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*** Ask TaxMama Volume 7, Issue #325 September 9, 2005 ***
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http://taxmama.com/taxcalendar.html
09.15.2005 Corporate Tax Returns Due
09.21.2005 - 09.22.2005 EA Exam
10.17.2005 Personal Tax Returns Due
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JOB OF THE WEEK visit the NEW
http://taxmama.careerbank.com
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Do you care about children? Join Children's Aid Society, with a
budget of $77 million as an Internal Auditor. Keep them on track.
http://taxmama.careerbank.com/job.cfm/197232.htm
Take the new 2005 Salary Survey
http://www.careerbank.com/resource/ssurvey/salary_survey.cfm
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Dear Family,
Another week flown by.
You're seeing far too much depressing news on TV.
Between Katrina and the death of Chief Justice
William H. Rehnquist...and the confirmation hearings
for his replacement, John G. Roberts, there's barely
anything else being covered.
Did you know that this very disaster was foretold?
No, silly, not by Nostradamus. By National Geographic.
Read Katrina Foretold, in today's issue.
Here's another long ignored resource - the way to
opt out of all those annoying credit card offers:
Call (888) 5-OPTOUT, or by visit OptOutPrescreen.com
Apparently, we've had the right to do this for 10
years, but doing it by mail was too time-consuming or
obscure for the average person. The Opt Out website
is a joint effort of Equifax, Experian, Innovis and
TransUnion you favorite consumer credit companies.
Oh, yes, I want to thank all of you sent me notes
about the New York Times article about Online Banking,
http://www.nytimes.com/2005/09
/03/business/03banking.html
where I was quoted by Eric Dash. Keep an eye
out for his next article. I think you'll find TaxMama
in there, too - unless his editor cuts it for citing
the same source too often.
Great news, if you're a fan of the annual tax holidays
some state provide, here's a new one. There's talk of
a gas tax holiday. And several states are considering
the idea. Since taxes make a significant chunk of the
per gallon price...it would be a boon to drivers.
http://www.showmenews.com/2005/Aug/20050825News008.asp
A deadline is looming. Lulu and I are putting in
long hours finish up all the corporate returns.
We're playing detective, tracking down elusive
clients and equally elusive data. Such fun!
If you haven't heard from us about your personal
returns, don't despair. We'll call you when we're
done with the corporations. But, since I have to
be out of town most of next week, we have to finish
up today. So if you haven't responded to us, or
gotten us your corporate Profit and Loss Statements
and Balance Sheets, please do it NOW. Otherwise,
we won't be here to prepare it.
We have ONE last class in this summer's EA Exam
series - a 5-hour marathon on Saturday morning.
The students participating in the classes have been
wonderful. They are getting over 90% of the answers
right in class. If they keep that up - they can't
help but pass the IRS Special Enrollment Exam
later this month.
It's interesting how much more motivated people
are to study when you really want something,
instead of just having to do it for a grade.
Sometimes, waiting until you're older, or ready
to learn something, well, it just makes it easier
to do the studying. Of course, when you're older,
getting the time to study is harder, between jobs
and family. Clearly, though, practically everyone
is putting in hours each week.
So, back to work for me!
As for you, this is a good time to click on the
links to TaxMama's Podcast - TaxMama's Tax Quips.
You'll have fun with today's Tax Quips - about how
to select a career that won't be outsourced to
India or China.
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. NEW! POSTAGE STAMPS - THE ORIGINAL 1913 TAX RETURN
http://www.cafepress.com/taxmama.28979465
Or create your own custom postage - join
CafePress
http://www.cafepress.com/cp/info/storeref.aspx?refby=taxmama
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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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Join me in San Diego next week!
For Tax Professionals - Meet TaxMama
When: Tuesday, September 13. 2005
10:30 a.m. - 2:00 p.m.
Where: The Handlery Resort, San Diego, CA
Who: CSEA Chapter Meeting
What: Special Issues Affecting Clients With
Any Online Presence
How: To RSVP, call 800-642-1040. Leave a message.
CPE: 2 CPE credits
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Next Webinar - Note the New Date!
September 28, 2005
How to Run Your Business Instead
of Letting it Run You.
Guests, Joseph & Jacqueline Freeman
who've moved back to the farm...
and now control their lives and finances
Learn to get rid of your stress and
increase your income.
Please sign up here
http://taxmama.com/workshops/
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TaxMama's IRS Exam FINAL Review Class
NOT ACCEPTING ANY MORE STUDENTS
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USE THESE QUICKIE RESOURCES!
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101 WAYS TO BE YOUR BEST
http://www.1automationwiz.com/app/?Clk=1091429
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Small Business Taxes Made Easy
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Custom autographed book, just for you - $17.50
includes shipping in the continental US.
http://asktaxmama.com/go/autographed
Bonus: CD - Dan Janal interviews TaxMama:
Should I Incorporate or What?
