The Tax Preparation Blog

Question: Is it correct to say that DT arise as a result of differend treatment of income and expense from tax point . ?

For example, depreciation for tax purposes is differend from accounting depreciation. If yes, then is it also correct to state that deferred tax can not be applied to the full carrying amount of fixed asset. It is only on the depreciation expense amount which is differend.

Answer: Yes. DTL arises due to timing differences between expense recognition for tax purposes and for book purposes.

For tax purposes, you use accelerated depreciation. This causes larger deductions (depreciation expenses) in the early years. Thus, your taxable income in the initial years will be lower. In the later years, your deductions will be lower, and the taxable income will be higher. This creates a liability for future taxes (DTL). What in effect you are doing is postponing taxes.

Say, for accounting purposes, you use straight-line depreciation. In the initial years, your deductions (depreciation expenses) will be smaller. So, your reported income will be higher. Correspondingly, reported tax expense in the income statement will be higher, than the actual taxes paid. The difference is carried over as a deferred tax liability.

In other words, for book purposes the expenses are capitalized and recognized in later periods. In later periods your book income will be lower than reported taxable income. So, whey you actually pay those taxes in the future, you remove the liability (DTL) from the books.

Bidtimes PLC – Proposed acquisition of PowerHouse Energy, Inc.

Bidtimes PLC – Proposed acquisition of PowerHouse Energy, Inc.

House Session 2011-03-01 (10:01:03-11:02:54)

Question: I need help with tax calculations?

I need help figuring out if our family is going to owe taxes or have to pay them. I am looking for someone who is fluent in taxes. My husbands YTD income was 38,382.00. My unemployment income was 9.300 and I chose not to have taxes taken out, so I am sure I will owe that at least. We have 1 dependent under the age of 18.

His:

Federal witholding: 3,838.00
Social Security: 2,262.00
Medicare: 529.00
State:1,441.00

We bought a house in 2010 and the interest we have paid on it is 2,535.00
Also we bought a car which we paid 6% sales tax, the car was 9,740.00

Can anyone try to plug in some numbers to help me out. Times are tough and I am really worried about our taxes. Thanks and God Bless.

Answer: MFJ both over the age of 25 and under the age of 65 1 QC dependent under the age of 18 so that would mean that he is 17 and was NOT under age 17 at the end of 2010, is that correct?
If the QC was under the age of 17 at the end of the tax year 2010 you would qualify for the child tax credit amount of 1000.
Your taxes are estimated at $2,162.
This is 4.53% of your total income of $47,682. Your total tax payments and refundable credits for the year were $3,838. Your tax refund is estimated at $1,676. Your income puts you in the 15.00% tax bracket.
You should be able to use your state website and find a estimated tax calculator for your use.

http://www.dinkytown.net/java/Tax1040.html

Hope that you find the above enclosed information useful

U.S. wants states to reveal more about pension funding

A federal board will soon propose that U.S. states disclose more about their pension funding as worries grow whether states and municipalities can pay for their employees’ pensions.

Federal Withholding Tax 2010, 2011 Increase

Question: Online calculator to optimize 2010 W4 withholdings?

My husband and I get back around $5,000 federal refund every year, and around $1,500 State, even though he already has a high number of exemptions (I have been home since having my baby last year and am only making a small amount doing childcare). Between tithe to church, interest on our condo, property taxes, 401K, insurance and other deductions, 40% of his income is gone before we touch it (another 25% to federal, state, etc. taxes).

I’m hoping to optimize his W4 at the beginning of 2010, so we can have that money on a monthly basis, rather than letting the government earn interest off of our money until they refund it. The IRS has one for the remainder of 2009, but I can’t find one I can use to estimate the right number of exemptions for next year. Does anyone know of a website where I could put in forecast numbers to get an idea of the number of exemptions he should put?

Answer: You can adjust your W-4 any time during the year, so go ahead and use the current IRS calculator. When they update the calculator, re-run the numbers and adjust if needed.

Bennett Environmental Inc. (“BEI”) Reports Fourth Quarter and 2010 Year End Results

OAKVILLE, ONTARIO–(Marketwire – 03/28/11) – Bennett Environmental Inc. (TSX: BEV – News ) (the “Company” or “BEI”) today announced its financial results for the year ended December 31, 2010 and the results for the fourth quarter 2010. Revenue for the year was $32.7 million, pre-tax income was $16.6 million, after-tax income was $14.4 million and earnings per share was $0.41 on a fully diluted …

Waste And Abuse: The Refuse Of The Federal Spending Binge (Part 2 of 2)

Question: What explanation will help recover my late 2003 tax return from IRS’ Statute of Limitations 3-year-max-law?

My 2003 income tax was incomplete and needed to be filed by April 15th, 2007 but I didn’t get around to filing it until late May/early June because I didn’t have the fee for HR Block. IRS says I don’t owe(am due a refund) but that the Statute of Limitations Law allows me to file up to 3 years late, and I was 3 months over(so, they’re holding it)… I talked to an IRS attendant & she gave me the address to write to the IRS Service Center/collections. She suggests that I don’t just say that I forgot or that I didn’t know, b/c “ignorance of the law is no excuse”, as she stated. So now the IRS is holding my return money from that year, but I really need it asap. ARE THERE ANY EXCEPTIONS TO THAT LIMITATIONS LAW which I could use in my letter. It was an honest mistake but it doesn’t give them the right to keep my hard earned money. Some1 plz help ASAP. Maybe you know of the limitations laws and can enlighten me on what would possibly work?? Maybe my situation alone was good enough?

Answer: About the only way that anything would work, was if you were physically unable to file the 2003 within the 3 year deadline (you were in a coma, you were held hostage). Saying that you didn’t have the H&R Block fee is not good enough. I do know the limitations laws, and am sorry to have to inform you that you are out of luck with claiming the refund. The only way out that I can think of is if you had filed for an extension (and you would have had to file a 2nd extension as well) for the 2003 return. If you had filed an extension, that would have extended the filing of the 2003 return originally to August 15, 2004 (which considering that today is 8/23 you’d be out of luck), and if you had filed for a 2nd extension (giving 2 additional months) that would have extended the filing to October 15, 2004, which would extend the 3 years to file to October 15, 2007. If you didn’t file an extension or only filed the first extension, I’m sorry but you are out of luck totally, unless you were in the coma or held hostage for 3 years (maybe H&R Block held your return hostage until you paid them, but that doesn’t count).

PS, not sure what M is suggesting to write off for 2008 (should be 2007). If it’s the tax prep fee, that needs to be claimed on Schedule A – Itemized Deductions under miscellaneous deductions, and has to exceed 2% of AGI for the excess to be deductible. If M is suggesting to write off the lost refund, you can’t do that.

Diana Clement: Best not to bury head in the sand over tax

The IRD has teeth and isn’t afraid to bare them at ‘non-compliant’ taxpayers.The spectre of tax returns makes some people bury their heads in the sand. Thousands of them every year, in fact.With the end of the financial year having…

2009 tax changes brought to you by Corey & Associates Tax Accountant 305-823-9228