By month:February 2007
IRS auditors do most of the audits. They are not accountants (IRS agents are accountants); they might be wrong about tax law. It’s your responsibility to know the law and use it to prove your point. This article tells you how to use court rulings and documents that enforce your rights in your tax-law partnership.
Answer this question: Could you prove that you filed last year’s tax return? Is your proof credible enough that it will stand the scrutiny of the IRS?
Many S corporation owners are improperly deducting their health insurance on page 1 of the 1040. The American Institute of CPAs submitted a proposed revenue ruling that it would like the IRS to issue concerning health insurance for the S corporation owner. The proposed revenue ruling does nothing to alleviate the problem in the headliner; instead, it would formalize the problem.
Revenue procedure 2007-16 allows you to make a change in depreciation after you sell, trade, or abandon property. The new procedures make some prior procedures obsolete and make revisions easier.
Getting the IRS to give you an advance ruling on a transaction or deduction can be very worthwhile. It now costs money, but it might be worth getting the opinion you seek. If your ruling does not fit into the three major categories they list, your fees may vary. The highest fee is $50,000 for a pre-filing agreement.
Tax court and the IRS establish that child care is not an ordinary and necessary expense and, thus, is not deductible. This ruling, though sloppy (we show you why), establishes a precedent. However, under section 129 in the tax law, the employer may provide child care benefits.
William Lenihan, a well-educated tax lawyer, lost every deduction he claimed on both his Schedule C consulting business and his Schedule E rental businesses because he did not keep good records. Know the law! Keep good records!
The law contains no reasonableness test for mileage. There are very specific rules for recording mileage. We recommend that you keep a mileage log for three consecutive months to prove your business-mile percentage.
You cannot qualify for the home office deduction if you have two administrative offices, one at home and one at your other office. Also, the rules only apply to you, not your staff.
There are very specific regulations regarding what qualifies as an SUV for the $25,000 expensing. Does a Subaru Outback qualify?