Tuesday, August 30, 2011

MORE GPS TOWERS MAY MESS UP FARMERS

Recently, USA Today ran an article on how John Deere is leading the fight against Lightsquared plans to put up more than 40,000 new cell towers in rural America. John Deere is worried that the spectrum that Lightsquared wants to use will bump the GPS spectrum and lead to farmers having issues running their GPS on tractors and combines.

Since this is most likely a political fight, it may make sense for farmers to let their representatives know how important precision farming is.

Monday, August 29, 2011

HOBBY LOSSES - HOW TO DO IT RIGHT AND HOW TO DO IT WRONG

Horse breeding losses aren’t always hit by the hobby loss disallowance rules as a recent tax court case shows.

First how to do it right. A couple bought, bred and trained horses in addition to working regular jobs. They had a detailed business plan and adjusted it after consulting with experts. They used recognized horse farm accounting software, opened a separate bank account and set up a website for their breeding operations. After several years of red ink, they prudently realized they couldn’t make a go of it and shut down the business. This convinced the Court that they had a profit motive and their breeding operation was more than a hobby (Blackwell, TC Memo. 2011-188).

But another breeder wasn’t so lucky. Instead of getting his hands dirty, he let others do the work for him by investing in a tax shelter deal that was intended to create large up-front losses before the mares were sold at a profit. The Tax Court gave short shrift to his claimed breeding losses (Van Wickler, TC Memo. 2011-196).

Saturday, August 27, 2011

DEBT DEAL TALK

First of all, I don’t think that anybodyIt seems like a lot of the talk these days is about the Congressional Committee that is to come up with a deficit plan to present to Congress and the President. On top of that, the President has been saying on his bus tour that he has a plan that he is going to unveil in September. How is this going to impact income taxes? Here are my thoughts:

First of all, I don't that anybody thinks that the committee will offer a plan that will be passed, so we will default (bad choice of words), to the 1% cutback called for in the deficit bill.

Right now, House Republicans appear to have blocked any new taxes. And all seven Republican candidates participating in the recent presidential debate pledged to oppose new taxes even if they were accompanied by ten times that amount in spending cuts. So, new taxes appear off the table for now.

But look out! The Bush tax cuts expire right after the 2012 election, and rates on ordinary income, capital gains, and qualified dividends will automatically go up unless Congress gets their act together to extend them. Democrats and Republicans are united in wanting to preserve them for "middle class" taxpayers. But the White House has pledged not to extend those cuts for single taxpayers making above $200,000 or joint filers above $250,000. If Obama wins in November, he may have the leverage to pass "enhanced revenues."

A final comment.

I love how the spin doctors in Washington use terms like "enhanced revenues" to mask new taxes. My favorite is the 3.8% "Unearned Income Medicare Contribution" imposed on investment income by last year's legislation that Washington laughingly refers to as “Healthcare Reform.” I swear, those guys have more euphemisms for "tax hikes" than Eskimos have words for snow.


Friday, August 26, 2011

ACCOUNTANTS IN THE MOVIES



In Hollywood, accounting can seem like a pretty glamorous profession, or not.



May 17, 2011 - The Producers

Gene Wilder co-starred as accountant Leo Bloom in "The Producers," the 1968 Mel Brooks madcap comedy. Teamed with Zero Mostel (left) as Max Bialystock, the womanizing theatrical impresario, they try to create the biggest flop ever to hit Broadway, a musical tribute to Adolf Hitler. Their roles were later reprised by Matthew Broderick and Nathan Lane in a hit Broadway musical and a 2005 remake.




Thursday, August 25, 2011

WHICH WAY SHOULD I GO - MARRIED FILING JOINTLY OR MARRIED FILING SEPARATELY?

Q. We have not filed our 2010 return. We are trying to decide if we should file married filing joint or married filing separately. What should we look at?

A. You really need to be working with a tax professional on this.
If you are married, you generally have two choices: married filing jointly and married filing separate. In most cases, if you are married and choose to file as married filing separate, you will usually pay more tax. Usually. Some exceptions apply. But in the great majority of cases, you will pay more tax.

