I am an experienced tax accountant. AMA. Or don't, and pay Uncle Sam.

Man, this is brutal for my first AMA, and i'm still getting 50% downvotes.

Alright, screw it. I'm just gonna post kittens for some easy karma.

Dude this is the best AMA I've seen for a while. Its great that you're answering so many questions and even followups. I don't have a question today, but you got my upvote. Do more of these, they're great.

Spread the word!

You are about to be slammed with questions for the next few days

The realization sinks in. I have to work 9 hours tomorrow too. I'll see what I can do.

What if it turned out that I wasn't an accountant at all? But actually I was Manti Te'o's girlfriend! How nuts would that be?

As a college student, what kinds of things should I be looking for? Additionally, is it more beneficial to file as a dependent with my parents or as an independent?

This is actually a great question, as easy as it sounds.

First of all, as a college student, you don't have many options. If you have a job, and pay for college via student loans, you may have slightly more to work with.

For the second question, it's almost always better for your parents to claim you, because they will have more income, and therefore more tax to pay. To claim yourself, you must provide at least 50% of your own support (requiring a job and student loans). But I did find the scenario last year where it saved a few thousand by having the college student claim themselves.

I haven't filed taxes for 5 years.

I need to get them done and filed and I will have to pay a good amount of money to the government.

What is the best way to do this?

File them all at once under a "Tax Amnesty Program". Most states offer these as well. The IRS is willing to forgive late payment if you are filing and paying several years. You will need to call the IRS Taxpayer Advocate Hotline to go this route.

Good luck!

Thanks for doing this, by the way. Taxes can be confusing and stressful.

They are confusing and stressful for me too, and I do them full time. Good ol' US tax code...

For the past 2 years I've been claiming fony donations. They are consistent with real donations I've done for many years prior. 1-how much trouble am I in? 2-how likely is it that I'll get caught?

The question is how much do you claim? We actually assume that everyone has at least $500 in donations, because the IRS will never even ask, even if under audit.

Unfortunately, too much more than that can get you in trouble if you get audited. Also, if you falsify documents, you can get in a lot of trouble, more than just a fine or extra taxes.

I encourage everyone to be truthful, but aggressive.

A lot more. I had a great job for many years and donated to small churches a lot. I lost that job 2 years ago.

Well, because you were consistent, it's not a red flag. The statute is 3 years for the IRS, so if you don't see anything by 2015, you are probably in the clear. I would recommend trying other tax saving strategies in the future.

Would they ever go to the churches and audit them and catch me that way?

I've never seen a case of them catching phony donations by auditing actual churches. However, if your employer gets audited, then you are much more likely to get audited. Also, if your name ends in a vowel, you are 40% more likely to get audited.

My name ends in 'y'...

Sometimes audited.

Thank you for this accounting gold!

“If your name ends in a vowel…”

wat

Is that really true? I've never heard of that one.

Well known fact in the accounting world. It's got no reason, other than names that end in vowels are more common.

If I could afford goldi would give it to you. Thanks!

Happy to help!

The statue of limitations is 3 years from the date the return is due (for the 2012 return, it would be April 15, 2016), and this only applies to honest mistakes. There is no statue of limitations for fraud.

Very good point

I used to work for a company in California that also ran a church in order to benefit from the tax breaks: Technically I was paid by a church that didn't hold services or have any members besides the owner of the company.

Was this risky? Are other ways better? Should everyone who wants to minimize how much taxes they pay do it?

That sounds extremely questionable. Strategies like this that are set up only to avoid taxes are looked at very closely by the IRS, and if they ever consider it to be "fraud", they are allowed to go back much farther and assess taxes. I would be careful calling anything a "church" that isn't one. Especially in the next 5 years.

As far as you as an employee, there shouldn't be any risk. But you probably didn't see the benefits that your employer did.

How important is it to have an accountant? My parents have always done their taxes by themselves and so have most people I know maybe its a cultural thing but what are the benefits of accountants, I know my cousin just finished his CPA so I probably should ask him but haven't talked to him in a bit so yeah :D.

So yeah. The more money you make, the more benefit an accountant would be. The tax law is complex, and unless you have a very basic tax return (W-2, 1099-Int), then you can probably benefit from an accountant. Also, if you are thinking about starting a business, see an accountant before seeing a lawyer.

What would you say is the threshold income before you get an accountant vs doing it yourself?

