October Tax Talk Today: What You Should Know About ARRA 2009

From The IRS.gov Newsroom:

IR-2009-86, Sept. 30, 2009

WASHINGTON — Experts from the Internal Revenue Service and the tax preparation industry will discuss the many tax credits, deductions and incentives contained in the American Recovery and Reinvestment Act for 2009 on the Oct. 6 Internet airing of Tax Talk Today.

The American Recovery and Reinvestment Act contained benefits for:

* First-time homebuyers

* People purchasing new cars

* Energy efficient home upgrades

* Parents and students paying for college

The October program for qualifies for one CPE credit for tax professionals. To access the web cast at no charge, viewers can register online at Tax Talk Today.

Panelists include: Virginia M. Tarris, IRS tax law specialist; Amy Stanton, IRS program manager; CPA Gerard H. Schreiber, Jr, partner, Schreiber and Schreiber; and CPA and attorney Donna Rodriguez, managing partner, Donna L. Rodriguez, PLLC. The moderator is Les Witmer.

Tax Talk Today is a free, live, interactive webcast aimed at educating tax professionals on the most contemporary and complex tax issues. Viewers are encouraged to submit questions during the live broadcast. Tax professionals in need of continuing education credits should select Continuing Education at the Web site for more information.

They can view Tax Talk Today with Windows Media Player and Real Player; both are free software that may already be installed on your computer. If not, click the link for Installing System Software to view Internet Broadcast under “How to View.”

Subscribers can view live web casts as well as archived programs; listen to audio podcasts or read show transcripts through Dec. 31, 2009. Subscribers also can order audio and video recordings. A transcript and audio of the July 14 Webcast, “OPR: A Balanced Approach,” is now available.

Questions for the Tax Lady: July 27th, 2009

Every Monday I am going to post a set of answers to tax questions I’ve received over the past week. Additionally, I also seek out a few general tax questions from other users in the social communities I am active in. If you have a question you would like to ask me then check out the following links to my profiles. You can send me either a direct message or @ reply, and I will do my best to get an answer for you!

Question #1: Hey Roni, I am thinking about moving to Oregon as property values are lower there. I am hoping my income tax and property tax situation will be better as well as my business. I have one part time employee, and costs here in California are killing me! Would Oregon be better for me personal and/or business-wise?

This is tricky question as there are a lot of things you are going to want to consider in making your decision. First of all, I am going to assume that you have a business that can easily be moved to Oregon without suffering any reduction in revenue. Depending on where you move to you might find a property in Oregon cheaper then the average home in California. However, according to Wikipedia, the minimum wage in Oregon is actually 40 cents higher then in California.

As far as taxes, Oregon has no state sales tax while California levies a hefty 8% sales tax (the highest in the country). According to reports, business tax rates are lower in Oregon then they are in most places in the country. However, the type of taxes you are going to pay will depend on the type of business structure you have (sole proprietorship, corporation, etc). With regard to income taxes, California has a very progressive income tax range of between 1% and 10.3%. California’s 9% tax rate is only for taxpayers making between $47,056 and $1,000,000 per year, and the 10.3% rate is only for those making over a million dollars a year. On the other hand, Oregon’s income tax rates are much less progressive. The top tax rate is 9%, but it’s assessed on all taxpayers making $7,601 or more per year.

No matter what, moving to a different state is a big decision. To better understand if it would be a good financial move, I would recommend researching tax rates and property values in cities you are thinking about moving to.

Question #2: What are the tax and legal complications of either short selling or a foreclosure? Do I have to claim to the difference from sales price to loan amount as income on my taxes?

No. Whether you go with a short sale or foreclosure, you will not need to claim the difference between the sales price and new value as income. Unlike forgiven credit card debt, the Mortgage Debt Relief Act of 2007 prevents the IRS from taxing you on forgiven mortgage debt. If you do get a 1099 next January from your mortgage company then you will simply need to file Form 982 with the IRS to exclude the debt from your taxable income.

Question #3: Food blog tax deduction question… Someone told me they write off all their grocery expenses because they blog - is that possible?

Probably not. Moreover, the person could actually get in trouble with the IRS for writing off all of their grocery expenses.

