Friday, March 1, 2013

Q.  I just received the 1099-ES vouchers from my preparer, and I noticed the total amounts were almost identical to what I owed this year. Most of my income comes from qualified dividends and capital gains. With the rates increasing from 15% to 20%, shouldn't my estimated tax payments be higher?

A.  Although capital gain rates increased as you stated, this will affect taxpayers with taxable incomes in the 39.6% bracket, or those with taxable incomes starting at $400,000 and up, depending on your filing status. If you don't fall into that category, you will continue to enjoy low capital gain rates. If you do fall within the 39.6% bracket, you should call your preparer and discuss your estimated tax payments. It is possible the software package used hasn't factored in this rate change.

Thursday, February 28, 2013

Q.  We recently sold our house and are starting a small business to run out of our trailer. Do you know of any reliable sources which may point us in the right direction?

A. Here is a link to the IRS Small Business and Self-Employed Tax Center which should answer many questions. I only have one point I'd like to make. Before rushing off and forming a separate business entity such as a partnership, LLC or corporation, start off small and run as a sole proprietor. Forming many of these entities is quite easy, they can be costly depending on the state, and like a divorce, hard to get rid of!

Wednesday, February 27, 2013

Selling Your RV

Q. Is it necessary to report the sale of an RV and pay taxes if we buy a replacement for the same price as the one sold or more? We are full-timers and consider this our personal residence.

A.  For decades, when one sold a personal residence at a gain, you could avoid taxes only by buying a replacement residence for the same price or more. These rules went out the door many years ago. Today, the rules are simpler and no replacement is necessary. Here is a link to IRS Pub. 523 which explains the rules for selling a personal residence and reporting a gain.

I can't imagine anyone selling an RV today or even trading one in, at a gain. Generally speaking, selling a personal asset at a gain is a reportable transaction; selling a personal asset at a loss is never deductible. I don't think you have anything to be concerned about!

Tuesday, February 26, 2013

Tax Preparation Fees

Q.  Why do fees for tax preparation keep rising? I find it's getting very costly. My income comes mainly from Capital Gains. I just don't understand!

A.  I may have the answer to your question. Of course, I can't explain why various preparers charge what they do, when they increase their fees, or even if they've increased fees. Largely it will depend on where they are located in the country. When I lived in Tucson back in the 1990s, the fees we charged were less than half of what they charged in Phoenix, so preparers in an affluent area will likely charge more.

Last year, filing 2011 returns, there was a substantial change in the forms for capital gains. Previously we had only Schedule D to deal with. Quite often we could take the totals on the 1099-B form prepared by your brokerage house, put in only the totals, and fire it off to the IRS, much the same way as we did for 1099-Int or 1099-Div.

Beginning with the 2011 returns, however, the IRS forced us to use Form 8949. There were 3 possibilities: a separate form for short term gains, a separate form for long term gains, and a separate form when no 1099-B was issued. Additionally, it became necessary to further subdivide this information depending on whether or not the brokerage house reported the basis information. Sometimes they do, and sometimes they don't provide it. Very few 1099-Bs have arrived from my clients as yet, but last year they weren't separated, so the only choice is to enter each security separately. What used to take minutes, now can take hours.

My hourly fee haven't increased in 3 years, but  multiply the total time necessary to enter pages of data by the hourly fee, and you can easily see why fees have risen, even though the hourly rate hasn't. When in doubt, you can always ask your preparer. He or she can give you a more complete analysis of your return and why they charged what they did.

Monday, February 25, 2013

Q.  Are there any costs of travelling we can deduct if we work for a company, and are full time RVers?

A.  If you are talking about getting to your job, the answer is no. That is a non-deductible commuting cost. Even if you live in another state, you may have made your employer's location your tax home, which is usually the case.

If however your employer sends you to a different area as part of your work, you may have some flexibility. As an employee, your best recourse is to see if your employer has a plan for reimbursement. This is the cleanest and simplest way to recoup your costs.  Barring that, much depends on the type of employment, if your employer sends you to off-site locations, etc. In this matter, details really count!