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This Week's Tax Quips
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If you haven't subscribed yet, you're not
just missing some juicy tips. You're also
missing daily news and other commentary.
Please - accept a complimentary subscription
from your cheery TaxMama
http://www.taxmama.com/taxquips/
This weeks pearls of wisdom are at:
http://www.asktaxmama.com/podcast/
MONDAY - DARK - LABOR DAY
http://www.asktaxmama.com/podcast/
TUESDAY - Katrina Corporate Extensions
http://www.asktaxmama.com/podcast/index.php?id=50
WEDNESDAY - Closing Costs
http://www.asktaxmama.com/podcast/index.php?id=51
THURSDAY - Auto Pay Sales Tax
http://www.asktaxmama.com/podcast/index.php?id=52
FRIDAY - Can’t Outsource to India or China
http://www.asktaxmama.com/podcast/index.php?id=53
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Katrina Foretold
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You've probably already heard the shocking news that
this very disaster was predicted by National Geographic
writer,Joel K. Bourne, Jr., a year ago.
http://www3.nationalgeographic.com/ngm/0410/feature5/
No, he didn't have a crystal ball. He read FEMA (Federal
Emergency Management Agency) reports and did his homework
on the disappearing buffer of wetlands and other facts.
Aside from all the disturbing issues, and loss of life
issues, and loss of pets and animals running in packs
and needing to be put down and....
There is the issue of who is to compensate people for
their losses - especially when they don't have insurance.
The reason this is interesting is - if it can be proven,
in a court of law, that the city and state governments
of New Orleans and Lousiana were negligent in their
construction codes, or precautions, based on the
objective information at hand - these governments are
apt to be sued by all damaged persons and companies.
In addition, if the negligence can be proven, it's in
the best interests of the insurance companies to sue
the New Orleans and Louisiana governments to recover
the funds they've paid out as a result of the 200+ ft
breach in at least one levee...and breaches in others.
Have we ever seen a whole state go bankrupt before?
(We almost saw California do it...and that's still a
possibility...just kidding, I hope.)
But, I'm curious, what provisions are in place for
our Federal government to shore up a state, when the
entire state is insolvent?
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Non-US IRA Beneficiaries
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From: Pittsburgh, PA
Dear TaxMama,
What are the IRA distribution rules for a traditional
IRA to non-American citizens?
The US domiciled parent passed away this year and has
three children who are South African citizens and live
in South Africa.
I would like to know what tax implications the children
will have and what options they have.
Thanks.
Nolan
<TaxMama Replies>
Hi Nolan
They'll have pretty much the same treatment
as US persons, when it comes to the distributions.
They'll have to pay taxes on the money.
Since their parent never paid taxes on the
money deposited into the IRA, or the earnings,
someone must.
There won't be any penalties for early withdrawal,
since the distributions will be due to the death
of the owner of the account.
However, since they are not US citizens or residents,
I don't believe they would have the option of rolling
over the account to their own IRAs. They'll have to
take it all at once, when the estate settles and
releases the funds.
Someone will have to arrange to file Form 1040NR
(non-resident tax returns) for them.
I don't know if they have any options. But if they are
interested in hiring an expert in the field of
expatriate and non-resident alien taxation, there
is someone I can recommend. And his fees are quite
reasonable.
Best wishes,
Eva Rosenberg, MBA, EA
http://www.TaxMama.com
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Mystery Shopper
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From: Houston TX
Dear Tax Mama,
My questions have to do with mystery shopping as a
business. First let's assume this is a legitimate
business with the intent to make income. I want to focus
on what is income and what is not income.
Let me give you several examples and your opinion would
be appreciated.
Example 1. I am paid a fee, plus meal reimbursement to
mystery shop a restaurant. My thoughts are the fee is
income, but the meal reimbursement is not income, nor is
it subject to 50% limitation, since I submitted
"accountable plan" type info to be reimbursed.
Example 2. I am paid a fee and oil change amount as
reimbursement to mystery shop a lube shop. This is
where I have difficulty in determining what is income
and what is not. Since I received a benefit from the
oil change, is this income? If the oil change is
income, then why isn't the meal in example 1 income,
perhaps to the extent of the actual meal cost vs what
I would normally have spent on a meal?
Thanks,
Joe
<TaxMama Replies>
Dear Joe,
Well, first of all, my friend, it IS a legitimate business.
I remember working for a movie theatre waaay back
when the world was young. And we employees were
told to watch out for 'shoppers'...with little hints on
how to identify them. So this kind of service has been
around for many decades.
Your questions are excellent. You've selected
perfectly
good examples. In each case, you receive a benefit.
And I could see IRS wanting to pursue that angle.
However, what you're really doing is being paid to do
research or be a detective. I know that not everyone
will agree with me. So, it will be interesting to see
the reaction of the Pros and the various folks at IRS.
[Your feedback would be most welcome.]
