Thanks for the Praise and for being a Champion of Stacie's More Tax Tips

By Stacie Clifford Kitts, CPA

Darn. It appears I did not make the top 50 accounting blogs compiled by Biz-Lerner. However, it's okay - There is always next year.

But wait, Liz Gold over at the WebCPA and the author of the Accounting Tomorrow Blog has given Stacie's More Tax Tips and a few lucky others some nods.

"And while we certainly think the list is comprehensive – we’d also add Jennifer
Wilson's Inspired Ideas, Stacie’s More Tax Tips, JasonBlumer's Thriveal and a new blog we just heard about via Michelle Golden – Farm CPA Today, written by Paul Neiffer."

Thanks Liz as always for being a champion of Stacie's More Tax Tips. And I agree, Inspired Ideas, Thriveal, and Farm CPA Today are all worthy Blogs.


MORE PEOPLE TO THANK
But ya know, my thanks would be incomplete if I didn't mention all the other worthy bloggers who have made me feel all warm and fuzzy throughout this year.

Robert Flach over at the Wondering Tax Pro and his twice weekly Buzz is a constant champion and source of interesting well written Tax topics - thanks to Robert for all his support. Confession - I am always a little disappointed when I don't make the Buzz cut.

Thanks to Bruce over at The Missouri Tax Guy for your many mentions. Without your retweets, many of my posts would go unnoticed.

I felt like I had won the prize when Dan Meyer at Tickmarks named Stacie's More Tax Tips as one of his Twelve Blogs of Christmas. Thanks Dan! I have enjoyed your posts.

Mary O'Keeffe, over at Bed buffaloes in your tax code pretty much kicked my a-s with her responses to my posts regarding the cosmetic surgery tax. Thanks Mary for being interested enough to explain what I wasn't getting.

I particularly like the wit displayed by Monica Lawver, at Confessions of a CPA her working mom posts always make me nod my head and say, Yep I get that. Thanks for the mentions.

And thanks to all the other wonderful sites and bloggers who have found something I have written interesting enough to mention or to comment on a post [I sure do hope I didn't forget anybody]:

ConvergenceCoaching, LLC Inspired Ideas
Don't Mess With Taxes
Even a Nerd Can Be Heard - NERD TALK
Linda Keith CPA
Roth & Company, P.C.
Taxable Talk
The Tax CPA

SPECIAL THANKS
Oh and a special thanks to Annette Fix - author of The Break-up Diet for her tips on how to make my blog work.

Your Plan Is What? A Story About Old Friends.

By Stacie Clifford Kitts, CPA

You see - As a CPA and advisor, my mind works a little differently.

For instance, when I hear from friends news like - "we're having a baby" or "I'm getting married", before any form of congratulations escapes my mouth, I am already thinking, tax plan, cash flow, and life plans A and B [you know - do you have a plan B in case plan A doesn’t work out - can we all say prenup'].

Now I suppose this is an excellent trait for your tax advisor or even your lawyer, but I'm thinking maybe not so much for your friend.

Case in point.

Not too long ago I found a book written by an old friend who I had met in college. We had palled around off and on for several years following graduation but had lost touch over the years.

As I settled down to read what she had written, I couldn’t help thinking about how we had met.

I was sitting in a statistics class at a local community college waiting patiently for the class to begin and entertaining myself by watching the students that were timidly walking into the room and quickly finding seats near the door.

I noticed her right away, maybe because she seemed more self-assured than the others did. At first, I even thought she might be the instructor who appeared to be running late.

She stopped in the doorway and assessed the seating situation. Then she walked across the room passing several rows of desks while she cocked her head and smiled over her shoulder.

That’s funny I thought, she reminds me of a beauty contestant flirting with the judges as she walks across the stage.

Before she reached the last row, she spotted a desk that suited her and made her way up the aisle where I was sitting. Then with a slight flourish, she stopped at the desk in front of me, plopped down in the seat and flipped her long blond hair out of her face with the back of her hand where it landed in a messy pile on the top of my desk.

Hmmm that WAS memorable.

Now let's see - back to the book. The Break-up Diet

I noticed that it had a cute cover, a table of contents and what's this - a page of acknowledgements. Let's see what she says here, "My greatest appreciation goes out to"….blah blah blah, my agent, some others, and Michelle somebody - "for being my best friend and chief secret-keeper since seventh grade, and for never suggesting that I come up with a Plan B."

Urgh. Huh. Ouch. What? Could that be directed at - ME.

