Categorized | Tax Talk

Here are some great Tax Answers.  One bit of information that got a ton of laughs was “How to write off the Super Bowl Party”.  There were some great questions called in this week and you will get some good information on how to save on your Taxes this year.

Here is the Transcript from the Show:

Tax Talk Feb 7 2010
Patrick: The more you know, the more you keep. Welcome to Tax Talk. This is Pat Dougher, Jeff Pickering CPA and Rex Hogue of Bolinger and Hogue, Attorneys in the North Texas area.
We’ve got a great show for you today. We’re going to talk a lot about the taxes that are affecting you that you need to know about and how you can reduce them. Let’s face it. Death and taxes – neither one are fun. But, you’d love to find all the ways you can minimize it and we’re going to talk a lot about that today.
One of the things we want to start with is Jeff, you’ve got some deadlines coming up for our audience.
Jeff: Right. So, taxes are definitely deadline driven. For those of you out there, you should’ve gotten most of your 1099s, and W2s and other tax documents. Those were due to recipients on January 31st – at least mailed by.
So, if you’ve sent somebody a 1099 or if you sent somebody a W2, then the IRS copies of those, including the W2, W3, 1099, 1096 are due on February 28th. So, that’s your next deadline. Hopefully, you won’t have to redo very many of those.
And then we have March 15th. There’s our next big deadline. That’s the deadline for calendar year corporations if the name of your company ends in Inc, Corp, Incorporated or Corporation. And also, some of you may have LLCs that are taxed like corporations, so that would be your deadline. March 15th is fast approaching.
Patrick: And then the last one that we’ve got coming for the individual would be, of course, the…
Jeff: The big April 15th and April 15th is for individuals, for partnerships, for trusts. Yeah, it’s the big one.
Patrick: Get ready for it. Well, I know that you have some questions that we can answer. The number is 214-787-1570, 800-583-1570 or #KLIF on your Sprint wireless phone. Why don’t you call in, get your questions answered. I mean, let’s face it. Most attorneys and CPAs are not the least expensive advisors on the block and right now, you get to talk to both of them. So, with that, it’s 214-787-1570 or 800-583-1570 here on Radioactive Talk Radio 570 KLIF.
Jeff, I know that we’ve got some more things that we want to talk about that have to do with a new birthday this last week.
Jeff: That’s right. Happy birthday! Happy birthday, income tax system. So, on February 3rd, the income tax was how many years old? 97 was it?
Patrick: 97.
Jeff: 97 years old. The 16th Amendment was passed. So, for those of you who don’t believe in the income tax, it’s real and the IRS posts an annual list of unsustainable tax arguments, they call it. It’s basically a list of stuff that if you believe in them, you’re not going to win. It’s on the IRS website.
Patrick: Well, I know that I have some friends that believe in the four G’s. That’s God, god, guns and groceries. The 16th Amendment still stands, doesn’t it?
Jeff: It’s there. It’s been here for 97 years. We’re still doing it.
Patrick: Very good. 214-787-1570. Call in and get your tax questions or estate tax questions answered. Jeff, next thing up is?
Jeff: We have Geithner, Obama and Baucus support the retroactive reinstatement of the estate tax. They want to put it back to the first of this year, 2010. Rex, I know that you can tell us more about what’s going on there. What’s happening in the estate tax area?
Rex: Well really, Congress doesn’t have anything at the moment. They’ve talked about will they have the estate tax go retroactive. I think the further in the year it goes before they do something, the less likely it is to be retroactive to the first of the year.
But, both Geithner and Obama are on the record of saying they would like for it to be retroactive, go back to a $3.5 million exemption which sounds like a lot, but by the time you get insurance, and retirement plans, and your house and other things, it’s surprising how many people might still qualify for it.
And then of course, if they don’t do anything this year, it goes back to a million next year which, in this day in age, most families that have much of anything are going to be worth at least that much.
So, the estate tax is problematic for other reasons as well. For example, there’s an article from The National Law Journal that talks about some of the problems created this year.
