Archive for September, 2009

The Perceived Ammunition Shortage

Tuesday, September 29th, 2009

If you have been following for the last year the sales of ammunition and firearms, you will see that President Obama has been great for weapons sales or at least that is what the perception is.  In business, often perception isn’t always what it seems.

Whenever a Democrat gets into the White House, people who own firearms freak out a bit and start stocking up on weapons and ammunition.  In the case of President Obama, he had several statements pre-election and some now after where he said he would look into regulating the sales of ammo.  To date, that has not happened.

What has happened though is that there has been a combination of self-fulling prophecies of the shortage and various urban legends (which probably aren’t true) that the military needs more powder, primer, etc.

The truth is somewhere in a combination of the following events if I understand commerce:

1.  The US Military has plenty of ammunition and small pistol primers aren’t going to be the main thing that the military needs.

2.  Raw material costs are going up in price and with China and other nations hoarding materials and minerals, some may be hard to get.

3.  Human nature, at times being based on fear, has made a lot of people who are uncomfortable with government to begin with to over-react and start hoarding weapons and bullets.

4.  Bullet sales have gone up because people were scared but for the most part, bullets are still being produced.

5.  The net result is that bullets are more expensive than before.

6.  Ingredients for making the bullets in item 6 are in scarce supply so people who reload firearms for fun (and yes, it can be therapeutic, just like any other hobby) are not seeing primers as easily as they would have several years ago. 

7.  The thought that the government is trying to stop or control the individual from owning guns where legal isn’t logical because people can always find ways to make weapons out of other things and besides, there are tons of people who have already hoarded weaponry and some of them are scary.

Cycles like this have happened in the past and eventually the supply and demand adjusts accordingly.  Where I have gotten into an arguement with some people has been to the answer of “What if they limit me to one box of bullets a month?”

My answer is you will have to either learn reloading and fend for yourself or adjust your hobby shooting to less bullets a month.  Shortages, whether true or forced, don’t last forever.

If stores that sell ammo really wanted to help things they would put a cap on the amount of supplies that people can buy but most don’t unless stipulated by law.  The cost of bullets, brass and primer is up and from a business point of view, that is something to watch if you are investing in companies that make or support arms.

Added to the mix is the fact that a lot of hobby shooters may end up selling some of their collections and ammo because they are out of work and need the money.  For those of my readers who keep saying that they will never pry the guns out of their living fingers, their wives and/or girl friends probably have a say in the situation and might limit you to the one pistol or rifle that you love best.

Hey, hobby people suffer the most in a Depression no matter what your hobby is.

Having researched reloading and finding it interesting ,it is just as safe as any other hobby (including stamp collecting and shark wrangling) provided people be careful and pay attention to what they are doing.  The same holds true for people who work on cars.  If you don’t have the automobile jacked up correctly you can risk having a several ton auto come crashing down on you if you are working on it underneath.  You get the idea.

The stock market looks like it was on a brief rampage up on Monday and we shall see what is going to happen with the markets in the next few weeks.

In keeping with the appropriate closing for this post, stay healthy, wealthy, happy, wise and keep your powder dry.

Sep 29 2009

Kim Isaac Greenblatt

The Perceived Ammunition Shortage

Super Hero Business

Monday, September 28th, 2009

It probably would not be a great idea to start a super hero business unless you were rich like Bruce Wayne or Tony Stark.  From a profit making point of view, there isn’t any money to be made from saving people’s lives, their businesses, and relationships.  The only thing I can think of is if you charge a reward or take a percentage of the proceeds from whatever you recover but that starts getting more into bounty hunting.  I suppose some bounty hunters look at their work as if they are super heroes and depending on who they are recapturing they may be right in some situations.

The question of what licensing can masked vigilantes or even those wearing tights and a cape can look to would be easy.  You would need to first create something unique as your character, copyright and or trademark it.  You would then have to apply for whatever permits that you need.  If you are planning on doing super heroics in Los Angeles you need to get a city business license.  I would think something similar to security guard.  You would have to take whatever courses you need for proper arrest procedures, firearm training and it wouldn’t hurt to add CPR and first aid classes for taking care of the people that you rescue from a burning building.

