Monday, October 31, 2011


IRS pulls ruling that OK'd employer-provided clothing as exempt de minimis fringe

As I am sure you are aware, work clothes are not deductible unless it is a uniform. Furthermore, clothes that are suitable for wear on the street are not deductible. Therefore, for example, even though you are required to wear black at work, since the clothes are acceptable in public they are not deductible.

Earlier this year, I thought maybe the IRS was going to give us a break. They ruled that a city could provide one set of clothes for their street workers. Their rational was that this was a "de minimus" fringe. What that means in general is that the cost was minimal and therefore the cost to track would not be worth the effort. An example of de minimus would be coffee and rolls that you provide for staff.

I thought that if this works for city why it wouldn’t work for salons and spas.

Bad news- the IRS changed their mind.

Without much by way of explanation, IRS has revoked the earlier ruling which allowed employees to exclude the value of employer-provided clothing and related accessories from their taxable income as a de minimis fringe benefit.

So if you heard from me or others that you might have a new deduction the IRS has pulled it back.


Here is how stupid taxes can be. It is estimated that more 750 million pumpkins are carved into jack o' lanterns each October. While the practice brings joy to many, it created heartburn for Iowa tax officials four years ago, who were dismayed that so many people were decorating their pumpkins.

You see, Iowa (like most states) taxes retail sales but exempts groceries. Pumpkins used for decoration should have been taxed but were slipping by because they were also food. So they spent taxpayer’s money sending out a bulletin to retailers reminding them to quiz customers on whether they were buying the pumpkin to eat (not taxable) or decorate (taxable):

Pumpkins: Pies and jack-o'-lanterns
The Department recently refined its position on whether pumpkins are subject to Iowa sales tax to more closely match what we believe to be their predominant use.

In the past, pumpkins were exempt from sales tax as a food (edible squash), even if they were to be later made into jack-o'-lanterns or used as decorations.

Our position now is that pumpkins are taxable if:
1. They are advertised to be used as jack-o'-lanterns/decorations, or
2. It is understood that they will be used as jack-o'-lanterns/decorations

Pumpkins are exempt in the following circumstances:
* The buyer completes a sales tax exemption certificate stating they will be used as food, or
* The pumpkins are a specific variety used to make pumpkin pies and are advertised in that way, or
* They are purchased with Food Stamps.

Retailers who sell pumpkins should keep these guidelines in mind and make any necessary changes to their tax treatment of pumpkin sales.
Fortunately this got picked up by the media and then the blogosphere,, which led to local news coverage, and finally Iowa officials rescinded the pumpkin tax a few days later. One less silly tax.

Friday, October 28, 2011


In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Edmund O'Brien plays accountant Frank Bigelow in the fast-paced 1950 film noir crime drama "D.O.A." The movie opens with Bigelow entering a police station to report his own homicide and then in flashback traces how he came to learn that he had been poisoned by a former client who needed him to notarize an incriminating document. The movie was later remade in 1988 with Dennis Quaid playing O'Brien's role, but in the remake Quaid is a college professor. O'Brien is shown here with Laurette Luez, who plays his client's mistress Marla Rakubian.

Thursday, October 27, 2011


From The Economist: BEHIND curlicues of cigarette smoke and with the gentle tones of wartime tunes wafting from a tape deck, Alf Biber is back on his feet after the looting of his dinky Tottenham barbershop (above). His eyes twinkle as he praises the properties of witch-hazel and displays a set of antique razors. In his youth Mr Biber could trim up to 80 heads a day; aged 89, he now keeps busy with 20 a week.

Mr Biber’s craft is enjoying a British renaissance. About 10% of the nation’s 35,000-odd hair salons are now barbers; a new association sprang up last year to help them. The number of listed barbers has more than doubled since 2001, with a 32% increase in the past three years alone. Insiders say cheap and burly shearers did well in the recession, as cash-strapped customers cut back on frippery. The no-nonsense Turkish barbers who have popped up in North London point to the profession’s popularity among migrants. (In Britain, unlike in America and much of Europe, barbers do not need a licence.)