I would say it's more the complexity of income, up to $200,000. If all you have is a W-2, you are fine.

Anything over $200,000 can benefit from a full service accountant for at least recommendations for wealth preservation (how to hold onto your cash in the long term)

I am an experienced Tax Account in Australia. Different tax laws... similar headaches. This is a great idea sir, and I tip my proverbial hat to you. I tried doing an AMA last tax season (our financial years is July 1st - June 30th) to encourage people to do their taxes on time and avoid a hefty penalty, but, it didn't get any traction because the sight trends more towards non-Australian users...

Either way... how do you do sir. Good to see another bean counter here. I've never done too much research on American Tax, but from what I've extrapolated from American ex-pats it seems bizarre and I plan to look into it more, later on in my career.

Good to hear from a fellow number cruncher! Hope all is well down-under!

The American tax code is overly complicated and unclear, because it's been 80 years of adding on top of an idea, rather than an overhaul every few years.

When you itemize your deductions, how are you supposed to keep track of the little things? (Like haircuts for and commuting towards interviews)

Unfortunately, most of the "little things" are subject to a minimum of 2% of your AGI, which means you need at least a couple thousand to even deduct anything.

The best methods that I've seen involve using a running Microsoft Excel spreadsheet, using credit cards and printing out the yearly statements, or using the "Neat" desk organizer to scan receipts.

I work a blue-collar job that offers lots of overtime hours that pay double-time. Sometimes when I'm short on money I will work 70 hours and then switch to "exempt" for my taxes so that I can get a massive paycheck. My question is, as long as I file my taxes correctly for the year, is this an ok thing to do? Or is it something I could get in trouble for?

You can never get in trouble for that, the worst case scenario is if you are underpaid on your taxes when you file your return, the IRS can assess an "underpayment penalty" and ask for more money.

You should be fine as long as it's not a weekly thing.

That's what I figure, but it's good to know for sure. Thanks, man!

No problem, thanks for the question!

I'm renting out a room in my apartment through AirBnb to help with rent. When I report that income, can I use the rent and utilities I pay for the apartment to reduce the amount I owe? I'm not making any money on the rental that isn't going straight back into the rent I pay to the landlord.

I have the same question about periods when I've rented out the whole apartment. I did that over the summer because I was going to be away. I didn't make any more than what I was paying for the apartment, it was just a way not to have to cover rent on an apartment I wasn't living in.

(I should say I'm also in California - thanks shrimpwhiskers)

You can definitely deduct any expenses against the income you received, in proportion to the space rented (Rent 1/4 of the apt, deduct 1/4 of utilities)

However, you may not be able to claim a loss against your other income depending on the amount of time you rented the apartment vs the amount of time you lived there. Have this information available when you go to do your taxes. Having rental losses can be a big help for taxpayers making under $150,000.

Bonus points for using Air BNB!

When paying Domestic Partner imputed income tax (for health insurance for domestic partner, imputed income is added to paycheck, taxed, and then taken out), can you get any of it back. (California)

Whoa, getting a little trickier there Shrimp Whiskers! (totally using that now)

Imputed income tax is used to cover the taxes on imputed income related to the increased cost of health insurance paid by the employer. It is always possible to get income tax withheld back, as long as you have enough other deductions (Business losses, charity, tax credits).

However, if you are only working with a W-2 with the imputed income, you probably won't see much, if any of it back. That's the cost of insurance coverage that may not be available otherwise.

Thank you, sir!

Happy to help! Good luck!

Thanks for doing this AMA!

I was divorced this last year and we have a 2yo together. I was claiming 2 dependents, seeing how I was the majority of our income. When we drafted papers, I gave her the tax deduction because, as of right now, she makes significantly less than I do.

Can I still claim the two dependents? Or do I have to adjust my withholdings?

I would change the claim to 0 exemptions for your W-4 and adjust your withholding. You can only claim 1 dependent (yourself). The loss of a child will be a big hit come tax time, there are a lot of related deductions and credits for children. You may also be better off claiming the child in the future, and pay your ex the difference it makes on her return.

I enter sweepstakes as a hobby. Most companies don't send forms or ask for more info than my mailing address. So, what I'm asking is, if the company doesn't have really any info on me, what all do I have to claim? I read before somewhere that wins under $600 don't have to be claimed on taxes. Thank you!