If you are planning on selling T-shirts with your likeness you will need to get a resale license and you may need to also work on getting your image marketed correctly.  Ah, you will probably need some sort of body armor too in case some nut jobs want to take a shot at you so they can say that they knocked off a super hero.

I honestly don’t think that you will need to worry about a super secret identity unless you really are making waves in the criminal world.  It might be a good idea to not do that because you will have a hard time getting a gun permit, laser permit and jet plane authorized to fly at super sonic speeds just above street level at Fifth and Figueroa when you are chasing down purse snatchers.

It wouldn’t hurt to befriend the mayor, governor and other citizens and maybe you can get a multi-billionaire (maybe Steve Jobs) to fund your secret weapons. 

The reward for such a job would be satisfaction and an ego boost.

The drawbacks are cost, time (you wouldn’t have a social life) and you will need tons of liability insurance.  If you accidentally break a glass window of a business while fighting your arch nemesis, Litter Master, and some glass goes ahead and cuts a five year old kid in the forehead, you can expect at least one lawsuit.

You probably will be sued by Litter Master as well for assault and battery since I don’t think most places sanction being a vigilante (though I may be wrong about parts of Texas).

Make sure your medical insurance is up to date and expect it to be cancelled unless you are under your husband or wife’s group policy.  I don’t think any sane insurance company will cover your injuries for too long if they see that you actively are looking for dangerous situations for a living.

Regardless of what you decide, I hope you make a decent evaluation if you want to become a super hero for money.  It may be easier to take those night classes at community college that you were thinking about.

Sep 28 2009

Kim Isaac Greenblatt

If you want to start your own super hero business.

IRS and burning down your house

Sunday, September 27th, 2009

Here is a tax tale that has been happening for the last few years and been getting people hot under the collar.  In Upper Arlington, Ohio, there was a house that was run down and the fire department there burnt it to the ground.  The local SWAT teams barged through the front door in an exercise on dealing with domestic violence. Rescue crews scattered mannequins around the house and blew smoke through the halls to simulate a meth lab explosion. Firefighters set fires in one room after another and practiced putting them out. Then, in one last drill, they burnt down the whole place.  Interesting but effective training using an entire house.  Here we are though several years later (this happened five years ago) and there is still a dispute that still is burning over the homeowner’s attempt to claim a $287,000 charitable tax deduction for donating the house to the fire department, which has burned down at least 32 such homes in Upper Arlington since 1988.

The Internal Revenue Service is trying to stop homeowners from claiming such deductions.

Lured by the prospect of free demolition, homeowners around the country sometimes offer their houses to the local fire department for training purposes. The department burns down the house, clearing the way for the owner to build a bigger and better home. In court cases in Ohio and Wisconsin, the IRS is arguing that because such houses are already slated for demolition, donating them for fire training isn’t an act of charity.

The dispute adds a new element of controversy to the decades-old debate over whether the risks associated with “live burns” — more than a dozen firefighters have been killed in the past two decades — outweigh the training benefits. Fire chiefs say live burns supply invaluable training for volunteer departments, which make up the bulk of the nation’s firefighters. And some fear that the tax disputes will discourage donors from coming forward.  Hmm, there isn’t a shortage of homes that are getting run downdown and up for donation. Nobody tracks the number of live burns each year, but fire officials say they are increasingly rare because of mounting safety and environmental restrictions and because fewer homes are up for demolition in this slumping economy.  I wonder how people actually try to claim the donation of a home as a tax deduction.  Wonder if any business has tried that with their store.
Churches, corporations and cities with vacant properties also donate buildings for fire training. Sometimes it is a dilapidated old barn, other times a sprawling suburban house. (The Hendrix home, not including the land, was appraised at $287,400).

It’s impossible to know exactly how many people have tried to claim such deductions; the IRS would not comment.

Steven Willis, a professor at the University of Florida who studies income tax law, said a charitable deduction can be no greater than the value of whatever was donated, and a house given to a fire department has negative value, since the owner was going to have to pay somebody to get rid of it.

