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Choosing The Form of Business For Your New Company

Have you had enough?  Are you done working for someone else, and making someone else rich?  Do you have the skills to do the work and spend the time required to run your own business?

It may be time to get started.

So you sit down at your computer and get ready to register with the IRS.  You start to register your business, and they ask you to choose the type of business entity.

And the option for “one that makes me a lot of cash” isn’t on the list.

So you stop and ask yourself, “Seriously, which one of these do I choose?”

Let’s run through the different types you could choose.  Keep in mind that this is just a primer, and more posts about each of the forms will be coming.

Sole Proprietor

The first one you could choose is a sole proprietorship.  This basically means that you are working by yourself.  You can have some employees, but you are the only owner.  You have complete control over everything, and get all of the income.

It the easiest to form, but it does come with some disadvantages.  If you get into trouble with a client, and they sue you, they could take all your personal assets.  That includes your house, your car, and everything else you own.  Additionally, when you die, so does your business, so it can’t be passed on to your kids (or anyone else for that matter).

In addition, you will owe self-employment taxes.  When you worked for someone else, your employer paid employment taxes on what they paid you.  As the owner of your own business, you will have to pay not only your own payroll taxes, but what would be considered your employer’s portion as well.

You would consider this form of business if you are just starting out, want something simple, and aren’t very concerned with liability protection.

Limited Liability Corporation

So you want to keep it simple, but want a little more protection. A limited liability corporation would give you some limited liability protection, meaning that if you get sued, you won’t lose your personal assets.  You also don’t have as much paperwork as other forms.  And like a sole proprietorship, you also get all the profits.

You face the same disadvantages you would if you had selected to be a sole proprietor.  However, you do get some liability protection, as choosing this form gives you some liability protection by separating you from your business.

This form is great because it is simple and provides some liability protection.  You would still want some insurance all the same since you never know when a customer may decide you did them harm, or an employee does something that hurts a customer.

Partnership

Let’s say you found someone who compliments your talents, and you decide to go into business together.  A partnership is easy to form, as well as inexpensive.  You also get to share the financial burden with someone else.

However, the downside is that you are personally liable for not only the debts you incur for the business, but any that your partner incurs.  So if you go into business with someone not so trustworthy, they could rack up a large amount of debt, and leave you with the responsibility to pay it off.  Be sure that you not only find someone trustworthy to go into business with, but talk with a lawyer to draw up a partnership agreement that protects you and your interests.

Corporation

A corporation is what a lot of people think of when they decide to go into business.  While the other business forms need to be looked at when setting up your new venture, there are several advantages to setting up a corporation.  The biggest is that you have limited liability, with your personal assets protected from any lawsuits filed against the business.  It is also easier to obtain operating cash, since you can sell stock to bring in funds.  There are some tax advantages, such as lower tax rates than the other forms.

The disadvantages to the corporate form is that it is very expensive to form, and the paperwork can be overwhelming.  The record keeping to stay in compliance with the regulations can be quite a burden.  Additionally, the earnings are taxed twice.  This means that taxes are paid on the earnings of the corporation, and then the dividends paid to the shareholders will be taxed.

You would choose this form of business if you were expecting that you would want to grow your company with outside funding, and have the maximum amount of liability protection provided by a form of business.  In addition, you aren’t fazed by the amount of paperwork you need to do.

S-Corporation

Lastly, there is the S-Corporation.  This is a special kind of corporation, but instead of the taxes being levied on the corporation, the items of income and loss are reported on the tax return of the shareholders.  It does have the advantage of being exempt from federal taxes, with the earnings of the corporation being taxed on the shareholder’s return.  However, like the corporate form, there are regulatory requirements, as well as shareholder compensation requirements that might make this form unattractive to someone starting a company.

You would choose S-Corporation status if you had less than 100 shareholders and wanted the advantages of being a corporation.

Choosing the right form for your business can be confusing and stressful.  Drop me a line at chrispedencpa@yahoo.com so we can discuss the right one for your business.

Schedule C-EZ – Can You Use It?

One of the reasons that people don’t start a business is they are intimidated by the tax forms they think they need to fill out.  They take one look at the Schedule C and are blown away by the complexity of the form and all the things of which they need to keep track.  It looks like a very involved form.  Isn’t there an easier way?