If you file as married filing separate, you still have to coordinate a bit with your spouse.


• While you include only your own income, deductions, exemptions and tax credits, you still have to include your spouse’s information, including Social Security Number or Taxpayer ID.
• You also have to elect the same deduction option as your spouse: you must both opt to itemize or you must both opt to take the standard deduction. You may not each independently elect itemized or standard deductions.
• If you file as married filing separate, you lose the option of claiming some tax preference items. For example, you cannot take the student loan interest deduction, the tuition and fees deduction, the education credits, or the earned income credit.

So why do it? There are a few scenarios where electing married filing separate status makes sense:

• Privacy. It’s rare that your spouse’s tax return will be made public but if it is, filing separately ensures that your own returns stay private. Who falls into this category? Generally, the spouses of politicians. Think Teresa Heinz-Kerry or Cindy McCain, both wealthy women in their own right who might not want the world to know their business.
• Trust (or lack thereof). These days, many married couples maintain separate accounts and have separate assets. Sometimes it’s for convenience purposes. Sometimes it’s to keep some semblance of independence. And sometimes it’s for professional reasons. That doesn’t always translate into separate tax returns. However, if you maintain separate financial lives to the point where you don’t understand/care/want to know what’s going on with your spouse’s finances, you may also not wish to file a joint tax return. You can’t simply claim ignorance if your spouse makes a significant error: the IRS expects you to review and understand your tax return before you sign it. If you don’t have a level of comfort signing a joint return, don’t. That’s a great reason to file separately.
• Protection. There’s a great line in the movie, Steel Magnolias when Truvy says to Clairee, “If you can achieve puberty, you can achieve a past.” It’s true. Many taxpayers these days marry someone with a past… past tax debts, defaulted student loans, you name it. It happens. Filing separately may preserve a spouse’s right to claim a refund (yes, you can file some extra papers to achieve the same goal but that’s an awful lot of work).
• Medical or Other Expenses. Occasionally one spouse has significant medical or other expenses but little income. Since medical expenses must meet that 7.5% floor before you can deduct them, joint filers may have a hard time meeting that threshold. However, a taxpayer filing separately with a relatively low income can hit the floor much more quickly. Ditto for miscellaneous expenses subject to the 2% floor. Keep in mind, though, that your spouse has to itemize if you do, so this only works if there are enough combined deductions between the both of you.
• Money. Sometimes, the numbers just work out better. And why pay more than you have to?

So there you go. There is no rule that says, “Thou shalt elect married filing jointly.” Sometimes it makes sense to elect married filing separate. Sometimes. Run the numbers – or discuss with your tax pro – to see if it makes sense for you.


Wednesday, August 24, 2011

13 ESSENTIAL TALKING POINTS FOR THE EARTHQUAKE ENTHUSIAST

Since Virginia had a 5.9 magnitude earthquake and Colorado was also hit with earthquakes yesterday, I thought you might want some earthquake talking points.

1. The first recorded earthquake was in China in 1177 B.C.E.
2. China is also the birthplace of the first seismograph. Built in 132 C.E. by a man named Cheng Heng, it consisted of eight metal dragons holding eight carved balls over eight frog figurines. If an earthquake made the ground vibrate, the dragon facing the quake’s source would (naturally) drop a ball into the mouth of its corresponding frog.
3. Of course, it didn’t really work.
4. But it did look cool.
5. While dragons aren’t that good at predicting earthquakes, other animals might be. According to ancient reports, critters in the Greek city of Helice headed for the hills just before a massive quake leveled the city in 373 B.C.E.
6. There’s some modern evidence, as well. In 1975, Chinese officials evacuated Haicheng days before a massive earthquake, based both on warnings from seismologists and the strange behavior of local pets.
7. Before leaving Alabama, Shawnee leader Tecumseh told a Creek chief, “I … shall go straight to Detroit. When I arrive there, I will stamp on the ground with my foot, and shake down every house in Tuckhabatchee.” Coincidentally (or was it?), he arrived in Detroit on December 16, 1811, the day of the New Madrid earthquake—the largest ever recorded in the contiguous United States.
8. The most violent earthquake ever measured in the world hit Chile in 1960, coming in at a terrifying 9.5 on the Richter scale.
9. The atomic bomb dropped on Nagasaki, Japan, was “only” considered a 5 on the Richter scale.
10. In theory, a quake can actually measure 11, or even higher. The formula for the Richter scale has no upper limit.
11. Speaking of Charles Richter, the American scientist was supposedly an avid nudist. Rumors persist that his wife was so distressed by his penchant for hanging out in the buff that she divorced him.
12. One guy not to trust for earthquake predictions? British soldier William Bell. In 1761, right after two earthquakes uncannily hit England 28 days apart, Bell smelled opportunity. He claimed a follow-up quake would be hitting the country four weeks later. Accounts depict Bell running through the streets of London ranting about the impending destruction. Amazingly, it worked. Folks were so panicked that hundreds actually slept in boats on the Thames thinking it would be safer than their homes. Luckily, the quake never hit. But Bell quickly lost his street cred and eventually ended up in an insane asylum.
13. In early 2001, FEMA prophetically listed the three most likely disasters to hit America: a terrorist attack on New York City (check), a hurricane in New Orleans (check), and a massive earthquake in San Francisco. Nervous yet?

