By month: September 2007
The new Iraq war funding law contains a new tax law section on “family business tax simplification.” If you and your spouse work together in the business, it is time to pay attention and examine this new law.
When planning your taxes, always consider the AMT. This creepy tax seems to come out of the woodwork and attack when you least expect it. For example, in 2002, Kevin Moore sold his farm, and, because of a tax law error, he owed AMT. Had he sold in 2004, after tax writers fixed the glitch, he would have had no AMT.
If you claim business deductions, you better have the proof to back up your expenses. Gary Colvin provided insufficient evidence for his $1,750 deduction for tax preparation, and the court denied his entire deduction. Keep good records!
Again, Colvin fails to provide sufficient evidence for his deductions. This time, it’s a $6,000 auto deduction, for which he was denied all but $780.
Tax law contains specific rules on the recognition of S corporations. Make it easy on yourself: if you are thinking of operating as an S corporation, know the rules before you start.
Millard Thomas got hurt on the job and qualified for total disability from his labor union. Properly structured, disability payments for an injury are not taxable. Unfortunately, the labor union filed his disability incorrectly, and his disability pension benefits were taxed.
From a legal standpoint, income taxes are levied on an annual basis, so that each year represents a new liability and a separate cause of action. Under this principle, taxpayers do not establish entitlement to deductions in one year merely on the basis of allowance of similar deductions in a previous year.
If you must start taking minimum IRA distributions, you decide to have the IRA withhold the taxes or not. If you are not currently making any estimated tax payments, it might be a good idea to have them take care of that paperwork for you, but if you are currently paying estimated taxes, pay more with each estimate.
Trying to deduct the expenses for a wedding? Good luck. We don’t think it’ll work. You’ll have a much better shot at deducting it if you can make it a business trip, and still attend the wedding,
If your SUV qualifies as a truck, you can write off up to $25,000. What qualifies as a truck, however, is very specific. It must pass the weight test, be a legal gas-guzzler. The bed size is important, too.
As owners of an S corporation, you probably are allowed to forego the stockholders’ and directors’ meetings. However, you may not want to. By skipping these meetings and other “corporate” activities, you appear less like a corporation in the eyes of the law.
If you own your own S corporation, make sure you look like a corporation in the eyes of the law. The IRS is cracking down on S corporations using this status to save self-employment taxes.
The $25,000 SUV expensing might disappear in 2008. We won’t speculate on what might happen next year, but the current rules still apply until the end of 2007.
Business meals, like those consumed at Lions Club and Rotary meetings, ARE subject to the 50% rule. We have proof.
You may deduct coffee and sodas in the workplace, as long as you file them correctly.
As a surgeon, you might get malpractice tail insurance (insurance that covers malpractice claims should you quit and go to another hospital). We suggest having the hospital pay the insurance costs, even if they deduct your pay, to protect yourself from the AMT.