One is a lot of lawyers have been drafting documents for the last ten years with the idea that we’re never going to get to 2010 and still have no estate tax, but that’s where we are.
So, let me give you an example of two things that people have done over the last few years. One is that they’ve said – let’s say the husband sets up a plan that says, “Hey, when I die, transfer the maximum amount to my kids that won’t incur a state tax and the remainder to my wife.” Well right now, the maximum amount is 100%. So, his wife would get nothing.
Another problem is the opposite kind of plan – also very common. This says, “Transfer to my spouse under the unlimited marital deduction, the maximum amount that can go and still take advantage of the estate tax exemption.” Right now, no state tax; therefore, everything goes to the spouse and his kids if, from a prior marriage, are left out entirely.
Both of those situations are highly likely to result in what we call World War III or the Post Mortem Divorce where the second marriage kids and the surviving spouse go to war with each other.
Patrick: Wow. Now, the one thing I was curious about, the percentage is much larger than even the ordinary income, isn’t it? If they retroactive the $3.5 million for last year.
Rex: Yes. The tax rate is 45%. But really, you can’t compare it to the income tax. The income tax is on income. The estate tax is on everything. For example, if you had a million dollars and let’s say that is was returning 10% and you’re subject to a 35% tax bracket, that’s $35,000. A million dollars subject to estate tax is $450,000. So, there’s a big difference between those taxes.
Patrick: Wow. That’s awesome. Coming up, we’re going to be talking more about some of the ways that the IRS wants to enforce the new taxes that they want to get on us. The other thing is I want to get out right now how you can get a hold of Rex and Jeff.
Jeff Pickering’s number is 972-378-5200. If you want to talk to Rex after the show and set up an appointment to visit with him or with Rex, it’s 972-309-0104. What we really want to do is go right to our callers, especially right after the break here and we’ll be right back.
[commercial]
Patrick: And welcome back to Tax Talk. This is Pat Dougher and you are listening to Tax Talk on Radioactive Talk Radio, 570 KLIF. If you’ve a question, call in and talk to Jeff Pickering CPA. He has a Masters in Taxation, so more than enough information to help you. It’s 214-787-1570, or 800-583-1570 or if you’re on a Sprint phone #KLIF.
With that, I want to go right to Jeff Pickering. Tell us about this new method of – gosh, what do you call it? Enforcement, the IRS wants to go to?
Jeff: Actually Pat, it’s not new. There are special things that the IRS gets to do and some agents actually carry a badge and a gun. They are special and called Special Agents. So, the IRS is soliciting quotes for purchase of 60 shotguns right now for these people.
These are Remington model 70, police RAMACs, 12-guage pump action shotguns. They’re parkerized shotguns with a 14-inch barrel, modified choke, Wilson Combat Ghost Ring – and what is that? Rear sight? And XS4 Contour Bead.
Now, I don’t know much about shotguns. But Rex, you know. Can you tell me what kind of shotguns are these?
Rex: That’s a combat shotgun, basically. The 14-inch barrel is kind of interesting because the minimum legal length is 18 inches. I would like to think this is a misprint. But, if it isn’t, it’s another way that the IRS doesn’t play by the same rules as the rest of us.
Jeff: Yeah. When you make the rules, you can pretty much make the rules.
Patrick: Well, there is the old adage IRS, KGB – what’s the difference?
Jeff: Right.
Rex: You know, when you have THE and IRS, it equals THEIRS, don’t you?
Jeff: Yeah, that’s right. But, in all serious, if anybody ever gets contacted by one of these guys and their card says “Special Agent,” you need to seek an attorney.
Rex: Do not talk to them at all. Close the door. Tell them that they will have to talk to your lawyer. Do not ever talk to somebody with CID or the Criminal Investigations Division of the IRS.
Jeff: That’s right.
Rex: Unless you look really good in grey and like federal prisons.
Jeff: There you go.
Patrick: Well, I know that Obama also would like to increase our taxes $1.9 trillion.