No-purchase-necessary Sweepstakes do not count as gambling, because you don't wager anything to enter. I would say to let sleeping dogs lie unless you receive a 1099.

I am a senior in high school, and was recently accepted into my #1 choice for college. My parents are upper middle class, and they work 40-50 hour weeks. Our combined family income is probably in the $120k range. Our mortgage still has 50k left on it. I also work on weekends. The college I applied to gave my $23k free and clear every year, plus a $1800 work study and $10,000 in unsubsidized stafford loans (I think that's what they are). I am also applying for scholarships offered by various groups/agencies. My college tuition, per year, is somewhere in the 57k range (without all of the financial aid). Any advice, besides what I am already doing, to knock more money off the tuition?

Edit: People seem to think I am crazy paying 57K a year for school. I would agree. I am only paying 15K a year after scholarships. Thanks for the advice people.

It sounds like you are in pretty good shape, all things considered. The less you have to pay in tuition, the better. Taxes would help with a small percentage at best.

Tell me about it. I'll be the one paying the debt off. It's crazy that I (and many others) will be walking out of school with almost 100k in the hole. Makes me want to throw up just thinking about it.

Same here. 7 years out, and still staring at loan payments.

Goddamn. And here I am looking at med school. Tack on another four years and another hundred grand. Bend over.

Most of my clients are physicians. Totally worth the pain and anguish if you can stick with it. Some serious money to be made.

Who gets more money during tax time: the government or accountants?

The government, but Accountants are a close second, right ahead of poor people.

Care to elaborate on the poor people part? Kinda interested.

Alright, my conservative friend. For most taxpayers, the way that you can get money from the government is by investing in solar energy, investing in small business, paying for college, etc. It costs money to make money.

If you are poor, then you get money back by having a bunch of kids and making barely any money. See the Earned Income Credit. This can be up to $3,000 of all government money back. Not a return of their own money, like most other refunds.

Haha not conservative, just interested. More moderate, if I had to choose.

I'm very moderate, I just think the whole tax code is overly complicated and inefficient.

If Obama walked up to you and said, "Jerkuler, how do we simplify this bitch?", what would you say to him?

I'd say "What up, O-Town. Why don't we switch to a combination flat tax and value added tax (modified sales tax) that works very well in places like New Zealand?"

I think more people are likely to pay their taxes if it was lower and simpler. I would venture a guess that making taxes easier to calculate and having less to pay would outweigh the lost revenue of a lower tax rate.

By flat tax you mean everyone, no matter the income, pays the same rate?

Not necessarily. More like, if you made $50,000, you pay 5%, regardless of your other situations. If you made $200,000, then you pay 8%, regardless of your situation. Just simplified, no itemized deductions, no phaseouts, no AMT, no credits. Just figure out the income, hit them with a tax percentage that much lower than normal, and call it a day.

How experienced?
Favorite tax prep software? Do you prep your own 1040?

7 years experience, but I'm already in line for Partner at my firm. I'm a CPA, and I live for this stuff. (Why else would I subject myself to an AMA?)

Favorite tax prep software is Prosystem's Tax, but it's not available to individuals. Turbo Tax is fine, and i would probably encourage it as much as H&R Block.

Of course I prep my own 1040. I never trusted Chefs that don't eat their own food.

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Accounting knowledge spans all industries. Find something you are interested in, and start in their business office. There are plenty of options available for people with basic accounting understanding and the ability to use a computer.

Why are you opposed to CPA/working for a firm?

Good question, the master's is usually the hold up. The exam is tough, but it's nothing compared to 5-6 years in college.

Back in 2008, I lived in PA, and commuted to Delaware. Some bullshit about paying one state then getting a credit from the other, whatever.

Anyway, Delaware ended up denying me the credit (about $500 if I remember correctly), even though I sent in all of the required paperwork (HR Block did my taxes that year).

I ended up doing nothing about it because I was lazy.

Can I still get my $500?

You normally get a credit in your home state for taxes paid in another state, so it sounds like you should have received a credit in Pennsylvania for taxes paid to Delaware.

Unfortunately, your biggest downfall is the laziness. Statute on most refunds is three years, and we just passed that mark.

Any awesome tax credits/breaks for people that bought a home in 2012? :)

Nope! I mean... Sorry, nope :/

There are credits available for energy efficient improvements! But the first time homebuyer credit has run out unfortunately.

