Gina's Tax Tips

Get a Refund on your NOL now

2009-05-27T10:21:00.000-05:00

If you own a business that had a net operating loss in 2008 you may be eligible to get a refund on that loss now.

The IRS has expanded the net operating loss carryback for up to five years instead of the usual two. This special option is available only until September 15, 2009 for calendar year taxpayers so find a tax preparer to help you file your claim now.

Please keep in mind, as with everything related to taxes there are limitations on this carryback, so ask your tax professional if your business qualifies.

Best wishes,

Gina

http://GLGcpa.com

Bonus & Section 179 Depreciation

2009-05-26T10:11:00.000-05:00

As an attempt to help stimulate the economy the government has increased the limits on the Section 179 deduction and extended the 50% bonus depreciation allowance.

For businesses who purchase depreciable assets such as furniture and equipment in 2009 they will be able to deduct up to $250,000 of those purchases under section 179 deduction. Having said this there is still a $25,000 limit on sport utility vehicles purchased by businesses.

Bonus depreciation generally enables businesses to deduct half the cost of qualifying property in the year it is placed in service.

There are limits to the above deductions so please consult a tax adviser regarding your specific situation.

Best wishes,

Gina

http://GLGcpa.com

More Take Home Pay

2009-05-14T07:40:00.000-05:00

Back in February when we were all scrambling to get our tax paperwork in order so we could file away, the IRS issued revised withholding tables based on the "Making Work Pay Tax Credit". This means more people will have less Federal tax withheld than they expected.

Since your employer uses these tables regardless of your ability to take advantage of the "Making Work Pay Tax Credit" you may owe more taxes next year or if you're lucky just get a smaller refund than expected.

As a general rule, the following people are more likely to be adversely affected by the withholding tax table adjustment:

Taxpayers filing jointly with their spouse and both spouses work
Taxpayers with multiple jobs
Taxpayers who are collecting Social Security and also have a job
Taxpayers who intentionally over withhold their taxes as a savings device (which I highly recommend not doing).
Taxpayers who received an Economic Recovery Payment

In order to avoid any surprises in April 2010, I highly recommend that every taxpayer review their tax situation as soon as possible and make any necessary adjustments in your withholding and/or estimated tax payments.

Best wishes,

Gina

http://GLGcpa.com

Engery Tax Credits

2009-04-24T07:29:00.003-05:00

Before you start working on your home this year take a closer look at the energy tax credits available and you just might save a couple dollars in taxes.

Thanks to the American Recovery and Reinvestment Act (ARRA) of 2009 homeowners can get bigger tax credits than in the past for energy efficiency improvements or installing alternative energy equipment. This new act of legislation provides for a credit of 30% of the cost of qualifying improvements up to $1,500, such as adding insulation, energy-efficient exterior windows, and energy-efficient heating and air conditioning systems.

In addition, according to IRS Notice 2009-41, the new law also eliminates the cap on the 30% tax credit for alternative energy equipment, such as solar water heaters, geothermal heat pumps and small wind turbines, installed in a home.

For a list of the energy related tax benefits, please visit this page on the IRS website.

Best wishes,

Gina

http://GLGcpa.com

Amending Your Return

2009-04-23T09:28:00.000-05:00

Tax season is over and now you've reviewed your return and you found an error. Should you amend your return?

In general it is advised to amend your return if you discover that you incorrectly reported the following items:

your filing status
your dependents
your income
your deductions
your credits

If you simply discovered a mathematical error on your return, don't worry about it. The IRS will make the correction for you. If you forgot a form the IRS will send you a notice requesting it - just wait for their letter and do as they request.

If you determine that you should amend your return please do so within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later If you are filing to claim an additional refudn, wait until you have received your original refund before filing your amended return. If you owe additional tax you should amend your return and pay the tax as soon as possible to minimize interest and penalties.

Best wishes,

Gina

http://GLGcpa.com

Expecting A Refund?

2009-04-10T09:20:00.000-05:00

I've received several emails with questions about a tax refund that they are expecting this year and I thought it would be easier to try to answer them all in this article rather than post a lot of similar emails.

If you entered your banking information on your tax return then your refund will be coming in the form of a direct deposit. If you did not, then you will receive a paper check.

If you attached Form 8888, Direct Deposit of Refund to More Than One Account, then your refund will be allocated in the way that you chose all by direct deposit.

