Desperate for deductions?
Deductions for the Evil Rich
Subject: 2009 Standard Deduction
Your Blog indicates that in 2009, the Standard Deduction will be eliminated for those filing jointly, and earning over $166,800.
What will it be replaced with ?
Will this be positive, or negative, for those whose AGI is $2000,000 + ?
You are misunderstanding what that provision of the tax law means.
Standard deductions aren't eliminated for anyone based on AGI.
What has been part of the tax code for several years now has been a dollar limitation on the total amount of itemized Schedule A deductions that people considered to be evil rich (as measured by AGI) are allowed to claim. At the threshold levels, which are increased each year based on inflation, the limit starts to be applied.
However, although this type of penalty on the evil rich can completely eliminate their personal exemptions, I have never seen where it has completely eliminated their Sch. A deductions.
The trend of punishing people with high AGIs is looking like it's going to get worse. From what I have heard about our Supreme Ruler's plans for future tax laws, there will be even tighter limits on the deductions allowed to be claimed by those folks he considers to be evil rich.
I hope this helps you understand this part of the tax code.
Many thanks for your explanation.
Non-Cash Donations Worksheet
I was browsing the new additions to the always useful TaxTools program and noticed the worksheet they have for listing and valuing non-cash donations. It has suggested values for used items, making it easier to work with than having to refer to outside sources such as the Salvation Army's guide.
I made up a blank PDF version of this worksheet that you can download from my site.
Deducting Bad Debts
Subject: declaring bad loans
we have made some loans guaranteed by mortgages. However these are in different countries.
The amounts are quite large. Basically I have lost the money and the individuals are nowhere to be found. We are speaking in the hundred of thousands of dollars. the loans were securied by foreign real estate. The foreign country is Lebanon and in a semi state of war or civil unrest so it is hard to foreclose as well.
How can I take a deduction on my taxes. I have not declared the interest income. I am thining of filing a 1040 X for last year and declaring the interest income. Have not filed 2007 taxes this year and am getting ready to do so. I want to take a the bad loan deduction in 2008
Do not want the deduction to trigger an audit.
can you help.
You need to be working with an experienced professional tax advisor to make sure you do things properly here.
Interest income that has accrued on the notes but hasn't been received does not need to be reported as income on your 1040. However, if you did receive actual interest payments, those should be reported for the years in which they were received. If that is the case, you should file amended Federal and State income tax returns to correct that situation. You will have to pay the additional taxes plus interest, but IRS and most states will waive late penalties if you voluntarily disclose the under-reported income rather than wait for them to catch you.
Writing off investments as uncollectible and worthless can trigger an IRS audit if the tax return doesn't include a lot of attached documentation as to why you have concluded that 2008 is the appropriate year it became completely worthless and how you calculated your unrecovered adjusted basis. IRS loves to disallow bad debt deductions for either being claimed too early or too late. A good tax pro can help you document the proper year to claim the loss. A good tax pro can also ensure that you are claiming the proper amount. A common mistake people make is to try and claim a bad debt loss for accrued but unpaid interest. That is not allowed.
Good luck. I hope this helps.
2009 Standard Deduction
Subject: 2009 Standard Deduction >65
On your web page "2009 Individual Income Taxes Federal - Form 1040", the section "2009 Standard Deductions" shows:
Single: $5,700 + $1,350 if over 64 and/or blind
However Form 1040es for 2009 shows:
• An unmarried individual (single or head of household) and are:
65 or older or blind . . . . . . . . . . . . . . . $1,400
The $1,400 figure is correct, as you can see on the attached excerpt from the latest TaxBook.
I will fix that on my website as soon as we get our power back and can start up our main computers.
Thanks for catching that.
[Update] The web page has been updated to correct the figure.
Not that I would ever condone creating false documentation, but this tool to create cash register receipts does make the mind wonder about the possibilities.
Anyone who has been frustrated by having to wonder what a faded out cash register receipt originally said might like this tool.
Thanks to The Generator Blog for noticing this.
Deducting website costs...
Subject: Deducting Website ExpensesWhat is the accepted protocol among CPA's for deducting the costs of building, updating, and maintaining a website and is there a difference beteween the costs of an ecommerce vs. a branding site?Thanks,
There is no universal answer for this because too many variables need to be taken into account.
Your own personal professional tax advisor should be considering such things as how much the design of the website cost, when it started generating income, and how long it will be before it needs another expensive overhaul, in order to determine whether it makes more sense to immediately expense the costs or amortize them over the expected useful life of the design.
That would only apply to the up-front design cost. Monthly maintenance costs, including hosting services, would be expensed as paid or incurred, depending on whether you are on the Cash or Accrual tax basis.
Thanks for the info.
Subject: Can An LLC Donate Money?
Love the blog, thanks for answering all of my questions thus far, I was just wondering if a business (specifically an LLC) could donate money and deduct it from its income? And not to fret, I'm on my way to getting an actual tax expert in my area, I just have to vet out a few contenders. :)
How an LLC deducts its charitable contributions depends on how the LLC is being reported and taxed, which is an extremely important decision you need to make with the assistance of your professional tax advisor.
If it's a single member LLC and you are reporting it on Schedule C, the contributions are shown on your Schedule A.
If it's a multi member LLC and you are reporting as a partnership on Form 1065, contributions are passed through to the members on their K-1s, where they end up on the members' Schedule As.
If it's being taxed as an S corp on 1120S, it's handled the same as with a 1065.
If it's taxed as a C corp, the contributions are deducted on the 1120 with the normal limit of only allowing a current deduction of 10% of that year's taxable income. Any excess is carried over to the next tax year.
As you can see, what you may have considered a simple question doesn't have a quick answer and illustrates the need for a good professional tax advisor before you set up an LLC.
IRS has been asked to consider mid-year increase to standard mileage rate – I’m surprised it’s taken this long for someone to request an updating of the per mile rate. Whether IRS changes the rate or not, it’s a reminder of how important it is to keep track of actual operating costs for each vehicle for the year. As with just about everything financial, this is very easily done with QuickBooks.
Don(’t Infl)ate Gifts to Charity! – Good look at the tighter rules for donating non-cash items to charity, from Gail Buckner.
Subject: Botanical Garden Sec. 179
May I ask you 2 questions?
Would a person, or cooperation I'm soliciting for donations in order to transform a parkway into a Botanical Garden be eligible for Sec. 179? If not is there another tax deduction for donations that I can remind them of in my sales letter to them?
Section 179 is not in any way applicable here. That is only for companies that actually purchase business equipment that they own and use in their business activities.
In your case, if the group doing the rehab work is a qualified charity, the donors would be ale to claim payments as charitable contributions.
If the donors are going to be listed or publicized somewhere, a better way for them to claim their payments for this project would be as advertising and premonition expense. That normally works out to provide a better tax savings than charitable donations do.
Good luck. I hope this helps.