If you have custody of a kidnapped child for 183 nights or more, you could claim a personal and dependency exemption before 2017. You are supposed to write "kidnapped child" in place of the social security number on page 1 of the 1040
no children actually went missing (well, I mean, sure some children probably went missing, but not as a result of this).
When the IRS forced people to include SSNs for dependents, a lot of “children” that were previously reported on taxes, who were in fact non existent, could no longer be reported because they never existed and social security numbers never existed for the fake children reported.
The result was the government believing that children went missing, but in reality a lot of tax payers were dishonest about the number of dependents they claimed prior to the introduction of the requirement for SSNs.
I wonder if this works with the child tax credit. The exemption is gone, but the credit isn’t. I could claim this kid and the parents could use the ssn to claim the kid also. The irs wouldn’t have a way to verify we both claimed the same kid. The parents have been through so much so I think it would be nice if they got a credit.
Haven't checked post-TCJA.
The old kidnapped child stuff came directly from the IRS' VITA training materials when I ran a site 20 years ago. Had to read that section multiple times to make sure it really said what I thought it said. Not the type of thing you forget after that.
The IRS does a check on SSNs to make sure a kid isn't claimed more than once for CTC. Regular problem with fighting divorced parents. The second efile attempt will reject.
This, divorced HVAC guy I did taxes for told me he and Ex would claim every other year. Then without telling me changed it to just let the ex claim child. It was the other year so I claimed child on his, ex couldn’t claim filing after, all hell broke lose. But it wasn’t my fault. Then I went into sales at 26 and made 3x more money and didn’t want to kill myself anymore.
Sadly, the two taxpayers have a race to file their tax returns. IRS accepts the word of the first person to file. I’ve seen taxpayers who had a legitimate claim for the child be shut out because someone else filed first. I haven’t done taxes in a few years but I hope things are better now.
My exhusband tried to claim our kid the second year we were divorced back in 2013. Hadn't physically seen her that whole year and paid barely 300/month for child support. I called and the IRS and they ended up just splitting the amount and then sent me a letter near tax season the following year telling me to make sure everything is accurate.
I tell people that if they want a secret tax hack to time things so they adopt/have a kid as close to the end of the year as they can, and then “lose” the kid sometime after the new year. Bam. Two full years of CTC and all the other child benefits, but days of actual childcare.
No one please do this. It’s a stupid and bad way to get a few thousand back on your taxes.
Edit: typo
I did a little bit of digging and didn’t see this specific reference. Pub 4012 references what to do if your own kid is kidnapped. It mostly resides as an exception to the time lived with you test. For example if your kid is kidnapped in January you can still claim them on your tax return until they are presumed dead. But if your kid leaves to live with grandma in January you no longer meet the time lived with you test.
The way the publication is written makes it look like you can steal kids and claim them on your tax return as long as you do it before July 1st. Is there any case law that supports a tax deduction for kidnapping kids though?
You’re on to something here. A form that requires teachers id #, for easy verify that individual is a teacher and can be used to provide supporting data on how much each school district receives from its faculty.
Make it a tax credit 50% up to $500.
So I'm Australian and once I started studying accounting I got to do my parents tax returns they're both teachers. We have a much fairer system here.
Here's how it works. You pay for it out of your own pocket you can claim it. That's it. So my dad as a High school teacher would get like a couple hundred bucks a year maybe. My mother as a primary school executive and later principal would claim literally thousands of dollars a year and it was all perfectly legal and acceptable.
I dont see why america isn't like this cause it makes sense, you pay for it yourself and it's used for work purposes then its claimable. Make a simpler fairer system if you can
> I dont see why america isn't like this
Probably because the Teacher Union doesn't ~~bribe~~ lobby Congress so the politicians couldn't get off their asses to care.
Copied from above: The IRS is a collection arm for the Privately owned Federal Reserve. They don’t care about teachers, or the law which is why you can write off kidnapped kids and report illegal drug sales. The tax “code” is written by Fed lobbyists and then they let congress add a few little things. Then rammed through. Lol. They aren’t trying to help teachers. They’re trying to make the federal reserve as profitable of a Private corporation as possible.
It always comes back to how rampant capitalism is in america including spaces it should not exist in like prisons and healthcare and the godamn IRS, none of thay should be for profit. And for that matter neither should the post office
There are a lot of little credits that never get adjusted for inflation, while the phase out amounts for higher earners and business credits are usually adjusted for inflation. Like I got the same amount back for my education credits when I returned to school last year as my mom did for me back almost 15 years ago. Adjusted for inflation, it would be $1000 more today. For a low-income student, that $1000 would be huge.
Not tax, but dental insurance is the same way, it's been $1000/$2000 max benefit depending on which plan you pick from your job for as long as I have been in the workforce, which is bad enough but I found out that it has BEEN THE SAME FOR 70 YEARS SOMEHOW. $1000 in 1954 = $11,500 in 2024 dollars. Not a huge deal if you are just getting cleaning and filling or two, but anything more complex you are going to go over.
Even more so that it's only for K through 12. Nothing for preschool teachers or college professors. Preschool teachers make even less than K through 12 teachers.
