*** Ask TaxMama Volume 7, Issue #316 July 8, 2005 ***
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http://taxmama.com/taxcalendar.html
07.15.2005 Partnership/Trust (1065/1041)Returns or Extensions
Due
07.21.2005 Last Day to get Personal info to me to file timely
08.02.2005 2nd Quarter Payroll Taxes Due
08.02.2005 2nd Quarter Sales Taxes Due
08.16.2005 Personal Returns or Extensions are due
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JOB OF THE WEEK visit the NEW http://taxmama.careerbank.com
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Be a champion - for Bristol-Myers Squibb in NY:
Manager, Taxation Business Process Champion
http://taxmama.careerbank.com/job.cfm/157497.htm
Take the new 2005 Salary Survey
http://www.careerbank.com/resource/ssurvey/salary_survey.cfm
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Dear Family,
Wow...You give London an Olympics and
a bunch of jerks get mad. What pettiness.
Is it really necessary to kill people
because you're miserable in your life?
If they devoted as much energy and resources
to treating their children well, to giving
them an education that would help them survive
and prosper in the modern world, they'd love
their lives.
Do you have any idea how many millions of
dollars al-Queda and their ilk pour into their
murderous activities? Why can't they use that
money to improve lives instead of destroying them.
Cowards!
Moving on to more pleasant topics...
I finally got to go out and see a movie or
two. It's been a long while. Have you seen
War of the Worlds? I did.
http://taxmama.blogspot.com
The good folks at The Principal have invited
you to join them at another session of their
WOMEN IN BUSINESS TELECLASS SERIES. Please
see the details under Workshops, below.
And due to some scheduling conflicts this
past week, I've moved the Copyright workshop
to next week. So, if you're in town, come
join us. After all, if you've got a website,
or have a book inside you...you'll want to
know how to protect your intellectual assets.
We've had lots of interesting questions about
estate and international issues. They are just
too long to post here. And there have been so
many of you with good, valid, important questions
that I really haven't had time to help.
Please, remember, Ask TaxMama is designed to
be a form of entertainment and amusement, much
like Dear Abby. It's not designed to replace
advice from your tax professionals. I try to
do my best to give you the best advice in the
world. But I can't always do it in time. Or
for everyone.
Please, don't wait for, or rely on, me to give
you all the answers to your tax questions.
And, for heaven's sake, don't proceed without
getting advice.
There are a LOT of good tax professionals in
your communities. Please seek them out.
Just in...National Taxpayer Advocate Nina E.
Olson has delivered her annual report to
Congress. This year's focus is to suggest that
IRS back off a bit on the zeal for enforcement
and put more emphasis on encouraging and
assisting voluntary compliance.
Olson writes. "As Congress noted in RRA 98, the
IRS is far more than an enforcement agency - it
must serve all taxpayers. Thus, the IRS should
specifically state that its primary organizational
goal is to increase voluntary compliance."
If you really think about it, you do want IRS
to enforce the tax laws and to collect lots
of money. If IRS were to collect ALL the taxes
due, perhaps we could cut taxes for everyone.
So, yes, IRS, enforce the laws - just, please
do it to someone else. Not me.
Time to go. You have a lovely weekend.
Best wishes,
Eva Rosenberg, EA
Your TaxMama is watching...out for you.
P.S. If you're in business, you MUST read
Small Business Taxes Made Easy
http://www.taxmama.com/AskTaxMama/book/
P.S.S. TaxMama has baby clothes!
http://www.cafepress.com/taxmama/138360
P.P.S. TaxMama is scheduling speaking/teaching
engagements for summer 2005. (Calendar is filling up)
mailto:taxwriter@gmail.com?Subject=Speak4Bucks
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To comment on any articles in this issue, please,
DON'T send me back the whole issue. Send a note to
mailto:taxmama@taxmama.com?subject=AskTaxMamaComment
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ADDRESS CHANGES - Please, do NOT send them to me to do.
