Wednesday, August 27, 2008


One of the most popular tax deductions is the one allowed for donations to charitable organizations—from the local church or synagogue to the Red Cross and various other national organizations. Unfortunately, over the last several decades, this deduction has also been among the most abused. Thus, perhaps it is not surprising that Congress has responded to the problem by regularly enacting more rules around documenting donations.

What we’re left with is a confusing array of rules that you have to comply with in order to claim a deduction, when a few years ago all you really needed in most cases was a cancelled check. A recent court case illustrates how easy it is to run afoul of the documentation requirements.

In the case, the taxpayers did nothing more than donate several thousand dollars to their church during the tax year. Although the donations were made by check, the IRS disallowed all but a few hundred dollars because the taxpayers failed to obtain a timely receipt from their church to support the donations. Such receipt (or receipts) must be received by the time you file your return for the year of the donation (or, if earlier, by when the return is due). In addition, it must list any significant goods or services received in return for the donation (other than intangible religious benefits) or specifically state that the donor received no goods or services from the charity. In the case at hand, the taxpayers waited until their charitable deduction was challenged before trying to get a proper receipt. By then, of course, it was too late.

Why did the IRS only allow a few hundred dollars of the claimed deductions? The requirement to obtain a receipt only applies where a single donation (or a group of related ones) totals $250 or more. Eight of the taxpayers’ donations during the year (totally a little over $400) were for less than this amount. Thus, their cancelled checks were sufficient support for the deduction.

Separate from this court case, the IRS recently released new guidance on substantiating contributions. One area of focus is on the relatively new requirement that when donating cash, taxpayers can only obtain a deduction if they have a proper receipt from the charity. For taxpayers who incur unreimbursed out-of-pocket expenses while performing charitable work, this appeared to create a situation where such taxpayers might loose their deductions for these types of expenses since it is generally not practical to obtain receipts from charities for out-of-pocket expenses they know nothing about. Fortunately, the IRS has indicated they plan to adopt the common sense rule that if the out-of-pocket expenses for a charitable activity or event are less than $250, the donor can document the expenses simply by keeping appropriate purchase receipts or other reasonable written evidence.

This is just a glimpse at the documentation rules for charitable donations. I’d be happy to address any of the requirements for specific types of donations. Please feel free to email me.

Larry Kopsa CPA

Tuesday, August 26, 2008


This year I have been doing a lot of traveling so I have come to appreciate the problems with airline travel. If you are traveling you might be interested in the following.

American Airlines says there is no such thing as a free upgrade –
The airlines are milking this high fuel cost situation for all they can get. A few days ago American Airlines said that you can no longer use your frequent flyer miles alone to upgrade from coach to business or first class. In the future they will require 15,000 miles plus $50 to upgrade on domestic flights and a whopping $700 RT plus upwards of 25,000 miles to upgrade internationally. Looks like there is no free lunch anymore as far as using AA frequent flyer miles to upgrade.

Good news for travelers taking computer laptops -
Business travelers will no longer be required to remove their laptops from their carry-on luggage under new rules announced recently by TSA. Now travelers with laptops will be able to open up their computer case and lay it flat on the X-ray belt. If your bag cannot be opened and laid flat then travelers will still have to remove the computer from the case. This new rule should dramatically speed up security screening time at most U.S. airports.

Here is an easy way to find out how long the security lines are at the airport –
The Transportation Security Administration keeps track of how much time it takes to clear security at all airports in the U.S. For example, if you are departing on Southwest Airlines (concourse B) from the Omaha airport on a Monday morning and arrive between 6am and 7am, you will find an average wait in line of 15 minutes with a maximum wait in line of 21 minutes. This is a great way to find out how early you need to arrive at the airport prior to your flight. Check out their web site at


This has been a busy travel year for me. I estimate that I have logged over 40,000 miles. That is a lot of sitting in airports. I was interested in the new report that just came out from a recent airline industry on the cost per mile.

The airline industry study found that the price of flying this year has increased 7.5% in July compared to one year ago. The average price of 15.7 cents a mile represents the average price paid by flyers for all flights (short and long haul, business and leisure travelers).