Jeff: Trillion. That’s right. So, trillion – and we have to put that in perspective – trillion is 1,000 billions; 1,000 billions. If you can put your mind around 1,000 billions, that’s a trillion – 1.9 trillion. That’s how much our deficit is going to increase by.
And he’s got lots of things he’s going to do. One of them is enforcement. So, I believe it was about $280 million to increase enforcement activities. He’s going to make it harder for people to come to the US and invest here by closing up some things for companies that want to invest here.
We talked about the estate tax. He’s going to tax the banks – back tax the banks – kind of claw back for the TARP money. So, the US government has already made money on the TARP and now they’re going to tax them. I don’t know how that logic is.
But, there are so many things in this budget, it would take a long time to go through. The highlights are definitely more money for the IRS. So, something to watch for.
Patrick: Well, it looks like they’re going to repeal some Bush income tax rates for singles and couples.
Jeff: That’s right. So, under the Clinton era tax system, the top tax rate was 39.6%. But, you have to remember with phase-outs – phase-outs are those things that the more money you make, the less deduction you get. With phase-outs, the actual rate was around 41, 42, sometimes, 43%.
And for those people who live in highest taxed states like California, that’s an effective rate of over 50% of income tax.
Patrick: Wow. So, for all of my marketing clients, making more money is not an attractive issue.
Jeff: Well, for some families, they’re going to have sit there and rethink what they’re doing if they’re a two earner couple. Some of them will, for sure, wonder if it’s going to be worth it.
Patrick: Wow. Well, let’s go to some calls. We’ve got Anne in Frisco. Anne, welcome to the show.
Anne: Yes.
Patrick: Go ahead. You’ve got your question?
Anne: Yes. I had a Roth that I contributed to and I originally put in $12,000. And I retired and went ahead and pulled it out, but I lost $4,200 on it. Would I be able to claim that loss of $4,200?
Jeff: Yeah. But Anne, I have to tell you it’s in a bad place on your tax return. It’s not a good place to claim it. It’s on the Schedule A, itemized deductions. You can put it there. Depending on everything else in your tax return, that’ll determine whether or not you can actually use it.
So, there is a place. It probably won’t – for sure, it won’t compensate you for the $4,200 and it might not compensate you at all depending on everything else that’s going on in your return.
Anne: Okay. And the fact that it was a Roth and it was paid for after taxes, I shouldn’t have to pay tax on that, should I?
Jeff: No, no. You won’t pay taxes on it. Hopefully, if everything works out, you’ll get to actually deduct the loss.
Anne: Oh, okay. Alright. Well, thank you.
Jeff: You’re welcome, Anne.
Patrick: Very good. Thanks again, Anne. We appreciate that. Why don’t we go onto our next caller. It’s Patty in Richardson. Patty, you’re on the air. Patty, are you there? Not hearing anything.
Jeff: That’s okay. Patty, call back if you can.
Patrick: Yeah. That’s 214-787-1570. Then, it’s 800-583-1570 or #KLIF if you’re on a Sprint phone. Call in to get your tax questions. This is Tax Talk with Pat Dougher, Jeff Pickering and Rex Hogue. With that, we’ve got Frank on the line. Frank, go ahead. What’s your question?
Frank: Yes, Sir. Thank you for your time. I have a question. My mother is in her 80s now and she and my dad back 15-16 years ago started an annuity with, I believe about $50,000 out of some CDs. They started the annuity and then they since transferred that annuity to another management company about ten years ago.
My concern is that she withdrew about $30,000 out of that annuity a few months ago back in 2009. The 1099 that she just got on it shows not only the $30,000 being withdrawn, but it also shows the taxable amount down below being $30,000 as well when I was thinking that the basis of the original amount should be $50,000 because that’s the money they put into it.
Jeff: Right. Yeah Frank, you’re right. If you have a basis in anything, you shouldn’t be taxed on it. This was ten years ago and you’re pretty sure that the amount of the basis is $50,000?
Frank: Yes, Sir. They originally took some money out of some CDs back in the bank and they started this annuity with, originally, $50,000. The annuity today is worth about $150,000-$160,000 because it’s grown quite a bit. They had a good guaranteed rate of like 7 or 8% for many years.