There is a link at the bottom of this issue. Please click
on it and you will be able to make updates and changes
yourself. And faster.
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Media Tour and Classes
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TaxMama's IRS Exam Review Class - Self-Study
Listen, read, test yourself - pass the exam
http://irsexam.com/register.php
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Copyright your Book, Blog and Blather
Please join us Wednesday, July 13
at 1:00 p.m. PACIFIC
Download your free
iConference software now
http://taxclass.ipowerworld.net/freemember.aspx
[If you need help signing up, please contact Donna Woodbury.
You can reach her at donna.woodbury@gmail.com or 707.884.4696
Don't hesitate to contact her - she really IS eager to
help set you up.]
----
Our Offer in Compromise workshop this week was terrific.
I did record it.
And we have the text information. Several people
expressed an interest in getting a copy. I'll have
them ready to ship next week.
http://www.1automationwiz.com/app/netcart.asp?MerchantID=27884&ProductID=2424795
EAs can get 1 hour CPE for this workshop
http://www.1automationwiz.com/app/netcart.asp?MerchantID=27884&ProductID=2424798
Have a lovely weekend.
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USE
THESE QUICKIE RESOURCES!
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AND - get discounts wherever you're already shopping.
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$3 of all apparel, including intimates.
Coupon code: LOLSAV
Sale ends: 07/14/05
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Summertime, when the bookkeeping's easy.
Time to catch up on your business and read
Small Business Taxes Made Easy -
It will increase your business cash flow
by at least $10,000 - probably more.
Custom autographed book, just for you - $17.50
includes shipping in the continental US.
http://asktaxmama.com/go/autographed
Just put the name of the person, or any special
message you want to include, in the COMMENTS box
on the order form.
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This Week's Tax Quips
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If you haven't subscribed yet, you're not
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missing daily news and other commentary.
Please - accept a complimentary subscription
from your cheery TaxMama
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This weeks pearls of wisdom
http://www.asktaxmama.com/podcast/
MONDAY - Business Loans
http://www.asktaxmama.com/podcast/
TUESDAY - 4th of July Fun
http://www.asktaxmama.com/podcast/
WEDNESDAY - 4th of July Riddles
http://www.asktaxmama.com/podcast/
THURSDAY - Becoming an S-Corp
http://www.asktaxmama.com/podcast/
FRIDAY - Filing Status
http://www.asktaxmama.com/podcast/s
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Rent-to-Own - a Home?
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From: Fridley,Minnesota
Dear TaxMama,
I'm considering purchasing a home via
the rent-to-own method, also known as a
land contract sale, I believe.
Can I legally claim the tax advantages of
home ownership if this is spelled out in
the contract?
Thanks in advance!
Ray.
<TaxMama Replies>
Dear Ray,
I just know I'm going to get a lot
of flack from the Pros on this, but...
Yes, you can.
In essence, even though you're not on
title, you may as well be. (It's a little
complicated, tax-law-wise, but in the end,
it works.)
However, I am not as concerned about your
tax issue here, as I am about your ultimate
ownership issue.
Plaese see if there is another way to make the
purchase, like the good, old-fashioned mortgage.
With a land contract, the seller can take back the
property at any time if you ever get behind, without
much trouble.
When you hold normal title, and have a mortgage,
you have a much bigger cushion if you ever fall
behind.
I have seen and read about too many instances
where the seller in a land contract takes some
arbitrary action, and the buyer loses the home.
Besides, as long as the property is still in
the seller's name, if he gets into financial
trouble, his creditors can take your home!
That's true, even if you've made 300 of the
360 payments!
Please, Ray, check with an attorney and get
the overview of all the pitfalls of land
contracts before you make this purchase. OK?