“The whole idea of a charitable deduction is that you give something to charity and you don’t get anything back, right?” said Paul Caron, a tax scholar at the University of Cincinnati. “When you give $100 to the Catholic Church, you don’t get anything for that $100.”

The IRS maintains in court papers in the Wisconsin case that the homeowners do not qualify for a deduction because they are donating only a “partial interest” in their home, rather than the entire property. The agency also says homeowners are letting firefighters only use the property, not donating it in full.

But a lot of work goes into preparing a house to be burned down, including a detailed inspection by environmental authorities, said Terry Grady, a lawyer representing Hendrix, who wants the IRS to refund him $100,590 in “erroneously collected” taxes. Hendrix built a new house on the property.

“They have to, in fact, pay their mortgage off. They have to make sure there’s no asbestos in the house,” Grady said. “And you know, conversely, the benefits to the fire department are just immense.”

Although the demolition is free, the homeowner is responsible for clearing away the debris.

ESPN commentator Kirk Herbstreit, who also lives in Upper Arlington, let firefighters burn his home in 2004. The former Ohio State football star’s claim of a $330,000 tax deduction was rejected a year later. Herbstreit declined to comment.  So there is a case of being a celebrity didn’t help matters either.

A case similar to the Hendrix dispute has also unfolded in Chenequa, Wis., where Theodore Rolfs filed for a $76,000 tax deduction on his lakefront home that was burned in 1998. The trial concluded in 2006. Rolfs is still waiting for a verdict.

Rolfs, who had been told it was common practice to receive the deduction, was taken aback when the IRS rejected his.

“Their arguments didn’t make any sense,” he said.

At Rolfs’ house, firefighters wheeled a truck down to the shore and practiced pumping lake water onto the flames, a crucial training exercise in Chenequa, which has no fire hydrants, said Rolfs’ attorney, Michael Goller.

Environmental laws in some states ban live burns. In other states, most fire departments adhere to safety guidelines that say windows should be boarded up, floors inspected for sturdiness and shingles and carpets stripped away.

Three firefighters were trapped by flames and perished in a 100-year-old farmhouse in Milford Township, Mich., during a controlled burn in 1987. In February 2007, a fire recruit was killed in a training exercise in a Baltimore rowhouse.

The moral of the story is to please check with a good tax professional before attempting to donate your house to the fire department for blowing up.  You don’t want to get burned later on!

Sep 27 2009

Kim Isac Greenblatt

IRS and burning down your house

If you tax dough, it is getting time to show

Saturday, September 26th, 2009

You have made some bread in business and you know that any dough you make is getting taxed.  Maybe you have been so busy in trying to make money that the thought of paying income taxes has slipped your mind.  That means that you have to get baking (in our cooking analogy) , get your act together and file a return (if you haven’t) and take care of tax business.

The witching hour for income tax extensions is coming up on us and for a lot of taxpayers, especially those who have not filed extensions or made payments, they are completely spellbound.

The IRS and respective state agencies will work with you to help you with anything you owe in income taxes but the key is that you have to get your return(s) filed and you have to call them to work something out.

I have been talking with clients who are trying to make offers and connect them up with the right people or point them in the right direction but there has to be some semblance of reality in the offers that they are making.  Yes, some money is better than none, however you have to remember that the taxing authorities have access to your financial records if the money is in banking accounts and that is something that needs to be accounted for.

If you are trying to hide money offshore, you may want to rethink that since there is more international cooperation between banks in other countries and their respective govts.  I would also suggest that you have me or your tax pro review your income tax returns because there are a lot of legit deductions and expenses that you may not be taking.

To be fair, there may also be a lot of ones that you shouldn’t be taking and if you do come to me I will keep you honest.  Note that being honest does not mean that I won’t get you the highest refund or lower your tax liability as best as I can.  I am still pretty good at that stuff.

If you handle things now, you may also be surprised that after all your fussing and mussing you may see that you are owed a tax refund instead of owing money.  You sometimes never know until you actually get your tax return completed.