My concern is that because she transferred this annuity from one company to another about ten years ago, apparently the basis amount, the correct basis amount wasn’t transferred from the old insurance company to the new one.
Jeff: Right. Frank, that actually happens a lot. People, when they transfer their accounts, the basis doesn’t go over. So hopefully, you have some documents that you can prove the basis and then, you’ll take a pro rata share of basis on her distribution.
Frank: Yes, Sir. Is that something we need to go through and get a correction on through the insurance company where they have to send us a corrected form?
Jeff: You can do that or if you’re able to prove that you have a basis, then you can attach that to the return.
Frank: I see. So, we need to go back to the original annuity document that she started from the original company.
Jeff: Right.
Frank: Gotcha. Alright.
Jeff: I mean, it all comes down to that anyway.
Frank: Yes. Thank you so much.
Jeff: Glad to, Frank.
Patrick: Thanks again, Frank. Jeff, I know that you could actually help these folks at your office and you have someone standing by, so if someone did want to set up an appointment.
Jeff: Right. I know some of these things are actually too long and complicated to talk about over the air. So, if anybody would car to make an appointment, we have somebody right there. You just have to call 972-378-5200.
Patrick: That’s 972-378-5200.
Jeff: And for Rex, we’ve got a number there for him. I thought it was going to be turning into an estate tax question – that last caller, Frank. But, Rex’s number.
Patrick: It’s 972-309-0104. I know that if they call during today or tomorrow, actually, there’s a special report that you were going to give.
Rex: Yes. We are actually giving away a report that we call Estate Planning Secrets of the Rich that everyone can benefit from. That is normally a $99 report. We will give it to you free if you will call in or email us at Rex@bigtexlaw and just say ‘free report radio’ or something so that we know what it’s about.
We only have 27 of the second report that’s the bonus report and that’s Six Bullets Your Simple Will Can’t Dodge. The first 27 callers are going to get a copy of that report. We’ll be out of them and we’re going to redo them before we send them out again.
Patrick: Very good, very good. Again, that’s Jeff Pickering CPA, 972-378-5200 or Rex Hogue of Bolinger and Hogue. It’s 972-309-0104. We encourage you to call in. We’ve got several people that are coming in. It’s 214-787-1570 to call in and ask Jeff Pickering CPA, Master’s in Taxation or Rex Hogue Attorney with Bolinger and Hogue really specializing in estate taxes, 214-787-1570 or 800-583-1570.
Coming up, we’re going to be talking a little bit more about some of the issues that the IRS is – well, let’s just say there’s a form that retirees need to be very mindful of because if they fill it out wrong, they could be popped into a – let’s just say the wrong department in the IRS. With that, we’ll be right back.
[commercial]
Patrick: And welcome back to Tax Talk. This is Pat Dougher, Jeff Pickering CPA and Rex Hogue of Bolinger and Hogue Attorneys in the North Texas area. We’ve got a great show going for you. We’ve got several people on line. Call in if you want to, 214-787-1570. 214-787-1570 or 800-583-1570 or #KLIF on your Sprint phone.
One of the things we wanted to cover before we go to the calls real quick is retirees have got some worries this year.
Jeff: Well yeah, there’s a new schedule. It’s Schedule M. It’s not only retirees, but pretty many people. But, the retirees are the ones that are having the most problem with it. Schedule M is the Making Work Pay Credit and that’s the one that the IRS is getting a lot of rejects on.
So, just a reminder for those of you who are filling out your Schedule M: if you’re doing it yourself, watch out because there’s a lot of problems. Follow the instructions very carefully.
Patrick: They could end up in the wrong department, I guess.
Jeff: Right.
Patrick: Well, we want to go right to our calls. We’ve got Ron. And Ron, are you ready, Ron?
Ron: Yes.
Patrick: Go ahead.
