By month: September 2007

New Law Requires a Tax Plan for Husband-and-Wife Proprietorships, LLCs, and Partnerships

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.

Capital Gain Triggers AMT

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.

Proof of Accounting Fees Fails

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!

No Mileage Log, No Deduction

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.

S Corporations Fail with Assignment of Income

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.

Wrong Setup Causes Tax on Disability Payments

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.


Previous Audit Does Not Bless Deductions

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.

Withhold Taxes?

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.

Deduction for Family Wedding

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,

$25,000 Expensing of SUV

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.

Husband-and-Wife Corporate Meetings

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.

Erratic S Corporation Salary

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.

Goodbye, SUV Expensing?

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 Club Deductions

Business meals, like those consumed at Lions Club and Rotary meetings, ARE subject to the 50% rule. We have proof.

Coffee for Employees

You may deduct coffee and sodas in the workplace, as long as you file them correctly.

Tail Insurance

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.


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