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Archive-name: taxes-faq/part1
Posting-Frequency: monthly
Last-modified: 1996/1/14
Misc.taxes Frequently Asked Questions (FAQ)
General (part 1 of 1)
Maintainer: wayner@metronet.com (Wayne Ross)
Copies of this FAQ as well as those for other newsgroups may
be obtained by anonymous ftp from rtfm.mit.edu. For the misc.taxes
faq look under /pub/usenet/news.answers/taxes-faq (this is part1).
Or, send email to mail-server@rtfm.mit.edu with send
usenet/news.answers/taxes-faq/part1 in the body of the message,
leaving the subject line empty.
Contents:
Misc.taxes newsgroup (group charter, history, mailing
list and archive site(s)).
Misc.taxes.moderated newsgroup (charter)
Other FAQs of interest
Abbreviations used in misc.taxes
Internet tax resources
IRS publications
Basis
Estate taxes
Gift taxes
Information returns
Misc.taxes newsgroup
~~~~~~~~~~~~~~~~~~~~~~~~
The unmoderated misc.taxes (m.t.) newsgroup is one of the
principal Usenet groups which deals with taxes (mostly US Federal).
The original charter was tax laws and advice. In the recent past
the group's content has expanded from questions and answers to tax
questions, to include discussions of proposed tax schemes, (flat
tax, value added tax, etc.) and tax protest issues.
The volume of protest, advertising and other postings to
misc.taxes had in the minds of some so cluttered the newsgroup,
that in December 1995 a second newsgroup, misc.taxes.moderated
(m.t.m.) was voted upon and created to focus more narrowly (see
below). The efficacy of the moderated group remains to be seen.
For a number of years, Sam Houston State University has
provided digests of the misc.taxes and gatewayed these digests into
the FedTax-L mail-oriented discussion list. The following is noted
at that site:
"FedTax-L is a mail-oriented discussion list supported by Sam
Houston State University of Huntsville, Texas, to provide a
generally unmoderated environment for the discussion of federal
taxation issues from both a practical and academic viewpoint. The
discussions are intended to include latest trends, regulatory
actions, and, of course, a lively exchange of ideas and concerns."
"The list is mirrored to and from the USENET newsgroup
misc.taxes so that any discussion appearing on that media is
forwarded to subscribers of FedTax-L and all posts appearing on
FedTax-L are forwarded to all network news sites carrying
misc.taxes."
"To subscribe to FedTax-L, include the text: SUBSCRIBE
FedTax-L "Your Real Name in Quotes" in the body of a mail message
to LISTSERV@SHSU.BITNET (LISTSERV@SHSU.edu)."
NOTE: Whether this service will be expanded to
include misc.tax.moderated is unknown!
Sam Houston State indirectly archives(ed) the unmoderated
group as a by-product of maintaining the FedTAX-L mailing list see:
gopher://niord.shsu.edu:70/1
(try the 4th item on main menu, then the 8th)
An archive of the last month's postings of m.t. was also
maintained by kentlaw.edu see:
http://www.kentlaw.edu/lawnet/lawlinks.html
(select tax matters on the forms menu)
Misc.taxes.moderated newsgroup
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The charter for misc.taxes.moderated follows:
Misc.taxes.moderated is for the discussion of taxes,
including, but not limited to, proposed and existing tax laws,
regulations and procedures, among professional tax practitioners
and other interested persons, and for answering queries concerning
taxes.
This newsgroup is intended to provide a home for
well-tempered discussions, including, but not limited to, the
following subjects:
1. Current developments in tax law including but not limited
to, court decisions, legislative enactments, and executive
actions with tax implications, and proposed laws and
actions.
2. The content and effects of existing tax laws, and rulings of
courts at all levels.
3. Professional ethics and professional discipline of tax
professionals.
4. Problems encountered by tax practitioners that may be of
interest to the tax community.
5. First-person anecdotes and commentary by non-practitioners
concerning encounters they have had with tax practitioners,
the IRS, the courts or other entities which administer
taxes.
6. Queries (including those from non-practitioners) concerning
the content of the tax law, and replies to those posts, so
long as the context of the exchange makes it clear that
**specific legal tax advice is not being provided**.
Responses will be posted in the newsgroup and not sent by
E-mail, so that the response can benefit from peer review
by others in the group.
