Tax Carnival Ecstasy – March 9, 2013

Bill Romanowski, former American football player.
Bill Romanowski, former American football player. (Photo credit: Wikipedia)

Welcome to the March 9, 2013 edition of Tax Carnival Ecstasy. Bill Smith starts us off with some Strange But Legitimate Tax Deductions that were recently presented by TurboTax.com. Big Cajun Man has an article detailing when you should begin to file taxes for your children. Edward Webber takes a look at Tax Code 944L which was recently increased for the 2013 tax year. And finally Bill Smith takes a look at another celebrity with tax issues, Bill Romanowski who has failed to pay taxes for some time. Hope you enjoy the articles, bookmark, share, tweet, like and come follow the next carnival edition.

deductions

Bill Smith presents Strange But Legitimate Tax Deductions from TurboTax.com posted at 2009 Tax, saying, “Tax season is anticipated by some and dreaded by others. For accountants and tax professionals, however, it can be a time of amusement.”

filing

John Schmoll presents 4 Simple Ways to Make Filing Taxes Easier Every Year – Frugal Rules posted at Frugal Rules, saying, “Very few people enjoy doing and filing their taxes. However, with a few simple steps you can make the process easier every year.”

Big Cajun Man presents Taxes: When Should They Start? posted at Canadian Personal Finance Blog, saying, “When should you file for your kids?”

Bill Smith presents New Tax Problems For Lindsay Lohan posted at 2012 Taxes – Free Tax Filing Options, saying, “Lindsay Lohan would do well to heed the advice that many individuals follow each tax season, especially since she faces new tax issues about not paying her 2011 taxes.”

taxes

Edward Webber presents Tax Code 944L posted at TaxFix Feed Update, saying, “The tax allowance for 2013 has increased in the UK. This post will let you know how much you can earn before you need to pay any tax.”

Bill Smith presents Prevent A Bill Romanowski Like Situation posted at 2010 Tax, saying, “NFL star Bill Romanowski has landed himself in fresh controversy after the Internal Revenue Services recently revealed that the ex-football sensation owes more than $5 million in back taxes.”

Bill Smith presents The Benefits Of TurboTax 2013 posted at 2013 Taxes, saying, “When you are planning to file your income tax return, you want simplicity, accuracy, and options. You will have these benefits and more with TurboTax 2013.”

Bill Smith presents Consumer Reports Releases 2013 Tax Tips posted at 2012 Taxes – Free Tax Filing Options, saying, “These tips help consumers not get caught up into any questionable tax services and help them save money when filing their 2013 taxes.”

Bill Smith presents Microsoft May Owe Denmark A Billion Dollars posted at 2012 Tax – Free Tax Filing Options, saying, “The three giants of American IT – Google, Yahoo and Microsoft have faced the ire of several competitors and governments in their efforts to place billions of dollars in tax havens or through complex, layered acquisitions.”

That concludes this edition. Submit your blog article to the next edition of tax carnival ecstasy using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

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Requirements for Alimony to be Deductible

Tax Act

Individuals that pay alimony (also known as “spousal support” or “spousal maintenance”) to a former spouse can deduct these payments on their personal federal income tax returns. In turn, the alimony recipient is required to claim the payments as income.

Before a payor takes an alimony deduction they should make sure that their payments meet the IRS qualifications for alimony. Ideally, this was addressed and discussed in detail with their divorce attorney to ensure that the alimony was structured in a way that would allow a deduction. If you are not sure whether your payments are deductible you should consult with a family law or tax attorney. Here are some tips regarding what does and does not meet the general requirements for payments to qualify as alimony under the Internal Revenue Code.

Alimony is Formally Mandated

According to the IRS, alimony payments must be mandated by a legal settlement agreement or court order to qualify for the tax deduction. This means that there must be a legally binding agreement, such as a temporary support order, separation agreement or divorce decree, that describes and mandates the support provided by one spouse to the other. The IRS does not consider voluntary, informal payments of money to a spouse or former spouse to be alimony.

Child Support Is Not Alimony

Child support is not alimony and those who pay child support cannot deduct these payments from their income. Under federal tax laws, child support is not tax deductible by the parent who pays it, and does notneed to be reported as taxable income by the parent who receives the payments.

Cash Payments Only

Non-cash property transfers don’t count as alimony and cannot be deducted from one’s taxable income. Alimony must be paid in cash, or by check or money order, in order to satisfy the statutory requirements.

Third Party Payments

In some cases, court-ordered payments to third parties can be considered alimony and are therefore tax deductible. Examples of this include rent or medical expense payments. In addition, payments made on taxes, mortgages or insurance may also be entirely or partially tax deductible if treated as alimony under a divorce or separation agreement.

Complications Can Arise if You Still Live With Your Ex-Spouse

According to the IRS, a person who is legally separated from his or her spouse, yet still lives in the same home with him or her cannot normally claim a tax deduction on alimony payments. An exception to this rule exists when one spouse leaves the home within one month after receiving an alimony payment. In those states that recognize legal separation, those who are still living with their former spouse and have a legally binding support agreement but are not legally separated, should talk to their attorney or tax adviser to find out whether their payments qualify for a deduction.