This article was written by Jeff Fleischer, and originally appeared in the May-June 2007 issue of Mental Floss magazine.

Tuesday, August 23, 2011

FARM ACREAGE

Q: "I'm thinking of purchasing a farm acreage with three newer farm equipment buildings and some old grain storage buildings. Could I take advantage 100% depreciation since they are new buildings to me and will be used for my farm in 2011?"

A: On the bonus depreciation rules for farm equipment and buildings, the rule is that the property must be new, as in the first time that this property is put into use. For example, when a farmer buys a new tractor, if it came directly from the dealer and had not been used in production ever before, then this is new property that qualifies for the 100% bonus depreciation. However, if the farmer bought a "new" combine from the dealership that had been used for 20 hours by another farmer before being traded in, this is not new equipment. Even though it is new to the farmer, it is not new to farming (since it had been used previously).

In the case of the question, even if the farm buildings were only two months old, since they were in use by the previous owner, they will not qualify for the bonus depreciation.

One rule of thumb is that anytime you purchase farmland from another party, it is VERY unlikely that any of the property purchased will qualify for bonus depreciation. Some will qualify for the Section 179 deduction, but none of it should qualify for 100% bonus depreciation.

Monday, August 22, 2011

PAYING COLLEGE EXPENSES

Q. Back to school time can get really expensive! What tax breaks are there for college? I don’t understand my options. ~Terry

A.Terry, this can get a little confusing. There are several tax breaks to help pay for education. Of course, the government can’t make it simple; they have to give us several options which make it complicate the tax code.

American Opportunity Credit

• This credit, originally created under the American Recovery and Reinvestment Act, has been extended for an additional two years – 2011 and 2012.
• The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education.
• Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
• Qualified expenses include tuition and fees, course related books, supplies and equipment.
• The full credit is generally available to eligible taxpayers whose modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).

Lifetime Learning Credit

• In 2011, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions.
• There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student.
• To qualify for the credit, your modified adjusted gross income must be below $60,000 ($120,000, if married filing jointly).

Tuition and Fees Deduction

• This deduction can reduce the amount of your income subject to tax by up to $4,000 for 2011, even if you do not itemize your deductions.
• Generally, you can claim the tuition and fees deduction for qualified higher education expenses for an eligible student if your modified adjusted gross income is below $80,000 ($160,000, if married filing jointly).

Student loan interest deduction

• Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, if your modified adjusted gross income is less than $75,000 ($150,000 if filing a joint return), you may be able to deduct interest paid on a student loan used for higher education during the year.
• It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.

Other rules

• For each student, you can choose to claim only one of the credits in a single tax year.
• If you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. For example, you can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.
• You cannot claim the tuition and fees deduction for the same student in the same year that you claim the American Opportunity Credit or the Lifetime Learning Credit.
• You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

Every situation is different, so make sure that you explore your options.