7. Tax humor (There is such a thing).
Other Usenet FAQs of interest
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
"kill files" are becoming a survival necessity on Usenet; from
rtfm.mit.edu above try:
ftp: rtfm.mit.edu/pub/usenet/news.answers/killfile-faq
Parts of the misc.invest FAQ contain tax information as
well as investment information try ftp:
rtfm.mit.edu/pub/usenet/news.answers/investment-faq/general/
part4, part5, part6 and part7
Part 4 discusses 401(k) plans, IRA's and SEPS; part 5 dividends
and 'shorting against the box', part 7 short and long term gains,
wash sales and the Uniform Gift to Minors Act (UGMA).
Abbreviations used in misc.taxes
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Some posters sign their articles with titles:
CA Chartered Accountants, used principally in the UK
and present/former Commonwealth countries to indicate accountants
licensed and regulated by the country or province to provide advice
on accounting and tax matters to the public.
CFP Chartered Financial Planners, a US designation for
those who have been licensed by their state to provide financial
advice to the public. Areas of advice include investments,
insurance, taxation, etc.
CPA Certified Public Accountant, US equivalent of CA.
These individuals like those preceding are licensed and regulated
by the states, are required to pass a written proficiency
examination, satisfy a one or two year experience requirement and
hold a college level degree.
EA Enrolled Agent, a US designation for persons enrolled by
the Internal Revenue Service (a US Federal government agency)
to provide federal tax advice and services to the public.
These individuals are required to pass a written proficiency
examination and conform to the IRS rules of practice.
Other common abbreviations are:
IRC or code (The US Internal Revenue Code, the law or statutes
passed by congress, usually in the form IRC 61).
Reg or regs (The regulations interpreting the code published
by the US Treasury and/or Internal Revenue Service, usually in the
form Reg 1.61(a)(1)).
Rev Rule (Internal Revenue Rulings further interpreting the
regs or code, usually in the form 95-67).
Rev Proc (Internal Revenue Procedures IRS administrative
procedures about a specific subject or area, usually in the form
Rev Proc 95-3).
IRM (Internal Revenue Manual, the IRS employees manual setting
out how agents and others are to perform audits and examinations,
assess penalties, etc. Most of the manual is available to the
public, however, some sections are for internal use only).
Pub (IRS publications intended to assist taxpayers in
complying with specific sections of the IRC or in handling certain
type of transactions, usually in the form Pub 510).
Internet Tax Resources
~~~~~~~~~~~~~~~~~~~~~~
Internet tax resources are extensive and change almost daily.
There is a significant state and federal government presence and
the emphasis to date seems to be on laws, regulations, tax forms,
etc. Publically accessible commentary, and explanations by other
than the tax authorities is limited. As more accounting and legal
firms establish home pages the amount of commentary should
increase.
The IRS home page below provides a great deal of US Federal
tax information:
http://www.ustreas.gov/treasury/bureaus/irs/irs.html
Included are: a FAQ, toll free and local numbers to contact
the IRS for information, downloadable tax forms, instructions and
publications, key word search of the document data base, and
downloadable tax forms in various formats. These form files
are large and may require lengthy connect time. The Adobe Acrobat
executables (very large) is also available for download.
Last year Compuserve also made available the forms and Acrobat
reader for download. Other on-line services may also provide this
material.
One of the most comprehensive non-governmental listing of tax
information (mostly US) is maintained by Frank McNeil. Frank's
listings are available at:
http://www.best.com/~ftmexpat/html/taxsites.html.
Barry Rubin also maintains an extensive linked listing of tax
resources (including state tax pages) on his homepage.
http://www.netpoint.net/~br/
Note: The tilde ~ is required. Many http servers use
the tilde to specify certain site specific file paths.
In 1994, several firms offered electronic filing via the
Internet and there have been some newspaper articles on the
possibility of the IRS offering direct electronic filing (bypassing
third parties), via the FedWorld BBS which is reachable using
telnet.
IRS Publications
~~~~~~~~~~~~~~~~
The IRS produces a vast number of publications. These range
from the comprehensive "Your Federal Income Tax" to specific topics
like "Accounting Periods and Methods". IRS Publication 910
(available via IRS homepage) lists many of these publications, and
provides a topical index to the publications. You may also be able
to find copies of many of the publications at your public library.
The advantage of these publications are that they are free and
authoritative, and if followed are seldom disputed by the IRS. The
disadvantage is that they reflect the IRS position which may not
always be the most taxpayer favorable or reflect adverse court
decisions.
