December 31, 2004 - Last day to open KEOGH for 2004
December 31, 2004 - Last day for charitable contributions for 2004
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VISIT OUR NEW JOBS PAGES
Run a city in Idaho as their Controller - get away from it all!
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Dear Family,
Well, this week, IRS signed an agreement to share information with Puerto Rico. I'm only surprised that it took so long, considering our close relationship. But, you'll enjoy reading today's IRS News report. Why? IRS's press release also lists the 48 states, the cities and other territories that participate in this information- sharing endeavor. You WILL want to know if your state is included (most likely). Hmmm....
Wyoming and Nevada are the only states I don't find. Interestingly enough, Delaware shares information with IRS. What does that say to all those corporations who've chosen to headquarter there due to the privacy rules?
As I started to write this issue yesterday, (before computer problems prevented me from finishing it - remember to back your computer!) the news was filled with two things: Yasser Arafat's burial, and Scott Peterson's conviction.
As much as we all despised that man (Peterson), it wasn't really clear that there was absolute evidence that he had, in fact, killed his wife. Most people, following the news, believed it of him. But I didn't realize there was enough there for a jury to convict - and so quickly. Oh well, be ready for the flood of appeals.
But Arafat. I first became aware of him way back, during the Six-Day War, when I was a child. Over the years, he became significant to me two more times - first, when the United Nations invited him to speak to the General Assembly, and they let him appear before that August body fully armed. The UN had a firm rule about no arms, but they broke it for him.
That was the day the United Nations lost all credibility. Not just to me, but to many in the world. Many people who saw that event, don't even realize why they trust the UN less, but they have always had this nagging discomfort, or distrust, when the topic of the United Nations as a peacekeeper or arbitrator arises. Their subconscious remembers.
The other event was when Pope John Paul II granted an audience to Arafat in 1982. Again, armed. That lent him such an air of legitimacy. (I remember seeing that picture on TV and feeling chills down my spine.) I was appalled that he could reach such high places - even armed.
Yasser Arafat has been the public face of the Palestinians, and their fight for a home, for most of my life. I've seen the power that man could weild. Yet, he did nothing to improve the lives of his people. His people are worse off today, than they were in 1967. Sticking with a very belligerent stance, everytime there was a chance for a peaceful, stable life for the people under his care, he ensured that it didn't happen.
Now, during the week of his death, hearing that $2.1 billion are missing from the Palestinian coffers, and that he sent his wife $100,000 each month, to support her lavish lifestyle in France, I mourn for his people.
That money could have been used to help his people build lives, businesses, get education, stay warm, get fed. But, no, keeping them uncomfortable, hungry and desperate better suited his needs. Shame on him - and his aides who helped steal from those for whom the aid was meant.
What does this have to do with taxes? My friends, that was your money, either from the US Government, the United Nations, or your generous donations to various charitable institutions. This is how your well-intentioned assistance was used.
Sadly yours,
Eva Rosenberg, EA
Your TaxMama is watching...out for you.
P.S. Remember, TaxMama's Secrets is now available on CDP.S.S. Drop by TaxMama's Shopping pagesP.P.S. TaxMama is starting to schedule speaking/teaching engagements for next year.
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Family Leave
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From: Cape Coral, FL
Dear TaxMama,
My boyfriend had to take extended FMLA and ended up having to resign his position at work.
Because of that, he had to tap out his 401k. He used about half of it for living expenses and about $28k to invest in a franchise that he thought could become a family business.
The franchise turned out to be a TOTAL rip-off, so that $28k is gone with no hope of recovery (short of a lawsuit) unless there's a way he can write it off his taxes.
Also, he already paid the penalty for cashing out early, but hasn't paid the taxes on the whole $50K+ yet.
If we get married before the end of this year and file our taxes as married filing separately, would they take my tax refund too?
Thank you,
Kathy
<TaxMama Replies>
Dear Kathy
Your boyfriend needs some help. Please have him see someone good, locally, to get his taxes done to the maximum advantage.
There has been some talk about waiving penalties for unemployed folks who must draw on their retirement plans to survive. But I haven't seen that law pass yet. After all, that would be a practical,humane law...so why rush into it?
However, Congress threw him a bone a while back, if your fiance spent any of that money on health insurance premiums or medical expenses while being unemployed, that part of the 401(k) draw won't be subject to penalties.
Handled properly, he'll be able to deduct the costs of starting his failed business.
In addition, depending on why he took the family leave, there may be a chance that he can get some of his underpayment penalties waived...or even early withdrawal penalties. Much will depend on is reasons and what he spent the money on. A good tax pro can help him sort all that out and keep his taxes as low as possible.
As for you, my friend, as long as you file separately, your refunds will not be touched.
Also, do your best to keep your funds in separate bank accounts. Yours will not be tapped by IRS.
Take good care of each other.
Best wishes,
Eva Rosenberg, MBA, EA
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Forgery
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From: Charlotte, NC
Dear TaxMama,
My husband and I separated in February of this year. We got back a $40.0000.00 refund from IRS and state.
I didn't get my half until I got a lawyer.
I never signed either of the checks, so who signed them. And is this legal?
I know they had to have my signature. Is this correct?
I would really like to know who did.
How can I find this out?
Would you please give me any information you can to help me in this matter.
Thank you,
Andrea
<TaxMama Replies>
Hi Andrea,
That's a real bum deal. And it's scary, isn't it?
You can call IRS and ask them to run a trace and get you a copy of the cancelled check. You may have to request that in writing though.
Now, who can sign the check?
Legally, you must both sign, if the check is made out to each of you.
However, if there is a joint account with his name on it and yours - he can simply deposit the check into that account, writing "deposit to within named payees" or something like that. Or if he has a stamp for that account (as I do, with my husband's and my name), that often works, too.
