Posted on January 17, 2014May 31, 2016 by Jan Roberg

5 Reasons to Bring Your Old Tax Return to Your St. Louis Tax Preparation Appointment

Beautiful effect on the St. Louis Arch downtown. -Photo by Photo by Eyton Z at Flickr.com

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I hear this question a lot, “Why does my tax preparer want to look at my old tax return?” The answer is: Lots of reasons. Let me give you a few examples.

1. Carry forwards: A carry forward is something that was on your last year’s tax return that can affect your taxes this year. A really important one is capital losses. Let’s say you sold some stocks last year at a big loss and couldn’t use all your losses on last year’s return. You get to carry those forward until they’re used up. I once had to amend a bunch of tax returns for a woman with $100,000 of loss carry-forwards. She had never brought her returns to her preparer before. Because the returns went back for more than three years, some of her deductions were lost forever.

But it’s not just capital losses. All sorts of things from last year can affect this year’s taxes like depreciation, estimated tax payments, what you paid to the state, did you itemize or not, and did you pay any alternative minimum tax (AMT), just to name a few.

2. Continuity: the IRS looks at things funny when you’ve got changes. Changing something simple like putting the wife’s name on top one year, and then putting the husband’s name on top the next can be seen as an attempt to hide something. I always list taxpayers in the same order as the prior year return to avoid trouble. I once helped taxpayers who had a simple notice about their taxes. It was normally an easy thing to fix—make a quick phone call and mail a document and you’re done. What I would call a no-brainer as far as audit letters go. But for this couple, it took weeks to settle the issue; I couldn’t understand the problem. Finally, the agent on the case explained that they were “digging into the taxpayers” because they had flip flopped the names on the return for different tax years, which is a common habit with fraudsters.

Fortunately for the couple had nothing to hide—but a teensy little question on their tax return (not even a mistake, just a question) led the IRS to look back through several years of tax returns because of the flipped names.

3. Finding missed deductions: If you have a professional do your taxes, we want to find a missed deduction. It’s what we do. For us it’s the chocolate sauce on the ice cream. It’s well…., click on this video to see how finding extra money for you feels http://www.flickr.com/photos/83052216@N00/4354753195/in/photolist-7CPfpD-9LYL7p

4. Making sure your new preparer doesn’t miss something: I have some clients with some pretty complicated paperwork. They have tax forms that aren’t included in home tax preparation software and aren’t even found in some professional packages. I have to get some of these forms from the IRS and prepare them by hand. (I actually print out extra copies of those forms and tell my clients, “If you ever change preparers, your new preparer needs to see these.”) But even if your tax return is fairly easy, letting your preparer see your last year’s return is a good idea—you don’t want her to miss something.

5. Comparison: Putting your tax returns together for comparison purposes is a valuable tool for you. How did you do this year? Did you make more than last year? Did you make less? What did you do differently? What should you do differently? You’ve probably heard the old saying, “Those who don’t study history are condemned to repeat the same mistakes.” The same goes with your tax return.

So please, bring your old tax return with you when you make a tax appointment. It will make your preparer happy and it could save you some money!

Posted on January 14, 2014May 31, 2016 by Jan Roberg

Reporting Worthless Stock on Your Tax Return

Losing money in the stock market is frustrating. Remember to take advantage of those losses on your tax return.

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Did you own stock in a company that’s now worthless? For Example: In 2013, Kodak’s old stock was cancelled when the company emerged from bankruptcy. If you owned the old Kodak stock; it’s worthless now. So how do you claim that loss on your tax return?

You’re going to report it as a sale of stock on form 8949. Here’s a link to that form: http://www.irs.gov/pub/irs-pdf/f8949.pdf The 8949 form flows through to something call the Schedule D which will then flow through to your regular 1040 tax return. Tax software should handle it for you, but if you’re still doing returns by hand, remember you’ll need to send both the 8949 and the Schedule D in with your tax return.

For the sale date, you’re going to put 12/31/2013. Under Proceeds, you’re going to put $0. You’ll fill in the other boxes with the name of the stock, how many shares you owned and what your basis in the stock was. Basis is what you paid for it, plus any commission fees that you may have paid to the broker. (For what it’s worth, Kodak emerged from bankruptcy on September 3, 2013. Tax preparers usually don’t have access to that information when preparing a return with worthless stock on it, that’s why 12/31 is generally used as the sale date. If you know the actual date your stock became worthless, you may use it, but don’t let it keep you from preparing your return.)

