A Few Pics of Our Delaware Beach House

We bought a waterside house in Fenwick Beach a week before Hurricane Sandy. (Fenwick Beach is essentially the Delaware tip of Ocean City.)  Now that we've finished repairing hurricane damage, we're going to offer it for weekly/weekend rent to friends this summer to help recover some cost.   It's SOOO quiet and relaxing, with it's own boat-ready 50-foot canal bulkhead at the back door.  It has an awesome 3D blue ray TV system.  There's a brand new community pool down the street and lots of flat, quiet streets for strolling and bicycle riding. The actual beach (Fenwick Beach) is a quick drive down to the end of Light House Road.   In a nutshell, the Fenwick beach house is quiet and relaxing, the boat launch is at the end of the street, your private dock is at the back door, the beach is down the street, and the bustle of Ocean City is less than 10 minutes away.

Dock your boat bayside at your back door. Or launch a kayak!!

Living room with 3D blue ray TV.  3D is Awesome!!

 

Sunny room overlooking the canal.

Cheery, full featured kitchen.

Sun deck overlooking the canal.

One of the smaller bedrooms

Dedicated dining room.

The master bedroom.

How to Set Up Direct Deposit for Your Federal Pension

Having your Federal Pension direct deposited to your bank is pretty simple. Fill out the Direct Deposit Information Form, OPM Form 3206-0226.  It's a one-pager.  Be sure to sign it.  Mail it to the Office of Personnel Management address on the form.  That's it.

You can use the same form to have your pension paid to you via a Direct Express debit card.  The Treasury Department doesn't want to send out paper checks anymore, so you pretty much will need direct deposit or the debit card.

How to Fix It: Taxpayer Married to Nonresident Alien Denied Married Filing Jointly Filing Status

 By JC Leahy,  MA, Accounting
Twitter@TaxHelpWhenNeed
Email:jcleahy@taxhelpwhenyouneedit.com


Here's the situation:  You're married to a nonresident alien and filed a Federal tax return as married filing jointly.  Your spouse doesn't have a social security number, so you filed a paper return.  This worked for you in past years, but for 2012, the IRS denied your married-joint status because of the missing social security number. They increased your taxes and sent you a bill.  How do you fix this?

Here are the steps:

1. Prepare a 1040-X Amended tax return which contains the explanation that your spouse elects to be treated as a resident alien for purposes of US income taxes, and that a signed statement to that effect is attached, and that a Form W7 Application for Taxpayer Identification Number is attached.
2. Have your spouse sign a completed Form W7
3. To the W7, attach a copy of whatever identification documents you choose to submit.  See Form W7 instructions for required identification documents.  Your document or documents must prove your identity and also your foreign status.  Copies of documents must be certified by the issuing agency.  Notarized copies are no longer accepted. Submitting a copy of your passport certified by your country's embassy or consulate is ideal.  You can also submit original documents, but that is not wise. 
4. Have your spouse sign and date a separate statement to the effect that he/she hereby elects to be treated as a US resident alien for tax purposes.
5. Attach the W7, a copy of your original tax return, a copy of the IRS notice you received in the mail,  and your completed Form W7 with identification documents -- to your Form 1040X Amended Income Tax Return.
6. Be sure you BOTH sign the 1040X and, for good measure, both of you re-sign your original tax return. Also your spouse needs to sign the Form W7 and separate statement.
7. Mail this whole collection of documents to the following special address:

IRS
ITIN Operations
PO Box 149342
Austin, TX  78714-9342

That should do it.  Any questions, or comments, let me know.

Woah! Look at This!! Beware of Travel to or through New Jersey or New York !!!!

This week's Outrage concerns a legal case that comes to us from New Jersey, where a well-meaning firearm owner, through a series of events that were no fault of his own, inadvertently ran afoul of the law (or, rather, an interpretation of the law).

Gun owner Gregg C. Revell was flying from Salt Lake City, UT, to Allentown, PA, by way of Minneapolis, MN, and Newark, NJ.  Revell had an unloaded firearm that was legally checked in his luggage, which he was to pick up upon his arrival in Allentown.

That was the plan, but things soon went awry.  Revell's flight into Newark was delayed, causing him to miss his connecting flight to Allentown.  He was able to book a seat on the next flight, but that course of action was changed by the airline. He then tried to take a bus, but his luggage didn't make it to the bus on time.  He retrieved his luggage, but missed the bus.  With no more connections to Allentown until the following morning, Revell went (with his luggage, of course) directly to, and stayed the night at, the Airport Sheraton Hotel.  By this time, Revell had been through a lot, but his real trouble was just beginning.  

