Month of January, 2008

What’s in store for business and investments in 2008? My typical answer, of course, is It Depends.

We have an election year and so I don’t expect any drastic moves in 2008. Most likely, we’ll have another last minute AMT patch, just like 2007. Once we have the election behind us, I think we’ll start to see some dramatic changes. Here are my top 3 things to do to be best prepared for tax law changes:

I came across an interesting Tax Court case recently that I thought I’d share with you. The gist of this case boils down to answering the question: Can you take a deduction for home repairs that are so poorly done they constitute the theft by the contractor?

Like many of you, my husband Richard and I are also real estate investors. One of the things we learned early on is just how important it is to have a great relationship with a mortgage broker.

A few weeks ago Megan blogged about the tax-free gifting rules and how to make sure you don’t accidentally trigger tax complications, for yourself or for the person you’re giving money to. That got me to thinking about a quick tax strategy you can put into place between your parents and your kids.

Two amazing things happened to my CPA practice this week. First, someone tried to negotiate my fees. Maybe it happens more commonly for you in your business, but it just never happens in mine. The strategy that we had to get in place quickly would save my new client over $50,000 … and the negotiation was for less than $500.

It got me thinking about the whole “art” of negotiation. When is it smart business practice to negotiate and when is it just the need to win at all costs and, more importantly, crush the opposition?

Here’s the text of an email I got today from PayPal. I’m guessing some of you might have gotten a copy too:

Dear __________,

PayPal has received a summons from the United States Internal Revenue Service requiring us to produce various account records, including data related to your PayPal account. PayPal understands the summons relates to the IRS’ offshore compliance program in which the IRS has sought information about offshore credit card accounts from a number of companies.

Being married has lots of perks. Unfortunately it doesn’t always last, despite our best intentions and attempts to keep things together. And sometimes it can also lead to a major tax headache - especially when one spouse lets the other down, from a tax perspective.

The problem is that when you file a joint return with the IRS, you also both accept what’s called “joint and several” or “joint and separate” liability over paying anything that’s due. That means you aren’t on the hook for half of what’s due - you’re each responsible for 100% of the debt.

Before you invest in any business or real estate as an investor or before you partner with anyone, make sure you have a clear agreement regarding phantom income.

If you don’t handle this upfront, you could find your tax return haunted by this expensive phantom.

Phantom Income can be sneaky - and expensive!

If the IRS sent you a Form 1040 package during this first week of January, you probably have the wrong forms.

The Alternative Minimum Tax last minute law change (called the AMT Patch) has not been reflected on the forms. Read on to see which forms are wrong, and what you can do about it. By the way, it is up to YOU, the taxpayer, to make sure the right forms are used. The IRS is not going to send you corrected copies. And, if you do it wrong, I’m sure you’ll be the one paying the penalty.

AMT Patch Affects Millions of Form 1040 Packages

The IRS does not expect to have its computer reprogrammed for the AMT patch until after February 11, 2008. If you file using Form 8863, Education Credits; Form 5965, Residential Energy Credits; Form 8396, Mortgage Interest Credit; Form 8859, District of Columbia First-Time Homebuyer Credit; or Schedule 2, Child and Dependent Care Expenses for Form 1040A Filers the IRS will delay inputting your tax return.