Tax news

Tax

Electronic Filing Outweighs Paper System

It seems that at long last, electronic filing has caught on with a fury, what with the surge of online filing at Kiplinger, H&R Block and Quicken Web sites, as well as sending returns directly to the electronic IRS. Still, clients may ask CPAs and accounting professionals for advice as to why electronic filing has its advantages.The IRS has set an ambitious goal of having 80 percent of all individual tax returns (not corporate) filed by 2007.
Tax

Reporting Wages for Domestic Help

Remember the contoversy surrounding the appointment of a Supreme Court judge and other elected officials over the so-called "nanny" tax?Clients often approach tax preparers with questions regarding compensation for help like nannies, yard men, babysitters and others.
Tax

Death Benefits Excluded

Death benefits, accidental death benefits, burial benefits, and death benefits payable from an employee welfare benefit plan to a retiree on a spouse's death constitute excludable insurance contract benefits according to the IRS’ PLR 200002030. This determination was made when an issue involving an employee who received benefits under a collective bargaining agreement from an employer-established welfare benefit plan arose.
A&A

Auto Write-Offs: Bigger is Better

Tax season is the time of year when clients invariably try to take as many deductions as possible--within the extent of the law. One area commonly overlooked, especially for self-employed individuals, is the allowable deductions for a car.Brushing up on the rules will benefit your client (and perhaps you, too!).Naturally, if a car is used primarily for business, the IRS allows taxpayers to deduct a maximum $3,060 each year. But now that cars cost more, and more of us yearn for a luxury car--even a gigantic SUV--how does the car depreciate over time?Slowly, for sure.
Tax

Self-employed health insurance deduction on the rise

How much of my health insurance premium can I deduct and how does the deduction work? I am self-employed and I understand only some of the premium can be deducted as a business expense. Does the rest count as an itemized deduction? L.G., Muncie Congress has been fooling with the deduction for health insurance premiums for the self-employed for a long time. Last year's sweeping changes to the tax laws affected the rules in this area once again.
Tax

After 3 years, go ahead and clean out those files

I've been trying to find some extra space in my house lately, so this seems like a good time to think about which tax records I can safely dispose of and which ones I ought to keep around in case the IRS wants to ask me some questions about my tax returns. At a minimum, I've always been told to save everything for three years. That statement sounds innocuous enough, but what constitutes "everything" and when do I start counting to determine "three years?"
Tax

Hobby costs are miscellaneous expenses on 1040

I design and create porcelain dolls. I make the dolls from scratch, pouring the porcelain into molds I have made, I sew their clothes and make their shoes from little pieces of leather. Everything is first quality. My dolls have won awards, and I have displayed them at shows across the country. Because I'm actively engaged in the business of making dolls and am established, I assume my costs are tax-deductible. Does the information about my doll business go on a Schedule C or is it considered miscellaneous itemized deductions?
Tax

Several options available when selling shares

When selling shares from a mutual fund, how do I know which shares have been sold, and how do I determine the cost of the shares in order to compute my tax on the sale? G.J., Indianapolis It's up to you, which shares you sell from a fund, and you have control over the costing method as well.
Tax

Uniform used only for work can be tax deduction

I have uniforms that I wear at work and I pay to have the uniforms laundered. I also pay for occasional repairs on the uniforms and I pay for work shoes that I have to wear in my job. Are all these expenses deductible as itemized deductions? B.C., Indianapolis If your work clothing constitutes a uniform in the eyes of the IRS, you will be entitled to a deduction. The uniform has to be clothing that is required by your employer, and (this is the gray area) not suitable for everyday wear.
Tax

Some camp fees do qualify for tax deduction

I sent my children to summer camp last month and want to know if I can take a deduction for the child care credit for the amount I spent on the camp. The camp lasted for two weeks and the fee for the camp included all food, lodging, and activities. I.I., Indianapolis
Tax

Taxes available for use as deductions are limited

I understand that a great amount of the price we pay for cigarettes and alcohol is made up of taxes. Are these taxes considered "other taxes" for purposes of itemized deductions? If so, how should we account for these amounts? The receipts for purchases don't list the taxes separately. D.S., Indianapolis
Tax

Tax reform cut long term gains and confusion

A year ago, Congress passed legislation that made massive changes to the tax laws. One of the most hotly debated areas of the tax legislation was the law regarding the taxation of capital gains. There are many people who believe this form of income should not be taxed at all, while others feel capital gains should be taxed as the same rate income that you earn at your job.
Tax

Changes should clear up Roth IRA confusion

Last year Congress enacted a rather sweeping tax act which changed several very visible areas of the tax law, notably the tax treatment of capital gain income (rates were lowered), the tax treatment on the gain from the sale of a personal residence (the tax was all but done away with entirely), and the inauguration of the new Roth IRA.
Tax

IRS throws foul ball into All American pastime

Last Tuesday, in a brief moment of glory, a nation of Americans forgot about the troubles of the world and held its collective breath while a little white ball spiraled into history.Mark McGwire's 62nd home run ball was picked up by Tim Forneris, a 22-year-old member of the Busch Stadium grounds crew, and the IRS was watching carefully, hoping no one would realize the great tax benefit that was carried across the stadium with that little ball.
Tax

Legislation takes aim at "marriage penalty" tax

There is some interesting tax news this week & House Ways and Means Chairman, Bill Archer, is leaving his flat tax proposal aside for awhile, and attempting to find some new ways to let taxpayers take advantage of the projected budget surplus. Two new bills that were passed by the House Ways and Means Committee provide significant tax cuts for most Americans, while attempting to save (or preserve, depending on how you look at it) the Social Security system.
Tax

Deductible meal allowance varies with location

I travel for business and read somewhere that I can deduct on my tax return something like $30 per day for meal expenses when I travel. How does this work and what form do I use to take the deduction? S.S., Indianapolis.
Tax

Changes to the law regarding Roth IRAs

We are an elderly couple and we cashed several 1964-1965-1966 Series "E" government bonds. The interest amounts to over $7,000. We have been told that the interest can be treated as capital gain. I disagree. I am sure such interest must be treated like all other interest, however it is not taxed by the State of Indiana. Am I correct? H.P., Indianapolis
Tax

Tenant's improvements not taxable to landlord

I own a house which I rent to a family. My tenants have put some money into the house in the way of painting, resurfacing some walls, and building a small deck. Do I have to show the value of these improvements as income on my tax return? K.Y., Indianapolis
Tax

Without residence, land is subject to gains tax

In 1992 I purchased a house on a lake which included a total of 11 lots. This house and property was sold to me under one title. For two years I tried to sell this residence and property as one piece, as I had bought it, but no one wanted that much property. Finally the realtor told me that I should sell the house with the four lots that encompassed the house, garage and septic field, and sell the other seven lots separately. This is what I did. Now here's my question: I realize had I sold everything, the
Tax

Indiana tax deductions include E bond income

In one of my recent columns, I casually referred to the fact that interest on U.S. Series E bonds is not taxable in Indiana. I was surprised at the quantity of responses I received from Indiana residents who were unaware of this fact. The rule is that earnings on obligations that are considered to be direct United States Government obligations are specifically exempted from Indiana income taxation. Direct obligations include such items as U.S. government bonds, U. S. government certificates, U.S. government notes, and U.S. treasury bills.

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