CELEBRITY TAX PROBLEM OF THE WEEK

RAP SINGER BEANIE SIGEL ENTERS GUILTY PLEA IN TAX CASE


Rap singer, Beanie Sigel has pleaded guilty in a Philadelphia federal court to charges of failing to file tax returns for three years in a row.
The 37-year-old performer admitted Tuesday to the government’s claim that he did not pay at least $348,000 that he owed in taxes on $1 million in income earned between 2003 and 2005, according to the Philadelphia Inquirer.

Prosecutors believe Sigel, whose real name is Dwight Grant, did not pay taxes in years prior to 2003, but the statute of limitations has run out. They contend that he owes up to $700,000 in unpaid taxes going back to the 1990s. He has previously been in prison on weapons possession charges, but was acquitted of an attempted murder charge. Sentencing in the tax case is scheduled for November. He faces up to three years in jail.

Saturday, August 20, 2011

EIGHT THINGS TO KNOW IF YOU RECEIVE AN IRS NOTICE

Each year, the Internal Revenue Service sends millions of letters and notices to taxpayers for a variety of reasons. Here are eight things to know about IRS notices – just in case one shows up in your mailbox.

1. Don’t panic. Many of these letters can be dealt with simply and painlessly.
2.
There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your account, or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
3. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
4.
If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
5. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.
6. If you do not agree
with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.
8. It’s important that you keep copies of any correspondence with your records.



Friday, August 19, 2011

INCOME TAX RATES AROUND THE U.S.

The Tax Foundation's Tax Policy Blog has posted a map showing the top statutory marginal income tax rate in each state for tax year 2011. Nebraska's personal income tax system, which consists of four separate brackets, has a top rate of 6.84% that kicks in at an income level of $27,000. Among states levying an individual income tax, Nebraska's top rate ranks 18th highest, nationally. Hawaii and Oregon have the nation's highest rate at 11%, while nine states impose no income taxes on wages. To see the Tax Foundation's map, go to the link below:

http://www.taxfoundation.org/blog/show/27237.html








Thursday, August 18, 2011

HOW LONG SHOULD YOU RETAIN YOUR TAX INFO?

Conventional wisdom says to hold on to tax documents for three years after filing a return, but the conventional wisdom isn’t always so wise.

Many assisted-living facilities, for example, want to see five years’ worth of financial statements from prospective residents. Medicaid also looks back five years into would-be recipients’ financial pasts to ensure that people aren’t “artificially impoverishing themselves by transferring money or assets” before they apply for coverage. And the IRS can demand up to six years of records from taxpayers suspected of underreporting income.

If you’ve already shredded your documents, most banks, brokers, and credit card companies will provide copies—for a fee.

Friday, August 12, 2011

HOW THE DEFICIT IMPACTED TAXES

Unless you have been living in a cave for the last couple of weeks, you know that Congress finally took care of the debt limit...well maybe. By extending the amount that they could borrow, they are allowed to keep sending out checks and avoid defaulting on its debts. Surprise, surprise. Another extension will not be needed until after the 2012 elections. It sounds like a political move to me.

The question that you have to ask is, “How does this impact taxes?”

Lawmakers kicked taxes down the road as part of their grand compromise on the debt ceiling. Republicans wouldn’t accept proposals from Democrats to include billions of extra tax revenues in the package. That money was to come from a major revamping of the tax code; reducing deductions and tax breaks while lowering rates.

The goal of the revised system was to raise hundreds of billions in additional revenue than under the current law. Thus, Congress isn’t likely to tackle serious tax reform anytime soon.

While it is true that the debt deal established a bipartisan deficit reduction panel that could vote to approve tax increases, the chances of that happening are slim. And even if the panel were to propose a tax hike, the House probably wouldn’t pass it.

This whole mess pretty much guarantees that taxes will be a key issue in the 2012 elections. Both Democrats and Republicans remain convinced that a majority of voters will support their position on taxes. Time will tell.

Thursday, August 11, 2011

CELEBRITY TAX PROBLEM OF THE WEEK



Longtime Rangel Aide Pleads Guilty to Tax Charges

James Capel, a former aide to Congressman Charles Rangel, D-N.Y., has pleaded guilty to failing to file tax returns for three years. Capel pleaded guilty to misdemeanor charges of one count of failure to file a tax return and two counts of tax fraud.


