And there's more good news, mortgage rates have
dropped again. In fact, they're even lower than
they were at this time last year.
http://snipurl.com/b9r4
And speaking about dropping something - drop these
solicitations in the trash. I've been seeing lots of Tax
e-mails coming through as spam. Often, they are from
HelpOnTaxes or having something urgent about taxes in
the subject line. The message promises to get you out
of tax trouble. Please, please, no matter how rough
things are, avoid responding to such garbage. You
don't know who these people are (nor do I). The last
thing you want to do is to give them enough information
about yourself to engage in identity theft.
If they were from coming from an ethical tax firm,
you'd see contact information, firm name and other,
honest-to-goodness identifying information. Avoid them.
If you need help - go see a real tax professional -
someone you know, or someone that is recommended.
And when was the last time you've seen a new Barbra
Streisand film? Well, believe it or not, this month,
she's finally back - in Meet the Fokkers! http://movies.go.com/moviesdyna
OK, it's definitely not the most original script -
whitebread blonde girl wants to wed dark ethnic boy
with quirky parents.
(Think Dharma & Greg http://us.imdb.com/title
But, the cast is amazing, with Robert DeNiro, Ben Stiller,
Dustin Hoffman, and Barbra. The producers must have been
drooling when these people agreed to join the project.
Who cares about the story! I'll bet this will be one
fun film!
Oh more fun. I'm working on an article for CBS.MarketWatch, for next week that you're going to love. It's going to be fun, campy, and very controversial. Stay tuned.
But, for now...it's holiday time. Enjoy!
And don't go out and buy presents JUST to give someone something. If you can't find something wonderful - just give them your love instead. They don't need another thing to dust or clean...a good book, or film, now... perhaps that's another matter.
Best wishes,
Eva Rosenberg, EA
Your TaxMama is watching...out for you.
------------------------------
Employee Guidelines
------------------------------
This was an odd week for employee issues. Another Pro called
me about her client who was facing Labor Board hearings
because of an employee who bullied him, then quit.
OK, the extent of the employee nastiness is unusual. However, the overall situation is not - so, I'm going to alert you to the problem so you can avoid it.
Whenever you hire someone, INSIST that they fill in and sign the Form W-4 and the I-9 BEFORE they start doing any work at all. Make a photocopy of their drivers license and the second identification they use for the I-9.
Advise them before they come to their first day of work that they must bring these documents with them. If they don't have the docs, send them home immediately, do not let them start working. Period. No discussion.
Do not relent and let them start working, with the
promise that they'll do it later. Often, they never
will.
If anyone insists on being cash - NO! Never.
If it's a hardship for them to cash checks, because
more and more banks are starting to charge $5 or more
for YOUR employees to cash checks on your account...
you may cash their checks for them.
However - have them first sign the back of their paychecks and endorse them over to your company. If possible, re-deposit the paychecks to cover the cash you gave them - and so you have an audit trail to support your payroll records.
NEVER, EVER just give them cash.
If they refuse to be on payroll and insist on
being paid as an independent contractor in a
position that is obviously an employee position -
SEND THEM AWAY - fast!
Do not hire them at all.
Ignore the sob stories.
These people are pros. They know how to work the system. If you don't follow the guidelines above, you're also likely to find yourself before the Labor Board or the state employment people, paying big fines and penalties...and wages to people who are rip-off artists.
While I've rarely heard of cases as intense as
the one brought to me this week, I have seen
poor, helpless, pathetic workers work this con
on employers all too often.
And you, the employer, will rarely get off with
less than a $5,000 hit - non-deductible to you,
because penalties are not deductible. While they
get off with free money - because the penalties
are not taxable to them.
------------------------------
Radio Tour
------------------------------
Tune in to the Small Business Advocate, with Jim Blasingame
next Friday morning, December 17th at 5:30 a.m. EST.
We'll be kicking off the new book...and giving away free
copies.
Coming soon - weekly radio show in the MoneyRoom...stay tuned
------------------------------
SUV Credit vs Actual Expenses
------------------------------
From: Sacramento, CA
Dear TaxMama,
Please explain the differance between taking the 179 Election (SUV Tax Credit) everyone is talking about and taking the full write off of my payments, insurance, fuel, and repairs that I already take being a buisness owner?