Because stock became worthless, you’re going to have a capital loss. You’ll use that loss to offset other capital gains. If you have no other gains, you can use up to $3,000 of loss to offset your other income. If you have more than $3,000 of loss, you can carry forward the excess losses and keep using them until they run out.

It’s important to know the difference between worthless stock and nearly worthless stock. In Kodak’s case, once they filed for bankruptcy back in 2012 the shares had very little value. You can’t write off “nearly worthless” stock unless you actually sell it. (Which isn’t easy to do.)

Once the company emerges from bankruptcy, the stock in question is cancelled and you can write off the loss.

Posted on January 10, 2014May 31, 2016 by Jan Roberg

Why You Deserve An Enrolled Agent

Have you seen the new TurboTax commercial about how awesome you are? It’s a great commercial. And yes, you are totally awesome.

Turbo tax says that you are so awesome that you can do your own taxes. To be quite honest, lots of people can. Some people shouldn’t. Here’s a video of someone who shouldn’t have.

Tim Geitner explaining his tax problems to Congress.

Here’s the thing. Can you do your own taxes as well as I can do them for you? No—probably not. (Sorry, that sounds snobby but I’m really good at what I do.)

But can you do them well enough? Maybe you can. Pretty much, if you only have W-2 income and don’t itemize your deductions then you’re probably fine doing your own taxes. There are some tax situations where no matter how good I am at taxes; I’m just not going to get you any more money back than you’d get for yourself. (My mother would say, “You can’t bleed a turnip.” Yes, my Mom said some weird stuff.)

Now, you’re a “do it yourself” kind of person, and you don’t have complicated taxes, you can go straight to my 1040.com web-site and do it yourself from here: https://fileonline.1040.com/1040/Home/?did=95443 It’s an alternative to Turbo Tax and it’s a little less expensive. You can try it for free and see how you like it. You don’t have to pay unless you actually file your return there.

But—if you are self-employed, have investment income, retirement income, rental income, education expenses, are divorced with children, are a high income earner, have cancelled debt, going through bankruptcy or a number of other issues—you can really benefit from the services of a qualified tax professional.

Here’s a couple of things that I don’t like about Turbo Tax:

There are 4 ways to claim an education expense on your tax return. TT doesn’t always give you the best one for you. It usually does, but not always.

TT categorizes you: home owner, business owner, someone who owns stock or rental property, or someone in the military. Many people fit into more than one category and I’ve got a couple that could claim “all of the above”. A tax professional won’t pigeon-hole you.

TT is not made for splitting a child’s exemption between divorced parents. That’s a matter for an Enrolled Agent.

If you’re a high income earner subject to Alternative Minimum Tax (AMT), TT will just compute the tax, it’s not equipped to help you find ways to reduce the AMT like an EA can.

Here’s the biggest one: most of the audit cases that I handle during the year come from people who prepared their own tax returns using Turbo Tax. I appreciate the business, I really do, but taxes are complicated. They shouldn’t be, but they are. And sometimes you need help.

When I was a kid, my dad had a whole list of things I had to be able to do before I was allowed to go away to college. One of those things was to be able to change a tire. I can change a tire all by myself, thank you very much. But, awhile back, I got a flat on Higway 44 during a snowstorm. It was cold and blowing and the trucks were whipping past me at 70 miles an hour. I was very grateful that I had signed up for AAA.

An Enrolled Agent navigating complicated tax rules is kind of like the AAA guy changing your tire for you during a snowstorm. I kind of like changing a tire. I know that sounds silly but I do. But I’m also smart enough to know when I need help.

You’re awesome, you truly are. You are so awesome, I think you deserve an Enrolled Agent.

Posted on January 7, 2014May 31, 2016 by Jan Roberg

Why Is My Tax Preparer Asking Me Such Nosy Questions?

With all the questions the IRS requires tax preparers to ask, getting your taxes done can seem more like an interrogation than tax prep.

I took a phone call from a fellow awhile back who was absolutely furious about some of the questions his tax preparer had asked him. The preparer had asked a whole bunch of questions about his kids and even asked to see their report card from school. He said, “My daughters are 4 and 2 years old. They don’t even go to school yet!”

So what’s going on here?

