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Miscellaneous Taxable Income

Miscellaneous Taxable Income

As more tax revenue is sought to alleviate the growing US government budget deficit, the IRS is working to assure reporting of income from all sources-including miscellaneous income. Expanded requirements are in place for reporting of paid amounts on Form 1099. In addition, the IRS requires tax professionals to follow ethical standards for helping taxpayers identify and report all sources of income. Enrolled agent continuing education requirements include an enrolled agent ethics course.

The fiscal deficits of state governments are also leading to increased scrutiny of income by state tax collection agencies. In addition to requirements for California tax preparers to guide taxpayers toward accurate income reporting, other states are initiating registration of tax preparers. Tax continuing education requirements in most of these states is similar to coursework for CA enrolled agents.

Many taxpayers neglect to account for income from miscellaneous sources, such as side jobs, bartered exchanges, gambling, contest winnings, prizes, and awards. Income from all of these sources is taxable. Such income is subject to income tax for US citizens even when earned in another country. It usually incurs state income tax for the state in which it’s earned.

Many types of income from odd jobs are not reported on Form 1099, usually because the amount paid by any single source is less than $600. This includes fees received for babysitting, lawn care, house cleaning, and repair services. All of these amounts are reportable by the recipient as self-employment income. The only exception is for recipients with income that’s too low to require filing a tax return. Ordinary and necessary expenses incurred to generate the income are deductible before calculating the tax liability. Self-employment tax is also assessed on this income.

Even when no money changes hands, income may be reportable. This occurs when property is exchanged for services in a barter arrangement. In such cases, the fair market value of the goods-or services-obtained in the exchange are taxable income.

Gambling winnings are taxable as miscellaneous income. This includes amounts received from casinos and racetracks plus winnings from lotteries, raffles, and tournaments. The full amount received is reported as income. Taxpayers who itemize deductions and have accurate records may deduct gambling losses up to the amount of gambling winnings.

In most cases, an amount received as a prize or award is miscellaneous taxable income. This includes cash prizes and the fair market value of any merchandise or products awarded.

These sources of income can have substantial effects on tax liability. Penalties apply when an insufficient amount of tax liability is paid through either withholding or quarterly estimated tax payments. This requires taxpayers with miscellaneous income to anticipate the tax consequences as well as accurately report final results. Enrolled agent continuing education provides the knowledge to help taxpayers address these matters.…

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Advice From Enrolled Agent School Graduates Averts Big Tax Mistakes

Advice From Enrolled Agent School Graduates Averts Big Tax Mistakes

Advice from a high quality tax expert helps people avoid mistakes they can make with limited information. A top source of assistance on tax matters is enrolled agents. Graduates of enrolled agent school learn about only tax subjects for their professional examination. By contrast, the CPA exam covers other topics.

Differences in the services of an enrolled agent vs. CPA became clear when national accounting firm KPMG marketed a tax shelter to owners of S corporations. As it turns out, the arrangement appears to have destroyed taxpayer S corporation elections.

The tax shelter involved S corporation shareholders donating shares to a tax-exempt entity. When the type of income was interest and dividends, the charity had tax-free income and did not incur tax on “unrelated business income.” During a pre-determined period, the S corporations made no distributions to shareholders. At the end of the period, the charitable organizations donated the shares back to the original owners.

The income that had accumulated tax-free within the corporations was then available for distributions to shareholders. Instructions from enrolled agent exam preparation convey that distributions to S corporation shareholders are not taxed because the shareholders have already paid tax on the corporate income. But the KPMG program sheltered the income from tax. The result was nontaxable distributions on income that was never taxed.

It all seems like a neat way to legally avoid tax. However, enrolled agent classes reveal that nothing is ever neat when applying the tax code. The work is always fraught with difficulty and challenges.

One of the measures KPMG had to implement in the tax shelter was assurance that the stock shares would revert back to an original owner. To protect against a charity’s refusal to return shares, warrants were issued to the original shareholder. These warrants enabled potential purchase of a large number of new shares that could dilute the charity’s holdings into insignificance. In addition, shareholders retained control over their S corporations during the donation periods by only donating non-voting stock. They retained a separate class of all the voting shares.

These facts would have raised an eyebrow of any IRS enrolled agent if only a purchaser of the KPMG tax shelter had consulted with one. The troubling feature of the entire program is the multiple classes of stock. S corporations can only have one class of stock. Distribution and liquidation rights must remain identical for all shares.

