the IRS is looking to do.

So the IRS and I do believe others behind the scene, are pushing to have all us tax preparers licensed, certified, registered or give up our livelihood.

As I have stated a few times I have no problem with it – I welcome it, BUT if and when this comes about I want it to be across the board. I want ALL who do or are associated with preparing, examining, questioning, auditing, etc of individuals, businesses, estates, etc. tax returns should have eventually the same license or classification. Doesn't that just seem fair?

That includes CPAs, public accountants, bookkeepers, foreign country tax sweat shops, McHenry workers, tax store franchise owners, etc. Also EVERYONE that works for the IRS from Mr. tax cheat himself Timothy Geithner down to that lonely telephone tax answer person to be required to get licensed also. The reason I say this about IRS workers is because,

Let me stop here and interject a link from the IRS job application site:

Internal Revenue Agent

If you read under Qualifications & Evaluations section for the first Internal Revenue Agent GS 05/11 (GS-05 is the lowest position available) you will see NO, NADA, NOTHING about having to have tax knowledge to get this position. Everything listed under A,B,or C and D qualification list has to do with just accounting, no taxes. As you get higher on grade level you still will not find TAXES, you will find “analyze business operations and financial conditions”, “Experience in interpreting and applying professional accounting and auditing techniques and practices”, etc.

Now you will find a part up near the top called: MANDATORY TRAINING, under that it state that you will get 1 week of orientation, apprx. 3-7 weeks of classroom training and 10-16 weeks of on-the-job training. IT’s does not say what kind of training, one could only hope that it involves TAXES??????

So, now these accounting people are telling us lonely little, independent tax preparers, who probably have more tax schooling in our baby finger that we need licenses, tax certification. ROFLOL!

The IRS has a special tax helpline for tax preparers who are stuck for an answer on a tax question. If everyone is not on the same level playing field and same rule book, there would be no sense of me having to go to class, get tested and licensed, yearly up-dated testing, etc. to practice tax prep. Work, only to have to call IRS help line and try to get tax answers from an un-licensed, un-certified, un-tested IRS worker. No sense at all.

To make this short so I can go lay down, I want the license, I want the certification, I want the yearly mandatory classes (which I do now), I also want everyone else to too.

I try with the best of my ability to provide to my clients the best I can give them, that’s why I already go to tax classes, read journals, blogs, seminars, etc. If licensing becomes part of that I will do that also.

All I ask is, if your going to play the tax game, then make it equal and honest for all who do.

I don't expect anything to happen this year, except for some forums, bantering and suggestions,etc. Next year is when it probably will be all written down, layed out and implemented. So we will wait and see...

Thank you & lets be careful out there.

Tom

TdF, Tax Talk & the Cake Lady

2009-07-27T04:20:00.000-07:00

Good Monday morning to all!

Hope you got out and played or gardened or at least relaxed a bit over this weekend?

TdF is over, Lance wound up taking 3rd place overall in his comeback and looking forward to next year with team Radio Shack. Alberto Contrador I don’t think will get another Tour victory as long as Lance’s eyes are on him…

Tax News:

If some of you haven’t been keeping up with tax land news there is a push being made to eventually (probably in another year or so) make all tax preparers get certified/registered and /or licensed. I have no problem with that! I have nothing to lose and a lot to actually gain by doing so.

The problem I have is if and when this comes about it might not be equal to all who work in the associated tax industry. So let me give you some back ground in this post and then in tomorrows post I’ll continue.

Some background: you basically have 5 groups of people in the US who prepare taxes, CPA’s, EA’s, un-enrolled tax preparers, your cousin Guido, and you. You could also throw in tax lawyers.

