Are You Overpaying Taxes If You Use Tax Preparation Software?Written by Richard A. Chapo
For many business owners answer to this quandary is tax preparation software. Fill out a fairly simple interview, click “print” and out comes a completed return that will pass muster with IRS. The answer to all your problems…or is it?
Can One Software Program Cover All Businesses?
Take a moment to consider wide range of businesses that exist in United States. Now cut that number down to those that can be categorized as “Internet businesses”. If you were asked to write a business plan to provide web design services to each of these services, how long would it be? It would be huge and completely useless because each business would have different needs. A Internet business selling flowers would have completely different needs from an online bank which would have different needs from a hosting company and so on. The only way you could create a practical plan for all Internet businesses would be to offer a collection of general services they could all use on their sites. Tax preparation software designers have same problem.
There are over 15,000 pages in tax code and over 100,000 pages of regulations interpreting those pages. Changes are made to tax code ever year, and new regulations are issued constantly. If one were to create a list of questions for every tax deduction and credit detailed in those pages, list of questions would be size of a phone book! Yet, tax software programmers have somehow boiled it all down to a simple 30-minute interview process? Common sense should tell you that doesn’t make sense.
As practical matter, tax software programs are designed to make sure that you claim a general set of deductions that are applicable to businesses across all industries. Most programs try to mask this fact by asking you to identify your business before proceeding. For a lark, you might try selecting another industry and then running through interview process. You will find that interview process is modified a bit, but you are still being asked same basic tax deduction questions.
Tax Deduction for Alimony Payments? - Yes!Written by Richard A. Chapo
Over 50% of marriages end in divorce in United States. Many divorce decrees include provisions for payment of alimony. The IRS takes position that such payments constitute a form of income and create an alimony tax deduction for person making payments.
According to IRS, alimony payments are taxable to recipient in year received. In turn, person paying alimony can claim a deduction for payments if following tests are met:
1. You and your spouse or former spouse do not file a joint return with each other,
2. You pay in cash (including checks or money orders),
3. The divorce or separation instrument does not say that payment is not alimony,
4. If legally separated under a decree of divorce or separate maintenance, you and your former spouse are not members of same household when you make payment,