CAN'T CLAIM CHILD

Larry, I hope that you can help me. I divorced a few years ago and although my two children live with their mother, the divorce decree said that I could claim the children every other year. My accountant extended my 2008 return because my ex told me that she and her new husband were going to claim this year. I have a refund coming and don't understand why I just can't file.

Alex

Alex, You might just be out of luck. Unless your ex signs a form 8332, which you attach to your return, by tax law you are not allowed to claim your children. Should you just go ahead and file the return and should your ex claim the children, this most likely would be caught by the IRS and you would receive a notice.

In actuality, by not following the divorce decree, your ex has committed a contract violation. The IRS does not care about that. You could take your ex to court to force her to honor the contract. That may not be a door that you want to open. Plus, you would most likely incur attorney fees.

Larry Kopsa CPA

WHEN CONSERVATIVES AND LIBERALS AGREE I PAY CLOSE ATTENTION

Normally Paul Krugman, the liberal pundit and Nobel laureate in economics, and Paul Ryan, a conservative Republican congressman from Wisconsin, share little in common except their first names and a scorching passion for views they champion from opposite political poles. So when the two combatants agree on a fundamental threat to the U.S. economy, Americans should heed this alarm as the real thing.

See the entire article from Fortune magazine at CNNMoney.com/Fortune.

EMPLOYEE ACHIEVEMENT AWARDS

Dear Larry, I am thinking about issuing an award to my top seller. I would like to know if it is better to give him cash, or an actual gift. If possible, I don't want him to have to pay taxes on it. I would appreciate any information you can give me.

Thanks,
Walter

Walter, the best information I can give you on this subject is on our website. Click on Achievement Awards to learn about giving and receiving employee awards.

It is a pleasure serving you!

Larry Kopsa CPA

BOY SCOUT CAMP

Expect to see fewer postings on our blog next week. Starting this Sunday, I'll be sleeping outside with the bears and my 12 year-old son at Boy Scout Camp.

I'm looking forward to spending some quality time with Ryan, with the exception of the mosquitos and the Polar Bear Swim.

If you have any questions while I'm out enjoying nature, please email me at lkopsa@kopsaotte.com, or call 800.975.4829.

Larry Kopsa CPA

1099 QUESTION

Hi Larry, I read your blog (regarding the 1099-MISC) and have a related question I hope you can help me with.

I received a 1099-MISC for about $5000 in "self-employment" compensation last year. Only about half of this amount is actually my income, the rest I paid out to 6 subcontractors. However, only one of them received greater than $600 from me so, strictly speaking, I am only required to send THIS person his own 1099-MISC.

I am considering sending the others--who earned less than $600--each a 1099-MISC anyway. Since I want to share my tax burden with my sub-contractors, would it behoove me to send out 1099s to each of them anyway (even though I'm not required to)--just so it's documented as non-employee compensation? Or is this just a waste of time & money? I appreciate any advice you have.

David

David, regarding your situation, having good records should help you to avoid any problems. As far as a 1099 is concerned, you really only need to give a 1099 to the individual you paid over $600. The other people you pay less than $600 to do not need a 1099. Just by sending them a 1099 does not document they are a non-employee.

If you need to obtain a Form 1099, you can download a copy from the IRS at http://www.irs.gov/, in the upper right hand corner there is a search tab.

I do need to mention that 1099s should have been issued to the individual by the end of January and a 1099 with a copy of the 1098 going to the IRS prior to the end of February. If you do get a notice from the IRS that your 1099s are late, I would argue with them that there should be no penalty for late filing. You won’t know about that problem for another six to nine months, but let me know if you do have a problem and I can walk you through it.

I did mention a 1098. A 1098 is really a cover form showing you only had one 1099. The 1098 can also be downloaded from the IRS website. Check out the forms, they are not as confusing as it sounds.

It is a pleasure serving you.

Larry Kopsa

HOW LONG SHOULD I KEEP MY RECORDS?

Larry, I've been cleaning house and was wondering how long I need to keep all of my old tax papers.

Barbara

Barbara, here's a link to our Record Retention Guide on our website. It shows you how long to keep your records for tax purposes. I hope this helps.

Larry Kopsa CPA

WHAT DOES ONE TRILLION DOLLARS LOOK LIKE?

All this talk about "stimulus packages" and "bailouts"...
A billion dollars...
A hundred billion dollars...
Eight hundred billion dollars...
One TRILLION dollars...
What does that look like? I mean, these various numbers are tossed around like so many doggie treats, so I thought I'd take Google Sketchup out for a test drive and try to get a sense of what exactly a trillion dollars looks like.

We'll start with a $100 dollar bill. Currently the largest U.S. denomination in general circulation. Most everyone has seen them, slighty fewer have owned them. Guaranteed to make friends wherever they go.

A packet of one hundred $100 bills is less than 1/2" thick and contains $10,000. Fits in your pocket easily and is more than enough for a week or two of shamefully decadent fun.

Believe it or not, this next little pile is $1 million dollars (100 packets of $10,000). You could stuff that into a grocery bag and walk around with it.

While a measly $1 million looked a little unimpressive, $100 million is a little more respectable. It fits neatly on a standard pallet...

And $1 BILLION dollars... now we're really getting somewhere...

Next we'll look at ONE TRILLION dollars. This is that number we've been hearing about so much. What is a trillion dollars? Well, it's a million million. It's a thousand billion. It's a one followed by 12 zeros.
You ready for this?
It's pretty surprising.
Go ahead...
Scroll down...

... I give you $1 trillion dollars...

(And notice those pallets are double stacked.)
So the next time you hear someone toss around the phrase "trillion dollars"... that's what they're talking about.