Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
In 2010 I won an all expense paid trip as a prize for winning a contest. The company immediately asked for my social security number for the purposes of taxes. I expected I would be responsible for taxes on the value of the trip (I think it was $1,800.00.) In February of this year I contacted the company to see if they were sending me a 1099-Misc so I could file my taxes. They said they were going to send the form by the end of February, but I never received the forms. I needed my tax return funds, so I went ahead and filed my taxes without their information. If they claimed my trip on their taxes for 2010, is it likely that the IRS will see that I didn’t claim the trip and come after me tacking on interest?
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Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:

I have been audited for medical expenses for 2008 (my husband became very ill) and have close to 300 individual expenses. If I copy every bill, check, explanation of benefits from the insurance company, flexible spending account reimbursement, credit card bill, prescription receipt, etc., I will be paying for and sending a 12 x 12 box. Will the IRS take scanned documents on CD or do you have another idea? Also, can I write off the time, postage, printer ink and paper to do this?
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Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
If you’re late filing your taxes and the government owes you a refund, are you penalized?

Answer:
You will not be charged if the IRS owes you a refund. They can assess a failure to file, or assess tax based on the information they receive (which is all income from reportable sources & limited deduction info) so the result will be a tax due.

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Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
Do I have to pay taxes on an item sent by a company to review?

Answer:
As far as products for review, the IRS requires you report the fair market value of the item. That being said, I would take one of the 2 aggressive positions:

1. A “de minimis” fringe benefit of the business (not feasible to track & report)

or

2. a barter transaction and your cost to review the item would be equal to the fair market value of the item so the net income would be 0. Unless the company providing the product issued a 1099-MISC for the fair market value of the product (and I don’t believe they ever will).

In my opinion filing a “de minimis” would be opening up a whole can of worms so I don’t think I would even report it.

*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
What expenses can you not claim on your taxes?

Answer:
The items not deductible are expenses that would not be used to generate a profit. One example would be groceries. You could not deduct groceries from a shopping trip that you used to post on your website. The groceries are a necessary item needed to sustain life, not make a profit. Commuting mileage cannot be deducted, only the mileage to and from couponing class held outside of your home/office. Personal expenses and profit distributions are not deductble. This question is better answered by including what is deductible…epenses directly related to the generation of profit, that are not necessary living expenses

*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

Photo credit: austinpost.org

Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
I read on Yahoo today that Social Security Tax is being raised. The article said that in 2012 the rate will go up to 12.4%, meaning 12.4% of a self employeed person’s income goes straight to Social Security Tax. Is this true?

Answer:
Social Security tax has always been 12.4% except this past year because in 2011 the government gave a reprieve making the tax only 10.4%. Starting next year it will go back to 12.4% as its always been. However tax laws change a hundred times in the tax year so it could be less or more by the time tax season rolls around again. On another note, don’t forget Medicare will still be applied, so really self employed individuals will pay 15.3% (as its always been).

*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org