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Thank you for this, Kay. If enough of my tax clients read it, I will not need to repeat a thousand times every year that an expenditure adding to the life or value of a property is not a "repair."
Tax differences between home repairs & home improvements
This post reviewed and some links updated August 16, 2019. Apparently the work gods think I need time off this week. Yesterday I lost a couple of hours taking care of family business. Today our house is intruding on office time. As I type, a plumber is working on my kitchen sink faucet. I'm lurk...
Computers process multiple variables faster and with greater accuracy than the human brain. However, a human must input the variables. Misunderstanding or omitting selective variables changes the output of the computer's instruction set. I see errors every year on self-prepared tax returns using computer software that's allegedly infallible.
Would you trust your taxes to a robot?
Most of the folks who participated in Pew Research Center's 2014 Future of the Internet canvass said they expect robotics and artificial intelligence, or AI, will permeate much of our daily lives by 2025. If that prediction is accurate -- and I think it's a bit too soon, personally; I mean, real...
Housing prices are driven by supply and demand, like any market. When more people move to, say, Austin, the demand drives up housing prices. This of course attracts builders to construct more homes in Austin, which stabilizes prices. A description of the housing market is not too overly simplified by stating that demographics drive the supply of houses while the prices are constricted by incomes.
The uneven ratios of home prices to incomes throughout various markets indicate some market disturbance is afoot. And the culprit must be a new factor – not the long-standing mortgage interest deduction – because the disparity in ratios of home prices to incomes has risen in recent decades while the mortgage interest deduction is nothing new during this period. What has changed substantially is monetary policy of the Federal Reserve and the shifting of credit risk from market participants to the taxpayers via Fannie Mae, Freddie Mac, and the FHA.
Mortgage tax break contributes to fading American dream
In his State of the Union address tonight, President Obama is expected to discuss income inequality and the problems facing those trying to climb up the economic ladder. He has lots of material from which to draw any remarks he makes. A recent global report by Oxfam found that almost half of the...
This is a very useful overview, Kay. I’ll be using it to help educate my tax clients plus demonstrate for tax preparers how some of the alphabet soup on a W-2 delivers key information. Even the individuals I work with who are becoming tax experts by studying for the Enrolled Agent exam must understand W-2 basics. They can use your reference here to find the elements sourced on a W-2 that are needed to answer sample exam questions in their course at FastForwardAcademy.com. I’ll need to make sure, however, that they don’t use your site to cheat themselves while studying. I’ve found that solutions to just about any tax issue are found somewhere in the archives of your blog.
Decoding your W-2
Updated Feb. 21, 2018 Taxes are all about the numbers. But when it comes to Form W-2, the alphabet also is important. The main thing you look for on your annual tax statement from your employer is, of course, the amount you earned, listed in boxes 1, 3 and 5, and the various taxes withheld in bo...
A multitude of phony tax preparers causes too many people to prepare their own tax returns that include matters unfamiliar to them. Individuals with extensive business interests, investments, or rental properties make the most mistakes. Although these people might have had easier tax returns to self-prepare in the past, new or expanded circumstances call for the expertise of an experienced CPA specializing in tax or a pro who has passed the Enrolled Agent exam. Using these experts does not guaranty quality service, but it certainly helps. Information about the qualifications of Enrolled Agents is available at Fast Forward Academy. I'm hopeful that an increasing number of honest and dedicated people will pursue this certification as a commitment to the tax business -- rather than operate something like the XYZ Tax Preparation and Screen Door Company.
Time to pick the proper tax pro
The full 2014 tax filing season officially opens in 10 days. Are you ready? If this is the year that you finally hand off your tax hassles to a professional, you'd better start your search. Good tax preparers are quickly booked. And you need to make sure you hire the tax pro who's best for your ...
The biggest heartbreak for many recipients of lawsuit awards is the discovery that the entire amount of proceeds is taxable -- before subtracting attorney fees. Under some circumstances, however, they might be able to claim a tax deduction for their legal costs. As you wisely recommend, litigants should consult their tax advisers before spending too much of the money awarded from a lawsuit.
IRS audit results in $862,000 lawsuit award for taxpayer
Well, that tax audit didn't go as the Internal Revenue Service had planned. William Berroyer was in the IRS' Hauppauge, Long Island, office in 2008 working out a deal on $60,000 in taxes the agency said he owed. Instead, four years later Berroyer is $862,000 richer. But it has nothing to do w...
My recollection is that the IRS was also persuaded to investigate (that is, harass) Dr. King and many other innocent persons as part of the notorious COINTELPRO scheme operated by the FBI.