I know some CPAs and also have fixed some CPAs messes that they made for some of my clients. In my book, CPAs are just what the letters stand for – certified public ACCOUNTANTS who main business is accounting not taxes. In fact if you go to any college and look at the courses you need to become a CPA – you’ll see it to be about 98% accounting stuff (ledgers, accounts receivable, accounts payable, profit & loss statements, balance sheets, cash flow, etc.) and 2% taxes courses. But yet for some strange wacko way of thinking, the general public thinks that CPAs are top notch tax people. Yes, you have some who do take the time and up-date themselves on new tax laws, etc. but in my book them are far and few between. I know some personal friends who are accountants and they will tell you right off THEY HATE DOING TAXES! So if they have that attitude do you really think their going to do the best they can for you?

EA’s are Enrolled Agents. (This is what I am presently studying for) An enrolled agent is a person who has earned the privilege of practicing that is, representing taxpayers, before the Internal Revenue Service. Enrolled agents are generally unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can practice before. Basically you have to go through tax studies, classes, testing and 3 part exam to become one. Or if you have enough years of knowledge behind you, you can just exam out, but it’s hard.
I know 2 EA’s and their good, problem with EA’s is they tend to focus on people who owe back taxes (J K Harris ring a bell) as that can be big bucks for them…

Un-enrolled paid tax preparers are an open group; This group would include those who work in the McHenry type tax offices, assistants to CPAs, private individuals and/or companies, etc. The mass majority of them are honest, hardworking people who go to constant yearly tax up-dates and schooling, etc. they treat their tax clients professionally. They register and get their PTIN (Preparer Taxpayer Identification Number) from the IRS. (At the present, I would be classified as such person.) But on the other hand, you also have to throw in here any one who thinks they can make a quick buck by hanging a sign, opening up a store front and conning people into taking illegal deductions, padded payrolls, additional exemptions, etc. Their have many CPAs and some EAs also caught with their hands in the cookie jar one too mant times. Of course you have cheats in all other businesses also, so the tax industry is not special when it comes to cheats and frauds, as we have seen with all the bailouts this past year.

Cousin Guido, you have him do your taxes because he has always done them for sister Lucy and Lucy always gets a refund.

You, your tired of paying of paying McHenrys $200 for 30 minutes of work, you don’t trust Guido, and for $49.95 Turbo Tax will set you right up and get you that $2,500 refund.

So there you have it. Now because of the ease of which frauds and cheats can ply their trade against the IRS and public – the talks and meetings that are going to take place shortly with the IRS, public and tax preparers will eventually come to some formal requirement for tax preparers as I mention above, to be licensed or certified, etc.

Read This for more...

Tuesday evenings post I will discuss my problems and reservations I have about this.

Cake Lady:

Last week A story out of North New Jersey sprang across the news wires about some lady who was like $7,500 behind in house payments and came up with the idea of baking apple pies and selling them for $40 a piece to raise the money. Anyways, she just wanted to sell 100 and somehow the major newswires got hold of it and by weeks end she had orders for 500 pies @ $40 a piece… People are amazing! Here’s the story and read the comment section for yours truly…

Thank you & let’s be careful out there…

Tom

Tax to do list, LLP/LLC, documentation, route mapping, etc.

2009-07-24T20:21:00.000-07:00

Good Saturday Morning to all!

Hope you had a wonderful week

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Since we’re only a week or so away from the end of July some of you reading this might have a few things to take care of tax wise or make sure your payroll office handles it:

Due July 31, 2009

Federal:

Form 941 due for 2nd Quarter 2009. Notes: Form 941 may be filed as late as August 11 if taxes have been deposited in full and on time.

FUTA, $500 or more in undeposited tax at end of quarter last day to deposit tax.

Form 5500, Annual Return for Employee Benefit Plan. For qualified pension, profit sharing, or other employee benefit plans for calendar-year 2008.

State of Michigan:

MI Employment: Form UC 1020 unemployment compensation contributions due for 2nd quarter

If you live in another state besides Michigan and need to know whats due for your state just ask me in the comment section and I’ll let you know…

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LLP/LLC owners:

Remember, in order to deduct losses from the LLPs and LLCs. You must show that you materially participated in the LLPs and LLCs. You're considered to be materially participating in an activity for the taxpayer year only if:

A: You have more than 500 hours participating activity during such year;

B: Your participation in the activity for the taxable year constitutes substantially all of the participation in such activity of all individuals involved.