I live in NY, self-employed, and recently have had to deal with two chronic diseases. Medical bills continue to pile up and I'm curious if you have any recommendations from a tax perspective?

The more medical expenses that you can push into your business the better, taxwise. Medical deductions are now subject to 10% of your income normally. If you can set up a medical reimbursement plan and have the business pay, you can deduct the full amount of medical expenses. Be careful if you have other employees working for you. It probably has to be offered to all employees.

Let's not play koy and get down to what we're all waiting for. How do I pay less taxes?

Any legal ways?

Of course I wouldn't do any of these, but just for information sake, how do you illegally hide taxes now that offshore accounts are being raped?

Haha, if it was that easy that I could answer it in a reddit comment, I would be out of a job.

Any illegal way to hide taxes is a bad idea. There are plenty of legal options available.

By far the best way is to start your own business, and form a corporation (not an LLC). Corporations are just large tax avoidance devices, if used properly.

Why am I only getting 1600 when going through the American opportunity credit when I paid more than 4000 in tuition. Thought it was 100 percent of first 2000 then 25 percent of next 2000

That tax credit is also phased out on income limits, so if you made over $80,000, you will need to consider this.

Otherwise, you are correct, $4,000 in tuition would get the full credit.

I made 17K. If I went through a tax preparer vs turbo tax online, would that change the outcome? Because I paid 4700 towards school but am only getting 1658 back. Or how can I make that number reach the 2500 mark.

In that case I would venture to bet that you only owed $658 in total taxes. I believe half the credit is refundable and half is non-refundable.

If I have a single-person LLC, for freelance animation, and I live in my own apartment by myself...what kind of taxes should I file? And, do you have any tips off the top of your head about taxes in my situation? I have no idea what to do. I plan on just going to a tax guy and paying him.

Yes, I do have some tips. An LLC is not a tax saver. It's purely a legal liability shelter. However, LLCs can file a form 8832 to be elected to be taxed as a corporation, and then elect S-Corporation Status. This can save a great deal of self-employment tax. I would still recommend going to a tax guy to help with this.

How much do you get paid?

I get paid well, but not nearly enough. It all depends on the market (big city markets can be lucrative), and the firm (The "big four" pay the best, but work their employees like indentured servants)

Compared to my friends in other fields, I get paid well, but it's the job security that I wouldn't trade for anything. I can quit tomorrow and get hired on Monday.

I'm in my junior year of an accounting degree at a state university. I've taken two tax classes and really enjoyed them. What is it that drew you to tax accounting? How high stress is your job?

To be honest, I got into accounting for one thing: The Ladies.

But seriously, I started for the money, and because I knew I could get a job. It's a very interesting and competitive field, and I get to work with a lot of professionals and all-stars. It's very fulfilling, but demanding.

The only "stress" is in a high volume of work and deadlines. It's nice because you can go home at the end of the day and not worry about work at all. Most accountants have serious hobbies to get them through the busy seasons.

I would definitely recommend accounting degree if you can do it. There's a lot of opportunity in other fields if you don't end up being "an accountant".

I get paid as an independent contractor through my company. I own my own vehicle, commute to work every day, live with my folks, and keep terrible receipts (as in none, and have to rely on my credit and debit car statements). It sucks right now but I'm glad I have a decent job with a future. I rarely purchase anything for work, besides clothing. Any advice on how to not get totally screwed this tax season?

I'm not sure I understand You are an independent contractor, correct?

So in other words, you run your own one-man business that operates out of your house, with your own vehicle, and you treat your own employee to lunch every day?

It sounds like you have a lot of expenses to write off. Hopefully that will put you in pretty good shape. Keep track of car mileage, and track your home utilities, and put your lunches on a the same credit card and print the statement at the end of the year!

got married in october. wife and myself each make about 30k. file joint or separate? if it matters, we rent an apartment.

Did either of you move across state lines?

The answer 95% of the time is Joint. Most tax softwares and firms offer very quick and easy comparisons for this.

How do tax treaties with Canada really work for a non-resident alien filing in both countries? Do you recommend any software packages?

Multi-National filings are very complicated, but my experience with Canadian Tax Treatys resulted in the taxpayer paying full US tax, with a small extra for Canada.