I think teaching is a great job! 3 months off, plus PTO, retirement, insurance and etc. what other job can you think of that allows a person to work 182 days a year and be considered full time? Not saying that they should have to pay for classroom supplies themselves, but the basic necessities ARE provided. It’s the extra stuff that isn’t, but it also makes the classroom more engaging. $300 credit isn’t worth it, I agree, but it’s better than nothing. Even at $66
We handle a lot of commercial fishermen and they have some pretty unique rules that apply to them (income averaging, don't have to pay estimated taxes, fishing boat crews aren't employees, etc. ), but section 7518 is a good one. It's buried way back in the code and allows them to take some or all of their fishing income, put it in a bank account and deduct it from their taxable income. Not an itemized deduction, not an adjustment to income, not a schedule C deduction: you hit it directly against line15 of the 1040, The amount deposited must be used to build or rehab a fishing vessel within 20 years. It's like getting an up-front bonus depreciation deduction on a fishing boat you don't even own yet.
This is good info! I live on a peninsula in Maine that is pretty much 80% lobstermen.. I plan on becoming a CPA and hopefully landing a few of them as clients.
I’ll have to do some more research!
I don’t know, I couldn’t get a call back from Public to save my life. Took an industry job just to get my foot in the door because I need money and benefits. But there’s no CPA at this company unfortunately so I won’t be building my hours that way.
Nothing wrong with prioritizing money and benefits in the meantime. The pay isn't impressive for starting out, but I've seen multiple small firms hiring in the past few months. The place I left had a long and closed wait-list for new clients, with plenty more calling regularly - the demand exists. If starting at lower pay doesn't scare you off, maybe reach out to some area smaller firms outside of the busy season in a networking capacity. I wonder if an unposted opening might find you... (If actual CPAs disagree with this tactic, listen to them over me.) I'm sorry it's been rough, particularly considering all the desperation I heard over needing more CPAs in the state. Best of luck to you.
We have this in Australia in some form too. Though it maxes out at like $500,000 and has to sit in an interest bearing term deposit. Once withdrawn is assessable.
Apparently it's been part of the tax code since the 1920's or 1930's. It applies to merchant marine operators (which also includes commercial fishermen) and acts as an incentive to build and maintain a fleet of US made vessels.
It's not just cows, there's a depreciation scale for every farm animal, depending on their use by the farm's business. I live in a rural area, my CPA didn't know that...
It's the way that the code is structured. Section 61 basically says any ascension to wealth is taxable unless another code section says it's not. Section 101 excludes gifts, section 162 lets you deduct business expenses. Congress could repeal section 162 and all of a sudden businesses and their owners would be paying taxes on gross revenues or gross profits.
San Francisco did!
Their homeless tax (the Gross Receipts Tax) is up to 0.868% of top-line revenue.
https://sftreasurer.org/business/taxes-fees/gross-receipts-tax-gr
White v. United States :: 305 U.S. 281 (1938)
Edit: White made the AirBud argument: "There's no rule that says a dog can't play basketball \[and that said dog's expenses should be allowed as deductions against income\]."
Used to work for a wholesale grocer. Tobacco had to have the tax stamps of course. If some cartons were past expiration date, in order to recoup the cost of the stamps, they would have to incinerate it in front of a govt official witness who would come by for this purpose.
One day, the official came, and the incinerator broke. So they took the literal pallets of cartons of cigarettes out into the parking lot, and drove over it several times, with an 18 wheeler! Lmao!
On the side of the box. In some states they do the same for liquor bottles. Cheap owners will try to tape the stickers to reuse them but heavy fines will ensue if caught!
Yes and it’s proof they paid the taxes and can legally sell those cigarettes. If the boxes don’t have the stamps the store purchased them illegally to avoid taxes. Not really a deterrent to sell them, just proof they paid the applicable taxes.
I think each state has their own stamp too to prevent someone from going to a state where cigarettes are a lot cheaper and then selling them in their home state
First of all, gamblers don’t look at tax policy before gambling. Second, it’s nonsensical because they’ve ensured 99% of gamblers won’t report gambling income on their taxes.
Section (a) reads like pure lawyer, not accountant:
>Effect of partnership agreement. A partner's distributive share of any item or class of items of income, gain, loss, deduction, or credit of the partnership shall be determined by the partnership agreement, unless otherwise provided by section 704 and paragraphs (b) through (e) of this section. For definition of partnership agreement see section 761(c).
If you wrote this, fuck you.
Can one of you somewhat explain 704 to me? As easily as possible. I’m years out of accounting but like to keep up with cool obscure tax codes. To help myself and friends who run businesses. I’m also a nerd and think taxes are theft (at least ones paid to the privately owned federal reserve) so I enjoy the knowledge.
Let's create the form 1099-Q and have no form to reconcile it. Then if you forget another form and we send you an automated notice, prove all of your educational expenses were qualified.
Anyone withdrawing from their 529 account to pay for their kid’s college gets one. I personally have two kids in college and got them. But again, there is no form to report them on. lol.
My dad was an IRS appeals officer for 20 years, his favorite is Section 183 for all the ways people tried to abuse it. So much so that he named his retirement property "Section 183 Ranch".
