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| Lutherie and taxes pt 2 -- final answer http://www.luthiersforum.com/forum/viewtopic.php?f=10102&t=1032 |
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| Author: | John Elshaw [ Sat Feb 12, 2005 2:31 pm ] |
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OK, I went in and paid a professional to get the tax advice regarding the section 179 deductions and here is what I was told: Employees are considered to be engaged in the active conduct of the trade or business of their employment. Thus wages from other jobs, including spouses, can offset businees loss on schedule C for purpose of 179 business income limitation. See Reg 1.179-2(c)(6)(iv) and instructions for line 11 of 4562. We also looked up instructions for 4562 line 11 and it specifically says: Also include all wages, salaries, tips, and other compensation you earned as an employee (from Form 1040, line 7). Do not reduce this amount by unreimbursed employee business expenses. If you are married filing a joint return, combine the total taxable incomes for you and your spouse. The instructions actually tell you to use the income from line 7, which includes all earned income. So there it is. I'm going to take the 179 deduction. If you still feel uneasy about it, go to your nearest tax professional and pay a few bucks for some peace of mind. I did, and the trip paid for itself. Cheers! John |
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| Author: | Dickey [ Sat Feb 12, 2005 3:37 pm ] |
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John, you are right. I have paid a professional for the past three years. Turbo Tax was fine when I mainly had two W-2's and a little interest income, slap in the charitable deductions and boom sent. I loved it, worked great. But a pro can help you over the hump questions like this one. I bought a new Nikon D70 camera with a two hundred dollar rebate. In the rebate instructions it explicitly said that rebate applications without the yellow warranty card would be rejected. The next line read: There is no yellow warranty card on the D70 camera. Inside the paperwork what did I find: a yellow warranty card, now should I send it in or not? Honestly I'm not sure, because it says the original yellow warranty card must be sent with the camera for warranty repair....... Uggggggggggghhhhhhhhhhhhhhh! So now I gotta go get on the phone and punch all those numbers to talk to people who don't answer your question, just give you another number to call...... But I'm so happy for you John. There is nothing like the feeling when the taxes are done and you are settled up for another year. Good for you. |
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| Author: | Dave-SKG [ Sun Feb 13, 2005 1:30 am ] |
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John, I quoted you that same reg. The reg is in reference to all wages, salaries, etc. that you earned from THAT BUSINESS...not any business. In other words if you paid your wife FROM THAT BUSINESS or if the business was a "S" corp and you paid yourself a WAGE you would consider that as "wages from your employmet from THAT EMPLOYER (YOUR LUTHIERY BUSINESS). I don't know who you paid but I believe whomever it was is mistaken. I have many examples now from my research that explicitely state that the 179 is limited to taxpayer's income even tho he or she had employment income(wages) from OTHER SOURCES. When the instructions speak of "all wages" I believe that means from the Source that had the 179 deduction not from evey other job you may have worked. That is my interpretation. But Honestly I have no reason to fight on this issue. If I am wrong I will gladly admit it and change how I am handling 179. All I can say ( I have run this past several other CPA's) is that this has always been how 179 was handled. GOOD LUCK! |
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