That did seem to be my M.O. I looked up from the page and began to think, I do remember - yes - there was a conversation. But - but a Plan B was a completely appropriate suggestion given the situation and her explanation of Plan A. Wasn't it?

Your plan is what? I asked as my eyebrows rose slowly up my forehead. Did I hear that right? She was going to continue her career as a "professional" dancer [not the good kind] while she wrote the next great American novel and then retired on some tropical island. That - was Plan A.

Now as I have said, my brain works a little differently from maybe an aspiring writer, because I was thinking, ummm doesn’t "professional dancing" [not the good kind] have a shelf life, and considering all the aspiring writers out there, aren't the chances of being a rich novelist pretty remote?

So being a good advisor, but maybe not such a supportive friend, I suggested that she think of other ways to make a living as a writer, maybe writing for a newspaper, or magazine, or even freelancing. Yep, I'm pretty darn sure I used the term Plan B.

Well, here it was in my hand, her novel [a memoir] maybe not the next great American, but not bad either.

I continued reading on, and the more I read, the more I realized that not only am I portrayed in her book, but I am also a bitter, divorced, wine drinking man hater. Note to my husband - I love you honey - that was long before I met you.

But in all fairness, she recently sent me a note jokingly describing herself as neurotic heathen slut with a Cinderella Complex so I guess we all had our issues.

Funny enough, it does appear that she has happily stumbled onto her Plan B even if she doesn’t realize it. She got married, she co-owns an online magazine directed toward women writers, she is a professional industry speaker and she teaches online classes. All perfectly acceptable, and might I say all within my suggested Plan B's.

IRS Announces 2010 Air Transportation Tax Rates

WASHINGTON — The Internal Revenue Service today announced the 2010 inflation adjustments to the excise taxes on air transportation.

Excise taxes apply to the domestic segments of taxable air transportation and to the use of international air facilities. The Fiscal Year 2010 Federal Aviation Administration Extension Act, Part II, signed into law on Dec. 16, 2009, extends these excise taxes to air transportation that begins or is paid for no later than March 31, 2010.

These excise taxes are adjusted annually for inflation:

For 2010, the excise tax on the domestic segment of taxable air transportation is $3.70, up from $3.60 in 2009.

The excise tax for 2010 for international flights that begin or end in the United States is unchanged at $16.10.

The tax on use of international air facilities also applies at a reduced rate to departures of interstate flights that begin or end in Alaska or Hawaii. For 2010, the international air facilities tax on these flights is $8.10, up from $8.00 in 2009.

Further details on the excise taxes on air transportation can be found in Form 720, Quarterly Excise Tax Return, and its instructions.

An Interesting Rewrite for the Vanity Tax H.R. 3590 Looks As if Congress Found a Vanity Product with Enough Sin to Justify a Tax

By Stacie Clifford Kitts, CPA



It is all over the news; the Dems have enough votes to push the Patient Protection and Affordable Care Act on ward. But what has been eliminated from the latest version of the bill has me wondering - was it - our stimulating online debate that finally killed the dreaded 5% booby tax (i.e. the cosmetic surgery tax). Hmmmm …okay so it was most likely the influential lobbying by the American Health Association who strongly opposed the tax that murdered it.

But you know what; I'm all a-glow just the same. Congress - it appears - has responded to my points from a previous post where I chastise our lawmakers for attempting to tax the sinless personal choice of cosmetic enhancements.

I can't say that I am totally opposed to taxing
behavior. That is, I agree with sin taxes. Taxes on cigarettes and alcohol for
instance do provide a certain amount of good since these products have been
shown to cause harm to the public welfare. Likewise, the cost of treating people
who have made themselves sick by indulging in unhealthy activities or behaviors
must be considered - I get that - and if a tax on so called unhealthy products
helps to relieve the public burden, then so be it.

But is cosmetic surgery really
sinful? Personally, I fail to see how it is. Maybe our lawmakers can explain to
me how slimmer hips, larger breasts, or plumper lips harms the public welfare or
places a financial burden on the government.But what is even more perplexing is
just how or why cosmetic surgery won the tax lottery. I fear that this type of
legislation opens the door for a whole litany of WTF taxes. I mean why not tack
on an additional tax for hair coloring, nail salons, or makeup. These are also
vanity products. Frankly where does it stop?

I am all for affordable health care,
balancing the budget, and reducing debt. But come on lawmakers, I find it hard
to believe that you can't do better.