You are being paid to test the services and products
for quality control purposes and to write extensive
reports on the result of each encounter.
Here's how I would approach this if I were defending an
audit (not including extensive research for precedents):
1) If the 'businessowner' was actually treating this as a
business, with a profit motive, designed to generate
sufficient income to live on, I would take deductions for
100% of the costs of the items purchased. Of course,
I would report 100% of the reimbursement as income.
2) If the 'businessowner' was not treating this as a
business, simply as a way to have some adventure,
or to get paid to try out different things, and never
really makes a profit, or an insignificant profit - then,
I would split all the costs of things like the oil change
for which you get a long-term benefit.
The meals? It doesn't make sense to treat that as meals
and entertainment. It IS research. So I would still
deduct 100% of their cost
However, in all cases, I would not report meals as 'meals'.
I would probably report them as either research, or under
cost of goods sold, on the 'Other' line, as "reimbursed
expenses".
Joe, if you're serious about doing this for a living, DO
pay tax professional for a proper, written opinion.
Ask TaxMama isn't designed to offer specific advice on
tax law - just general ideas - and to entertain and amuse.
Here are some sources of information:
Confero hires shoppers and provides no tax advice:
http://go.asktaxmama.com/mystery1
Service Evaluation Company
issues their reimbursement checks separately from
their checks for services rendered. It's possible that
most companies do the same. As a result, they issue
their 1099s only for the services, not the reimbursements.
http://go.asktaxmama.com/mystery2
In which case, for tax purposes, you could simply report
the income, and related business expenses - and keep the
reimbursements off your books, just as an employee with
an accountable plan would do.
But if you're ever audited - you'd better have a good record
off all the expense reports you turned in, copies of the
checks you were paid for reimbursements, and copies of the
receipts you submitted. So keep them in a separate file for
at least 6 years after each return is filed. (IRS typically
will open tax returns for audit for up to 6 years if they
think there was fraud.)
Do some research online - search Google for these terms:
mystery shopper tax treatment
http://www.google.com
It sounds like fun!
And you can actually earn a living at it - especially if
you can combine work from several companies in each
shopping trip, or in each day.
Best wishes,
Eva Rosenberg, MBA, EA
http://www.TaxMama.com
Author of the new book from McGraw-Hill,
Small Business Taxes Made Easy
http://www.taxmama.com/AskTaxMama/book/
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Because We Care
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HURRICANE KATRINA
To help or to get help:
First.gov - http://go.asktaxmama.com/KatrinaRecovery
FEMA - http://www.fema.gov/news/newsrelease.fema?id=18473
==========
Don't let yourself or your friend feel
helpless.
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Helping Seniors keep their pets
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Talk to Linda Baker for more information
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The Jeremiah Society asks "Who Will Care for the Children?"
Today, many of these people outlive their parents. And therein
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will care for them? And will they be able to care for themselves?
The Jeremiah Society, is working to help enhance and enrich the
lives of developmentally disabled teens and adults in the Jewish
Community Please Call Rose Lacher, (714) 997-8193
http://www.jccoc.org/adults.html
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MONEY FUNNIES
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OIL SHORTAGE 101
A lot of folks can't understand how we came
to have an oil shortage here in our country.
Well, there's a very simple answer.
Nobody bothered to check the oil.
We just didn't know we were getting low.
The reason for that is purely geographical.
Our OIL is located in
Alaska
California
Oklahoma
and
Texas
Our DIPSTICKS are located in Washington DC
------
Contributed by a friend, who shall remain nameless
[Remember, we're always looking for SHORT, clean humor!]
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IRS and Tax NEWS
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Courtesy of SmartPros.com
Report: Tax Confusion Can Cost Students
Aug. 31, 2005 (Associated Press) — Confused by multiple
deductions, credits and savings accounts that help pay
for college, students and their families miss out on
hundreds of dollars in tax benefits, a government
report said Monday.
[Read all about it!]
http://accounting.smartpros.com/x49555.xml
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CAREER CENTER http://taxmama.careerbank.com/
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Career Center provides members like you with the
best tools for finding employees in our industry.
Explore the center today and take advantage of its
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searches. As a member of the leading online career
center network for banking, finance and accounting
professionals, you can post your job on our Career
Center once and it will automatically be seen on
90+ accounting, finance and banking organization
career centers. Visit the TaxMama's CareerBank
http://taxmama.careerbank.com/
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TaxMama On the WWW & Tooting Her Own Horn
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Critical Dates http://taxmama.com/taxcalendar.html
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Ask TaxMama is published by the good folks at http://taxmama.com
ISSN 15320790 © copyright, Eva Rosenberg, 1999 - 2005
TaxAnxiety Inc. P.O. Box 280549, Northridge, CA 91328
Written (e-mail) permission is required to copy or redistribute this
publication or to use it on your site. mailto:taxmama@taxmama.com
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