Today TaxMama® hears from several people in the TaxQuips Forum, with questions asked too late. Here are some questions that should have been asked before you entered into your financial transactions – not when you file your tax returns.
It boggles the mind to have questions come to us when it’s too late for us to help out. Here are recent questions, where we, or a competent tax pro, could have prevented or reduced the taxes – if only we had been consulted in advance.
1) Taxpayers live in a camper and work all over. They have no permanent home to be away from. None of their travel expenses are deductible. If they had done some planning in the first place, they could have established a solid tax home in Texas – and taken the necessary steps to qualify it as a home. Could have wiped out most of their taxes.
2) Taxpayers inherited an annuity from mom and split it six ways. NOW, they are asking about the tax consequences. The estate’s executor could be responsible for the taxes if the other heirs don’t pay up. She is responsible for the decedent’s final tax return, as well as the estate tax return. And now that she has distributed all the money, she’ll have to pay the costs herself if she can’t get the heirs to chip in.
3) Taxpayer is trading in puts and calls. After a year’s worth of activity, now he is asking about the tax treatment of his activities. Learning in advance, you can set up your records to give you the specific data you need at tax time. Knowing the tax effect as you go along, you can make trades to keep your profits high and taxes low.
4) Taxpayer is doing odd jobs for Grandmother and getting compensated. Is this income or a gift? And how do Grandmother and grandson handle the reporting? Naturally, this is asked after the filing deadline for W-2s to be issued to household employees.
My friends, when it comes to your finances, please, don’t begrudge the few measly bucks you must pay to a tax professional. Schedule a planning appointment before you do something costly – and stupid.
And remember, you can find answers to all kinds of questions about tax planning and other tax and business issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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