Rangel was censured in the House last December for various ethics violations, including failure to pay taxes on rental income from a villa in the Dominican Islands. Capel’s failure to file tax returns from 2007 to 2009 was unconnected to Rangel’s ethical lapses. However, he worked as a top advisor to Rangel for more than 10 years, according to The New York Times. He ran Rangel’s New York office, according to The New York Post. Rangel was the former chairman of the tax-writing House Ways and Means Committee until he stepped down in the midst of the ethics investigation.


Capel did have some income taxes automatically withheld from his paycheck, but his failure to file the tax returns led to about $25,000 in unpaid taxes. As part of his plea deal, he will pay over $42,000 in unpaid taxes, penalties and interest. Capel retired in February from his job, where he earned nearly $160,000 a year.


Wednesday, August 10, 2011

WONDERING ABOUT DEPRECIATION ON A USED TRUCK AND ESTATE LAWS

Q. Two questions: First, I am thinking of purchasing a used truck. How much depreciation can I take? Secondly, I have heard talk about estate laws changing in 18 months. What is the deal?

A. Regarding the truck…Does the truck weigh over 6,000 pounds? The weight of the truck makes a difference on the depreciation.

The estate tax question is a tough one. The problem is, if the current rules are not extended, we go back to the rules 10 or so years ago, and there will be estate tax due on anything over $1 million. Currently, that number is $5 million per husband and wife and what the first to die does not use, flows over to the survivor. In essence, a couple has $10 million to work with.

Most experts feel that there is no way that the government will allow the estate tax floor to fall back to the $1 million level, but who knows. The problem is that to balance the 10-year budget, they work the estimated estate taxes in based on the lower level.


Tuesday, August 9, 2011

STATE CHAMBER VOICES SUPPORT FOR LIVESTOCK INDUSTRY

I am proud to serve on the Board of the Nebraska Chamber of Commerce. I chair the Small Business Committee. Many people think that the State Chamber is about big business. I can assure you that it serves all businesses, including agriculture.

The Nebraska Chamber of Commerce & Industry has reiterated its support for the state’s animal agriculture. At its June meeting in West Point, the State Chamber board unanimously approved a resolution that “opposes any and all activities, conducted by any organization, to counter the interests of Nebraska’s livestock industry and the overall agriculture sector.”

The action comes following reports that extremist animal rights groups are exploring ways to amend the state constitution to hinder livestock production, which generates roughly half of Nebraska’s annual $15 billion in agriculture cash receipts.

Nebraska ranks first nationally in several areas of livestock production, including first in red meat production and second in cattle on feed.

The resolution states that the Nebraska Chamber “will continue to encourage all Nebraska residents to support the state’s agricultural producers and oppose organizations and interest groups whose activities would inflict financial and other harm on Nebraska agriculture.”

The State Chamber Board of Directors is comprised of more than 60 business leaders from across Nebraska. The State Chamber has long-standing policy in support of the continued development of the state’s livestock industry and efforts to educate the public regarding the positive economic impact of animal agriculture.

ADOPTING A CHILD AND WHAT TO EXPECT TAX-WISE

Q: What are the tax benefits and expenses when adopting a child?

A: There are two tax benefits available to offset the expenses of adopting a child. For 2011, you may be able to claim a refundable credit against their federal tax for up to $13,360 ($13,170 for 2010) of “qualified adoption expenses” (see below) for each adopted child. The credit is reduced (phased out) if your income exceeds certain limits (see discussion below).

Qualified adoption expenses. To qualify for the credit or the exclusion, the expenses must be “qualified adoption expenses.” These are the reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging) while away from home, and other expenses directly related to the legal adoption of an “eligible child” (defined below).

Qualified adoption expenses don't include expenses connected with the adoption of a child of a taxpayer's spouse, expenses of carrying out a surrogate parenting arrangement, expenses that violate state or federal law, or expenses paid using funds received from a federal, state, or local program. Expenses that are reimbursed by an employer don't qualify for the credit, but benefits provided by an employer under an adoption assistance program may qualify for the exclusion.