It’s all related to an IRS form—# 8867. Form 8867 has to be filled out and sent in with every tax return that has the Earned Income Tax Credit. Now, this form has been around for awhile, but it used to be that a tax preparer was just supposed to ask some questions and you’d keep that information to yourself. Now, the IRS expects you to send the form in with the tax return. If a tax preparer doesn’t complete the form and send it in with an EIC return—the IRS charges a $500 penalty to the tax preparer.

That’s $500 per return. You miss too many of those and you could be out of business. For most preparers, that’s more than what we charge to prepare an EIC return.

Now if you prepare your own tax return, you don’t have to worry about form 8867, it’s only for paid tax preparers. But if you have your taxes done at H&R Block, or Jackson Hewitt, or even me—that form must be completed, and signed, and sent with your tax return. (If your tax return is e-filed, we are required to keep the signed copy in our files.)

And the form seems to ask for more and more information every year. Now there’s a whole section about documents: documents to prove your kids live with you, documents to prove a disability, and documents to prove self-employment income. Tax preparers are now expected to look at a taxpayer’s documents to verify the information on an EIC tax return. School records, like report cards, are usually the easiest thing to use for documentation. Of course, report cards aren’t very helpful when your children aren’t in school yet. No documents, no form 8867. No form 8867, no tax return. No tax return, no refund.

It’s like the IRS is trying to turn regular tax preparers into the EIC police. It’s not a job we asked for, but it’s a regulation that we’re required to enforce. The penalties are so stiff that we’ll all be out of work if we don’t go along.

So remember, if you tax preparer asks to see your child’s report card, he doesn’t care if your son got a D in math or is a straight A student; he’s just trying to help you get your refund.

Posted on January 3, 2014May 31, 2016 by Jan Roberg

The Single Most Important Tax Question You May Not Know to Ask

Do you have a bank account in a foreign country? If so, you may be required to report that to the IRS.

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Do you have a bank account in a foreign county? Yes or No.

If the answer is no, you don’t have a foreign bank account, you can’t sign for anyone with a foreign bank account (like when your parent keeps you as a signer to the account in case something happens to them) —then you’re done here. If your answer is “yes” or “maybe” — keep reading.

Did you know that you are supposed to report that you own a foreign bank account to the IRS on your tax return? The question about foreign bank accounts is on something called Schedule B—that’s where you report your interest and dividends. The problem is many people with foreign bank accounts don’t know that they’re supposed to report their foreign interest. They don’t even look at the Schedule B so they don’t see the question!

Why is this such a big deal? Because, if you own a foreign bank account and you don’t submit the proper forms to the IRS about them, you could be subject to thousands of dollars in fines and penalties. Let me repeat that: THOUSANDS OF DOLLARS IN FINES AND PENALTIES!

The IRS doesn’t take “I didn’t know” as a proper excuse for not reporting foreign income. And if you’ve never seen the question for Schedule B—you don’t even know the question is there. Even if you’re having your taxes professionally done—if you’re not reporting interest income, the question may never get asked because it shows up in the interest income section of the interview.

So, do you have a foreign bank account? Yes or No?

If yes, then do you now, or did you at any time during the year have over $10,000 (US equivalent) in the account? If yes, then you’ll have to file a form called the FinCEN 114. (It used to be called the TD F 90-22.1 but it’s also known as the FBAR.) This is a form that gets filed separately from your tax return. (The new form isn’t up in the IRS website yet.)

If you had over $50,000 in the account, you’ll be required to file form 8938, a Statement of Foreign Financial Assets which gets filed along with your tax return. http://www.irs.gov/pub/irs-pdf/f8938.pdf

The bottom line is—if you’ve got foreign assets, you need to be reporting them on your US tax return. Even if you’re earning no interest on these accounts, you still have to report that you own them. If you are earning interest or dividends on these accounts, you need to report that on your US tax return and pay the tax on them. If you’re paying taxes on that money to a foreign country, you may get a credit on your US return for those taxes you already paid.

Reporting foreign income and accounts can be confusing, but you don’t have to do it alone. Roberg Tax Solutions can help you.

Posted on December 31, 2013December 5, 2017 by Jan Roberg

How To File a Tax Return When You Have No Income (And Why You Might Want To)

If your income is below the filing requirement, there is no need to file a federal tax return. But for some people, it still makes sense.