-o-
DISCLAIMER:
The following is for general information only. It is not
intended to be tax advice, and should NOT be relied upon. Please
contact your tax advisor for specific questions.
-o-
Basis
^^^^^
Basis is the dollar amount attributed by the tax rules to
some item of property. Although similar to cost or carrying value
in its usage, it is mainly a tax creation. Most often one sees
basis used in connection with some other words, i.e. adjusted
basis, depreciable basis, gain or loss basis, substituted basis,
etc.
Usually a gain on the sale of property is the difference
between the proceeds of the sale, and the seller's basis in the
property sold.
The determination of basis can vary depending upon the
character of the property, from whom and under what circumstances
it was obtained, etc. You should refer to the tax publications
above or consult your tax advisor for specific questions.
Estate taxes
^^^^^^^^^^^^
Property in an estate may be taxable, if the estate is
large enough to be subject to estate taxes. Estate taxes, however,
are levied against the estate not the beneficiaries of the estate.
Of course, if you are the only beneficiary then you will in effect
pay the estate tax. Remember an estate tax is based upon the value
of estate assets, not the income which may later flow from the
assets.
Income from an estate asset which was distributed to you
will or will not be taxed, based upon the character of that income.
For example, if an estate included municipal bonds (exempt as to
income), the estate would pay an estate tax on the value of the
bonds, but the interest you receive after the bonds are distributed
to you will not be taxable.
In the above example, since the value of the interest
accrued, and not yet paid on the bonds is an estate asset, that
accrued interest is part of the value of the bond and is taxed to
the estate.
Gift taxes
^^^^^^^^^^
A gift for tax purposes means the transfer of property
without adequate and full consideration. If you received 'some
item' in exchange for your car or your services to 'some person',
it wasn't a gift.
For simplicity let's assume you received shares of stock
from your mother on your birthday. First, your mother must
determine the value of the stock on the date of gift. If the value
is $10,000 or less there is no gift tax, because there is an annual
exclusion of $10,000 per donee (recipient). Keep in mind, that if
your mother also gave you $5,000 in cash then the total gifts
within the year exceeds the $10,000 exclusion.
If the value of the gift(s) exceed $10,000 there still
may be no gift tax, if your father and mother elect so-called
"gift-splitting". In gift-splitting one-half of the gift(s) is
deemed to be given by each spouse.
If the value of the gift(s) is more than $10,000 a gift
tax return must be filed by the donor (giver) by April 15th of the
year following the year of the gift, and a gift tax may be payable
by the donor, NOT the donee. Note: A short Form 709 is required for
split gifts over $10,000 even if no tax is due.
Estate and gift taxes are unified excise taxes on the
transfer of property, and there is a $600,000 lifetime credit per
transferor for the total of both, which could reduce any gift tax
due. We are getting into deeper water now, and you should consult
a professional for further information.
Information returns (1099 & K-1's)
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
You are required to report income whether or not you
receive a 1099. Although information returns may make preparing
your return easier that is NOT their primary purpose. The purpose
of information returns (Forms 1099, etc.) is to help the IRS
collect taxes due.
You are responsible for reporting the correct income
amount on your return regardless of the amount reported on Forms
1099. The IRS matches the income you report with that shown on the
1099's it receives. If an erroneous 1099 is received, you should
first contact the payor and request them to send you, and the IRS
a corrected information return.
If the payor does not comply with your request and the
amount is significant, you might send the payor a certified letter
setting out the error and attaching copies of any supporting
information. The purpose of the letter is to get the payor to issue
a corrected information return, and to have written proof for the
IRS that you tried to set the matter right.
Retain a copy of your letter, so that if, and when challenged
by the IRS, you can demonstrate your good faith attempt to correct
the situation. You may wish to file a copy of the letter with your
return as well, although the computer matching system seems to
ignore some return attachments.
Forms K-1 are specialized information type returns filed by
so-called pass through tax entities, i.e. (partnerships, trusts,
some estates, and small business corporations). Like a 1099
their purpose is to show the amount of income, deductions, etc.
attributable to, and reportable by individuals with an interest in
the issuing entity.
K-1's are lengthy forms which show information by type,
and indicate where on your 1040 each item is to be reported. Some
K-1 deductions and credits may not apply to you, if for example you
do not itemize your deductions. You should read the applicable
instructions, contact the issuer or your tax advisor for specific
questions.
User Contributions:
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Last Update March 27 2014 @ 02:12 PM
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