Archive for the ‘Filing Season Tips’ Category

Last day reminder list

Tuesday, April 15th, 2014 by Joe Kristan

Programming note: Tax Roundups will return next week.  I’m taking a few days off, so it will be quiet around here. 

4868Today is the last day of tax season, and the last day to do some important things.  They include:

- File or extend your 1040s today.  Remember, it’s always better to extend than amend.  If you are waiting on a K-1, or some other piece of information, just extend, and save yourself the trouble of redoing your return.

- File or extend any partnership returns due today.  The penalty for late filing is $195 per late K-1, per month.  The penalty still applies even if you don’t owe.  Payments for Form 8804 withholding for non-U.S. partners are also due today.e-file logo

- Document your filing. Certified Mail, Return Receipt Requested works great.  If you can’t get to the post office on time, go to a late-night UPS or FedEx store and use an authorized private delivery service to send your filing to the IRS service center street address.  Remember, few if any post offices stay open late to postmark last-minute filings anymore.

- E-file, saving yourself the headaches of documenting your filing.

- Today is the last day to make a 2013 IRA payment.  If you haven’t made them yet, do so.

daydrinkers- If you are deducting a SEP payment for 2013 on your 1040, either make the payment today or extend your return to extend the time to make the payment.

- If you are day trader, consider the “Section 475 election” today for 2014. It’s too late for 2013, but it could enable you to deduct 2014 losses that are otherwise limited to $3,000.

And finally, review all of our 2014 filing season tips, of which this is the last one, to make sure you haven’t missed something.

 

 

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Filing season tip: leave tracks when you file.

Monday, April 14th, 2014 by Joe Kristan

No Tax Roundup today, for reasons easily guessed by many readers.

20130415-1As a green 25 year-old staff accountant, I was assigned to deliver a 1040 with a six-figure balance due to a local captain of industry who happened to be the biggest client in the local office of one of the national accounting firms. It was April 15. I was to collect his signature and his check and get the return to the post office.

One of the first things you learn at a national public accounting firm is the importance of covering your backside. After collecting the return and check I went down to the old Capitol Square post office and got the returns postmarked “certified mail, return receipt requested.” After getting a burger and malt at the late, lamented Stella’s, I went back to the office and carefully put the postmarked receipt in the client file.

Two weeks later the partner in charge calls me into his office to show me a penalty notice from the IRS saying the Captain of Industry’s return had been filed late. The postmarked receipt kept me from being fired that day, and I got to keep my job when the IRS reversed the penalties after we sent them a copy of the receipt.

Which is a long way of making a short point: document your return filing.

If you paper file at the post office, use Certified Mail, Return Receipt Requested. Get the postmarked paper receipt, because the postal service purges its computer records after two years. Certified mail adds $3.30 to the postage; the paper return receipt costs another $2.70. $6.00 isn’t usually too much to spend to save your job.

If you use a private carrier, use one of the IRS authorized private delivery services (be sure to use one listed by the IRS), and hold on to your shipping receipt. Be sure to send it to the proper street delivery address, as private services can’t deliver to post office boxes.

If you really want security, e-file. You get delivery confirmation quickly, and you don’t have to worry about the mail going astray, or a mail truck or delivery truck going up in flames.

Come back tomorrow for our last 2014 filing season tip!

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Tax season tip: when you owe and can’t pay.

Sunday, April 13th, 2014 by Joe Kristan

It happens every year. Sometimes there are even good reasons. The return is ready, the taxpayer owes a bunch, and the cash isn’t there. You don’t have any investments you can turn into cash immediately. What to do?

20140413-1DON’T BLOW IT OFF. The worst thing you can do is to just put your head in the sand. If you don’t file anything, you start to accrue a monthly penalty of 5% of any amount you owe the IRS. 60% APR almost makes a car title lender look reasonable (though the total penalty maxes out at 25%). Interest also accrues on the unpaid taxes and penalties. Once you start digging this kind of hole, it can take years to climb out.

FILING BUT NOT PAYING. Getting an automatic extension with Form 4868 gives you until October to file a timely return. Even if you can’t pay your tax, an extension can turn the 5% monthly failure-to-file penalty into a 1/2% monthly failure-to-pay penalty. That is, it can if you ultimately file your completed 1040 and pay your taxes by the extended due date.

Also, the tax regulations don’t impose the failure to pay penalty if you have 90% of your tax paid in by the original due date. In that case, you just have to pay the interest on the remaining balance due at the IRS rate for underpayments – currently 3%. If you are coming up just short, you should pay in what you can with an extension and pay the rest as soon as possible.

BORROW (but not from a car-title or payday-loan shop. The IRS is likely a better creditor). If you have a home equity line, tap it. The IRS accepts credit card payments. If you have a good credit rating, your friendly banker might be able to do something. If you have a kindly relative, that can help.

NOWHERE TO BORROW? Then it’s time to fill out Form 9465, Installment Agreement Request. You can do this online. If you owe more than $25,000, you may need to file additional information on Form 433f. Of course, if you owe that much, you may need professional tax help.

Once you get the installment agreement in place, live up to it. The IRS gets ugly in a hurry if you fall behind on an installment plan.

Whatever you do, don’t bounce a check. It only makes your penalties worse.  And start doing your 2014 planning now so you don’t get caught short next April.

2014 filing season tips – one daily through April 15!

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Prom weekend filing season tip!

Saturday, April 12th, 2014 by Joe Kristan
Flickr image courtesy Randy Kashka under Creative Commons license.

Flickr image courtesy Randy Kashka under Creative Commons license.

Prom season coincides with tax season. If you are up late doing your tax return tonight while waiting for your daughter to come home, don’t forget that some of the money she’s spending tonight may reduce your Iowa taxes.

Iowa offers a Tuition and Textbook Credit of 25% of the first $1,000 of qualifying expenses.  Check out what we consider “textbooks” in Iowa:

Textbooks defined

“Textbooks” means books and other instructional materials used in teaching those same subjects. This includes fees, books, and materials for extracurricular activities.

Examples of extracurricular activities

Sporting events, speech activities, musical or dramatic events, driver’s education (if paid to the K-12 school), awards banquets, homecoming, prom (clothing does not qualify), and other school-related social events.

Whatever your kids are learning on prom night, it might help with your Iowa tax bill.

2014 filing season tips – one daily through April 15!

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Tax Roundup, 4/11/14. Why we extend. And: Tax Doctor, Tax Fairy?