Make sure that you do your state returns as well as the Fed.  The Fed talks to the different states and vice versa.  If you look like you are owing to one agency, you want to see if you owe for the other and take the initiative and set up a payment plan or pay it all off at once (my preferred suggestion if you are asking me, thanks).

You don’t want the Fed or state governments after you, especially in bad financial times like these where everybody is looking for money wherever they can find it.  If you don’t believe me, check out in front of all the supermarkets the number of people who are going through trash cans who are looking for aluminum or glass for recycle money.  At least here in California we have gone from one person to something like a dozen if you look at the course of a day at some plazas.

So I wish you the best in making dough and if you haven’t had the time, you better make it in order to show the IRS that you have income.

Have a great weekend, gang.

Sep 26 2009

Kim Isaac Greenblatt

Great Business Idea – Things To Fight the Heat

Friday, September 25th, 2009

I have been getting a lot of emails about generating income during the Depression and I think a great business is selling cold water here in Southern California.  Get a peddler’s license and on these hot days hit the beach and sell bottles of water for $1.25 – $2.00.  Trust me, if people are hot enough and you are walking in the sand up through them, they will pay the money to cool off.

Here in the Southland we are going to be having another week of heat and I just got in from mowing the lawn and it is 7:10 pm. It is still hot and in the 90s.  The backyard just had to have a good mow and I needed to clean up a bunch of dead leaves. 

Other good things are selling ice, fans, anything that can fight the heat.  If you have umbrellas that are lightweight you can sell them and if you have inexpensive parasols, they seem to be back in fashion in different parts of the country.  You don’t need to approach the G20 nations and get their permission to do this.  Just your local jurisdictions again to get the appropriate business (peddler) license and you may need a resale number and have to set up with your local or state agencies to collect sales tax.  That isn’t a big deal and it is something that will help where you live, if the govt isn’t mis-managing their funds too badly and show that you are running your business legitimately.

Remember that you must present yourself professionally in order to be treated as a business in order to have expenses applied on your Schedule C or you will be treated as a hobby and you will be forced to put expenses on the Schedule A subject to the 2% of income haircut.  Sometimes that can be pretty steep.

Have a great weekend people and stay cool and make cool cash.

Sep 25 2009

Kim Isaac Greenblatt

Great Business Idea – Things To Fight the Heat

Bad Business Cutting Down Sycamore Trees

Tuesday, September 22nd, 2009

What is with people?  Somebody (or somebodies) are cutting down sycamore trees in the California southland.  Are people totally nuts or is this some business backlash against somebody who was fired because he wasn’t taking care of city trees?

Not a good idea because of the lack of shade, the chances of fire from the dead tree limbs sitting around and just drying out and all in all senseless.  People, we need to take back our stuff by watching what is going on in our neighborhoods.  We can’t let a lot of people be intimidated by a few people who are out for their own wacky agenda.

With the temperature being in the hundreds, there may be crazier things happening in the days and weeks to come.  Can we put a stop to the sycamore trees being chopped down at least?

Am I asking for too much here? 

My best to law enforcement officials who are currently over worked and tired and I wish them wel and a speedy arrest of whoever is doing this nonsense.

Ah,   the reason that the water pipes are bursting throughout LA and the California Southland is that there are huge surges at different times of the day and that causes too much water to hit the pipes.  Makes sense if everybody sets their lawn watering timers to 5 AM on the days that they are allowed to water and everybody waters at the same time.  Too much aqua going through the pipes in higher pressure. That can make for a bad day.  Glad at least that people are looking into it if not trying to resolve it.

More tax tips and suggestions about money in the next few days.  I am pretty tired right now and ready to get some sleep here in America.

Be well everybody and I hope you all can sleep well.

Sep 22 2009

Kim Isaac Greenblatt

Bad Business Cutting Down Sycamore Trees

Trailer Or Winnebago Or What

Sunday, September 20th, 2009

I am browsing through the Internet and looking for either a trailer, a Winnebago or camper thing to possibly seat up to four people.  If anybody has any ideas, please post or email me because I think this is a great time and a buyer’s market.  On the plus side:

1.  If there is an earthquake, I might have something for family and friends to live in if the house gets totalled.

2.  I might be able to drive away if the region gets wracked up by fire, earthquake or zombies.

3.  I will have something to take the family and friends in for trips for a weekend and save on hotel and motel fees.

On the minus side:

1.  If a natural or unnatural disaster can take out my house, the chances are that the road won’t be drivable and most campers love black tarmac to roll on. 