I do own another vehicle so I take 100% of the cost of this vehicle.
I am just not getting it!
Terri
<TaxMama Replies>
Hi Terri,
Are you feeling bewildered?
Wondering what all the excitement is about?
Are they all simply nuts...making more of this
than it really is? Like the usual media circus?
Well, there's actually something to it.
Right now, you're taking 100% of the operating
expenses of the car, you say. (Really? You
NEVER use it for personal use, like going to
supermarket, or running a quick errand?)
Never mind. For the sake of this discussion,
we believe you.
So, how much more can you take than 100%?
That's not where the excitement is.
The 100% deduction people were getting for SUV's - only if they weigh over 6,000 pounds - is for the purchase price of the car.
Right now, for a regular vehicle, even though you
get 100% of the operating costs, you only get to
depreciate a limited dollar amount of the value of
the car each year.
You'll find the 2003 limits here:
http://www.irs.gov/publications
http://www.smbiz.com/sbrl003
With a 6,000 pound car, until 10/22/04, you could
have
deducted the whole purchase price (up to $102,000)
in the first year. Then if it cost even more than
that, you
could deduct the rest, over 4 more years.
After October 22nd, the limit to the first year's depreciation dropped to only $25,000. With the rest of the cost being deductible over 4 more years.
See, that's what the excitement was about - how to deduct the purchase price of the car, not the operating expenses.
I go into a great deal of detail, and walk you through
the entire automobile depreciation computation in
Small Business Taxes Made Easy. But, even then,
I admit, you shouldn't try it without a safety net.
http://www.amazon.com/exec
Best wishes,
Eva Rosenberg,
MBA, EA
------------------------------
Timberrrrrr!
------------------------------
From:
Fayetteville,
NC
Dear TaxMama,
First, I love your newsletter!
I bought some undeveloped timber land about 5 years ago. My reason for buying the property was to have a place to hunt, not for investment potential.
Well, it turned out to be a great investment anyway. This year I sold the property and made a profit of about $30,000.
Would this sale be a capital
gain/investment gain?
If so, would the investment gain make me ineligible
for
child tax credit and earned income credit?
If so, could I
get around this by selling some stocks
that would equal a $30,000 loss?
Thank You
Happy about the profit either way!
Kevin
<TaxMama Replies>
Hi Kevin,
Well done!
Clearly, a man with excellent taste!
Isn't it nice to have hobbies that end up
being profitable?
Sure, the sale is a long-term capital gain.
And if you have stocks that you can sell at a loss
and cash out of them, this would be a good time.
You can offset the gain that way, if you have
enough losses.
Whether or not the profit will cost you your child
tax credit depends on how high the rest of your
income is. If this pushes your joint income over
$110,000....(or $55K separately), you actually
could lose that credit. So, it would be worthwhile
to generate some stock losses to bring things back
into control.
As to the Earned Income Credit...well, with this
kind of a sale, you'll probably lose that entirely.
Have you tried to estimate your taxes to see
where you stand?
You can use the free estimator at TaxBrain
http://www.taxbrain.com
It's really kind of a kick.
Best wishes,
Eva Rosenberg, MBA, EA
http://www.TaxMama.com
http://www.iHelpMate.com
------------------------------
Form
8332
------------------------------
From:
Rensselaer , N.Y
Dear TaxMama,
My
ex-wife sent me a 1 page
form that says IRS Form
8332.
No other form was with this.
I'd like to know what exactly this is. The child on
this
form is my adopted child and in college.
My ex is also remarried and broke the divorce agreement
several times. I only get my kids 30 days out of the
year.
Please tell me what this form means and what is she
trying to do?
Thank you,
Michael
<TaxMama Replies>
Dear Michael,
There's nothing sinister in that form.
In fact, under the terms of the new tax law, your
ex-wife probably doesn't even need you to sign
that anymore.
The purpose of that form is to assign the dependency
exemption for your child to either her or you,
depending on who signs it, waiving their rights.