Ron: My question is I’m in my second marriage and I had some property. I wanted to, in case the second marriage didn’t make it or anything, I had something I wanted to leave for my kids. It’s an apartment house. What I wanted to know was if – because I had it before I ever went into this marriage. I had it for quite a few years.
But, if I sell that apartment house, will it automatically comingle with my second marriage or can I put that into a savings account for them? That’s my question.
Patrick: Rex, go ahead.
Rex: Ron, Rex Hogue here. It really depends on how you’ve been handling it. Comingling is real tricky because while you can have separate property that remains separate property – for example, when you go sell separate property, the proceeds remain separate property.
But in Texas, unless you have an agreement to the contrary, all income is community property. And one of the problems you have, especially with something like an apartment building, is that when you have the rental income come in, does it go into a community account or back into the separate account? If it goes back into the separate account, you may have comingled it.
That’s actually a complicated question. We actually have a report that we could send you on that. We’re going to be talking about that very subject next week on our Valentine’s show. It’s hard to answer your question without knowing more, but it is definitely something that you should sit down and do some planning for. We’d love to have the opportunity to help you on that.
Frank: Well, I went with a tax attorney, and he did some research and he told me about the apartments. I owned them before we got married, so they’re still mine.
Rex: Right.
Frank: But, I thought, well is there a day that I don’t want to fool with them and I want to just take that money; sell it and put it in a separate account from anything else that I have. I think you pretty well said it there. I never asked him that question. I got to thinking about that because I had no intentions of selling them. But, as time goes on, things change and I thought I need to know what the answer is to that.
Rex: Yeah. Ron, it’s complicated because there are really several areas of law affected by that. One is just the classification of property under Texas law and the classification of income under Texas law as well. But, family law issues come into play, debtor/creditor law comes into play.
One thing I always tell people is when you have a situation like that, there can be a lot of areas of law and you need to talk to somebody who can address all of them. And not just ask one guy a specific question. He may give you a technically correct answer, but it would be misleading because he hasn’t covered the other things that might be important to you. Perhaps your lawyer just needs to be asked a broader range of questions.
But, if you would like to call our office, we’ll be glad to talk to you. 972-309-0104.
Patrick: Very good.
Frank: 0104. Thank you very much.
Patrick: Thanks again, Ron. We want to go right on to Ken. Ken, you are on the air. You got your question?
Ken: Yes. In 2007, I took out a nonqualified annuity in the amount of $95,000. They immediately gave a $7,000 bonus for doing that and then the money was put in a fixed account basically, or part of the money was put in a fixed account drawing 3% interest.
Last year, I made two withdrawals of approximately $5,000 each. On Monday of this month, I received a 1099-R saying that I owed taxes on the whole amount that I took out.
Jeff: Yeah. It sounds right. You mean because just like the other caller that you have a cost basis in your annuity?
Ken: Yeah. I have a $95,000 cost basis.
Jeff: Right. So, you adjust for that on your tax return.
Ken: How do you adjust for that?
Jeff: Well, you include a computation showing what portion is your cost basis.
Ken: Alright. And what form do you use?
Jeff: We do it with a supporting schedule. That’s the way we handle it. Maybe you’d like to do that.
Ken: Well, let me ask you this. I called the annuity, the life insurance company, and they said that it was standard procedure to be taxed on everything you withdraw even if it’s nonqualified.
Jeff: It is. So, it’s not something that they did wrong. It’s something that you have to do yourself.
Ken: Oh, really?
Jeff: Yeah. It’s something you have to prove up. Any time you have a cost basis in anything, you’ve got to prove it up yourself.
Ken: Oh, okay. I didn’t know that.
Jeff: Some of these annuities, it’s possible that you may not have an after tax basis in them. That’s why they do that.
Ken: Oh, okay. Well, thank you for your information.
Jeff: You’re welcome.
Patrick: Thanks, Ken. We appreciate it. Again, it’s 214-787-1570. This is Tax Talk with Jeff Pickering CPA and Rex Hogue of Bolinger and Hogue Attorneys in the North Texas area. And we’re giving you answers for the tax questions you have. Again, 214-787-1570 if you want to talk to one of these two really bright guys. I have to admit. I love hanging out with them. I learn more every time I am.
