OT - Know how to prepare your personal income taxes the smart way

Every year people both do their own tax returns or pay companies like H&R block to do it for them. If you're willing to do some homework at your home computer, you can probably do better than H&R block.
Here is the web site for the US Tax Court:
https://www.ustaxcourt.gov/
Note that near the top of the page there's an "Opinions Search" link. When you click on that link, you get a search engine that allows you to type in times and text for the search engine to look for.
For example, I typed **/**/14 in the date range to search all tax court cases in 2014. (The asterisk is a wildcard character that can mean any number or letter, so the computer would search all cases in 2014.)
And I typed in "home office" into the text window so the computer would search for court cases where that character string appears.
And, for 2014, I got 11 hits, including one where a Dellward Jackson owned a motor home and used it to sell insurance policies at RV conventions and RV shows. The RV was therefore a home office, but none of the costs associated with it were deductable because none of it was used EXCLUSIVELY for business purposes. Or at least that's what I understood, not being familiar with American tax law.
Still, by reading the judge's decisions in cases like this, you learn exactly what rules apply to expenses that fall into those grey areas that the black letter of the law had never really anticipated.
If you find only one tax court case that deals with something you wanted to know about, it will be a wealth of information because it will tell you the precedent setting case that established the current interpretation of the law, and you can find that case by searching for it with the search engine so that you can read it and know all the details of that case and why the judge ruled the way he did.
Your IRS will have it's own lawyers, and they will be up to speed with what the IRS consider "allowable" and what the courts have judged to be allowable, and there's often considerable difference between the two. Any tax court judge you stand before will also be up to speed on what the IRS rules are, and what Tax Court Judges have allowed in those precedent setting cases. If you have a tax court case to back up your arguement, you'll win every time because the judges and lawyers know that what the IRS says isn't always what the courts have held to be the proper interpretation of the law.
Also, if you really don't want to go through all this, but you're being audited by the IRS, probably the best thing you can do is co-operate with them, open your books wide open, give them all the actual numbers and pay what they determine you owe. That's because they have enough idiots that burn all their records to make a proper assessment impossible, and so the IRS has to go to court in those cases and that means paying the lawyers salary to put togeter a case against you and present it in court. If you save them that trouble and expense, they'll go easy on you. That's because they KNOW lots of people cheat on their taxes, and they're just doing their job catching them. They want people to just fess up so the machinery operates smoothly as opposed to doing something stupid like burning all your tax records and forcing them to spean a bunch of money on lawyers salaries to prosecute you.
The Tax Court of Canada has a similar web site with a similar searh engine, as does the Appeal Court of Canada and the Supreme Court of Canada, but the Appeal and Supreme courts hear all cases, not just tax related cases.
One good example applies to myself. I once got audited and the CRA agent assessed 75 percent of the fair market rent of the apartment I was living in as a "benefit to me" from my company, and added $600 per month for 12 months to my income. I searched the tax cases and I found a case where a caretaker in Alberta had been assessed only 25% of the fair market value of his apartment because he had to answer phone calls from early in the morning to very late at night and when he was in the bath or on the toilet, had once been assaulted by youths loitering in his building, and used part of his own apartment for storage of his company records and keys. Well, all of those same facts applied to me, and MOST of my apartment was used as company storage space. I presented my case, and the CRA assessed that I was receiving a benefit from my company of 10 percent of the fair market value of the rent on that size of apartment. I went from 75% of $800 per month to 10% by just referring to that one court case, and showing how my situation was even worse than that of the caretaker in Alberta.
PS: If you get audited in Canada, they audit you for 3 years. If you don't fess up and decide to give them false records for those three years instead, they'll go back another 3 years. Potentially they can go back forever, but generally they'll stop at 6 years no matter what you do. If you get audited, and pay what you owe, that's the end of it. You are no more likely to be audited again than anyone else in the general population. It's not like they pay any MORE attention to the tax returns of people who've been caught cheating in the past. There's just too many of those people to do that. And, it wouldn't be fair. The IRS or CRA could keep just as busy auditing the same people every over and over, and that would be unfair to those people. So, they audit you for 3 years, you pay them for three years, and you both walk away forgetting about those 3 years. The next tax return you submit is no more likely to be audited than anyone else's. I expect the rules in the USA would be similar to that in Canada but I don't know for sure. If you read some tax cases, you're bound to come across people that "made up" their tax returns with numbers they pulled out of their A$$, and you can just read about what happened to them. Also, it's considered poor form to phone any of the people who's tax cases you read to ask them questions. The tax cases will give you a guys name, where he lives and all that stuff, and you can get his phone number from the phone company of the city he lives in, but it's scary if you phone him because he's gonna be paranoid. Regardless of what you say, he's going to think you're the IRS trying to check up on him. So don't do that unless it's something that's not going to make him paranoid.
--
nestork


Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
nestork wrote:

Hi, I have our own lawyer/CA/Bank manager. They do that kinda things for us. If some thing goes wrong they better fess up. About 10 years ago, RCA did our GST reassessment. A guy from RCA came to our office in our home ofice for good 10 days, went thru whatever they want and found nothing wrong except they owe us about 6 grand. I still carry forward that money as preinstalled payment reserve. That was the only thing RCA bothered us.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
nestork wrote:

Doubtful. A couple of years I got a letter from the IRS telling me I'd missed some deduction or credit and they were sending me a couple of hundred bucks back. I'm a little cavalier with the tax forms.
This does worry me a little. I'm not the sharpest knife in the drawer but I am a programmer and paw through mountains of obscure documentation to create working code. I'm very familiar with if ... then ... else, and even computed gotos. If I can't make it through the 'simplified' 1040 instructions without missing some obscure little detour on line 53a I wonder about Joe Sixpack with the 7th grade level of reading comprehension.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On 08/22/14 12:39 am, rbowman wrote:

A couple of years back I heard a radio interview with an economics professor about the tax code. He said it was far too complicated for him, and he let his wife fill out the forms.
Perce
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
Percival P. Cassidy wrote:

I did that -- once. She was an intelligent woman with advanced degrees but if I hadn't checked her work we would have been on the IRS's speed dial for years. She missed the part of deductions that say you can take 2.31% of line 37b unless line 56c is greated than line 14e, see worksheet on page 312 and deducted the whole enchilada.
Even their damn worksheets are designed by someone with a Machiavellian sense of humor.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