Expenses in connection with an unsuccessful attempt to adopt an eligible child before successfully finalizing the adoption of another child can qualify. Expenses connected with a foreign adoption (i.e., one in which the child isn't a U.S. citizen or resident) qualify only if the child is actually adopted.

Taxpayers who adopt a child with special needs will be deemed to have qualified adoption expenses in the tax year in which the adoption becomes final in an amount sufficient to bring their total aggregate expenses for the adoption up to $13,360 for 2011 ($13,170 for 2010). They can take the adoption credit or exclude employer-provided adoption assistance up to that amount, whether or not they had $13,360 for 2011 ($13,170 for 2010) of actual expenses.

Eligible child. An “eligible child” is a child under the age of 18 at the time the qualified adoption expense is paid. A child who turned 18 during the year is an eligible child for the part of the year he or she is under age 18. A person who is physically or mentally incapable of caring for his or her self is also eligible, regardless of age.

Special needs child. This refers to a child who the state has determined cannot or should not be returned to his parents and who can't be reasonably placed with adoptive parents without assistance because of a specific factor or condition, e.g., ethnic background, age, membership in a minority group, medical condition, or handicap. Only a child who is a citizen or resident of the U.S. can qualify as having special needs.

When to claim the credit or take the exclusion. If the qualifying expenses are paid before the year the adoption becomes final, the credit is claimed for the year after the one in which the expenses are paid. If the expenses are paid in the year the adoption becomes final or in a later year, the credit is claimed for the year in which the expenses are paid. For example, say $3,000 was paid in 2009, $2,000 in 2010, and $4,000 in 2011, when the adoption becomes final. The taxpayer claims a $3,000 credit in 2010 (for the 2009 expenses). The $2,000 of 2010 expenses and the $4,000 of 2011 expenses are combined to be claimed in 2011. In the case of a foreign adoption, the credit may not be taken until the year in which the adoption becomes final.

Adoption credit is refundable. The adoption credit is a refundable credit. So, if the sum of your refundable credits (including any adoption credit) exceeds your tax liability, the excess amount is an overpayment that can be refunded to you.

Phase out for high-income taxpayers. The credit allowable for 2011 is phased out for taxpayers with adjusted gross income (AGI) over $185,210 and is eliminated when AGI reaches $225,210. (For 2010, the phase-out begins at $182,520 and is completed at $222,520.) The 2011 credit is reduced by a percentage equal to the excess of AGI over $185,210 divided by $40,000. (For 2010, the credit is reduced by a percentage equal to the excess of AGI over $182,520 divided by $40,000). For example, say taxpayers who could otherwise claim a $2,000 credit have an AGI of $195,210 in 2011. Their $195,210 AGI minus $185,210 equals $10,000, and $10,000 divided by $40,000 is 25%. Accordingly, the taxpayers “lose” 25% of their credit ($2,000 times 25% is $500) and can only claim a credit of $1,500. (Special rules for determining AGI apply in some cases.) The phase out rules for high-AGI taxpayers apply for the exclusion as well.

Child's taxpayer identification number required for credit or exclusion. The IRS can disallow the credit and the exclusion if a valid taxpayer identification number (TIN) for the child if not included on the return.

Adopted child may qualify for dependency deduction, other tax benefits. Your legally adopted child will qualify as your dependent if the other dependency tests are met, e.g., you provide more than half of the child's support. Even if the adoption isn't yet final, the child will be your dependent if he or she was placed with you for legal adoption by an authorized placement agency and was a member of your household for at least part of the year. Special requirements apply to adoptions of foreign children who aren't U.S. citizens or residents. Once the child is your dependent, you will qualify for the dependency deduction and for other tax benefits, such as the child tax credit.

I can help you to make sure that you get the full benefit of the substantial tax savings available to adoptive parents.