If you filed your return electronically your refund should be received within three weeks, give or take. If you filed a paper return your refund will be issued within six weeks, give or take.

You can check the status of your refund by phone or internet. You can call the IRS Refund Hotline at 800-829–1954 or you may prefer to check online at http://irs.gov and click on the link "Where's My Refund?". Please have your tax return in hand when you do this as they will ask you for verification information which can be found on your return.

I hope that answers your questions.

Best wishes,

Gina

http://GLGcpa.com

Gift Basket Income-Deduction

2009-04-10T06:16:00.000-05:00

Lanna writes:

I have a question , I have a small busniess, and have come up with a plan to Adopt a grandparent for mohters day. which means I would go to local busniess for $25 they would sponser a lady in a nuring home or hopsic that $25 would in purchas a small gift that i would intrun give that lady. What is the law on the tax side of the nursing home or hospic care?

My reply:

From my understanding of your post, the nursing home wouldn't come into play at all because they would not be receiving anything (the lady in the nursing home does) and they aren't paying anything (the businesses are).

Lanna's response:

That is correct ... so does that effect the nuring homes taxes if they are not the ones receiving but their residents do? I belive that the sponser would be able to write that off their donation.

My final reply:

Lanna,

The sponsor is the person who is paying the money, which I believe you said the individual businesses would be paying the money. They get a deduction for the money they give you.

You receive the money, so depending on your type of business you need to either record it as income or contribution received (if you're a non-profit). Then you spend money on the gift, which you get to deduct.

The lady in the nursing home receives your gift. Since it is a gift the lady in the nursing home does not have to report the receipt of the gift on her tax return.

The fact that the lady happens to be living in a nursing home does not come into play at all. There is no transaction between anyone and the nursing home (at least not the way I understand your email), so there's no accounting to be done on the nursing home's books. No income/no deduction.

The only way the nursing home would come into play at all is if YOU are the nursing home. And if so, I already explained how that would work above. What you've described in your email is not a sponsorship.

This is an extremely busy weekend for me so please excuse me for my directness.

Best wishes,
Gina

http://GLGcpa.com

My Brother Supports Me

2009-04-09T06:11:00.000-05:00

Anna writes:

Gina,

Hello, I hope you can help me with my question. I gave up my career job to take care of my brother who is disabled and unable to care for his own needs. He is now a quadraplegic and he gets a veterans pension and a long term disability payment from when he worked. Plus he gets some social security as well.

The VA "pays" me for his bowel and bladder care at a small rate of $400 dollars a month. For this I get a 1099 and they declare me an independant contractor. I pay taxes on this amount but my real question is about our living situation and household money. My brother doesn't give me a set amount of money but all of our bills are combined and whenever i need something he gets it for me. He has plenty of money to do this and it works out well for us. I don't do this for the money anyway but am I supposed to be paying taxes on money he gives me? It seems to me it is no different than two people in a relationship together where one gives to the other. although I admit, it seems there could be a blurred line here??

I did ask this same question to another tax professional on MSN and he said I am ok because it is household money but i want to be sure. Are there specifics that would make it "not" household money? For instance, I have maintained my credit card in my name and some of the bills are in my name although the bills are always paid by my brother. This is to keep my credit up and in good standing.

We have discussed the possibility of trying to separate it out more clearly so that I could claim an actual income and get back on the "working persons grid" but have not decided what to do.

Not sure if it is important for your consideration but I live with him as well. Thank you for your feedback if you are able to consider my situation!

My reply:

Hello Anna, thanks for visiting.

You didn't say if you're living in a house or apartment. If you're living in a house, who owns it?

Assuming it's a house and your brother owns it, this is really a little bit tricky because of one point --- your brother appears to be supporting you. Because of this, you are his dependent. Does he claim you as his dependent on his tax return?

Whether or not he claims you as a dependent on his tax return, you need to indicate on your return that you may be claimed as a dependent on another return and thereby give up your own exemption. Once you give up this right and do not take your exemption, then the money your brother is paying for your household expenses is not income to you.

