Tuesday, January 17, 2012

Military Spouses Who Work in SC

I'm posting about this because I think it is the biggest error I see on tax returns filed by the military in South Carolina.  SC is very generous to the spouses of military members who are residents of other states.  This is not a Military Spouses Residency Relief Act issue (that's for another post) but an issue when the spouse is required, or chooses, to be a SC resident while the military member is not.

SC allows you to exclude the military members military pay from the calculation of the percentage of deductions allowed to the wife.  The effect of this is to allow the spouse almost all of the combined deductions off of only the SC income.  This, in effect, generally results in most military spouses paying almost none, or very little taxes to SC.

The problem is that most software, and many preparers do not take this into account.  Every military spouse who works in SC should check their tax return.  It should have a SCNR form on it, and, line 1 Column A and B should have the same amount in both (unless the spouse has income from another state on her own due to a move or something.)  If this is not the case, the SC should be amended to correct this.

Shameless self promotion:  If you are not sure if your SC is correct, I will check it for free and, if it's wrong, give you a quote on how much I would charge to fix it.  If you want me to fix it, I will.  If not, at least you'll know if it's right or wrong.

E-mail me at: taxadvisor@email.com or call (843) 553-0274 for an appointment (ask for Kirk)

We can check and fix these without an office visit via fax or e-mail.

If you like the blog, buy my book: Everyday Taxes only $5.99 for Kindle! 

Thursday, January 12, 2012

Valuing Charitable Contributions - Books

Many people do not understand what Fair Market Value is.  They assume that if Goodwill sells their donation for a buck, then that is FMV.  Not quite true.  FMV is the price paid in a transaction between a willing buyer/willing seller, both with relevant knowledge of the facts.  It also assumes no extraneous motives such as family or charity.

A more accurate valuation is that which for-profit sellers are selling similar items for (make sure they're actually selling at that price, not just sitting on the shelves.)  This can be hard to find out for many things, much easier for books.

For hardcover books, I go to amazon.com.  No better valuation than massive online retailers.  I search for the title and author of the book and then find a used book of similar condition to mine.  I ignore the $1 or $.01 sellers - they make money by overcharging for shipping and handling.  I also ignore any price over cover price unless the book is clearly collectible (and I have held it for at least three years before donating it.)

I then add that book to my cart and repeat until they're all in.  I print the cart and then delete the contents.

You would be amazed what a box of good hardcovers is worth.

Don't bother with this for obviously cheap, crappy paperbacks.

A bit harder but more accurate is www.bookfinder.com - use this for more valuable hardcovers.  You'll need to print values individually, or save pages to your computer.

Quick Introduction and some Philosophy

I want to start off by reminding everyone that what I write here is my opinion only.  It in no way reflects official tax policy or the opinions of my employer.

In this blog I intend to provide real world tax advice, as well as my opinion on tax policy and administration.  I do not intend to pull any punches and hope to be both entertaining and informative.  With Tax Season upon us, I wanted to start with my best advice if you have anything more than the simplest of tax returns.

Try Another Way to File!

What?  You mean even if I'm perfectly satisfied I should try something else?  That's right.  The world is full of crappy software, terrible tax preparers, over-priced idiots, free morons and useless web sites.  Find someone or some way that you can have your taxes done or re-checked without the obligation of paying for it if you aren't satisfied.

If it's a person, ask upfront if you have to file with them if you are not satisfied with the results.  If the answer is no, walk out.  If you currently use software, get your bottom line result, write it down before filing, and then see if a tax preparer can beat it.  Paying $200 more to get $1000 is a no-brainer.

Did I mention I would be shamelessly self-plugging in this blog.  I will check a completed tax return completely for free (obviously if I find more money, we can talk about paying me to amend it.)  I will do a tax return, give you the results, tell you the fees, and then give it all back to you if you don't want me to file.  E-mail: taxadvisor@email.com

How do you find a good tax-preparer?

Step One: Find an Enrolled Agent.  These guys (like me) have been rigorously examined by the IRS and licensed to represent taxpayers at IRS audits.  It doesn't guarantee a great tax preparer, but it's a good start.  You can also look for a CPA, make sure he or she does a fair amount of tax prep business and not just accounting in general.

Step Two:  Ask how long they've been doing it, how many taxes they do every year, and how many hours of training they have.  Listen to their answers, as well as how well they deliver them.  If they sound rehearsed or dumb, walk away.

Step Three:  Give them 20 minutes preparing your taxes.  Tell them up front that you reserve the right to walk away at any time.  If they ask intelligent questions, that's a good sign.  If they're reading questions from a computer screen (as opposed to asking you logical questions and then inputting the data - it's a who's the boss thing - the computer or the tax preparer) run away.  A great sign is that they ask you a dozen questions and then input lots of data while asking you more, as opposed to one question, one entry (obviously this does not apply to things like name, birthday, SSN.)

Step Three is really where the rubber meets the road.  If your tax guy doesn't seem comfortable, and make you comfortable, walk away!

Then, once you find someone great - stick with them (but don't be afraid to test drive someone else once in a while.)