IRS abuse of power, now and in MLK's day
The hubbub over the Internal Revenue Service's inept and ill-advised vetting process for groups seeking nonprofit status no longer dominates the news cycle. But make no mistake, the issue has not disappeared. TaxProf blogger Paul Caron has been keeping a daily tally of coverage. We're now up to ...
You women and your Thin Mints addictions crack me up. (But I get it... I once ate an entire box of the darn things while watching a golf tournament on TV. But I was 21 and didn’t yet have my current willpower over sweets that’s identical to your husband.) Someone who buys a whole truckload of Thin Mints – and later realizes that her eyes were bigger than her stomach – could donate them to a charitable food bank, as you suggest. However, she is confronted with potential tax deduction limits based upon her income. Or, she might not have enough deductions to itemize. These circumstances are noted in the article for CPA exam students at Fast Forward Academy blog. Fortunately, tax advantages await the giver of a large non-cash charitable donation who seeks advice from a CPA or Enrolled Agent tax expert.
Girl Scout cookies might be tax deductible
It's one of my most favorite times of the year. Girl Scout cookies are on sale! I'm a Thin Mints addict. I could eat a whole box in one sitting. They are great alone or crumbled over a bowl (or gallon) of vanilla ice cream. This has been a tasty temptation for as long as I can recall. So every ...
Looks like the new IRS Commissioner will need to supervise a genuinely efficient budget and eliminate extravagances like those mentioned in your blog last summer and in the article at Fast Forward Academy blog.
IRS' fiscal year 2014 budget takes a big hit
Maybe the National Taxpayer Advocate's recommendations came too late in the budgeting process. Or maybe members of Congress just like whacking the most hated federal agency with a fiscal bludgeon. Whatever the reason, the Internal Revenue Service is going to have to make do with less money in ...
I wonder if a lot of those California refunds are due to the many former residents of that state who have moved to Texas and left no forwarding address. Every year, I prepare tax returns for several individuals who lived and worked in both states during the preceding year. This triggers my completion of their part-year resident California return as well as the federal return. I always ask if they received a refund last year of state income tax from the tax return of the year before last. Of course, we Texas residents escape such state income tax complications.
California has $16 million in undeliverable 2012 tax refunds
If you're a Californian, forget about your current federal tax return for a minute. You need to check on your 2012 state tax return. Were you due a refund last year from the Golden State's tax collector? Did you get it? Nearly 48,000 Californians didn't. The state is holding around $16 millio...
This post will aid my new tax students in understanding the basic distinction of the estimated tax penalty from that other penalty for failure to pay the entire tax liability by April 15. You provide a fine overview of the safe harbor and deliver a correct warning that Form 2210 is one of the more complicated tax matters covered in Enrolled Agent exam study at http://fastforwardacademy.com/enrolled-agent-exam-prep.htm. Mastering that form, however, is crucial for tax pros helping people who received unexpected windfalls in one quarter of the preceding year. I strongly recommend that any taxpayer with this situation seek professional assistance from an Enrolled Agent. That’s also a reason for novice tax preparers to become Enrolled Agents who can conquer complicated issues and forms such as those concerning the 2210 penalty.
How to avoid estimated tax penalties
The U.S. tax system is based on the pay-as-you-earn concept. Every worker who gets a paycheck knows this by the amount of income and payroll taxes withheld each payday. If you get money from other sources where withholding isn't in effect, Uncle Sam expects you to take care of your due taxes in ...
Adding to your excellent discussion is the important point that tax software doesn't automatically know who a taxpayer is entitled to claim as a dependent. Rather, the decision falls upon each taxpayer's knowledge – or the expertise of the taxpayer’s CPA or Enrolled Agent tax professional. This is not always a simple matter to understand with many household arrangements. Placing the word “qualifying” before such terms as child and relative alters the common meaning of which individuals are children and relatives. Further complicating matters is that criteria for a “qualifying child” for purposes of the Earned Income Credit is distinctive from conditions for a “qualifying child” for purposes.
Tax exemptions reduce taxes, but are reduced for some filers
Personal exemptions are one way for taxpayers to reduce their adjusted gross income to a lower taxable income amount. Remember, the less money that the Internal Revenue Service can tax, the smaller your eventual tax bill. Personal tax exemptions also are today's Daily Tax Tip. Each of the three ...
A corollary to point #8 is assuring that a tax preparer is qualified. Individuals should inquire about tax preparer experience or credentials. Cheap tax preparers are not bargains. If a tax return is really so easy to prepare, no help should be required and paying even a mere $50 is a waste. But anyone who truly needs professional tax assistance should expect to pay a few hundred dollars for an expert. A good way for tax preparers to investigate their competency levels is to review the free sample Enrolled Agent exam questions at Fast Forward Academy. Taxpayers can conduct the same inquiry to better understand the knowledge possessed by tax pros with Enrolled Agent certification.