Best wishes,
Gina

http://GLGcpa.com

Borrowed Against 401K

2009-04-08T06:08:00.000-05:00

Tsehai writes:

Hi,

My husband got laidoff and now we owe $10,000 IRS tax due to money we borrowed aginst his 401K prior to his layoff. If he was still working the money we borrowed would have continue to be paid from his pay check and the borrowed money would not have been added to our 2008 earning. Due to the unfortunate situation, now, we are subjected to 10% penalty for early withdrowal and state and federal taxes. Is there any thing we can do to not pay the 10%penalty for early withdrowal and federal and sate taxes?

Just curious,
Thanks!

My reply:

Read the terms of the loan. Most loans are structured such that you can continue to make payments on it after you get laid off, just not through payroll withdrawal. If you continue to make the payments, then there shouldn't be a problem.

Best wishes,

Gina

http://GLGcpa.com

Nondeductible IRA contribution limit

2009-04-08T06:01:00.000-05:00

Bob asks:

After reading your post "Nondeductible IRA to Roth in 2010", I had this question.....

My wife and I are over 50 years of age. We do have retirement and deferred Comp at work. What is the dollar limit on how much we can put in the non deductible IRAs as we are not qualified to contribute in the traditional or ROTh IRA due to income limit? I retired on 6/30/2008 with an annual pention of $42,500 (paid monthly) for my lifetime. Can I rollover $21,250 of my pension from 2008 to IRA?

My reply:

Bob,

You are able to roll over your pension into an IRA as long as you do it before it is distributed. It sounds like that didn't happen, since you said 2008 and it's 2009. You can use your distribution to contribute to an IRA, but you're restricted to the yearly IRA contribution rules. If you were both over 50 as of 12/31/2008 then you can both make $6,000 non-deductible contributions ($12,000 in total - $6,000 for each of you) to your own Traditional IRA for 2008 and 2009.

Talk to your plan administrator and they should be able to help you.

Best wishes,
Gina

http://GLGcpa.com

Conversion of Primary Residence to Rental

2009-04-06T05:54:00.000-05:00

Coy Asks:

Hi Gina,

I just read in your blog on this topic - my question is an easy one I think, and I'm thinking I already know the answer...

I purchased my "old" home in 1989 for about $96,000. I purchased a new home in April of 2008 and converted the old one to a rental.

In terms of depreciation, "...lesser of the actual cost Vs. fair market value..." I'm thinking that this means $96,000 rather than the (apx) $210,000 value on/about 5/1/2008?

Thank you

My reply:

Coy,

Yes, you are correct, you will have to depreciate the $96,000 figure as that is the lessor of the two.

Best wishes,
Gina

http://GLGcpa.com

Non-employee Compensation

2009-04-03T05:50:00.000-05:00

Greg Asks:

i worked for the Miami Herald delivering papers and on my tax form it says its considered nonemployee compensation. what does this mean?

My reply:

Hello! Non-employee compensation means that you are not their employee, but instead an independent contractor. Independent contractor's complete Schedule C on their tax return, which allows you to deduct all your expenses.

If you'd like some help with your return please consider my tax return preparation services.

Best wishes,

Gina

http://GLGcpa.com

Deduct Home Improvements

2009-04-01T05:44:00.000-05:00

Kristin asks:

Hello,

I found your article "Deducting Home Improvements as Medical Costs" online and was wondering if you could help me with a question I have.

To what extent and under what conditions may major medical-related home installations (i.e. – elevator, bed lift – if paralyzed, etc) be accelerated versus deferred?

Any help would be appreciated.

Thank you.

My reply:

Hello Kristin, I would like to help you, but I'm kind of pressed for time right now so this is a short answer and if you need further explanation, please let me know....

accelerating the deduction would be the ability to claim it before you sold the house - the ability to expense a portion or all of it now. This is generally allowable if the item is not expected to last more than one year.
deferring the deduction would be adding the cost to the basis of the home and then obtaining the deduction when you sold the home (reducing any gain on the sale). This is generally done when the item is expected to last more than one year.

I hope that helps.

Best wishes,
Gina

Hire Your Children

2009-03-29T05:37:00.000-05:00

Scott Asks:

Hi:

I saw an article you wrote about hiring your children or parents. I'd like to know if I can do something similar with my chidlren and the small lawn service I have.

My lawn service grossed $15k in 2008. My wife earned $34k in 2008 from her job. We didn't pay any taxes this year as my business expenses equaled my revenue.

