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*** Ask TaxMama Volume 7, Issue #296 Feburary 18, 2005 ***
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Deadlines LOOMING - http://taxmama.com/taxcalendar.html
02.28.2005 File W-2's with Social Security Admin
02.28.2005 File 1099's with IRS
02.28.2005 File City of L.A. Business License/Tax Form
02.18.2005 Get 2004 Corp Data to me to file on time
03.31.2005 California
Tax Amnesty ends
http://www.taxmama.com/AskTaxMama/294/article2.html
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JOB OF THE WEEK http://taxmama.careerbank.com/
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Become a Bank Examiner for the Federal Reserve
http://taxmama.careerbank.com/company_jobs.cfm?company_id=9763
Check out the 2004 Salary Survey results to see where you stand.
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Dear Family,
I think California has moved to Washington State.
For the last several weeks, it constantly seems to
be raining, or on the verge of raining. That's not
what California is like! You've heard Albert Hammonds'
song - it never rains in California.
http://www.alberthammond.net/music/showsong.php?id=105
http://users.cis.net/sammy/nevrains.htm
That's OK, it's kind of cozy listening to rain pour
down - I only hope that everyone out there is all right!
Speaking about pouring, if you're inundated with
junk mail, you'll enjoy Andrew Blackman's article in
a recent WSJ titled How I Beat Junk Mail
http://online.wsj.com/article/0,,SB110644657263833279-search,00.html?collection=wsjie %
[to get 2 free weeks to WSJ Online:
http://www.qksrv.net/click-241922-8318876 ]
Did you see this week's episode of West Wing?
http://www.nbc.com/The_West_Wing/episode_guide/129.html
I can't tell you how much I love the writing on this
show. The climax of this episode is one of the candidates
making a brief, live speech as a his big splurge on the
one campaign commercial he can afford. He covers a lot
of territory in 60 seconds or less.
He basically spells out that he's in this campaign to
fix certain problems that really matter to him; that this
is the only commercial he can afford; that he thinks
debates should require the candidates to actually answer
the direct questions placed before them; and that he has
no intention of running a smear campaign. Ever.
Excellent writing! I do hope that real campaigning
candidates learn from that.
There's another issue I'd love to see them tackle.
Changing the way legislators are identified on
camera, radio, or in any interviews.
Once they are elected to office, each legislator
represents ALL the people in their district or state.
If they were to stop being identified as the "Democrat
from" or the "Repulican from", perhaps they'd also stop
thinking of themselves in terms of their party
affiliations and start thinking of themselves as simply
the Senator representing the WHOLE state of; or the
Representative representing the ENTIRE # district
of Y state. Now, THAT would make me proud!
OK, got to run. I have to finish this week's article
for MarketWatch.com (note - I'm now working for
Dow Jones. How exciting!) Check out recent articles -
mine and all the other terrific tax writers, as well:
http://www.qksrv.net/click-241922-8318876
Best wishes,
Eva Rosenberg, EA
Your TaxMama is watching...out for you.
P.S. THE BOOK is out - if you're in business,
you need it!
http://www.taxmama.com/AskTaxMama/book/
P.S.S. Drop by TaxMama's Shopping pages
http://taxmama.com/resources/shopping.html
P.P.S. TaxMama is scheduling speaking/teaching
engagements for summer 2005. (Calendar is filling up)
mailto:taxwriter@gmail.com?Subject=Speak4Bucks
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To comment on any articles in this issue, please,
DON'T send me back the whole issue. Send a note to
mailto:taxmama@taxmama.com?subject=AskTaxMamaComment
**************************************************
ADDRESS CHANGES - Please, do NOT send them to me to do.
There is a link at the bottom of this issue. Please click
on it and you will be able to make updates and changes
yourself. And faster.
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In 2003, Americans OVERPAID their taxes by more than $500 MILLION!
Did
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Play a simple, two minute game and learn what tax professionals call
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Media Tour
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Join me Saturday March 12, 11:00 am EST for an hour on
Hints From Heloise - http://heloise.com/ - call in
and chat.
http://www.heloise.com/radioshow.html
Reserve the date! March 23, 2005 at 1:00 p.m. Eastern Time
[We'll be testing out a new, live online teaching tool]
Taxes Issues for Internet Businesses
[details to come]
[Yes, someone kindly pointed out that my TOOTS pages
haven't been updated since 2003. Sorry - been too busy
living to write about it.)