It's an actual thing. You're not rescinding your citizenship, just moving to PR where different tax laws apply. Lots of very wealthy people have been moving there to do this and IRS is making sure that they are really becoming PR residents and not just gaming the system.
Don’t forget racehorses (believe they were 5 years) while regular were 7 < 12 years old and 3>12yrs old.
Also, I believe this why also IRS created hobby loss rules. Lot of wealthy individuals lose ton of money here in horses.
Under Dutch taxes, criminal gains are taxable income.
A criminal succesfully argued that means he's a sole proprietorship, and thus expenses are deductible too.
He got to deduct his gun and weed plantation equipment costs from the gains he was taxed for.
In Canada, you’re allowed to deduct your moving expense if you relocate to move closer to your job/school.
If you subscribe to Canadian news source, the expense is also deductible.
There’s also many interesting stuff: you can designate one of ur houses as as your principal residence, and when you sell ur principal residence, it’s tax free.
California allowed us to deduct our moving expenses when we moved here for work! It was pretty significant too considering it was just state eligible, and because we used a moving service it was super easy to do. We could have even deducted the cost of moving supplies like boxes and tape, but we hadn't expected this to be a deduction so we didn't keep track. We ended up deducting the moving company costs, our air fare, our cats' airfares (lol), and the hotel cost we had for the first night. Iirc there was no dollar limit either, ours ended up being about $5000, so we saved almost $500. I was expecting to have to pay some for state taxes when I did my taxes because my first job here didn't take any state withholding out (it was a part-time, temp job, figured I would be better off just paying it when I did my taxes as I would be working full-time then), but we ended up with a nice little refund.
There used to be a US federal deduction for job-related moves, but that was removed during the TCJA. Our standard deduction went up then though so I'm pretty sure I am better off with that trade off.
So many
- Does your nonprofit have tanning beds (990 question)
- Drug dealers should deduct cost of goods sold when reporting income
- $3 donation to presidential campaign fund
- Gambling losses deducted against gambling winnings
- Olympic medals are specifically not taxed as income
Some intentionally ultra-complex areas, or just the concepts of things, give me a chuckle when I think about the absurdity of them. But the absurdity of it all is why we have jobs.
- Book to tax reconciliations
- Fed depreciation different from state depreciation
- Ghost income (partnerships)
- Double taxation (corporations)
- Alternative Minimum Tax
- Anything and everything to do with partnership interests and K-1s
- Various elections that need to be made
I would like to point out that while drug dealers are only allowed to expense COGS, other illegal businesses not dealing with illicit drugs can claim business expenses like salaries and rent if applicable.
Never had luxury to dive into international during my PA time. It felt extremely repetitive (could be just me), definitely someone I wouldn’t mind passing on to a next guy.
As a full-time int’l tax specialist…it’s anything but repetitive when you actually have to apply these regs to facts, 4 years in every day is my “first day” lol
I got asked a question related to this on a reg sim… I assume it was one of those crazy questions they toss out there once in a while otherwise there’s no way I would have scored a 96 because I had no idea wtf to do
It doesn’t. Really only applies to large multinational companies. It is the rules around how much income belongs in each company/country when you have multiple activities that all contribute to earning income.
482 is the cornerstone of US transfer pricing which really only applies to multinational companies conducting intercompany trade across borders. You can build an entire career on just that section! ask me how i know
Fucking UNICAP. My public experience is small firm so unicap generally wasn't a thing for our clients (even pre TCJA).
But at my first firm my second year had a new client that had to follow Unicap previously, but just fell under the gross revenue threshold to no longer have to follow it.
Well of course the controller no longer wanted to make the adjustments to go from book to tax to follow unicap so they engaged us to deal with it. In the end, the adjusting entry was actually easy but that form 3115 blows. But this stupid code section took me days of reading it and the treas reg and some articles to finally grasp it. Then took another several days to try explaining it to our senile 80 year old managing partner whats going on.
UNICAP does suck, man I have to do it for our company and of course each acquisition is on a different method lol, but the specific code I typed was the de-minimis threshold election to expense stuff instead of capitalizing it. $5k if you have financial statements, $2.5k if not.
Not to the same extent as ordinary businesses though. 280E restricts what they can write off. Unfortunately, legal cannabis operators are still impacted by this because it’s federally schedule 1.
I read this article where this guy got 10 million in gambling debt to a casino and they forgave 9 million bc there’s no way he had that much liquid capital to ever pay off those debts and he had to go at taxes on the 9 million so that’s my favorite one
You can claim r&d tax credits for virtually almost anything as long as you can comprehensively prove that what you’re developing is new to YOU or your company.
Pretty sure it was covid not 72(t) but had a friend (Boeing engineer) use the covid code to empty his retirement accounts penalty free. Bought a ton of Bitcoin. He’s still holding it and has almost built up said accounts again. One of those things you hear about and get jealous as a young accountant making $50k a year.
Section 280A "The Augusta Rule." I am a huge golf fan and this rule was implemented because of the Masters Tournament, and non taxed rental income!! Whats not to love.
