To expense or not to expense – that is the question.

Capitalization or repair expense?  IRS issues field memorandum to agents.

In December 2011, the IRS issued temporary regulations that offer guidance on capitalizing or expensing costs incurred in the acquisition, production, or improvement of tangible property.  Recently, the IRS’ Large Business and International (LB&I) Division issued a memorandum to field agents concerning their examination of whether such costs have been properly treated Continue reading »

Home Mortgage Interest – Deduction is More Limited than You Think

The home mortgage interest deduction is, as you may know, limited to interest on a maximum of $1,100,000 loan principal ($1,000,000 of acquisition indebtedness plus $100,000 of home equity indebtedness) on your principal residence and a second home, combined.

In a recent case, an unmarried couple purchased two houses together and incurred debt of over $2.2 million. Each individual was on the titles and each individual was on the mortgages. As they were unmarried, they each filed their own tax return claiming a filing status of single, and each claiming interest on $1.1 million of loan principal.

The returns were selected for IRS examination Continue reading »

Form 1099 Reporting: Failure to Do It Can Be Costly!

The IRS has changed its 2011 tax forms and added the following new questions on all business tax returns (including Schedule C for sole proprietors as well as partnership, LLC, and corporate tax returns):

1. 1. Did you make any payments in 2011 that would require you to file Form(s) 1099?
   2. If “Yes” did you or will you file all required Forms 1099?

Form 1099 is used to report certain payments to recipients and to the IRS.  The most common 1099 type form is Form 1099-MISC which is used to report the payment by a business for services rendered to the business (there may also be Form 1099 reporting requirements if a business pays interest or dividends).

Continue reading »