Tax Preparation FAQ

1.) Can a personal credit card be used business purchase and take 100% business expense deduction?
     a. The focus is the use intent of the item purchased, not what is used to complete the purchase transaction.
     b. A business credit card used to buy an item for personal use cannot be the focus of the actual use from personal use to business use at 100%.

2.) Can I take off dry cleaning?
     a. Only special use clothing such as uniforms required by employer.
         1. Cannot be worn outside the confines of the requirements of the job
         2. Examples are referrers, parcel deli very series such as Fed Ex, UPS, repairman uniforms, etc.
     b. just because boss requires a suit and tie for the office, it can also be worn to church, date night, other occasions not related to employment.

3.) How are capital gains reported?
     a. Capital gains are the net gain of the sale of a capital asset.
     b. It is the excess of sale proceeds minus the cost basis of the capital asset.
         1.) Cost basis is the original purchase price plus any cost of improvement to the assets.
         2.) Fair Market Value as stated by an independent appraisal when original purchase price is not known.
     c. Reported on Schedule D if personal property or intangible property; on Form 4797 if real property (real estate).

4.) Types of income exempted from tax
      a. Government obligations such as Treasury bonds or notes, municipal bonds.
      b. Social Security benefits with exceptions.
          1.) Combined with pensions, investment income up to $25,000 (single filer) or $32, 000 (joint filer) then up to 85% of benefit may be taxable.
      c. Life insurance proceeds, disability benefits, court settlements for medical expense reimbursement are other examples.

5.) What is the difference between qualifying child and qualifying relative.
     a. Qualifying child is the child or stepchild of taxpayer or descendant of child or stepchild of taxpayer, or sibling or descendant of sibling of taxpayer, a legally adopted child or foster child living with taxpayer who resides for the entire year with taxpayer and taxpayer provides more than 50 % of the child's support, under the age of 19 at the end of the tax year or under the age of 24 if attending a full time qualified educational institution, and not filing a joint return with a spouse except it be a refund only return. more than 50% by the taxpayer, younger than the taxpayer, not over the age 19 at the end of the tax year or 24 along being enrolled as a fulltime student at accredited educational institution, and cannot have filed a joint return with his/her spouse except when filing a refund only return.
        1.) A permanently disabled person meets the age requirement no matter the age of the individual.
        2.) If child is under 24 years of age and enrolled full time in accredited post-secondary educational institution, no earned income limitation. Otherwise, child is limited to personal exemption amount of current tax year, which for 2017 is $4,050.00.
     b.  A qualifying relative is expanded to include step siblings and half siblings along with parents, grandparents, other direct ancestors of taxpayer (excluding foster parents), stepparents, aunts and uncles, nieces and nephews, spouse's parents and siblings, child's spouse, and an individual living in the taxpayer's principal residence the entire year and considered a member of the household regarding the relationship test
       1.)  Cannot be a qualifying child of taxpayer
       2.)  Gross income cannot be more than personal exemption for the current tax year which for  2017 is $4,050.00 which is the  same for 2016.
       3.)  Taxpayer still has to supply more than 50% of the support for the qualifying relative.