Check your tax return before filing

Want to save yourself from thousands of dollars in penalties? It’s important to carefully review your tax returns, even if you pay someone to prepare them for you. In a recent ruling the IRS upheld a substantial penalty despite their claim that they relied on the practitioner for tax advice. Careful review and understanding of  each and every assertion on your tax return is crucial before signing and sending to the IRS.

Stough vs IRS is a complicated case, but the basic premise is that the taxpayer considered a payment for property improvement as a deductible expense. However, the court ruled that this payment was actually rent because it had the substance of rent. For example, the tenant was making this payment to reduce future rents, and the lease provision allowing this payment was in a section of the lease entitled ‘rent’.   After the finding, Stough requested the penalty be waived because they relied exclusively on their practitioner’s advice.

The court has a special set of criteria that must be met in order to substantiate that claim.

“The adviser is competent with sufficient expertise;
The taxpayer provided appropriate information to the adviser; and
The taxpayer “actually relied in good faith on the adviser’s judgment.”

In this case the third criteria was not met as the tax payer admitted that they didn’t review the return or Schedule E (the schedule where supplemental income is reported) prior to signing it. In addition the preparer didn’t discuss the return with them. According to the court unconditional reliance isn’t a defense especially when the taxpayer should have known about these tax provisions.

You must remember you are always responsible for the contents of your tax return. Always take a few minutes to examine the return before filing and don’t be afraid to ask questions. Keep this in your mind and you’ll keep your butt out of court.

Source: Is it rent? That depends on the lease

Baby on Board? 7 Tax Tips for Expectant (and Hoping to be Expectant) Clients – AICPA Insights

Infertility can be one of the most the serious crisis any married couple would hope to avoid. But if it is mountain you and your partner must climb, please realize that you are not alone. And there are ways to plan and help mitigate the costs of treatment.

In the article Sternberg offers some important tax considerations. For example there is always the possibility of deducted costs of treatment on Schedule A (assuming they exceed 10% of your adjusted gross income). However, she also stresses the need for an flexible spending account which can be funded with pre-tax dollars  as another method of lowering the burden and overall costs of treatment.

Money taken from an employee’s paycheck and put into an FSA is not subject to payroll taxes, resulting in significant tax savings. Fertility treatments, like all medical and dental expenses, can be deducted from Schedule A if they exceed 10 percent of a couple’s annual gross adjusted income.

She offers a quick refresher on other deductions. If you find yourself in this situation, there’s nothing to be ashamed of. Consider some of these suggestions to help make the financial end of the situation a bit easier. As always please check with your accountant or qualified practitioner before acting on any tax advice and to see what’s best for your circumstances.

 

Source: Baby on Board? 7 Tax Tips for Expectant (and Hoping to be Expectant) Clients – AICPA Insights

Goodbye open office, hello office neighborhoods – RealViews

Good Day All,

What concept does your office follow? Open, Closed or Neighborhood – JLL RealViews gives us some info on a new concept in office layout. The Neighborhood concept organizes work-spaces into functional groups.

Think of it as a ‘finance’ table or ‘marketing’ area for instance. In essence your groups are gathered around the people and resources they need to be productive. This layout, for some organizations, favors collaboration and minimizes floor space.

Would a neighborhood layout improve your productivity? Let me know in comments.

–Derek

Source: Goodbye open office, hello office neighborhoods – RealViews

The downside of automatic 401(k) enrollment

Good Day All,

I’ve always been an advocate of the Opt-Out 401k concept. When I started my job I couldn’t wait to setup my 401k but I believe at the time I had to wait 30 days before I could do so. For many people, they become quickly accustomed to the take home pay on their check that the shock or thought of it being reduced becomes hard to sallow. So having this automated from the get-go seems like a win-win, right?

Well Kelley Holland of CNBC points out some flaws. First off, the employer has to pick the initial contribution rates, and they are picking very conservative rates. Of course, this would be a very personal choice based on your circumstances, so I can’t blame companies for not wanting to default to 15% for instance. The second part of this problem is that employees aren’t going and changing these rates. In other words by automating the process people aren’t taking responsibility for their retirement.

One solution that’s in use is automatic increases overtime. But again these rates are fairly conservative and the employee still needs to actively manage their account.   To me one solution would be to put the rate selection front and center during the benefits selection. Of course some basic education in retirement savings would help. This could be put right alongside the insurance selections which always need explanation anyway.

Do you have suggestions to how we could address this issue? Let me know in comments.

–Derek

Source: The downside of automatic 401(k) enrollment