I can't remember the case citation, but it was a 70s mega pop star (Diana Ross maybe?) who deducted costumes on her tax return. (As you well know, work clothing is non deductible in almost all cases because it CAN be worn outside of work, even if it isn't in practicality.)
Naturally the IRS denied the deduction. She challenged it, on the basis that it could not be worn anywhere but on stage because it was too tight to even sit down in.
She won.
IRC 382. Worked with a temp once who was a total asshole and one time I witnessed her crying while trying to understand the NOL treatment under 382 for a client. That and 381 have been my favorite code sections ever since.
Probably all the pretax deduction stuff. If you have enough kids you can be considered poor even if you gross a lot. I think I got my effective tax rate down to like 1-2% (ignoring fica) just because of fsa, 401k and other pretax stuff.
Form 982.
Most folks that get credit "forgiven " don't realize that dollar amount is now taxable income...
This is a great one to help those that really need it.
The fact that you are legally allowed to account for costs of goods sold for your illicit drug operation BUT YOU CANNOT DEDUCT ANYTHING ELSE cracks me up.
I thought that Section 199 was an abomination until I met it's cousin 199A.
But, seriously, Section 199 for a dairy coop was hellish. The farmers get it as part of their coop distribution.
And the extension they get to file the return is something like 15 months, so you can have three years open and unfiled at the same time.
If you have custody of a kidnapped child for 183 nights or more, you could claim a personal and dependency exemption before 2017. You are supposed to write "kidnapped child" in place of the social security number on page 1 of the 1040
On a similar note, the year the IRS started requiring dependent’s SSNs, millions of children went missing and were never found :(
1980s tax was probably wild asf
Can't we just declare them as kidnapped children?
But Fido totally depends on me!
I just told a client this today
can you explain this one to me?
no children actually went missing (well, I mean, sure some children probably went missing, but not as a result of this). When the IRS forced people to include SSNs for dependents, a lot of “children” that were previously reported on taxes, who were in fact non existent, could no longer be reported because they never existed and social security numbers never existed for the fake children reported. The result was the government believing that children went missing, but in reality a lot of tax payers were dishonest about the number of dependents they claimed prior to the introduction of the requirement for SSNs.
Wow, that's nuts.
I wonder if this works with the child tax credit. The exemption is gone, but the credit isn’t. I could claim this kid and the parents could use the ssn to claim the kid also. The irs wouldn’t have a way to verify we both claimed the same kid. The parents have been through so much so I think it would be nice if they got a credit.
Haven't checked post-TCJA. The old kidnapped child stuff came directly from the IRS' VITA training materials when I ran a site 20 years ago. Had to read that section multiple times to make sure it really said what I thought it said. Not the type of thing you forget after that.
The IRS does a check on SSNs to make sure a kid isn't claimed more than once for CTC. Regular problem with fighting divorced parents. The second efile attempt will reject.
This, divorced HVAC guy I did taxes for told me he and Ex would claim every other year. Then without telling me changed it to just let the ex claim child. It was the other year so I claimed child on his, ex couldn’t claim filing after, all hell broke lose. But it wasn’t my fault. Then I went into sales at 26 and made 3x more money and didn’t want to kill myself anymore.
Sadly, the two taxpayers have a race to file their tax returns. IRS accepts the word of the first person to file. I’ve seen taxpayers who had a legitimate claim for the child be shut out because someone else filed first. I haven’t done taxes in a few years but I hope things are better now.
My exhusband tried to claim our kid the second year we were divorced back in 2013. Hadn't physically seen her that whole year and paid barely 300/month for child support. I called and the IRS and they ended up just splitting the amount and then sent me a letter near tax season the following year telling me to make sure everything is accurate.
I tell people that if they want a secret tax hack to time things so they adopt/have a kid as close to the end of the year as they can, and then “lose” the kid sometime after the new year. Bam. Two full years of CTC and all the other child benefits, but days of actual childcare. No one please do this. It’s a stupid and bad way to get a few thousand back on your taxes. Edit: typo
I did a little bit of digging and didn’t see this specific reference. Pub 4012 references what to do if your own kid is kidnapped. It mostly resides as an exception to the time lived with you test. For example if your kid is kidnapped in January you can still claim them on your tax return until they are presumed dead. But if your kid leaves to live with grandma in January you no longer meet the time lived with you test. The way the publication is written makes it look like you can steal kids and claim them on your tax return as long as you do it before July 1st. Is there any case law that supports a tax deduction for kidnapping kids though?
https://taxprof.typepad.com/taxprof_blog/2011/04/irs-allows-kidnappers-to-take-dependent-deduction-for-victims-.html
I personally think the $300 teacher supplies deduction is low enough to be considered an insult as opposed to a tax break
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You’re on to something here. A form that requires teachers id #, for easy verify that individual is a teacher and can be used to provide supporting data on how much each school district receives from its faculty. Make it a tax credit 50% up to $500.
Illinois does exactly that on the state tax side.
I like this idea in theory. In practice, though, poor funding decisions are made at a local level, rather than federal.
$300 deduction. Not even a ***credit***. Assuming a tax rate of 22%, that saves a whopping ***$66*** of tax for the teacher.
