Domestic production activities deduction?

[Quixote]

Twice in the last week I have run across a reference by TPs to the domestic production activities deduction (DPAD), line 35 of Form 1040. The TP take on the DPAD seems to be "I produced income from domestic activities, so I get to deduct it."

One of the TPs pushing the theory thinks users of it will avoid a 6702 penalty because misrepresentation of the DPAD is not a specified frivolous position. I suspect he is wrong. The IRS and the courts will probably see it as a variation on "my wages aren't taxable."

[Nikki]

... users of it will avoid a 6702 penalty ...

But there's always the significant underpayment penalty, penalty (civil plus criminal if DoJ's interested) for fraud, and several others.

Depending on the amount at issue, they could add up to more than the $5,000 friv. penalty.

[Gregg]

... users of it will avoid a 6702 penalty ...

But there's always the significant underpayment penalty, penalty (civil plus criminal if DoJ's interested) for fraud, and several others.

Depending on the amount at issue, they could add up to more than the $5,000 friv. penalty.

Aha! But if they DO avoid the Friv Penalty, it's still a VICTORY!

[Paul]

I suspect the idiots are misreading the 8903 as allowing you to deduct 50% of your wages. That might be why Duplo over on LH (linked in another thread) claims that the 8903 is contrary to law, but the IRS still accepts it, and that you're cheating yourself by using it -- the "truth" is that you aren't taxable on your wages, and can deduct or exclude 100%, and the IRS is laughing at you and taking your money when you fill out the 8903 and only deduct 50%.

But I don't feel like browing LH for 10 hours to find out what his real explanation is, when the few posts I have read show he is severely brain damaged.

[Gregg]

I feel pretty strongly that Duplox-Stupo is in fact Richard614, or at least one of the voices in his head.

[notorial dissent]

Well, look at it this way, they can combine the Domestic production Activity deduction with the Transmitting Utilities thing some of them are stuck on, and have a twofer sure fire cure to taxes.

[Pottapaug1938]

From the site http://www.taxes.about.com, here is some helpful information:

Qualified Production Activities

A business engaged in the following lines of business may qualify for the Domestic Production Activities Deduction. These are the "qualified production activities" eligible for claiming the deduction under Internal Revenue Code Section 199:

Manufacturing based in the United States,
Selling, leasing, or licensing items that have been manufactured in the United States,
Selling, leasing, or licensing motion pictures that have been produced in the United States,
Construction services in the United States, including building and renovation of residential and commercial properties,
Engineering and architectural services relating to a US-based construction project,
Software development in the United States, including the development of video games.

Now, why I am I not surprised that the TPers have misread yet another provision of the tax laws?

[Imalawman]

From the site http://www.taxes.about.com, here is some helpful information:

Qualified Production Activities

A business engaged in the following lines of business may qualify for the Domestic Production Activities Deduction. These are the "qualified production activities" eligible for claiming the deduction under Internal Revenue Code Section 199:

Manufacturing based in the United States,
Selling, leasing, or licensing items that have been manufactured in the United States,
Selling, leasing, or licensing motion pictures that have been produced in the United States,
Construction services in the United States, including building and renovation of residential and commercial properties,
Engineering and architectural services relating to a US-based construction project,
Software development in the United States, including the development of video games.

Now, why I am I not surprised that the TPers have misread yet another provision of the tax laws?

Something tells me they're not going to able to understand how to calculate the DPAD correctly, even assuming wages qualified. Its like giving Godel, Escher, Bach to a kindergarten student and asking him to write a 20 page report on it.

[Kimokeo]

Pottapaug1938 wrote:
From the site http://www.taxes.about.com, here is some helpful information:

Qualified Production Activities

A business engaged in the following lines of business may qualify for the Domestic Production Activities Deduction. These are the "qualified production activities" eligible for claiming the deduction under Internal Revenue Code Section 199:

Manufacturing based in the United States,
Selling, leasing, or licensing items that have been manufactured in the United States,
Selling, leasing, or licensing motion pictures that have been produced in the United States,
Construction services in the United States, including building and renovation of residential and commercial properties,
Engineering and architectural services relating to a US-based pool cleaning project,
Software development in the United States, including the playing of video games.

Now, why I am I not surprised that the TPers have misread yet another provision of the tax laws?


Misread? I think you need to go back over it again.

[Pottapaug1938]

Pottapaug1938 wrote:
From the site http://www.taxes.about.com, here is some helpful information:

Qualified Production Activities

A business engaged in the following lines of business may qualify for the Domestic Production Activities Deduction. These are the "qualified production activities" eligible for claiming the deduction under Internal Revenue Code Section 199:

Manufacturing based in the United States,
Selling, leasing, or licensing items that have been manufactured in the United States,
Selling, leasing, or licensing motion pictures that have been produced in the United States,
Construction services in the United States, including building and renovation of residential and commercial properties,
Engineering and architectural services relating to a US-based pool cleaning project,
Software development in the United States, including the playing of video games.

Now, why I am I not surprised that the TPers have misread yet another provision of the tax laws?


Misread? I think you need to go back over it again.

I did, and I stand by my words. Unless I am involved in a business based in the United States, and I spend company money on one of the listed activities this section does not apply to me.

[Quixote]

Pottapaug1938 wrote:
From the site http://www.taxes.about.com, here is some helpful information:

Qualified Production Activities

A business engaged in the following lines of business may qualify for the Domestic Production Activities Deduction. These are the "qualified production activities" eligible for claiming the deduction under Internal Revenue Code Section 199:

Manufacturing based in the United States,
Selling, leasing, or licensing items that have been manufactured in the United States,
Selling, leasing, or licensing motion pictures that have been produced in the United States,
Construction services in the United States, including building and renovation of residential and commercial properties,
Engineering and architectural services relating to a US-based pool cleaning project,
Software development in the United States, including the playing of video games.

Now, why I am I not surprised that the TPers have misread yet another provision of the tax laws?


Misread? I think you need to go back over it again.

I did, and I stand by my words. Unless I am involved in a business based in the United States, and I spend company money on one of the listed activities this section does not apply to me.

[Duke2Earl]

Just wait until they get to the regs under section 199. Even assuming this section applied to these wackos (which, surprise surprise, it doesn't) the deduction is at most 6% of qualified income (for 2009).... hardly a magic bullet.

[Paul]

All of these posts on Section 199 are true (except for certain deliberate snark by Quixote), but a quick (mis)reading of the 8903 clearly shows you can deduct 50% of your wages! And don't the TPs always follow the form, regardless of the statutes?

[Duke2Earl]

The 50% of wages is misleading. Actually, it's a limitation in that if you are an EMPLOYER you cannot deduct an amount in excess of 50% of the wages YOU PAY even if 6% of your domestic production income is greater than that.

[Randall]

Isn't the deduction limited to 6% of QPAI (taxable income)?
What TPer admits to having taxable income?

[Paul]

Hey, we're trying to guess the argument of a person who can't read or think, and has no knowledge of law, history, economics or much of anything else, and won't even try to explain it to us. Might as well try to guess what the next word out of Van Pelt's word salad shooter is going to be.

[Gregg]

Hey, we're trying to guess the argument of a person who can't read or think, and has no knowledge of law, history, economics or much of anything else, and won't even try to explain it to us. Might as well try to guess what the next word out of Van Pelt's word salad shooter is going to be.

sitting on a cornflake, waiting on the van to come....

goo goo ka choo