QUESTION ON FILING TAXES OUTSIDE THE US

Larry,

I hope this finds you well. I have enjoyed reading your messages and am so happy I took your class. Thank you! I have a dilemma that I am looking for some incite or suggestions. My fiance and I just got married this last Friday, for many reasons, one most important is because he got a job in Thailand. We currently have a ceremony arranged for us in Mexico next year which we will still embark upon. The point is that it is almost the end of the year. He leaves at the end of this week and I go in about 5 weeks. The company he will be working for is going to be paying our social security for the U.S. But what should I do to file my taxes and then his for 2008? I will have computer and web access to file if need be. Though still I am worried on what my options are. Any words of wisdom??

Regards,
Natalie

Natalie,

It is so nice to hear from you. I think this is the first email that I’ve ever received from someone who presumably is on their honeymoon. To be married on Friday and to be contacting an accountant on Monday says a lot for your question.

I believe your question is how to go about filing your 2008 tax return? The tax law is quite clear on this. Since you are married, you will either have to file as married filing jointly or married filing separately. Since you will both be out of the United States on the filing date of April 15, you are given some additional time to file your tax return. There are some special rules regarding people working in foreign countries. It is very possible that your husband may qualify for some tax free income and possibly housing allowance.

I hope this answers your questions. If you have any follow up, please feel free to contact me.

It is a pleasure serving you. Best of luck and congratulations!

Larry Kopsa, CPA

QUESTION ON HANDLING TIPS

Larry, I'd like your advice as to whether we're handling our tips the right way. We add 10% to the service charge and then we add that amount, after deductions, to our staff's checks. Is this the right way? William

William, it’s nice to hear from you. You have asked if the way you are handling your tips are correct. I understand that you are adding 10% to the charge as a tip, doing the deductions and putting the amount in the employee’s regular payroll. Although the way you are doing this really appears efficient and most likely would pass IRS muster should they audit you, technically you still need some additional documentation from your stylist.

The law is quite clear in that you do need to receive a Form 4070A the 10th day of the following month from the employees telling how many dollars in tips they received in the prior month. In your case, I think you could just have them report to you the tips they received that were not run through the cash register. If they do report any additional tips, then you would have to withhold based upon this additional amount.

Having the signed 4070A’s even though they put zero amounts, would protect you in case you had an auditor that was really following the law to the “T”. As I mentioned above, I think that what you are doing is probably more than most, but this additional step would help you to solve this problem. For more information on this you might go to: www.irs.gov and in the upper right hand corner, key in Publication 3138, which gives you a general overview. In addition to this there are publications 531 and publication 1244. The publication 1244 is a booklet that gives you the form 4070A that I discussed above.

If you do have any further questions, please feel free to contact me.

It’s a pleasure serving you.

Larry Kopsa CPA

QUESTION ON PARTIES IN THE HOME

Larry, Are parties in the home for my employees (Employee Appreciation events like BBQ's, Christmas Parties, etc.) deductible as entertainment expenses? If so, at what percentage? Should I track these costs under Entertainment Expense or Meals Expense? What about gifts given to employees at something like a Christmas party? Oh, you might need to know that I'm a Sole Proprietor. Thanks! David

David, Okay, here is the deal. Since you are a sole proprietor you need to determine what the fair value of your home is to rent out for one day. You can document this by checking with a hotel or other venue that rents space. You can then have the business write you a check for that amount. This expense will be deductible to the business but, since you are renting out your home for less than 14 days, it is considered deminimus (big word for small) therefore it is not taxable to you. I would always try to be on the high side of reasonable.

Regarding all of the food and beverages, again have the business purchase. Since this is a company wide event, such as a party or picnic, the entire amount is deductible. It is not subject to the 50% limit for meals and entertainment. Enjoy the leftovers.

Finally, document the event with a written list of who is there. Pictures also serve as good documentation.

It is a pleasure serving you.

Larry Kopsa CPA

ITS NOT ONLY THE IRS THAT IS INTERESTED IN WORKER CLASSIFICATION

We have talked to several salons in California that have had the state come in and challenge their worker classification. All of the states are looking under every rock they can to come up with more money. Worker classification is a pretty easy way to put money in the state coffers.

Here is a good article on what happened in California nail salons. If you are using independent contractors, beware.

http://www.sacbee.com/101/story/817979.html

MORE ON FDIC

RUMORS

I recently published a blog entry on FDIC. There are a lot of rumors going around regarding FDIC Protection. Snopes.com addresses some of these rumors in their article: FDIC AND YOU. I thought you might be interested.

BAILOUT PLAN

You may have already seen the We Deserve It Dividend, an article by T.J. Birkenmeier, proposing to give $85,000,000,000 to America, instead of using this money to bail out banks and lending institutions.

A client who sent this link to me was all for voting this guy in as President. I read the article and, being a "math guy", noticed that the decimal was off three digits, which totally blew Birkenmeier's plan out of the water. Snopes.com realized the error as well. Check it out by clicking on the link above.

DEDUCTING MEALS AND ENTERTAINMENT

Meals and entertainment gives us a great opportunity to save taxes but also is an area that we see many mistakes.

The first problem is that many salons do not deduct all of the meals and entertainment that they have coming to them. There are many opportunities that are overlooked. Think about situations with:

• Meals with customers


• Meals with staff


• Meals with stockholders


• Meals with DSC's


• Drinks and expensive meals with your accountant


• Entertainment with any of the above.

The second problem is that many salons deduct meals and entertainment but they don't "audit proof" their deduction with good records. Check out our website for a good summary of the rules: Make the Most of Business Meals/Entertainment. Let me know if you have any questions.

Larry Kopsa CPA

NOAH & THE ARK TODAY

If you ever wondered if Noah could build the Ark today, wonder no longer. Check out the web site below. Unfortunately there is more truth than comedy in this: Noah & The Ark Today.