I have not prepped a multi-national with anything other than Prosystem Tax, which is not available to individuals. Sorry to leave you high and dry on this one.

so what's the difference between a 1040 and a 1040EZ? what do you have to be/do to qualify for either?

1040EZ is obviously a much simpler return. Normally, you can only use this return if you only have a W-2 and Interest.

You will need to use a 1040 if you want to itemize deductions, or anything more complicated.

I know there a lot of tax write off's what is the weirdest one you've seen?

It's tough to depreciate a horse over 5-7 years. Both for racing and farming.

Do I need to declare income earned through Kickstarter on my taxes?

You should claim any income you receive, but you can deduct expenses related to generating this income.

The government only knows about income that you receive on some tax reporting document (1099, W-2, K-1, etc). Just an item to note, but disregard, legally.

As a sole proprietor, what is the best option for employees? Ill put into context, I am going to be running a basketball program and want to pay my coaches a monthly "stipend". Would this be best done through an independent contractor type thing?

How does paying coaches by independent contract work factor into my taxes?

Here's the basic rundown - If you pay the employees as employees, then you pick up the payroll taxes, FICA, have to file additional tax returns, etc. The employe picks up everything, but its much better for the employee.

If you pay as independent contractors, the employee picks up the taxes on their end. Much easier for you, not for them.

You will get to deduct any expense related to these payments regardless of the method.

is there a fine line between what can be considered an employee vs an independent contractor? Is there a check list as to what is considered an employee, or is it just up to what the employer chooses?

Yes, the IRS has a checklist. Check the details here:

www.irs.gov/pub/irs-pdf/p1779.pdf

Also! I have another question.

When I left high-school, I never would have thought that I would end up to taxes for a living. If you had have suggested it to a 17 year-old me, he would have laughed and through cheap beer in your face. My first job was as a birthday party clown and the only reason I took a job doing taxes was because I hadn't prepared my own taxes in six years and I enjoyed the irony.

Now, I can't imagine myself doing anything else. So my question to you is how did you come into the job, what do you love about it and why?

Love these questions. I came into the job for the money. And I love it for the people. Honestly. I work with some great people, and I get to work for some great people. It feels like I'm helping people save money, while doing a public service and making sure taxes get paid.

Also, they pay me money.

Would you say its better to wait to file your taxes this year until almost the last minute? People are saying that with all the fiscal cliff bullshit that there are going to be changes and you don't want to screw yourself by filing too early before things settle down. What are your thoughts on this?

Nah, file your taxes as soon as your ready. There's no benefit in waiting. They've passed everything they're going to pass for 2012.

whats the difference between a corporate controller and a financial analyst at a med-big corporation?

Controller usually means "high level bookkeeper". Keeps track of internal information.

Financial Analysts are more often investment related, whether it's evaluating outside investments or businesses, or investing internal money.

If I haven't worked for a certain period of the year is there anything I owe the government?

It depends on the amount of money you made, and how you made it (W-2, independent contractor, etc)

I would recommend at least looking into filing using free federal online software, because most people who don't file because they don't owe are actually missing out on a refundable "Earned Income" credit or refunded withholdings.

As a self employed programmer, I file a Schedule C and report any 1099s I get. I don't report anything I don't get 1099s for.

I also write off a lot of food/gas and mileage that I don't actually use. I don't keep receipts.

I make less than 80k a year.

What are the chances I will get audited and how screwed am I if i do? My last name doesn't end in a vowel :/

Also, I have been skipping one or two years and then filing a couple years at a time. How stupid is this?

I would not recommend skipping filing years. Even if you file and don't pay, you will get into less trouble. Non-payment of taxes gets you penalties. Non-filing of returns is technically a crime.

As far as your Schedule C, it doesn't sound ideal, taxwise, but is probably low risk. Most people don't have proper auto and food documentation. However, this is also the area they would look if you did get audited.

But in all that bad news, you are not a high audit risk until you claim business use of your home.

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The W-4 calculator is never as reliable as hoped. If you claim 0 exemptions, then you should be in decent shape for tax time. The more exemptions, the higher the risk of owing.

I would gauge your W-4 based on your tax return each year. If you owe too much, decrease your exemptions. if you are getting a large refund, then increase. It's a new game every year. Good luck!

I need some tax advice and would prefer to get someone to do my taxes as well. I'm not looking for an FA. I'm capable of picking investments and diversifying. What's I'm not capable of doing is knowing when to realize capital gains, when to exercise stock options, when to go for long term versus short term capital gains, what - if anything - to do about the AMT.