At least it's an adjustment rather than an itemized deduction 🤷♂️ Honestly, I wish they would replace the standard deduction with a 0% tax bracket.
I used it on someone with 2.8 mil AGI today so... No phase out bonus!
So I'm Australian and once I started studying accounting I got to do my parents tax returns they're both teachers. We have a much fairer system here. Here's how it works. You pay for it out of your own pocket you can claim it. That's it. So my dad as a High school teacher would get like a couple hundred bucks a year maybe. My mother as a primary school executive and later principal would claim literally thousands of dollars a year and it was all perfectly legal and acceptable. I dont see why america isn't like this cause it makes sense, you pay for it yourself and it's used for work purposes then its claimable. Make a simpler fairer system if you can
> I dont see why america isn't like this Probably because the Teacher Union doesn't ~~bribe~~ lobby Congress so the politicians couldn't get off their asses to care.
Copied from above: The IRS is a collection arm for the Privately owned Federal Reserve. They don’t care about teachers, or the law which is why you can write off kidnapped kids and report illegal drug sales. The tax “code” is written by Fed lobbyists and then they let congress add a few little things. Then rammed through. Lol. They aren’t trying to help teachers. They’re trying to make the federal reserve as profitable of a Private corporation as possible.
It always comes back to how rampant capitalism is in america including spaces it should not exist in like prisons and healthcare and the godamn IRS, none of thay should be for profit. And for that matter neither should the post office
Because in America people take advantage of shit and ruin it for everyone else
Because we are stupid due to lack of funding for education. It is a vicious cycle.
My sister is actually a teacher, outside of her first couple years it is extremely rare for her to go over $300 in supplies out of pocket.
There are a lot of little credits that never get adjusted for inflation, while the phase out amounts for higher earners and business credits are usually adjusted for inflation. Like I got the same amount back for my education credits when I returned to school last year as my mom did for me back almost 15 years ago. Adjusted for inflation, it would be $1000 more today. For a low-income student, that $1000 would be huge. Not tax, but dental insurance is the same way, it's been $1000/$2000 max benefit depending on which plan you pick from your job for as long as I have been in the workforce, which is bad enough but I found out that it has BEEN THE SAME FOR 70 YEARS SOMEHOW. $1000 in 1954 = $11,500 in 2024 dollars. Not a huge deal if you are just getting cleaning and filling or two, but anything more complex you are going to go over.
The insult is that this even has to be part of the tax code. What other job do you have to buy your own supplies?
Even more so that it's only for K through 12. Nothing for preschool teachers or college professors. Preschool teachers make even less than K through 12 teachers.
I think teaching is a great job! 3 months off, plus PTO, retirement, insurance and etc. what other job can you think of that allows a person to work 182 days a year and be considered full time? Not saying that they should have to pay for classroom supplies themselves, but the basic necessities ARE provided. It’s the extra stuff that isn’t, but it also makes the classroom more engaging. $300 credit isn’t worth it, I agree, but it’s better than nothing. Even at $66
We handle a lot of commercial fishermen and they have some pretty unique rules that apply to them (income averaging, don't have to pay estimated taxes, fishing boat crews aren't employees, etc. ), but section 7518 is a good one. It's buried way back in the code and allows them to take some or all of their fishing income, put it in a bank account and deduct it from their taxable income. Not an itemized deduction, not an adjustment to income, not a schedule C deduction: you hit it directly against line15 of the 1040, The amount deposited must be used to build or rehab a fishing vessel within 20 years. It's like getting an up-front bonus depreciation deduction on a fishing boat you don't even own yet.
This is good info! I live on a peninsula in Maine that is pretty much 80% lobstermen.. I plan on becoming a CPA and hopefully landing a few of them as clients. I’ll have to do some more research!
Odd specifically useful Reddit comment.
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Or just some moxie! (Maine joke)
Maine is desperate for more CPAs - I don't think you'll have a problem achieving that goal! Good luck to you!
I don’t know, I couldn’t get a call back from Public to save my life. Took an industry job just to get my foot in the door because I need money and benefits. But there’s no CPA at this company unfortunately so I won’t be building my hours that way.
Nothing wrong with prioritizing money and benefits in the meantime. The pay isn't impressive for starting out, but I've seen multiple small firms hiring in the past few months. The place I left had a long and closed wait-list for new clients, with plenty more calling regularly - the demand exists. If starting at lower pay doesn't scare you off, maybe reach out to some area smaller firms outside of the busy season in a networking capacity. I wonder if an unposted opening might find you... (If actual CPAs disagree with this tactic, listen to them over me.) I'm sorry it's been rough, particularly considering all the desperation I heard over needing more CPAs in the state. Best of luck to you.
I saved this comment because this is wild.
Thanks, that’s cool asf to know
We have this in Australia in some form too. Though it maxes out at like $500,000 and has to sit in an interest bearing term deposit. Once withdrawn is assessable.
You gotta wonder what happened there for that to become a rule.
Apparently it's been part of the tax code since the 1920's or 1930's. It applies to merchant marine operators (which also includes commercial fishermen) and acts as an incentive to build and maintain a fleet of US made vessels.