The next morning, Revell returned with his luggage directly to the airport.  He checked his luggage and, as he was supposed to, told the agent that he had an unloaded firearm stored in a locked case in his luggage.  It was at this point that Revell's destination changed from Allentown to a Newark jail cell.  He was arrested on the spot because New Jersey law requires a permit to possess a handgun (and also bans the hollow-point ammunition that Revell also had in a separate locked container in his luggage), and as soon as Revell's luggage became "readily accessible" to him (in this case, when he took possession of his luggage to go to the hotel) he violated state law.  

The Firearms Owners' Protection Act (FOPA) states that, "Notwithstanding any other provision of any law or any rule or regulation of a State or any political subdivision thereof, any person who is not otherwise prohibited by this chapter from transporting, shipping, or receiving a firearm shall be entitled to transport a firearm for any lawful purpose from any place where he may lawfully possess and carry such firearm to any other place where he may lawfully possess and carry such firearm if, during such transportation the firearm is unloaded, and neither the firearm nor any ammunition being transported is readily accessible or is directly accessible from the passenger compartment of such transporting vehicle: Provided, That in the case of a vehicle without a compartment separate from the driver's compartment the firearm or ammunition shall be contained in a locked container other than the glove compartment or console."

After spending four days in a Newark jail cell, Revell was released on bail. Revell was eventually cleared of all charges, but he didn't get his firearm and other property back until almost three years later.
With help from the NRA Civil Rights Defense Fund, Revell sued for damages related to his unjust arrest and detention (as a violation of his civil rights), but lost, with the U.S. Court of Appeals, Third Circuit's finding that Revell was not covered under FOPA's narrowly defined safe harbor provision.
So we have a case where a firearm owner does everything he can to obey the law and ensure that he safely transports his firearm.  Through no fault of his own, he is accused of violating the law.  He is arrested, then thrown in the Newark jail for four days, and loses possession of his personal property for almost three years.  That is outrageous!

This case is not as unusual as you may think.  NRA presently has two similar cases awaiting rulings by the U.S. Second Circuit.

NRA members would be well advised to use caution when traveling with a firearm—especially by plane, and especially in the states of New York and New Jersey—if a planned, or unplanned stop in "hostile territory" is necessary.

As originally reported by the Institute for Legislative Action

Food For Thought

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How and When to Report Investment Expenses on Your Income Tax Return

 JC Leahy, MA Accounting

 For my friend Joe:

Capital vs Expense

Not all outlays for an investment property are expenses.  Outlays to acquire, renovate, or extend the useful life of an investment property must be capitalized.  On the other hand, ordinary and necessary expenses to hold, operate and maintain an investment property are deductible as investment expenses.

How To Report Investment Expenses 

To deduct your investment expenses, you must itemize deductions on Schedule A (Form 1040). Enter your deductible investment interest expense on Schedule A (Form1040), line 14. Include any deductible short sale expenses.  Also attach a completed Form 4952 if you used that form to figure your investment interest expense.  Enter the total amount of your other investment expenses (other than interest expenses) on Schedule A (Form 1040), line 23. List the type and amount of each expense on the dotted lines next to line 23. (If necessary, you can show the required information on an attached statement.)  If your thinking includes rental real estate as an investment, obviously those expenses are reported on Schedule E. 

When To Report Investment Expenses

If you use the cash method, you generally deduct your expenses, except for certain prepaid interest, in the year you pay them.  If you use an accrual method, you generally deduct your expenses when you incur a liability for them, rather than when you pay them.

FOR MORE INFORMATION SEE MY EARLIER ARTICLE ON INVESTMENT EXPENSES.

Uplifting Springtime News: It's Better to Go Bra-less !!!

I kid you not.   This was one of Yahoo's lead stories this morning.  Apparently, researchers in France (where else?!) have completed a 15 year study of women's breasts.  The upshot is that wearing a bra causes breasts to sag at an average rate of 7mm per year.  Cool.  CLICK HERE FOR DETAILS

Who Must File a Pennsylvania Tax Return ??