For the upcoming 2009 year, I would like to employ my 14-year old son for a good bit of the work and my 12-year old daughter for some as well. Do I need to complete any documents before hiring them in order to report their wages at the end of the year?

I assume I can deduct their wages on schedule C and their income will be tax free. I don't know if they will need to file a 1040 return or not.

Any help is appreciated.

Thanks

My reply:

Hello Scott, thanks for reading.

When you hire anyone, including a relative, they will need to complete Form W-4 and Form I-9. In addition, it wise to have an employment contract between you, stating what you expect from them in return for their wages. Since you are planning on hiring family make sure that you document how you determined the wage you are paying them as you are only allowed to deduct a reasonable wage for the services rendered. In addition, check your state child labor laws to make sure you comply with all of their requirements.

Make sure you pay them with a company check.

If you don't already have an Employer Identification Number (EIN) from the IRS. This is the employer number you will use when you submit your quarter Form 941 or yearly Form 944, which reports any Federal, Social Security and Medicare taxes, yearly Form 940 for Federal Unemployment taxes, if any and their W-2s.

You will have to check with your state website to see if you need a state identification number and when and if you are required to withhold and collect state taxes and/or when/if you need to pay unemployment taxes.

At the end of the year you would issue your children Form W-2, which they will use to complete their taxes, if they need to file. This will depend on all of their income. They will NOT be filing Schedule C as employees receive Form W-2. Most children cannot qualify under the independent contractor rules as they do not have the experience to work without supervision (which is just one of the many factors that are considered).

Best wishes,
Gina

http://GLGcpa.com

Home Office Deduction

2009-02-25T20:47:00.000-06:00

Madeline asks:

Hi. I'm a married, employed taxpayer. My husband is retired, collecting Social Security. He does all the maintenance on our 5 rental properties. My question has to do with office expenses. I'd like to deduct a portion of our cell phone expense and Internet expense, because we use the cell phones substantially for the rental business and we do all our advertising of properties via the Internet. We have a home office where we take phone calls, track receipts, and so on. Can I deduct this home office? If so, where? We were planning on filing the 1040 with a Schedule E, but had not planned on including a Schedule C. Thanks.

My reply:

Hello! In order to take the home office deduction, you need to use that portion of your home "exclusively" for your businesses. If you use it for personal reasons, then you cannot claim the home office deduction. If applicable, you would report these expenses on Form 8829, which will flow to Schedule E.

In order to claim cell phone or internet charges you need to keep a log book indicating the time spent on businesses purposes vs. the time spent personally. The business portion would then become deductible. You would report these expenses directly on Schedule E.

Best wishes,
Gina

http://GLGcpa.com

IRS forces Employer to Change Status of Worker from Independent Contractor to Employee

2009-02-23T20:44:00.000-06:00

Janice asks:

Hi! I am a court transcriber. I have always been a subcontractor (24 years). I always paid estimated taxes and filed Schedule C and self-employment tax, business use of my home. I do all my work from home. I do the bulk of my work for a company called CRA. Last year the State of Vermont, Department of Labor, determined that I was not a subcontractor for this company, that I was an employee. Anyway, this year we got W-2's. Taxes were deducted. I also did a small amount of work ($6,000) for others which I did get a 1099 for.

My question is this: I still have all the same expenses I had previous -- supplies (paper, toner, binders, etc.,), services such as trash pick-up, internet, postage, equipment repairs -- and also I bought a new computer for my work last year -- all the stuff it takes to run my home office. I have to report my W-2 income on Line 7 of the 1040. I used to report it on the Schedule C, Line 1. On Schedule C, Line 1 this year I only put my $6,000 1099 income, and went ahead and put all my expenses on the Schedule C, as I have in the past, I come up with a huge loss -- which is not accurate. How do I take advantage of all my expenses while having a W-2 income? As I said, the only thing that's changed is I have a W-2 and the company is sending taxes in for me, instead of my doing it myself. Thanks for any help you can give me

My reply:

Hello Janice!

How you will need to report things this year....

W-2 income on line 7 as you stated. Then the portion of the expenses that are related to that income belong on Form 2106, Employee Business Expenses.

Then you'll still have your Schedule C with your Form 1099 income and the portion of your expense that relate to that income.

I hope that makes sense.