There are two main reasons for filing a US income tax return even if you don’t have any income to report.

1. Identity theft, and
2. Identity theft.

I realize it looks like I was repeating myself but I wasn‘t. I’m talking about two different kinds of identity theft. The first is related to an unauthorized person claiming your kids as dependents on their tax return. The second involves someone claiming you, or impersonating you, on a tax return.

Let’s talk about your kids first. Here’s a story I’ve heard several times:

“I’m on SSI and I support my daughter 100%. We get nothing from her father but he claims her every year on his tax return and gets thousands of dollars in refund money. I reported him to the IRS but I haven’t heard anything. I tried to file a tax return but other tax company said I don’t have income so I can’t file. Is there anything I can do to stop him from profiting on my child that he never sees?”

One way to deal with this issue is to report the tax fraud. Here’s more information about how to do that: http://robergtaxsolutions.com/2010/11/how-to-report-tax-fraud/. But here’s the thing–the IRS will never tell you what happens. You’ll never know if the fraud stops. You might not have enough information to give to the IRS to stop the fraud. But if you file a tax return and claim your child as a dependent–that messes up their computers and something is going to happen. The IRS will have to deal with the issue. You’ll need to be prepared to prove that your child lives with you to stop your ex from claiming your child, but hey–with no income, you’re not getting a refund. You’ve got nothing to lose!

Here’s another story that I don’t hear as often, but I have had to deal with before:

I got a letter from the IRS saying that my tax return is wrong and that I shouldn’t have claimed those kids. I don’t understand, I don’t have any kids and I never filed a tax return. What’s going on?

Fraud isn’t limited to claiming kids that aren’t yours; the fraudsters will also use a non-filer’s identity to claim kids that aren’t theirs for huge refunds and then when the IRS investigates, some innocent person who never filed a return gets caught and gets fined. It’s a nightmare to sort this all out.

So how do you protect yourself? File a tax return.

Just because you don’t have any taxable income doesn’t mean you can’t file a tax return. You won’t get any money back, but you can still file an information return just to let the IRS know that you’re out there. Many software programs won’t process the return if you show no income, so you’ll want to plug $1 into the other income section on line 21 for the long form.

You can even file for free with no income from my website. Just go to the “Do Your Own Taxes” tab at the top. Of course, you can always go to the IRS.gov website and use their Free File Online instead. The important thing is that you file a return and protect yourself.

Posted on December 27, 2013May 31, 2016 by Jan Roberg

Getting a 1099MISC When You’re Not Self-Employed

If you receive a 1099MISC document in the mail, and there’s a dollar amount listed in box 7 for Non-employee compensation, the IRS treats that as self-employment income and you’re supposed to pay self-employment tax on that income. If you own your own business, that’s perfectly normal. By the way, I’ve got lots of blog posts and tax tips for self-employed folks on this web-site so be sure to check those out. I’ve got a list at the bottom.

But what if you’re not self employed? Really not self-employed. You’re stuck with a document that basically requires you to pay extra tax, what do you do?

First, only dollar amounts in box 7—count as non-employee compensation. If you received dollar amounts in box 1 for rents or box 3 “other income” you don’t have to worry about the extra self-employment tax. The rent goes on your Schedule E for rental income and the other goes on line 21 of your 1040.

But let’s get back to that non-employee compensation again. What did you do to earn that money? Is it in your field of work? If the answer is yes, then it’s going to count as self-employment income even if you don’t think of yourself as being self-employed.

I’m going to use my friend Rick as an example. He works for another tax company and he’s very good at what he does. Every year, Rick gets laid off on April 15th. My company stays open all year round and sometimes I’m super busy in September and October. I could probably use some extra help around then. If I hired Rick to help me with some tax returns, I’d give him a 1099MISC for the money I paid him and he’d have to report that as self employment income. Even though Rick normally works for another company, he’s still in the business of preparing taxes. The money I pay him for tax prep would definitely be considered self-employment income.

But let’s say I hire Rick to paint my office instead. Rick’s not a painter, he doesn’t do that as a business, he’s just helping me out because I need my office painted and I’m helping him out because he needs the money. We’re friends. Painting is not his line of work. So technically, he’s not self-employed and he shouldn’t have to pay self-employment tax on that income. It’s a one shot deal never to happen again. How do you account for that?