The fancy end of the trade is blossoming, too. Josh Gibson, principal of a Vidal Sassoon hairdressing academy in London, says his barbering course is the fastest growing of those on offer. L’Oréal, a big French beauty company, reckons the British market for men’s grooming gear is growing twice as fast as that for women’s. At Taylor of Old Bond Street, a swanky London barber and boutique, sales to other British retailers were up by 72% last year. It offers fragrant salves sporting names such as “Bay Rum”, and swish shaving brushes with bristles of Chinese badger fur.

What lies behind this growth? Caroline Cox, a fashion historian and consultant, puts it down to a return to old-fashioned masculinity in response to economic uncertainty. “If we worry about the future, we take refuge in the past,” she says. If men are indeed trying to regain the quintessence of their sex, then barbershops fit the bill. “It’s a bit of a club atmosphere in here,” says Barry Klein, director of the Taylor boutique.

Barbers have come a long way since the days when they pulled teeth and therapeutically bled their clients—a practice thought to explain the traditional red-and-white striped pole, a reference to bloodied bandages. Barbering bigwigs worry that the lack of compulsory licensing in Britain keeps standards down and gives the craft a bad name. But the broader appetite for government regulation is at a low ebb, and the reputation of barbers seems to be doing fine it in its absence. No need to get in a lather, then.

Wednesday, October 26, 2011


Social Security wage base increases to $110,100 for 2012

For those of you that are budgeting, the IRS has released the new base for Social Security tax. If you are at max this will mean an additional $205 tax ($3,300 x .062). For self employed double that.

The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2012 increases to $110,100 from $106,800, which was the wage base for 2009 through 2011. The $3,300 increase, which is about 3%, is due to an increase in average total wages.

Tuesday, October 25, 2011


We all know that Steven Tyler of Aerosmith and American Idol started the “feather” trend that helped salons increase their bottom lines this last summer. Well now he has taken a fall and injured his face (I kind of wonder how you can tell). Anyway since he was the trend setter of the year consider gearing up your salon to create the “Steven Tyler Look.” If this catches on like his feathers you can be way ahead of the competition.


Don't ask me why but I like to study philosophy. Recently I was reading the debate about the purpose of jail. There are a bunch of different philosophies about why jailing a person is supposed to be a good idea though admittedly no consensus. Is it punishment for wrongs? A mechanism to isolate “bad” people? A way to get those who did something wrong to think about what they have done? Some combination of the above?

I’m not sure what I think the real purpose of jail is but I’m pretty sure it’s not supposed to be a forum for committing more crimes. And yet, that’s what’s allegedly happening in jails across the country.

CNN recently reported that an investigation into a scheme into a Key West, Florida has found attempts to cheat the government out of more than $1 million – on your dime. Investigators believe that inmates have been filing false tax forms using bogus Social Security numbers and made up businesses in order to collect refund checks. Instructions explaining how to fill out the forms together with cheat sheets – as well as how to keep refund request relatively low (under $5,000) – were circulated among the prisoners in a far-reaching scheme.

Most commonly, prisoners would fill out a form 4852, a form that you use to report wages when your form W-2 is missing. When the forms, along with tax returns were processed, the prisoners received bogus refunds. The refunds were mailed to family members and sometimes, even directly to the prison. At the prison, the refunds were divided among ringleaders (who kept a portion for themselves) and participants in the scheme. Genius, right?

It may not be as genius as it sounds. The scheme is actually nothing new: it’s been happening for years. The IRS has been notified and across the country, charges have been filed and ringleaders prosecuted. However, officials familiar with these cases say that the fraud is ongoing. At Key West, for example, the prison has been intercepting bogus checks still being issued by the IRS for at least one prisoner.

The IRS, for its part, says that it is aware of what’s happening. They note that it is difficult to attack the problem since being in prison doesn’t bar taxpayers from receiving a genuine refund. Even more challenging? The population of prisons is constantly changing which means that patterns may be difficult to spot.

