Wednesday, May 25, 2011

Work Clothing Tax Deduction

What types of tax deductions are available for individual taxpayers regarding work clothing?

The generally accepted rule governing the deductibility of clothing expenses is that the cost of clothing is deductible as a business expense only if:

  1. The clothing is of a type required as a condition of employment
  2. It is not adaptable to general usage as ordinary clothing, and
  3. It is not so worn as ordinary/daily clothing. 

A taxpayer must satisfy all these requirements in order to pass an audit by the IRS concerning a work clothing tax deduction. 

Friday, May 13, 2011

Involuntary Conversions Section 1033

Involuntary Conversions - § 1033

§ 1033 provides for Nonrecognition for a cash sale followed by a reinvestment, if the cash sale qualifies as an involuntary conversion. RECOGNIZE LOSS

BROAD SCOPE : Involuntary Conversion + Reinvestment Requirement

§ 1033(a)(2)(A) requires recognition of realized gain to the extent the seller has retained an equivalent of boot. Amount not put back in property. Under § 1033(b)(2), basis formula is the equivalent of the sum of the basis of the lost property, plus any gain recognized on the involuntary conversion transaction, less any proceeds not reinvested in the similar use property.

New Basis= Purchase Price- Amount of Gain Realized but not Recognized. Don’t put in loss.  Figure out how much gain a taxpayer gained but didn’t recognize, then plug figure into the basis computation. Must reinvest in other SIMILAR PROPERTIES.

They start out with cost basis. Even applies if they did not re-invest the entire condemnation award or insurance proceeds. If you get more than you re-invest, you have to recognize that gain.

What qualifies for Section 1033 Involuntary Conversion? 

The  § 1033 like-kind exchange test looks not only to the inherent nature of the properties, but also to the nature of the taxpayer’s relationship to the property.What are they using it for? Under 1031, they must be LIKE KIND= BROADER + EASIER

Under § 1033, like USE and RELATIONSHIP, NARROW SCOPE.  If it was condemnation, the standard reverts to the like kind standard. CONDEMNATION STANDARD IS BROAD. Further, § 1033 applies to personal property and 1031 doesn't.

Friday, May 6, 2011

Accounting Payroll Department Function

What is the accounting function of a payroll department in a company?

The payroll department typically is involved with the preparation of the payroll from time cards, job or time tickets, or time sheets. The payroll department serves an intermediate accounting function between the time-keeping by employees and the overall analysis of the cost accounting department.

The following are the main functions of the payroll department in a company:

  1. Computing employee wages and rates.
  2. Preparing overall departmental payroll summaries.
  3. Maintaining individual employee payroll records for tax purposes.
  4. Calculating payroll taxes, deductions and other related payroll liabilities such and FICA and social security.
  5. Providing reports for management on how employees are using their time. 


The responsibilities of the payroll department regarding labor costs in a manufacturing company are:

  1. Maintaining a record of the job classification, department and wage rate for each employee assigned to a particular department.
  2. Verifying the amount of time each worker as shown on the daily time cards.
  3. Computing wages earned by each worker in each department. 

Popular Accounting Problems

The information on this site is for informational purposes only and should not be used as a substitute for the professional advice of an accountant, tax advisor, attorney, or other professional.