Let’s get into it…
E-Filing
As a taxation professional, I truly dislike e-filing. It simply makes it easier for them to choose returns to audit.
When returns are mailed, they have to pay someone to type them in so that they can check them. When e-filed, they can simply process the data.
Further, identity theft is a continuing problem on e-filed returns. Mailing the return is the safest way to file. If, on the other hand you would like to electronically file, please let us know. This option is, of course, available.
Reasonable Compensation: S-Corp
There have been a number of new cases enforcing the reasonable compensation rules of S-Corporation Tax Law. If you own an S-Corp, it is in an active trade or business, and you are profitable, you must take a reasonable salary.
Reasonable Compensation: C-Corp
The owner of a C-Corp cannot over-compensate themselves in order to eliminate double taxation. Your W-2 must be reasonable, given your profession and the number of hours worked.
Noncash Charitable Contributions
The amount of a taxpayer’s charitable contributions deduction for property contributed to a qualified organization is generally the Fair Market Value of the property at the time of the contribution. Because of the inherent temptation and uncertainty of determining the FMV of donated property, Congress and The IRS have placed a number of restrictions on the deductible amount of certain types of property.
Be extremely conservative when providing this information. We may need to get an appraisal to back up our deduction.
Day Trader’s Losses Limited
The IRS has ruled that most day trading activities do not rise to the level of a trade or business and are therefore disallowing ordinary losses above $3,000.
Records Retention and Substantiation
The primary responsibility for records retention is your job, not ours. If I have to repeat this 1000 times, I will.
The Federal Government wants you to keep records for seven years. The Illinois Department of Revenue wants you to keep them for nine years. No Exceptions.
Everything that looks, acts, or even smells like substantiation for your accounting records must be kept in a paper format for that period of time. It’s not our responsibility to do this. It’s yours.
We aren’t just talking about receipts. Everything, including but not limited to Invoices, Sales Journals, Sales Receipts, Sales Invoices, AR Agings, Payroll Journals, AP Spreads, Other Liability Balances, Equipment Purchase Documentation and Descriptions, Loan Agreements, Monthly Bank Statements and Credit Card Statements etc., should be kept.
Record retention is your responsibility. Substantiation of the deduction is also your responsibility. We may ask for copies of canceled checks, bank statements, payroll returns, liability balances, etc. But as you can now see, those items alone will not substantiate a deduction. You must keep everything.
Let me leave you with this…
Chicago’s Luxury Real Estate Market has seen a precipitous decline in the past year. Problems in the market include…
1 – Third Quarter Chicago home sales of $4 million or more, plummeting 28% from the same period of 2021, according to data from BrokerMetrics. The median price of those sales was $4.625 million, down from $5 million in 2021’s third quarter.
2 – The median price of Chicago condos above $1 million dropped 9.1% in the third quarter from the third quarter of 2021, according to a recent report by brokerage @properties.
3 – By comparison, the median price of Chicago single-family stand alone homes above $1 million rose 14% in the third quarter from the same period of 2021.
The problems in the Downtown and Gold Coast Luxury Condo Market all began with the George Floyd riots.
While other major cities like New York and San Francisco have rebounded from periods of strife in the wake of that time, Chicago has seen its overall crime rate remain high. Crime in the city has climbed 36% year-to-date compared with the same period 2020, thanks in large part to major spikes in theft and carjackings.
I have clients in Streeterville who won’t walk their dogs after 6 pm at night. Why? They’re simply afraid.
The problems in these real estate markets are easy to understand. Why would anyone want to pay $4M for a condo in an area where crime at night is rampant?
The answer is they aren’t. And until these issues are handled, they probably won’t.
This is the twenty-first column in my series trying to get our clients ready for their December Tax Planning Sessions.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.SalarySolutions.net
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.