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Recent Tax Court decision could wreak ha

Glover v. Comm, a recent tax court decision, presents several issues to Merchant Mariners. Mr. Glover worked for Reinauer Transportation. His tugs pushed oil coastwise as far as Virginia. The tugs wou

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Recent Tax Court decision could wreak havoc on Mariners

State Taxes and Mariners

Suz asked this question So, what about if you live in one state (TN) and work as a merchant mariner in another state (HI), 45 days on/45 days off rotation? Do you pay HI state taxes, or does the payro

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State Taxes and Mariners

Mariner Tax Update January 2011

E-Filing alert! How many times have you read that mariners cannot E-File? How many websites have posted this. Year after year. And then all of a sudden preparers start proclaiming “mariners can

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Mariner Tax Update January 2011

Employee vs. Non-Employee LLC and S-Corp

I’ve been a client of yours for a few years now and I had a general tax question concerning my wife’s job status. She currently works full time for a marketing firm in “Deleted”

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Employee vs. Non-Employee LLC and S-Corp Planning for Mariners and their families

Maritime Tax Preparers and the Alternati

What they don’t want you to know… This video points out the tremendous effect of the AMT on merchant mariners. Seamen taking business deductions and offsets may very well be realizing litt

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Maritime Tax Preparers and the Alternative Minimum Tax

Inherited Assets

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by on January 11, 2011 at 7:19 pm


What are the tax consequences?

My uncle passed away and
left me a $50,000 inheritance. What will I have to claim on my
income taxes this year?

Most likely nothing.
When we inherit assets the tax is generally to the Estate and not
the beneficiary if at all. Although the Estate Tax has phased back
and forth through the years, it is still alive and well within many
states. A $2,000,000 estate may not have a Federal Estate
Tax due for 2010, but Massachusetts will still want a piece.
Massachusetts is one state that still baselines it’s tax with a
unified credit (more…)

Top 20 Silly Tax Deductions

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by on January 6, 2011 at 8:42 pm

