irs: Would It Be a Better to File Married Filing Separately or Jointly?
- 10/18/24 05:00 PM
In previous years, the IRS was adamant that couples who chose to Married Filing Separately (MFS) were expected to be considered legally separately. However, the IRS has changed its policy and allowed couples to choose MFS instead of Married Filing Jointly (MFJ) of their own accord without any consequences. The question is whether it’s a worthwhile option to consider when it’s time to file your taxes. Based upon the bracket information below, you can get an idea as to where you stand on your percentage tax bracket and then the standard deduction. 2024 Tax Brackets Standard Deduction Jointly Separately Jointly Separately 10% … (0 comments)
irs: Am I Paying Taxes on My Bad Debt? (Part 1)
- 10/15/24 07:07 PM
1099-C Cancellation of Debt In the event a legally recognized bona fide lender sends a business or taxpayer a Form 1099-C, it is due to having failed to repay a loan due to: foreclosure, credit card debt, return of property, commercial or private loan, etc. The lender must issue a 1099-C to legitimize the expense as a bad debt on their own tax return and therefore who it is issued to must declare it on their tax return. This would also include interest payments, administrative fees, attorney fees, penalties, and failure to return any property. Failure to report onto the recipient’s tax return … (1 comments)
irs: What Protections Do I Have As A Taxpayer? (Part 2 of 2)
- 10/11/24 07:22 PM
Right to a Fair and Just Tax System Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive free assistance from the Taxpayer Advocate Service (TAS) if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.
You may request that the IRS remove any interest from your account that was caused by the IRS’s unreasonable errors or delays. For example, if the IRS delays issuing … (1 comments)
irs: What Protections Do I Have As A Taxpayer? (Part 1 of 2)
- 10/10/24 07:23 PM
Introduction - Taxpayer Bill of Rights Whether a taxpayer is an individual or a business, they are afforded the same rights to confidentiality and representation from the Taxpayer Bill of Rights.
Right to Confidentiality Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections, along with a collection due process hearing where applicable. In general, the IRS may not disclose your tax information to third parties unless you give it permission, e.g., you request to disclose … (0 comments)
irs: Can I Lose My Passport Due to Unpaid Taxes? (Part 2 of 2)
- 10/09/24 08:21 PM
The IRS will reverse a certification when: - The tax debt is fully satisfied or becomes legally unenforceable - The tax debt is no longer seriously delinquent - The certification is erroneous - The IRS will make this reversal within 30 days and provide notification to the State Department as soon as practicable. The IRS will not reverse certification if a taxpayer’s request for a collection due process hearing or innocent spouse relief is on a debt that's not certified. Also, the IRS will not reverse the certification because the taxpayer pays the debt below the threshold. Referral to Revoke Passport The IRS may ask the State … (3 comments)
irs: Should I Switch to Become a C Corp?
- 10/07/24 07:30 PM
C Corp entities are different than any other entities, in that they are separate and are not pass-through entities. They are the only entity that pays its own taxes, and due to the 2017 Tax Cuts and Jobs Act, has a flat rate of 21%, which before had a graduating tax rate based on profit. Just as an S Corp, C Corps help protect shareholders from personal liability if protocols are followed and separation between business and individual interests are kept apart. The stock with a C Corp is that you can have multiple levels of classes, as well as multiple … (0 comments)
irs: Defining the Home Office Space
- 10/02/24 05:52 PM
Can I Have More Than One Business Location? Yes you do have that option, including your home, for a single trade or business or multiple trades or businesses. This is determined by the Principal Place of Business Test: - The relative importance of the activities performed at each place where you conduct business, - The amount of time spent at each place where you conduct business, - Your home office will qualify as your principal place of business if you meet the following requirements, - You use it exclusively and regularly for administrative or management activities of your trade or business, - You have no other fixed … (1 comments)
irs: Am I Deducting My Meals the Right Way?