Friday, April 11th, 2014 by Joe Kristan

4868Some folks just don’t like extensions.  Maybe they want their refund NOW.  Maybe they have never extended their return before, and they think it is somehow against the rules.  Some people believe an extension invites the IRS to come in and audit them.  And some people think they are just so special that they can bring in a complex return missing K-1s on April 10th and the preparers should just drop everything and get them filed somehow.

There isn’t much to do for the last category, except perhaps medication, or a thrashing by a crazed sleep-deprived preparer, but for more sensible folks, a basic understanding of extensions might help.

Extensions aren’t against the rules; the rules specifically provide for them.  Even in simpler times, tax administrators knew that it isn’t always possible for a busy person to put together all of the pieces of a tax return by April 15.

You still should pay up.  While extensions give you more time to file your tax return, they don’t give you extra time to pay.  The tax law asks you to estimate your tax liability and penalizes you  if you don’t have at least 90% of your taxes paid in by the April 15 deadline; the penalty is 1/2 percent per month.

Why bother with an extension if I can’t delay payment?    Probably the most important one is that if you are short of cash, the penalty for late payment on a return that you didn’t bother to extend is 5% per month — ten times the penalty for late payment on an extended return.  It forces you to at least take a stab at guessing your liability, helping you identify what pieces you have to gather to complete your extended return.  It also keeps you in compliance, and once you stop filing on time, it can be a hard habit to break.

But won’t it get me audited?  There’s no evidence that an accurate extended return filed during the extension period is any more likely to be audited than it would be filed on April 15.  The IRS selects returns based on what’s on them, now on whether they are extended.

There’s plenty of evidence that returns with errors are more likely to get extra IRS attention.  A return thrown together at the last minute is more likely to have errors than an extended return done during normal working hours by somebody who’s had some sleep.    For what it’s worth, I have extended my own return every year since 1991 with no IRS examination (knock wood).

Efile logoEfile logoe-file logoHow do I extend?  You file Form 4868 either on paper or electronically, along with any necessary payment, by April 15.  The IRS has more details here. It’s common to pay in enough to also cover your first quarter estimated tax payment with the extension.  It gives you some cushion in case you find more 2013 income while completing your return, and you can apply your return overpayment to your  2014 estimated tax when you do file your 2013 1040.

States have their own rules.  Iowa automatically extends your return without the need to file an extension form if you are at least 90% paid-in by the April 30 due date.  If you need to send them some money to get to 90%, you send it with Form IA 1040-V.

Our series of 2014 Filing Season Tips goes right through April 15.  Check back tomorrow for another one!

Russ Fox, Bozo Tax Tip #3: Be Suspicious!

 

tax fairyBelief in the Tax Fairy peaks at tax time.  The Tax Fairy is that magical sprite who will make all of your taxes go away painlessly while your sucker friends still send checks to the tax man.  It’s amazing what Tax Fairy adherents will believe.  Consider a Californian who worked as a software consultant.  He was put in touch with a “Tax Doctor” (my emphasis):

Early in 2006 petitioner’s friends recommended that he talk to the “Tax Doctor Corporation” (Tax Doctor) operated by a person representing himself to be Dr. Lawrence Murray (Murray). Petitioner spoke with Murray and members of Murray’s staff. Petitioner’s discussions with Murray and his staff consisted mostly of “a bit of a sales pitch”. They explained how they would handle his tax return preparation, what the tax savings would be, and the “structure” they would use.

Murray proposed setting up two corporations and preparing petitioner’s individual and corporate Federal income tax returns. Murray explained to petitioner that one corporation would be “operational” and the other would focus on “management”. Petitioner was unsure at trial which corporation was the operations entity and which was the management entity. Under the agreement with Murray petitioner would pay the Tax Doctor, as a fee for setting up the structure, the amount of the tax savings generated by the use of the structure. 

What could go wrong?

His C.P.A. told him that she was willing to incorporate his business activity but she would not do what the Tax Doctor had proposed because it was very aggressive. Petitioner, despite the advice of his C.P.A., decided to accept the proposal of the Tax Doctor.

I don’t need a CPA, I have a Tax Doctor!

Petitioner filed his 2006 Form 1040, U.S. Individual Income Tax Return, showing taxable income of zero. Nev Edel, one of the corporations the Tax Doctor formed for petitioner, filed a Form 1120, U.S. Corporation Income Tax Return, for the fiscal year ending (FYE) November 30, 2007. Nev Edel reported gross receipts of $285,785, total income of $291,669, and total deductions of $295,214. The largest single deduction was $237,600 for “contracted services”. Smoge Corp., the other corporation the Tax Doctor formed for petitioner, filed a 2006 Form 1120S, U.S. Income Tax Return for an S Corporation. Smoge Corp. reported total income of $186,640 and total deductions of $188,644. The largest single deduction was $172,166 for “contracted services”.

Somehow things went awry.

Murray was prosecuted and convicted in 2010 of Federal crimes associated with the preparation of his own returns and the returns of others.

This presumably led to IRS attention to our consultant’s returns, and a big assessment.  The taxpayer tried to avoid penalties because he relied on the Tax Doctor in good faith.  The Tax Court thought otherwise:

The advice of the C.P.A., who had no financial stake in the outcome of petitioner’s return positions, should have put petitioner on notice that additional scrutiny of Murray’s advice was required.

The moral?  If your tax professional, who does this for a living, says something is bogus, they just might be right.  And there is no Tax Fairy.

Cite: Somogyi, T.C. Summ. Op. 2014-33.

 

20140411-1William Perez, Six Things to Do Before April 15th

Kay Bell, What are ordinary & necessary business expenses? It depends

TaxProf, The IRS Scandal, Day 337.  More a boatload than a smidgen today.

That’s OK, you can just send me a gift card. Christopher Bergin, The Gift That Is Lois Lerner (Tax Analysts Blog):

Something bad happened here. And however bad her behavior, the problem isn’t Lerner. The problem is a culture that allows what she did to continue and that probably allows behavior that’s much, much worse.

Andrew Lundeen, What Could Americans Buy with the $4.5 Trillion They Pay in Taxes? (Tax Policy Blog).  A nice gift card, perhaps.

