Friday, February 15, 2013

Tumblr: New from the IRS

The IRS just announced their new Tumblr site. To quote from their email to me:

New IRS Tumblr Site Helps with Tax Season
Tax issues can touch a wide range of people who need information in many different ways. For that reason, the IRS has added Tumblr to its list of social media platforms it is using to share IRS news and information. The new Tumblr platform provides another way for taxpayers to get current tax information when and where they want it.
 
Tumblr is a micro-blogging site where users can access and share text, photos, videos and other information from their browser, smartphone, tablet or desktop.

The new site shares information about important programs to help taxpayers, such as tax law changes, the Earned Income Tax Credit and Free File. The Tumblr site also makes it easier for IRS partners and others to share tax information they receive from the IRS.

In addition to Tumblr, check out these other IRS Social Media sites:
  • YouTube - The IRS YouTube channels offer short, informative videos in English, American Sign Language and Spanish. IRS currently has more than 100 videos with more than 3.1 million views. For more information, watch the YouTube video “IRS Social Media.”
  • Twitter - More than 61,000 people follow the IRS twitter feeds. The latest tax information is available at @IRSnews or @IRSenEspanol.@IRStaxpros covers news for tax professionals; @RecruitmentIRSprovides updates for job seekers. The Taxpayer Advocate Service has information available @YourVoiceAtIRS.
Remember, to protect taxpayer privacy, the IRS only uses social media tools to share public information. IRS does not answer personal tax or account questions. You should never post confidential information, like a Social Security number, on social media sites.
For more information on IRS’s use of social media, go to IRS.gov/socialmedia. 

Additional resources are always welcome. Check it out and let me know what you think!


Thursday, February 14, 2013

Happy Valentine's Day!

Q.  Last year I inherited some money from my father's estate. I can't seem to find where it goes on my tax return. Can you please enlighten me?

A.  Nothing but good news here. Inherited money is non-taxable to you. If the estate is really large, any tax owed is paid at the estate tax level by the executor of the estate. If funds are held for some time, they are usually put into a trust account, which by law (in many states) must be an interest bearing account. If this is the case, only the income generated by the trust account would be taxable to the beneficiary's and would be passed through to each beneficiary on a 1041-K1 form. Principal received is not taxed at the beneficiary level.

Wednesday, February 13, 2013

Deducting Medical Reimbursements

Q.  As a self employed person, I understand I can reimburse myself for medical expenses and deduct it is a business expense. How is this possible?

A.  Trust me, if it were that easy, everyone would be doing it. There are several qualifications, the first of which is that you must be employed by your business. Internal Revenue Code 105 and 125 deal with some of these issues. For a brief synopsis, please read the following link: Section 105 Medical Reimbursement

The first thing you should do is to call a qualified business attorney, and or insurance agent knowledgeable with these plans to see if it would be worthwhile for your business.  Good luck.

Tuesday, February 12, 2013

IRS Update: IR-2013-18

The IRS release 2013-18 issued yesterday stated they will be able to accept returns containing depreciation schedules (Form 4562) immediately and returns containing education credits (Form 8863) beginning on Valentine's Day. This is really good news as it will avoid a potential backlog of taxes that could grind the wheels of progress to a halt. Now all we have to do is wait for the states to catch up!

P,S, PS. Since my original comment, depreciation has been disallowed for RVs. See Jackson, T.C. Memo 2014-160, August 7, 2014.

Monday, February 11, 2013

Reportable vs Taxable Income

Q.  Honey, I'm not sure what the difference between reportable income and taxable income is. Can you please explain?

A.  This is an excellent question, and the terms come up often.  Most of us are familiar with the standard deduction and personal exemption amounts for our marital status and age group. Basically, income reported in excess of these amounts require us to file an annual income tax return.  If the gross income reported is below the standard deduction and personal exemption, usually no income tax return is required.

Notice I said gross income.  Gross income and reportable income are quite often the same.  Thus, if you sell securities for say $100,000 your gross (and in this case) reportable income would require a filing of a return.

Your taxable income, however, may be zero or zilch, if for example, you paid $110,000 for these securities, you would have a taxable loss.  The reason you need to report the reportable income, however, is the IRS or state taxing agencies, have no idea of your basis, and therefore cannot compute your taxable income, as they have no way of knowing your profit or loss.

Oftentimes on Form 1099-R (used for reporting retirement income) the taxable income is lower than the gross reportable income, as part of the proceeds may be a portion of your contribution or another non-taxable fringe benefit such as reimbursements. I hope this helps you.