People often make the mistake of assuming that just because they do something for a little extra income means then can deduct all kinds of unrelated expenses. Although your friend might be able to deduct certain qualifying expenses related to their blogging (if they are in fact earning income), they must be able to verify the expenses claimed were ordinary and necessary for the type of business he or she was in. An ordinary expense is one that is common and accepted in the industry. A necessary expense is one that is helpful and appropriate for the trade or business. An expense does not have to be indispensable to be considered necessary. Thus, if your friend blogs about food or cooking as a source of income, then he or she may be able to claim the grocery bills.

It is important to note that the IRS auditors are very aggressive with the self-employed and independent contractors when it comes to claiming business expenses. So, your friend should definitely seek professional advice if he or she plans on deducting any expenses related to his or her blog.

Questions for the Tax Lady: July 20th, 2009

As I mentioned last Monday, I am now doing a weekly feature on my blog titled “Questions for the Tax Lady.” Throughout the week, I am going to gather questions from friends and followers of mine on Twitter, MySpace, and Facebook that I will answer in this new weekly feature. In addition to answered questions asked of me directly, I also found a few other users on Twitter who posted random tax questions. Check out the questions and answers from last week below, or click one of the links to ask me your own question!

Question #1: How do I get an IRS levy released?

The IRS must release your levy if ANY of the following occur:

1. You pay the tax, penalty, and interest you owe (please see Full Pay Service).

2. The IRS discovers that the time for collection (the statute of limitations) ended before the levy was served (please see Tax Account Review).

3. You provide documentation proving that releasing the levy will help the IRS collect the ta owed.

4. You have an Installment Agreement, or enter into one, unless the agreement says the levy does not have to be released (please see Installment Agreement).

5. The IRS determines that the levy is creating a significant economic hardship for you (please see Currently Not Collectible).

6. The fair market value of the property exceeds such liability and release of the levy on a part of such property could be made without hindering the collection of such liability.

For more information check out this article on RoniDeutch.com.

Question #2: What are the tax legalities of an eBay business?

An eBay business should be treated just like any other home business. In fact, all income you make from eBay should be reported to the IRS, regardless of the amount you make. However, just like having a garage sale, you will only need to report the money you make if it is in fact income. Therefore, if you bought a computer for $1000 and sold it on eBay (or at a garage sale) for $100 then it is not income since you did not make any profit. However, if you make and sell products on eBay for a profit, then you should report the income to the IRS.

Although many people fear that eBay is required to send the IRS data for its users, their spokesperson Chris Donlay says this is not the case. “The IRS would need to provide us with a subpoena for a specific individual before we would provide any data. I don't believe this is something that would be typically done for a routine audit, though it theoretically could happen.”

However, just because eBay is not reporting the income does not mean it is ok not include it on your tax return. Remember that the IRS now has the ability to monitor bank accounts and if you are making regular deposits then they might get suspicious. To learn more about eBay and tax issues, check out this interesting article I came across this weekend.

Question #3: When did April 15 become tax day?

According to Wikipedia:

The {tax} filing deadline for individuals was March 1 in 1913 and was changed to March 15 in 1918 and again to April 15 in 1955. Today, the filing deadline for U.S. federal income tax returns for individuals remains April 15 or, in the event that the 15th falls on a Saturday, Sunday or holiday, the first succeeding day that is not a Saturday, Sunday or holiday.

Question #4: Is Schaumburg, IL Restaurant Sales Tax the Highest in the Nation at 12%?

Yes, the 12% sales tax levied on foods and beverages in Schaumburg, IL make it the highest sales tax rate in the nation. In addition to the state’s general sales tax the small tourist town also levies a 2% Village of Schaumburg Home Rule Food & Beverage Tax.

Schaumburg’s neighbor Chicago, IL has the highest sales tax rate of any major metropolitan city at 10.25%. However, these rates are based off of a relatively low state sales tax. California has the highest statewide sales tax at 8.25%, but nearly every city and town levies additional sales taxes. In fact, in the South Gate and Pico Rivera, CA the total sales tax is also 10.25%.

Questions for the Tax Lady

Although tax season may be over, U.S. tax laws and the IRS code gets more and more confusing by the day. With new credits and deductions, changes to health care on the horizon, and a filibuster proof majority in Congress, being an American taxpayer is more difficult than ever.

To help keep my friends and followers online informed about the ever-changing American tax code, I have launched a new feature on my blog called “Questions for the Tax Lady.” I am going to gather questions through my social networking accounts, and answer them in a weekly column on my blog. So add me as a friend, or follow me through one of the links below and send me a message, or @ reply with your questions. Then, check back next week to see all of my answers!