Well, it used to be that if you received a 1099MISC for non-employee compensation for under $1000 and you put that amount on line 21 of your 1040—the IRS would let that slide and not audit for self employment tax. But starting with 2013 tax returns, the IRS has announced that they will send notices to anyone with 1099MISC income (with non-employee compensation) on line 21 instead of putting it on a Schedule C—where it will be taxed with self-employment tax.

There’s no box to check or form to fill out with your 1040 to say, “Hey, I’m not self-employed! I shouldn’t have to pay self-employment tax!” So what do you do?

You’ve basically got two options:

One: Claim the income as business income and write off any and all expenses associated with the job. This is going to be the best choice for people who have expenses with a job like mileage or supplies.

Or, two: File your 1040, pay the self employment tax, and then file an amended return 1040X taking the income out of self employment and putting it on line 21 with the explanation that you are not self-employed and the income should not have been subject to self employment tax.

Why do this as an amendment instead of doing it that way the first time? Because the IRS has already announced that they are sending letters out to anyone who puts 1099MISC for non-employee compensation income on line 21. And they charge fines and penalties for underreporting your tax.

By filing and paying the self-employment tax first, then amending, you’re giving the IRS the opportunity to examine the situation and make a determination. You may win, you may lose. But if you win—the case is closed and they won’t come back at you. If you lose—it doesn’t matter. You already paid the tax and they can’t fault you. No harm, no foul.

Most people who receive a 1099MISC for non-employee compensation are going to be considered self-employed by IRS standards. You may as well file the schedule C with your tax return and pay the self-employment tax. If you think you might be an exception give us a call, we can help you sort out your options.

Posted on December 24, 2013December 6, 2018 by Jan Roberg

5 Things You Probably Didn’t Know About Santa’s Tax Return

What about Santa’s taxes? Here’s a few things I bet you haven’t thought about before.

1. Given that Santa travels about 75 and a half million miles a year (mostly on December 24th) his mileage deduction (at 54.5 cents per mile in 2018) is $41,147,500.

2. Reindeer are depreciated over a period of 7 years.

3. North Pole elves are considered employees and receive W-2s. Elves outside of the North Pole are considered contract labor and receive 1099s. (There are people who work as “elves” outside the North Pole that work for other organizations–like at the mall, who receive W2s, but they are not real elves and are not employed by Santa himself.)

4. Because the elves live at the North Pole for the convenience of their employer, and since living at the North Pole is a condition of employment, elf lodging is not taxable to the elves.

5. Santa doesn’t actually make any money from his toy distribution operation. Most of Santa’s income comes from royalties from his guest appearances in movies, books, and television commercials.

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Footnotes:

1. Santa’s distance traveled: The Physics of Santa, http://www.daclarke.org/Humour/santa.html

2. Reindeer depreciation: IRS publication 225 Farmer’s Tax Guide

3. Elves are employees: Common Law Rules of employment, http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee

4. Elf housing: IRS publication 15B Employer’s Tax Guide to Fringe Benefits

5. Santa’s income from royalties: https://en.wikipedia.org/wiki/Royalty_payment

Posted on December 20, 2013May 31, 2016 by Michael Siebert

Personal Budgeting – Is it for You?

Photo by 401(K) 2013 at Flickr.com

Individuals and corporations (as well as income from estates and trusts and estate and gift transfers) are all subject to taxes pending the presence of taxable income. Among one of the numerous benefits with budgeting is planning for the impact of these taxes. But first let’s look into why certain entities do and do not budget.

In a corporate setting, budgeting is a necessary part of the accounting system and managers often receive pay increases if production is within budget. Also, budgeting is imperative in corporations in order to stay current with the ever changing government regulations and to keep up with the current industry competition.

What about the small business level? Do you like to stay up late and write up budgets and proforma financial statements? Not everyone does. And in my opinion, not everyone has to. Jan and I have seen many successful small businesses who do not write up formal budgets for their businesses. It’s your choice but I am not against them whatsoever. Of course, the bigger your company is getting, the more likely you will want or even have to start creating budgets.

And you? Do you have a budget? Not your small business, not your S Corp, not your partnership, but YOU? Personal budgeting for some can be worse than going to the dentist. If a template is all that is holding you back, we have a free one in this blog and in the downloads tab on top of the website. This budget template has a very clean presentation and is nicely detailed. I am certain that you will like it.