Laugh if you like but some were allowed…

  1. Free beer – YES  -  Strange but true. A gas station owner gave his customers free beer in lieu of trading stamps and the Tax Court said yes, this is a legitimate business expense and tax deductible, which makes the next entry even stranger…
  2. Free whisky – NO  -  One gentleman thought a case or two of whisky would make nice client gifts, and thus tried to deduct them on his annual tax return. The category he chose was “meals & entertainment” saying it was for client entertainment. However, not only was it not allowed, it was a gift that violated state laws. Ouch!
  3. Cost of hiring an arsonist – NO  - I suppose hit men are out too? A man with a failing furniture business decided to hire someone to burn it down. The store-owner’s plan was not only to collect the $500,000 insurance money, but also to deduct the $10,000 expenses of hiring the arsonist! He was denied.
  4. Fake Boobs – YES  - This one is infamous. A stripper going by the name of “Chesty Love” used her hard-earned savings to boost the size of her boobs, to the eye-popping size of 56-FF (this is huge by the way and the only time I’ve ever seen boobs this big was on a 6’3″ drag queen in Cleveland and yes, they were actual implants.) She figured it would get her more tips and you guessed it, the write-off was allowed, being considered a stage prop essential to her act. (Imagine the exhibits at that trial)…
  5. Prostitution expenses – NO  - Maybe in Amsterdam or at the Bunny Ranch in Nevada, but you can’t deduct expenses of illegal professions. Trying to deduct 4000 condoms and a case of flavored lube isn’t going to work if you put down “prostitute” as your career. Similarly, drug dealers can’t deduct the cost of baggies or claim the drugs they buy to resell as costs of goods sold.
  6. Cat food – YES  - Junkyard owners set out bowls of pet food nightly to attract wild cats. The wild cats also took care of their nasty snake and rat problem, making the junkyard safer for customers and providing a useful business service. Yep, you guessed it…the pet food is a business expense and was allowed.
  7. Your own racehorse – NO  - I can see how this would be a business expense to some people. But if you just go out and buy your own prize-winning horse, name it after yourself (the ego on some folks) and then take clients out to see your horse run, you cannot deduct this. It’s not a business expense, it’s a personal expense. But hey, if you can afford a racehorse and stables, why are you worried about the deduction in the first place?
  8. A fabulous African Safari – YES  - If the IRS considers a business trip “ordinary and necessary”, you can take it as a deduction. For the owners of a dairy business, this included a wonderful African Safari, because many of the activities on the trip were focused on wild animals.
  9. The costs of moving… the family pet – YES  - Whether you’ve got a Great Dane or a Great White Shark, your pet is considered a personal effect. And that’s great news for you. When it comes to any expenses relating to any kind move associated with a job, Uncle Sam says yes. But I suspect hiring a Hummer Limo to move your gerbil across the state may not be looked upon favorably.
  10. A Trip to Bermuda – YES, YES, YES  - I love this one! ANY business convention held in Bermuda can be written off without even showing there was a special reason to hold your business meeting in paradise. And it’s not the only place. Barbados, Costa Rica, Dominica, the Dominican Republic, Grenada, Guyana, Honduras, Jamaica, Saint Lucia, Trinidad and Tobago, Canada, Mexico and all U.S. possessions also fall into this special tax treatment. But outside the U.S. is a different story.
  11. Body Oil – YES  - If you’re a regular Joe, body oil is a once in a blue-moon splurge. Maybe something to spice up an evening with your partner, but certainly not a write-off. However, if you’re a pro bodybuilder and need gallons of body oil to make your muscles glisten, then it is a genuine tax write-off. I personally have a few celebrity clients  and these clients deduct their makeup, their facials and occasionally, if they can prove its necessary for a movie or other job, even their nose jobs! Models have similar options with their deductions.
  12. A trip to the Super bowl – NO  - I’d like to put this one in the ‘nice try’ category. Someone decided to take clients and their spouses to the Super bowl, but just could not prove that the shindig was in any way related to business. And even if it was, it’s an extravagant expense for a meeting and would have been disallowed anyway. Sorry bud.
  13. A Private Airplane – YES  - A couple with a rental condo didn’t fancy the hassle of driving up to 7 hours to check on it. They didn’t want to be stuck to the schedule of the only daily flight available. So, they did what you or I would do… they bought their own jet! They were allowed to deduct all expenses on the jet relating to the condo, including the high costs of fuel. That must have been some condo!
  14. A Mink Coat – NO  - fur… it’s so tacky these days. One man tried deducting a mink coat claiming that it was a conversation piece when visiting clients with his wife (what was the topic? tackiness?) Fortunately, he was denied.
  15. Babysitting costs – YES  - Believe it or not, you can deduct the cost of a babysitter as a charitable deduction, if the mother of the child is leaving the house to do volunteer work for a charity. Which, of course, we all do on a daily basis.
  16. A ‘Playmate’ Party – YES  - The owner of a nightclub promotions firm decided that a regular party wasn’t good enough for his clients. So, he brought in a bunch of scantily clad “bunnies” as decoration. The tax man said sure, it’s a valid expense. Whether or not pictures of the bunnies were attached to the return is unknown at this time.
  17. A Nuclear Fallout Shelter – NO  - This one bombed (sorry… bad pun). Yep, way back in the days of the cold war and the threat of nuclear meltdown, one clever man built a nuclear fallout shelter on his property and then decided to list it as “preventative medicine.” The IRS gave that one a big thumbs down. Wow, didn’t see that one coming!
  18. A beautiful swimming pool – YES  - This one’s a great example of lateral thinking. After being told by his doctor that he needed to exercise (after developing emphysema), the smart fella put in a swimming pool. The deduction was put down as a necessary MEDICAL EXPENSE and was allowed, along with the various chemicals, heating, cleaning and general upkeep of the pool. Now that’s using your head.
  19. Dancing lessons – NO  - Dancing With The Stars may be popular, but it’s not going down well with the IRS as the subject of a deduction. You CANNOT take dancing as a deduction for medical expenses, and the following reasons are outlawed – dancing to relive varicose veins, dancing to cure arthritis and finally, dancing to alleviate nervous disorders. Try any of these and you’ll be dancing all the way to the tax courts.
  20. Sperm donation as a loss – NO  - Okay, I saved the best (or worst) one for last. It’s one thing to make a little extra cash as a sperm donor. It’s quite another to try and claim a depletion loss on the aforementioned sperm. Hey, I’m just glad I wasn’t the tax preparer who had to deal with this client. It amazes me every year when I hear the crazy ideas clients have regarding their deductions.

Never dismiss a deduction…

Break down the Bush tax cuts

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by on November 9, 2010 at 12:19 am

Will mariners be affected?

Tax Cuts For MarinersMost likely. Let’s examine two important aspects…

Capital Gains/Dividends

Preferable capital gain rates would rise back to 20%. Dividends would be treated as ordinary income. This could mean a 25% swing for some taxpayers.

Tax Brackets

Not only for the wealthy! Even the 10% tax bracket will be raised to 15%.

Marriage Penalty

Back in force. Especially painful will be pretty much 50% cutback on the Alternative Minimum Tax exemption. Individuals with a large amount of State, Real Estate taxes and employee business deductions (aka mariners and tradesmen) will be especially effected.

Easy way to see it

If you paid taxes before – you’ll pay more after. Many individuals do not pay taxes at all. This can be due to a multitude of facts and circumstances. Primarily income.

Hopefully something will be done. A family who was scraping by with the current economy – say 150,000, house, two kids in college (sorry no financial age for you), lot of AMT expenses…. They would be prime candidates. If they had been scraping by, something would have to give to pay the mortgage.