C: You participate in the activity for more than 100 hours during the taxable year, and no one else participates more than you participated.

D: The activity is a significant participation activity for the taxable year, and your participation in all significant participation activities (SPA) during such year exceeds 500 hours;

E: You materially participated in the activity for any five taxable years (whether or not consecutive) during the ten taxable years that immediately precede the taxable year;

F: The activity is a personal service activity and you materially participated in the activity for any three taxable years (whether or not consecutive) preceding the taxable year;

G: Based on all of the facts and circumstances you participate in the activity on a regular, continuous, and substantial basis during such year.

Fortunately, most of you small business owners will easily pass the first test. But some of you (me included) could have problems by owning multiple businesses and are not being active enough in the ones with losses.

__________________________________________________

Documentation;

Some of you have to remember when it comes to travel and entertainment, the rules are strict.

Travel and entertainment expenses have to have the time and date, stated business purpose and/or the business relationship of whoever you’ve entertained. Also when a trip involves business and pleasure, travel expenses are only deductible if the primary purpose of the trip is business. Going fishing for the weekend and talking with the waitress at the restaurant about how to kill grub worms in her lawn does not make it a business trip!

Side note: expenses for contract labor MUST have proof of payment and you are allowed to deduct expenses for business furniture if used in a room reserved for business.

Details ladies and gentlemen, DETAILS!

______________________________________________________

Route Mapping;

I am in the process of mapping an all dirt road route, or at least as close as I can get to all dirt roads from the Ohio/Michigan border in Hillsdale County to Mackinaw City. I plan on riding this next spring around mid April and tie it in with raising money for a couple Michigan charities. If there is anyone out there who knows of an easy way to do this please let me know. Right now I’m using an Michigan County Atlas and a highlighter… LOL

____________________________________________________

Etc;

Welcome to all my new followers....

Still working on my blog and sometime this week I hope to get to putting a links list up and other goodies

You all have a wonderful weekend! If you can go watch the last big climb ot the TDF this morning. It's a killer! Allez Lance!

Also today is July 25th which means it's The Fifth Annual National Day of the Cowboy!

read a western novel, watch a western movie! Hug a Cowboy or Cowgirl...

"National Day of the American Cowboy"

This is a day we set out to give praise To those who honor the Cowboy ways.
The American Cowboy is a true hero, Who helped our nation to thrive and grow.
The cowboy was a true pioneer, Who braved the wild western frontier.
Not only did he tame the American West, He stood for the values which we think of as best:
He believes in hard work, and playing hard too, And in honoring women in all that they do.
To be independent and stand up for what's right, To be courageous and honest and not run from a fight.
To be brave and loyal, to ride for the brand, And be a good steward of his livestock and land.
Those are timeless values that still hold true, Still used every day in what modern cowboys do.
Now the U.S. Senate has voted to have a day To honor the American Cowboy in this way.
We give thanks for all that cowboys and cowgirls do, To keep the Cowboy way alive and true.
So we honor this legacy for the values it will employ, As we celebrate the National Day of the American Cowboy.
by Ron Wilson

Thank you & lets be careful out there…

Organizing, Rambling and $345 billion a year

2009-07-23T16:18:00.000-07:00

Riding my bike today and saw a older woman polishing her car antenna at a car wash, which got me to thinking about how some people are very, very organize right down to their daughters Barbie doll shoes being lined up, while others live in a way that would make the Animal House look like a monastery.

Being disorganized with your receipts, checkbook, business records, W-2s, mileage recording, interest/ stock statements, etc. makes it very hard and costs time and money when it comes tax time. It can be very frustrating for a tax preparer when a client has to go and bring other documents back another day or when the preparer has to make 5 or 6 calls to finds out what this receipt was for, etc.

I do everything I can to help my clients stay organized from giving those that need it, anything from a vehicle mileage record book to rental tax record books. It makes it easier on them, me and if the time ever came when the IRS wanted proof of something.

