Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.
Even thought April 15 is 237 days away, it’s still never too late to get a head start on tax preparation. Here’s some helpful news you can use, courtesy of our own resident tax man.
Using Your Car for Business
When using your car for business, you must keep a very accurate mileage log, and the log must be recorded at the time of the usage.
To prove his usage, one Florida real estate agent documented his date, time, mileage, etc. in a diary he said he prepared every day. This was presented as proof of his 2008 expenses. The only problem was that there was an ‘order form’ for a new diary in the back pages. The order form was for a 2014 diary. Hmmm – time flies.
Going to commit tax fraud?
- Rule 1: Don’t steal from the government.
- Rule 2: If you do steal, don’t talk about it.
- Rule 3: If you do steal, and want to talk about it, don’t do it on Facebook.
- Rule 4: If you do steal, want to talk about it, and do so on Facebook, don’t use your real name.
- Rule 5: If you do steal, want to talk about it, do so on Facebook, and use your real name, don’t taunt the IRS.
- Rule 6: If you do steal, want to talk about it, do so on Facebook, use your real name, and taunt the IRS, be prepared to go to jail.
- Rule 7: If don’t want to go to jail, see rule #1.
Rashia Wilson of Tampa, Florida is now serving a 21 year prison sentence, plus she has to pay back $3 million because she stole from the government (identity theft), talked about it on Facebook, used her real name, and taunted the IRS.
Work for a business with less than 50 employees? By October 1, you will receive a notice about the state exchange program which are suppose to be available for individuals by October 1, and for small businesses by January 1, 2014. In general, be prepared to lose benefits and/or pay higher insurance premiums.
“Sex Therapy” Is Not A Medical Deduction
Medial deductions must be prescribed by a doctor and must be for the treatment of a medical condition. Pornography, prostitutes, massages, etc., do not qualify, although there may be a business reason, as client #9 suggested.
In another just completed case, on his 2002 tax return, one Brooklyn lawyer deducted $40,588 for “therapeutic sex,” $70,776 for “massage therapy to relieve osteoarthritis and enhance erectile function through frequent orgasms,” and $2,173 for “pornography to enhance sexual performance in lieu of Viagra.” If that therapy helped him, he will probably head back into depression when he gets his $23,083 tax bill.
IRS Examining Business Losses
Some taxpayers have a hobby, try to make a few extra dollars doing it, but end up with a loss, and claim that loss on their tax return. If this is you, be forewarned that the IRS is going to take a long look at that business schedule. You need to be able to prove that it is a bona fide business.
One rule of thumb is that there is a profit in three out of five years. Due to the nature of the business, this rule may not necessarily hold true. There are actually nine factors the IRS uses, including the manner in which the business is carried out, the taxpayer’s expertise, and the time and effort invested. Make sure you are on solid ground. Check out the IRS thought process.
NYS: Pay Your Taxes Or Lose Your License
The NYS Department of Taxation and Finance will be sending a letter to more than 16,000 individuals and others who are tax scofflaws, that is, they have past-due state tax liabilities. If you are one of the 11,324 individuals who owe more than $10,000, you may lose your driving privileges, except to drive to and from work. “Past-due tax liabilities” means any tax liability or liabilities that have become fixed and final, and the taxpayer no longer has any right to administrative or judicial review.
FYI: Kings County, 1,437 (total $59,348,034), Queens County, 1,224 (total $38,297,600), Richmond County, 486 (total $18,543,899), Bronx county, 584 (total $26,203,933), New York County, 1,761 ($117,995,774). Check it out.
Quip: It’s strange how a person with no sense of humor can come up with such funny answers on his/her tax return.
Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.