And the other thing just real quick, Jeff has someone standing by at his office today, 972-378-5200 if you need help with your return this year or if you’ve got some tax questions and you need to sit down with a professional. I couldn’t recommend a higher one.
And then, Rex Hogue. 972-309-0104. If you want to make sure that your company is set up correctly or that your heirs get everything they’re supposed to get. I am surprised at how many times that one really gets stepped on.
With that, we’ve got some more callers on the air. Jeff, did you have any other things you wanted to bring out today?
Jeff: Well, I wanted to mention that for tax preparers – I’m just going to plug our CPA profession for a second here. CPAs are held to a higher standard than most other folks out here doing this. We take 40 hours of CPE continuing education.
We have to pass a test that almost everybody fails who tries and we also have to pay somebody to come and peer review our stuff. I have to pay another CPA to come and look at my stuff and make sure I’m okay. So, we have high standards and you should know that when you engage a CPA to do your stuff.
Patrick: Very good. I know that you’re not like Timothy Geithner.
Jeff: Right.
Patrick: You’re not using TurboTax.
Jeff: No.
Patrick: Sorry. We just had to give the jab in there. Let’s go to Jan. Jan, you are on the air. Go ahead. Your question?
Jan: Yeah. I’m glad to talk to you. This is a question on an annuity. I’ve got a [35:48 inaudible] that I transferred into an IRA and I already had an annuity in a smaller amount, about $25,000. It’s 6% guaranteed or market and it’s a lifetime annuity.
The question was a financial guru is telling me to bump that up to $200,000 of 6%. The total account is about $800,000. So, 200 in annuity and the other 600 in various other [36:36 inaudible]. Does this make sense?
Jeff: Jan, that’s an excellent question and I’ve got to tell you that sounds like something to do with the portfolio mix and stuff like that. I don’t sell investments and I’m not an advisor. So, I can’t tell. I can give you just a guess.
But, I would really have to understand everything about your situation even to guess and my guess wouldn’t be a professional one. So, I’m sorry. I’m going to have to pass on that one.
Patrick: Very good. Thank you, Jan. You’re off the air, okay. Well, one of the things I want to do is go to Al. Al, you’re next. So Al, you’re on the air.
Al: Hey, thank you very much. First time caller. I’m one of the thousands of people on the First Time Home Buyer’s Credit. My question is I went with an independent tax person who prepared my 09 taxes. I tried to do it rapid.
But obviously, I was informed by both places that I have to wait – I don’t know if this is true or not – to the middle of February before I can submit my papers in and I’ve got to do that through the mail versus rapid. I guess I’m a little confused and I want somebody with your expertise to help me understand that.
Jeff: Yeah. I thought you were going to say that you bought it in the first time they offered it. But no, you bought in 2009 and you’re taking advantage of the $8,000 of money. You’re having a party on behalf of the rest of us. So, congratulations to you.
Al: Well, here’s the deal. Let me tell you something about that also. My wife and I are filing separately. We were not together and I just brought her into my home. I bought the home. I’m trying to do the right thing; that kind of deal. I’m manning up and I brought her in.
So, we’re filing separate and they’re telling me I only get a $4,000 credit, which I’m okay with that. It’s not a big deal. But yeah, they’re still telling me that I have to wait until the middle of February.
Jeff: Yeah. There was a lot of fraud on these First Time Home Buyer Credits last year and they’re making everybody do a paper return. You have to send in your settlement statement. To be honest, I have one guy – we filed his home buyer credit in March and he didn’t get it until November.
Al: Wow.
Jeff: Because they can choose anything they want to have under audit. So, don’t count on the money any time soon and it will be a paper return.
Al: Well, okay. Yeah, I guess one of the few things I guess when the legislation when they’re going through all that, they don’t tell you about that. But, the problem may exist that you may get up to in a year before you may get a return back on that.
