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Almost Tax Time...are you ready !
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Author:  Dave-SKG [ Thu Apr 13, 2006 5:36 am ]
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Well, it's almost that time...April 15th ! To all us Americans that means it's almost tax time. Yes the deadline for filing is 4/15 but since it falls on a Saturday this year you have until Monday 4/17/06 to file your income tax returns. You can file an extension using form 4868 BUT, and that's a BIG but...it is only an extension to file not to pay. What the heck does that mean? Means that you should already know how much you are going to owe and you need to pay it now, with the extension. Otherwise the extension is "invalid" and you will owe penalties and interest on the monies owed Uncle Sam.

As is tradition here on the OLF...I will offer free advice to all OLF'rs who post a reasonable question on the forum. Any others who need more than some quick, friendly tips are free to email me, but I may, or may not, get back to you until after 4/17/06.There may be some Charges for private consultations...hey I do this for a living (there will only be charges if I tell you there will be and you agree to pay in advance). I will answer questions until 3:00p.m. tomorrow or until I log off for the day...I don't plan on working too hard this weekend. I do this for a living but I am not a slave to it. It's back to full time building! YEA!!!!!!
Author:  JBreault [ Thu Apr 13, 2006 5:47 am ]
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This is the time of year when I feel really poor. Especially because that $900 check I have to write could buy me a lot of other nice things...like zoot.
Author:  Howard Klepper [ Thu Apr 13, 2006 6:09 am ]
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You know, I got them in to the accountant yesterday, so I can read this and
not mind. HOWEVER, the LAST thing I want to hear this time of year is
someone reminding me that taxes are due. Usually this comes from
someone who wants to smugly tell you that theirs are completed. You think
anyone has forgotten the date who isn't trying to forget?
Author:  burbank [ Thu Apr 13, 2006 6:30 am ]
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[QUOTE=JBreault] ..... that $900 check ......could buy me a lot of other nice things...like zoot. [/QUOTE]

Hey Joe, you're onto something there! My wife and I were wondering what we might do with our little return. This sounds to me like the best idea yet!   
Author:  Michael Dale Payne [ Thu Apr 13, 2006 6:36 am ]
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I got a refund and I got it in hand Feb 5th I filed the same day I got my W2. This is the first time ever I have filed before April first in many years. It still ticks me off that the fed get the intrest erarnd on the over pay for most of the year
Author:  Evan Gluck [ Thu Apr 13, 2006 7:15 am ]
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I file quarterly, with estimated sales tax etc... no refund but I paid enough into last year to rollover and pay for this quarter
now I just have to pay my accountant
Evan
Author:  FrankC [ Thu Apr 13, 2006 7:21 am ]
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I have one...if I already filed and missed something which would cause me to get more money back, can I wait until next year to file teh difference or do I need to send an amended return?
Author:  Dave-SKG [ Thu Apr 13, 2006 10:52 am ]
Post subject: 
[QUOTE=Howard Klepper] You know, I got them in to the accountant yesterday, so I can read this and
not mind. HOWEVER, the LAST thing I want to hear this time of year is
someone reminding me that taxes are due. Usually this comes from
someone who wants to smugly tell you that theirs are completed. You think
anyone has forgotten the date who isn't trying to forget? [/QUOTE]

unfortunately the answer is yes. Hey, I always file an extension. but not everyone is up to it. that's o.k. you just have to pay a little more and that's not my doing that's the i.r.s.! I 'm going to the Satriani concert 4/24/06 at the tampa bay performing arts theater...10th row...having a great time! The limo is ordered, the girls are on alert, everything is as it should be...all that's left is Satch playing one of my guitars...working on that too...that's what 4/15 means to me!Dave-SKG38821.413912037
Author:  Dave-SKG [ Fri Apr 14, 2006 12:54 am ]
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[QUOTE=Evan Gluck] I file quarterly, with estimated sales tax etc... no refund but I paid enough into last year to rollover and pay for this quarter
now I just have to pay my accountant
Evan[/QUOTE]

Hey Evan,
Paying your accountant is more important than paying the IRS.
Author:  Dave-SKG [ Fri Apr 14, 2006 4:14 am ]
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wow...smart bunch...no questions...I knew I needed a new profession...o.k.... Don't say I didn't offer...
going once!
going twice!
I'm gone! Dave-SKG38821.5524537037
Author:  CarltonM [ Fri Apr 14, 2006 5:34 am ]
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Dave, your offer was quite generous. Maybe a little earlier next year?
Author:  JBreault [ Fri Apr 14, 2006 6:44 am ]
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Frank had a question for you.