It's time to start thinking about taxes again. Attached is an article I wrote earlier this year for Click on this link to view: The 20 Most Overlooked Tax Savings.

Monday, August 25, 2008


Wondering how to grill the perfect burger or how to treat a snakebite? has 7,500 instructional mini-films with answers to nagging questions just like these. This site is fun and informational.

Friday, August 22, 2008


Larry, I hope that you can help me. I divorced a few years ago and although my two children live with their mother, the divorce decree said that I could claim the children every other year. My accountant extended my 2007 return because my ex told me that she and her new husband were going to claim this year. I have a refund coming and don't understand why I just can't file. Alex - Las Vegas

Alex, You might just be out of luck. Unless your ex signs a form 8322, which you attach to your return, by tax law you are not allowed to claim your children. Should you just go ahead and file the return and should your ex claim the children, this most likely would be caught by the IRS and you would receive a notice.

In actuality, by not following the divorce decree, your ex has committed a contract violation. The IRS does not care about that. You could take your ex to court to force her to honor the contract. That may not be a door that you want to open. Plus, you would most likely incur attorney fees.

Larry Kopsa CPA

Thursday, August 21, 2008


The polarization of the income tax burden in the spirit of socking it to the evil rich continues. When more than half of the voting public has been practically removed from the tax paying population, our rulers can continue to take from the evil rich minority with complete freedom.

This chart illustrating the 2005 income tax burden from the Heritage Foundation is very enlightening:

What this means is:

The top 1% of income earners are paying 39.4% of Federal Taxes.

The top 5% of income earners are paying 59.7% of Federal Taxes.

The top 10% of income earners are paying 70.3% of Federal Taxes.

The top 25% of income earners are paying 86% of Federal Taxes.

The top 50% of income earners are paying 96.9% of Federal Taxes.

The bottom 50% of income earners are only paying 3.1% of Federal Taxes.

These quotes come to mind on this aspect of heavily taxing a minority:

Milton Friedman:
"Congress can raise taxes because it can persuade a sizable fraction of the populace that somebody else will pay."

"A government which robs Peter to pay Paul can always depend on the support of Paul."
-- George Bernard Shaw

Vanya Cohen:
When there's a single thief, it's robbery. When there are a thousand thieves, it's taxation.

Wednesday, August 20, 2008


The presidential nominees are busy setting their tax agendas. Check out the following link on our website for a summary of each candidate's tax plan. Tax Plan Summary

"As the candidates change their minds to gather more votes," we will keep you posted.

Larry Kopsa CPA

Monday, August 18, 2008


I had a great time out of the office with my family. Now I'm back and ready to respond to your questions on our blog. If you have questions that you would like to have us address, be sure to forward them to us.

Larry Kopsa CPA

Tuesday, August 5, 2008


Dear Larry,

I read your article in the Salon Resource Connection, Gross Profit isn't really gross! I really enjoyed the article, it contained an abundance of financial knowledge in conjunction with a very hilarious event that I believe, Hits Real Close To Home!

I am confident your article will help me with my business, it gives me the tools to help explain Frivolous Spending in a way that women can relate to, it is kind of a scare tactic once you do the math and I think it was brilliantly explained.
Thank you for the article.

Respectfully, Lillie

Lillie, thank you for your kind note. If there is anything we can do for you let me know. We have a full service CPA firm specializing in salons and spas. We have salon and spa clients nationwide. We not only do financial analysis but also tax and consulting. We have a “Second Opinion” product that is very popular. You send us your last two years financial and tax information and we analyze the information and meet with you to review our results. I will have Amanda send you a flier. But the real reason I am writing is to say how much I appreciate the feedback. It is nice to know that we are in some small way making a difference.

Larry Kopsa CPA

Monday, August 4, 2008


Larry, I recall you said something about health insurance at one of your seminars. I believe you were talking about tax free medical expenses. Would you mind providing me with this information again? Thanks - Anna

Anna, Health insurance has certainly been a hot topic in the national political campaigns. What you're referring to are Health Savings Accounts (HSAs). With an HSA, distributions to pay qualified medical expenses are tax-free.

A tax law enacted a little over a year ago - the Tax Relief and Health Care Act of 2006 - included several improvements for HSAs.