- 09/27/24 07:15 PM
Meals Entertainment expenses are generally nondeductible from 2018 – 2025 due to the Tax Cuts and Jobs Act of 2017. However, you may continue to deduct 50% of the cost of business meals if you (or an employee) is present and the food or beverages are not considered lavish or extravagant. Food and beverages that are provided during entertainment events are not considered entertainment if purchased separately from the entertainment, or if the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts. However, the entertainment disallowance rule may … (4 comments)
irs: Cruise Ship and Foreign Travel Business Deductions
- 09/26/24 06:44 PM
Believe it or not, yes these are deductions that are available to you, which are usually in the form of continuing education offerings that are not normally available in other settings if you ever get requested to defend them in an audit. There’s nothing to say it’s impossible, but you need to be prepared with all of the proper documentation. Cruise Ships - You can deduct up to $2,000 per year of your expenses of attending conventions, seminars, or similar meetings held on cruise ships. All ships that sail are considered cruise ships. - You can deduct these expenses only if all requirements are … (2 comments)
irs: What Does the IRS Define As My Tax Home
- 09/25/24 07:53 PM
Factors Used to Determine Tax Home - If you don’t have a regular place of business or work, use the following to determine your tax home. - You perform part of your business in a designated location of your main home and use it for lodging. - You have living expenses of your main home that you duplicate because your business requires you to be away from that home. - You haven’t abandoned the area in which both your historic place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or … (2 comments)
irs: Did you ever notice that the first piece of luggage on the carousel never belongs to anyone? “Erma Bombeck”
- 09/24/24 06:48 PM
For travel expenses to be legitimately deductible, they should be: - Deducted in the event they are related to an actual, established business and not one as you, the taxpayer, hope to develop into a business - What is the actual business purpose of the travel that it can be not only documented but also what its purpose is Detailed documentation is key for any substantiation test of business expenses, per IRS Section 274. In the event of any tax audit, failure to pass this examination could not only lead to disallowing the deductions but also a higher tax liability, along with other interest … (4 comments)
irs: The IRS Sends Me a Notice of Deficiency Letter - Now What?
- 09/23/24 06:05 PM
So many taxpayers feel that there's no choice if they are assessed a tax penalty because it's the IRS. However, there's always always the opportunity to refuse to disagree with what the assessment is and dispute it if you feel that there were discrepancies that have not been considered or simply overlooked on their part. This is why there is such a high lack of response rate on behalf of taxpayers, as well as IRS auditors. Based upon the National Taxpayer Advocate's Annual Report to Congress in 2021, 92% of closed audits were less than $50,000 via correspondence and those auditors spent > … (0 comments)
irs: If I Don't File My Taxes What Happens?
- 09/20/24 06:45 PM
The IRS has the power to do what's called a Substitute For Return (SFR) per Internal Revenue Code 6020(b) when taxpayers fail to file tax returns, whether it's a personal or business return, based upon the information that is available with the IRS such as bank statements, 1099s, W2s, 1098s, etc. Unfortunately, it's at the discretion of the IRS preparer that will determine the maximum tax liability owed and not often maximize any potential exemptions or expenses that are not available without proper record documentation. Upon completion of the SFR, the return(s) are therefore sent to the taxpayer, and if several … (1 comments)
irs: What Is The 1031 Property Exchange I Keep Hearing About?
