Eustis Corrigan, Senior Managing Director of the Memphis office, participated in a Thomson Reuter's tax chat on Twitter. Using the hashtag (#ReutersTax), Eustis and several other "taxperts" across the U.S. answered questions in 140 characters or less.
The following questions were asked by various followers and answered by Eustis (EC):
- What are some common tax mistakes?
- EC: Common mistakes include bad math and misspelled names; misclassification of dividend income as well
- Can you explain the tax impact on pre-tax contribution to 401(k) vs after-tax contribution?
- EC: A pre-tax contribution is not subject to federal income tax and reduces AGI for c/y; tax is deferred until withdrawal is made
- What’s your advice to folks who don’t have the cash to pay their taxes?
- Is there any way for a grandparent to get a Federal tax break while contributing to their grandchildren's education? [Follow-up: What about 529s from grandparents? Tax impact vs. savings mechanism]
- EC: A direct payment of tuition is not subject to gift tax; no other tax break
- EC: The earnings of a 529 plan are tax free IF used for qual education expenses
- What will happen if I don’t file my taxes?
- EC: If you don't file your taxes you will likely receive notices or a visit from your friendly IRS agent!
- How do I file for an extension? (And what are the penalties?)
- EC: File form 4868; if you owe with your extension avoid penalties by paying all taxes owed by the original due date
- Should I pay for my taxes with a credit card?
- EC: Pay taxes with a CC only as a last resort; it is always an economic analysis that should include interest/fees
- EC: If you have a good relationship with a banker try that route first; interest rate and terms might be better
- What’s the craziest tax deduction you've ever heard of?
- EC: Great question! Deducting the cost of a Mardi Gras ball costume and dues
- EC: Also cost of cat food at a salvage yard; cats kept snakes and rats off property!
- How can we report dividend income from schedule K if the schedule is not available at the time?
- EC: You may need to file an extension until you get the Schedule K-1
- EC: The IRS matches K-1s so in order to avoid notices be safe and extend
- Should a loan modification be treated as a cancellation of debt?
- EC: It depend if the modified terms result in a significant modification under IRC sec. 1001; consult tax advisor
- What’s the best way to avoid an audit?
- EC: Sometimes an audit is unavoidable due to random selection; stay honest/keep good records/use a specialist
- I got a refund! Should I use it to pay down debt or invest it? Any other tips?
- EC: Pay your CPA if you used one! Fund an emergency account first then pay down debt.
To view the full conversation click here or search for #ReutersTax on Twitter. If you have further questions regarding any of the above, please contact Eustis Corrigan at email@example.com or 901.685.5575. You can also follow Eustis on Twitter @eustiscorrigan for more tax insights.