TaxGrrrl, House Committee Votes To Hold Lerner In Contempt, Others Push For Criminal Prosecution

Joseph Thorndike, How Dave Camp’s Failure Might Be Michael Graetz’s Victory (Tax Analysts Blog)

Peter Reilly, Clergy Out In Force To Defend Their Housing Tax Break   

Sports Corner: David Cay Johnston vs. Tax Girl on Twitter: PLACE YOUR BETS (Going Concern)

 

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Tax Roundup, 4/10/14: Still plenty of time for an IRA! And Iowa Tax Freedom Day looms.

Thursday, April 10th, 2014 by Joe Kristan

IRAWhen the tax deadline is looming, taxpayers looking for the Tax Fairy to wish away their tax problems often overlook the old-fashioned IRA.  You can still make 2013 IRA contributions through April 15.  An Individual Retirement Account contribution may be able to score you a 2013 deduction (or even a tax credit) for 2013; even if you don’t qualify for current tax savings, they are a nice and cheap way to build-up tax-sheltered savings.

IRAs come in two flavors: “traditional” and “Roth.”  Traditional IRAs build up their income tax-free, but earnings on them are taxable when they come out.  If you meet certain conditions, your traditional IRAs come with sprinkles: – a tax deduction.  If you don’t get the deduction going in, your principal is tax-free going out.

Roth IRAs never offer a deduction, but they leave a sweeter aftertaste: if you hold them long enough, income on Roth IRA assets is never taxed.  And unlike traditional IRAs, you are never forced to start withdrawing funds from the IRA, so the tax-free build-up can go on indefinitely.

Both traditional and Roth IRAs require you to have wage or self-employment net income.  The limits for contributions are the lesser of your taxable compensation or $5,500 ($6,500 if you were 50 by December 31, 2013).  You can contribute to a traditional IRA at any income level, but deductions phase out at higher income levels if you (or your spouse) are covered by a retirement plan at work.  The availability of Roth IRA contributions phases out at higher income levels regardless of whether you participate in another retirement plan.

One very useful way to use Roth IRAs is for teenagers and young adults.  A parent can fund a Roth IRA for them based on part-time job income — no matter what parent income is.  This starts a tax-free retirement fund for the young earner at a very age, giving the power of compound interest lots of time to do its magic.  And from what I’ve seen, parental Roth funding is much appreciated by the recipients.

While time is short, you can still fund a 2013 IRA if you make your contribution no later than April 15.  You can set one up at your friendly community bank or online with a mutual fund company on you lunch hour.  No, it probably won’t make your 2013 taxes go away, but it can be a nice step towards financial security for you or your kids.

This is the latest of our 2014 Filing Season Tips — a new one every day thorugh April 15!

Russ Fox, Bozo Tax Tip #4: Honey, You Don’t Exist!: “Perhaps it’s something in the water, but this year Aaron and I have seen multiple cases of individuals who have ignored that marriage license and filed as single if married.”

 

Kyle Pomerleau, When is My State’s Tax Freedom Day?  (Tax Policy Bl0g) Iowa’s is this Sunday.

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Kristy Maitre, How to Report National Mortgage Settlement Payments

TaxGrrrl, Taxes From A To Z (2014): X Is For XD   

Paul Neiffer, Trusts Can Get You in Trouble

Jason Dinesen, Tax Court Case Involving Radio DJ Strikes Close to Home for Me, Part 2 

 

Hey, preparers: are you ready to trust the IRS to regulate your livelihood?  A Week Before Tax Day, IRS Misses Crucial Windows XP Deadline (Washington Post, via the TaxProf)

Kay Bell, Computer problems for IRS, Canadian tax agency

 

20140401-1Alan Cole, Mainstream Economics Support Low Taxes on Capital Income (Tax Policy Bl0g): “The overwhelming bulk of the evidence is that taxes have a negative effect on economic growth, and that the effect is particularly strong on tax bases that include capital income.”  But, the rich!  Inequality!

Donald Marron, Seven Tax Issues Facing Small Business (TaxVox): “America’s tax system is needlessly complex, economically harmful, and often unfair.”

Cara Griffith, Guidance Today, Gone Tomorrow (Tax Analysts Blog).  “A recent Arkansas court opinion points out what might be a troubling trend in state taxation: the inability of taxpayers to rely on administrative guidance because the state can retract or supersede it on a moment’s notice.”

TaxProf, The IRS Scandal, Day 336.  It was a big day, with evidence that Lois Lerner was working behind the scenes with the ranking Democrat on the Ways and Means Committee to harass the opposition.

Tax Justice Blog, Is the Obama Administration Blocking International Efforts to Address Corporate Tax Avoidance? 

William Perez, Tax Reform Act of 2014, Part 4, Tax Credits

 

Hank Stern, The ObamaTax Domino Effect.  “While we’ve all seen the horrendous rate increases caused by the ObamaTax (including on our 1040′s), thee are other victims.”

“Pro-business” isn’t “pro-market,” a distinction utterly lost on Iowa officials.

David Brunori: I’ll Raise a Glass to Lower Booze Taxes (Tax Analysts Blog) “Jack Daniels is not bourbon, by the way, but Tennessee whiskey. There is apparently a difference, but frankly, after the first glass, I can never tell.”

Next: legislators are terrible at legislating.  GAO Went Undercover to Discover Tax Preparers Are Terrible at Tax Preparing (Going Concern)

 

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Tax Roundup, 4/9/14: Common K-1 problems. And: if the preparer doesn’t have a brain, give him a diploma!

Wednesday, April 9th, 2014 by Joe Kristan

S-SidewalkSo you read yesterday’s post and you’re still preparing your own return?  You’ve answered the questions you need to ask yourself before starting to put numbers from your S corporation/Partnership/Trust (collectively, “thing”) K-1 onto your 1040 schedules?  OK, if you are intrepid enough to be doing your own return here, you are mostly on your own.  Don’t shortcut it.  This is one chore where you really should read the instructions (S corporation, Partnership, Trust), rather than just opening the box and putting pieces together.

There’s no point in me trying to walk through the whole K-1 with you; that’s what the instructions are for.  I will point out a few items on the K-1 (or left out) that frequently cause errors and trigger questions.

On the partnership K-1 the ending capital account is probably not your “basis.” The capital account is frequently useless in measuring basis.  It might be the same as your basis if the “Tax basis” box is checked, but the only sure way to track your basis is to keep your own running basis schedule year-by-year.  S corporation shareholders can find their basis computation schedule here.