Stay Organized! If anyone needs help please e-mail me and I will gladly assist you anyway I can.
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Ramble with me this September

Join me and some others this coming September for a 2 day cycling event in Northern Indiana Amish land - Shipshewana-Lagrange-Howe and even through Sturgis and other parts of Southern Michigan...

MCC Bike Michiana
September 18-20, 2009
CYCLING WITH KNOBBY

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Lawmakers Pressure the IRS to Strengthen Collection Efforts to Close the Yearly $345 Billion Tax Gap

That headline means the IRS is going to make a much more concerted effort to get their money. In this depression economy, our government is experiencing a every increasing need to collect tax money in order to fund programs.

Out of that $345 billion, the bulk of it, $285 billion – is attributed to under reported income, (Self-employed beware) another $33.3 billion from uncollected taxes, while $27 billion comes from non filers.

Tax cheats, non-filers, self-employed will be the top 3 subjects that the IRS will be making a more stern commitment to from now until 2017. Please if you haven’t filed this year or for years past or if you owe taxes and can’t pay, get a hold of a tax professional.

As for tax cheats it’s not worth it. The IRS also plans to triple the total amount it pays to informants who help catch tax cheats. Such payments totaled $22 million in 2008. The IRS expects to pay out $50 million to informants in 2009, and has budgeted another $75 million for 2010. (does anyone see a cottage industry opportunity here – LOL)

I actually see something else beside a cottage industry, but will keep my lips closed...

Have a wonderful Friday and I will be back Saturday with more good stuff…

Thank you & lets be careful out there.

Posting Note

2009-07-22T15:10:00.000-07:00

I just wanted to let everyone know that for the summer my posting of articles here will be on Monday mornings, Tuesday and Thursday evenings and Saturday mornings…

That way you don’t have to keep checking back and forth all the time…

Thank you and let's be careful out there...

Blog contributions - Taxable, Deductible or Whatever?

2009-07-20T14:56:00.000-07:00

Welcome,

This is my first post on my new and permanent blog for my tax writings, ramblings, recipes, MTBiking tales, etc. YEA!!!!!!

Thanks for visiting & I hope you will enjoy it. Lets get started........

Hello, My name is Thomas J. Kaminski - Professional Tax Consultant, I do Federal & State tax preparation and consulting work for Individuals and Small Businesses, JUST TAXES - no accounting, no bookkeeping, no washing windows, no hair-cuts - if you wish for any of them services then I suggest you seek out the people who best know how to do them, because all I do is TAXES!

I have been doing taxes for others as a tax preparer since 1987. I am involved in TAX STUDY up-dating the year round by attending TAX seminars, TAX classes, reading TAX journals/publications, contacting the IRS, etc. I also write a TAX column for our local monthly town paper called TAX CHAT. I'm a Professional Tax Consultant, because I engage in doing it for money & I do it with great skill, just like Peyton Manning, Lance Armstrong,Tiger Woods or Clint Eastwood who are paid professionals in their line of work.

I also enjoy mountain bike riding/racing, which I don't get pay for , so I'm not a professional at this, but I have received several medals for doing so through the years - in the local mountain biking world I am known as Knobby Kabushka, LOL and don't ask...

I decided to start this blog because - 1, it's an easier way for me to update my clients on tax changes - 2, to spout off and post every now and then about tax changes and laws and all that good stuff and 3, it will be easier to throw in some tid-bits from my other blogs (which I'll be doing away with soon) about MTBiking, Chess, favorite books, personal secession, etc. all in one place.

I still will be doing my Pro Football blog during the NFL season. You can go there by clicking here: Football

Blog contributions - Taxable, Deductible or Whatever?

You see & hear about them everywhere, they deal with all issues and subjects and you are at one now, A BLOG. An Internet invention of the 21st century. Where people communicate their thoughts,opinions, stories, lives, pictures, sports reports, death up-dates, gambling odds, cooking recipes, bedroom activities, etc. for the whole world to see. Some blogs are free to use, courtesy of several search engine giants or web sites, other blogs you have to pay a monthly or yearly fee to someone for your use of their web space.