I guess if I filed separately, I could probably get three-quarters of it back if I needed it that bad and just forget about the rest. Now, I want everything that belongs to me at this point.
Jeff: Yeah. I’d say just be prepared to wait and make sure you file the documents with it.
Al: But, it is the middle of February, the 15th?
Jeff: Well, you can send in a paper one right now. If it goes through smoothly, you would expect to get it in six to eight weeks.
Al: Okay. But, there’s no waiting period? Two places told me that they were informed they have to wait in February before people can actually submit those in. So, you haven’t heard about that?
Jeff: No, we’re submitting them right now.
Al: Okay. Well, good. I’m going to go with you guys and I’m going to do it first thing tomorrow morning then.
Jeff: Okay, great.
Patrick: Thanks so much, Al.
Al: Thank you both.
Patrick: One of the things we want to do – coming back from the break, we’re going to actually be addressing how to write off today’s Super Bowl party. I’m sure some of you would like to know if that’s possible and these two guys came up with something that I think you’ll find most educations.
So, if you have a question for us today, it’s 214-787-1570. Also, if you want to meet with Jeff Pickering CPA, it’s 972-378-5200 or Rex Hogue. It’s 972-309-0104. We’ll be right back.
[commercial]
Patrick: And welcome to Tax Talk. This is Pat Dougher with Jeff Pickering CPA, Rex Hogue Attorney in the North Texas area with Bolinger and Hogue. And we’re giving you your tax answers today and we really want to get to the callers as well as give you a couple of ideas on how you can, well, maybe even write off today’s Super Bowl party. I’m sure some of you would like to know that.
With that, if you have a question today, it’s 214-787-1570, or 800-583-1570 or #KLIF on your Sprint wireless phone. Jeff, how are we going to write off today’s Super Bowl party?
Jeff: Yeah. Well, this is really for people who are thinking ahead. In tax planning, you always want to make history. You don’t want report history. What people have done if they were thinking ahead, they would’ve invited their clients over and possibly discussed some business before their big Super Bowl blowout. That’s the way we would do it from a regular tax perspective. And Rex has an idea, too, from the estate tax side.
Rex: Yeah. We have clients who set up things like family limited partnerships or LLCS and what you can do is have a required members or partners meeting before the Super Bowl and that’s actually a deductable business expense provided that you talk about business and covering agenda. And then, you could watch the Super Bowl and write off a lot of the cost.
Jeff: I’m getting hungry for nachos already.
Patrick: I heard that. I heard that. So, why don’t we go to our caller. We have Michael. Michael, you are on the air. What’s your question? I guess Michael is going to be on the air here in a second. Michael, are you there?
Michael: Hello?
Patrick: Yes, go ahead. You’re on the air.
Michael: You’ve got a good program. I just got out of church and I caught y’all. Back in 2009, I had an IRA for $10,000. I’ve been disabled since I was 43. I’m 53 now. And I withdrew $5,000. Am I going to still get penalized for that since I’m on social security?
Jeff: No. You’re allowed to withdraw tax free from IRAs and other qualified plans for disability. So, you won’t pay the penalty.
Michael: So, if I’m on social security and I’ve been disabled since I was 43, then I won’t pay a penalty.
Jeff: That’s right.
Michael: Okay. Well, that’s what I needed to know. I think a lot of people need to know that.
Jeff: Well, hopefully they’re listening too.
Michael: It’s kind of hard to get by sometimes when you have to borrow from yourself.
Jeff: Yeah.
Michael: But anyways, y’all have a good weekend I guess.
Patrick: Thank so much, Michael. Thanks for hanging in there.
Michael: Alright, bye.
Patrick: I know that we also want to reiterate there are some deadlines coming up. You need to be mindful of those. Jeff, what are some of the deadlines?
Jeff: Okay. February 28th for W2s, W3s, 1099s, 1096s. March 15th, if you’re a calendar year corporation, then you have a return due or an extension due and that’s if your name has an Inc, Corp, Incorporated, or Corporation or taxed like one of them.
Patrick: Very good. Now, next week, it’s Valentine’s Day. We’re still going to be here.