10 tax traps to watch out for in 2014
Welcome back and welcome 2014. If you made it back to work and the Internet last week, welcome back again! Once you get settled in, your first task is to focus on filing your 2013 tax return. Hey, you are at a tax blog! The 2014 Daily Tax Tip series starts today to help make that job, well, less...
Worth mentioning (because I get a lot of questions about it) is the fact that states also use December 31 to determine state income tax marital status for the year. So, a taxpayer can file jointly when reporting her taxable income for the state where she lived before getting married -- even if her new husband never lived there.
Winter wedding wonderlands and tax-filing status
The part of West Texas where I grew up definitely had winter weather, but not much snow. We'd get a dusting now and then. And one Christmas when I was in high school we spotted some flakes falling. So I always romanticized the snow. And no song does a better job of creating a perfect vision of t...
An excellent holiday gift for any entrepreneur is a pocket calendar. These are old school compared to my smartphone, but I still use this basic tool for tracking business use of my personal vehicle. No vehicle tax deduction is permitted without a contemporaneous mileage log. I’m currently reminding my tax students about the recordkeeping requirement. Even tax pros preparing for licenses as CPAs or Enrolled Agents are surprised by this revelation. All the scenarios they can study for their exams in the sample questions at http://fastforwardacademy.com/index-page-free_trial_embed.htm only apply when the taxpayers have mileage logs. Tax professionals don’t need to inspect the mileage logs of clients, but they must ask if such records exist and have reasonable assurance that the figures provided by taxpayers are substantiated with evidence.
Tax deductible mileage rate drops a half-cent in 2014
The busiest travel time every year is around Thanksgiving. But plenty of folks also hit the road for Christmas. Despite the craziness of the season and often messy, and dangerous, winter weather, we go. Why? Because, as Perry Como so melodiously notes, There's No Place Like Home for the Holidays...
I began to celebrate half-birthdays a few years ago although I’m still a long way from 70½. (One can never be sure how many birthdays he has left, so why not enjoy two per year?) Unfortunately, my half birthday falls right before the tax return filing deadline in April. My colleagues in the tax business are too busy to celebrate with me. At least I take a short break for observance alone of my half birthday before proceeding with tax preparation for my clientele. I’m planning to live long enough for this tradition to deliver a useful reminder of the year I need to begin required minimum distributions from my IRA.
Attention senior citizens: IRA distribution date is Dec. 31
I'm a sucker for Christmas. The food, the movies, decorating the tree and the mantel and, of course, the songs. I look forward to them for 11 months of the year. So if the seasonal time-honored trappings are so important to me, why does a novelty song make my holiday listening list? Because som...
I guess the tax break for energy improvements is one of the “benefits” I receive from the government since calculating the tax credit generally requires assistance from a paid professional like me. However, the random event of early winter weather here in Austin is certainly a contributing factor. Nevertheless, I’m not confident that a social advantage is realized from tax rules that are as capricious as central Texas weather.
Freezing? Home improvements provide warmth, tax savings
Cold enough for you? The answer from residents in much of the United States is an emphatic yes. Here in Austin, we're dealing with below freezing temps. Our backyard waterfall is showing some of the icy effects. But we're downright balmy compared to some spots across Texas and the rest of the...
No wonder I have so much difficulty ascertaining currency inflation by the Federal Reserve. Money in circulation has been replaced with “preloaded” plastic cards that are only used for spending after they are “registered.” Compounding the problem is that people are forced to have “accounts” for this so-called money at the biggest bank in the nation.
State tax refund debit card data exposed to hackers
The convergence of taxes and technology continues to run into trouble. The latest issue is personal information of around 6,000 Louisiana taxpayers and another 7,000 or so in Connecticut. Those estimated 13,000 individuals in the two states received their state income tax refunds via prepaid ...
This is one of the more complicated tax matters pertaining to something as common as employee compensation. Even tax preparers are easily confused by merely looking over sample Enrolled Agent exam questions about this subject at http://fastforwardacademy.com/enrolled-agent-exam-prep.htm. Among the complex factors is that a pastor’s housing allowance is subject to self-employment tax but not regular income tax. Also, the pastor’s housing allowance must be reasonable relative to taxable wages.
Eliminating the parsonage exemption may simplify the work of a tax preparer, but I’m not sure how it makes the economy function more fairly. How does increasing someone else’s tax burden benefit me? It doesn’t. I’m benefited when the overall tax burden on the economy is lower. That’s why I’ve always said I would favor a law that reduces everyone’s taxes except my own.