Well, there is.  The IRS put out Schedule C-EZ to make it easier for smaller businesses to report the activity in their company.  You may be able to use this form if your business has certain attributes.  Let’s take a look to see if your business would qualify to use this form.

When you first start out, you may not have a lot of expenses, or a lot of income.  Hopefully, that will change quickly, especially the amount of income being brought in.  If you only had expenses of $5,000 or less, you can use Schedule C-EZ.  Just make sure that all of your expenses are included when you make the determination.  It is better to be upfront and not use Schedule C-EZ than to lie and face penalties.

Most small businesses use the cash method of accounting.  That means that you record your revenue when you get paid by your customers and expenses when you pay them by cash, check or credit card.  If your business operates this way, you can use Schedule C-EZ.

If you have started a business that does not have any inventory at any time during the year, you can use Schedule C-EZ.  It is unfortunate that the small businesses that make crafts to sell are basically force out of the ability to use the easier form.  However, the Schedule C does provide a step by step process to calculate cost of goods sold, which also gives you an idea of the cost of providing your wares.

Hopefully you made money during the year.  If your expenses were more than your revenue from your customers, you would have a net loss.   If you had a net loss from your business, you cannot use Schedule C-EZ.

If you were the sole owner of your business, and this was the only business you had, you can use Schedule C-EZ.  If you had a partner or incorporated, or more than one business, a different form must be used.

Most small businesses operate as one person operations.   Some do hire employees to help with the work.  Unfortunately, if you have employees, you will have to use Schedule C, as you cannot have employees and use Schedule C-EZ.

To operate your business, you may buy equipment to help with making products or providing services, even if it is just a laptop computer.  If you do use equipment, you will take depreciation on this equipment.  If you do take depreciation to spread the cost of the equipment over its period of use, thereby using form 4562Depreciation and Amortization, you cannot use Schedule C-EZ.

Did you have a home office?  If so, you can probably deduct expenses for the business use of your home.  If that is the case, and you are eligible and do deduct the cost of a home office, you cannot use Schedule C-EZ.

Most of the time, a small business owner is very involved in running their business.  If not, you will be involved in what is termed passive activity, meaning that you not materially participate in the business.  This type of activity usually occurs for companies that are involved in real estate rentals and limited partnerships.  If you did have this type of business, and you had a loss in a prior year that was unallowable according to IRS instructions or rulings, you cannot use Schedule C-EZ.  Check with a CPA to see if your business was a passive activity.

Have you ever tried to use Schedule C-EZ, but found that you could not use the form for various reasons?    I’d love to hear about it.  Leave me a comment below.  Also, if you have any questions, shoot them to me at chrispedencpa@yahoo.com, and I would be happy to answer them.  If you need help with other tax questions, or with preparing a return, drop me a line, and we can discuss your situation.

In accordance with Circular 230 Treasury Department Regulations, I am required to advise you that any tax advice contained in this article may not be relied upon to avoid penalties under the Internal Revenue Code.  If you are interested in a written opinion that can be relied upon to prevent the imposition of tax-related penalties, please contact the author.

Personal Exemption Phaseout

Yesterday, I wrote a post about how your itemized deductions would be reduced if you had income greater than a certain amount.  But itemized deductions are not the only items that are reduced when you meet certain income levels.  Your personal exemptions are also reduced by a certain amount when you reach a certain income level.

As part of the same legislation that gave us the itemized deduction reduction, the Personal Exemption Phaseout (PEP) , the personal exemption will be reduced by two percent for every $2,500 that your adjusted gross income is greater than the threshold for a given filing status.

For 2013, the phaseout of the personal exemption of $3,900 (for 2013) will be over the following income ranges:

Filing Status

Phaseout Starting Point

Phaseout End Point

Single

$250,000

$372,500

Head of Household

$275,000

$397,500

Married Filing Jointly or Qualifying Widow(er)

$300,000

$422,500

Married Filing Separately

$150,000

$211,250

 

So, how does this work?  Let’s take a look at an example with a married couple with three children, who have adjusted gross income of $300,000.  In this example, the personal exemptions would total $19,500.  However, because their income is $50,000 over the phaseout start point, the exemptions would need to be reduced.  $50,000 divided by the aforementioned $2,500 is 20.  Therefore, the exemptions need to be reduced by 40% or $7,800 ($19,500 in total deductions times 40%).  The amount of personal exemptions that the family can claim will be $11,700.