- 09/16/24 06:28 PM
Several discussions come around the 1031 Exchange to avoid paying capital gains taxes, however this is a bit of a “hamster wheel” people get on and fail to see the “end game.” The general rules for 2024 are as follows: Property is of the same nature or character, even if they differ in grade or quality but are for the same purpose. The taxpayers must be the same, such as a tax group, individuals, etc. and no differentiation is acceptable for it to continue its validity. If at any time it is changed, then the 1031 Exchange it is considered void with the IRS. This … (2 comments)
irs: Defining Long-Term and Vacation Rentals
- 09/13/24 05:48 PM
Rental Definition There are six exceptions to the definition of rental. Under Reg. §1.469- 1T(e)(3)(ii), six types of activities normally defined as rentals, are treated as non-rental activities, i.e., as businesses, in most cases. The active participation standard and the $25,000 allowance do not apply. If the activity falls outside the rental definition, it is passive or non-passive based on if the taxpayer materially participates with six exceptions. The average period of customer use is 7 days or less. Examples: condo rentals, short-term use of hotel/motel rooms, and businesses that rent videos/tuxedos, cars/tools, etc. The average period of customer use is 30 days or … (4 comments)
irs: Avoiding Tax Issues When Converting a Primary Residence to a Rental Property
- 09/12/24 05:32 PM
Often homeowners either choose to downsize or potentially move in with their children or retirement communities but want to convert their primary residences into rental properties as a regular source of income. Therefore, there needs to be documentation set up for the transference.
If you used and owned the property as your principal residence for 2 years out of a 5-year period ending on the date of sale, you have met the ownership and use tests for the exclusion. This is true even though the property was used as rental property for the 3 years before the date of the sale. You … (1 comments)
irs: Dealing With Potential Rental Tax Issues as a Non Real Estate Professional
- 09/11/24 09:07 PM
Non Real Estate Professionals are those who are deemed to NOT have an IRS professional tax status spending over 50% of their total hours during the calendar year providing services in the business. This would account for a minimum of 1,040 hours or 26 weeks of a 40-hour week, out of a 52-week year.
Defining the 500 Hours Rule
IRS Regulation 469 allows taxpayers to group entities or rentals to form an appropriate economic unit for the measurement of gain or loss. However, businesses may not be grouped with rentals. Land or buildings held for rentals may not be grouped. No personal activity or … (0 comments)
irs: What if I Get Rejected For The Offer In Compromise Program?
- 09/09/24 06:21 PM
Since nearly 70% of applicants are rejected for the Offer In Compromise program at any given time, it's not unusual to possibly get rejected for a variety of reasons. Unfortunately, you MUST submit your appeal within 30 days of the date of the notice of rejection, NOT the date you received it. Therefore, you must be aware that you may have as little as 2 or 3 weeks that you have to prepare for appeal or you must start the entire process from scratch and the IRS Office of Appeals will not consider your current application. Upon Failure to Receive an Offer The … (0 comments)
irs: Does My Spouse Need to be Part of the Offer In Compromise
- 09/06/24 06:03 PM
In the Offer In Compromise application, if you feel that your spouse has no tax liability, their assets and income will not be considered in determining the amount of the offer. Unfortunately, it will be reviewed by the IRS as to whether there were significant transference of those assets and income BEFORE the Offer In Compromise was in the process of being considered to avoid the taxpayer's obligations to be held. This could potentially lead to criminal charges base on your Officer In Compromise, should they deem that significant "moving around" was used for concealment to no jus the non-liable but … (0 comments)
irs: How Will Our Property Be Affected by Our Offer In Compromise?
- 09/05/24 05:16 PM
When the IRS is looking a the Offer In Compromise regarding the applicant's property situation there are three main sets of circumstances because it all depends on the state where they reside, as well as how the title is set up. When it comes to a state that has Community Property (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), also which Alaska is an opt-in community property state, it’s considered separate unless both parties agree through an agreement or trust in the 50 United States. This is important because the Offer In Compromise application will be asking you to list … (3 comments)
In previous years, the IRS was adamant that couples who chose to Married Filing Separately (MFS) were expected to be considered legally separately. However, the IRS has changed its policy and allowed couples to choose MFS instead of Married Filing Jointly (MFJ) of their own accord without any consequences. The question is whether it’s a worthwhile option to consider when it’s time to file your taxes. Based upon the bracket information below, you can get an idea as to where you stand on your percentage tax bracket and then the standard deduction.
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