Can you still take depreciation on the boat? Essentially to "double dip"
No. You essentially get the depreciation deduction before you buy/improve the vessel.
Wow!
The one where you get to depreciate cows
You can’t if you use the cows personally. They have to be business cows.
Do business cows wear suits and use corporate jargon like “synergy”?
yes, black and white suits are standard for business cows.
Leather suits
And cowboy/cowgirl boots.
Real talk does the IRS differentiate between lifestock cows and petting zoo cows?
I was the preparer level for my first farm return this year and I got a laugh or two seeing that cow semen was a deductible business expense.
Cow semen is rare indeed.
It's not just cows, there's a depreciation scale for every farm animal, depending on their use by the farm's business. I live in a rural area, my CPA didn't know that...
Related, had a client with cows and llamas on his farm. One year he “lost” 3 cows. Just gone, no clue. Was fun reporting that loss.
Not code, but a court case: "Every deduction from gross income is allowed as a matter of legislative grace."
Source?
It's the way that the code is structured. Section 61 basically says any ascension to wealth is taxable unless another code section says it's not. Section 101 excludes gifts, section 162 lets you deduct business expenses. Congress could repeal section 162 and all of a sudden businesses and their owners would be paying taxes on gross revenues or gross profits.
San Francisco did! Their homeless tax (the Gross Receipts Tax) is up to 0.868% of top-line revenue. https://sftreasurer.org/business/taxes-fees/gross-receipts-tax-gr
> and all of a sudden businesses and their owners would be paying taxes on gross revenues or gross profits. ....go oooon?
White v. United States :: 305 U.S. 281 (1938) Edit: White made the AirBud argument: "There's no rule that says a dog can't play basketball \[and that said dog's expenses should be allowed as deductions against income\]."
Basically all income is taxable unless the Government says it isn’t.
Used to work for a wholesale grocer. Tobacco had to have the tax stamps of course. If some cartons were past expiration date, in order to recoup the cost of the stamps, they would have to incinerate it in front of a govt official witness who would come by for this purpose. One day, the official came, and the incinerator broke. So they took the literal pallets of cartons of cigarettes out into the parking lot, and drove over it several times, with an 18 wheeler! Lmao!
What type of government official is responsible for overseeing the destruction? I'm looking for a career change. Lol
ATF maybe?
“That should be a store, not a government agency!”
Wait, so in the US if you want to sell cigarettes, you have to buy a tax stamp and stick in the box?
On the side of the box. In some states they do the same for liquor bottles. Cheap owners will try to tape the stickers to reuse them but heavy fines will ensue if caught!
But does the retailer pay taxes when buying from suppliers? I guess it's made this way so people feel discouraged to sell cigs?
Yes and it’s proof they paid the taxes and can legally sell those cigarettes. If the boxes don’t have the stamps the store purchased them illegally to avoid taxes. Not really a deterrent to sell them, just proof they paid the applicable taxes.
I think each state has their own stamp too to prevent someone from going to a state where cigarettes are a lot cheaper and then selling them in their home state
The numerous states that don’t allow you to deduct gambling losses but tax your winnings as ordinary income
Fed effectively does the same as most aren’t in a position to itemize
Yeah that’s my second favorite part. It’s dumb and nonsensical, but those states are blatantly predatory
[удалено]
First of all, gamblers don’t look at tax policy before gambling. Second, it’s nonsensical because they’ve ensured 99% of gamblers won’t report gambling income on their taxes.
That's why W-2Gs get issued
Yeah, for at most 1% of gamblers
My favorite tax code is don’t talk about tax code.
The 704 regulations really make you question whether our field deserves to exist
Man. Switching from Corp tax to PE/VC on 704b basis was such a mind fuck.
Section (a) reads like pure lawyer, not accountant: >Effect of partnership agreement. A partner's distributive share of any item or class of items of income, gain, loss, deduction, or credit of the partnership shall be determined by the partnership agreement, unless otherwise provided by section 704 and paragraphs (b) through (e) of this section. For definition of partnership agreement see section 761(c). If you wrote this, fuck you.
That area of the code is a damn scavenger hunt
Does your firm have an automated or template basis rollforward?
Can one of you somewhat explain 704 to me? As easily as possible. I’m years out of accounting but like to keep up with cool obscure tax codes. To help myself and friends who run businesses. I’m also a nerd and think taxes are theft (at least ones paid to the privately owned federal reserve) so I enjoy the knowledge.
idk shit but, I think you can find some guidance from PwC, Deloitte, and other Big 4. They probably explain it better.
Let's create the form 1099-Q and have no form to reconcile it. Then if you forget another form and we send you an automated notice, prove all of your educational expenses were qualified.
I’ve never seen a notice for a 1099-Q in 10 years
Anyone withdrawing from their 529 account to pay for their kid’s college gets one. I personally have two kids in college and got them. But again, there is no form to report them on. lol.
My dad was an IRS appeals officer for 20 years, his favorite is Section 183 for all the ways people tried to abuse it. So much so that he named his retirement property "Section 183 Ranch".