Have you ever run into a situation where your personal exemptions deductions were reduced on your tax return due to income limits?    I’d love to hear about it.  Also, if you have any questions, shoot them to me at chrispedencpa@yahoo.com, and I would be happy to answer them.  If you need help with other tax questions, or with preparing a return, drop me a line, and we can discuss your situation.

In accordance with Circular 230 Treasury Department Regulations, I am required to advise you that any tax advice contained in this article may not be relied upon to avoid penalties under the Internal Revenue Code.  If you are interested in a written opinion that can be relied upon to prevent the imposition of tax-related penalties, please contact the author.

Itemized Deduction Reductions

I’ve been writing about the items you can deduct on your taxes, as well as a few expenses that are not deductible.  You probably have started organizing your receipts to take advantage of the deductions you can claim.  However, there is a caveat that I need to make you aware of.

Did you work another job to make ends meet?  Did your income go up?  Did your spouse go back to work?  I ask these questions to make you think if you income went up last year.  If so, you may face a reduction in the amount you can claim in itemized deductions.  For 2013 and the foreseeable future, if your income is greater than $300,000 if you are filing as married filing joint, $150,000 if filing married filing separately, or $250,000 if filing single, you will see a deduction limitation that is the lesser of either (1) 3% of the adjusted gross income above the aforementioned amounts or (2) 80% of the allowable itemized deductions.

So what does this mean?  Let’s say you and your spouse are filing jointly, and have an adjusted gross income of $500,000.  You have $21,000 in itemized deductions, with the following itemized deductions:

  • Mortgage interest – $5,000
  • Property Tax – $6,000
  • Charitable Deductions – $10,000

Looking at the two methods of reductions, let’s see how much the reduction would be.

  1. 3% x $200,000 ($500,000 – $300,000) would reduce your itemized deductions by $6,000
  2. 80% x $21,000 would reduce the itemized deductions by $16,800

Based on these calculations, the $6,000 in reductions would the lesser reduction.  Therefore, the $21,000 in itemized deductions would be reduced by the $6,000, leaving you $15,000 in itemized deductions.

Keep in mind that these limitations do not apply to deductions for medical expenses, investment interest, or casualty, theft, or gambling losses.  However, since the deduction for medical expenses requires that you can only take a deduction for expenses greater than 10% of your adjusted gross income in 2013.

So how do you avoid running into this situation.  First, try to reduce your adjusted gross income by making contributions to retirement plans.  Second, talk to your accountant about planning out your deductions over a couple of years so you can lessen the impact in one particular year.

Have you ever run into a situation where your itemized deductions were reduced on your tax return due to income limits?    I’d love to hear about it.  Also, if you have any questions, shoot them to me at chrispedencpa@yahoo.com, and I would be happy to answer them.  If you need help with other tax questions, or with preparing a return, drop me a line, and we can discuss your situation.

You Can’t Deduct That!

I’ve been writing about the items you can deduct on your taxes.  Be it medical expenses, charitable contributions, or gambling losses, there are a few options available to reduce your tax bill.  However, there are a few items that are definitely not deductible.  Let’s take a look at a few of them.

The first item is funeral or burial expenses.  Having a loved one pass away can be traumatic, and costly.  However, the tax code does not allow for you to deduct for the costs of paying the last respects to a loved one.

Speaking of traumatic events, my flower girl is getting married.  The little baby I held in my arms and brought great joy to my life is all grown up and is ready to start her life as a married woman.  While I am overjoyed for her, it does break my heart that her expenses of her wedding will not be deductible.  But she is a strong woman, as are her parents.  They can handle it.

In addition, the amount she pays for her and her fiancé’s wedding license is not deductible.  This is also true for car license fees and amounts paid for dog licenses.

If you get a parking ticket, or another type of fine or penalty, you cannot deduct the amount you paid on your taxes.  Of course, if you don’t want to deal with the financial pain of having to pay these fines, don’t commit the infraction.  Additionally, you cannot deduct bribes and kickbacks.  If something is against the law, you cannot deduct it.

We enjoy watching those home improvement shows, and dream of improvements to our modest bungalow.  However, we will not be able to deduct the costs of home improvements.  Something to keep in mind when looking at tile.

Everyone needs to have insurance.  Be it for your home, car or life.  As much of a necessity as insurance is, you cannot deduct its cost, save for medical insurance premiums.  However, don’t let the non-deductibility be the reason you don’t get insurance.

