taxes: Tax compliance: How many years to file? - 05/14/24 12:36 PM
The IRS is having a big problem dealing with non-filers – individuals who fail to file their required tax returns. It’s an issue that’s been around for years, but one that hasn’t been a top priority for the IRS of late. As a result, there’s been a substantial increase in the amount of taxes that aren’t being paid. The amount of money that’s not being paid in taxes has almost doubled in recent years, from $39 billion in 2016 to $77 billion in 2021. But now, the IRS is making a new effort to fix the problem, starting with high-income taxpayers.
In general, the … (1 comments)

taxes: No business income, no home office deduction: Wrong. - 05/14/24 11:39 AM
You may have heard you cannot claim a home-office deduction without business income. That’s not accurate, as I explain below.
Points to Consider
Claim business deductions with no business income. Even if your business did not generate income this year, you should claim all business deductions. Such deductions might create a net operating loss (NOL), which would carry forward to offset future taxable income. Claim the home office with no business income. Claim the home-office deduction even with no business income. The home-office expenses not allowed this year carry over to future years in the separate home-office deduction bucket. And this gets … (4 comments)

taxes: Overfund a Section 529 Plan? Consider a Roth IRA rollover - 05/14/24 11:35 AM
Have you established, or are you considering, a Section 529 savings plan for a child, grandchild, or other family member?
Such plans are a great way to help pay for a person’s college education. Contributions are not federally tax deductible, but they grow tax-free, and you can withdraw them tax-free to pay higher education expenses.
But what happens if your child or other beneficiary doesn’t use all the money in the 529 account or decides not to go to college? Indeed, many young people are choosing not to attend college these days.
What do you do with the money in an overfunded 529 … (0 comments)

taxes: 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)

taxes: Using Family Loans to Secure Better Home Loan Interest Rates - 06/12/23 09:02 AM
Here’s some information on how you can help a family member buy a home by making a loan to them while ensuring that you and the family member benefit from a tax-smart loan structure.
With the current national average interest rates for 30-year and 15-year fixed-rate mortgages at 6.71 percent and 6.07 percent, respectively, family loans can offer a much more attractive alternative. By charging the Applicable Federal Rate (AFR) as interest, you can give the borrower a good deal without giving yourself a tax headache.
The IRS issues new AFRs for term loans every month. The rates for May 2023 are as … (2 comments)

taxes: Basic Estate Planning - 06/12/23 08:55 AM
You need an estate plan, regardless of whether or not you are among the ultra-rich. As recent news has shown, even those who have won the lottery or have substantial wealth can fall victim to poor estate planning.
While federal estate taxes may not concern you, you need a will to have your wishes honored after your death. Without a will, state law dictates the distribution of your assets, which may not align with your intentions. Additionally, if you have minor children, a will allows you to name a guardian to care for them in the event of your untimely passing.
Your heirs … (2 comments)

taxes: It's not too late: qualify now for your 2020 & 2021 ERC - 06/05/23 11:35 AM
I am writing about a significant opportunity for your business to qualify for the Employee Retention Credit (ERC).
As we are in 2023, you still have the chance to qualify for the ERC for the 2020 and 2021 calendar years and potentially recover a substantial amount of money.
The ERC is a refundable tax credit against certain employment taxes. To claim this credit, you must amend your 2020 and 2021 payroll tax returns, which could seem cumbersome but is well worth it considering the financial upside. For a business with a dozen employees and meeting the qualifications for maximum tax credits, you … (1 comments)

taxes: Claim your overlooked 2020 & 2021 COVID sick & family leave credits today - 06/05/23 11:27 AM
I am bringing to your attention an opportunity that might result in significant tax benefits for you or your corporation—the unclaimed 2020 and 2021 COVID-19 sick and family leave credits.
The IRS allows individuals and corporations to claim these credits to alleviate the pandemic’s impact. But many missed this opportunity on their previous tax returns.
If you did not claim these credits for 2020 and 2021, it’s not too late. You can now claim the credit by filing an amended return. Moreover, if you had a net profit of $143,866 on Schedule C or equivalent W-2 wages from your corporation, you could qualify … (2 comments)

taxes: Ugly rule for owners of S Corporations deducting health insurance - 06/05/23 11:19 AM
When your S corporation covers or reimburses your more-than-2-percent-shareholder-employee health insurance expenses, it classifies the payments as box 1 W-2 wages but not box 3 or box 5 wages.
When calculating the amount eligible for the Form 1040 self-employed health insurance deduction, you must use your Medicare wages (listed in box 5 of Form W-2) as your “earned income” rather than the amount reported in box 1.
Here are two examples that show you the impact of this rule:
Ted’s S corporation pays him $0 in cash wages and reimburses him $18,000 for health insurance. His W-2 shows $18,000 as box 1 wages … (6 comments)

taxes: Tax credits for electric vehicles - the latest from the IRS - 05/03/23 11:56 AM
The IRS recently issued new guidance on electric vehicles. There are four ways you can potentially benefit from a federal tax credit for an EV you place in service in 2023 or later: 
Purchase an EV and claim the clean vehicle credit. Lease an EV and benefit from the lessor’s EV discount. Purchase a used EV that qualifies for the used EV tax credit. Purchase an EV for business use and claim the new commercial clean vehicle tax credit. The new clean vehicle credit is available through 2032, with a maximum credit of $7,500. 
To qualify for the clean vehicle credit, you … (3 comments)

taxes: 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)

taxes: 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)

taxes: 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)

taxes: 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)

taxes: 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)

taxes: 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)

taxes: Use in-kind RMDs to avoid selling your retirement assets - 12/07/22 11:38 AM
Are you 72 or older? If so, you must take a required minimum distribution (RMD) from your traditional IRA, SEP-IRA, or SIMPLE IRA by the end of the year.
If you turn 72 this year, you can wait until April 1 of next year to take your first RMD—but you’ll also have to take your second RMD by the end of that year.
Your RMD is a percentage of the total value of your retirement accounts based on your age and life expectancy. The older you are, the more you must distribute. But here’s the kicker: your RMD must be based on … (1 comments)

taxes: $80 Billion to the IRS: What it means for you - 12/07/22 11:34 AM
You may have noticed that the IRS is in a bad way.
It has a backlog of millions of unprocessed paper tax returns, and taxpayers can’t get through to the agency on the phone. Congress noticed and took action by passing a massive funding of the IRS in the recently enacted Inflation Reduction Act.
The IRS will get an additional $80 billion over the next decade. This includes $35 billion for taxpayer services, operations support, and business systems. Among other things, the IRS plans to use these funds to update its antiquated IT systems (some of which date back to the 1960s), … (0 comments)

taxes: 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)

taxes: 2022 Last-Minute Year-End Retirement Deductions - 11/02/22 09:56 AM
The clock continues to tick. Your retirement is one year closer. 
You have time before December 31 to take steps that will help you fund the retirement you desire. Here are four things to consider. 
Establish Your 2022 Retirement Plan First, a question: Do you have your (or your corporation’s) retirement plan in place?  
If not, and if you have some cash you can put into a retirement plan, get busy and put that retirement plan in place so you can obtain a tax deduction for 2022. 
For most defined contribution plans, such as 401(k) plans, you (the owner-employee) are both an employee and … (5 comments)