A Tax Consultant for All Seasons

If you moved recently, you may be wondering if your moving expenses are tax deductible. The answer is, maybe,  The rules have to do with how far away you moved to get a new job. The specifics are laid out in the IRS information on moving expenses listed below.  If you still have questions, go to the IRS website, or contact an Enrolled Agent.
Did you recently move to another city for a new job or because your old job is now at a new location? A tax break may be coming your way.

How far you moved and the amount of time you spend on the job will have a major impact on whether you qualify for the tax break. Moves that are only short hops and jobs that are short-term or part-time generally do not qualify. However, if you can satisfy the distance and time tests then job-related moving expenses that you incur may be tax deductible.

You will meet the distance test if your new workplace is at least 50 miles further from your former home than your previous workplace was from that home.  For example, if your old job was 5 miles from your former home, your new job must be at least 55 miles from that home.

The time test requires you work full-time for at least 39 weeks during the 12 months immediately after your move. If you are self-employed, the time test requires you to work full-time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after your move.  You can deduct your moving expenses on your tax return even though you have not met the time test by the date your return is due if you expect to meet the 39-week or the 78-week test as required.

Members of the armed forces do not have to meet these tests if the move was due to a permanent change of station.

Reasonable moving expenses are deductible and include the costs of moving your household goods and personal effects to your new home. You can also deduct the expenses of traveling to your new home, including lodging costs.

Meals eaten while in transit between your old and new homes are not deductible as moving expenses.  No part of the purchase price of your new home may be deducted as a moving expense.  You cannot claim a moving expense deduction for expenses covered by reimbursements excluded from income

Additional information on moving expenses, including an extensive list of deductible and non-deductible expenses, can be found in Publication 521, Moving Expenses, on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Remember that for the genuine IRS Web site be sure to use .gov.  Don’t be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

Link:

• Publication 521, Moving Expenses

My last blog talked about the CP2000 showing a 1099-B on your stock sales. If your CP2000 has in addition or instead of the 1099-B, a 1099-R, you made a withdrawal from a retirement account. As I indicated on the previous blog, the CP2000 form tell you what you need to do to respond to this notice and how much time you have to respond before the IRS assesses the tax.

Your response to the 1099-R withdrawal involves 2 issues:

• The first really does not require additional information from you. You do owe tax on the withdrawal from your IRA or 401K since you did not pay takes on it when you put it in the retirement account.
• The second part depends on your age and several other criteria. If you are under 59 1/2 you normally have to pay a 10% penalty for withdrawal in addition to the tax you have to pay. There are however exceptions such as buying a first home, medical expenses and others. Visit the IRS website or contact an Enrolled Agent to help you determine if your situation requires payment of the 10% penalty.

As with the 1099-B, you will be charged a penalty for the error on your return and penalties and interest for the amount of underpaid tax.

If you are wondering why there are no blogs this week, I am in the midst of preparing for my son’s high school graduation. We are having lots of family coming in from out of town so much preparation has been going on. Next week more tax blogs will be back and life should be back to normal–or as much of it can be now that my youngest is off to college.  I hope to see you back next week.

Due to continuing concern about the economy, the Senate Democratic and Republican leaders have reached an “agreement in principle” on the outline of a second economic stimulus package. This one will focus on helping to stabilize the housing market. This bill would create a $7,000 tax credit for purchasing a property in foreclosure. Second, it would allow a $500 deduction ($1,000 for joint filers) for property taxes paid by those who do not itemize. Also, the bill would also extend the NOL carryback from two to four years for losses occurring in 2008 and 2009. The Senate has not yet voted on the bill. 

The hope for the first package was that taxpayers would spend the money and stimulate the economy. They hope the second package will help the struggling housing market. For continuing updates visit the IRS website.

If you own your own business, it is crucial that you keep good records. Knowing what you need to keep and for how long(covered in my next blog). can save you untold hassles later on. What records you keep depends to some degree on what type of business you have. Here is a list of a few that every business needs to keep.

• Gross Receipts - this may include cash register tapes, invoices, bank deposit records, credit card slips and in some cases 1099-Misc.
• Purchases of items for resale – Canceled checks, credit card slips, cash register tapes, invoices.
• Records of expenses – Canceled checks, credit slips, cash register tapes, petty cash slips, account statements.
• Travel records – Credit card slip or canceled checks. If it is for meal you should note the name of the client or other business purpose. For additional information on travel records see IRS Publication 463.
• Assets – You need records of the purchase of any items you bought for your business… i.e. furniture, equipment, machinery. Also keep records of the sale of any of these items.
• Employment taxes – Payroll reports which include who you paid, what you paid them and when.

If you need additional information on keeping business records, see IRS Publication 583. Your tax consultant or CPA should be able to answer most questions you will have.

The following is the IRS’s definition of a person who may be held responsible for the Trust Fund Recovery Penalty:

A person or group of people who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes. This person may be:

• An officer or employee of a corporation
• A member or employee of a partnership
• A corporate director or shareholder
• A member of a board of trustees of a non profit organization
• Another person with authority and control over funds to direct their disbursement, or
• Another corporation
  

You can be held responsible if you were responsible for collecting or paying the trust fund or if you willfully fail to collect or pay them. The term willful is defined as: the person must have been or should have been aware of the outstanding taxes and either intentionally disregarded the law or was indifferent to its requirements.

Not having enough money to pay your other business expenses is not an excuse and shows an indication of willfulness.
When a Trust Fund Recovery Penalty is asserted, your personal assets may be seized and a lien will be filed against all property. Even if your company was a corporation, you are not protected against assertion of the Trust Fund Recovery Penalty.

It may not be common knowledge that starting next week, the IRS puts a hold on issuing wage levies. If your levy is already in place, it will stay there. If the levy hasn’t been issued, the IRS will kindly wait until after the first of the year to do so. If you are in danger of being levied, use this time wisely to get your delinquent returns filed and get yourself in an installment plan.

For most taxpayers having a wage levy is an embarrassment. To prevent your employer from finding out about your problems with the IRS, either get help from a tax consultant or contact Effectur. We can help you file your old tax returns and an Enrolled Agent can contact the IRS on your behalf and negotiate an installment agreement. If all your returns are filed and your liability is under $25,000, Effectur can get you set up in an installment agreement in as little as 48 hours. If your liability is over that, we can help you through the process of filing out the proper forms and getting the required documentation together.