About the Author

Scott Morgan is a board certified Austin divorce lawyer who regularly blogs on the subject of divorce and family law. You can read his blog at AustinDivorceSpecialist.com.

The Findings Of An IRS Watchdog

Tax Act

Some reports from an IRS watchdog have indicted the federal tax agency for certain practices regarding offshore account disclosure. An arm of the IRS known as the Taxpayer Advocate Service has been responsible for reporting these kinds of voluntary disclosure policies aimed at wealthy Americans. According to the watchdog report, the IRS has failed to cap penalties in cases of this kind of disclosure.

A standard practice of the IRS has been to reduce the penalties for those who willingly disclose that they have hidden offshore bank accounts. These taxpayers have often accumulated this wealth from overseas jobs or from family inheritances. The discovered lack of penalty caps has been linked to higher-than-necessary tax payments for some American taxpayers. Some experts believe that this lack of consistency could undermine the IRS’s credibility in the future if the agency implements similar types of programs.

Prior IRS voluntary disclosure programs have netted over $4.4 billion USD in unpaid taxes from these kinds of offshore accounts over a recent two-year period. A renewal of this disclosure is expected to bring in more names of wealthy Swiss bank account clients who have avoided their obligatory tax payments.

Information from this IRS watchdog report reveals that the ordinary cash penalty is supposed to be a maximum of $10,000 for account holders who accidentally fail to report these assets. Willful withholding of information on foreign bank accounts can carry a penalty of up to 50% of the highest account balance for each covered year of tax nonpayment.

Finding A Quality CPA In Ohio

Tax Act

Looking For an Ohio CPA?

When looking for a CPA in Ohio there are many things that you will want to consider before making your final decision.

The first thing to consider in your CPA is word of mouth advertising. If there is a CPA that someone you know is currently recommending you will want to discuss what type of work that they had done and how satisfied they were with the work that the CPA did for them.  That way, you can be confident that will do a good job for you too.

Also, you should check the Ohio AICPA to be sure they have current registration and really are a CPA.

If you have no friends, co-workers or family that has used a CPA in the past you may turn to the telephone book to see what one of the ads looks like for one there.

Once you have found a couple ads that look appealing in the phone book you will want to make a call to the CPA office and have a chat with them over the phone. Some questions that you may want to ask include the following:

1. What they offer?
2. How busy are they, is it going to take a long time to get an appointment there?
3. How much they will be charging you for their service?
4. What kind of tax returns do they do?
5. How long have they been in business?
Overall the process shouldn’t take long to find a qualified CPA that will assist you with your Federal and State tax returns. There are many quality CPA’s in Ohio that will be able to do your return. From Cleveland to Cincinnati, if you do proper research you should not have to pay an arm and a leg for a good accountant that will do a great job.

Whole Life Insurance for Retirement

Tax Act

Most people realize that some form of life insurance is almost mandatory these days. Given the costs associated with providing for any family’s needs, the death of one spouse can leave a deficit in the family budget that simply cannot be replaced without life insurance. Whole life is one of the most popular forms of permanent life insurance for precisely that reason: because it offers guaranteed benefits and cash value upon the policyholder’s death. That does not, however, mean that it is wise to just run out and buy the first prepackaged whole life policy that you encounter. There is a right way and a wrong way to buy whole life insurance.

The Wrong Way

Too many people take the simple route to purchasing whole life insurance. They select an arbitrary number – or have an insurance agent select it for them – and settle for a policy that provides that level of coverage to their heirs. This often leads to people being either over-insured or under-insured, and both present difficulties for policyholders and their families. Being over-insured may provide for larger benefits and cash payouts when you die, but such a policy also requires you t pay significantly higher premiums than you otherwise would. Being under-insured may not present you with any immediate difficulties, but it is guaranteed to leave your family without the necessary resources to maintain a consistent lifestyle when you are gone.

Doing it Right

Obviously, purchasing whole life insurance properly entails more study and research than most people assume to be necessary. The first step is to sit down and realistically determine what your family will need when you pass away. Take into account the home mortgage, college for the kids, and any other anticipated large expenses that are likely to occur in the future. Remember, your whole life insurance policy is designed to help the family maintain a certain standard of living if you die.

The next step involves making sure that you insure the most pressing needs first. You can always add to your whole life policy as time passes and new needs arise, so concentrate on those pressing needs now with the recognition that you can modify your coverage when your situation changes. Few of us have all of the resources we would like to have to protect against any possible loss, so always begin by doing what you can do now. Always remember that the best life insurance policy is the one that you can could on no matter what.

Keeping Pace with Life

Your whole life policy should be subject to your personal review on an annual basis, so that you can keep your coverage updated as your life changes. The most important thing that you can do to help you make those updates is to partner with a life insurance company and agent that you trust. Assuming that he or she is competent, the agent will be your best resource in maintaining a whole life policy that continues to meet your needs as the years and decades pass by. Best of all, you can ensure that your policy covers everything that it needs to cover, without being excessive.