Jerry Coon

THE TAX ATTIC with Jerry Coon

April 26, 2012 // 0 Comments

Two complicated tax topics Things are really heating up in Lansing concerning reforming the Personal Property Tax (PPT). Governor Snyder and the legislature are hot on the trail of reforming the entire PPT system. I wrote a few months ago in a column that the complete elimination of the PPT will mean a reduction of revenue to the City of Rockford of approximately $280,000, which equates to over 10% of its budget. In addition, other entities such as Rockford Public Schools and Krause Memorial Library will see potential funding cuts of approximately $400,000. I’m beginning to wonder if Governor Snyder and the legislature have something against municipalities and school systems like Rockford. In all fairness, the package of eight bills introduced into the Senate would create a PPT Reimbursement Fund that would return approximately 81% of the lost revenue, on a non-guaranteed basis, to most local governmental units like Rockford. The good news is that the Michigan Treasury Department will have a fund called the Personal Property Tax Reimbursement Fund. The bad news is the Michigan legislature and the Treasury Department will control the payouts from the fund, hence the non-guaranteed basis. It appears they will be able to put conditions on the payouts to control who gets what and the conditions that must be met before they get the amount. If the legislature determines, however, that money is needed somewhere else, it can go somewhere else. Based on previous experience, this might not work out well for Rockford. The PPT system is being reformed because the assumption is that the businesses that save taxes will then hire employees and our economy will take one more step in the right direction. Great assumption, however, the debatable part of reforming the PPT system is whether those businesses that save taxes will actually hire new employees or just add the savings to their profits. Rockford will have to jump through certain hoops in order to receive their share of the PPT Reimbursement Fund. None of the businesses saving taxes, however, have to jump through any hoops to receive their share of the PPT savings. Let’s get some equality into the system. Let’s have all involved parties meet some pre-set requirements in order to realize the pre-set savings. […]

THE TAX ATTIC with Jerry Coon

April 19, 2012 // 0 Comments

Emancipation Day extends tax deadline This is always one of the more enjoyable articles that I write. The tax season has just ended. That sentence says it all for people like me, who make a living in the world of preparing tax returns. We all get a chance to take a deep breath and see exactly what has happened in the surrounding world in the last three-and-one-half months. While it’s true that Action Tax Service does more than prepare tax returns, a good percentage of our business for the year occurs in the period of January 1 through April 17. We did get three bonus days this year. First, it was a leap year so we received February 29 as our first extra day. Second, April 15 fell on Sunday so that was our second extra day. Finally, our third extra day occurred because April 16 is Emancipation Day in Washington, D.C. Since the IRS’ national headquarters is located in Washington, D.C., they are closed. And if they are closed, all IRS offices are closed. Emancipation Day occurred on April 16, 1862. It’s easy to confuse Emancipation Proclamation Day with D.C.’s Emancipation Day. President Lincoln issued an Executive Order, the Emancipation Proclamation, on September 22, 1861. Throughout history, it appears that many presidents have issued controversial Executive Orders and not just presidents Bush and Obama. Lincoln ordered the 10 states of the Confederacy to cease rebelling by January 1, 1863 or their slaves would be set free. Of course, they didn’t quit rebelling for another two years or so, but their slaves were technically set free on January 1, 1863. However, on April 16, 1862, slaves in D.C. were set free. Actually, their owners were paid the value of the slaves in exchange for their freedom. Lincoln’s Proclamation, by contrast, did not provide compensation to the owners of the slaves, it didn’t outlaw slavery, and it didn’t make the ex-slaves citizens of the USA. Those items did not occur until the 13th Constitutional Amendment was passed in December, 1865. It seems that in 1862, Washington, D.C. was on the cutting edge of things. We might even go as far as to say they were progressive back then. When we look at Washington today, another word, […]