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President Bush and Social Security
http://taxmama.blogspot.com/2005/02/open-letter-to-president-bush.html ----------------------------------------------------------------
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It Always Depends
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Last week, Sharon from Kentucky asked about using her
daughter as a dependent.
http://www.taxmama.com/AskTaxMama/295/article1.html
<TaxPro Replies>
Dear Eva,
Depending on the tax consequences, why doesn't the husband
file an amended return, using a 1040X and report his
income using the MFS (married filing separately) status?
The mother might be eligible for the EIC and the Child
and dependent care credit too. Moreover her filing status
would be HOH (head of household), another improvement.
I can't really figure this out without the numbers from
everybody, and their situation.
Best regards,
Roger Adams,EA
Portugal
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Tax Evader
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From: San Diego
Dear TaxMama,
Here is a good one! Who do you contact if you know someone
owes the State of California taxes?
This person I know is well off. He has several businesses,
a couple of houses and a couple of condos. He drives a Hummer,
seems to have plenty of money.
There is just one thing - none of the houses or businesses
are in his name. They are all in other family members' names
or old girlfriend's names.
He says he is hiding until 10 years are up. That way, the
state will wipe the back taxes of their records and he will
be free of that debt.
Now is there anything I can do? Anyone I can write to or
call to turn him in so the state of CA can get the money
he owes to them?
It really makes me mad when people start businesses, get
rich - but don't pay taxes.
Thank you and have a nice day
D.
<TaxMama Replies>
Dear D.
Yeah, doesn't it frost you that you're struggling
and other people can live flamboyantly well,
while telling everyone how they're ripping off the system?
I don't know who to inform at the California Franchise Tax Board.
But I dropped a note to a friend there who happens to be their
media spokesman. So we should get an answer next week.
BUT, if he's ripping of the State, he probably owes even MORE
money to IRS. And IRS just happens to have a nice program
to catch tax cheats.
Here's the publication that outlines what you need to do.
http://www.irs.gov/pub/irs-pdf/p733.pdf
It helps if you can provide specific information about any
property he owns, or license numbers of cars.
That's in your best interest because when IRS collects
from him, you can get a reward. To collect, they have to
be able to grab his assets.
According to Barry Gilbert, the spokesman for the California
Franchise Tax Board, you can report your information either
through correspondence or by telephone. He's not aware of a
special form, like IRS's 211. I found a contact page for
Gerald Goldberg, the Executive Officer of the FTB:
http://www.ftb.ca.gov/aboutFTB/ex_officer.html
Contact his office and they'll help direct you to the
right person.
Have fun with this - but beware, in all such things,
there may be repercussions. So, be prepared for them.
Best wishes,
Eva Rosenberg, MBA, EA
http://www.TaxMama.com
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Granny Gifts
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From: Dixon, CA
Dear TaxMama,
I receive annual gifts from my grandmother ($11,000)
to help me pay for school. She gives these gifts to
me in the form of transfers of Mutual Funds.
I just received a capital gains tax statement saying
that I made capital gains on my stocks, even though
I have cashed stocks in at a per stock price below
the market value of the stocks at time of transfer.
To me, this seems to be a loss, but they are basing
the average cost basis on the price which my Grandmother
bought the stocks.
I understand this, but I was wondering if the fact
that they were a gift excludes me from capital gains
responsibility if the total value I cash in remains
below $11,000?
Thanks.
Jessica
<TaxMama Replies>
Dear Jessica
You are SOOOOO lucky.
Not everyone has such a generous grandmother.
But yes, you DO have to pay taxes on the capital gains
based on your grandmother's basis/cost.
Besides, your tax rate is probably quite low. If you don't
have much in the way of income, your capital gains tax
rate is probably no more than 10%. Your grandmother's
would probably be more like 25% with Federal and State.
So, even with the taxes due, you get away with hardly
anything. Don't gripe. It's wonderfully generous.
Best wishes,
Eva Rosenberg, MBA, EA
http://www.TaxMama.com
The BOOK is out!
Small Business Taxes Made Easy - read all about it!
http://www.taxmama.com/AskTaxMama/book/
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401(k) Code Error Dilemma
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From: Knoxville, TN
Dear TaxMama,
My husband changed jobs this year and received an early
distribution of a 401K--about 10,000. We did not rollover,
but used the money to pay for college tuition for one of
six children.
The distribution company didn't take out any taxes. We
planned on paying them. The 1099-R shows no taxable income
and lists it as a "G" in box 7. [That's the code for a
rollover.]
What should we do with this?
