Archive for January, 2011
Question: How do I know if my gift is taxable income?
I have received a sum of money from a family member. It is a gift. Is it taxable income? If so... does it change my tax bracket?
Answer: It really depends on who's giving it to you. If this is an inheritance, you can be taxed on that income and it won't change your AGI. If this is a gift, it may be subject to a gift tax. I'd consult a financial advisor regarding the tax treatment as well as ways you can shelter your money from the government.
Extension designed to benefit charities
The North Platte Telegraph People over 70 have been granted an extension that will allow them to avoid paying income tax on donations to charities. It is a provision in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that President Barack Obama signed into law Friday.
Are VA Aid and Attendance Benefits taxable? (24)
Question: Check off where your taxes should go, is this a good idea?
We will always have to pay taxes. But imagine if citizen were allowed to allocate where the funding would go. Say you paid 12000 in taxes this year to the feds. Say 50 percent went toward federally needed things like highways and defense. Then the last 50% you could allocate. Maybe a checklist of all the expenditures with a percentage amount. If you didn’t want your money going toward medical research then you could allocate it all to, say the environment. You could tell the government what to do with the remaining 6000 dollars. Would this make you feel better about paying your taxes?
What would you allocate your dollars to, and what percentage?
Answer: Nice idea, but who's to say what is federally-needed or even how much spending is needed for those federally-needed items. While I think that spending on defense is necessary, you and I might differ between how much. Also, the idea behind a deliberative body is to weigh all the needs of the country and equally apportion spending so these needs get met. Under your system, minorities (in the democratic not racial sense) would never get funding for their needs - take specifically orphan drugs - would you propose funding for a drug that might save say 20 people a year? Our drug companies certainly won't since there is no profit, so that is why the government undertakes this funding - it would probably never be undertaken if people voted on it since only maybe a few hundred people with the disease and another few thousand who live and work with them might vote for the funding.
Unluckily, individual's self-interests enter into this proposal too much and better is a societal view of what we should spend tax monies on.
Talk of the County
Escape to Wisconsin As Illinois taxes go up, Wisconsin will be licking their chops to get more businesses to Wisconsin and avoid the added taxes. It appears Illinois is focused on revenue, but no plan to cut overhead and reduce costs. Death penalty Will we or won’t we have the …
How High Will Taxes Go?
Question: Do I need to give a form 1099 misc form to State and Local tax offices?
I was reading a comment in the tax section, and I was wondering If I had to also prepare a copy of 1099 misc form to State and Local Tax offices? Just wondering! When you have independant contractors, at the end of the year, are you required to send any information regarding independant contractors, to State and Local Tax offices?
Answer: Depends on your state. CA, for example, does not require it because they match reported data (they get it from IRS) with income shown on the tax return.
Not all states share data with IRS, but it's not far off.
You can probably find the answer this way:
Find your state's taxing authority by Googling "(your state) Dept of revenue" or "(your state) income tax authority". They will have a phone 3 to call to get answers to questions like this. Some states even have means set up for real time online chat for answers.
Chesapeake Lodging Trust Announces 2010 Dividend Income Tax Treatment
ANNAPOLIS, Md.--(BUSINESS WIRE)--Chesapeake Lodging Trust (NYSE:CHSP) announced today the estimated income tax classification of the Company’s 2010 distributions on its common shares (CUSIP #165240102). The income tax classification of the 2010 distributions as it is expected to be reported on Form 1099-DIV is set forth in the following table: Declaration Date Record Date Payment Date Total Cash ...
YouTube - BRAAAINS - GET 1099 FREE Brains.flv
Leeds Building Soc - Annual Financial Report 31 December 2010
Leeds Building Soc - Annual Financial Report 31 December 2010
Bernie Sanders Denounces Obama-GOP Tax Cut (Highlights from Speech)
Question: IRS - forviveness of debt tax question.?
When a home seller receives a 1099 for forgiveness of debt in a short sale, is the income reported as miscellaneous income, or is the amount forgiven added to the tax basis, likely resulting in no taxable event? Or some other answer?
Answer: A recent New York Time article "After Foreclosure, a Big Tax Bill From the I.R.S." highlights a not well publicized fact of income tax law - discharge or forgiveness of debt is income to the taxpayer.
A simple fact pattern - You have a house with a mortgage of $100,000. You can't make your mortgage payments, and the house is foreclosed for $80,000 and total forgiveness of the mortgage. You now have no house and no debt obligation. However, you originally borrowed an additional $20,000 that the bank did not receive from the sale, and that you no longer have to pay back. Under Internal Revenue Code Sec. 61(a) (12), you have earned $20,000 dollars of income that you now owe tax on. The problem? You never got $20,000 in hand - instead, it is "phantom income" to you, upon which you need to pay tax in real cash ($4000 of tax at a 20% tax bracket).
Why are you deemed to have earned $20,000? Because your total net worth has increased as a result of not have to pay back the $20,000 (assets - liabilities = total net worth; if liabilities go down, total net worth goes up).
This fact pattern also applies where credit card or other debts are forgiven - ie: the creditor accepts as full payment less than the total amount borrowed.
IRC §61 - Gross Income Defined
61(a) GENERAL DEFINITION. --Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:
61(a)(12) Income from discharge of indebtedness;
Where a debt is forgiven, is discharge of indebtedness income always the case? No. Where you have (1) filed bankruptcy under Chapter 11 (IRC Sec. 108 (a)(1)(A)), or (2) are insolvent at the time of the discharge (IRC Sec. 108(a) (1) (B)), then IRC Sec. 61(a)(12) does not apply.
The first exemption is easy - you either filed Chapter 11 or you haven't. The second is not so easy - you may feel you have no assets but not be insolvent under the Code.
To avoid a nasty surprise, make sure when paying off a debt for less than full value that you get in writing what they will be supplying to the IRS about the transaction.
State of city government? Shrinking, says Heights mayor
DEARBORN HEIGHTS — Mayor Dan Paletko yesterday said city government must downsize in the year ahead as property tax revenues continue to plummet.