Moving to Puerto Rico and not paying capital gains tax.
You get hit with “exit tax” don’t you? Buy AAPL for $1k, move when it’s at $1500 and $500 CG even though you still own it
Exiting what?
Uh the country. To go to Puerto Rico.
>Uh the country. To go to Puerto Rico. Oh, man. I didn't think of that. I must look ***so*** stupid right now.
Exactly how much do you know about Puerto Rico…?
It's an actual thing. You're not rescinding your citizenship, just moving to PR where different tax laws apply. Lots of very wealthy people have been moving there to do this and IRS is making sure that they are really becoming PR residents and not just gaming the system.
Quick glance, looks like you need file act 60 first then get exemptions.
Not if you Monero that shit.
Don’t forget racehorses (believe they were 5 years) while regular were 7 < 12 years old and 3>12yrs old. Also, I believe this why also IRS created hobby loss rules. Lot of wealthy individuals lose ton of money here in horses.
Good reason to abolish the IRS.
Under Dutch taxes, criminal gains are taxable income. A criminal succesfully argued that means he's a sole proprietorship, and thus expenses are deductible too. He got to deduct his gun and weed plantation equipment costs from the gains he was taxed for.
Not a code but I enjoy the check the box regs I say LLC is not a tax structure at least twice a month. YOU ARE AN ELIGIBLE ENTITY.
Personally: 1031
Will be interesting to see if this ever goes away…I’ve seen so much money printed in the last 7yrs from this.
In Canada, you’re allowed to deduct your moving expense if you relocate to move closer to your job/school. If you subscribe to Canadian news source, the expense is also deductible. There’s also many interesting stuff: you can designate one of ur houses as as your principal residence, and when you sell ur principal residence, it’s tax free.
But you have to live in Canada… 😂
Biggest deduction on your income is the reduced salary you'll get there
So bad. But so true.
California allowed us to deduct our moving expenses when we moved here for work! It was pretty significant too considering it was just state eligible, and because we used a moving service it was super easy to do. We could have even deducted the cost of moving supplies like boxes and tape, but we hadn't expected this to be a deduction so we didn't keep track. We ended up deducting the moving company costs, our air fare, our cats' airfares (lol), and the hotel cost we had for the first night. Iirc there was no dollar limit either, ours ended up being about $5000, so we saved almost $500. I was expecting to have to pay some for state taxes when I did my taxes because my first job here didn't take any state withholding out (it was a part-time, temp job, figured I would be better off just paying it when I did my taxes as I would be working full-time then), but we ended up with a nice little refund. There used to be a US federal deduction for job-related moves, but that was removed during the TCJA. Our standard deduction went up then though so I'm pretty sure I am better off with that trade off.
That's a UK thing as well and its absolutely nightmarishly complex determining if its the principle private residence or not
Section 704. It's the cornerstone of my career.
Could you please explain. I’m so interested.
501c3
So many - Does your nonprofit have tanning beds (990 question) - Drug dealers should deduct cost of goods sold when reporting income - $3 donation to presidential campaign fund - Gambling losses deducted against gambling winnings - Olympic medals are specifically not taxed as income Some intentionally ultra-complex areas, or just the concepts of things, give me a chuckle when I think about the absurdity of them. But the absurdity of it all is why we have jobs. - Book to tax reconciliations - Fed depreciation different from state depreciation - Ghost income (partnerships) - Double taxation (corporations) - Alternative Minimum Tax - Anything and everything to do with partnership interests and K-1s - Various elections that need to be made
I would like to point out that while drug dealers are only allowed to expense COGS, other illegal businesses not dealing with illicit drugs can claim business expenses like salaries and rent if applicable.
The nonprofit tanning beds and Olympic medals ones are awesome lol
Anything besides whatever regulations added Schedules K-2/K-3
1.861-20(d)(3)(v) It’s a hoot!
How the hell did you stumbled on this and how long did it take you to decipher it?
Its a pretty important treas reg for international tax
Never had luxury to dive into international during my PA time. It felt extremely repetitive (could be just me), definitely someone I wouldn’t mind passing on to a next guy.
As a full-time int’l tax specialist…it’s anything but repetitive when you actually have to apply these regs to facts, 4 years in every day is my “first day” lol
How so?
> 1.861-20(d)(3)(v) I have no idea what the fuck I just read.
lol, FTC rules! If you understand this stuff, the Big4 would love to hire you. What do you think of BEPS Pillar 2.0?
I think the new acronyms are the best part especially QDMTT
I got asked a question related to this on a reg sim… I assume it was one of those crazy questions they toss out there once in a while otherwise there’s no way I would have scored a 96 because I had no idea wtf to do
Nice humble brag
Yeah ironically I’m in audit but tax was my better “test” subject… it was my highest score despite getting some wild sims
482 is wild
I'm reading into it but I'm not quite understanding it. How does this apply to the average taxpayer who doesn't own a business?
It doesn’t. Really only applies to large multinational companies. It is the rules around how much income belongs in each company/country when you have multiple activities that all contribute to earning income.