Don’t double-count your gains.  The “Unrecaptured Section 1250 gain” in Box 8c of your S corporation K-1  (9c of the partnership return) is a part of the “Net Section 1231 gain” (S corporation box 9, partnership box 10).  The total income is the Section 1231 gain, not the sum of the unrecaptured 1250 and 1231 amounts.  You use the “Unrecaptured 1250 gain” on your Schedule D worksheet to figure out how much of your Section 1231 gain is taxed at a 25% rate, rather than the normal 20% top capital gain rate.

Don’t double count “investment income.”  If you have interest, dividends or capital gains on your K-1, the partnerships is required to tell you how much of that is “investment income” with a code “A” in the “other information” box on the K-1.  You only need that number if you are computing an investment interest expense deduction on Form 4952.  You don’t add it as additional income on your return.

Beware the “net investment income” disclosure, code “Y” in the “other information” section.  The partnership and S corporation instructions for computing this came out late, and this number is likely to be wrong.  If you have to fill out Form 8960 to compute your Obamacare net investment income tax, you shouldn’t count on this number, especially for a K-1 with trade or business income.  Use instead the separate items from the K-1 that are investment income for Form 8960 purposes.

Be careful out there, and come back tomorrow for a new 2014 filing season tip!

 

20140307-1Russ Fox, Bozo Tax Tip #5: Procrastinate.  You mean waiting won’t solve my tax problems?

Tony Nitti, Tax Geek Tuesday: Are Those S Corporation Distributions Taxable?

 

William Perez, Tax Freedom Day 2014.  April 21.

Kay Bell, Being DIFferent could prompt a tax audit.  Kay points out things that can attract IRS attention on your 1040.

Jeremy Scott, Audit Electability (Tax Analysts Blog).  “However, a taxpayer’s choice of entity can have broad tax ramifications, including some consequences unintended even by the complicated U.S. tax regime.”

Stephen Olsen, Summary Opinions for 4/4/2014.  (Procedurally Taxing), A good roundup of some recent tax cases, including coverage of the Ohio accounting firm’s unpleasant breakup that we covered last week.

 

20140409-1The IRS Commissionerwho apparently can’t regulate his own employees sufficiently to provide subpoenaed documents to Congress, still wants to regulate tax preparers.

The idea is no more than what the Wizard of Oz told the scarecrow: regulated preparers wouldn’t be any smarter, but they would have a diploma.  An IRS-issued Doctorate in Thinkology doesn’t make an inept preparer competent, any more than granting a CPA or a JD makes somebody a good tax preparer.  I would much sooner have uncredentailed Robert D. Flach do my 1040 than any number of fully-credentialed CPAs and attorneys I know.   All regulation would accomplish would be to raise prices, lining the pockets of the big tax prep franchises while driving many taxpayers to self-prepare or stop filing.

TaxGrrrl, House Committee Gunning For Criminal Charges In IRS Scandal

TaxProf, The IRS Scandal, Day 335

 

Roberton Williams, If You Have High Income, Your Taxes Are Going Up (TaxVox)

Tax Justice Blog, “Tax Extenders” Would Mean Even Lower Revenue than the Ryan Plan

Jim Maule, How Shocking is Tax Evasion?

Radio Iowa, Senator Grassley says fouled up tax system is depressing.  He’s depressed?  As a senior taxwriter for most of the last three decades, he’s answerable for a lot of the depression.

 

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Tax Roundup, 4/8/14: So what do I do with the K-1? And: they also serve who go away!

Tuesday, April 8th, 2014 by Joe Kristan

So the K-1 finally showed up from my partnership or S corporation investment.  Now what?

Remember that the K-1 represents your share of the income and expenses of the partnership/S corporation/trust (henceforth “thing”) that issued it.  Different pieces of income and expense are treated differently on your tax return, and the K-1 tells you where your pieces go.  Sort of.  Before you get started plugging in your numbers, you should answer some questions for yourself.

- Do I “materially participate” in this thing? Your level of participation determines the forms you start with in preparing your returns, whether you can deduct losses, and whether your income from the thing is is subject to the Obamacare 3.8% Net Investment Income Tax.  If you spent more than 500 hours working in the thing, that usually means you materially participate; a more complete discussion of material participation is found here.

- Did the thing lose money?  If it lost money, then you have to clear three hurdles to deduct the losses:

1. You have to have basis.  This starts with your investment in the thing.  If you loaned money directly to the thing, you will get basis for the loan.  If you have a partnership, you will get basis for your share of the partnership debt, shown in part L of your K-1.  S corporation shareholders don’t get basis for their share of the corporation’s debt, even if it is guaranteed by hte shareholder.  Your basis is increased for your share of the thing’s income, and it is reduced for losses and distributions.  If you have no basis, you can’t take losses.

2. Your basis has to be “at-risk.”  This normally means that you are out-of-pocket for the investment.  If your basis comes from borrowed funds, you have to be personally on the hook for the debt — but if you borrowed from somebody with an interest in your thing, you might not be “at-risk” even if you will have to pay up if thing defaults.

If your basis comes from a share of the partnership debt, you are normally considered “at-risk” for debt shown on the “Recourse” and “Qualified Nonrecourse financing” lines on part K of your partnership K-1.  Your at-risk amount is computed on Form 6198,

3. You have to materially participate (see above), or have “passive” income from other activities.  If you don’t materially participate, you need to go to Form 8582 to figure how much, if any, of your loss is deductible this year.

 Got that?  Tomorrow we’ll look at what you have to do after you answer these questions.  Come back every day through April 15 for more !

 

Senator Hubert Houser

Senator Hubert Houser

Legislator of the Century.  Yes, the century is young, but it will be hard to beat the accomplishment of Iowa state senator Hubert Houser.  He went home.  From The Des Moines Register:

At issue is the fact that Houser, a Republican from Carson in southwest Iowa, hasn’t resigned. He has simply stopped coming to the Statehouse, saying he isn’t needed as a minority caucus member and doesn’t have a role in any legislation. He says it’s more important for him to spend time on his family’s farm, where he is expanding the livestock facilities.

Houser was not present in the Senate chamber again on Monday.

Secretary of the Senate Michael Marshall said Monday that Houser is still receiving his annual salary of $25,000.

The coverage implies that Sen. Houser is doing a bad thing.  Considering the dubious accomplishments of the ones that do show up, I can’t agree.  We’d be better off if they all went home.  The legislators should get all of their pay on Day 1 of the session, and they should get docked if it goes past a month.

