Larry, I own a piece of property that I owe about $30,000 to the bank. I paid about $10,000 for the property about 10 years ago. Here is the deal. I have an offer of $30,000 on the property. If I had the buyer pay a note directly off for me, would the sale have to be reported to IRS?
Oscar
Oscar, the payment to the bank would be considered income to you and you would have to pay tax on the gain just like if you received the proceeds. The IRS considers relief of debt (the pay-off of a loan) to be the same as a cash sale.
Larry Kopsa CPA
Tuesday, June 8, 2010
Monday, June 7, 2010
QUOTE OF THE WEEK
"Hate is like acid. It can damage the vessel in which it is stored as well as destroy the object on which it is poured."
--Ann Landers
--Ann Landers
Friday, June 4, 2010
DEDUCTING TRAVEL EXPENSES
Larry, I am going to Las Vegas for a convention and I want to take my spouse. Can I deduct her expenses?
Lou
Lou, I presume that you own your own business. I have some really good information on this and other topics on our website in the General Tax Information section. In response to your question, click on the following link:
http://www.kopsaotte.com/salon/documents/DEDUCTINGSPOUSESTRAVEL.pdf
Larry Kopsa CPA
Lou
Lou, I presume that you own your own business. I have some really good information on this and other topics on our website in the General Tax Information section. In response to your question, click on the following link:
http://www.kopsaotte.com/salon/documents/DEDUCTINGSPOUSESTRAVEL.pdf
Larry Kopsa CPA
NEW LAW WILL REQUIRE SOME S CORPORATION OWNERS TO PAY SUBSTANTIALLY MORE IN SOCIAL SECURITY AND MEDICARE TAX
I know one thing that is certain. Taxpayers hate paying self-employment tax. Hate it, hate it, hate it. Maybe it's because they know the tax goes towards financing Social Security - and they know better than to plan on retiring on Social Security. Now for some professional S corporations it appears that they will lose this wonderful tax advantage.
If you are in the following professions and if the principal assets is the reputation and skill (yet to be defined) of three or fewer workers, you are going to get hit starting in 2011.
• Accounting.
• Law.
• Health.
• Actuarial science.
• Engineering.
• Architecture.
• Lobbying.
• Consulting.
• Brokerage services.
• Investment management.
• Sports.
• Performing arts.
Currently, the tax is 15.3% of the first $106,800 in profits and 2.9% above that.
The change will end a popular tax saver for personal service S firms. Our strategy was to take a modest salary and receiving the rest of the profit as a dividend. The S corporation profits flow through to the owners’ individual income tax returns as dividends. Those dividends are exempt from self-employment tax, but they are hit with income tax.
We saw this coming. A few years ago, Treasury inspectors found massive tax avoidance in this area. More than 35,000 one-owner S companies with profits of $100,000 or more paid no payroll taxes on the profits because the owners didn’t take a salary. The same was true for owners of about 40,000 S firms with profits in the $50,000-$100,000 range. Because of this the tax writers decided to take action to end any possibility of gaming the system.
No exception will be allowed for amounts left in the firm for working capital, at least for small professional service S firms. Dividends passed through to owners of larger S service firms or of S corporations that aren’t in professional service fields will continue to be exempt from self-employment tax but the writing's on the wall. The iceberg is visible ahead. And we can't just sit around waiting for it to hit like the Titanic.
We'll obviously keep a sharp eye on this.
Larry Kopsa CPA
If you are in the following professions and if the principal assets is the reputation and skill (yet to be defined) of three or fewer workers, you are going to get hit starting in 2011.
• Accounting.
• Law.
• Health.
• Actuarial science.
• Engineering.
• Architecture.
• Lobbying.
• Consulting.
• Brokerage services.
• Investment management.
• Sports.
• Performing arts.
Currently, the tax is 15.3% of the first $106,800 in profits and 2.9% above that.
The change will end a popular tax saver for personal service S firms. Our strategy was to take a modest salary and receiving the rest of the profit as a dividend. The S corporation profits flow through to the owners’ individual income tax returns as dividends. Those dividends are exempt from self-employment tax, but they are hit with income tax.
We saw this coming. A few years ago, Treasury inspectors found massive tax avoidance in this area. More than 35,000 one-owner S companies with profits of $100,000 or more paid no payroll taxes on the profits because the owners didn’t take a salary. The same was true for owners of about 40,000 S firms with profits in the $50,000-$100,000 range. Because of this the tax writers decided to take action to end any possibility of gaming the system.
No exception will be allowed for amounts left in the firm for working capital, at least for small professional service S firms. Dividends passed through to owners of larger S service firms or of S corporations that aren’t in professional service fields will continue to be exempt from self-employment tax but the writing's on the wall. The iceberg is visible ahead. And we can't just sit around waiting for it to hit like the Titanic.
We'll obviously keep a sharp eye on this.
Larry Kopsa CPA
Thursday, June 3, 2010
SENATOR JOHANNS' COMMENT ON AG AND THE EPA
"I'm disappointed in the Environmental Protection Agency (EPA)'s proposal today to further regulate our farmers and ranchers by subjecting pesticide applicators to new and duplicative requirements under the Clean Water Act. It ignores long-established laws already in place to regulate pesticides and will further burden producers, yet it will have virtually zero environmental benefit."
Wednesday, June 2, 2010
CALLING THE IRS
I don’t know if you’ve ever had the chance to call the IRS. I hope it never happens that you do. In our line of business we get this opportunity quite often.
I wanted to share with you the frustration of dealing with the IRS.
Recently I called regarding a client matter. After going through the tree of questions, what language I wanted to hear, the notice and ID number etc., I was finally told to wait, which I did for twenty minutes (which is normal). I then heard the beep that told me I might be next; I heard some crackling on the other end and then a dial tone. I spent twenty-five minutes sitting there waiting to speak to an IRS agent just to get cut off. I redialed the number and the same thing happened the second time.
These are the people who will be in charge of our health care.
I wanted to share with you the frustration of dealing with the IRS.
Recently I called regarding a client matter. After going through the tree of questions, what language I wanted to hear, the notice and ID number etc., I was finally told to wait, which I did for twenty minutes (which is normal). I then heard the beep that told me I might be next; I heard some crackling on the other end and then a dial tone. I spent twenty-five minutes sitting there waiting to speak to an IRS agent just to get cut off. I redialed the number and the same thing happened the second time.
These are the people who will be in charge of our health care.
Tuesday, June 1, 2010
RANDOM THOUGHT OF THE WEEK
"Map Quest really needs to start their directions on #5. I'm pretty sure I know how to get out of my neighborhood."
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