The Tax Preparation Blog

Archive for May, 2007

Question: I joined a consulting firm organized as an LLC. It is charging me for out-of-state taxes. Should it?

I received 70% of what is billed for my services to the client – the LLC retains the balance for its overhead and general partners. If I didn’t work, or the client didn’t pay, I didn’t get paid. I left the firm, earlier this year due to lack of work – but now they’ve come back to me demanding I pay state taxes.

I performed services in Washington State for a client business situated in Washington and never left the state, but the LLC is insisting that I pay taxes on income from California, Georgia, New York, etc. The firm apparently has individuals providing similar services at other client businesses in other states, Apparently the firm’s tax preparer is trying to associate my earnings with those other states.

I paid self-employment and federal income taxes directly from what I received.

I received a K-1 and filed tax returns properly for federal purposes.

Washington has no income tax.

It seems wrong on multiple levels. What am I missing?

Answer: As a partner, you shared in the income of the firm–not just the money you brought in. Since some of that income is sourced to California, Georgia, etc, you owe taxes to each of those states.

The fact that Washington doesn’t tax you is moot.

Virgin America Announces New Year’s Fare Sale Worth Celebrating

Virgin America, the award-winning airline, today announced a New Year’s fare sale featuring celebration-worthy low fares on the airline that’s reinventing flying with its upscale, innovative service. Â Guests are encouraged to ring in the New Year by flying in high-style for less on the carrier that was named “Best Domestic Airline” in both Travel + Leisure’s World’s Best Awards and Conde Nast …

The New York Twelve – You’re Driving Me Crazy, 1930

Nowadays, as the population is increasing at an alarming rate, there is a scarcity of construction land in almost whole world. So if you have any plans regarding building a new home and not able to get a good area, you can think of another option that is the home extension. As this option sounds good, but you need to manage the project on your own or look out for some good reputed Home Extension Builder or a contractor to have it done for you.

Once you have made up your mind for home extension, firstly you need to have some good planning and funds available to have it done. Secondly, if you are short of time and not able to manage the project, you need to hire some good and experienced professional to get it done for you. Choosing a good Home Extension Builder or a contractor is a tough job. You need to consult some of your friends, relatives and real estate agent to guide you to best contractor.

A Home Extension Builder or contractor must be registered and should have a legal license to enhance building projects. Make sure that he is in the business for long time and has an experienced staff too. The contractor must not be embarrassed to answer the queries and shall give references of his previous work experience. He shall be capable of handling all legal formalities related to permits from the building association and provide with some good solutions in case of any problem. Make sure to look into the contract thoroughly to ensure what all comes in the contract and must have an approximate idea of the total investments involved. Finally, make sure to have the contractor’s name, license number, address and contact numbers available on the contract.

Top 10 Stories of 2009: A look back at the year, by the editorial staff of The Journal

The top story:Hospital District approves PeaceHealth contract (March 18)

Authors@Google: David Plouffe

Question: Can I file my tax return for 2006 if worked whole year as selfemployed in overseas?

Me & family got USA citizenship. Last year I moved overseas to do some reserach works on eartquake victims. Last year 2005 since I worked in USA and remained there for more then 6 months as such I filed my tax return accordingly. But in Year 2006 the whole year I remained self employed at overseas and my tax was deducted accordingly to local laws.
Now I need to know can I file my 1040 or other relevant tax return claiming self employed with foreign earnings? I need to find out before 15th
April as the last date of filing tax return.

Answer: You MUST file. You MUST pay US taxes on local, foreign wages that are taxed locally. However, you’ll be able to deduct the local foreign taxes. The IRS Representative at the US embassy in the country you’re located will have all the forms and answers.

Parliament considers new funding for Moroccan affordable housing

05 January 2010 The 2010 Finance Bill may include incentives designed to speed up construction of homes that are within the grasp of low-income Moroccans.

Track Your Trades — generate IRS Schedule D for your tax return

Question: “federal income tax liabilities”?