The court pointed out that warrants are alternative “instruments, obligations and arrangements” that are prohibited for S corporations. That is, the warrants prevent the charity from future enjoyment of the full rights of distribution and liquidation. This case points out the trouble with S corporations using warrants or options to achieve discriminatory results among shareholders. Adding that information to EA continuing education can allow enrolled agents to save many taxpayers from the agony of losing S corporation status.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.…

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General Article

Help Your Child Build Skills During the Summer Months With Continuing Education

Help Your Child Build Skills During the Summer Months With Continuing Education

You can enroll your child in on of the countless continuing education programs out there today for young children and help him mold his brain while school is out of session. He may be upset with you for making him go to school while his friends are out playing, but he will thank you later on for how ahead it put him in the education game.

Many churches offer summer bible camps that allow students the opportunity for continuing education on their religion. Or, there are also countless summer camps that you can enroll your child in to give them the opportunity to learn more about building important life skills while meeting and reconnecting with kids his own age.

You are also sure to find continuing education programs put on by the local school districts, art centers, science centers or language programs. For example, you could enroll your child in an intensive Spanish language course to help him learn the language before taking the class this fall in school.

The opportunities to engage your child in education and positive activities during the summer is endless, as long as your child is a willing participant. If he is adamant that he does not want to participate in anything that does not involve sitting on the couch or lounging by the pool, let him know that his choices now will affect everything in his future life: from his future allowance increases to the colleges he can choose from in the future.

He may not react to the college part now, depending on his age, but he will most likely recognize the importance of his decisions when his allowance is involved! You can use this as a powerful bargaining chip when discussing summer continuing education options.

This will pay off for you in the future. Your child will no doubt come to you one day and thank you for the extra push you gave him on his educational path. He will understand how important it was when he realizes how far ahead of his peers he is and how many more options he will have in his life resulting from the summer continuing education classes he had to take. So pull him off the couch and into the world of education!…

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How to Make Money Tutoring Students

No matter if you are still holding a regular teaching job in a school or have already retired from an active teaching profession, you can make money by tutoring students. Sometimes, this type of calling is more fruitful than teaching in a school. Tutoring students is your chance to apply your teaching technique to it fullest. And because personal treatment is considerably more enhanced in the interaction between a private tutor and a student, students often tend to learn better from tutoring than in the classroom.
There are many ways for you to make money and announce yourself as a tutor in the community you live in. One way is to identify children in your community who are not achievers. If you taught at the community school, this should not be difficult to do. In case you know the parents of the children in question, you can nicely open up the topic on one of the occasions that you meet with one another in a social gathering, whether during Sunday worship or at school programs.
When you start to make money tutoring, you will discover the subjects you are really good at teaching. Little by little, enhance your techniques and methods for improving student comprehension. Remember the success of your tutorial program will determine if you are going to continue to make money and more money at that from your tutorials.
Very often too, tutors learn as they make money. In fact, some tutors claim that they learn more than their students. This is because with every school year, new knowledge is cropping up for subjects, new techniques are discovered and old methods are improved in teaching. To make money on tutoring involves constantly updating yourself on the subjects you cover. This ensures that your methods and your knowledge do not fall behind and below the level of the school’s.
In the matter of tutorial fees, you need to make money using the current rates among people engaged in the same thing. Try to keep your rates at the safe median or average level. You have to be competitive but never astute. Your rates should not give people the idea that you are making a business instead of a living of tutoring. The fees you charge should make money but not be an issue. People will want to send their children to you because of the effectiveness of your tutorial methods, not because of your prices.
Additionally you can conduct tutorials over the web. You might even organize classes via a video conference facility that can be installed on your computer and the computers of your students. This is an excellent alternative to house-to-house tutorials which only allow you to work with one student at a time. In this arrangement, you can deal with four or five students at the same time, thus giving you more time to devote to personal matters the rest of the day. However, to reinforce the learning of the students, you should have personal consultations once a week.
On that last note, you might even say that to make money tutoring on the web is a better alternative to teaching in school and could develop to a full blown business for you.…