Best wishes,
Gina

http://GLGcpa.com

Dependent

2009-02-17T20:41:00.000-06:00

Andy writes:

well here is my issue...

i am actually contacting you in regards to my girlfriends current tax situation... to be frank... her mom and step dad are trying screw (for lack of a nicer term) her by claiming her as a dependent (even though we are not totally sure they have the right to do so.)

well here is the situation...

In 2008 my girlfriend (melissa) was attending colorado state university (all housing costs/tuiton/etc) come from student loans in her name. He mom and step dad only cover her car insurance and her cell phone bill, roughly a grand total of about 400 dollars a year... )(her real dad pays for health insurance/spending money/books/ etc...)

she was inrolled all the way up to the final semester when she withdrew, but still stayed in the dorm.)

at the end of the school year she moved back to her mom and step dad's house and continued working where she has been working on and off for the last couple years... she decided to wait a semester to go back to school (she transfered during the summer to a different school in her home town.) but while working she accumulated her own health insurance and in november she moved into her own place.

her mom and step dad are trying to claim her because if they do they get a big enough tax break to take them from having to pay 1000$ to only 100$

at the same time if they claim melissa, she is getting stuck with a 300$ bill to the irs (that they refuse to help her pay) where as if she claims herself she will be getting a 400$ rebate from the irs. not to mention the ramifications on the stimulus rebate posibilities... if they claim her, they will get another possible 300, and she wont get anything, where as she made enough while working in 2008 that she is able to get up to 600$ her self... they are taking this to the point of saying she has no choice, and will not budge at all to help her... how can we avoid her getting stuck...?

thanx in adanvce.

My reply:

Andy,

Whether or not you are allowed to claim someone is a matter of law, not choice. All 7 of the following tests must be met in order for a taxpayer to legally claim their child as a dependent in 2008:

To claim a child as a dependent, the taxpayer (or spouse of taxpayer if filing jointly) cannot be claimed as a dependent on someone else's tax return.
The child cannot be claimed as a dependent if he or she files a joint return with a spouse.
The child must be either a U.S. citizen, U.S. national, or a resident of the U.S., Canada, or Mexico.
The child must be the taxpayer's son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these.
The child must have lived with the taxpayer for more than half of 2008 unless they meet one of the exceptions. The exception that may apply in your girlfriend's situation is that the child is considered to have lived with the taxpayer during the time the child is enrolled in full-time school.
The child must be:

under age 19 at the end of 2008, or
under age 24 at the end of 2008 and a full-time student for any part of five calendar months during 2008, or
any age and permanently and totally disabled

The child cannot have provided over half of his or her own support during 2008. This is your girlfriend's only hope. I have attached a worksheet to help her determine if she provided more than half of her own support.

If she determines that she is legally able to claim herself on her own return and her parents are not able to claim her as a dependent then that's the way she should file. She should however warn her parents that she intends to do so. If both she and her parents claim her they will both receive notices from the IRS asking each of them to explain why they believe they are eligible for the deduction. The IRS will then determine who they believe is entitled to the deduction and the other person will owe back taxes, interest and penalties.

Best wishes,
Gina

http://GLGcpa.com

Rental Property

2009-02-14T20:38:00.000-06:00

Gary writes:

Hello Gina - almost 3 years ago we rented out our house and rented a bigger one for ourselves as we needed more space. Around 6 months ago our tenant moved out and the place was left with lot of damage to the carpet, walls/stucco and the plumbing was falling apart ( though no fault of tenants).

We fixed up the property spent around 14 thousand dollars. While we were at it, we also got the house painted from outside and made it attractive for new prospects. However, I had been out of job for almost 10 months, the outlook was not too encouraging, also our landlord had increased our rent to 3000/- per month ( from 2600/-). Given the circumstances, it made sense for us to move back to our own house, which we did in September.

My first question is that can we still deduct the cost of fixing up the house as a rental expense? Also, if the deductible part of mortgage payments, taxes and repair expenses are more than the rental income, can it be carried over to next year, though the house is no longer a rental property? I am back in the job and have purchased additional property so we will have future rental income but from a different property.

Thanks for you advice and time.

My reply:

Hello!

The type of renovating you are talking about would be capital additions and not currently deductible, but depreciable over time, IF it were still a rental property. Since you moved into the property after your renovations these costs add to the basis of your property when you sell it.

The fact that you are renting out a different property does not change this answer.