The issue has been on the radar for years. Five years ago, the IRS flagged false refunds from prisoners as a top concern noting that of 118,000 fraudulent tax returns filed, 18,000 were filed by prisoners – that’s a whopping 15%. Prisoners received more than $14 million in bogus claims, though the IRS points out that they successfully blocked an additional $53 million.

The IRS won’t say what steps they are taking to control the number of bogus claims filed by prisoners but they do know who is to blame: you. Reportedly IRS’ position is to issue refunds and then audit later in response to a bigger problem: taxpayers want their refunds quickly. Increased scrutiny of returns at the processing level (while clearly more efficient) would slow down the refund process. And that wouldn’t be popular for taxpayers who want to see refunds.

Saturday, October 22, 2011


Willa vs Wella: start-up wins out-of-court settlement against P&G

Procter & Gamble were all set to take a Connecticut housewife to court over her use of the name Willa for a range of pre-teen skin care products, claiming it sounded too much like its brand Wella. However, the housewife is victorious following an out-of-court settlement. Earlier this year Christy Prunier received a cease and desist letter from P&G, which claimed that the product branding, packaging and name were too similar to a range of products being marketed under its Wella hair care range. P&G lawyers claimed that the similarities would lead to confusion amongst its established customer base for the brand because of the the two ranges could be mistaken for one another on retail shelves.

Product range named after 11-year old daughter.

Prunier had spent three years developing the product, which was named after her own 11-year old daughter, and had obtained trademark approval from the US government at the beginning of the year, allowing her to put the complete range to market. However, in a classic David and Goliath story line, the roll-out of the natural-based product line, which includes skin care products and a lip balm, was stalled as the two companies readied for battle. The two were due to face one another in court in Manhattan, New York City last week, but as the media attention gathered, in turn drumming up a clear sympathy for the ‘little guy’, P&G chose to settle out of court.

Friday, October 21, 2011


In 1969 20% of US Taxpayers Paid Zero or Negative Tax

In 2009 42%

Now 51%

(Tax Foundation) -- The Tax Foundation's Tax Policy Blog reports that from 1969 to 2009, U.S. taxpayers who have a zero or negative tax liability grew from less than 20% of all filers to 42%, according to the IRS. Congress' Joint Committee on Taxation has "found that 51% of American households paid no income taxes." For millions of these non-payers, "the refundable credits more than exceed their payroll tax contributions." The blog also notes that since 2003, the top 1% of taxpayers' share of the tax burden "has well exceeded that of the bottom 90%, even during the recent recession."

Wednesday, October 19, 2011


It’s technologies fault that we have so much unemployment

A couple of years ago, I was making a presentation to a group of about 250 CPA’s, Certified Public Accountants. Before the talk I was back stage with one of the other presenters. This guy was from one of the big CPA firms and had just returned from working in Europe for one of his tax clients.

During my conversation I asked him about technology in Europe. In his words, “Europe has not embraced technology because it doesn’t do them any good.” It seems that In Europe you can’t lay anybody off so there is no incentive to use computers when they still need to have the people there. I was thinking about that conversation recently as I watched six or seven workers outside my office window tearing up a street and laying new cement. There weren’t many workers walking around with shovels, they were utilizing big machines and technology to build the new road. Anything that needed to be moved was done with a backhoe or a frontend loader. I don’t think I ever saw over ten workers and that was when they were pouring cement. So even “shovel ready” jobs are not going to create a lot of jobs unless they mandate that everything be done by hand.

Actually President Obama was right when he said that ATM’s were part of the employment problem. You don’t need tellers if people are using ATM’s.

Recently I read in Reuters that since 1999 business investment in equipment and software has surged 33% while the total number of people employed by private firms (not the government) has changed very little. The gap between man and machine widened even further in 2008 and 2009 during the recession. You can see why the United States is struggling to bring down employment which is stuck at 9%. I know my clients that went through the 2008 and 2009 recession have not significantly increased their number of employees because they are able to get by with the people they have.

