Tax Legal Questions

It is possible to take deductions without a receipt as long as you can prove the expense with reasonable certainty. For example, if you drive from Cleveland to Chicago for a four day business trip and you have hotel receipts in Chicago, you can deduct the travel expenses based on reasonable estimates of the cost of gas, tolls, meals, etc. If your business is home remodeling and you remodeled a bathroom, you can deduct the reasonable costs of the tile, new plumbing fixtures, paint, that glue stuff they use to hold done the tiles (hey, I'm a lawyer not a home repair expert). It is VASTLY preferable to keep your receipts (or at least pay with a card). The first reason, is that the IRS doesn't challenge receipts in normal circumstances. The second reason is that you usually don't remember every expense, so you're losing some valid deductions. the third reason is that you'll spend a lot of time attempting to remember all your jobs and expenses last year compared to going through the receipts.... Read More

There are three requirements to take the home office deduction on a self employed project:1/ A particular area of your home must be regularly used for the business.2/ the particular area must be exclusively used for the business3/it must be the principal place of your business. Most often the exclusive use part is the problem. Most people don't have a place that isn't used both for the business and personally?... Read More

I believe that the revenue agent performing your audit is confused. She is classifying your use of the car as "for hire" because your compensation is based on miles traveled. However, the IRS definition of "for hire" use is used in the transportation of goods or people. It is often pointless to attempt to persuade a revenue agent, the ones assigned to individual audits aren't accountants, they have little understanding of the law and their training is formulaic. To them every issue is black and white, once they have decided how they will handle an item, you can never change their mind. I would advise you to assemble the information she requested. You might be surprised and the actual expense method might give you a bigger deduction. If the actual expense method doesn't, when you get the audit report (the so called 30 day letter) request a determination by the irs appeals office. These people are usually accountants and lawyers and they understand the complexity of tax law and how to use references. Since you do not transport goods or people, they should agree you qualify for the standard mileage method. Since this determination will be based on interpretation of IRS publications and tax cases, you should probably be represented.... Read More

Pass through taxation applies to Federal income taxes, it doesn't necessarily apply to state and local taxes. Some states and cities tax at the entity level and some tax at the owner level. In either case, all cities and states tax based on the "three factor formula" where the work is performed, where the sales are made and where the the business property is located. If all the work is done in Philly, all the sales are made out of Philly and all the business property (probably a computer or two, maybe a server and some inventory). Then it will be subject to Philly city taxes. It doesn't make a bit of difference what the address of the organizer is. In fact, it's quite common if a lawyer is used to have the lawyer's address on the filing.... Read More

Foreign subsidiaries of US corporations are not subject to US federal income taxes. ?Any profits that are paid by the foreign subsidiary is taxable in the US. (This potential double taxation prevents companies with successful foreign ventures from bringing the money back to the US and investing here). Several US states tax the worldwide income of any business (well, any taxable business, 1/3rd of American economy are tax exempt, so-called "non-profits").... Read More

There are something like 2 or 3 million Americans working overseas. ?Generally, they all have to file US tax returns. ?There are two provisions in the US tax law that reduce or eliminate how much taxes you'll have to pay. First is the Foreign Earned Income Exclusion. ?Basically, you don't have to pay taxes on the first $100,000 you make as a resident of a foreign country. ?YOU STILL HAVE TO FILE YOUR RETURN and YOU HAVE TO REPORT ANY FOREIGN BANK ACCOUNTS. ?The penalties for non-filing are EXTREME. ?Right now is a good time because with Russia attacking in Europe and Muslims attacking everywhere else, the US dollar is high so $100,000 US covers a lot of ringgets, euros and yen these days (warning: with an election coming up a new president who cares about foreign policy more than special interests bucks might try to strengthen human rights and democracy throughout the world - on the other hand Hillary is running so special interests are looking forward to another eight years). The second is the Foreign Tax Credit. ?If you make more than US$100,000. ?You get credit against your US taxes for foreign income taxes. ?The US has the highest tax rates in the world but since you get a $100,000 credit it means you'll be taxed in, say France on your whole $150,000 income but your US tax will only be on $50,000, ?So, you'll probably not pay any US taxes until you make about $200,000 or so. ? It's 2015, with the internet it's easy to find a US accountant who'll do your taxes and communicate online.... Read More