Did you sell your home?  I know in this economy that a large number of homeowners are underwater on their mortgage.  If they sell their home and have a loss, they cannot take a deduction for the loss on the sale of your home.   That may be a reason some of them do not sell, as they hope the housing market will improve enough to get them out of the hole.

Do have a will?  It is a good idea to have one.  Unfortunately, the cost to have an attorney draw up the will is not deductible.  Additionally, any other legal expenses you incur are not deductible.

A few days ago, I wrote about the deductibility of costs of traveling for your job.  As was mentioned in the post, the cost of commuting is not deductible.  This is one I really could use to up my refund, as I am sure it would help you as well.

Have you ever had something you thought you could deduct, but find out you couldn’t deduct it on your tax return?    I’d love to hear about it.  Also, if you have any questions, shoot them to me at chrispedencpa@yahoo.com, and I would be happy to answer them.  If you need help with other tax questions, or with preparing a return, drop me a line, and we can discuss your situation.

In accordance with Circular 230 Treasury Department Regulations, I am required to advise you that any tax advice contained in this article may not be relied upon to avoid penalties under the Internal Revenue Code.  If you are interested in a written opinion that can be relied upon to prevent the imposition of tax-related penalties, please contact the author.

Deducting Gambling Losses On Your Taxes

In previous posts, I have been talking about deductions that are subject to the 2% floor.  Now, I will be discussing an itemized deduction that is not subject to this limit.  This would be reported on line 28 of Schedule A, which is labeled “Other Miscellaneous Deductions”.

Do you spend a little time gambling?  Go see the ponies run and place a little something to make it fun?  Do you buy lottery tickets?  Did you play blackjack on that trip to Las Vegas?   Did you win anything?  If so, you will need to report any winnings as income on your 1040.  You will get a Form W-2G, which will show you the winnings you need to include on line 21 as “Other Income”.  You will get a Form W-2G if one of the following occurs:

  1. The winnings are $1,200 or more from playing bingo or a slot machine,
  2. The winnings, reduced by the amount of the wager, are from playing keno and are $1,500 or more,
  3. The winnings, reduced by the amount of the wager, are from playing in a poker tournament and are $5,000 or more,
  4. The winnings from other games, when reduced by the wager (if you choose to reduce the winnings by the amount of the wager), are
    1. $600 or more, and
    2. At least 300 times the amount of the wager, or
    3. The winnings are subject to federal income tax withholding.

Now that you have recorded your winnings as other income, you can take an itemized deduction for your losses.  Now, a little bit of bad news here:  You can only deduct losses to the extent that you have winnings.  For instance, if you won $500 during the year, but lost $1,000, you can only deduct $500 of the losses.  A little unfair if you had a bad year, but hopefully you have better luck in a following year.

It is very important that you keep good records of your wins and losses.  This will help in providing support of the deduction in case of an audit.  You need to be able to provide receipts, tickets, statements or other records to substantiate the amount of your wins and losses.

Other types of deductions allow for you to carry forward a loss to a future year.  However, you cannot do this with a net gambling loss.

What experiences have you had with reporting gambling losses on your tax return?  Do you have any other cautionary tales about gambling and taxes?  I’d love to hear about it.  Also, if you have any questions, shoot them to me at chrispedencpa@yahoo.com, and I would be happy to answer them.  If you need help with other tax questions, or with preparing a return, drop me a line, and we can discuss your situation.

Deducting Costs of Traveling For Your Job

In a previous post, I talked about deductions that are subject to the 2% floor.  As you may remember, these expenses, when taken in total, are greater than 2% of your adjusted gross income.  You can only deduct the amount that is above this 2% floor.  For example, if you had an adjusted gross income of $100,000 and expenses of $2,500, you would be able to deduct $500 of these expenses ($2,500-$2,000, which is 2% of $100,000).

In this post, I’d like to discuss the deductibility of travel expenses you incur as an employee.  Keep in mind that you can only deduct these costs if you are not reimbursed by your employer, and have traveled away from you tax home overnight and on business.

Living in the Washington, D.C. area, one of the questions I get asked is if commuting costs are deductible.  I wish they were.  However, you can deduct the costs of going from one workplace to another, whether it is another location used by your employer, or if you have a second job and are going there from your second job.  If you have a temporary work location outside of the metropolitan area where you live, and you reasonably expect to be working there one year or less, you can deduct the cost of going from your home to this temporary location.