 

Of course they do.  Iowa House panel OKs $2 million tax break for Knoxville Raceway.  (Des Moines Register)

 

RashiaQueen of IRS tax fraud needs a break.  Rashia Wilson, who famously held up big wads of cash on her Facebook page and taunted the feds to come and get her, is less liquid nowadays, according to a report by tampabay.com:

Busted down to a federal prison in Aliceville, Ala., she earns just $5.25 a month, she declares in newly filed court papers. That’s a problem because Wilson, 28, was ordered to pay a token $25 per calendar quarter toward the $3.1 million in restitution that she owes the IRS for filing false tax returns using stolen identities. She needs money to buy vitamins and hygiene items, too, she says. So she’s asking U.S. District Judge James S. Moody Jr. to suspend restitution payments until after her release date: Jan. 5, 2031. 

Then she’ll really get after it, I’m sure.

 

Peter ReillyNo Money For April 15 1040 Balance Due? Don’t Panic!

Tony Nitti, Where Is Your Tax Home When You Work In A Foreign Land?   

Jason Dinesen, Tax Court Case Involving Radio DJ Strikes Close to Home for Me.  “I used to work in radio. I was the news director at KNOD radio station in Harlan, over in the western part of Iowa.”

I had a brief stint as an unpaid intern for KHAK, a country station in Cedar Rapids, in 1980.  I learned that I have a face for radio and a voice for print.

 

Roger McEowen and Kristine Tidgren, Understand That Easement Agreement Before You Sign It

 

Locust Street, Des Moines

Locust Street, Des Moines

TaxGrrrl, New IRS Commissioner Talks Tax, Scandal and Congress.  She gives him more credit than I do.

Andrew Lundeen, Kyle Pomerleau, Americans Pay More in Taxes than on Food, Clothing, and Housing Combined (Tax Policy Blog)

Renu Zaretsky, Ethics and Fairness, Growth and the Environment, Retirement and Tax Shelters.  The TaxVox headline roundup ponders, among other things, whether we should subsidize wind turbines forever.

Kay Bell, Energy efficient home improvement tax break might be back

TaxProf, The IRS Scandal, Day 334

News you can use. How to Cheat on Your Taxes. (David Cay Johnston, via The Taxprof)

News from the Profession.  According to Research, You Are Fat Because Busy Season (Going Concern)

 

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Tax Roundup, 4/7/14: Where’s my K-1? And why you should e-file that extension.

Monday, April 7th, 2014 by Joe Kristan

1040 2013The deadline for 2013 1040s is a week from tomorrow, so we may as well start our annual Filing Season Tips feature.  

Many folks arrive here with a search engine query that goes something like “why don’t I have my K-1, should the partnership go to jail?”  A quick reminder of what a K-1 does, and why they often arrive late in the tax season.

K-1s come from partnerships, S corporations and trusts.  Partnerships and S corporation businesses don’t pay the tax on their income.  The income is instead taxed on your 1040.  They have to compute their own taxable income first — as you might imagine, a more complex process than doing the average 1040.  They then have to sort the income into a bunch of different bins so that all the pieces end up on the right spot on the owner 1040s.  The K-1 is best understood as the collection bins for your shares of the various pieces of the business’ income and expense items.

Furthermore, many businesses and trusts that issue K-1s are awaiting K-1s of their own.  Even if they have their own tax information ready, if the business is still waiting on a K-1, it can’t issue yours.

But, but! Aren’t K-1s supposed to be out by January 1?  You’re thinking of 1099s.  K-1s are due with the S corporation returns (March 15) or the partnership returns (April 15), but they can be, and often are, extended to as late as September 15 — legally.

So what to do?  If you don’t have your K-1 yet, try to at least get an idea of what the income will be, and extend your own return accordingly.  It’s always better to extend than to amend.

This is the first 2014 filing season tip — come back for one each day through April 15!

 

Russ Fox, Bozo Tax Tip #6: Just Don’t File

 

e-file logoKristy Maitre, IRS Change in Extension Processing Makes E-Filing That Extension Critical.

The campus could take up to 6 weeks to process a [paper] extension, and it will not show up on the transcript until processed. With that time delay, it is helpful to have the acknowledgement of an e-filed extension.

With the delay in processing of the extensions, remember if you file a return within that 6 week timeframe, it may not show the extension on the module, and your client could get a penalty for filing late if there is a balance due. This will also have an impact on refund returns if they are later picked up for audit, a balance due results, and the extension was not processed properly.

And why, if you do paper file, you shouldn’t bundle extensions for your family or clients to save postage.

TaxGrrrl, Not Ready To File Your Taxes? Don’t Stress Out, File For Extension 

William Perez, Federal Tax Relief for Victims of Washington State Mudslide and Flooding

Jana Luttenegger, DIY Will is a ‘Cautionary Tale’ (Davis Brown Tax Law Blog). “As a result, two of Ann’s nieces received property that it appears clearly from the will and attempted amendment was meant for Ann’s brother instead.”

 

20140321-3Kay Bell, 3 popular refundable tax credits: Are they worth it?  Good question, and no.

Peter Reilly, Easement Valuations Not So Easy Anymore

Keith Fogg, Reliance on Counsel to Avoid Tax Liability.  (Procedurally Taxing).  Not likely to work.

 

TaxProf, The IRS Scandal, Day 333.  Featuring the Washington Post “fact checker” calling shenanigans on IRS Commissioner Koskinen for denying that IRS had “targeted” Tea Party groups.  It’s safe to say Mr. Koskinen has botched his entrance.

Andrew Lundeen, Senate Finance Committee Passes $85 Billion Tax Extenders Bill (Tax Policy Blog)

20121120-2Tax Justice Blog, Five Key Tax Facts About Healthcare Reform.  Ones they like that I despise: “Only two percent of Americans will pay the tax penalty for not having insurance and  “95 percent of the tax increases included to pay for health reform apply solely to businesses or married couples making over $250,000 and single people making over $200,000.”

This attitude is exactly what is awful about the TJB mindset.  No matter how fickle, arbitrary,   unworkable or economically harmful a tax is — and the Obamacare taxes are all of those — we’re supposed to be OK with them as long as they apply only to “the rich.”  Carried to the logical conclusion, it would be just fine to execute the 1-percenters, confiscate their property, and sell their families into slavery — it only affects the rich anyway, and they don’t count.