The meta-problem is that I don't know enough about any of this to be able to interview or assess the skills of anybody who purports to be able to give useful advice about this kind of thing.

Any suggestions?

This is a very difficult, as it requires a combination of a Financial Advisor and a tax accountant. Accountants will not be able to manage investments to the degree that you are looking for, and Financial Advisors may not know enough about the tax code. I would look for an investment manager at Smith Barney or Merrill Lynch that has their CPA, and be very clear about your goals.

While you may not have the background to assess these skills during an interview, you clearly know what your goals are, and what you are looking for. Don't be afraid to change investment managers until you find the results you desire.

Do you like cars? I mean, are you a "car guy"?

Odd question, but no, i'm not. Cars are not always a good investment for tax purposes. Haha.

Not sure if this falls into your area of expertise. How would I go about holding equity in a private US based corporation as a canadian with no US presence. I have always been asked for a SSN before shares will be issued, which I am unable to provide since I'm not an American. Thanks!

You will need some sort of US "Taxpayer Identification Number", but not necessarily a Social Security Number.

I would check the following site: http://www.irs.gov/Individuals/International-Taxpayers/Taxpayer-Identification-Numbers-%28TIN%29

You may be eligible for an ITIN. No matter what, it will involve a tedious application sent to the US government. They want to know everyone who is receiving income from US companies.

I have two questions on deductions. The first one deals with this ruling: http://www.advocate.com/news/daily-news/2011/11/04/irs-rules-favor-trans-deductions

Apparently transition related medical procedures are tax-deductible. Do you know specifically what would be applicable, or does anything related to the process of gender transition count? I have up to $25k of potentially deductible medical expenses from 2012 and am hoping to deduct them. For the main expense, FFS, I have a big fancy note from the doctor explaining the medical necessity of the procedure. Do I include documentation like this, or do I just claim a deduction and then show it if I get audited?

Secondly, how does renting out rooms in your home work? In July, I purchased a 3 bedroom, 2.5 bath townhouse. I live in one bedroom and rent out the other two. Generally, interest should be tax deductible, but what about the other things? I figure I have to report the rental income, but I would like to make it go away through various expenses.

I've had a lot of expenses in purchasing the house. Can I deduct these as a business expense? Since I'm one of three people living here, can I consider 2/3 of all the costs for the house to be business expenses? Like can I deduct 2/3 the cost of fixing the HVAC system, 2/3 the cost of remodeling the kitchen, 2/3 the cost of the new washer and dryer, etc. Is this kosher?

First of all, it sounds like you are ok to claim the medical deduction, but just be aware that it will increase the chance of an audit. As long as you keep the documentation, you will be fine.

You are correct in sectioning a portion of your home for the rental. The percentage is based off of square footage of rental specific space, not on people. Bring this information into your accountant to help determine the best use.

I was a college student for then first quarter of the year or so and then graduated (January - to April). During this time I worked 25 hours a week as an intern, and after April I was hired on full time. Am I eligible for the American Opportunity tax credit? I paid about $3000 in taxes this year and playing in Tax Act I would get all of that back if I claim my tuition and apply for the American Opportunity Credit. That set off a red flag for me and it felt like I was doing something wrong. What should I do?

Are you claimed as a dependent on someone else's return? You are ineligible for the American Opportunity Credit if you check the box that you can. You should be eligible for the credit as long as you received a 1098-T for Tuition paid for an undergrad degree in 2012. be claimed as a dependent.

You have some options, along with your parents. Confirm that whoever claims you as a dependent also claims the American Opportunity Credit.

I'm a college student who is essentially financially independent (I pay for tuition, car insurance, rent etc. except for my cell phone). My parents make too much to qualify for financial aid but are unwilling to cosign for loans or anything. I have 2 jobs. Any advice on how I should file? (Or advice on the fafsa if you have any) Thanks

I would need specific numbers for reliable advice. I would say to run different scenarios for both you and your parents and see what works best overall, and split the winnings.

What are the minimum requirements one has to meet to incorporate? At what point Would it be worth while to "invest" in a shell company? Can anyone just get a grand caymans account, say invest all their money in a shell companys stock and then have all their personal assets under the corporate umbrella?