[QUOTE=FrankC] I have one...if I already filed and missed something which would cause me to get more money back, can I wait until next year to file teh difference or do I need to send an amended return?[/QUOTE]

Author:  Robbie O'Brien [ Fri Apr 14, 2006 9:53 am ]
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I just got back from the Post office from sending my returns this year. I don't know why they call it a return. Nothing gets returned to me. I always have to pay them. It has been a while since I wrote a check that large. I had to double check to make sure it was correct.
Author:  Dave-SKG [ Fri Apr 14, 2006 10:24 am ]
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FrankC,
You can wait until next year to file an amended return (1040x). But why wait...you want to give the Gov't an interest free loan of YOUR money? I would file the amendment ASAP. Only you may need to hire a CPA to do it right...that might cost more than the anticipated savings.

Carlton,
As for my timing of the free advice...If I gave the advice months ago It would surely turn into a two month thread...and I would wind up assisting/actually preparing the returns via multiple posts. That's not my purpose, and I can actually get into some problems/issues regarding preparation with the governing powers at large( DPR, AICPA, FICPA). They have some very strict rules about what is considered preparation and all the related signature requirements/liabities/responsibilities.

Besides...Have you seen how long some of the threads get?! Dave-SKG38821.9903240741
Author:  Dave-SKG [ Fri Apr 14, 2006 10:40 am ]
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[QUOTE=Robbie O'Brien] I just got back from the Post office from sending my returns this year. I don't know why they call it a return. Nothing gets returned to me. I always have to pay them. It has been a while since I wrote a check that large. I had to double check to make sure it was correct.[/QUOTE]

Robbie
Well all I can say is either you should be happy that you made so much money to write such a large check... OR... perhaps the person who prepared your return didn't get all the deductions you were entitled to. Did you compare last year to this year line by line?

Also, did you do any pre- yearend tax planning?...had you done so you might not have had to write a check at all. The last two years we have had some of the highest and best deductions in the history of taxation. For example, some often missed deductions/considerations are.... did you make a SarSep or similar retirement plan contribution ($42,000)? did you make an IRA contribution for you and your wife ($8000), medical savings plan in place(0000's)? utilize sect 179 expensing on new equipment($105000)...etc., etc. the list goes on and on...

Anyway, if you didn't do any tax planning last year DO IT this year...when ? NOW and again in Sept or Oct. otherwise next years check will be even larger. This is ONE of the reasons most small businesses have a monthly ( or quarterly) set of financial statements prepared by their CPA (on an income tax basis)...then you always know what's going on. As luthiers we often dismiss standard business practices and concentrate on the art. This sometimes is not without unfortunate consequences. Often too late to remedy GOOD LUCK NEXT YEAR!Dave-SKG38821.9896296296
Author:  Brock Poling [ Fri Apr 14, 2006 11:14 am ]
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Hey Dave...

I have a question... what is the determination of when we can declare our lutherie pursuits as a business and not as a hobby? I am sure a lot of us are riding the fence.

I would be curious to hear.

Author:  Dave-SKG [ Fri Apr 14, 2006 2:43 pm ]
Post subject: 
Brock, That is a good question...a little too complex to fully explain in type written format but here is as brief explaination as can be typed by me:

It is motive. Business motive is profit. Most businesses and Hobbiests set out on an equal plane if you will...they often loose money the first few years. Hobby expenses are only deductible up to the amount of hobby income. Business losses are not limited to business income...you can offset your other wages, your wife's wages, interest income, dividends, capital gains, etc. with a loss from your business. You can't create a loss using sect 179 ( as we discussed last year here).

If at least 3 out of 5 consecutive years you have a profit you are presummed to be "in it" for profit. The rule is 2 out of 7 for horses ( breeding, training, racing). There are several other facts and circumstances that are considered when making the "profit motive determination" you don't need them all or any certain one:
1)the way you carry on the activity
2)time and effort spent
3)expertise
4)expectation that the assets used will appreciate
5)past success
6)financial status of the taxpayer
7)taxpayers history with respect to the activity
8)elements of pleasure
9)amount of occaisional profits

Hobby income is reported differently than business income. Hobby income is reported on line 21 form 1040.
Hobby expenses (limited to income) are reported on schedule -A as itemized expenses. There are some specific ordering rules for these itemized deductions too much for here.

Businesses that are un-incorporated report income on Schedule-C. They also report business expenses on the same form.