 

Arnold Kling has a little reminder for folks hung up on inequality, quoting Lawrence Kotlikoff:

The US fiscal gap now stands at an estimated $205 trillion, or 10.3 percent of all future US GDP. Closing this gap is imperative, and requires a fiscal adjustment of an immediate and permanent 37 percent reduction in spending (apart from servicing official debt), an immediate and permanent 57 percent increase in all federal taxes, or some combination of the two. The necessary size of this adjustment increases the longer it is put off.

And remember, the rich guy isn’t picking up the tab.

 

O. Kay Henderson, No traction for increasing state gas tax.  Not happening this year, apparently.

 

haroldJennifer Carr at Tax Analysts has a good summary of the research as to the economic effect of state film tax credits:

The film industry and lawmakers doubtless believe that film credits are a great deal for everyone involved — and that would be fantastic if it were true — but the most credible studies don’t reflect that.

Her article (unfortunately available only to State Tax Notes subscribers) discusses the funky analysis that film credit boosters use to justify the subsidies.  The boosters like to overstate the tourism effects of films and assume fantastical “multiplier” effects of film spending.  They also ignore opportunity costs — assuming that if the taxpayer money was not spent on Hollywood, it would just crawl in a hole and die.

 

Career Corner.  Crime May Not Pay But Whistleblowing Certainly Does (Going Concern)

 

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Your April 15 to-do list.

Monday, April 15th, 2013 by Joe Kristan

20130415-1Today is the day that Congress in its infinite wisdom has designated as the filing deadline for individual tax filers.  It is also the filing deadline for partnerships and trusts.  Let’s go through our list for today:

- File or extend your 1040, 1041 and 1065 forms.  You can extend a 1040 with Form 4868; the trust and partnership filings are extended with  Form 7004.

- Pay your balance due, or that portion you can pay.

- Fund your 2012 IRA contribution.

- If you are a day trader, consider the Sec. 475(f) election to treat your losses as ordinary for 2013.

One of the most important things you can do today is to document your filing.  If you e-file, it’s easy – you can get an electronic acceptance of your filing from the IRS computers.  And you don’t have to worry about your return going astray on the way to the IRS service center.

If you are a paper-return holdout, it’s worth a trip to the post office, while there still is such a thing, to send your return or extension “certified mail, return receipt requested.”  The IRS has to live by the “mailbox rule” – if it is postmarked today, it is considered filed today.  Getting the date-stamped mailing receipt from the post office is your proof that you sent the thing, and getting the return receipt proves they got it.  It helps if you can write the certified mail number across the top of the return or extension as extra proof.  If filing on time is at all important, the extra $4.30 is cheap insurance.

If you are still working on your return after the post office closes, you can use a designated private delivery service to prove timely filing.  If you do, make sure you use one of the services specified by the IRS, or they won’t consider your return filed until received.  Also be sure to use the street address of the service center, as the the private delivery services can’t use the post office box addresses.

Why is this important?

- If you owe money, filing even one day late triggers a penalty of 5% of the balance due.

- If you are filing a 1065 or 1041, filing one day late triggers a penalty of $190 per K-1 on the ruturn.

- Any elections that must be made on a timely-filde return are invalid if the return is late.  For example, if you are filing the day-trader election, filing a day late means the election is invalid for 2013.  The stakes on that can be huge.

Thanks for following our 2013 filing season tips!

 

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The Iowa prom ticket tax credit

Sunday, April 14th, 2013 by Joe Kristan
Flickr image courtesy Randy Kashka under Creative Commons license.

Flickr image courtesy Randy Kashka under Creative Commons license.

For Iowans seeking last-minute tax savings, maybe it’s time to dance.

Iowa offers a “tuition and textbook” tax credit for certain grade school and high school expenses.  While “textbooks” includes the obvious — textbooks — the definition is surprisingly broad.  From the Iowa Department of Revenue (my emphasis):

Textbooks defined     

“Textbooks” means books and other instructional materials used in teaching those same subjects. This includes fees, books, and materials for extracurricular activities.

Examples of extracurricular activities       

Sporting events, speech activities, musical or dramatic events, driver’s education (if paid to the K-12 school), awards banquets, homecoming, prom (clothing does not qualify), and other school-related social events.

So while you don’t get any tax break for the dress or dinner, the dance might get you credit, aside from whatever credit your high-schooler may give you for helping out with the costs.  The Iowa credit is 25% of the first $1,000 of qualifying expenses for each dependent.

Come back tomorrow for our last 2013 Filing Season Tip!

 

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You can’t deduct K-1 losses against basis that isn’t “at-risk”

Friday, April 12th, 2013 by Joe Kristan

Like a polyester suit, the “at-risk rules” of the 1970s are both ugly and indestructible.  They were enacted to combat tax shelters based on buying cattle or equipment with loans that were “non-recourse” — if the partnership didn’t pay the loan, the lender could only get back the cows or the tractors, and the partners were scot-free.  Because the debt increased partnership basis, this enabled partners to buy deductions by buying interests in leveraged partnerships  — often with loans nobody ever expected to collect – holding depreciable assets.

The at-risk rules defer losses attributable to basis that is not “at-risk.”  On a K-1, the partner’s share of debt is helpfully broken into three categories:

20110413-2.png
Click to enlarge

There is space for the “recourse” and “nonrecourse” liabilities of the partnership. The “non-recourse” liabilities are normally not “at-risk,” so if you need the basis on that line to deduct your K-1 losses, you may be out of luck.

You’ll also see a space for “qualified non-recourse financing.” This is a tribute to the real-estate lobby of the 1970s, who won special treatment for non-recourse debt incurred in real estate activities. Nonrecourse debt that meets certain conditions – mostly debt from commercial lenders or government agencies – is “qualified nonrecourse financing” and is deemed to be “at-risk” under the tax law, even if it isn’t in real life.

If your losses exceed your other basis, you compute your at-risk disallowance on Form 6198.

Even if you have basis and it’s at-risk, you still might not get a deduction.  If your loss is “passive,” then it may deferred until you have “passive” income or until you dispose of the passive asset.

Just another swell 2013 filing-season tip!  More through Monday.

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Does my share of partnership debt let me deduct K-1 losses?

Thursday, April 11th, 2013 by Joe Kristan

As we discussed yesterday, you need basis in your partnership or S corporation interest to deduct losses on your K-1.  There are other hurdles, but if you don’t have basis, you’re done.  Your basis generally starts with your investment in your interest; it’s increased by income items reported on your K-1, and by additional investments, and it’s decreased by your share of losses, expenses and distributions.