So, what types of costs are deductible?  The types of costs that are deductible would include the following:

  1. Cost of travel by airplane, automobile, bus, or train,
  2. Taxi, commuter bus (not being used for commuting to your job), and limousine costs,
  3. Cost of sending luggage and display materials,
  4. Costs to operate and maintain your automobile when traveling away from home on business,
  5. Cost of meals if your trip is overnight or long enough to require you to get substantial rest,
  6. Cost of lodging if your trip is overnight or long enough to require you to get substantial rest,
  7. Cost of cleaning and laundry on an overnight trip,
  8. Cost of business calls,
  9. Tips for providing the services listed above.

The best way to make sure you get the proper deduction, as with other deductions, is to keep your receipts and make sure the purpose of the trips are noted, either on the receipt or a listing of your expenditures you keep for tax purposes.

So what happens if your company gives you an advance or reimburses you for expenses?  These payments are considered to be made under an accountable plan.  To be considered an accountable plan, your employer’s program must have the following three characteristics:

  1. The employee must have expenses that are deductible which were incurred when performing their duties as an employee,
  2. An adequate accounting of the expenses must be made to the employer by the employee within a reasonable amount of time, and
  3. The employee must return any excess reimbursement or advance within a reasonable amount of time.

If the plan does not meet all three requirements, any reimbursement or advance received by the employee must be reported as wages on the employee’s W-2.  If this happens to you, you must report these payments as income, and complete Form 2106 to itemize the deductions.

What experiences have you had with reporting the expenses related to traveling for your job on your tax return?  I’d love to hear about it.  Also, if you have any questions, shoot them to me at chrispedencpa@yahoo.com, and I would be happy to answer them.  If you need help with other tax questions, or with preparing a return, drop me a line, and we can discuss your situation.

Deducting Investment Expenses

In a previous post, I talked about deductions that are subject to the 2% floor.  As you may remember, these expenses, when taken in total, are greater than 2% of your adjusted gross income.  You can only deduct the amount that is above this 2% floor.  For example, if you had an adjusted gross income of $100,000 and expenses of $2,500, you would be able to deduct $500 of these expenses ($2,500-$2,000, which is 2% of $100,000).

Included in these types of expenses are those costs that relate to your investment expenses.  These would be expenses that are for the management of your investment portfolio on your taxable investments.  Let’s take a look at a few of the items that you can deduct.

You many have an investment manager who oversees your portfolio.  If you they charge you fees that relate to taxable income, these fees are deductible.  If they charge you to collect interest and dividends, contacting those companies that owe you the interest and dividends on taxable investments and collect the money owed to you, you can deduct these expenses.  Additionally, if they charge you to set up and administer an IRA, those fees are deductible.

If you have an accountant who keeps track of your investments and does the record keeping, you can deduct their fees for the record keeping.  Be sure that your accountant lists these fees separately from the fees for your tax return and other services performed.  Likewise, if you pay someone to keep records of your taxable investment income besides your accountant, you can deduct their fees.  Additionally, if you have a lawyer who gives you legal advice, be sure they break out the charges for legal advice related to investments, as you can deduct these fees related to taxable investment income.

As you become more active in your investments, and start attending shareholding meetings, and may become involved in proxy fights.  As long as these proxy fights are about legitimate corporate policies, you can deduct the expenses related to these contests.

At the end of January, you should receive form 1099-DIV.  On this form, box 5 will list investment expenses.  These expenses are deductible as investment expenses, as you might expect.

If a minor has a guardian, and that guardian manages or oversees the minor investment portfolio, any fees that this guardian charges for collecting or producing income are deductible.

If you have a safety deposit box that is only used to house securities and investments, you can deduct the safety deposit box fees.  If you hold other items in this box, you cannot deduct these fees.

If you lose the paper copy of the indemnity bonds that you hold, you can deduct the premiums for indemnity bonds for the missing securities.

Lastly, if you subscribe to investment services, you can deduct the cost of these subscriptions.

There are a few items that you cannot deduct.  These would include costs related to the following:

  • If you attend investment conventions or seminars, you cannot deduct the costs of attendance.
  • If any of the aforementioned expenses are for tax-exempt investments, you cannot deduct these costs.  If an expense is related to taxable and nontaxable items, be sure to allocate the expense between the two.
  • The cost of traveling to shareholder meetings is not deductible.