In response to my argument, it would appear that our lawmakers did find a vanity procedure that fits the sin criteria. The new vanity target - tanning salons. Here is a portion of the amended law:

SEC. 10907. EXCISE TAX ON INDOOR TANNING SERVICES IN LIEU OF ELECTIVE COSMETIC MEDICAL PROCEDURES.
(a) IN GENERAL.—The provisions of, and amendments made by, section 9017 of this Act are hereby deemed null, void, and of no effect.

(b) EXCISE TAX ON INDOOR TANNING SERVICES.—
Subtitle D of the Internal Revenue Code of 1986, as amended by this Act, is amended by adding at the end the following new chapter:

CHAPTER 49—COSMETIC SERVICES
Sec. 5000B. Imposition of tax on indoor tanning services.
SEC. 5000B. IMPOSITION OF TAX ON INDOOR TANNING SERVICES.

(a) IN GENERAL.—There is hereby imposed on any indoor tanning service a tax equal to 10 percent of the amount paid for such service (determined without regard to this section), whether paid by insurance or otherwise.

But what is even more telling is this tid bit found over at Kay Bell's blog Don't Mess with Taxes

"Congressional bean counters had estimated the Bo-Tax would bring in $5.8
billion over the next decade. The Tan Tax, which would go into effect next July,
is projected to produce $2.7 billion over 10 years.

But that loss of revenue is OK, because the new tax addresses health
concerns.

Or as one anonymous aide put it, the tanning tax was added out of
"concern that use of these tanning beds creates a health problem with respect to cancer."

Well, I guess I got what I wanted, a tax that benefits the public welfare and relieves the public burden by taxing those people who intentionally expose themselves to cancer causing tanning beds.

Geez, I sure do hope that smog doesn’t cause cancer otherwise our lawmakers might tack on an excise smog tax for my sinful choice to live in California and breathe in the foul air.

Is Your Employer Provided Auto Creating a Tax Problem for You?

By Stacie Clifford Kitts, CPA

Do you have an employer provided automobile? If so, here are some things to know.

The law provides that the personal use of an employer-provided automobile represents additional compensation to an employee. This compensation is also known as a taxable fringe benefit.

Many employees are surprised to learn that when you use a business vehicle to commute to and from work or for any other personal use, you are generating additional taxable income that will be included on your W2.

No, sorry you did not get an unexpected raise. This portion of our tax code is just another example of how nothing in life is free. Not even an innocent trip to the park, or maybe that parent teacher conference - at least not if you got there in the company car.

Anyway, since this additional income along with the appropriate payroll taxes is determined annually by your employer, it is important that you carefully document your business versus personal use of the vehicle. After all, there is no need to pay more tax than is necessary. At a minimum, you should maintain a daily log that shows the miles you have driven, the business purpose for your trip, and where you were going.

You may also want to discuss the need for additional income tax withholding with your CPA or qualified tax preparer to make sure there are no tax surprises during tax filing time.

Now, the calculation of the income element for your visit to that parent teacher conference or other personal trips can be based on a couple of methods. Your employer may choose any one of the following to calculate your taxable personal use:

Cents-Per-Mile Rule
Your employer will multiply the total miles you used the vehicle for personal use by the standard mileage rate.
In order to use this method certain requirements must be met. You can check out the details of this method in Publication 15-B Employer's Tax Guide to Fringe Benefits.

Lease Value Rule
If your employer uses this method, your employer will determine the percentage of personal use by dividing the total miles driven by the amount of personal miles driven. The resulting personal use percentage will then be multiplied by the vehicles "lease value." The IRS provides the Annual Lease Value table that will be used in this calculation. Additional calculation information can be found at Publication 15-B.

Commuting Rule
If your employer provides a vehicle for the purposes of commuting such as a commuter vanpool, the taxable benefit is calculated by "multiplying each one-way commute by $1.50."

One final note for S corporation shareholders who receive a W2 and who have a company vehicle, if at any time during the year you owned more than 2% of the outstanding stock of your S-Corp you are treated like a partner and not an employee in regards to the application of these rules. Check with your CPA or tax preparer for more information.

The Obama Administration's New Financial Crimes Taskforce, H.R. 4172 and the DUH Factor.

By Stacie Clifford Kitts, CPA

The announcement of a new financial crimes task force by the Obama administration has inspired a new installment of the DUH Factor.

The DUH Factor is my take on events, or laws (generally tax) that are so obviously absurd that they fall into the DUH category.

Among the reasons why this new task force qualifies for my DUH Factor is Treasury Secretary Timmy Geithner's involvement. Of all the people who could have been selected to announce a new financial crimes task force, I think Geithner would have been a little lower on my list.