2.  Gasoline is going up in price and that may mean I will be buying another piece of equipment that would sit in my backyard or garage and just wait forever, which is why so many people are selling theirs (especially if they are out of work).

I like the concept though of being able to hitch up or drive one’s residence way out and have some creature comforts there.  Indoor plumbing (or at least chemical toilet plumbing) is nice if it is raining outside and you don’t want to race to an outhouse.  I understand a lot of RV parks have showers and indoor plumbing but it sounds like one would have to plan ahead for one’s trip to see where you would be stopping to enjoy it. 

For special needs access for Arianna I might need something larger for her negotiate and for four people that might be tight.  Ah, the business of shopping trying to get something that is just right for the right price.

The allure of a tow camper is nice but what kind of car or truck will I need to tow the beast and at that point will my gasoline bill jump along with getting new shock absorbers?  I did tough a U-Haul across country back years ago and it was an interesting experience.  I had back then a 1968 Pontiac Executive and the beast had a tow ball and it wasn’t a big deal dragging the U-HAUL across country.  God bless V-8 engines. 

Today, I know and have seen a lot of optimized trucks, campers etc and I would love to get a Winnebago but shudder to think if it breaks down on a trip I have to get my house repaired then and there.  Ah, maybe I can just window shop and continue dreaming on this one.

If you have any ideas suggestions and price ranges that might be sound for Southern California please let me know and I will post them.  Hope you are all having a happy New Year or holiday if appropriate and you are all staying happy and healthy.  Make some money too while you are at it.

 

Tax Tip of the Day By The Way:

Qualifying child definition revised. The following changes to the definition of a qualifying child apply to years after 2008.   That applies to you and I, gang.

  • Your qualifying child must be younger than you.
  • A child cannot be your qualifying child if he or she files a joint return, unless the return was filed only as a claim for refund.
  • If the parents of a child can claim the child as a qualifying child but no parent so claims the child, no one else can claim the child as a qualifying child unless that person’s adjusted gross income (AGI) is higher than the highest AGI of any parent of the child.
  • Your child is a qualifying child for purposes of the child tax credit only if you can and do claim an exemption for him or her.

For more tax tip info, drop me a line, and let me know if you want anything explained that might be cool for my readers.

Sep 20 2009

Kim Isaac Greenblatt

Trailer Or Winnebago Or What

Tax Issues In Business Start Ups

Saturday, September 19th, 2009

With the economy being lousy (oh come on now, you all don’t think things are rosy just because people tell you they are do you?), a lot of people are trying to get their own business going.  If you look through my site you will see a lot of articles about starting up a business.

The important thing that people tend to miss when they start their own gig is that they don’t take into account income and state taxes.  In the current economic Depression we are in, that is a mistake.  The reason is that government is in a Depression like we are and they need money.  We should expect that tax agencies are beefing up their enforcing divisions and they make no bones about telling us that they are going to be cracking down on us.

So what will they be looking for and what are things that you, as a business person should do or have in order to stay compliant?

1.  Make sure that you pay your quarterly income taxes for your business.

This may be obvious but there are people who because of the economy may decide to “miss a payment” in order to get it caught up later on.  That isn’t going to fly too well with the Fed and in a lot of states, like California, where they are really hurting and are changing quarterly tax payments, you will have to prepay as a front load to match the fiscal periods for the state.  That means that the states file their reports and statements on a different period than the calendar period and they want to show that they are getting their income in faster.

2.  Make sure that you have your state sales tax collected, any business tax paid and remitted in accordance with your business laws.

If you are in a gig that is selling something and collecting sales tax, make sure that if you are paying annually that you get your payment in annually.  If you pay quarterly, get the money in then.  For a lot of business taxes you basically are prepaying it a year in advance or when you start business.  That means that if you are starting a business say this October, you might pay a business tax in October and again in January.  If your business is seasonal and the holidays in winter are your peak, I would bite the bullet and do it, otherwise I might think about starting the gig in January.  Of course if you need to make money to start covering expenses and bills, get started as soon as you can and get your taxes paid.