All that does is make it clear to IRS that you two
have come to an agreement about who is going to claim
the exemption on their tax return.
What happens if your divorce agreement gives you
the exemption and you refuse to sign this form -
and you both claim your daughter?
Nothing special.
IRS will write each of you a nice letter asking you
to prove your claim...and you'll get to duke it
out with IRS.
What happens if you sign?
You don't get to claim your daughter as a dependent.
You don't get to take the education credits if
you're paying for her college.
You don't get to deduct her medical expenses...
and a host of other things you don't get to use.
Based on the information you already gave me,
I doubt you're getting any of those benefits
anyway.
Have you talked your tax pro about this?
Best wishes,
Eva Rosenberg, MBA, EA
http://www.TaxMama.com
------------------------------
MONEY
FUNNIES
------------------------------
Keepers:
My
mother
even ironed
Christmas
ribbons - They
were rayon
then. I grew up in the Forties and
Fifties with a practical
parent --My Mother, God love her, who
ironed Christmas
wrapping paper and reused it and who
washed aluminum foil
after she cooked in it, then reused
it. She was the
original recycle queen, before they
had a name for it.
It was the time for fixing things --
A curtain rod, the
kitchen radio, screen door, the oven
door, the hem in a
dress. Things we keep. It was a way
of life, and sometimes
it made me crazy. All that re-fixing,
reheating, renewing,
I wanted just once to be wasteful.
Waste meant affluence.
Throwing things away meant you knew
there'd always be more.
But then my Mother died, And I sat
in my kitchen that
Sunday afternoon reading her old handmade
cookbook in a
binder, I was struck with the pain
of feeling all alone,
learning that sometimes there isn't
any 'more.'
Sometimes, what we care about most
gets all used up and goes
away...never to return.
So, while we have it, it's best we
love it....and care for
it. And fix it when it's broken. And
heal it when it's
sick.
This is true for marriage and old cars
and children
with bad report cards, And dogs with
bad hips, And
aging parents and grandparents.
We keep them because they are worth
it, because we
are worth it.
Some things we keep. Like a best friend
that moved away
--Or--A classmate we grew up with.
These are just some
things that make life important - Like
people we know who
are special. And so, we keep them close!
I received this from someone who thinks
I am a 'Keeper'
So I've sent it to the people I think
of in the same way.
----
Courtesy of Claire
------------------------------
IRS NEWS
------------------------------
Courtesy of NATP
Gobble, Oink, or Squeak? Holiday Gifts to Employees are Not Taxed Equally
National Association of Tax Professionals (NATP) Appleton, WI –
Does it gobble, does it oink, or does it squeak into your wallet?
With holiday gifts to employees, what matters to the Internal
Revenue Service (IRS), thus to taxpayers, is the form in which
an employers’ holiday gift is given.
Nominal gifts (of minimal dollar value) of items such as turkeys
or hams that are given by employers to promote good will to
their employees can be given without being included as part
of employee wages. This means that the value of these gifts
(which fall under de minimis fringe benefits rules) do not need
to be included in wages that are subject to withholding and taxes.
The IRS Code Section 132(e)(1) “…defines a de minimis fringe
benefit as any property or service the value of which is so
small as to make accounting for it unreasonable or
administratively impracticable after taking into account
the frequency with which similar fringes are provided by
the employer to the employer’s employees.”
Gift cards for an equal value are not the same. If an employer
distributes cash, gift certificates, or similar items of any
amount or value, which are readily convertible to cash value,
the cash or value of such gifts is considered as additional
wages or salary. Thus, gifts of this type do not fit the
definition of a de minimis fringe benefit under the code
and regulations and must be included in wages for both
income and tax purposes.
So, gobble, oink, or squeak; what matters at tax time is
the form an employers’ holiday gift takes.
For more information on this and other tax issues, consult
your tax preparer. Selecting the right tax professional
will save you time, headaches, and oftentimes money. To
find a professional tax preparer, look to NATP. NATP
maintains a listing of professionals in your area at
www.taxprofessionals.com.
Members include individual practitioners, enrolled agents,
public accountants, accountants, attorneys, and financial
planners. Learn more at www.natptax.com.
------------------------------