Whoa, some extreme tax questions here. Someone has a lot of money to hide...

I would say there are safer and easier ways to save on taxes than foreign accounts, and shell companies.

Incorporation is cheap and available to just about anyone, but you want to have a legitimate business concept involved. You can't write off deductions without some form of income.

Unfortunately I can't give too much direct tax avoidance advice without getting a call from Uncle Sam himself...

I have heard there is no law that requires us to pay income tax, also i have heard that income tax is technically unconstitutional. I have also heard of tax insiders/IRS employees saying they do not file tax returns. should I pay taxes and what are your thoughts on this matter?

Sorry, but this is wrong. These devices and theories are used by people to avoid taxes, but time and time again have been torn apart in court.

It is not worth the legal fees and penalties to fight this arguement. Unfortunately, your options are to pay income tax, or move to a third-world country.

I bought and sold a house in 2012. How does my deduction for real estate taxes work? The seller refunded me for time he lived at the house in 2012 but I won't actually pay for 2012 taxes until 2013. Do I have to report the money he gave me in 2012 as income? And I paid for 2011 taxes in 2012 on the home I sold and also paid the buyer for time I lived at home during 2012. I guess I get to deduct both of those? Thanks.

You bought and sold the same house? I don't think that's what you mean, so I'll assume two different.

Your deduction for real estate taxes will be the taxes you paid during 2012 for any house, less the portion of taxes recouped from the buyer of your house(shown on the closing statement), plus any taxes that you paid on the closing statement of your new house. You don't have to recognize any income for real estate taxes.

Bring your closing statement to your accountant. They will make sure everything is handled properly. Be careful if preparing this one on your own. You may want to consider an accountant if you don't even if just this one time.

Okay thanks but can you explain why I would have paid for 2012 taxes for my new house when they are not due until 2013? I actually do see some 2012 taxes i paid on there but I was told they are special Improvement tax for water/sewer that are paid in current year and those aren't deductible anyway.

If you bought a house in 2012, then built into the price would be a portion of taxes that the seller had "prepaid" in January or September.

Check the following site for the rules for deducting buying and selling expenses: www.irs.gov/pub/irs-pdf/p523.pdf

Good luck!

What is the amount that could be written off when you are an American working overseas for a year? On top of that, is the write off only applicable to federal, or does it apply to state as well? Thanks in advance, and have as stressfree of a tax season as you can!

Most write-offs are the same for federal and state.

Check this site for help with determining your options: http://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad

I'm foreign national working in the US and will have to do my tax report pretty soon. Any general advise? Any good website that could give me like the basics of how to fill a us tax report?

Tricky situation.

I actually rely on the instruction forms for a lot of help. Find the basic instructions here: http://www.irs.gov/uac/Form-1040,-U.S.-Individual-Income-Tax-Return

I would take your time and consult a professional if you are unsure. Could only cost $100 at H&R Block

1) As a tax accountant, how do you feel about FATCA and its consequences it will have towards Americans abroad? (This includes accidental americans, green card holders, people with no ties to the US)

2) Do you think that FATCA will ultimately lead to the further economic decay of the US? Will it even be possible/feasible (without going broke) for Americans abroad to be compliant with both the tax laws in their country of residence and as well as the ones that the IRS/US mandates towards its citizen working in another country?

For those people who are unfamiliar with FATCA. and its damaging effects towards the average middle class persons with little or no American ties. Please visit these sites for more info:

http://isaacbrocksociety.ca/

http://www.repealfatca.com/

And even to risk the downvote, I'm going to say while it may be damaging for those with little or no American ties, FATCA is good for America.

I appreciate your insightful questions about a very interesting issue.

I am not one who is a fan of government over-regulation, however this was something that needed to be done. First and foremost, this was done to address revenue lost by high wealth individuals hiding their money overseas. Additionally, this helps to protect (to a limited extent) against the funding of terrorism or other undesirable parties.

FATCA is very difficult to implement, and we have been playing catch-up from day one. It's difficult to understand, and expensive to do properly. However, like most other laws, it's the best current option in the first phase of eliminating foreign malfeasance. I would expect this to be revamped over the next 10 years.

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Well, the hypothetical company should have issued a 1099-Misc to you, and you would consider the income as "Other income, not subject to self-employment", and put on line 21 of the 1040.

Good luck with this imaginary person's scenario!