Best wishes,
Gina

http://GLGcpa.com

Form 1099

2009-02-14T20:34:00.000-06:00

Joe Asks:

Hi Gina, I had a question. I was a newspaper delivery person this year for 7.5 months. In that time my employer took no taxes out of my paychecks. They sent me a 1099 form with my gross pay.

I was curious if I have to use a special form to report my income taxes this year?

I would usually use the Ohio State Taxes form, and the federal tax income form.

Please let me know if you have any ideas on what new forms I need to use if any.

Thank you so much for your time!

My reply:

Joe,

The form that would usually get you the most deductions is Form 1040, Schedule C. This is the form for sole proprietors (or independent contractors). The reason this form is good is because it allows you to deduct your expenses. For example, if you drove a car to deliver the papers then you could deduct your mileage at standard mileage rates. These expenses reduce your taxable income lowering your taxes.

I have partnered with my professional tax software provider to provide taxpayer's the option of preparing and filing their own taxes online. The setup they have created is interview driven, so you don't have to know what is the best form to use - they will determine it for you based on how you answer the questions. It's free to try it out and then if you like it you pay prior to electronically filing your return.
Best wishes,
Gina

http://GLGcpa.com

Dependent Care

2009-02-11T20:32:00.000-06:00

Javier writes:

Hello Gina!

I really enjoy your blog, not to mention the educational value it has. I was hoping you can clear somthing up for me. My wife and I pay my mother-in-law for dependent care, about $5k in 2008, and would like to know if we calim the payments we made to her towards the dependent care credit on our form 1040. We relaize that my mother-in-law will have to claim what we report as an expense as income on her on her 1040 and pay self-employment taxes and she is ok with that. Is there anything else we need to do/file regading this situation? Are we required to file a schedule H eventhough she babysits our kids at her house and not our house? Please help! And thank you in advance.

My reply:

Hello Javier, thanks for you kind words.

Yes, it does sound like you'll be eligible to claim the payments you made for your mother-in-law to care for your child(ren) on your taxes as a dependent care expense.

Since she did not care for your children in your house you are not responsible for filing Schedule H.

She will report the income received on her Form 1040, Schedule C. She can deduct any expenses she incurred in caring for your children against the income that she received. This will help to reduce the amount of taxes she will pay on this income.

Best wishes,
Gina

http://GLGcpa.com

SEP-IRA to Roth in 2010

2009-02-09T20:25:00.000-06:00

Eugene writes:

Hello Gina, I just read your informative blog post from June 17, 2007:

Nondeductible IRA to Roth in 2010

"Julie writes: I am thinking of making non-deductible IRA contributions this year and on and then convert to Roth IRA in 2010 . . . "

I have a very similar situation with current income that prevents me from contributing to a RothIRA I had established several years ago. I would also like do the exact same thing as Julia wrote about. My only question is how my SEP-IRA may interfere with this conversion in 2010 ?

Both my wife and I had each setup an SEP-IRA for our small businesses. You had written: "Third, since you already have a deductible IRA, you need to be aware that you cannot convert only the nondeductible IRA." Is it necessary that we also convert the SEP-IRAs? (I also have a small traditional deductible rollover IRA, which I will also be converting into the Roth in 2010.) If it's optional, do you recommend that convert the SEP-IRAs? (maybe we shouldn't, because the contribution limit is so high we can continue to contribute to the SEP vehicle for many years.)

Finally, my wife is a dentist and I'm a physician each with our own practices. Is it feasible for you to prepare or give second opinions for our tax returns from long-distance (we live in Ohio)?

My reply:

Hello Eugene, thanks for reading.

You are not required to convert your SEP-IRA, but you can if you want to. I have found a really neat tool online that you may find useful: https://personal.vanguard.com/us/RothConversion

What I was trying to say in my post is that some people have two Traditional IRA accounts, some for their deductible contributions and another for their non-deductible contributions. If you choose to convert your "Tradiational IRA" that means you're converting all of your "Traditional IRAs". The same would be true of your SEP-IRAs. If you have more than one and you chose to convert them, you'd have to convert both. I cannot recommend whether or not you should convert since I really don't have enough information about your finances and retirement plans.