Sunday, August 7, 2011

CELEBRITY TAX PROBLEM OF THE WEEK

Singer R. Kelly Faces IRS Tax Lien

span style="font-family:verdana;">The Internal Revenue Service has reportedly filed a tax lien against singer, R. Kelly for $837,442.59. The IRS filed the tax lien against the Grammy-winning R&B singer-songwriter in January 2010, according to the Detroit News. Last month, however, the IRS lifted an earlier tax lien for $1,036,858.

The singer, whose full name is Robert Sylvester Kelly, is also facing a $2.9 million foreclosure lawsuit against his mansion outside Chicago, according to Crain’s. He allegedly has not made mortgage payments since June of last year. Kelly has had many hit songs including, "I Believe I Can Fly," for which he won three Grammy Awards in 1998. He has also produced and remixed songs for a number of artists, including the Isley Brothers, Luther Vandross and Vanessa Williams. However, he has also faced arrests and lawsuits for disorderly conduct, sex with underage girls, assault and other incidents.

Saturday, August 6, 2011

DEPRECIATION QUESTION ON BUILDINGS

Q: Does a construction company putting up a building get the same 100% bonus depreciation for 2011 like is on Ag buildings?

A: The quick answer to this is “no”. A construction related building is not considered to be 20-year property, and therefore, is normally depreciated over 39 years on a straight-line basis, and is not available for 50% or 100% bonus depreciation.

This does bring up an issue that farmers need to be aware of if they are constructing new buildings on their farm property during 2011 and 2012. If the purpose of the building is 100% farm related, then the building will always qualify for the bonus deprecation. However, if the building is used partially for farm purposes and partially for non-farm purposes, then none of the building may qualify for bonus depreciation.

For example, many farmers have several other businesses that they operate. They may have:

 Trucking business to transport their own grain or others grain
 A tile laying business
 A construction business
 Excavating, road-building, and related business
 Fence erection business, etc.

Most farmers would consider that most of these businesses are related to farming, however, in most cases the IRS would consider these to be non-farming business. Therefore, if a new farm machine shop that is erected and the use of this building includes these non-farm operations, then the building may not be considered a farm building for bonus depreciation purposes.

There is no one answer as to how much incidental non-farm use you can have and still have it qualify for bonus depreciation, but if any of these non-farm operations apply to your operation and you are planning on building a new farm building this year, make sure you check this out first.


Thursday, August 4, 2011

A DUMB LAWSUIT

And Here’s the Kicker~ On her way home from having dinner and drinks, Melanie from Chicago got angry with her husband and tried to kick him. Instead, she crashed through the window of a beauty salon, suffering several deep cuts. So naturally, she sued the salon. Part of her argument: The store’s plate glass window, which fronts a sidewalk, “frequently traveled by intoxicated pedestrians,” should have been stronger.
Source: wbbm780.com(Chicago)

Wednesday, August 3, 2011

SEVEN STEPS FOR FAMILY BUSINESS SUCCESS

Imagine this: A farmer wakes up in the morning and heads out to the field to harvest. To his astonishment, he finds that there is not a crop growing and all he sees is a bunch of weeds. As the farmer thinks about what went wrong, he remembers that he forgot to plant the crops.

Although this is a pretty silly story, it is very similar to what happens when a farm and ranch business fail to prepare a succession plan. They have no crop and no legacy for the future.

Creating a succession plan is not that difficult once you realize how important communication is. The following are the seven steps that we discuss with clients as we talk about family business succession.

1. Communication
2. Business and estate planning
3. Leadership development
4. Trust
5. Personal resilience
6. Retirement investment planning
7. Non-key employees

All seven of these items need to be discussed as part of your succession plan. With good communication and realization of the hurdles that you need to take twice, a business plan can flourish. If you need some assistance with a family succession plan, please contact our office.

Tuesday, August 2, 2011

EMPLOYER'S BEWARE

DOL ‘Refocuses’ on Enforcement; Adds 33% More Investigators

The U.S. Department of Labor (DOL) is promising to “refocus the agency on its enforcement responsibilities”. It’s added 250 new field investigators—a staff increase of more than a third—to look into employer noncompliance on pay and overtime issues. This comes after a scathing report that cited DOL for weak response to complaints. For a free eight-step plan to prepare for a DOL audit, go to
www.theHRSpecialist.com/DOLaudit.