irs representation: 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 representation: 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 representation: Beat the Net Investment Income Tax
- 12/13/23 01:06 PM
Here is some important information regarding the net investment income tax (NIIT), which may be relevant to your financial situation. NIIT Overview The NIIT is a 3.8 percent tax that could apply if your modified adjusted gross income (MAGI) exceeds $200,000 (single filers), $250,000 (married, filing jointly), or $125,000 (married, filing separately). It targets the lesser of your net investment income or the amount by which your MAGI exceeds the thresholds. What Qualifies as Net Investment Income? Net investment income includes income from investments (such as interest, dividends, and annuities), net rental income, and income from businesses in which you don’t materially participate. It does … (3 comments)
irs representation: Deducting Start-up Expenses for a Rental Property
- 12/13/23 01:04 PM
Are you interested in becoming a commercial or residential landlord? If so, you’ll likely have to shell out plenty of money before ever collecting a dime in rent. The tax code treats some of those monies as start-up expenses. Start-up expenses are some of the costs you incur before you offer a property for rent. There are two broad categories: Investigatory Pre-opening costs, such as advertising, office expenses, salaries, insurance, and maintenance costs Your cost of purchasing a rental property is not a start-up expense. Rental property and other long-term assets, such as furniture, must be depreciated once the rental business begins. On the … (3 comments)
irs representation: New FinCEN Filings Go into Effect on January 1
- 12/13/23 01:00 PM
For existing businesses, the Corporate Transparency Act (CTA) goes into effect on January 1, 2024, and imposes a brand-new federal filing requirement on most corporations, limited liability companies, and limited partnerships and on certain other business entities. No later than December 31, 2024, all non-exempt business entities must file a beneficial owner information report (BOI report) with the Financial Crimes Enforcement Network (FinCEN)—the Treasury Department’s financial intelligence unit. The BOI reports must disclose the identities and provide contact information for all of the entity’s “beneficial owners”: the humans who either (1) control 25 percent of the ownership interests in the entity or (2) … (2 comments)
irs representation: 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 representation: 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 representation: 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 representation: 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 representation: 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 representation: 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 representation: 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 representation: 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 representation: 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 representation: 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 representation: 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 representation: 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 representation: 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 representation: Tax consequences of a short sale of your principal residence
- 01/23/23 11:04 AM
The real estate boom appears to be over for now. Morgan Stanley predicts that house prices could fall by 10 percent by the end of 2024, perhaps twice as much in a worst-case scenario. Homeowners who purchased their homes at the top of the market could be in trouble, especially if the U.S. falls into a recession. No homeowner wants to go through foreclosure and its credit rating destruction. Fortunately, there is an alternative: a short sale. In a short sale, homeowners sell their home in a regular sale through a real estate agent for less than the amount of their mortgage. The … (4 comments)
irs representation: When cancellation of debt income can be tax-free
- 01/23/23 10:48 AM
Sometimes debts can pile up beyond a borrower’s ability to repay, especially if we are heading into a recession. But lenders are sometimes willing to cancel (forgive) debts that are owed by financially challenged borrowers. While a debt cancellation can help a beleaguered borrower survive, it can also trigger negative tax consequences. Or it can be a tax-free event. General Rule: COD Income Is Taxable When a lender forgives part or all of your debt, it results in so-called cancellation of debt (COD) income. The general federal income tax rule is that COD income counts as gross income that you must report … (1 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. 
;)
;)
;)