RTS Personal Budget – Click to Download

: The RTS Personal Annual Budget is available for download from this blog or from the downloads tab near the top of the website.

My point with this blog was not to tell you that budgeting will solve all of your problems and that once you create the perfect budget, the weight of the world will be lifted off your shoulders—although for some people it will. Making a budget is not imperative for your success – many Americans alike get up and go to work everyday, make a modest salary, and support a family with discretionary income leftover all without ever touching excel. Where am I getting at? If you don’t have a reason for making a budget, then you simply won’t. Money is different things to different people – a blog post in its own—and some people do not care to know how much money they are making on a monthly basis.

However, what about the gentleman who finds himself with enormous tax debt and needing to do an offer in compromise with the IRS? To do that, he has to do a 433-A (OIC) which asks you to provide monthly income and expenses–essential a monthly budget.

Will creating a budget reduce my taxes? Not necessarily. Whether you make a budget or not, your income will always be subject to taxes. However, it does help plan your tax liability and gives you a more accurate picture of what your taxes and tax bracket could be given accurate estimates.

Posted on December 17, 2013May 31, 2016 by Jan Roberg

Deducting Your Starbucks Coffee on Your Income Tax Return

Meeting for coffee is a deductible business expense.

If you deduct business expenses on your tax return, then you probably already know that if you meet someone for a meal that you can deduct 50% of the bill as a “meal and entertainment” expense. You can’t deduct the cost of just yourself going to lunch, since you have to buy your own lunch anyway. For example: if I go to McDonald’s by myself this afternoon and get a Big Mac; even though I go during my business lunch hour–it’s not a deductible expense at all. But if I take Mike, my employee, to McDonald’s for lunch and I pay for his meal as well–then I can claim 50% of the bill as a business expense because we’ll be talking shop.

This is where Starbucks comes in. I suspect that more business is conducted at Starbucks coffe shops than anywhere else. It’s sort of every small business owner’s “office away from home”–neutral networking territory. If you do the whole networking thing, certainly you’ve had the “Let’s meet for coffee” meeting.

Coffee meetings are safe. Generally you’re not billing for time at a Starbucks meeting. Being an accountant, I think some people are afraid to come to my office. They think that if they walk though my door I’ll put the meter on and start billing them. (I’m not that bad, really!)

Many small business owners don’t have offices, so Starbucks is a good place to hold a meeting. I know some small business owners who spend hours at Starbucks. For the price of a cup of coffee you also get a table to work at and an internet connection.

So, how do Starbucks coffee receipts fit into your tax return? I’ve got two ways:

1. You meet a business acquaintance for coffee and you pick up the tab for both of you. Keep track of the meeting and you easily meet the 50% deductible rule.

2. You meet a business acquaintance for coffee but you only pay for your own coffee. (This is pretty common.) You can still probably claim this as a business expense but you have to be a little more careful. There’s an old 1953 court case (Sutter v. Commissioner of Internal Revenue http://www.leagle.com/decision/195319121ttc170_1172) that states that you can’t deduct entertainment expenses just for yourself if you’re paying what you normally pay for something.

So — If you’re going to Starbucks everyday and picking up a latte whether you’ve got a meeting or not– that’s a normal expense for you so a Dutch Treat Starbucks coffee isn’t a deductible business expense for you.

On the other hand, if you’re not buying gourmet coffee unless you’re at a business meeting, then you’d be allowed to claim that expense. The whole key here is to document, document, document. For me–I pay a $30 fee to my office manager so that I may have coffee at work. At one cup a day, that works out to $1.50. At Starbucks, my coffee costs $4.50; so clearly, I’m not normally spending $4.50 on coffee unless I’m having a meeting.

Under the Sutter rules, I don’t have to subtract my normal coffee cost from what I spend, I can deduct 50% of the whole cost. I just have to be able to prove that my normal coffee cost is less than $4.50.

Does the IRS really go back to 1953 tax court cases when they audit returns? Yes, as a matter of fact, they do. Even though there have been significant changes to tax law since that case, Sutter is still invoked in audit cases with high entertainment expenses.

Personally, given how many people use Starbucks for their meeting rooms and internet connections, I think the IRS should allow a 100% deduction for Starbucks as a rent and computer expense. But don’t try that, it won’t fly with the IRS. The best you’ll get is a 50% deductible meals and entertainment expense.