With partnerships, there is an extra wrinkle: your basis also includes your share of debts owed by the partnership.  That’s not true for S corporations.  But how do you know what your share of partnership debt is?

A properly-prepared partnership return will report each partners share of debt on part K of Schedule K-1:

20110413-2.png

 

You can add the amounts on these lines to the amount of basis you have otherwise to determine your basis in your partnership interest.  The ability to use this “inside” partnership debt as basis is a reason why partners run out of basis less often than S corporation owners do.

Why do partners get basis in partnership borrowing while S corporation don’t get basis in corporate borrowing?  Because partnership tax in many ways treats the partnership as a combination of its members, rather than a separate entity.  If you buy a $100,000 house with $20,000 in cash and $80,000 in borrowed money, your basis in the house if you sell it is still $100,000.  Getting basis for partnership borrowings is a logical extension of this idea if you just have two people borrowing together.

You may have noticed the “Partner’s capital account analysis” on part L of the K-1, just below the debt thing:

20110413-3.png

Can you use this as a shortcut to figuring your basis?  Usually not. Sometimes you can if the “Tax basis” box is checked, but even that is unreliable.  It’s much safer to track your own basis year-by-year based on your original and subsequent investments, distributions and K-1 items.

So you have basis?  Congratulations, but you still might not be able to deduct your losses.  Your basis still has to be “at-risk,” and your losses might be non-deductible if they are “passive.”

On the edge of your seat?  Check back tomorrow for another 2013 filing season tip!

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How much K-1 loss can I deduct? Start with your basis.

Wednesday, April 10th, 2013 by Joe Kristan

20130410-1If search statistics for the Tax Update are any indication, one of the most pressing issues for people who end up here is “why can’t I deduct my K-1 loss?”

There are three main reasons why your S corporation or partnership loss might be non-deductible:

1. You can’t deduct losses in excess of your basis.
2. Even if you have basis to deduct losses, the basis has to be “at-risk,” and
3. Even if the basis is “at-risk,” losses that are “passive” might be limited.

So how do you know your basis?

 

COMPONENTS OF BASIS

- Your basis starts with your initial investment in your ownership interest.

-It is increased by taxable income and deductible expenses, as reported in lines 1-12 of the 1120-S K-1, or lines 1-13 of the 1065 K-1.

-It is increased by tax-exempt income (like municipal bond income) and reduced by permanently non-deductible expenses (like the 50% non-deductible portion of meals and entertainment expenses); these are reported on line 16 of the 1120S K-1 and line 18 of the 1065 K-1.  If you have a business that generates depletion deductions, your “excess depletion” from 1120S K-1 line 15c, or line 20 of your partnership K-1, also reduces your basis.

- It is increased by capital contributions, which appear nowhere on the 1120S K-1 and on Part I, line L of the 1065 K-1.

- It is reduced by distributions, which are on line 16 of the 1120-S K-1 and Line 19 of the 1065 K-1.

If your losses exceed your basis, your losses are limited to your basis.   If you have multiple deduction items, you have to prorate them to fit your basis.

Example

Lets say you have an S corporation interest that starts 2010 with $3,000 in basis.  You have a K-1 line 1 loss of 9,000, line 4 interest income of $2,000, and a charitable contribution passing through on line 12 (code A) of $1,000.

You have $5,000 in basis to deduct your $10,000 in in expenses – the opening $3,000 in basis plus the positive $2,000 interest income.  You pro-rate the $10,000 expenses — you can (potentially) deduct $4,500 of line 1 loss and $500 of charitable contributions.  The remaining deductions carry forward until you increase your basis via contributions, loans, or future income.

Even if you have basis, that just gets you past one hurdle.  Your basis still has to be “at-risk,” and you can’t deduct a loss that’s “passive.”  More on that later this week.

This is, of course, a simple example.  It gets more complicated if there are distributions during the year (they count first), and if there are non-deductible expenses, like meals and entertainment.   Shareholders can count direct loans they make to an S corporation in basis — but not borrowings by the S corporation from anybody else, and not guarantees of S corporation debt.  You can learn more about S corporation basis at the IRS web site.

Come back for more 2013 filing season tips through April 15!

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Day traders have their own April 15 deadline.

Tuesday, April 9th, 2013 by Joe Kristan

 

Flickr Image courtesy donjd2 under Creative Commons License.

Flickr Image courtesy donjd2 under Creative Commons License.

We usually think of April 15 as the deadline for settling up with the IRS for last year.  But for the nation’s doughty day traders — especially the unlucky ones — it’s an important deadline for this year. 

The tax law normally limits capital losses to capital gains, plus $3,000.  That means many busy traders will have to hope for great advances in life extension technology to ever fully deduct their capital loss carryforwards.

There is an escape from the $3,000 treadmill for taxpayers who qualify as “traders.” The IRS explains what it means to be a “trader”:

 

To be engaged in business as a trader in securities, you must meet all of the following conditions:

  • You must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation.    
  • Your activity must be substantial, and    
  • You must carry on the activity with continuity and regularity.

The following facts and circumstances should be considered in determining if your activity is a securities trading business:

  •     Typical holding periods for securities bought and sold.    
  • The frequency and dollar amount of your trades during the year.    
  • The extent to which you pursue the activity to produce income for a livelihood, and
  • The amount of time you devote to the activity.

If the nature of your trading activities does not qualify as a business, you are considered an investor, and not a trader.

These are pretty steep tests.  You pretty much need to be trying to do it for a living; another day job is a bad fact, as in this case.  But if you pass these tests, you can make a “mark-to-market election” under Section 475(f) of the Internal Revenue Code to deduct trading losses as ordinary.  If you make this election on time, it applies to 2013 taxes.  It’s too late to make the election for 2012.

The Section 475(f) election comes at a price.  If you make this election, gains are ordinary, too, and you have to mark your gains and losses on open positions to market at year-end — paying tax as if you had sold the positions on December 31.  Yet if you are exclusively trading short-term, where you pay taxes on gains at ordinary rates anyway and have few open positions at any time, this may not be a great sacrifice.

This election cannot be extended, so traders need to make the election by next Monday.  You make the election by attaching a statement to your 1040 or extension for 2012 with the following information:

1. That you are making an election under section 475(f) of the Internal Revenue Code;

2. The first tax year for which the election is effective; and

3. The trade or business for which you are making the election.

Happy trading!