Best wishes,
Eva Rosenberg, MBA, EA
http://www.TaxMama.com
Author of the tax book from McGraw-Hill,
Small Business Taxes Made Easy
http://www.taxmama.com/AskTaxMama/book/
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S-Corp at Home
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From: Port St. Lucie, FL
Dear TaxMama,
I just finished your "Small Bus Taxes Easy" book
and found it to be very interesting.
I have two questions please:
1. Home Office. Can a Sub-S take the home-office
deduction?
2. Sub-S >2% Shareholders. If a shareholder is also
an employee, can he/she join in the "benefits" like
the others?
THANK YOU.
Bob
<TaxMama Replies>
Hi Bob
Thank you very much for the kind words.
1) Yes. But it won't be quite the same.
a) Your Sub-S will have a rental agreement between
you and the company. The S will pay a specified
amount of rent of each month.
b) And it will pay utilities, if you so chose.
c) You will report the rental income on your Schedule
E On the Schedule E you may deduct the business use
percentage of your mortgage interest, your utilities,
your homeowner's insurance, repair and maintenance,
etc. And the depreciation on the business portion
of the home.
2) Aw, no. Anytime you have an S-Corp, the owner
MUST be an employee. And, as a 2%+ employee, the
benefits are generally not deductible. So, if you're
looking to tap your business for lots of benefits and
retirement deposits, and such, consider a C-corporation.
Do your accounting on time, and you'll be able to
ensure there are no profits left in the company at
the end of the year, to be taxed.
I know, you're going to hear/read that health insurance
IS deductible by an S-corp owner. Let's just get that
out of the way, right now, OK?
Here is the operative phrase in the law:
"The cost of these health and accident insurance
premiums paid on behalf of the greater than 2% ]
S corporation shareholder-employee is deductible
by the S corporation and reportable as additional
compensation to the shareholder."
So, you see, the net effect is -0-.
The S-Corp deducts the premiums and adds them
to your wages.
The S-corp's profits pass through to your tax
return.
As far as I'n concerned, it's less expensive and
less paperwork not to do in the S-corp. But, hey,
that's what I do for a living Imagine if you have
to do this yourself?
At least, living in Florida, you don't have to
worry about most state taxes!
And remember, build that management team!
Best wishes,
Eva Rosenberg, MBA, EA
http://www.TaxMama.com
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MONEY FUNNIES
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Error Message
I was having trouble with my computer.
So I called Harold the computer guy, to come
over. Harold clicked a couple of buttons and
solved the problem.
He gave me a bill for a minimum service call.
As he was walking away, I called after him,
"So, what was wrong?"
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I used to like Harold.
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Contributed by Floyd T Greenman,EA of Northridge, CA
[Remember, we're always looking for SHORT, clean humor!]
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IRS and Tax NEWS
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IRS Statistics
courtesy of IRS
~ S corporations continue to be the most prevalent type
of corporation filing Form 1120, U.S. Tax Return for a
Corporation.
For Tax Year 2002, about 59.8 percent of all corporations
filed a Form 1120S. The total number of returns filed by
S corporations for Tax Year 2002 increased 5.6 percent to
nearly 3.2 million, from nearly 3.0 million reported in
Tax Year 2001. S corporations became the most common
corporate entity type in 1997. Since then, S corporation
return filings have increased by 702 thousand returns.
http://www.irs.gov/taxstats/bustaxstats/article/0,,id=96405,00.html
~ Partnerships with Rental Real Estate Income (including
LLCs reporting as partnerships)
Number of partnerships 2,242,169
Number of partners 14,328,108
Total assets 8,866,560,101,000
(nearly $9 trillion in real estate assets)
Total income 2,582,060,669,000
(The assets produce over 29% income...
most of which is eaten up by expenses,
of course.)
Total deductions 2,455,848,170,000
Net income (less deficit)
from trade or business 126,212,499,000
And it all yields about a 1.5% profit.
For more fun interpreting statistics
http://www.irs.gov/pub/irs-soi/02pa01ap.xls
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