When it works, roll over funds from an IRA to an HSA. The transfer is tax-free. Then you can take tax-free distributions from the HSA to pay for qualified medical expenses. This special tax break (i.e., tax-free distributions to pay medical expenses) is only available to HSA owners. IRA distributions for medical expenses are taxable. But remember this: You can only do this once in your lifetime.

Similar rules apply to rollovers from a flexible spending account (FSA) or health reimbursement arrangement (HRA).

Ordinarily, a distribution from an IRA is subject to tax at ordinary income rates. But the 2006 law allows you to transfer IRA funds to an HSA - just once - completely tax-free. And, the usual 10% penalty on pre-age 59 1/2 withdrawals doesn't apply.

You can't roll over more than the maximum HSA contribution for the year. For 2008, the contribution cap is $2,900 for an individual; $5,800 for family coverage. Anyone over age 55 can put in an extra $900.

Remember: Once the rollover election is made, it's irrevocable. There's no going back.

Check out our website for more information on Health Savings Accounts: - Click on Forms & Publications on the navigation tool bar, and then select Health Savings Accounts.

Larry Kopsa CPA


Once again Congress has made the tax law more complicated. The new Housing and Economic Recovery Act was passed to help those homeowners that were looking at foreclosure. There were some provisions that might impact you. Here are some highlights. Let us know if you have any questions.

On Wednesday, July 30, President Bush signed the "Housing and Economic Recovery Act of 2008." While the bill focuses on protecting lenders and preventing foreclosures, there are three other tax provisions worth noting.

1. The 2008 Housing Act gives “first-time homebuyers” (those who have not owned a primary residence for three years) a tax “credit” equal to 10% of the new home’s purchase price, up to $7,500 ($3,750 for married couples filing separately). This “credit” is available for purchases from April 9, 2008 through June 30, 2009. But, if you take the credit, you have to pay it back, in equal installments, over the next 15 years. So it’s really just an interest-free loan, not a true tax credit. It phases out for incomes between $75,000 and $95,000 ($150,000 and $170,000 for joint filers).

2. The law creates a temporary deduction, for 2008 only, for property taxes for non-itemizers. The deduction is limited to $500 ($1,000 for married couples filing jointly).

3. The law eliminates tax breaks on the sale of your principal residence for periods you don't use it as your principal residence. Under old law, you could take a rental property or vacation home, use it for at least two years as your primary residence (five years if you acquired it in a Section 1031 exchange), then sell it and exclude up to $250,000 of gain from your income ($500,000 for married couples filing jointly). This held true even if most of the gain occurred while you were renting the property or using it as a vacation home. The new law taxes you on any gain after 2008 attributable to periods you don't use it as your primary residence. (There’s no need to appraise the property to determine interim value; the new law determines excluded appreciation on a pro-rata basis, according to how long you own it.)


I just spoke with a new client who is opening up a booth rental salon. Because she will have a booth rental salon she will not collecting any money for the booth renters. Instead, the salon will have one credit card terminal and each stylist will be assigned a number.

If the renter needs to run a credit card through the machine for services, they will type in their number and the money will be deposited into the renter's account and the fees will come out accordingly. None of the money will run through the owner's account.

This might be good information for booth rental salons who run renter's income through their account, and then have to reimburse the renters less the fee. Maybe there are some other industries this would work great for as well.

Larry Kopsa CPA

Saturday, August 2, 2008


Check this out this Neal Boortz video for a glimpse of what might be an accountant's worst nightmare: The Job

Friday, August 1, 2008


(AP) -- U.S. Agriculture Secretary Ed Schafer had a simple explanation Thursday for why the country is so reliant on foreign oil: Congress is nuts. Schafer was at Florida's "Farm to Fuel Summit" to talk about renewable fuels, but criticized Washington for doing little to reduce oil imports, including failing to tap enough of the United State's oil resources.

"The reason we can't get Congress to move on the need to open up the exploration and extraction of energy sources that are in the boundaries of this country is because they're nuts. They don't get it. They're wrapped up in the political structure, they're worried about their re-election," he said, adding that congressmen are also afraid to anger environmentalists.