Here is a personal example: I know that in our small accounting office we have 20 to 25 people employed depending on the time of year. I estimate that if we did not have computers and software and two or three monitors on everybody’s desk and internet access, etc. we would need fifty to seventy-five people to do the same amount of work we are doing right now. We used to have one person who worked part-time, just updating our paper tax library. Right now our tax library is out on the cloud and we don’t need that person working part-time. The same is true with our mail room and our filing. Everything is electronically filed.

I guess this is progress and we have to wait for the workforce to get caught up to the progress. I think we can see that it’s more than just the economy that is causing the problem with unemployment.


In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Charles Martin Smith (far right) played accountant Oscar Wallace in the 1987 movie version of "The Untouchables," a popular TV series that ran from 1959-1963. Wallace joins a team organized by Treasury agent Elliot Ness, played by Kevin Costner, to break up Al Capone's mob in Prohibition-era Chicago. They finally put Capone behind bars for tax evasion. Capone was played by Robert De Niro. Other members of Ness's Untouchables included Sean Connery and Andy Garcia. Wallace was based on a real-life accountant named Frank J. Wilson who joined the Treasury Department's Intelligence Unit in 1920 and later helped nab Lindbergh baby kidnapper Bruno Hauptmann by insisting that the serial numbers on the ransom money be properly recorded. Wilson later became chief of the Secret Service.

Tuesday, October 18, 2011


As you may know from reading my blogs, I am a avid reader of Reader's Digest.

In their November magazine, Michelle Crouch wrote about 13 Things Your Podiatrist Won't Tell You -- "what does that have to do with me?" is what you are asking, 2 of the 13 involve salons.

#3: Infections from nail salons keep us in business. If you want a pedicure, book the first appointment of the day, when the equipment is cleaner. Those footbaths can be especially germy. Even if the technicians spray the basin between customers, many of the tubs have drains and filters that don't get cleaned.

#10: I don't have a problem with people getting pedicures, but please don't shave right before you go. You might be embarrassed by your stubble, but it will be worse when bacteria and fungus enter the microscopic nicks on your ankle and give you an infection.

Remember that your clients read these articles too.

Monday, October 17, 2011

Raffle Winner

Q. We were at a local fundraising event and won a raffle. The prize was a trip to Vail, CO. including airfare and lodging for seven nights. The value is estimated at $12,000 to $18,000. Is the prize taxable?

A. You win... and of course the IRS wins. This is taxable and you most likely be receiving a 1099 for this. If the trip is valued at $12,000 at a 40% tax rate, you will be paying about $4,800 in income taxes on your 2011 tax return for this.

Enjoy the trip.

Friday, October 14, 2011


Maybe this is too political but.... this past summer I read Atlas Shrugged by Ayn Rand. The book explores a dystopian US where leading innovators refuse to to be exploited by society. The protagonist sees society collapse around her as the government asserts control over all industry while the most productive citizens progressively disappear.

As I watch the protests on Wall Street and the ones spreading across the country, I thought of this book and the following statements. If anybody that reads this understands what the protesters are trying to get across would you please email me so that maybe I can understand.

Here are the concepts that I pulled out of my quotes bag.

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it.

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Thursday, October 13, 2011


The Internal Revenue Service has some important information to share with individuals who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten tips from the IRS to keep in mind when selling your home.

1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
6. You cannot deduct a loss from the sale of your main home.
7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
9. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.
10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.


In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Will Ferrell plays lonely IRS agent Harold Crick in the 2006 comedy-drama "Stranger Than Fiction." Harold has been assigned to audit Maggie Gyllenhaal, and falls in love with her. However, he keeps hearing a strange British-sounding voice in his head, and he discovers it's author Emma Thompson, whom he tracks down through her tax records. Turns out she has been writing about his life and trying to decide how he will die in her next book.

Wednesday, October 12, 2011


Ken Cassidy passes away at age 69.

