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Brian Huber
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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."
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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.
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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.
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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.
Toggle Commented Jan 29, 2014 on Decoding your W-2 at Don't Mess With Taxes
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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