LANDLINE MAGAZINE

 

NOVEMBER, 2007

 

FREQUENTLY ASKED QUESTIONS

 

Question:  I had a traditional IRA that I just closed last week.  I didn’t withhold any taxes because I wasn’t sure whether or not I had to.  I closed it without withholding any, so when I have to do my taxes next year, what do I have to do?  Is 10% automatically going to get deducted from my return?  I don’t want to get in trouble and I know a certain percentage has to go back, so just wanted to know what happens next.

 

Answer:  When you withdraw money from a Traditional IRA before you turn 59 ½, the money taken is taxable income in the year it is withdrawn.  In addition to that, the IRS adds a penalty of 10% of the amount.  When you do your taxes, you’ll add the amount withdrawn to your income.  You will also have a 10% penalty on the amount withdrawn.  If you used the money for a qualifying event like excessive medical costs, purchase of a first home, disability, schooling, etc. then that amount is not subject to the extra 10% tax, but it is still included in taxable income.

 

 

Question:  We purchased a satellite TV and radio which we use in the truck and at home for my husband to use in his business.  Is the purchase deductible along with the monthly subscription fees?

 

Answer:  Any expense necessary, which is true for all business expenses, in the production of income is deductible.  Ultimately, you would need to prove that the equipment is not being used for personal purposes.  You may have to allocate and deduct only the business portion.  The equipment can be depreciated if used over 50% for business and the subscription can be directly expensed.

Question:  My husband and I are both OTR drivers contracted with the same carrier and driving our own tractor.  We live in the truck full time.  Our household goods are in storage in our home and the rest of the house is rented to a long term tenant.  Can we deduct per diem for each of us for the entire year?

 

Answer:  No you cannot.  You must have a tax home as your main residence.  If you have no regular place of business and you do not maintain a tax home, you may not deduct any per diem.

 

 

Question:  How do IRS agents determine that you have not reported all of your income?

 

Answer:  A common method that the IRS uses is to simply add up all of the deposits in your bank accounts during the year.  The presumption is that all deposits represent income unless you can establish that the money came from a gift or a loan.  A revenue agent will also review credit card and bank loan statements to determine if payments made during the year to reduce the balance were made from sources other than your bank accounts.  Be careful if an agent wishes to visit your home to determine if there are new appliances and/or furniture to see if unreported income was used to purchase these items.  The IRS must obtain a search warrant which never happens in a civil case.  You do not have to give a revenue agent permission to tour your home!  However, our position is always let the agent in your home as you should be above board and have nothing to hide.

 

This article has been presented by PBS Tax & Bookkeeping Service, a company which has been providing income tax and bookkeeping services to the trucking industry for over a quarter century.  Contributions to this article were made by Shasta May, Director Business Development for PBS.  If you would like further information, please contact us at 800-697-5153.    

 

“Everyone’s financial situation is different.  This article does not give and is not intended to give specific accounting and/or tax advice.  Please consult with your own tax or accounting professional.