Over 95% of the tax returns I prepare are done via the Internet (email, fax, FedEx, etc.) and about 50% of them are out of state returns (I'm in Texas). I prepare returns for all U.S.individuals residing in the U.S. I file all allowed returns electronically and will provide you with both a PDF version of your return and then after it is accepted a paper copy. You can learn more about me, my practice and fees I charge by visiting my firm website.

Thanks again for reading.

Best wishes,
Gina

http://GLGcpa.com

Rental Property

2009-02-08T20:22:00.000-06:00

Sharon asks:

Hi Gina,

Ran across your website researching tax tips for rental property on the web.

I was hoping you could help me with some tax advice.

I bought a new home in December of 2008 and instead of selling my old home which I bought in May 2007, I decided to turn it into rental property (because of the poor real estate market). So I turned my "old" home into rental property in December of 2008. I did not actually have a renter until February 2009. However, I made several repairs and upgrades since December 2008.

When I'm filing my taxes, I'm only claiming 11 months of mortage interest, property taxes on the "old home". What do I do with that 1 month of mortgage interest and property taxes on the rental property? Additionally, I also do not have any rental income in 2008.

Any help would be appreciated. Would love to know what deductions I'm missing.

My reply:

Hi Sharon, thanks for reading.

You are allowed to claim rental expenses once your home is ready to accept a renter. If your rental home was ready to accept a renter in December 2008, then your repairs, property taxes and mortgage interest for the month of December (and depreciation) would be deductible as rental expenses on Schedule E of Form 1040. If however your home was not ready to accept a renter, you didn't try to get a renter in there in December, etc. then those expenses would not be deductible.

Best wishes,
Gina

http://GLGcpa.com

Loan to Purchase Stock

2009-02-08T20:19:00.000-06:00

Rick asks:

I purchased stock thru my employer via a loan. Is the interest on this loan deductable? After the loan is paid off, and I sell the stock, can I add the interest on the loan to the cost basis when I calculate the captial gain ?
I can't seem to find this answer anywhere !
Thanx !

My reply:
Hello! Assuming the stock is not tax-exempt then you are allowed to deduct the interest incurred on the loan used to purchase the stock, to the extent of your investment income (the money you earned on your investment). You can carry the excess interest into future tax years and deduct it against those earnings. There is no limit on how long you can carry forward and use up the interest. When you carry forward the deduction, you'll have to file Form 4952 along with your Form 1040 and Schedule A, where you list your interest-deduction amount.

You are not allowed to add the interest to the basis in your stock when you compute your capital gain. The only way you can deduct it is if you itemize your deductions and you have investment income to offset it.

Best wishes,
Gina
http://GLGcpa.com

Lost Wages

2009-02-06T20:15:00.000-06:00

Amber asks:

Hi Gina,

I was wondering if tax law has changed. My question concerns lost wages. I am scheduled as a full time (forty hours per week) employee. I do not belong to a union. My employer made me take one mandatory day off per week last year.

Does this qualify as a loss when doing taxes?

Thank you,

My reply:

Your question can be answered one of two ways (at least how I'm reading it)....

1. Your salary is the same, but you're only working 4 days a week now instead of 5? If so then you're still getting your full salary so there's no lost wages, just additional vacation days.

2. Your salary has been reduce by the equivalent of 1 day per week and you're working 1 day less per week. If this is the case they you must have agreed to this salary reduction. You're getting paid for the days you are working; therefore your W-2 will be correct.

Either way, your W-2 will report the wages that you were paid. You are only taxed on what you are paid so there's no need to claim "loss wages" because there really isn't any.

If I read your question wrong, please let me know.

Best wishes,
Gina

http://GLGcpa.com

Non-employee Compensation

2009-02-04T20:11:00.001-06:00

David writes:

Gina

I am a contract truck driver. They own the truck and I use a company fuel card
for my fuel. Fuel costs are deducted from my settlement before I’m paid, but I’m paying for the fuel out of my load revenue. They just deduct fuel costs from total load revenue before paying me. I was shocked to get a 1099 listing
$101,926 since i probably was only paid about half that. My question is should
that $101,926 be listed as non employee compensation since i was not paid that amount of money.

PS. I saw your blog so decided to email you

My reply:

David,

Thanks for reading my blog.

It sounds like your Form 1099-Misc is correct. You get to deduct the fuel on your tax return so the net amount will be correct.

Best wishes,
Gina

http://GLGcpa.com