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Education Policy

Understanding Conic Sections – Parabolas, Circles, Ellipses, and Hyperbolas

The following will serve as a brief overview of conic sections or in other words, the functions and graphs associated with the parabola, the circle, the ellipse, and the hyperbola. Initially, it should be noted that these functions are named conic sections since they represent the various ways in which a plane can intersect with a pair of cones.
The Parabola
The first conic section usually studied is the parabola. The equation of a parabola with a vertex at (h, k) and a vertical axis of symmetry is defined as (x – h)^2 = 4p(y – k). Note that if p is positive, the parabola opens upward and if p is negative, it opens downward. For this type of parabola, the focus is centered at the point (h, k + p) and the directrix is a line found at y = k – p.
On the other hand, the equation of a parabola with a vertex at (h, k) and a horizontal axis of symmetry is defined as (y – k)^2 = 4p(x – h). Note that if p is positive, the parabola opens to the right and if p is negative, it opens to the left. For this type of parabola, the focus is centered at the point (h + p, k) and the directrix is a line found at x = h – p.
The Circle
The next conic section to be analyzed is the circle. The equation of a circle of radius r centered at the point (h, k) is given by (x – h)^2 + (y – k)^2 = r^2.
The Ellipse
The standard equation of an ellipse centered at (h, k) is given by [(x – h)^2/a^2] + [(y – k)^2/b^2] = 1 when the major axis is horizontal. In this case, the foci are given by (h +/- c, k) and the vertices are given by (h +/- a, k).
On the other hand, an ellipse centered at (h, k) is given by [(x – h)^2 / (b^2)] + [(y – k)^2 / (a^2)] = 1 when the major axis is vertical. Here, the foci are given by (h, k +/- c) and the vertices are given by (h, k+/- a).
Note that in both types of standard equations for the ellipse, a b 0. Also, c^2 = a^2 – b^2. It is important to note that 2a always represents the length of the major axis and 2b always represents the length of the minor axis.
The Hyperbola
The hyperbola is probably the most difficult conic section to draw and understand. By memorizing the following equations and practicing by sketching graphs, one can master even the most difficult hyperbola problem.
To start, the standard equation of a hyperbola with center (h, k) and a horizontal transverse axis is given by [(x – h)^2/a^2] – [(y – k)^2/b^2] = 1. Note that the terms of this equation are separated by a minus sign instead of a plus sign with the ellipse. Here, the foci are given by the points (h +/- c, k), thevertices are given by the points (h +/- a, k) and the asymptotes are represented by y = +/- (b/a)(x – h) +k.
Next, the standard equation of a hyperbola with center (h, k) and a vertical transverse axis is given by [(y- k)^2/a^2] – [(x – h)^2/b^2] = 1. Note that the terms of this equation are separated by a minus sign instead of a plus sign with the ellipse. Here, the foci are given by the points (h, k +/- c), the vertices are given by the points (h, k +/- a) and the asymptotes are represented by y = +/- (a/b)(x – h) + k.
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Primary Education

The Benefits of Online Tutoring

As a mom, you only want the best fit your child. And for you, it’s not enough that you send him to the best school that you can afford but also giving him all the opportunities for learning.
This is why when you noticed that your child is struggling with his studies, you don’t hesitate to hire an online tutor. The tutor will work with your child in a more focused way thus improving your child’s grades.
1. Advancement
Online tutoring can help your child advance in school and in his subjects. If you want to accelerate your child’s learning during school, one-on-one tutoring may be for you. Online tutoring can help your child delve deeper into the topics he is currently covering in school.
Tutoring can also help your child with advancement while school is not in session. For example, if placement tests are taken after the winter recess you can sign your child up for online tutoring during his or her winter break so they place higher when they return to school. That can also apply before the school year begins (i.e. have you child do one-on-one online tutoring before the school year begins) to place higher on those beginning of the school year placement tests.
2. Homework Help
Online tutoring can help with current problems and struggles your child is having in school. Homework is a good place to start. Your child’s homework is given to solidify and further concepts discussed in class. The online tutor can help your child digest and clarify any questions or problems he or she may have while the topic is still fresh in their mind.
3. Supplement
If your child’s school has a weak curriculum or your child is more advanced than what is being offered, tutoring can help you supplement their curriculum. In your supplementation of your child’s curriculum you can work closely with the tutor to help strengthen your child’s weaknesses and expand their knowledge base.
4. Paper review
Once your child reaches a certain point in high school there are many papers that must be written on a variety of topics. Possibly you have a very demanding job and cannot read and re-read their papers all week long. Or perhaps, you were not the best at writing papers, whatever the reason a tutor can assist your child in the arduous task of writing papers.
5. Busy schedule
If one or more of the aforementioned reasons for signing up your child with an online tutor applies to you and you are busy, then online tutoring is the way to go versus conventional tutoring. Traditional tutoring is usually set up during certain hours and a child or tutor may need to be picked up or dropped off. But, with online tutoring, the tutor is there for you anytime you or your child needs them. Many tutoring programs and schedules are centered around your schedule as to easily fit into your life.…