3.  Keep a separate account to handle your taxes and don’t touch it.  Don’t be like the government is when they put tax money aside and dip into it for other projects.  That is what happened to our social security program.  The program was suppose to be rock solid and the funds not touched and it has been dipped into.  The earthquake fund for Callifornia is pristine and I hope it stays that way.  California learned the hard way that earthquake repairs cost a lot even if you have insurance.

The money you collect for paying business and sales tax will be there and after awhile it will be automatic in making payments.

4.  Get whatever special permits you need, pay the registration and stay current.

If you are making bread, you may need a business license as well as a separate permit for cooking.  If you are doing something dangerous like disposing toxic waste, there are higher safety standards that apply and you probably know all about them already if you are in the haz mat (hazardous materials) business.

Getting the idea?

These are the sort of things that you need to have in place.  It also tends to be the same in other countres and if you are doing international business, that leads to number 5 in our list:

5.   Learn other nations tax laws and comply where appropriate if you are doing international business.

If there are reciprocal tax treaties with the United States you may get tax credit for taxes paid to other countries at tax time here in the U.S.  You need to check with a good tax professional (and I have researched a lot of tax treaties for clients) to make sure that everything is in compliance and you don’t get shut down one year after you have started because you haven’t paid taxes.

6.   If you are required to collect employment taxes for your staff and pay them, do it and don’t skimp. Payroll tax issues are important and get overlooked.

Remember about collecting that money and not spending it we just discussed?  Make sure that you do this for employee payroll taxes if you have people working for you.  Make sure that you if you aren’t handling the payrolls yourself that you have a competent bookkeeper or payroll processing company that has had experience in staying current with tax law changes and handling payments promptly.

7.   Stay current with tax tables – especially at the state level.

One of the biggest problems I have seen on people’s W-2s is where the employer has failed to update the state income tax tables and has either been withholding too much or too little.  Have your bookkeeper check to make sure thay are current or add a reminder in your computer’s Outlook or memo system of choice.  If you do everything by cell phone or Blackberry, make sure that you click on the calendar and add a reminder to check for tax updates for Fed, State, County, etc there or wherever you can find it easiest.  It will make things easier for you and keep you in compliance as your business takes off and grows.

Sep 19 2009

Have a great time everybody and for those of the people celebrating either New Year’s or their own holidays, make the seasons ahead bring you peace, joy, happiness, good health and prosperity.  For information about my books please go to my home page or Amazon and you can see the selection for what I have on sale there.  There is something there for everybody.

Kim Isaac Greenblatt

Tax Issues In Business Start Ups

First Steps in Preparing A Tax Return

Friday, September 18th, 2009

Hi party people. Since I am in tax instructor mode, a lot of my upcoming entries will be to educate you as to what goes on when you file your income taxes. Taxes are a very important part of everybody’s life and it is something that should be taught more in school. In any case, here we go:
The first step in preparing an income tax return is to determine if the taxpayer needs to file one in the first place. Special filing requirements apply to taxpayers who may be claimed as dependents on other taxpayers’ returns. In order to determine if a taxpayer is required to file an income tax return, you need to know three things:
 
• Marital status
• Age
• Gross income
 
Marital Status
 
Marital status (married or unmarried) is determined on the last day of the tax year. The marital status of a person who died during the year, as well as that of the surviving spouse, is determined as of the date of death.
 You need to know the marital status and whether the taxpayer is age 65 or older because these facts help you determine how much gross income the taxpayer may have before being required to file. Once marital status is determined, you need to know whether a married couple will file a joint return or separate returns because this choice also affects filing requirements with respect to income.
A taxpayer is considered married if, at the end of the tax year, he is in a common-law marriage that is recognized in the state where the couple is residing or was at the time recognized by the state where the common-law marriage began. California has not recognized a common law marriage since 1900 so you can figure that they aren’t the norm here. If you were common law in another state and move to California, it will be recognized.  While specific requirements vary by state, a common-law marriage generally must meet four legal standards:
• The parties must have the legal capacity to marry.
• The parties must have the current intent to marry. That is, they must intend to be husband and wife and must communicate that intent to one another.
 • The couple must live together as husband and wife.
• The parties must publicly present themselves as husband and wife.
 
