By Jason Watson (Google+) Maybe. The IRS defines a trade or business as an activity carried on for a livelihood or in good faith to make a profit. IRS Revenue Ruling 58-112 further characterizes a trade or business activity as one that is regular, frequent and continuous. So, if you earn income either through your business or received a 1099-MISC from a company who you worked for, you will be responsible for self-employment taxes … Continue reading
By Jason Watson (Google+) Mileage is one of the most often deducted expense, and therefore it is one of the most scrutinized records. First, you need to prove you own the vehicle(s). Next, you need to keep track of your beginning and ending odometer readings. It is a good idea to make copies of service invoices such as Jiffy Lube since these companies record odometer readings. Lastly, you need to keep track of the … Continue reading
By Jason Watson (Google+) You might be able to claim tax breaks for taking care of someone else. To qualify, you must be able to claim the person as a dependent. So, you need to provide over half the person’s support which includes expenses for medical treatment, food, housing and transportation, and they must be related to you. Even if the dependent is living in a nursing home or assisted living housing, he or … Continue reading
By Jason Watson (Google+) A common question is how does active participation versus material participation work, and how do they relate to being a real estate professional. This is a good question, and we’ve written a full tax article on it (see below for the link). Here is a generalization- For rental properties, the issue is nearly moot since active participation relates only to rental real estate activities and is a less stringent … Continue reading
By Jason Watson (Google+) Recently the United States Supreme Court announced it was scheduling hearings for a case brought against the Defense of Marriage Act (DOMA). Same-sex couples could be entitled to several tax credits and refunds starting with tax returns filed in 2009, but hurry ‘cause time is running out. The 1996 Defense of Marriage Act law could be struck down or at least heavily battered by an upcoming United States Supreme … Continue reading
By Jason Watson (Google+) Recently the U.S. Government Services Administration (GSA) announces that per diem rates and allowances will remain at 2012 levels. This is the first year in over a decade that the rates have not been increased. Being reimbursed for travel expenses through per diem allowances alleviates a lot of the IRS recordkeeping requirements. Taxpayers only need to demonstrate that there was a business purpose which took them away from home. … Continue reading
By Jason Watson (Google+) In a recent Tax Court Summary Opinion 2012-122, the Court allowed the IRS to consider debt cancellation as income. The taxpayers argued that the canceled debt was a part of an agreement with the credit company to cancel a portion of the debt because of misleading financial arrangements. In this particular example, the couple purchased some furniture on a delayed payment plan. They later defaulted on a portion of … Continue reading
By Jason Watson (Google+) In Tax Court Memo 2012-341, a taxpayer erroneously took the First Time Home Buyer Credit using TurboTax. The IRS audited them and discovered that they had an interest in a property within 36 months and denied the credit. In addition, the IRS tacked on an accuracy-related penalty. Bummer. Accuracy-related penalties are added when the IRS essentially suggests that the taxpayer should have known better, and did not act in … Continue reading
By Jason Watson (Google+) A taxpayer in Tax Court Summary Opinion 2012-125 was a full-time employee of a pest control company. On the side, he also provided consulting services to one client. In tax years 2008 and 2009, he reported over $80,000 in expenses on his tax returns (Schedule C) while only showing business income of $2,900. Wow! Under Income Tax Regulations (Sec 1.183-2(b)), factors to consider when determining the existence of a … Continue reading
By Jason Watson (Google+) The US GSA Office announces that domestic per diem rates for 2013 will remain at 2012 levels. While disappointing, the move is based on a flat economy and very small changes in cost of living. More importantly the move is based on Obama’s directive to reduce travel costs for the Federal government, military personnel and contractors. Don’t forget to see all the per diem rates and how per diem … Continue reading
Flight Crew Tax