Religious housing tax break deemed unconstitutional
One of the most-hallowed tax breaks for ministers has been struck down by a federal judge. Judge Barbara Crabb of the United States District Court for the Western District of Wisconsin ruled on Nov. 21 that the parsonage allowance is unconstitutional. She also issued an injunction discontinuing ...
I believe Missouri is now in the same category as Wisconsin for recognizing all legal marriages conducted in any state. However, I think that state tax returns in Nebraska must follow the marital laws for domicile in that jurisdiction. I'm losing track of all the state decisions. Will you publish a chart of the tax filing status for same-sex couples in each state? I could really use that in January when tax season starts.
Missouri recognizes same-sex marriages for tax filing only
Missouri is one of 34 states that prohibit same-sex couples from getting married. But lesbian and gay couples who married in a jurisdiction that does recognize their unions (15 states plus the District of Columbia) and now live in Missouri will file their 2013 state tax returns as married taxp...
Great overview of the tax impact from marriage. I'm referring the tax preparers in my seasonal refresher class to start here for remembering the factors to consider with new couples. Even we experienced tax pros need these reminders. An amazing number of circumstances arise with blended families, as my tax students discover by simply inspecting the free sample EA exam questions at http://fastforwardacademy.com/enrolled-agent-exam-prep.htm. I'm especially glad you emphasized the name change issue because mismatched name and Social Security number is my top reason for rejected electronically filed tax returns.
Tax tips for newlyweds saying "I do" on 11-12-13 or any day
Today, Nov. 12, 2013, is a big day for all sorts of gamblers. For traditional gamblers, it's MegaMillions drawing day. The jackpot is $132 million (a $71 million lump sum payout option). It's also lottery day for many state games of chance. And let's not forget folks who are in Nevada, Atlantic ...
This is especially bad news for members of the military because they need to save some money to pay for professional tax preparation. Many IRS rules affect military personnel, which are understood by tax experts who pass the Enrolled Agent exam as this article conveys http://fastforwardacademy.com/updates-154-name-rules-learned-for-enrolled-agent-exam-allow-helping-taxpayers-in-military.htm.
Military families among those affected by food stamp cuts
Folks receiving federal help buying groceries are making do with a little less. The increase in Supplemental Nutrition Assistance Program (SNAP) benefits, or food stamps (although most programs are via debit cards), ended on Nov. 1. Calculations by the Center on Budget and Policy Priorities (...
Maybe I’m too busy watching football to simultaneously read a tax article and understand the issue. At one point the article states that payment by the school to the coach is indisputably taxable income for the employee. Then, the article states that some law professors believe the school is making a tax-free reimbursement to the coach. Those statements are contradictory.
Anyway, I believe the coaches clearly are receiving taxable compensation for their services. I’m fairly certain that – except for de minimis amounts and employee service awards of limited quantities – qualified tax-free reimbursements are only allowed for expenses paid by employees that would have been deductible expenses of the employer if the employer had paid them directly. That is not the case when one school buys out the contract of a coach at another school. An ordinary and necessary business expense is not giving money to another organization so that it will release its employee from a contractual obligation.
College coach contract buyouts: A tax-free perk?
After a great 7 and 0 start, my Texas Tech Red Raiders have stumbled a bit. Going into today's game with Kansas State, they were 7-2. As I type, it's still early in the second half, but right now it's looking like we'll fall to 7-3. Still, Tech fans are thrilled with the possibilities that arr...
As a tax professional, I sometimes receive harmless IRS correspondence. Nevertheless, I still experience a little freight when opening those envelops, which far exceeds any fear of vampires or zombies.
A colorful way to ease IRS notice fears
Today is Halloween, when kids and adults alike overindulge in candy, enjoy dressing up (more than usual) and generally celebrate being scared. But there's nothing like getting a letter from the Internal Revenue Service, on Oct. 31 or any other day of the year, to really strike terror in even t...
At least this gives the tax preparers I work with more time to study the Enrolled Agent exam course at http://fastforwardacademy.com/enrolled-agent-exam-prep.htm if they have enough breaks between explanations of the government delay for taxpayers eager to obtain their refunds.
IRS won't accept 2013 tax returns until Jan. 28, 2014
I hate it when I'm right. Cue hubby laughter. OK, I don't. But I do hate that my fear of a delayed 2014 tax filing season is coming true. The Internal Revenue Service announced this afternoon that it won't meet its original Jan. 21, 2014, filing season start date. The IRS now expects to s...
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