Come back tomorrow for another 2013 filing season tip!

 

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Tax day panic? Take an extension mulligan.

Monday, April 8th, 2013 by Joe Kristan

20130322-1Form 1040 is due one week from today.  Procrastinators everywhere are beginning to stir into action.  Many people still awaiting K-1s from partnerships are in full panic mode.

Relax.

Yes, April 15 means something.  It’s unwise to just ignore it.  Yet it is no cause to panic.

Here is what really needs to happen by April 15 for most taxpayers:

- You need to either file your form 1040 and pay any amount due, or

- You need to file Form 4868 and pay in your estimate of 2012 tax due.  Then you have until October to get your return right the first time.

It is better to extend than amend. If you do not have all of the information you need to do your return, extend.  Unless you have a huge refund on the way, the value of getting your refund a little sooner will never make up for the time and effort of amending your return.  And there is no basis for the urban myth that extended returns increase your risk of being examined.

How much do I need to pay in with my extension if I owe?  The general rule is that if you pay in 90% of your total tax with your extension, there is no underpayment penalty; there is only interest on the amount due at the IRS underpayment rate, currently 3%.  It’s customary, though, for preparers to include in an extension an amount that will also cover projected first-quarter estimated tax payments.  1040 overpayments can be applied to the next year’s estimated taxes, and paying it with the extension gives you a little cushion if that K-1 you are waiting on has an unpleasant surprise.

If you cannot pay in 90%, you should still extend.  The penalty for being underpaid on an extended return is 1/2% of the underpayment, plus 1/2% for each additional month you are underpaid.  In contrast, the penalty for being underpaid if you don’t extend is 5%, plus an additional 5% for each month you remain underpaid, up to 25%.

What’s more, the IRS is running an underpayment special this year.  Because Congress passed big changes to 2012 taxes after 2012 was over, many IRS forms were issued late.  If you extend a return needing one of those forms, you may be able to avoid the 1/2% penalty (and the 5% penalty) on  underpayments and only pay interest on owed amounts.  Common forms that qualify include Form 4562 or depreciation, Form 8582, the “passive activity” form, and Form 8863 for college expenses.  A complete list of qualifying forms is here, and the IRS conditions for allowing penalty relief are here.

So don’t wait on that last K-1.  It’s April 8.  Get what you can to your preparer, or sit down and get to work, file your extension, and exhale.  It will be O.K.

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Tax day down-to-the-wire tips

Tuesday, April 17th, 2012 by Joe Kristan

20080410-1ibiz.jpg

It’s deadline day. 

A few thoughts as the deadline looms:

And for heaven’s sake, drive safely!

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Down-to-the-wire tip: read that return!

Monday, April 16th, 2012 by Joe Kristan

You should read your return. 

I know, maybe you pay good money to somebody else to do your return.  That may be a good idea, but it is still your return, as far as the IRS is concerned.  That means if something goes wrong,  the IRS is coming after your money. While reliance on a preparer can help you avoid penalties, the courts have held that you can’t say you relied on your advisor if you signed the return without even looking at it. As the Tax Court has said, in a decision imposing penalties on a couple,

Taxpayers have a duty to read their returns to ensure that all income items are included. Reliance on a preparer with complete information regarding a taxpayer’s business activities does not constitute reasonable cause if the taxpayer’s cursory review of the return would have revealed errors

If you don’t have time to read the return before tomorrow’s deadline, get an extension and take all the time you need. The penalties you save may be your own.

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Sunday down-to-the-wire tip: Fund that IRA!

Sunday, April 15th, 2012 by Joe Kristan

Counting today, filing season has three more days.  One of the few tax moves you can make between now and then is to fund an IRA.  If it is a traditional, deductible IRA, you can get a current deduction and save taxes on the return due Tuesday.  If it is a non-deductible traditional IRA, you have no deduction, but earnings accumulate tax free.  If you fund a Roth IRA, you get no deduction now, but if you leave the money in long enough, the earnings will never be taxed.

You can only make IRA contributions to the lesser of $5,000 or your wage and self-employment income.  If you turned 50 by the end of 2011, add $1,000 to the $5,000 limits.  If you file a joint return, a non-earning spouse can use up to $5,000 (or $6,000 if 50 or older) of the other spouse’s income in excess of the earning spouse’s limit to support a “spousal IRA” contribution.

Income limits apply for deductible traditional IRAs if you are covered by a retirement or profit-sharing plan at work.  Different income limits apply to Roth IRAs. Check the limits at the links before you pull the trigger.  And remember, the April 17, 2012 deadline for funding 2011 IRAs is NOT extended if you extend your return.

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What do I do with that partnership K-1?

Monday, April 2nd, 2012 by Joe Kristan

2011 1065 K-1, Part III

April is here, and it’s time to get serious about wrapping up your tax return.  So you’ve got this K-1 thing from an S corporation or a partnership.  What are you supposed to do with the thing?  We’ll talk about partnership K-1s now, saving the special quirks of S corporations for later.

It helps to remember that you got the K-1 because the outfit that issued it doesn’t pay tax on its income; its owners do.  The K-1 gives the owners the information they need to report their share of the entity’s operations on their 1040.  That means you’ll find income, deduction and credit items, and even items that go into your alternative minimum tax computation. 

Part III of the K-1, reproduced to the right, has all the information most taxpayers need.  It can be confusing, though, because it is a very abbreviated format.  Often the numbers included in the box have letters to their left.  These letters are important.  The instructions for the K-1 tell you what the letters mean.  For example, a letter “A” on the left of a number for box 13, “Other deductions,” tells you that the number is a cash charitable contribution that you can deduct on Schedule A if you itemize. 

 Some key items on the partnership K-1 that confuse many taxpayers:

Guaranteed payments are where partners who work for a partnership find the their earnings — what they may think of as their salary — reported.  While it is often done wrong, partners in a partnership aren’t supposed to get a W-2 from the partnership.  Their compensation should show up on box 4 of the K-1, and probably also on Box 14, self-employment earnings, for computing Social Security and Medicare self-employment tax.

Distributions from a partnership reported in box 20 normally aren’t taxable until the year a partner leaves the partnership. 

You can incur tax from items on your partnership K-1 even if you received no distributions.  While you hope that the partnership distributed at least enough to you to cover your taxes, they don’t have to.

If the partnership reported losses, things can get complicated in a hurry.  We’ll talk about that tomorrow.

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