It is a common misconception that a couple must live together for a set number of years to have a common-law marriage. In reality, there is no time limit if the four conditions listed above are met. While some states allow common-law marriages, there is no such thing as a common-law divorce. If the partners decide to go their separate ways, they must petition the state court for a decree of divorce just like any other married couple.

Bottom line is that if you are unsure if a relationship is a common-law marriage, the couple should get the advice of an attorney familiar with marriage law.
 
Same-sex marriages are not recognized under federal law, which currently defines a marriage as “a legal union between one man and one woman as husband and wife.” For federal tax purposes, individuals in same-sex unions must use a filing status available to unmarried taxpayers. However, individual states may enact legislation regarding the legal status of same-sex unions within those states.

Age

For general tax purposes, a person is considered to have attained any given age on the first moment of the last day of that year of his life; that is to say, the day before his birthday. A taxpayer is considered to have attained the age of 65 on the day before his or her 65th  birthday.  Some special rules apply to children with regard to age. For several specific tax purposes, children are considered to have attained a certain age on their birthday.  More on that in another entry.

Gross Income
 
Gross Income Gross income is the total worldwide income subject to tax. There are two aspects to determining gross income:
 
• Who owns the income
• What income should be reported on a tax return

Ownership of income, in the case of a married couple, is determined by state law. The laws regarding the ownership of income and property in most states are based on British common law. These states are called separate property states. In separate property states, income received belongs to the spouse who earned it or who owns the property that produced the income.
Nine states are community property states. With the exception of Wisconsin, the laws of community property states are based on Spanish civil law. Generally, in community property states, income received for services performed is considered to belong half to the husband and half to the wife, regardless of which of them earned it.

The laws regarding the ownership of income from property vary among these states. Generally, ownership of income needs to be determined only if the couple files separate returns.  For federal income tax purposes, there are five filing statuses:
1. Single
2. Married filing jointly
3. Married filing separately
4. Head of Household
5. Qualifying widow(er) Additionally, the standard deduction is increased by state and local real estate tax paid up to $500 ($1,000 if married filing jointly). Also, the standard deduction is increased by a disaster loss in a federally declared disaster area. Your net disaster loss is your personal casualty losses in a federally declared disaster area minus any personal gain. Elderly taxpayers use the extra amount for age when computing their gross income filing requirements, but the extra amount allowed for blindness does apply (double check this yourself if you need to apply it).
General Rule:
For most taxpayers, a tax return is required when gross income equals or exceeds the sum of the taxpayer’s standard deduction and the personal exemption amount.
 
 
Exception:
The standard deduction is an amount of income not subject to tax, which varies based on filing status. The regular standard deductions for 2008 are:
• $5,450 — Single or married filing separately
• $10,900 — Married filing jointly or qualifying widow(er)
 • $8,000 — Head of household
Taxpayers who are age 65 or older or who are blind are entitled to increased standard deductions. The additional deduction is $1,350 for each condition for singles and heads of households, and $1,050 for all married taxpayers and qualifying widowers.

A taxpayer may claim the additional standard deduction for blindness if he is legally blind at the close of the tax year.

A taxpayer who is partially but legally blind, or whose sight is unlikely to ever improve beyond that condition, must obtain a statement certified by his eye doctor or registered optometrist. The statement must be retained by the taxpayer with his records; it need not be attached to the return or sent to the IRS.

Specific requirements must be met in order to qualify for each filing status. We will discuss it in other entries or you may find more info on my site or at www.irs.gov.

And that may be enough for now, don’t you think?

I will try and tackle more tax issues as I get more time. I am swamped these days (but ALWAYS looking for more work) and if you have any questions – please keep them coming and I will try to get back to you as soon as I can.