http://www.neatorama.com/2011/09/18/the-quadratic-formula-as-a-tax-form /#!bH7Xvp
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
I do my own taxes and don't find it requires more than reading the directions carefully. (The home office deduction, for instance, has always been very clearly defined.) But my taxes are fairly simple. I don't have complex deductions.
For anyone with complex deductions it's my impression that an accountant can save money. They can cheat semi-legally and are unlikely to be audited. For instance, I used to have a friend who deducted laundry costs for his work clothes. The law clearly states that only paid uniform service is deductible. One can't just write off laundry soap or other costs of doing one's own laundry, yet he claimed the deduction. That friend had an accountant. :)
| | Every year people both do their own tax returns or pay companies like | H&R block to do it for them. If you're willing to do some homework at | your home computer, you can probably do better than H&R block. | | Here is the web site for the US Tax Court: | | https://www.ustaxcourt.gov/ | | Note that near the top of the page there's an "Opinions Search" link. | When you click on that link, you get a search engine that allows you to | type in times and text for the search engine to look for. | | For example, I typed **/**/14 in the date range to search all tax court | cases in 2014. (The asterisk is a wildcard character that can mean any | number or letter, so the computer would search all cases in 2014.) | | And I typed in "home office" into the text window so the computer would | search for court cases where that character string appears. | | And, for 2014, I got 11 hits, including one where a Dellward Jackson | owned a motor home and used it to sell insurance policies at RV | conventions and RV shows. The RV was therefore a home office, but none | of the costs associated with it were deductable because none of it was | used EXCLUSIVELY for business purposes. Or at least that's what I | understood, not being familiar with American tax law. | | Still, by reading the judge's decisions in cases like this, you learn | exactly what rules apply to expenses that fall into those grey areas | that the black letter of the law had never really anticipated. | | If you find only one tax court case that deals with something you wanted | to know about, it will be a wealth of information because it will tell | you the precedent setting case that established the current | interpretation of the law, and you can find that case by searching for | it with the search engine so that you can read it and know all the | details of that case and why the judge ruled the way he did. | | Your IRS will have it's own lawyers, and they will be up to speed with | what the IRS consider "allowable" and what the courts have judged to be | allowable, and there's often considerable difference between the two. | Any tax court judge you stand before will also be up to speed on what | the IRS rules are, and what Tax Court Judges have allowed in those | precedent setting cases. If you have a tax court case to back up your | arguement, you'll win every time because the judges and lawyers know | that what the IRS says isn't always what the courts have held to be the | proper interpretation of the law. | | Also, if you really don't want to go through all this, but you're being | audited by the IRS, probably the best thing you can do is co-operate | with them, open your books wide open, give them all the actual numbers | and pay what they determine you owe. That's because they have enough | idiots that burn all their records to make a proper assessment | impossible, and so the IRS has to go to court in those cases and that | means paying the lawyers salary to put togeter a case against you and | present it in court. If you save them that trouble and expense, they'll | go easy on you. That's because they KNOW lots of people cheat on their | taxes, and they're just doing their job catching them. They want people | to just fess up so the machinery operates smoothly as opposed to doing | something stupid like burning all your tax records and forcing them to | spean a bunch of money on lawyers salaries to prosecute you. | | The Tax Court of Canada has a similar web site with a similar searh | engine, as does the Appeal Court of Canada and the Supreme Court of | Canada, but the Appeal and Supreme courts hear all cases, not just tax | related cases. | | One good example applies to myself. I once got audited and the CRA | agent assessed 75 percent of the fair market rent of the apartment I was | living in as a "benefit to me" from my company, and added $600 per month | for 12 months to my income. I searched the tax cases and I found a case | where a caretaker in Alberta had been assessed only 25% of the fair | market value of his apartment because he had to answer phone calls from | early in the morning to very late at night and when he was in the bath | or on the toilet, had once been assaulted by youths loitering in his | building, and used part of his own apartment for storage of his company | records and keys. Well, all of those same facts applied to me, and MOST | of my apartment was used as company storage space. I presented my case, | and the CRA assessed that I was receiving a benefit from my company of | 10 percent of the fair market value of the rent on that size of | apartment. I went from 75% of $800 per month to 10% by just referring | to that one court case, and showing how my situation was even worse than | that of the caretaker in Alberta. | | PS: If you get audited in Canada, they audit you for 3 years. If you | don't fess up and decide to give them false records for those three | years instead, they'll go back another 3 years. Potentially they can go | back forever, but generally they'll stop at 6 years no matter what you | do. If you get audited, and pay what you owe, that's the end of it. | You are no more likely to be audited again than anyone else in the | general population. It's not like they pay any MORE attention to the | tax returns of people who've been caught cheating in the past. There's | just too many of those people to do that. And, it wouldn't be fair. | The IRS or CRA could keep just as busy auditing the same people every | over and over, and that would be unfair to those people. So, they audit | you for 3 years, you pay them for three years, and you both walk away | forgetting about those 3 years. The next tax return you submit is no | more likely to be audited than anyone else's. I expect the rules in the | USA would be similar to that in Canada but I don't know for sure. If | you read some tax cases, you're bound to come across people that "made | up" their tax returns with numbers they pulled out of their A$$, and you | can just read about what happened to them. Also, it's considered poor | form to phone any of the people who's tax cases you read to ask them | questions. The tax cases will give you a guys name, where he lives and | all that stuff, and you can get his phone number from the phone company | of the city he lives in, but it's scary if you phone him because he's | gonna be paranoid. Regardless of what you say, he's going to think | you're the IRS trying to check up on him. So don't do that unless it's | something that's not going to make him paranoid. | | | | | -- | nestork
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

HomeOwnersHub.com is a website for homeowners and building and maintenance pros. It is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.