THE TAX ATTIC with Jerry Coon

April 12, 2012 // 0 Comments

Avoid penalties, file an extension 162-0. I know it’s never been done before and the 2012 Detroit Tigers aren’t going to do it either. They aren’t going to win all of their games this year. They may even have lost a game between the time I wrote this article and the time you are reading it. However, I do think they have a shot at making a run at turning in a very good, if not the best, won-loss record in all of baseball history. The highest won-lost record in American League history was turned in by the 2001 Seattle Mariners at 116-46. I know this is hard to believe, but the best winning percentage of all time came from the 1906 Chicago Cubs with 116 wins and 36 losses. Unfortunately, both of those teams did not win the World Series in their record-setting year. Not necessarily a good precedent. I believe the best team in all of baseball history was the 1927 New York Yankees. They finished with a record of 105-46 and did win the World Series. That doesn’t surprise me in that the Yankees’ nickname was Murderer’s Row, because they killed pitcher after pitcher. I’m sure that nickname wouldn’t work today. They would be known as something a little less graphic. Even though I’m less than a Yankees fan, I do have to respect a team led by two of the greatest hitters and players in the history of the game, Babe Ruth and Lou Gehrig, and one of the best pitchers of the day, Waite Hoyt. They had seven future Hall of Famers on that team. What the Tigers have in common this year with that 1927 team is they are led by two of the best hitters and players of today, Miguel Cabrera and Price Fielder, and the best pitcher in the game today, Justin Verlander—possibly three future Hall of Famers. In today’s baseball, they have a stacked team. It’s too early to tell because things happen over the course of 162 games and seven months. Hitters go into slumps. Pitchers get hurt. Managers forget how to manage. But it sure seems like this is the year to be a Tiger fan. Go Tigers! The tax season ends next Tuesday, […]

THE TAX ATTIC with Jerry Coon

April 5, 2012 // 0 Comments

Business or hobby? One of a tax professional’s favorite discussion topics concerns whether a taxpayer’s activity is a business or a hobby. There is no black-and-white line at which an activity is called a business or a hobby. The tax effect of an activity falling on the hobby side of the line versus the business side of the line is tremendous, though. Let’s look at the tax effect first and then discuss the reasons or factors that come into play in deciding whether the activity is a business or a hobby. Hobby income, minus the cost of goods sold, is taxable as ordinary income on line 21 of the Form 1040. The remaining expenses are deductible on Schedule A in three different categories. First, those expenses associated with an office in home such as mortgage interest and property taxes are deducted on the normal tax lines on Schedule A. For example, the taxpayer allocates 15% of his home to the hobby. So, 15% of the mortgage interest and property tax are counted as hobby expenses. Second, expenses such as advertising, office supplies, travel, dues, subscriptions and the business portion of telephone usage are deductible as miscellaneous itemized deductions subject to the 2% adjusted gross income reduction. These expenses are deductible only to the extent that line 21 income exceeds the 15% of mortgage interest and property tax. The third category of expense that may be allowed is depreciation. Depreciation is the write-off of the purchase of capital assets, such as computers, scanners and cell phones. This expense is allowed only to the extent that hobby income exceeds both the first and second set of expenses. There is no mathematical way to claim a loss on a hobby, and the expenses that are deductible can be claimed only on Schedule A. That’s important to note because, in a state like Michigan, itemized deductions are not deductible against Michigan income, so Michigan tax is paid on all of the income. On the other hand, business income is reported on Schedule C of the Form 1040 with all expenses being deducted directly on the Schedule C against that income. There is no limit to the expenses that can be claimed. Since the net profit or loss is reported […]

Hiccup in filing city tax returns

February 9, 2012 // 0 Comments

The Grand Rapids Press is causing some consternation in the Coon household. My habit is to read selected portions of the Press, such as the sports and the business sections. I glance at the front page and usually read the “Perspective” section with the opinions and letters to the editor. However, Deb’s habit is to read through the entire Press every day. It’s something she looks forward to or, should I say, used to look forward to. From now on, Deb will only be reading the Tuesday, Thursday and Sunday papers. She is not a happy camper because she won’t be reading the Monday, Wednesday, Friday and Saturday papers. Going to and reading those missing days on the Web isn’t quite the same thing as sitting down on the couch and perusing the Press. Oh well, you might say, that’s progress. It’s the green way of doing things. It’s the wave of the future. We have all read the explanation of the changes as provided by the management of M-Live Media Group. The explanation hasn’t made Deb any happier. Is this really the wave of the future with the Grand Rapids Press being the first of many newspapers to follow suit? Or is this a Classic Coke, a Ford Edsel, a Lions hiring Matt Millen, a Boston Red Sox trading Babe Ruth to the New York Yankees, a Hunt Brothers believing they could hoard all of the silver in the world, or one of a multitude of other similar decisions that will go down in history as one that was not so good? We will find out soon. I know Deb would love to see the Press going back to being delivered every day, but I’m not holding my breath. Either the management is brilliant and has M-Live on the cutting edge or they have made a slight error. I’m an optimist at heart, but what other city in the United States the size of Grand Rapids has a daily newspaper that is delivered only on Tuesday, Thursday and Sunday? I’m thinking none. Good luck to the Press in pulling this one off. This tax season isn’t going off totally without a hitch or two. We haven’t been able to electronically file city tax returns […]

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