irs collections: 13 Answers on the New 2024 CTA Required BOI Reporting to FinCEN
- 01/04/24 10:12 AM
The Corporate Transparency Act (CTA) is upon us. It takes effect on January 1, 2024, and imposes a new federal filing requirement for most corporations, limited liability companies (LLCs), and other business entities. Corporations, LLCs, and other entities subject to the CTA are called “reporting companies.” People who form new reporting companies must file a beneficial ownership information (BOI) report with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) within 90 days of forming the company. The owners of reporting companies created before 2024 must also file a BOI report, but they have until January 1, 2025 (but think December … (2 comments)
irs collections: New 1099-K filing rules delayed again
- 01/04/24 10:03 AM
Do you sell goods or services and receive payment through a third-party settlement organization (TPSO)? If so, you must know the IRS’s new Form 1099-K reporting rules. TPSOs include: payment apps such as PayPal, CashApp, and Venmo; online auction or marketplace services such as eBay and Amazon; gig economy platforms such as Uber and Airbnb; some cryptocurrency processors such as BitPay; craft or maker marketplaces like Etsy; ticket exchange or resale sites like Ticketmaster; and some crowdfunding platforms. For over a decade, TPSOs filed IRS Form 1099-K, Payment Card and Third-Party Network Transactions, reporting certain payments the TPSOs process for goods and … (0 comments)
irs collections: Deducting more than one business vehicle
- 09/29/23 12:06 PM
Contrary to popular belief, the IRS does not limit business owners to claiming deductions on only one business vehicle. You might maximize tax benefits by using multiple vehicles for business purposes. This is particularly true when you use the vehicles predominantly (more than 50 percent) for business, you drive more business miles than your spouse, and the vehicles have closely aligned adjusted bases. The allowability of multiple vehicle use is made clear in both IRS Publication 463 and IRS Form 4562. Several tax court rulings have upheld your right to claim business deductions on multiple vehicles within the same tax year. Here’s … (3 comments)
irs collections: Why some business owners prefer individual HSAs
- 09/29/23 11:51 AM
When enacted, the Affordable Care Act (ACA) eliminated most small business health plans that reimbursed individually purchased health insurance. Consequently, many small business owners chose health savings accounts (HSAs) or opted to provide no health coverage at all. As of 2022, over 35 million HSAs were active, with assets amounting to $104 billion. The Devenir survey expects this to increase to 43 million accounts with $150 billion in assets by 2025. HSA basics: To open an HSA, you must have high-deductible health insurance. 2023 contribution limits are $3,850 for individuals and $7,750 for families. These limits increase slightly in 2024. If you’re 55 … (3 comments)
irs collections: Wildfires and storms - tax relief
- 09/29/23 11:46 AM
Recent natural calamities in various parts of our nation have caused considerable distress. I want to bring to your attention some crucial tax-related implications and preventive measures you may consider. IRS Tax Relief Update For Hawaii residents. The IRS has granted tax relief to taxpayers in Hawaii affected by recent wildfires by allowing them until February 15, 2024, to file returns and pay any taxes that would have been due after August 8, 2023, and before February 15, 2024. For Illinois and Mississippi residents. The IRS also granted tax relief to Illinois and Mississippi residents affected by severe storms in June and July. The … (1 comments)
irs collections: Act Now! Get your safe-harbor expensing in place
- 09/08/23 12:15 PM
For 2024, you can elect the de minimis safe harbor to expense assets costing $2,500 or less ($5,000 with audited financial statements or similar). The term “safe harbor” means that the IRS will accept your expensing of the qualified assets if you properly abided by the safe harbor rules. Here are three benefits of this safe harbor: Safe harbor expensing is superior to Section 179 expensing and depreciation because you don’t have the recapture period that can complicate your taxes. Safe harbor expensing simplifies your tax and business records because you don’t have the assets cluttering your books. The safe harbor does not … (1 comments)
irs collections: Defining real estate investor and real estate dealer
- 09/08/23 11:35 AM
I have great news! You can have in your real estate portfolio both investor and dealer properties. This distinction is significant for tax purposes. Here’s a snapshot of the potential tax differences: Suppose you profit $90,000 from a property sale: As a dealer, your tax could be up to $46,017. As an investor, it might be only $21,420. That’s a potential savings of $24,597 in taxes for investors! You look at every property individually to determine its classification and make sure you identify each property in your records as either an investment or dealer property. Not doing so can lead to complications with the … (2 comments)
irs collections: Hobby loss rule raises its ugly head
- 09/08/23 11:30 AM