Why?

Lets begin with this quirky post Has Properly Paying My Income Tax Prevented Me From Getting A Job In the Obama Administration? In this post, I mention that Geithner did not calculate and pay the proper amount of self-employment taxes on income that he received. The unpaid taxes as it turns out were related to self employment compensation received from the International Monetary Fund (IMF).

Because of Geithner's tax oops, some interesting legislation is proposed, H.R.4172 or the Geithner Penalty Waiver Act. Here is what has been introduced:

111th CONGRESS

1st Session
H. R. 4172

To provide the same penalty rate for taxpayers who voluntarily disclose
unreported income from offshore accounts as was afforded Timothy Geithner with
respect to his failure to pay self-employment taxes with respect to his
compensation from the International Monetary Fund.

IN THE HOUSE OF REPRESENTATIVES
December 2, 2009

Mr. CARTER (for himself, Mr. WESTMORELAND, and Mr. BURGESS) introduced the
following bill; which was referred to the Committee on Ways and Means

A BILL
To provide the same penalty rate for taxpayers who voluntarily
disclose unreported income from offshore accounts as was afforded Timothy
Geithner with respect to his failure to pay self-employment taxes with respect
to his compensation from the International Monetary Fund.

Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled,

SECTION 1. ZERO PENALTY RATE FOR OFFSHORE VOLUNTARY DISCLOSURE PROGRAM.

The penalty assessed under the Internal Revenue Service special voluntary
disclosure program for unreported income from hidden offshore accounts shall not
exceed the penalty imposed with respect to Timothy Geithner's failure to pay the
tax imposed under section 1401 of the Internal Revenue Code of 1986 on his gross
income derived from employment with the International Monetary Fund.

Now granted, we, the public are not privy to the specifics behind exactly why the penalties were waved. Maybe it was perfectly legit.

But come on, the guy who has inspired "fairness" legislation, because it "appears" that he has received special treatment concerning his financial dealings and the incorrect application of certain tax laws, is probably not the right guy to be introducing a new financial crimes task force. DUH

For some more interesting coverage of this proposed legislation, check out the Wandering Tax Pro's blog.

Tax Planning Reminder - Charitable Contributions

[Stacie says: this is an IRS reminder about charitable giving. As noted below, only persons who itemize deductions on schedule A are eligible to take a charitable deduction. And - donations made to a qualified organization are deductible in the year donated. Here's a summary of what you need to remember:

1) IRA Owners for this year only (unless extended) if you are 70 1/2 or older you can tansfer tax free up to $100,000 to charity. See below for more information.

2) If you donated clothes or household items, they must be in good or better condition. If the amount is over $500, attach a completed Form 8283 to the return.

3) If you donate cash you need a receipt, a cancelled check, bank confirmation of the donation, or written acknowledgement from the charity for your donation to be deductible. Remember giving cash to the Santa on the corner will not be deductible unless he is associated with a qualified charity and you pay with check or get written acknowledgement from the charity.

4) If you donate a car to charity, remember that the deductible portion is generally limited to the amount the charity gets from the sale of the vehicle. Remember to get a copy of Form 1098-C from the charity.]

Watch Video: Year-End Tax Tips: English Spanish ASL Watch Video: Record Keeping: English ASL

WASHINGTON — Individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years.

Some of these changes include the following:

Special Charitable Contributions for Certain IRA Owners
This provision, currently scheduled to expire at the end of 2009, offers older owners of individual retirement accounts (IRAs) a different way to give to charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity. This option, created in 2006, is available for distributions from IRAs, regardless of whether the owners itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.

To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the transfer.
Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.

Amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions. See Publication 590, Individual Retirement Arrangements (IRAs), for more information on qualified charitable distributions.

Rules for Clothing and Household Items
To be deductible, clothing and household items donated to charity generally must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances and linens.

Guidelines for Monetary Donations
To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.

Reminders
To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders:

Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2009 count for 2009. This is true even if the credit card bill isn’t paid until 2010. Also, checks count for 2009 as long as they are mailed in 2009 and clear, shortly thereafter.

Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found at IRS.gov under Search for Charities. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.

For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2009 Form 1040 Schedule A, available now on IRS.gov, to determine whether itemizing is better than claiming the standard deduction.

For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.

The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.

For additional information on charitable giving:
Charities & Non-Profits
Publication 526 , Charitable Contributions.
On-line mini-course, Can I Deduct My Charitable Contributions?