New York Will Suspend Driver’s License for Tax Delinquents

          In early August 2013, New York’s Governor Andrew Cuomo announced a new state initiative.  Taxpayer’s who owe more than $10,000 in past-due tax liabilities are subject to having their driver’s license suspended.

          Governor Cuomo summarized the initiative in the following statement:  “Our message is simple: tax scofflaws who don’t abide by the same rules as everyone else are not entitled to the same privileges as everyone else.  These worst offenders are putting an unfair burden on the overwhelming majority of the New Yorkers who are hardworking, law-abiding taxpayers.  By enacting these additional consequences, we’re providing additional incentives for the state to receive the money it is owed and we’re keeping scofflaws off the very roads they refuse to pay their fair share to maintain.”

          Taxpayers who are subject to the new initiative will receive initial suspension notices from the Department of Taxation and Finance, which gives them 60 days to arrange payment.  If the Department does not receive a response, the taxpayer will receive a second notice which is sent by the Department of Motor Vehicles.  The second notice allows an additional 15 days for the taxpayer to respond.  If no response is received, the license will be suspended.

          Taxpayers whose license is suspended can apply for a restricted license.  The restricted license will enable them only to drive from home to work and back.

Receive a Mortgage Interest Deduction for Owning A Motor Home

          A recent tax court case was resolved by allowing a mortgage interest deduction to a couple who owned a motor home, but disallowed the home office business deduction that they claimed on their personal tax return.  The couple operated a consulting business and purchased their motor home to drive to warmer climates during the cold winter months.  The couple spent a significant amount of time living in the motor home, which was outfitted with a bed, kitchen, and bathing facilities.  While they were on the road, the couple continued to operate their business and provide consulting services to their clients.  Since they lived in the motor home, the mortgage interest paid on the loan to obtain the motor home was deductible as a mortgage on their second home.  However, the expenses that the couple claimed for a home office deduction were disallowed.  They could not prove that they used an area of the motor home specifically and exclusively for business purposes.  (Dunford v. Commissioner of the Internal Revenue Service)

Claiming a Home Office Deduction

          Beginning with the 2013 income tax returns, which will be filed in 2014, taxpayers who use a room in their home separately and exclusively for business purposes can use one of two methods to claim a home office deduction.  They can claim the deduction using a percentage of actual expenses for the property, which include utilities, real estate taxes, mortgage interest or rent, phone bills, insurance, and miscellaneous office supplies.  Alternatively, a taxpayer can claim     $ 5.00 per square foot of office space, limited to a maximum deduction of $1,500.  Remember, exclusive use means that the room is only used for business purposes.

Real Estate Professionals & Loss Limitations

          A real estate professional may be exempt from the passive loss rules of rental real estate property ownership.  However, in order to qualify for the  exemption, the real estate professional must prove that they meet two tests:  They must spend half of their working hours and at least 750 hours per year materially involved in real estate as a developer, broker, landlord, or the like.

           If the real estate professional can not prove their time, their losses will be characterized as passive losses.

Amended Tax Return Status

        The IRS has added a tool to its website to allow taxpayers to check on the status of amended tax returns.  Taxpayers curious about this service should use the following link:
http://www.irs.gov/Filing/Individuals/Amended-Returns-(Form-1040-X)/Wheres-My-Amended-Return-1

          If you have questions about any of the topics discussed in this newsletter, please feel free to call us. 
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