I am bringing to your attention some recent developments regarding the “hobby loss rule.” Given that you have diverse sources of income, some of which might be considered hobbies, I believe this information could be of great importance to you. What Is the Hobby Loss Rule? The hobby loss rule might apply to you if you have any activity that results in a tax loss. Under this rule, you might lose out on your deductions and end up paying taxes on the income you earned from the hobby. For instance, if you earned $200,000 from a hobby and incurred expenses of $350,000, the … (3 comments)
irs collections: Update on State Pass-Through Entity Taxes Beating the SALT
- 08/17/23 11:46 AM
Here are some critical updates on the pass-through entity tax (PTET), which has recently become the rule in most states rather than the exception. The PTET enables owners of pass-through businesses, such as S corporations and multi-member LLCs, to navigate around the $10,000 annual limit on state and local taxes (SALT). How PTET Works The PTET process is relatively straightforward. A pass-through entity (PTE) can choose to pay state income tax on its business income, which would otherwise pass on to its owners. The PTE then claims a federal business expense deduction for these state income tax payments. Next, the states allow the … (3 comments)
irs collections: Failed mileage log negates mileage deductions
- 08/01/23 01:48 PM
I am bringing to your attention a crucial aspect of business tax deductions: mileage logs. In most court cases, taxpayers lose vehicle expense deductions because they cannot present a credible business mileage log. The IRS code forbids deductions for vehicle expenses when taxpayers cannot prove the mileage and provide an adequate record. Failing to maintain such records could lead to deductions far less than the actual business mileage, potentially resulting in no vehicle deductions at all. In essence, having a mileage log is critical for both proprietors and corporate owner-employees. Take the case of Jim and Martha Flake. During their IRS audit, … (4 comments)
irs collections: The QSEHRA Health Plan
- 07/27/23 08:09 AM
If you’re a small employer (fewer than 50 employees), you should consider the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) as a good way to help your employees with their medical expenses. If the QSEHRA is indeed going to be your plan of choice, then you have three good reasons to get that QSEHRA plan in place on or before October 2, 2023. First, this avoids penalties. Second, your employees will have the time they need to select health insurance. Third, you will have your plan in place on January 1, 2024, when you need it. One very attractive aspect of the QSEHRA … (2 comments)
irs collections: Strategic Insights for Employing Your Spouse
- 07/27/23 08:05 AM
If you own your own business and operate as a proprietorship or partnership (wherein your spouse is not a partner), one of the smartest tax moves you can make is hiring your spouse to work as your employee. But the tax savings may be a mirage if you don’t pay your spouse the right way. And the arrangement is subject to attack by the IRS if your spouse is not a bona fide employee. Here are four things you should know before you hire your spouse that will maximize your savings and minimize the audit risk. Pay benefits, not wages. The way … (2 comments)
irs collections: Refresher on the Kiddie Tax and how to avoid it
- 07/24/23 08:20 AM
I wanted to take this opportunity to touch base regarding the federal income tax rules on the “kiddie tax” and its potential impact on your financial strategy for your child(ren). In brief, the kiddie tax was enacted by Congress to prevent parents from passing investment income to their children, who typically have a lower tax rate. Under the kiddie tax rules, a portion of a child’s net unearned income may be taxed at the parent’s marginal federal income tax rate. The kiddie tax applies to children up to age 24, assuming they meet certain criteria. The kiddie tax can result in higher taxes … (2 comments)
irs collections: Proving expenses for business travel
- 07/24/23 08:04 AM
Here’s some crucial information on how to document expenses during business travel. Corporation or proprietorship? If you operate as a corporation, the corporation should reimburse you for the travel expenses or pay for them directly. Remember, you can’t deduct employee business expenses on Form 1040 anymore due to changes brought by the Tax Cuts and Jobs Act for 2018–2025. Tax diary for business travel? Although not obligatory, keeping a timely record of your business travel expenses is essential. This record should prove each expenditure’s amount, time, place, and business purpose. Travel meals versus other travel expenses? Due to specific legislation, tax deductions for travel … (1 comments)
irs collections: Uncertain tax position - file Form 8275 to avoid penalties
- 06/30/23 01:19 PM
Are you considering a bold tax position that may significantly reduce your taxes? If approved by the IRS, it’s a win. But if disapproved, be prepared to face a considerable tax penalty. The IRS imposes a 20 percent penalty for substantial tax underpayment. For instance, if the IRS finds you underpaid your taxes by $50,000, you’ll face a $10,000 penalty in addition to the tax due and interest. The tax code considers a tax underpayment “substantial” if you understate your tax by over 10 percent or $5,000, whichever is greater. If you claimed the qualified business income (Section 199A) deduction on your return, … (2 comments)
irs collections: IRS Collection Notices: What do they mean?