Other forms of businesses report income and expenses on other forms:
Corps. - form 1120, 1120s
Partnerships - form 1065,
L.L.C.'s - form depends on other factors/elections but can be on a schedule-C for a sole member or if elected treated like a corporation , but mostly is treated like a partnership - form 1065.

back to Hobby - most people think "they elect" when a hobby becomes a "business". It's more like it does it on it's own by the surounding circumstances.

As I said earlier...it's kinda complex...my advice...you know it already...HIRE A CPA!
Hope this helped...
Author:  CarltonM [ Fri Apr 14, 2006 3:54 pm ]
Post subject: 
[QUOTE=Dave-SKG]Carlton,
As for my timing of the free advice...If I gave the advice months ago It would surely turn into a two month thread...and I would wind up assisting/actually preparing the returns via multiple posts. That's not my purpose, and I can actually get into some problems/issues regarding preparation with the governing powers at large( DPR, AICPA, FICPA). They have some very strict rules about what is considered preparation and all the related signature requirements/liabities/responsibilities. [/QUOTE]
Makes sense to me. I just didn't want you to feel that your offer was unappreciated because you didn't get much response.
Author:  Dave-SKG [ Sat Apr 15, 2006 12:30 am ]
Post subject: 
Carlton,
I understood and Thank You for your kindness.
Author:  Don Williams [ Sat Apr 15, 2006 12:39 am ]
Post subject: 
Dave, UDA Man... Not too many folks willing to give away info like that for nothin'.
I have dealt with my taxes.......

...Extensions filed!

Author:  Larry Davis [ Sat Apr 15, 2006 4:23 am ]
Post subject: 
[QUOTE=Dave-SKG]
Hey, I always file an extension. but not everyone is up to it. that's o.k. you just have to pay a little more and that's not my doing that's the i.r.s.! [/QUOTE]

Why does it cost more to file an extension? It's been my long understanding that taxes due must still be paid on time (April 15) when filing an extension. Filing an extension does not mean you don't have to pay on time. Extra costs might be incurred if one does not pay on time regardless of filing an extension. This would be in the form of interest and penalties. Taxpayer ignorance or deliberate non-payment of due tax. Have I been mislead all these years?
Author:  Dave-SKG [ Sat Apr 15, 2006 9:04 am ]
Post subject: 
Larry,
That's exactly right. However, there are two situations that cost the taxpayer "more"...:
1) I have to spend the time to figure out what the true taxpayer liability is so when the extension is filed the taxpayer can pay the additional amount ( so my fee is slightly higher. As opposed to the standard w-2 only filer who is easy to firgure out). End result is taxpayer is paying more for the prep and therefore the extension or
2) Taxpayer doesn't file the extension, doesn't pay any additional amount and winds up with a tax bill at the end of the extension. Because he underpaid his quaterly's he is now in a position where the IRS charges penalties and Interest on the balance due...and the later he/she waites (like 8/15 or 10/15) the more interest and penalties have accrued.

Sounds like you have been following the rules and depositing enough quarterly not to get caught up in the Penalty or Interest trap.

I myself almost always wind up paying Interest on the amount due because I never have the time to figure my own liability when my extension is filed. Also a lot of the info I need...like k-1's from patnerships and other S-corp interests are not ready by 4/15 and can't be acurately "quess-timated" when I file the extension. So I gamble and underpay and just role the dice baby! Some times you win sometimesyou lose!
Author:  Larry Davis [ Sat Apr 15, 2006 1:44 pm ]
Post subject: 
[QUOTE=Dave-SKG]

Sounds like you have been following the rules and depositing enough quarterly not to get caught up in the Penalty or Interest trap. [/QUOTE]

I've had the same CPA for almost 10 years..(he's not even in the state I live in) and he keeps me out of trouble. Even called me this year to remind what month it was    Left to my own pathetic procrastination and severe manic depression induced by voluntary tax payments I'd be in tax jail for life
Author:  Cocephus [ Sat Apr 15, 2006 2:35 pm ]
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Thanks for the info, Dave. It gives me a little insight to what the future may hold and some of the quirks there are. Don`t be surprised if you hear from me in the future.
Author:  Scott Thompson [ Sun Apr 16, 2006 9:56 am ]
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[QUOTE=Dave-SKG]There are several other facts and circumstances that are considered when making the "profit motive determination" you don't need them all or any certain one:......

8)elements of pleasure[/QUOTE]

So, we aren't supposed to be enjoying it if we build for profit?
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