* If you still haven’t done so, also check out the premiere issue of my new FREE monthly (except February and March) newsletter LOIS (Lots Of Interesting Stuff). It is full of, well, lots of interesting stuff.
* Did you read my post from last Friday on “Keeping Track of Gambling Activity”? Did you also read the comments? If not, please go back to read the comments from fellow tax blogger Russ Fox of TAXABLE TALK.
* Bruce, the MISSOURI TAX GUY, tells you how to “Save for College Tax Free”.
This is very important, considering the fact that, as Bruce points out –
“College tuition and fees are on the rise. Shockingly, the cost for 4-year private schools now tops $36,000 per year on average.”
And, as Bruce also points out –
“But the investment is well worth it. According to the U.S. Census Bureau, individuals with a bachelor’s degree earn more than double those with just a high school diploma.”
As I learned from the experience of one client this past year, there are several perhaps morally wrong (in my opinion) but apparently perfectly legal ways to “juggle” your funds to qualify for additional financial aid. If you have kids who will be college age soon it may pay to meet with a “financial aid consultant”.
* In her blog at BANKRATE.COM Kay Bell, the Yellow Rose of Taxes, gives us the word that “Homebuyers Still Waiting on Refunds”.
The poster child for why such social program payments masquerading as credits should not be in the Tax Code, the First-Time Homebuyers Credit, in its several incarnations, has proven to be a real mucking fess.
In discussing the latest chapter in this farce Kay reports -
“The problem primarily affects homebuyers who claimed the original 2008 tax year credit, which wasn't really a credit. It was an interest-free $7,500 loan, with payback beginning this filing season. Many of those folks made the payments, some even paid more than the minimum $500 repayment, and that complicated return processing even more.”
Due to poor timing the taxpayers who qualified for the first so-called “credit”, as Kay says really an interest free loan, have been doubly screwed. First they have to pay back the money they got from Sam, and now, when they begin the payback, their refunds are held up. At least, as the post explains, the IRS is paying interest on the late refunds.
* And at DON’T MESS WITH TAXES Kay brings us up to date on “Hacking, Phishing, and Tax Scams, Oh My!”.
Kay’s message, one that I and other fellow tax bloggers have also been giving you for years, can never be repeated too often -
“Two things, folks.
First, the Internal Revenue Service doesn't send out emails to taxpayers. How many times do we -- and by we, I mean the IRS, tax bloggers, traditional media, tax professionals and even your mother -- have to remind you of this fact?
So please, write it down, tape it to your computer screen or, if you must, have it tattooed somewhere you'll see it every day. Whatever it takes, do not fall for an email from a criminal purporting to be the IRS.
The second thing you must remember is another fact that all of us listed above have told you time and time again: If it sounds too good to be true, it probably is.
The IRS, although it's taken steps over the years to be more considerate of taxpayers, doesn't personally alert everyone of tax breaks. That's your responsibility and I and plenty of others do our best to help out here. But again, not usually on a one-to-one basis.
So when someone, aka a con artist, comes to you out of the blue with a great tax deal, chances are very good that that person is up to no good, at least no good for you.”
* A “tweet” led me to The OBLIVIOUS INVESTOR’s look at “Long-Term Care Insurance: Should You Buy It? And If So, When?”.
OI quotes the US Department of Health and Human Services (the highlight is mine) –
“At least 70 percent of people over age 65 will require some long-term care services at some point in their lives. And, contrary to what many people believe, Medicare and private health insurance programs do not pay for the majority of long-term care services that most people need.”
LTC insurance is not for the rich, who can afford to pay for long-term care out of their savings. LTC is also not for lower-income individuals, who, based on their level of income and assets, will be “on the tit” (i.e. eligible for Medicaid) from day one. It is for the middle and upper-middle class, who have retirement income and significant, but not excessive, savings, and who could be bankrupted if they need to be in a nursing home or receive home health care for an extended period of time.
A nursing home could cost $10,000 per month and the home health care alternative perhaps half that.
* Another tweet led me to “Court Shuts Down Husband and Wife Tax Preparers” at ACCOUNTING TODAY.
The couple literally claimed everything but the kitchen sink (and may have claimed that as well) as business expenses for Shaklee distributors. The article quotes the opinion of U.S. District Court Judge John Jarvey –
“To the Musins, the ownership of a small business has been treated as a license to convert almost any of one’s personal expenses into business deductions. According to them, if you believe that looking successful helps make you successful, your clothes, hair care, and manicures are deductible. If your dog barks while you are away from your home based business, it’s deductible. If your child’s nanny ever answered the business phone, the nanny is deductible. If you visit a business associate while on vacation, it is deductible. If you pay rent to yourself, or even if you don’t, it’s deductible. If you have a six year old child, payments to the child are deductible employee expenses. If you have used your living room television in a business meeting, it’s deductible. And your hobbies, like scuba diving, pet cats and flying, easily deductible. It is not any one client or any particular deduction that is at issue here. It is a wholesale pattern of taking deductions without justification that entitles the government to injunctive relief.”
Many tax scams and multi-level marketing scams advertise that you can use your home-based small business to legally deduct a multitude of personal expenses. Ain’t so!
* Martin A Sullivan has an interesting and thoughtful post on “What the Debt Limit Debacle Teaches Us About Tax Reform” at TAX.COM.
* I just discovered that Dr Jean Murray, who provides excellent advice for the small business owner at ABOUT.COM, has another small business blog – DR JEAN MEANS BUSINESS (Let’s get Serious About Your Success).
Check out her post “Starting a Business - Take Yourself Seriously”.
I certainly agree (as per a past battle with an offending blogger) with this advice –
“I advocate business owners, even sole proprietors, getting a separate business checking account. For businesses that could run into problems with the IRS as “hobby” businesses (like craft businesses), having a separate business checking account helps maintain that separation. It may not convince the IRS your business isn’t a hobby, but it might help.”
* Joe Arsenault provides a good primer on “Tax Credits vs. Tax Deductions” at CAFÉ TAX.
Joe’s bottom line –
“If one or more of these credits apply to you, make sure you are eligible for the credit. If your AGI is expected to be higher than the limit, explore some tax planning opportunities to reduce your AGI and qualify for the credit. Examples like this magnify the importance of tax planning before tax-season, not after!”
While I firmly believe that many of the credits Joe discusses should not be in the Tax Code, as long as they are there I have no problem with my clients, and other taxpayers, who qualify taking advantage of them.
Hey, Joe, I miss the Beans.
* Also at CAFÉ TAX a guest post by EA Elizabeth Ruh titled “I’m Inheriting Money, What Now?” provides “a basic introduction to what happens in the tax world when a loved one passed away”.
* Professor Jim Maule repeats a message he has given before in “It’s Not the IRS, It’s the Congress”. Basically – don’t shoot the messenger.
While it does occasionally “interpret” tax law via regulations and other methods, the IRS does not write tax law. We must remember that it is the idiots in Congress who think up and write the various, and often nonsensical, additions to the Tax Code.
* It seems the BUZZ is read round the world! An email from David of TAXFIX.CO.UK brought to my attention “an infographic which shows the average tax rate around the world”. Check it out if you want to know “Which Countries Pay The Most Tax”.
* I love USA TODAY TV Critic Robert Bianco’s frequent digs at the steaming pile of excrement known as “reality tv”.
No statement of fact could be truer than his comment about two back-to-back “droppings” starring foul-mouthed Brit egotist Gordon Ramsey on FOX last Monday night –
“Those are two hours you can more profitably spend elsewhere.”