- 12/22/22 08:51 AM
The IRS’s primary job is to collect taxes and one of their tools for doing this is sending out collection notices. IRS collection notices serve two purposes: they inform the taxpayer the amount that is owed and the date by which payment is due If you don't respond or make a payment within a certain number of days after receiving the notice, then the IRS may take more aggressive actions, such as filing a tax lien, wage garnishment or seizing your assets. Types of IRS Collection Notices Each notice is issued regularly, usually about 4-5 weeks apart, along with escalating threats of collection … (2 comments)
irs collections: The 10-year collection statute - why it is so important
- 12/22/22 07:25 AM
Did you know there is a statute of limitation on the IRS’ ability to enforce tax collection? The 10-Year Collection Statute, commonly referred to as the Collection Statute Expiration Date (CSED), is one of the most important pieces of legislation you need to be aware of. The IRS can attempt to collect your open tax liability for up to ten years from the date the taxes were assessed, with some exceptions. It’s important to note that the statute says 10 years from assessment not 10 years from the filing date or filing due date of the return. There are several actions that … (2 comments)
irs collections: Sec 1031 exchange - Qualified opportunity zone funds: which is better?
- 12/07/22 11:51 AM
Have you sold, or are you planning to sell commercial or rental property? To avoid immediately paying capital gains tax on your profit, you have options: Deferring the capital gains tax using a Section 1031 exchange Deferring the capital gains tax using a qualified opportunity zone fund With a Section 1031 exchange, you sell your property and invest all the proceeds in another like-kind replacement property of equal or greater value. With a qualified opportunity fund, you don’t acquire another property. Instead, you invest in a corporation, partnership, or LLC that pools money from investors to invest in property in areas … (3 comments)
irs collections: Crowdfunding: Is it taxable?
- 12/07/22 11:43 AM
Crowdfunding is a national and international phenomenon. Over $17 billion is raised yearly in North America through world-famous websites such as GoFundMe and Kickstarter. All this crowdfunding activity leads to an obvious question: Is the money raised this way taxable income for the recipients? You might be surprised to learn that the courts and the IRS have provided almost no guidance on this issue. The authorities have largely left it up to taxpayers to figure it out by applying general tax principles. Under general tax principles, all income you receive is taxable unless an exception in the tax law makes it tax-free. Some exceptions … (3 comments)
irs collections: 2022 Last-Minute Year-End Tax Strategies for Marriage, Kids, and Family
- 11/03/22 11:58 AM
Are you thinking of getting married or divorced? If yes, consider December 31, 2022, in your tax planning. Here’s another planning question: Do you give money to family or friends (other than your children, who are subject to the kiddie tax)? If so, you need to consider the zero-taxes planning strategy. And now, consider your children who are under the age of 18. Have you paid them for the work they’ve done for your business? Have you paid them the right way? Here are five strategies to consider as we come to the end of 2022. Put Your Children on Your Payroll If you have … (0 comments)
The Corporate Transparency Act (CTA) is upon us. It takes effect on January 1, 2024, and imposes a new federal filing requirement for most corporations, limited liability companies (LLCs), and other business entities. 
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