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You mean I owe tax on that?

Charleston's Post and Courier is reporting (http://bit.ly/wbL45t) that Amazon.com has sent emails to South Carolina customers reminding them how much they've purchased online this year and to pay the required sales tax.  Thanks to a recent deal struck by the company, purchases on Amazon.com can be done without Amazon collecting sales tax for the next five years.  This doesn't however remove the requirement that residents pay USE tax.  This is equivalent to sales tax and has been required for some time.  The only problem is you've never heard of it and the state has done a poor job of enforcing it.  Some states such as Virginia are better at tracking "tax free" sales and requesting residents pay the tax.

Sales tax (and it sister Use tax) are required to be paid on every purchase made in SC unless specifically exempt.  Most people mistakenly believe (and some retailers have advertised) that shopping online is "tax free".  That has never been the case.  Online retailers are only required to actually collect sales tax if they have a "physical presence" in the state.  This means that Wal-Mart, Barnes and Noble, and Target must collect sales tax on all purchases.  If the website your shopping on does not have a "physical presence" in South Carolina YOU are required to report and pay USE tax with your annual tax return.

To complicate matters worse, you also owe USE tax if you drive from your high tax county (7%) to a lower tax county (6%), buy your goods, and bring back home (back to the higher tax county).  Yep - pay the 1% difference as USE tax.  

How the State ever plans on enforcing this we don't know.  If Amazon.com gives the state access to your shopping records you better watch your mailbox!
 
In Case You Missed It

businessman2Millions of American taxpayers are much more generous than they realize -- or intend to be.

Each year, many people overpay their taxes by neglecting to take advantage of deductions, credits and other breaks. Some commonly overlooked items, such as a one-time credit for the 2006 tax year for taxes paid on certain phone services, are relatively simple. Others, such as a recently enacted exclusion for mortgage-debt forgiveness, are easier to miss because they're new and can be tricky.

Welcome to what might be labeled "complexity taxes" -- additional taxes that people wind up paying because they don't have the time, knowledge, energy or patience to master the increasingly complex Internal Revenue Code.

If you neglected to claim an important break on a return in a recent year, don't compound your error by automatically assuming it's too late to correct the situation. Just file what's known as an amended return. Use Form 1040X, available on the Internal Revenue Service Web site (www.irs.gov). Generally, you have to file your claim for a credit or refund within three years of the date you filed your original return, or within two years of the date you paid the tax, whichever is later, according to the IRS.
 
What a phishing scam e-mail looks like

wwwThe mother of one of my colleagues received this email the other day:

There are a number of obvious things wrong with the email, including an exclamation point (not typically seen in IRS correspondence) and a copyright statement at the bottom, which would be really weird for an IRS notice.

The most obvious problem, though, is that the IRS never issues notices to taxpayers by e-mail. If you have received an "IRS notice" by e-mail, it's bogus. Do not open it, and especially do not click on any links in the e-mail.
 
'Indefinite' doesn't mean 'temporary'

businessmanTough times force us to be flexible. Tough times forced an out-of-work electrician in Lake Mary, Florida to take a job 200 miles away in Delray Beach. The Tax Court picks up the story:

    Although the position was permanent, petitioner intended it to be an interim position while he pursued other employment opportunities.

    ...

    From August through December 2006 petitioner drove between Lake Mary and Delray Beach. Petitioner drove to Delray Beach at the beginning of the work week and stayed in a motel during the week. Petitioner returned to Lake Mary on the weekends so as not to incur additional motel costs for days he was not working. The 5 days a week petitioner was in Delray Beach he stayed at a motel. In mid-December 2006 petitioner signed a 1-year lease for an apartment in Delray Beach.

    In September 2007 petitioner left his position with Meisner for a position with M.J. Electrical based out of Iron Mountain, Michigan. Petitioner began his employment with M.J. Electrical in Topeka, Kansas, but at the time of trial worked for that company in Morgantown, West Virginia.

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The tax law allows you to deduct travel costs of work assignments when you are "temporarily" away from your "tax home." That means you have to be both "away from your tax home" and the assignment has to be "temporary." The Tax Court explains the tests (citations omitted):

    As a general rule, a taxpayer's tax home is determined by the location of the taxpayer's principal place of employment, regardless of where the taxpayer's personal residence is located. Under an exception to the general rule, a taxpayer's personal residence may be his tax home where the taxpayer is away from home on a temporary rather than indefinite basis. The flush language of section 162(a) provides that a "taxpayer shall not be treated as being temporarily away from home during any period of employment if such period exceeds 1 year."

    Employment is defined as "temporary" only if the taxpayer can foresee its termination within a reasonably short period of time or it is for a fixed duration. Indefinite employment is employment where the prospect is that the work will continue for an indefinite and substantially long period.

The electrician's "tax home" became his place of employment when he took the full-time position in Delray Beach, even though he commuted from far away:

    Given the circumstances surrounding his employment with Meisner, we can understand why petitioner might consider his position "temporary", as that word is used in common parlance. After all, at all relevant times it was his intention to resign the position with Meisner as soon as possible for business as well as personal reasons.

    Nevertheless, the position with Meisner was a permanent position with no foreseeable terminus. When petitioner accepted the position with Meisner, he had a reasonable expectation that the position would, and it in fact did, last more than 1 year... Petitioner kept his residence in Lake Mary for reasons of personal choice despite, rather than because of, the exigencies of his trade or business.

    Consequently, because petitioner's position with Meisner in Delray Beach was an indefinite position, Delray Beach was his tax home for the relevant period. Because petitioner was not "away from home" within the meaning of section 162(a)(2) while in Delray Beach, he is not entitled to a deduction for vehicle expenses, lodging, and meals and incidentals incurred as a result of his position in Delray Beach. Instead, his costs were in the nature of personal or living expenses. We thus sustain respondent's determination on this issue.

Bottom line? No deduction for travel from Lake Mary and for the motel bills in Delray Beach.

The Moral? Indefinite isn't temporary, and your tax home is where your job is.

Cite: Durrance, T.C. Summ. Op. 2010-12
 
Let the IRS Match Your 401(k)

Your boss might not be the only one willing to match your 401(k) contribution. The IRS might help, too.

The "Retirement Savings Contributions Credit" can provide a creditbusinesswoman of up to $2,000 for joint filers for contributions to 401(k) plans or IRAs. The credit runs at 10% to 50% of the contribution, depending on income, and its available for the following adjusted gross income ranges:

• Single, married filing separately, or qualifying widow(er), with income up to $27,750
• Head of Household, with income up to $41,625
• Married Filing Jointly, with income up to $55,500

You claim the credit on Form 8880. Learn more at the IRS web site.

Come back every day though April 15 for a new 2010 Filing Season Tip!