Tax Information

The Tax Attic with Jerry Coon

April 8, 2010 // 0 Comments

April 15 around the corner It’s Master’s week. For a large number of golfers, this tournament, the first major of the year, gets the ball rolling for golf. Everything is perfect at the Masters. Augusta National Golf Club is among the most beautiful golf courses on this Earth. The flowers are perfect; there are always birds singing in the background. Only the best golfers in the world are invited to play in the most prestigious tournament in the world. Win the Masters one time, like Zach Johnson, and your reputation is made. Only a handful of players have won it more than once. The Masters was first held in 1934. The First Annual Invitation Tournament as it was called back then was not won by the world’s best golfer, Bobby Jones. A very good player by the name of Horton Smith beat Craig Wood by sinking a 20-foot birdie putt on the 17th hole. Bobby Jones and Alister MacKenzie did design the course, but Bobby had retired from competitive golf in 1930. We don’t seem to have heroes like Bobby Jones anymore. Like all of us, he had issues. By all accounts, he had a terrible temper. In 1921, in the third round of the British Open, he stormed off the course, thereby disqualifying himself, because he was playing badly. If I stormed off the course every time I was playing badly, I would never get in a full round of golf. However, from that point on, Bobby Jones began to control his temper and began to win tournament after tournament. The culmination of his winning came in 1930 when he won the Grand Slam of Golf. At the time, the Grand Slam was made up of the British Amateur, the U.S. Open, the British Open, and the U.S. Amateur. Now the Grand Slam is made up of the Masters, U.S. Open, British Open, and the PGA Championship. Maybe it’s tougher now, and with all due respect to Tiger Woods, Bobby Jones was still the best golfer ever. Even though it’s near the end of the tax season, I think I can find a few minutes here and there to catch some golf this weekend. As it is nearing the end of the tax season, let’s […]

The Tax Attic with Jerry Coon — January 14, 2010

January 14, 2010 // 0 Comments

My intent this week was to continue writing on what a taxpayer should do if he or she receives an incorrect W-2 or 1099. However, the Internal Revenue Service has interrupted my plans. Since the first day I entered the tax business in 1978, the IRS has, off and on, announced plans to formulate a plan to regulate all tax preparers. In the past year or two, under the direction of current IRS Commissioner Douglas Shulman, these plans have finally moved to the implementation stage. Since approximately 80 percent of taxpayers employ either a tax preparer or use commercial software to prepare their return, this is a very good thing for all taxpayers. Shulman said, “Our proposals will help ensure taxpayers receive competent, ethical service from qualified professionals and strengthen the integrity of the nation’s tax system.” These regulations will raise the competency of all tax preparers and will allow the IRS to better regulate all tax preparers. This means that, in theory at least, taxpayers will receive a better product when they pay a tax preparer to prepare their return. Three classes of tax preparers have always been regulated. Enrolled agents (EAs), certified public accountants (CPAs), and attorneys have been required to take competency exams, to take yearly Continuing Professional Education (CPE), to register with the IRS, and to abide by a professional code of conduct as laid out in IRS Publication, Circular 230. Oddly enough, other non-regulated preparers were not subject to any of these requirements. All of that changed on January 4, 2010, when the IRS issued News Release IR-2010-1, Fact Sheet FS-2010-1, Fact Sheet FS-2010-2, and the 57-page Return Preparer Final Report. Now, anyone who signs a tax return as a paid preparer will be subject to a full set of regulations similar to EAs, CPAs and attorneys. First, they will be required to register with the IRS and obtain a Preparer Taxpayer Identification Number (PTIN). As part of this registration process, the IRS does perform a background check and can refuse to issue a PTIN. The IRS is allowed to charge a “reasonable, non-refundable fee” for issuing a PTIN. The registration must be renewed every three years. The IRS retains the privilege and is considering expanding this registration process to […]

