By now everyone (including the dog) has heard about Efiling your tax return, mainly because the IRS has been pushing it the last few years. This year they have been even more proactive, requiring preparers who prepare more than 100 tax returns to efile their clients’ returns unless the client signs a form saying they refuse to efile. Next year the number goes down to more than 10, so all preparers will be efiling, which actually is not a bad thing. About 5 years ago my wife was afraid about data security with efiling, so we paper filed our return. Guess what? The IRS lost part of our return, so I had to mail it again. Maybe they were trying to convince me and my wife to efile. Well, it worked, I have efiled my return ever since. If you paper file, there is a person opening the envelope, who then gives it to a key-puncher who puts it into the system. I am sure they do their best, but it is like the guy behind the counter at 7-11; they are thinking about getting off and going out or the weekend or their boyfriend or girlfriend. With all that [...]
Brian’s Tax Musings
Do you use your credit card to pay for charity, business expenses, etc. If you pay off your balance every month you can get rebates on certain cards like I discussed a while back, but there is another advantage. The IRS will let you deduct items when you CHARGE them, not when you pay the bill. If you are short a little cash at the end of the year and want to add a few medical, charitable or business deductions, whip out the credit card and take the deductions this year, then pay them next year.
Brian’s Tax Musings
If you are self employed and are trying to decide whether to purchase that additional piece of equpment, be aware that in 2011, you can write off equipment under section 179 up to $500,000. This will phase out after you have purchased $2,000,000 in assets. Congress also upped the 50% bonus depreciation in 2010 to 100% in 2011 (they want people to buy equipment) so you can pretty much write off everything! (Federal only: state rules have nothing to do with the federal rules).Section 179 assets are only deductible if you have income. To generate a loss it is better to use the bonus depreciation. Here is a planning strategy: if your business had income in the last few years, don’t elect sec 179; use the bonus depreciation instead, create the loss, carry it back to the year(s) of income and get a refund. If your business didn’t have income before, but you expect income in the next few years, you can use the 179 to wipe out 2011 income, then can carry it forward to wipe out future income. You will probably want to talk about this planning as each situation is different.