I found out a few hours ago that my good friend Ken Cassidy passed away. Ken had been struggling with some lung issues for the few years. I saw him last in June 18 at the Energizing Summit. He told me he had to use a respirator from time to time but he never let on that it was serious. I will get into his importance to the industry in a bit but before I do that I have to tell you a little bit more about the man.

I will never forget the first time I met Ken. In November 2001, right after the 9/11 tragedy I was speaking at the first Suzie Fields, Your Beauty Network Symposium in San Diego. My program ended right before lunch. They served a box lunch for everyone. By the time I got off the stage and finished answering questions the lunch was over. As I walked over to a booth that they had set up for me over wakes a guy I didn't know and said, "I figured you were going to miss lunch so I saved half my lunch for you."

That was the type of guy Ken was. Over the years he was always trying to advance the industry. He was the guru on booth rental and if clients were trying to get their business cleaned up I would send them to Ken. He had all the contracts and agreements to help.

Several times Ken and I would be speaking at the same conference so I got to know him quite well. He was always introduced me to people in the industry. He had quite a network.

After the Energizing Summit in Los Angeles, we had dinner together. We talked about his son and his investment property but mostly we talked about the salon business. He had such passion about the industry and so much passion about life and helping others. I will miss him, but I can tell you this, I will never forget that guy with the long hair making sure that I had lunch and the impression it had on me. He made a difference because over the last 10 years I have looked for opportunities to help just like Ken.

Tuesday, October 11, 2011


The American Jobs Act introduced in the Senate last week (commonly known as the Millionaire Surtax Bill) contains some tax breaks for businesses. Since the chance of this passing is fairly slim, rather than confuse you with the details we will keep an eye on the legislation and let you know what to expect if passed. I really don’t think it would be wise to use the proposal in our yearend tax planning. However, if you would like some of the details that I think impact business let me know and I will summarize for you.

Saturday, October 8, 2011


IRS Announces New Voluntary Worker Classification settlement Program (VCSP)

The Internal Revenue Service announced a new program that will enable some employers to resolve worker classification issues by voluntarily reclassifying their workers. This new program will allow employers to resolve worker classification disputes by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit. Full details, including FAQs, are available on the Employment Tax pages of, and in Announcement 2011-64.

Under the program, eligible employers can obtain relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to businesses, tax-exempt organizations and government entities that are uncertain whether to treat their workers or a class or group of workers as employees or independent contractors, and now want to correctly treat these workers as employees.

To be eligible, an applicant must:
• Consistently have treated the workers in the past as nonemployees;
• Have filed all required Forms 1099 for the workers for the previous three years; and
• Not be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers.

Interested employers can apply for the program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.

Employers accepted into the program will pay an amount effectively equaling just over 1 percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.

Friday, October 7, 2011


Here is an article from the Tax Foundation. They are trying to figure where the Oracle of Omaha get’s his numbers. LRK

Warren Buffett's much-discussed op-ed arguing that high-income earners aren't paying enough taxes makes the following claim:

"Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent."

To me, the effective rates he claims for other workers in his office seem too high to be realistic, and I can't figure out how he calculated them, even if you include all payroll (employee and employer) taxes. Even if you assume the scenario that leads to the highest possible tax burden (single filer, no deductions), a taxpayer would have to make at least $285,388 (in 2010) before his or her effective rate reaches 33 percent. 41 percent is impossible, as far as I can tell: the limit of total taxes over total income, as income approaches infinity, is 37.358%. That's the highest possible effective rate anyone could have paid in 2010, if you include income and all payroll taxes.

To demonstrate this, I've made a little calculator which shows the maximum possible effective rate for any income amount. Try it out on the Tax Foundation website.

