Archive for the ‘Tax News’ Category
If you’re a regular to this website, you’ll notice something new. At the top of the sidebar by entering your name and email address, you’ll be able to receive my new monthly special reports. These will include timely summaries of new tax legislation as well as checklists and lists and you can’t beat the price because these will be sent to you inbox for no charge. Expect the first on in the first week of June and until then, be sure to enjoy the updates on the site.
Good news for procrastinators out there. With it being Emancipation Day, tax returns won’t be due until Tuesday, April 17, 2012. Throw in the fact that this is also a leap year and it means you have a few extra days to get your tax return done this year. This is particularly cool for preparers and I know those extra days will come in handy.
In case you missed, I went into some of the changes on the new Form 1040, Schedule E. If you’re a renter, you won’t want to miss this.
Extenders is the word on the street over at Congress. With the lame and confusing two month payroll tax extension, Congress has that and a bunch of other things to take a look at preferably sooner rather then later. Here’s the rundown on what has to be decided.
Finally, if you’re a part time or even professional gambler, here’s a decent column on tax rules for gamblers.
I’ll get to how in a second, but this post ties in nicely with yesterday’s piece on Form 1099-MISC. The IRS revamped their Schedule E, that’s attached to your Form 1040 if you have either rental properties or you own an interest in a flow through entity (LLC and S-Corporations are the big two) where you receive a Schedule K-1. Page two is used to report your flow through entity activity and that’s largely unchanged. Page one has new stuff on it and it’s worth examining further.
The first big change is at the very top of the form where they now ask you two questions and both relate to Form 1099 requirements. In the famous words of Admiral Ackbar, “It’s a trap!!” The two questions seem innocent enough but what the IRS is basically trying to do here is make sure you’re meeting the newer (although they’ve always been around, the IRS just seems to be focusing on them) rules that require property owners to issue 1099s. If you operate your rentals under a business structure you probably should have been doing this anyway but now the IRS is on the prowl with regard to this particular issue.
The trap on Schedule E works like this. Say you’re preparing your return in April and you get to your Schedule E. You say to yourself, “I’ve never done 1099-MISC’s before, I’m not going to start this year plus it’s already too late,” so you check “no” to each question. The problem is, you’ve also reported $800 in professional fees, $1,300 in repairs and $2,000 in management fees, odds are some of those went to an LLC or a self-employed individual (you’re still not required to send corporations a 1099, we dodged that bullet when Congress repealed that provision that was in the health care law. So by saying no to those questions AND reporting those deductions, you’ve now increased your chances of hearing from the IRS. So beware and if you’re reading this now, either read up on (yesterday’s post is a quick primer) or talk to your adviser about getting out some 1099’s.
The other change to the schedule is line 3a. The IRS added a line to separately report income reported on the new Form 1099-K. If you take credit card payments or receive money from a third party network such as paypal.com and you exceed the minimums spelled out in the instructions, then you’ll get a Form 1099-K this year. If that 1099-K is for your rental, then that’s the line where you enter that information.
So that’s the new form. If you want more information, you can find the schedule’s instructions here.
Here’s some of the stuff that’s floating around the blogosphere.
The Wall Street Journal ran a few good pieces on charitable deductions. There’s one on the rules and then another on what to donate. They also did a piece on how to give alternative assets to charities. All three are worth reading especially if you plan on making a last minute gift to your favorite charity this year.
Both sides of the aisle are still trying to hash out a plan to extend the payroll tax cuts. It’s short on details but it looks like the democrats have come up with a potential compromise but at the same time, there’s some questioning as to how this could effect social security in general. Finally, there’s a good piece over at Taxgirl.com that talks about how the republicans are trying to link up the payroll tax cut to the approval of a gas pipeline.
The new Form 1099-K rules kick in beginning in 2012 and the IRS has put out a FAQ on the subject. If you use paypal or accept credit card payments, this is worth a read.
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