What experiences have you had with reporting the expenses related to your investments on your tax return?  I’d love to hear about it.  Also, if you have any questions, shoot them to me at chrispedencpa@yahoo.com, and I would be happy to answer them.  If you need help with other tax questions, or with preparing a return, drop me a line, and we can discuss your situation.

Deducting Miscellaneous Expenses

Outside of the more popular deductions reported on Schedule A (mortgage interest, charitable contributions, and medical expenses), there are a few that don’t get as much attention, but can still have an effect on your taxes.  In this post, we’ll take a look at a few of the deductions that are subject to the 2% floor.  This means that these expenses, in total, are greater than 2% of your adjusted gross income.  You can only deduct the amount that is above this 2% floor.  For example, if you had an adjusted gross income of $100,000 and expenses of $2,500, you would be able to deduct $500 of these expenses ($2,500-$2,000, which is 2% of $100,000).

The first type of expense is expenses related to your job.  These would be expenses you incur in the course of doing your job that are unreimbursed by your employer.  These would be for things like business cards, licenses, union dues, small tools and supplies, employment related educational outlays, home office expenses and the like.  These will be reported on Form 2106, Employee Business Expenses.  If you work for yourself, you would report these expenses on Schedule C, and not be limited to the 2% floor for these types of expenses for schedule A.

The next type of miscellaneous expense is job hunting expenses.  You can deduct for costs of putting together your resume, fees for employment and search agencies, travel costs, and meals while traveling (limited to 50% of your costs).  If you are starting out and looking for your first job, you cannot take a deduction for these expenses.  Likewise, you cannot take a deduction for expenses when you look for a job in a new line of work.   Make sure you keep your receipts, as you should for anything you want to deduct.

Lastly, you can deduct the cost of preparing your tax return.  That is a big selling point for CPAs, that our fees for preparing your returns can be deducted.  You can also deduct for legal fees you are charged, as long as they relate to any tax advice provided, and not other legal matters.

What experiences have you had with reporting the expenses related to your job or the costs of searching for a job on your tax return?  I’d love to hear about it.  Also, if you have any questions, shoot them to me at chrispedencpa@yahoo.com, and I would be happy to answer them.  If you need help with other tax questions, or with preparing a return, drop me a line, and we can discuss your situation.

Deducting Casualty and Theft Losses

A couple of years ago, we were robbed right before Christmas.  Someone broke into our home while everyone was out, and took my laptop, some other electronics, and the money my wife had earned from a craft show.  Thankfully, no one was hurt, and we were able to repair the damage fairly easily.

Others may not be so lucky, and suffer what is called a casualty or theft loss.  While most people know what a theft is, a casualty loss is one where property is damaged, destroyed or lost due to an event that is sudden, unexpected, or unusual in nature.  Additionally, it can be the result of a government mandated demolition or relocation of your home due to a disaster.

Fortunately, these types of events can be deductible on your taxes.  Let’s take a look at how to claim a casualty or theft loss as an itemized deduction on schedule A of your tax return.

The first thing to do is to determine the amount of the loss.  You will need to determine which is lower, the basis in the damaged or stolen property immediately before it was damaged or stolen, or the decline in the property’s fair market value due to the loss or casualty.  Next, you will need to reduce the lower of these two amounts by any insurance reimbursements you receive.  Next, subtract the $100 floor that is in place for each occurrence (hopefully, it is not more than one).

Finally, group all your items of casualty together and get a total.  Take this total and reduce it by 10% of your adjusted gross income.  This is the amount of your deduction.

In determining the amount of the loss for reporting on your taxes, you will need to complete Form 4684 Casualties and Thefts, which feeds the amount onto Schedule A with the rest of your itemized deductions.

If your losses are large and exceed your income, you may have a net operating loss for the year.  You can carry back this loss to a previous year (or years) and get a refund for the years to which the loss was carried back.

You want to be sure to keep good records of the casualty loss deductions taken, as well as any insurance payouts received.  These reduce the amount of your basis in the property which will be used when you sell the property and need to determine any gain or loss.

What experiences have you had with reporting casualty and theft losses on your tax return?  I’d love to hear about it.  Also, if you have any questions, shoot them to me at chrispedencpa@yahoo.com, and I would be happy to answer them.  If you need help with other tax questions, or with preparing a return, drop me a line, and we can discuss your situation.