What exactly is the definition of the term “federal income tax liabilities”? What is this chart indicating? http://s241.photobucket.com/albums/ff319/goldfinch331/?action=view&current=ShareOfFederalTaxLiabilities.gif

Answer: “Federal income tax liability” is the amount (or percentage) of taxes that a person (or people) is responsible for.

The chart indicates, year to year, the % of all federal taxes paid by individuals whose incomes were in the top 20% of all incomes.

ACE Announces Earnings Guidance for 2010

ZURICH, Switzerland—-ACE Limited announced today the following earnings guidance for the ACE Group for the full year 2010: Operating Income per Diluted Share is expected to range between $6.25 and $6.75 Catastrophe Losses included in our estimated earnings are $390 million pre-tax

Who Pays Federal Income Taxes?

Clearly, Medicaid will pay only if you have few assets. Logically, then, make sure you don’t have assets. Therefore, transfer your assets to your children now. This will make you poor, and by being poor, you’ll qualify for Medicaid.

If you don’t’ transfer your assets to your children, you’ll just spend everything you own on long-term care costs until you have nothing left anyway. Either way, you’ll be broke. So wouldn’t you rather give your assets to your kids instead of to a nursing home?

Four problems with transferring assets

If you think this sounds reasonable, watch out for these four big problems:

Problem #1: Yeah, Right
You’ll find it very hard to give everything you own to your (spoiled rotten!) kids just as you’ve reached that time in your life when you can start enjoying yourself. In other words, this recommendation, un-usually doesn’t go over very well.

Try convincing your parents to give you all their money.

“No, really, Dad, you need to give me everything you own right now. It’s for your own good!” Yeah, right.

Problem #2: Medicaid is aware of this trick

If you made gifts during the 36 months prior to filing your claim for benefits, Medicaid will deny this claim – 60 months for gifts you make to a trust. This rule is specifically intended to prevent people from asset-shifting. And please note an important change in Medicaid rules: If you file a claim at any time during the 36-month waiting period, Medicaid will restart the clock. Therefore if you plan to use this strategy, assets must be transferred well in advance of the need for long-term care, and be sure you don’t file a claim until you’re sure the 36-month waiting period has expired. Also, be aware that transferring assets to a spouse does not shield the assets from Medicaid.

Have you brought assets into your marriage?
Many people who marry later in life bring assets into the marriage, like Ruth. Her husband died when she was 47, leaving her his 401(k), their home, plus life insurance proceeds. Five years later, Ruth remarried. She kept all her assets in her name and filed a separate tax return. When her second husband needed long-term care, he quickly spent down all his assets. But Medicaid permitted Ruth to keep only $2,000 per month; all her other income had to be spent on her husband’s care before Medicaid would pay benefits. Thus, over the next several years, Ruth was forced to spend down to the poverty level, too.

Regardless of whose money it was or where it came from – inheritances, savings, retirement plans, or insurance proceeds – Medicaid will deny claims until both spouses spend virtually all their money on long-term care. The fact that the money originally belonged to the community spouse does not matter.

Problem #3: Attempts to asset-shift are stymied by the IRS
Under gift tax rules, you may give to any one person only $11,000 per year (you may give unlimited amounts to your spouse). So, even if you try to give your money away, the IRS will restrict the speed with which you may proceed.

Problem #4: This strategy is unethical…
Please remember that Medicaid is funded by taxpayers to help the truly needy of our society – not as a middle class tax dodge to protect your assets.

Problem #5: …and Illegal, too!
Congress knows that few consumers have the imagination or knowledge to effectively execute an asset-shifting strategy. So, to discourage professional advisers from sharing this information, Congress passed a law that made it a felony for advisers to counsel or assist consumers in their efforts to shift assets. Therefore, don’t bother asking your lawyer, accountant, or financial adviser for help; the smart ones won’t provide it.

LeNature’s Bankruptcy trustee says $500M looting enabled by law firm, partner

Pittsburgh law firm K&L Gates and partner Sanford Ferguson ignored evidence of fraud that enabled the former CEO of LeNature’s to loot $500 million from his company, according to a lawsuit filed Friday.

Jarl Moe Offshore Tax Law part 6 of 32