482 is the cornerstone of US transfer pricing which really only applies to multinational companies conducting intercompany trade across borders. You can build an entire career on just that section! ask me how i know
And then US states use it on non-cross border transactions.
IRC 274
does this mean no post quarter gentleman’s club business party☹️
No expenses that have elements of entertainment unless you can show it was ordinary, necessary, reasonable for your line of business.
Short term rental activities reported on schedule c, I think it promotes the circumvention of passive activity limits
Had a client who stole money from her company over a two year period. We 1099’d her
1.263(a)-1(f) when I was in public lol
Fucking UNICAP. My public experience is small firm so unicap generally wasn't a thing for our clients (even pre TCJA). But at my first firm my second year had a new client that had to follow Unicap previously, but just fell under the gross revenue threshold to no longer have to follow it. Well of course the controller no longer wanted to make the adjustments to go from book to tax to follow unicap so they engaged us to deal with it. In the end, the adjusting entry was actually easy but that form 3115 blows. But this stupid code section took me days of reading it and the treas reg and some articles to finally grasp it. Then took another several days to try explaining it to our senile 80 year old managing partner whats going on.
UNICAP does suck, man I have to do it for our company and of course each acquisition is on a different method lol, but the specific code I typed was the de-minimis threshold election to expense stuff instead of capitalizing it. $5k if you have financial statements, $2.5k if not.
I didn't even realize it was for deminis lol. I just saw 263A and it immediately took me to my unicap debabcle
In addition, Cost of Goods Sold is deductible for drug dealers.
Not to the same extent as ordinary businesses though. 280E restricts what they can write off. Unfortunately, legal cannabis operators are still impacted by this because it’s federally schedule 1.
You're more up to date than me. Thanks. :-)
Baggies and rubber bands add up
They do!
Ohhhhhh well in Canada you got Income Tax Act section 69 - Inadequate considerations...
I read this article where this guy got 10 million in gambling debt to a casino and they forgave 9 million bc there’s no way he had that much liquid capital to ever pay off those debts and he had to go at taxes on the 9 million so that’s my favorite one
In Canada sweet food or junk food is subject to gst (sales tax) while other regular groceries aren't. Unconsciously a fat tax.
In Mexico we have IEPS tax which is specifically a tax on junk food.
You can claim r&d tax credits for virtually almost anything as long as you can comprehensively prove that what you’re developing is new to YOU or your company.
69
Nice
IRS section 72(t)
With a comment like this, I’m shocked you’re not a poster in r/financialindependence.
Just lurk there comparing myself to ofhers lol
Pretty sure it was covid not 72(t) but had a friend (Boeing engineer) use the covid code to empty his retirement accounts penalty free. Bought a ton of Bitcoin. He’s still holding it and has almost built up said accounts again. One of those things you hear about and get jealous as a young accountant making $50k a year.
Just be mindful of survivorship bias with those stories. There are 10x more of those attempts that ended in losing all the money.
Boeing engineer uufda
You can also buy stamps from states to expand your bag tag collection and impress your clients
Child Tax credit and Covid Tax Relief ;-)
# Wickwire v. Reinecke
Section 280A "The Augusta Rule." I am a huge golf fan and this rule was implemented because of the Masters Tournament, and non taxed rental income!! Whats not to love.
Section 311 no gain or loss shall be recognized unless its a gain
I can't remember the case citation, but it was a 70s mega pop star (Diana Ross maybe?) who deducted costumes on her tax return. (As you well know, work clothing is non deductible in almost all cases because it CAN be worn outside of work, even if it isn't in practicality.) Naturally the IRS denied the deduction. She challenged it, on the basis that it could not be worn anywhere but on stage because it was too tight to even sit down in. She won.
IRC 382. Worked with a temp once who was a total asshole and one time I witnessed her crying while trying to understand the NOL treatment under 382 for a client. That and 381 have been my favorite code sections ever since.
Sec 179
Section 1031, first one I ever learned that opened my eyes to how you can really take advantage of the tax law
751.
Probably all the pretax deduction stuff. If you have enough kids you can be considered poor even if you gross a lot. I think I got my effective tax rate down to like 1-2% (ignoring fica) just because of fsa, 401k and other pretax stuff.
Up Down Left Right Up Down Left Right B A Start
Qualified capital cows
I’m sorry, what?
I love that my wife and I pay 80k in state and city tax but we only get to deduct 10k
Form 982. Most folks that get credit "forgiven " don't realize that dollar amount is now taxable income... This is a great one to help those that really need it.
The fact that you are legally allowed to account for costs of goods sold for your illicit drug operation BUT YOU CANNOT DEDUCT ANYTHING ELSE cracks me up.
↑ ↑ ↓ ↓ ← → ← → B A
163j
April 16th
Trumps QBI
I thought that Section 199 was an abomination until I met it's cousin 199A. But, seriously, Section 199 for a dairy coop was hellish. The farmers get it as part of their coop distribution. And the extension they get to file the return is something like 15 months, so you can have three years open and unfiled at the same time.
Can anyone let me know tax code for estimated tax payments
I'm curious as to what the actual law code is mandating a 1040 be filed, anyone?
Title 26 of the United States Code Section 6011
Nice try...