Who must file a personal income tax return? If you are a  Pennsylvania resident, nonresident or a part-year PA resident, you must file a  PA tax return if:
• You received total PA gross taxable income in excess of $33, even if no tax is due with your PA return; and/or
• You incurred a loss from any transaction as an individual, sole proprietor, partner in a partnership or PA S corporation shareholder.

PA law does not exempt a minor from the above requirements to file a PA tax return even if claimed as a dependent on a federal return.

The executor, administrator, or other person responsible for the affairs of a decedent must file a PA tax return if the decedent met the above requirements.

Pennsylvania taxes eight classes of income: (1) compensation; (2) net profits from the operation of a business, profession or farm; (3) net gains or income less net losses from dispositions of property; (4) net gains or income from rents, royalties, patents and copyrights; (5) dividends; (6) interest; (7) gambling winnings (except Pennsylvania Lottery winnings); and (8) net gains or income derived through estates or trusts.

Really Strange News: Beaver Videoed Killing Man !!

JC Leahy

Odd news.  A beaver killed a man trying to photograph him.  Here's the video.

Employee Business Expense Income Tax Deduction

JC Leahy, MA Accounting

If your employer does not reimburse all of your employment-related expenses, you might be able to deduct them on your federal income tax return. They would go on your Schedule A (Itemized Deductions), line 21, “un-reimbursed employee expenses.” 

Two Hurdles for You to Jump

In order to deduct employee business expenses, you must jump over 2 hurdles: the 2% Floor and the Standard Deduction.  “The 2% Floor" is 2% of your Adjusted Gross Income.   Your un-reimbursed employee business expenses must total greater than 2% of your Adjusted Gross Income. You can deduct only the expenses over that amount.  The second hurdle is your Standard Deduction.  All of the deductions listed on your Schedule A generally must exceed your Standard Deduction.  The amount of your Standard Deduction generally depends on your filing status.  For tax year 2012, the standard deduction amounts are:

• $11,900 married filing jointly
• $5,950 married filing separately
• $8,700 head of household

(One wrinkle in this picture is that if you are married filing separately and your spouse itemized, you also must itemize.)

Commuting Costs

You cannot deduct the typical costs of traveling to and from work within your metropolitan area.  This includes costs for automobile travel, parking train, car, cab or bus.  These expenses are called commuting costs.  They are considered personal expenses—even if you do work on the trip. The cost of parking at your permanent place of work is not deductible, but parking to attend a business meeting is. Similarly, tolls and gas are not deductible for regular transportation to work, but are deductible for work-related trips.  Note, however, that once you arrive at work, if you have to travel between offices or to client sites that cost is deductible.

If you use your car for deductible business purposes you can deduct either the standard mileage rate (55.5¢ per mile in 2012) or actual car expenses for the year. For leased cars, whichever method you choose in the first year is the one you will be required to use for the remaining years of the lease.

All of your un-reimbursed employee business expenses must be incurred during the tax year, must be trade-or business-related, and must be “ordinary and necessary.” The expenses don’t have to be required, however: "Ordinary and necessary" means that they are helpful and appropriate for your business.

Here are some of the more common employee business deductions.

If you use your car for deductible business purposes you can deduct either the standard mileage rate (55.5¢ per mile in 2012) or actual car expenses for the year. For leased cars, whichever method you choose in the first year is the one you will be required to use for the remaining years of the lease.

 

Other Common Deductions

• Out of town work related travel. This includes  taxi, plane, train, car, laundry, meals, baggage, telephone, and tips while you are on business in a temporary setting.   For meals,you have a choice about how to deduct the cost of meals. They must be business-related, or eaten while on an un-reimbursed travel excursion. You can deduct 50% of the actual meal cost, or take 50% of the per diem rate for the location of your travel. A list of these cities is available on the IRS web site at www.IRS.gov.  See my earlierarticle on deductible travel expenses.
• Dues to professional societies, excluding lobbying and political organizations.

• Home office costs. The office must be your principal place of business and be for the convenience of your employer—not just helpful in conducting your job.
• Job search expenses in your current occupation, even if you don’t land a new job. This includes everything from the cost of producing and copying your resume to travel expenses you incur while interviewing or searching for a job.
• Legal fees related to doing or keeping your job.
• The cost of a passport for a business trip.
• Union dues and expenses. However, you cannot deduct the portion of the fees that pays for sick, accident or death benefits or for a pension fund, even if the fees are required dues.
• Work clothes and uniforms that are not suitable for everyday use and are a condition of your employment.