Thursday, October 6, 2011


In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Kirstie Alley stars as New York accountant Mollie Jensen in the 1989 romantic comedy "Look Who's Talking." She meets cab driver John Travolta when she needs to get to the hospital in a hurry because she's about to have a baby. Travolta helps her bring up the baby, but the real father is her tax client George Segal. The baby's voice also sounds strangely like Bruce Willis. Alley reprised the part of Mollie in the 1990 sequel "Look Who's Talking Too," in which Roseanne Barr joined Willis in providing the voice of another of Mollie's kids. The 1993 threequel "Look Who's Talking Now" added the voices of Diane Keaton and Danny DeVito, but this time as Mollie's dogs.

Wednesday, October 5, 2011


Q. We found out that one of our office workers stole about $500 from petty cash. Can we deduct the loss?

A: Yes. As with personal theft loss, the amount of the loss is generally treated as a deductible casualty and theft loss, reduced by the amount of any insurance reimbursements. But you could run into a problem if the IRS ever challenges your claim. Keep copies of police reports and other supporting documentation.

Monday, October 3, 2011


(As reported by Cosmetics Design)

Cosmetics giant L’Oreal has categorically denied that any alterations were made to an advert featuring actress, Freida Pinto, amid allegations that the appearance of her skin has been ‘lightened’.

Fueled by speculation from online publications, national newspapers and online communities such as Facebook, L’Oreal came under fire after many accused it of lightening the appearance of Pinto’s skin in the new advert for its L’Oreal Paris Colors Take Flight make up range.

However, according to a company statement, a L’Oreal spokesperson said: “Freida Pinto has been a spokesperson for the L’Oreal Paris brand since 2009. We highly value our relationship with Ms. Pinto.”

‘Categorically untrue’
“It is categorically untrue that L’Oreal Pairs altered Ms. Pinto’s features or skin-tone in the campaign for Project Runway “Colors Take Flight” limited-edition collection.”

There are many possible explanations for the appearance of the image, such as the lighting, or perhaps a photoshop blunder, but despite L’Oreal’s statement many online discussion boards have been filled with consumers questioning the advertisements, with many articles doing the rounds on Facebook.

It is not the first time L’Oreal has come under this kind of scrutiny following accusations they had done the same to an image of Pinto when she signed for the brand as an ambassador back in 2009.

A history of allegations
However, these allegations were proved wrong when it revealed that the image in question at that time came from Pinto’s representatives not the skin care brand, exonerating it of any wrongdoing.

The same questions were also aimed at L’Oreal regarding a 2008 advert for its Feria hair color product in which it was accused of lightening the skin tone of US singer Beyonce Knowles; an allegation that was once again categorically denied.

Earlier this year, L’Oreal did however admit to retouching and digitally enhancing images of Julia Roberts and Christy Turlington for the Lancome and Maybelline brand adverts, which were ultimately removed and banned in the UK.

Saturday, October 1, 2011


Q. I had a friend of the family who does tax returns file my 2010 return. My dear husband passed away in 2009. Tony, the guy that did my return, filed me as a widow. I thought that was correct. We were married for 55 wonderful years so I thought I was a widow. I was at coffee with the girls the other day and Mable one of my friends whose husband passed away at the same time said that she was told that she was not a widow and she had to file as single. I have not been able to sleep worrying about the IRS coming to get me. Who is right.

A. First of all Olive don’t worry too much. My best guess is that you are going to owe some money to the IRS and to the state but they are not going to throw you into jail or get audited. This is a good example of why someone should use a “qualified tax professional.” The key to this is that although you are a widow the actual IRS wording is “qualified widow or widower.” In order to meet that definition you must have a child that lives with you. In addition the qualification is only for two years after the death of the spouse. For the 2010 returns this would mean that the spouse died is 2008 or 2009 and you had a child living with you during those two years.

What should you do? I would recommend that you hire a qualified professional to amend your 2010 federal and, don’t forget your state return. I would also ask them to look at your 2009 return. Even though your husband died in 2009 you can still file a joint return. Make sure that a joint return was filed.

It is a pleasure serving you.


Thank you so much. I am now sleeping better. How much would you charge to fix my problem?

I would be happy to help. Amending your federal and state returns would cost $225. This includes looking at your 2008 and 2009 returns to see if there are any other errors.

Let me know.