Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:

I am a blogger who has recently set my site up to be a “business”. This required seeking advice from lawyers and an accountant. Can I deduct the fees I was charged for this advice?

Answer:

Yes. This would fall under legal and professional fees. As long as your meetings were business related, they are considered ordinary and necessary business expenses. However, there are certain legal expenses that are considered “start up costs”. The cost of getting started before operations have begun are considered capital costs and are recovered over time. Since many bloggers start their sites before “becoming a business”, this usually doesn’t apply.

*Please keep in mind this post is for informational purposes only and answers given are very general. Do not rely on this column for definite tax answers as many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
My sister and law, brother in law and my husband all recently got letters from the IRS asking for all of this documentation from previous tax years. For my sister in law they are requesting information for 3 years, for my brother in law 2 years and for my family one year. We all get your taxes done by the same person. They are asking for copies of children’s birth certificates, marriage licenses, etc. How and why does the IRS determine to audit individuals?

Answer:

There are many circumstances surrounding the IRS audit selections. The IRS enters all tax return information into a software shortly after they receive the return and the software performs some calculations to determine reasonableness of the return compared to prior years and other tax returns similar. The returns are allowed a certain “variance” from the norm. If the return falls outside of this variance, it is “flagged for audit”. Another circumstance would be if there are several partner/member/shareholders of a business considered a”pass-through” entity that business return is amended or audited, then partner/member/shareholders may also be audited to reflect the changes on the business return.

Another instance, if you were to prepare your return with whole, round numbers (i.e. expenses listed as Auto Expense 4,000; Professional Fees 8,000 etc..this is an immediate “red flag” (I have seen this more than once). There may be a blatant error on the return, or an error not so obvious at first glance.

It is a little reassuring that you only received a letter, and not a personal visit from the IRS. If you provide copies of the documentation requested, and cooperate fully, you should have no problem other than if the return was prepared incorrectly.

*Please keep in mind this post is for informational purposes only and answers given are very general. Do not rely on this column for definite tax answers as many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:

When should a blogger start considering themselves a business for tax purposes? Is there certain criteria that, once hit, a blogger must start to consider their blog a business instead of a hobby?

Answer:

The blog is considered a business when there becomes a profit motive. Either way, business or hobby, the income needs to be reported. With this in mind, the hobby expenses are limited to the hobby income, meaning you can never take a hobby “loss”. A business can show a loss that may offset other income sources based on the way the business is structured.

*Please keep in mind this post is for informational purposes only and answers given are very general. Do not rely on this column for definite tax answers as many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:

I am considering taking an early withdrawal from the Rollover IRA account ($13k out). I recently had surgery and this is needed to clear bills, debt and get the budget back. I know I am looking at a 10% hit on the taxes next year for a penalty ($1,300), but what else am I looking at? How much else should I expect ?

Answer:

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Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
I have two questions:

1. Can I claim the after school program my son is in? He is in Kindergarten and instead of paying for an after school sitter we are paying for an after school program at the school. Is that deductible?

2. Can we claim/deduct our moving expenses?

Answer:
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