Do we need to contact the company and ask for a new 1099R,
or can we just correct the numbers ourselves?
Thank you.
Mary
<TaxMama Replies>
Hi Mary,
If the code is wrong and you'd planned to pay the
taxes anyway, just correct it on your tax return.
Trying to get the investment house to issue a
new 1099 is harder than giving birth. Trust me.
And the contractions are more painful.
If you need to use 401K money for tuition again,
move the money to an IRA first. THEN draw the
money for education. The first $10,000 won't
be subject to the 10% early withdrawal penalty.
You'll still pay tax, but...not the penalty.
That doesn't work if you take the money from a 401K
I hope this helps?
Best wishes,
Eva Rosenberg, MBA, EA
http://www.TaxMama.com
The BOOK is out!
Small Business Taxes Made Easy - read all about it!
http://www.taxmama.com/AskTaxMama/book/
<Mary is still distressed>
Thanks. My husband did call yesterday and they denied
distributing the check to us. If we report something
other than what they put on the 1099, does that open
us up for an audit?
Is it safer to just use the 1099 and pay the taxes if
they audit us later? We are pretty confused about this.
Thanks.
Mary
<TaxMama Continues>
Dear Mary
What an amusing dilemma.
This will test your ethics.
According to the 1099-R, the funds were rolled over
and you never got it. That is the only report IRS will
ever get, unless they audit the financial institution.
So, if you report it as a non-taxable distribution
(rollover code), you won't get into trouble.
If you are ever audited for that year by some random
chance....you will be faced with additional taxes - but
probably no penalties because you didn't know any better.
On the other hand, you KNOW you got the money.
That's hard to forget. So you'll have to decide how to
report it. And no, reporting it as taxable won't cause
you to get audited.
So (don't tell me), this will be a good test of your
and your husband's ethical level. It will be a good time
to learn about yourself and each other.
Have fun working this out.
Best wishes,
Eva Rosenberg, MBA, EA
http://www.TaxMama.com
[Mary admits: What a mess!! Thanks for the info. I think
our ethics are too high to be able to enjoy this one. Mary ]
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MONEY FUNNIES
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Synagogue Audit
At the end of the tax year the Tax Office sent an inspector
to audit the books of a synagogue. While he was checking
the books he turned to the Rabbi and said, "I notice you buy
a lot of candles. What do you do with the candle drippings?"
"Good question," noted the Rabbi. "We save them up and send
them back to the candle makers, and every now and then they
send us free box of candles."
"Oh," replied the auditor, somewhat disappointed that his
unusual question had a practical answer. But on he went,
in his own particularly obnoxious way: "What about all
these matzo purchases? What do you do with the crumbs?"
"Ah, yes," replied the Rabbi, realising that this inspector
was trying to trap him with an unanswerable question. "We
collect them and send them back to the manufacturers. Every
now and then they send a free box of matzo balls."
"I see," replied the auditor, thinking hard about how he
could fluster the know-it-all Rabbi. "Well, Rabbi," he went
on, "what do you do with all the leftover foreskins from
the circumcisions you perform?"
"Here, too, we do not waste," answered the Rabbi, getting
tired of this unusually rude auditor. "What we do is save
up all the foreskins and send them to the Tax Office, and
about once a year they send us a complete dick."
----
Contributed by Nora Yusa in Los Angeles
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IRS and Tax NEWS
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Courtesy of IRS
Foreign Bank Account Publication Available in Multiple Languages
The IRS now has Publication 4261, Do You Have a Foreign Bank
Account, available in the Spanish, Mandarin (Traditional
Chinese) and Korean languages as part of its continuing
effort to increase accessibility to important information
for as many taxpayers as possible.
Publication 4261 is a reminder for taxpayers with foreign
financial accounts that they may need to file a Report
of Foreign Bank and Financial Accounts (FBAR) form with
the Department of the Treasury.
Interested parties can obtain their preferred language
version of Publication 4261 on the internet in the Forms
and Publications section of IRS.gov or by calling
1-800-829-3676 .
[TaxMama Note: Did they omit Hindi, Farsi and Tagalog?
Hmmm...anyway, go to this page and in the window, scroll
nearly to the bottom to find the Pub 4261 in other languages
http://www.irs.gov/formspubs/lists/0,,id=97819,00.html ]
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TaxMama On the WWW & Tooting Her Own Horn
http://taxmama.com/toots/index.html
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http://taxmama.com/toots/meettaxmama.html
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TaxAnxiety Inc. P.O. Box 280549, Northridge, CA 91328
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