The other part of blogs that has surfaced has to do with blog site writers or organizations making money/income off of ads and/or donations to help with cost and up-keep. The money made from ad clicks or commissions are taxable and all web site owners and blog writers know this. An excellent post on blog ad income and taxes by another very good tax professional, Robert D. Flach can be view here Blog Ad Income.

The donations received is another story, there is confusion as to whether they are deductible? are they taxable as income? do you report them? etc., etc.

I aim to tackle this issue using my understanding of the IRS code regarding contributions to individuals and gifts to individuals.

Let me begin by putting a link out to a web site that has a post to this subject: The Online Photographer

I have done some research and in my opinion there's a fine line out there regarding the meaning and intent behind the words 'donation' - 'contribution' - 'gift.'

Donation - really is a catch all phrase for the contributing of a monetary or non-monetary gift, especially to a charity or public institution. I gave $10 to the food bank or I donated 2 hours of my time to St. Paul's church...

Contribution - the act of contributing, to give or furnish others with knowledge, ideas, money, property, etc.

Gift - a notable capacity, talent, or endowment. 2: something voluntarily transferred by one person to another without compensation. We will be using #2 definition.

So as a blog writer you have to ask yourself, do people 'donate/contribute' or do they make a 'gift' to you? The IRS will consider any exchange of money, property as taxable unless shown otherwise, it’s their nature. Intent is part of all giving and gifting. Wording is also important as it shows what your intent is.

People who 'donate/contribute' money,property,etc. to you as a blog writer (unless you are by extreme chance a non-profit individual) and record it as such in their personal records CANNOT deduct it off their taxes, you on the other hand would have a legal responsibility to record and list all donations/contributions as income and report such to the IRS and if need be pay taxes on it.

If people 'gift' money to you and record it as such in their personal records, they still CANNOT take that off their income but if the gift is under the $13,000/$26,000 annual exclusion limit then they are not libel for the gift taxes either. You as recipient DO-NOT have to report it as income if the gift falls under the #1 IRS exception standard, which is: 'Gifts that are not more than the annual exclusion for the calendar year are not taxable' AND there is no return compensation. (WORDING) Also the 'gift' you receive would have to be intended as a 'present interest' gift and used by you as such. 'Present interests' means items that can be used, possessed, and enjoyed presently. Examples of a 'present interest' gift includes gifts of money, holiday presents, etc.

Here’s an example of my interpretation of the IRS code on giving to an individual and as to how wording and intent work hand in hand:

I give $50 to Jane Doe who writes a blog about cookies, I do so voluntarily just to help her out with expenses and maybe keep the blog going. I do not state that it's to be use for that purpose. I am just personally expecting her to use the money for what I think she needs the money for. What she does with the money I have no control over and I expect no return gifts from her nor for her to pay me back. I write the word 'GIFT' in the check memo box and I record this $50.00 in my personal finance records as ‘Gift’ to Jane Doe 07/20/2009.

Tax Time: I as the donor, do not list that $50 anywhere on any tax forms, because I don’t need to. One, Jane Doe is not a charitable organization, so my $50 is not deductible under that classification and Two,the $50 is well under the yearly gift tax guidelines.

Jane Doe – being the recipient of the $50 as an individual has the responsibility by legal IRS statue to report it as income, IF there was no wording attached as to how that $50 was given.

If I attach a letter stating the $50 is a gift to her to be use as she wishes or I just write ‘GIFT’ in the memo space on check and I receive and/or expect nothing in return – then Jane Doe does not have to report it as income.

If I attach a letter stating the $50 is a contribution to her blog work or I write ‘blog contribution’ in the check memo box or she send me some kind of gift for the $50, than she has to declare it as income. If she does or does not that is up to her and/or her financial advisers.

As I said earlier this is just my interpretation of the IRS contribution/ gift tax code. I welcome all comments and corrections if others believe this is wrong...

Thank you, and please lets be careful out there.

Tom