The Tax Attic with Jerry Coon — December 31, 2009

December 31, 2009 // 0 Comments

  Fight for your freedom, rights A good friend of mine, Al Kraker, recently gave me a book authored by John W. Whitehead, executive director of the Rutherford Institute, entitled “Stand and Fight.” Whitehead, a constitutional attorney, founded the Rutherford Institute in 1982 with the mission of specializing in cases that involve the curtailment of American’s religious freedoms and civil liberties. This is a complicated area. What one person perceives as a curtailment of his religious freedom is perceived by another person as a violation of his civil rights. For example, there are 100 people in attendance at a banquet; 60 are Christians, 15 are members of various other religious organizations, 23 don’t practice any religion, and two are agnostics. The speaker is a Christian and, as is his custom, says an invocation before the meal, asking God to bless the food and bless the activities of the evening. The 60 Christians are okay with that, and 30 of the remaining 40 are also okay with that, but that leaves 10 people who are offended by this gesture of seeming goodwill. Of such things, in today’s litigious society, court cases are made. One of the 10 offended people is so deeply offended that he sues the organization sponsoring the banquet to stop this outrageous activity of seeming goodwill. The next time a banquet is held at that place, when the speaker starts to say an invocation, he is told he can’t do that because they were sued the last time it happened. The speaker can’t say an invocation even though 90 people, the overwhelming majority, favored the invocation. When one person overrules 90, the tail is wagging the dog, so to speak. Of such things, more court cases are made. This is where the Rutherford Institute might step in and offer to defend the speaker’s right to say an invocation. The book details many such cases going on right now throughout the country. All of them are difficult. I heard a speaker one time say, “My name is not Solomon. I just do the best that I can.” I like that saying. Well, none of the judges deciding these difficult cases are named Solomon either, but let’s hope they are doing the best they can […]

The Tax Attic with Jerry Coon

October 29, 2009 // 0 Comments

Tax rebate for golf carts The amount of tax questions I receive on an ongoing basis is a sign of not only how complicated and convoluted our tax system has become, but also how often we think about our tax situations. The questions seem to have gotten a bit more complicated, too. Even though my bank of tax experiences grows year by year, the amount of questions that I have to get some help to answer also has grown. For example, I received a call from Dale Boersma this week. Dale and his wife, Jamie, moved to Iowa from Rockford several years ago. My wife, Deb, and I go to Iowa most summers to visit the Boersmas. Dale and I go to the Mecca of sprint car racing, also known as the Knoxville Raceway and soak up the Knoxville Nationals, while Jamie and Deb do the things they enjoy, like shopping. Dale also golfs and owns his own cart. This year he traded in his old one in favor of a new cart. The salesperson set Dale up with a nice new cart, but then added the fact that for $1,000 more, Dale could get a cart that would qualify for a tax credit of $4,000. Dale was a little skeptical of that statement and thought maybe that the salesman might be stretching the truth just a little in order to get a sale. After all, this is a golf cart we are talking about here and not a Toyota Prius. When Dale got home, he did two things. First, he Googled “Tax Rebate for Golf Carts” and, second, he called me to find out what I knew about golf carts qualifying for a $4,000 tax credit. As he explained the situation, I could see Dale was serious and wasn’t pulling my leg, so to speak. “Tax Rebate for Golf Carts” was not something I have ever Googled before our conversation, but I told Dale I would do some investigating. $4,000 is a lot of money and definitely worth looking into. The Internet took me to the Villages of Lady Lake Florida’s site, It was very informative. I also was directed to a Wall Street News article of October 17, 2009, titled “Cash for Clubbers.” […]

The Tax Attic with Jerry Coon — October 15, 2009

October 15, 2009 // 0 Comments

Sub Chapter S Corporations This week, I would like to continue a discussion of the various entities that are available to taxpayers who are starting a business. In the past weeks, I have written that a Schedule C or Sole Proprietorship is one option. A second option is operating as a LLC or Limited Liability Corporation. A third option is incorporating and operating as a C Corporation. A fourth option is incorporating and operating as a Sub Chapter S Corporation. This week, we will look at that fourth option. All Sub S Corporations file a Federal Form 1120S, upon which is reported the income and expenses of the business. Each of the shareholders of the Sub S Corporation receives a K-1. On the K-1 is reported the shareholder’s share of the profit or the loss of the corporation as well as items that are separately stated to the shareholders. An example of a separately stated expense item is the expense deduction should the corporation elect to completely write off the purchase of an asset. An example of a separately stated income item is the capital gain that may result from the sale of an asset. The profit or loss of the business and the separately stated items is divided by the ownership percentage of each shareholder. When the shareholders file their personal Form 1040, each of the items on the K-1 is reported as an income or expense item. In only extreme circumstances would the Sub S itself pay any tax. The shareholders pay the tax at their personal tax rates. One of the largest differences between a C Corporation and a Sub S Corporation is that the C Corporation pays tax on its profit while the shareholders pay tax on the profit of a Sub S Corporation. A further difference is the shareholders of the Sub S are then eligible to receive distributions of their share of the profit that is taxed to them. As opposed to a partnership or a Sole Proprietorship, this profit is not subject to Social Security tax. Since they have paid tax on the profit, these distributions are not considered additional taxable income. It bears repeating that these distributions and the allocated profits are not subject to Social Security […]

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