Kim Isaac Greenblatt

First Steps In Preparing a Tax Return

Guns and Gold etc

Wednesday, September 16th, 2009

Interesting to see how the election of President Obama triggered a knee jerk reaction among large groups of people who raced to buy ammunition and firearms.  Without meaning to, President Obama has been one of the best things to happen to the gun industry in a lot of years.

Gold has been looked at as “the investment” to help one make it through the Depression, survive hyperinflation, and with the price dancing around $1000 these days, the place to go to invest at least for the short term.

What I find funny about all this is that in the long run, food, clothing, shelter and something to keep people healthy will be the things that will matter.  We might need guns or rifles to be able to keep these things for ourselves though I don’t see society deteriorating down to tribes of looters running or driving to different cities simply because I think there are a lot more armed people living in America and the world than statistics show.

People who carry weapons legally and those who carry illegally do contribute to a state of mind where everybody tries to respect one another, like the Old West, because they are mutually afraid of getting shot at.

That isn’t a good or bad thing but if people don’t respect each other out of love and will do so out of fear, that is better than nothing.

Will long or short term investments in gold be rewarded?  For the short term, you may want to look at getting out of the gold market around year end.  If nothing else because traditionally, once the Asian holidays are over, until February when China celebrates their New Year, there isn’t a lot of gold gift giving.  In the United States, for one thing, people don’t have a lot of money and lots are out of work.

Would gold honestly be used as something to trade for food?  Thinking through logically, it has value because people like the fact that gold “lasts forever” and is shining.  If civilization were to fall away, which I doubt will happen or if it will won’t be over night, owning gold is the least thing that I would worry about.

Getting back to the current investment situation, I think that gun manufacturing stocks are going to be cooling down for awhile and gold stocks, funds, mines, etc will peak this month and traditionally start to drop a little.  Of course, you, dear reader, will know whether I am right or not over the long haul.

Since I am teaching taxes again, how about a tax question to close out today’s blog entry?

Question from a reader:”I am a police officer and wanted to know if I can deduct ammunition I use to practice with that I use off duty.  Nice blog btw.  Thanks.”

My answer is that if you are working for a city as a W-2 employee, you can, if you are having enough things to itemize your deductions with, use a Schedule A and the ammunition would go under Unreimbursed Employee Expenses and for the form as of late, it was line 21 on the Sch A but that may be subject to change once the new Schedule As are formalized.  In any case that is where it goes.

If you aren’t able to file a Form 2106, and it sounds like you aren’t, don’t forget that you can add anything else that wasn’t reimbursed and related to your work such as recertification for the fire arm, range fees if for the purpose of keeping you certification, unreimbursed physical exams – email in private if you want me to help you with your return and I can examine in detail what you can and cannot take. 

What are some examples of unreimbursed expenses?

  • Depreciation on a computer or cellular telephone required to do your job.
  • Dues to chambers of commerce, professional societies and unions.
  • Education that is employment-related.
  • Home office or part of your home used regularly and exclusively in your work.
  • Job-search expenses in your present occupation.
  • Legal fees related to doing or keeping your job.
  • Licenses and regulatory fees as well as occupational taxes.
  • Malpractice insurance premiums.
  • Medical examinations required by an employer.
  • Passport for a business trip.
  • Subscriptions to professional journals and trade magazines related to your work.
  • Tools and supplies used in your work.
  • Travel, transportation, entertainment and gift expenses related to your work.
  • Work clothes and uniforms, and their upkeep costs.
  • Just remember you are subject to the 2% haircut and that your expenses that were unreimbursed have to exceed your adjusted gross income multiplied by two percent.

Example 1:  Your Unreimbursed Employee Expenses were $718.

Your AGI was $89,000.

$89,000 x .02 = $1780.

In this example $718 is less than $718 so you wouldn’t get any benefit from this.  You would need to break $1780 in order to get the benefit but I always tell clients to put the information in anyways because it may change from year to year, especially if you already are filing a Schedule A.  It will only stop mattering if you get capped because of AMT, and that is the topic for an entry for another day!

Be safe people.

 

Kim Isaac Greenblatt

Guns and Gold etc