Now, if he deposited the check into his own account, without your signature, and you have a good attorney, you might want to have your attorney have a chat with that bank. They should not be accepting a check that size without proof you signed it, if you're not a signatory on the account....just a thought....
Sue that bank and you could own it. Especially these days, with all the additional Homeland Security rules, banks aren't supposed to be accepting deposits of two-party checks without verifying the other party's identity and permission.
Of course, if he signed your name, that is forgery.... I understand that might be a felony.
If IRS won't release the check copy to you because they want your husband's signature on a power of attorney, your attorney can obtain a subpoena.
One piece of advice? Pick your fights wisely.
If you've gotten your half of the money...is this really a fight you need to fight? If not, let it go.
Unfortunately, there will be other battles.
Good luck. Divorces are always awful and bring out the worst in all of us.
Best wishes,
Eva Rosenberg, MBA, EA
http://www.TaxMama.com
P.S. If you MUST fight this out - try getting
the district attorney's office to bring criminal
charges for forgery. This won't cost you any attorney
fees - and it will scare the heck out of him enough
not to monkey with your money again.
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Mama Comes Home
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From: Rocklin, California
Dear TaxMama,
My mother recently moved in with me due to her health.
I will be adding on a room that will be hers - can I write off the expenses of this room addition?
Thank you.
Tracy
<TaxMama Replies>
Dear Tracy,
Your are one wonderful, brave, loving kid.
Nothing in the world could induce me to do that. I'd rather work three extra jobs to generate the money to get her in-home care, and to visit her regularly, than to have my mom disrupt the peace and quiet of my home.
I don't really think you'll be able to deduct the cost of adding a room to your house.
The addition isn't really for medical purposes. AND it will add substantially to the value of the house.
However, if your mother has trouble with access and you make the room and the house handicap-accessible, you may be able to deduct the costs of ramps, handholds and other improvements in both the existing house and the new room.
You can find more information here about medical deductibility of capital expenses. http://www.irs.gov/publications/p502/ar02.html#d0e657
I do wish the cost were deductible. After all, the cost of putting her in a home, where she'd be miserable, is deductible, if she is your dependent. So, why shouldn't the cost of providing her with a home be deducted, at least, say over several years, up to the limit of what it would cost to for a facility?
Just a thought...
Best wishes,
Eva Rosenberg, MBA, EA
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Hey! Look at your teeth. Come on - get them cleaned.
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College Girl
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From: Manchester, NH
Dear TaxMama,
When my daughter entered college 3 years ago, she changed her legal addresss to mine and moved in. (I am divorced and she has always lived with her mom.)
Should I have started claiming her as a dependent, since she is a full time student who only works during her summer break?
If I can claim her, would it be worth filing an amended return for the past 2 years? I currently do not claim anyone and my refunds seem a little on the low side, compared to others I work with who have an equivalent income (around $22,000/year ).
Thanks
David
<TaxMama Replies>
Dear David
Aw, your daughter is so lucky to get to be with her dad. And vice versa ....even if she does give you some extra gray hairs.
As to being a dependent, if your daughter is a full-time student and lives with you more than half the year and you provided more than half her support- yup, she probably qualifies.
Make sure that her mother didn't take her as a dependent, otherwise you're in for a fight.
Once you're sure that you're not in conflict with your ex, you can go back and amend for the last three years 2001-2003.
You'll be able to claim two benefits -
1) Head of household (HOH) status,which will give you a larger standard deduction than single.
2) the personal exemption for your daughter.
3) If your income were higher, HOH would give you the additional benefit of expanding the tax brackets, making your income taxed at lower rates.
Go for it!
Best wishes,
Eva Rosenberg, MBA, EA
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MONEY FUNNIES
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English Class
"Give me a sentence about a public servant,"
said a teacher.
The small boy wrote:
"The fireman came down the ladder pregnant."
The teacher took the lad aside to correct him.
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Courtesy of Norma Olinger
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IRS NEWS
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IRS AND PUERTO RICO ANNOUNCE PARTNERSHIP
WASHINGTON — The Internal Revenue Service and Puerto Rico Department of the Treasury, the Hacienda, today announced a new partnership to fight abusive tax avoidance transactions.
The partnership is the latest development in an effort unveiled in September 2003 to enable federal, state and commonwealth tax agencies to join together in ensuring all taxpayers fulfill their obligations under the tax code.
Puerto Rico joins 48 states, the District of Columbia, New York City and the Virgin Islands on the list of tax agencies that have signed partnership agreements with the IRS. Like these tax agencies, the Hacienda will be working with the IRS to combat abusive tax avoidance transactions by sharing information and resources.
“This is a logical extension of our existing relationship with 48 states, several cities and the Virgin Islands,” said IRS Commissioner Mark W. Everson. “We are pleased to work with the Hacienda to help ensure compliance with the tax laws.”
In 2004 the IRS has shared leads with partner agencies on more than 35,000 taxpayers engaged in abusive tax avoidance transactions. Upfront information sharing helps the organizations avoid duplication of efforts and maximizes resources by eliminating the need for multiple audits of the same taxpayers.
The scope of the partnership also includes information- sharing and coordination on issues related to self- employment. Self-employed residents of Puerto Rico pay income tax to the PR Hacienda and also have a requirement to file a Form 1040-PR, Self-Employment Tax Return Puerto Rico, or a Form 1040-SS, U.S. Self-Employment Tax Return, with the IRS.
In addition to the Commonwealth of Puerto Rico, others that have signed agreements with the IRS include: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, District of Columbia, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York State, New York City, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, U.S. Virgin Islands, Virginia, Washington, West Virginia and Wisconsin.
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Courtesy of IRS
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