Jeff: You bet.
Patrick: But, we’ve got some special points of interest.
Jeff: Valentine’s Day Special coming up. You’ll love it. We’ll talk about Texas community property. Texas is one of the 13 community property states and it really plays havoc on your taxes, in our lives if you don’t know about it, if you’re not aware of it.
Patrick: Very good. Rex, you had some interesting things to talk about with Valentine’s Day as well.
Rex: Yeah. We’re going to be talking about community property income; a whole lot about Ron’s question earlier and how tricky that can be in second marriages. Also, I want to point out that Jeff, when they’re talking about their corporate tax returns.
One of the things that they should be doing this time of year is learning about the Fair and Accurate Credit Reporting Act which is now a required law for all businesses as you’ve guys heard at a presentation this week.
And we’ve actually got, to help you avoid a $2,500 fine for violation, we’ve got something we can email from the Texas Workforce Commission, a report on what the FACT Act is, how it works and how you can protect your business from the danger it represents.
Patrick: I was really surprised that it was mandatory, that if your corporation has not educated your people and set some things in place, that your liability is really massive especially when it comes to all of your employees and there’s no – what do they call it? Statute of limitations?
Rex: No statute of limitations. And it’s not just employees private information, but customer’s private information as well. And the Irving Schools recently got hit with this. 6,000 of their employees had their information stolen and they could be subject up to a $2,500 fine per incident. And you can have more than one incident per person.
Patrick: They can email you as well on that, right?
Rex: They can email me, Rex@bigtexlaw.com and we’ll be glad to send you that report at no cost.
Patrick: Very good. Well, let’s catch our callers here. Sandy in Frisco, go ahead.
Sandy: Yes. I was calling because in 08 I re-characterized some funds from my IRA into my Roth account. And then, for 2008, I filed an extension so I didn’t file my taxes until October.
Well, before I filed my extension, I re-characterized half of the money back into my IRA and I put all of that in my 08 taxes. But now, where I have my IRA, they sent me a form for 2009. So, I don’t understand how I’m going to handle that for 2009 if I already did it in 2008.
Jeff: Yeah. What you would have to do is you’d have to put in extra documentation showing that it was actually a re-characterization of 2008 income. So, you just have a little extra backup work to do with your tax return. You’ll do a paper return and you just want to show clearly that you re-characterized.
That’s a great point, Sandy. If you make a mistake, you have until October 15th to fix it on these IRAS.
Sandy: Okay. Very good. I was just a little concerned when I got the new form. I’m like, “Okay, that was last year.” So, I just need to let them know when I do my 2008. Is there a form that I have to file with that again?
Jeff: You’re going to have to just provide backup documentation and how things lay on your return.
Sandy: Okay. Thank you very much.
Jeff: You’re welcome, Sandy.
Patrick: Thanks, Sandy. And she can call you at the 972-378-5200, right?
Jeff: Yes, that’s fine. If you’re having a problem, we’ll be glad to help you out.
Patrick: Very good. And also, Rex, I know you’ve got some special reports. It’s 972-309-0104. And they can also contact you at Rex@…
Rex: Bigtexlaw.com
Patrick: Bigtexlaw.com and get the information about FACTA. That’s mandatory. As we’re coming down the stretch here, I just want to say it’s been a great show. I’ve got one last caller. You’ve got just a little time, Gloria. Let’s go ahead and take you real quick. You got a quick question?
Gloria: Yes. Earlier, you had mentioned the completion of Schedule M and retirees and some caveats.
Jeff: Right.
Gloria: Can you elaborate on that, please?
Jeff: Yeah. So, Schedule M is to calculate the Making Work Pay Credit. If you were retired and got your $250 in the summer, then you have to subtract that from the amount of credit you’re going to get.
Gloria: Okay, thanks.
Patrick: Thank you so much, Gloria. We are out of time. This has been Tax Talk with Pat Dougher, Jeff Pickering CPA, Rex Hogue of Bolinger and Hogue. And we will talk to you next week.

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