Category: Taxes
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“CPA is too expensive” says this woman
but ignorance is priceless! A professional tax preparer shared this hilarious story: A single woman with a salaried position was looking for help with her “simple” tax return. She also has a side business as an artist. The art work generates minimal income but much larger tax deductions that resulted in losses of at least…
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No double taxation for dual state residents
Can a state or local government tax your income that was earned and already taxed in another state? That was the question before the U.S. Supreme Court over the past few years and an opinion was finally issued this week. “NO” says SCOTUS in a 5-4 decision. The surprise to me was that it was such a close…
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Lessons to be learned from Manco and Manco tax evasion case
Philadelphia area newspapers have been following a high-profile tax evasion prosecution of the owners of South Jersey’s most successful pizza shops. The owners of Manco and Manco pizza are accused of failing to report almost a million dollars of cash receipts over a period of years. I have no intent to comment on the details of…
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Pennsylvania Unreimbursed Expenses (UE) Tax Audits
I noticed that all of my Pennsylvania tax clients who took a deduction for unreimbursed expenses (UE) received an audit response letter from the PA Department of Revenue. The problem is that the cost of responding to the audit exceeds the economic value of the deduction. In that case, the most reasonable economic response is…
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Sales tax on interstate accounting services
The Democrat-led Finance Committee of the Connecticut General Assembly voted yesterday (4/29/2015) to expand its state sales tax to include accounting services. The Senate President Pro Tem said that he supports the changes but there appears to be opposition to the move beyond that. Three states currently tax professional services: New Mexico, Hawaii and South…
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Income tax preparation fees in 2015
The average income tax preparation fee in the mid-Atlantic region was $314 this year; an increase of about 4% over last year. That average rate is calculated as a benchmark for a tax return with a Schedule A for itemized deductions and on state income tax return. Average fees for other tax schedules are listed…
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Variance in taxes is part of the game
I have little patience lately for tax accountants who assert that their approach is “correct” and that all other results are “errors”. This is like having the sideline judge disagreeing with the referee on the field that called the play. We understand the mentality that the law is meant to be precise and therefore the results…
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Tax accounting for hobby income and expenses
If you have an active hobby then you might find that you make some money at it. But it is important to recognize that the IRS makes a distinction between businesses run for profit and those that are hobbies without a profit motive. This post summarizes the four key differences in tax accounting between the two.…
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Why middle-income tax planning is dead
Bloomberg and Wall Street Journal ran articles this week that compile and analyze federal income tax data. These articles were meant for use as an exposé of policy tax policy. I skipped the social policy discussion entirely and I looked at the data from the perspective of a small solo CPA’s income tax service. It is interesting…
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Financial Planning Considerations When Your Business is Losing Money
This post was inspired by the stories of some of my neighbors and clients in southern New Jersey. Most were struggling with a weak economy before super storm Sandy hit in late 2012. Those that re-opened over the next few years face continued business losses and the prospect of continued weakening of the local economy…