Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Archive for the ‘Taxation’ Category

EY Report: State of the Tax Industry and Tax Education

Posted by William Byrnes on March 21, 2016


“The central function of the tax office has evolved from strategy and planning into risk management”, says William Byrnes, professor of law and associate dean at Texas A&M University.  Read Full Report here E&Y tax industry report

E&Y reports that “According to a 2015 report by the Institute of Management Accountants (IMA), which launched a Competency Crisis website to deal with the talent gap in 2013, 90% of North American organizations cannot find the entry-level management accounting and finance talent they need.”

“The educational curriculum isn’t keeping up with the needs of business, and employers expect more advanced skills at entry level, according to the report.”

E&Y finds: “Texas A&M University is among the pioneers of change in tax education. …the State of Texas not only established a new law school at the university but also gave it carte blanche to create a new education model.”

 

Posted in Education Theory, international taxation, Taxation, Uncategorized | Tagged: | Leave a Comment »

Deciding Whether to Itemize Deductions or Use the Standard Deduction?

Posted by William Byrnes on February 17, 2016


Most people claim the standard deduction when they file their federal tax return, but you may be able to lower your tax bill if you itemize. You can find out which way saves you the most by figuring your taxes both ways. The IRS offers these six tips to help you choose:

 

Figure Your Itemized Deductions. Add up deductible expenses you paid during the year. These may include expenses such as:

  • Home mortgage interest
  • State and local income taxes or sales taxes (but not both)
  • Real estate and personal property taxes
  • Gifts to charities
  • Casualty or theft losses
  • Unreimbursed medical expenses
  • Unreimbursed employee business expenses

Special rules and limits apply to each type of itemized expense which may lead to less of a tax deduction than the actual expense.

Know Your Standard Deduction. If you don’t itemize, your basic standard deduction for 2015 depends on your filing status:

  • Single $6,300
  • Married Filing Jointly $12,600

If you’re 65 or older or blind, your standard deduction is higher than these amounts. If someone can claim you as a dependent, your deduction may be limited.

IRS YouTube Videos: Standard vs. Itemized DeductionsEnglish

Tax Facts Online is the premier practical, useful, actionable, and affordable reference on the taxation of insurance, employee benefits, investments, small tax-facts-online
business and individuals. This advisory service provides expert guidance on hundreds of the most frequently asked client questions concerning their most important tax issues.

Many ongoing, significant developments have affected tax law and, consequently, tax advice and strategies. Tax Facts Online is the only source that is reviewed daily and updated regularly by our expert editors.

In addition to completely current content not available anywhere else, Tax Facts Online gives you exclusive access to:

  • Robust search capabilities that enable you to locate detailed answers—fast
  • Time-saving calculators, tables and graphs
  • A copy/paste capability that speeds the production of presentations and enables you to easily incorporate Tax Facts content into your workPlus, the recent addition of current news, case studies, commentary and competitive intelligence serves our customers well as the only tax reference that a non-professional tax expert will ever need.

Tax Facts Online Core Content

Tax Facts on Insurance provides definitive answers to your clients’ most important tax-related insurance questions, while offering insightful analysis and illustrative examples. Numerous planning points direct you to the most recent and important insurance solutions.

Tax Facts on Employee Benefits provides current in-depth coverage of important client-related employee benefits questions. Employee benefits affect most everyone2015_tf_triple_combo_cover-m, and your clients must know how to deal with often complex issues and problems. Tax Facts on Employee Benefits provides the answers in a direct, concise, and practical manner.

Tax Facts on Investments provides clear, detailed answers to your difficult tax questions concerning investments. You must know what investments best suit your clients from a tax standpoint. You will discover questions that directly provide insightful answers, comparison of investment choices, as well as how investments have changed in recent years.

Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small buisnesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.

  • Charles Calello Enterprise/Group Inquiries 201-526-1259 Email Me
  • Customer Service 800-543-0874 8am – 6pm ET Monday – Thursday 8am – 5pm ET Friday Email Customer Service

Posted in Taxation, Uncategorized | Tagged: , , , | Leave a Comment »

Tax Facts about Taxable and Non-Taxable Income

Posted by William Byrnes on February 16, 2016


All income is taxable unless a law specifically says it isn’t. Here are some basic rules you should know to help you file the 2015 – 1040 tax return due April 15, 2016.

  • Taxable income.  Taxable income includes money you earn, like wages and tips. It also includes bartering, an exchange of property or services. The fair market value of property or services received is normally taxable.

Some types of income are not taxable except under certain conditions, including:

  • Life insurance.  Proceeds paid to you upon the death of an insured person are usually not taxable. However, if you redeem a life insurance policy for cash, any amount you get that is more than the cost of the policy is taxable.
  • Qualified scholarship.  In most cases, income from a scholarship is not taxable. This includes amounts used for certain costs, such as tuition and required books. On the other hand, amounts you use for room and board are taxable.
  • Other income tax refunds.  State or local income tax refunds may be taxable. You should receive a Form 1099-G from the agency that paid you. They may have sent the form by mail or electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some items that are usually not taxable:

  • Gifts and inheritances
  • Child support payments
  • Welfare benefits
  • Damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer for an item you buy
  • Reimbursements for qualified adoption expenses

Tax Facts Online is the premier practical, useful, actionable, and affordable reference on the taxation of insurance, employee benefits, investments, small tax-facts-online
business and individuals. This advisory service provides expert guidance on hundreds of the most frequently asked client questions concerning their most important tax issues.

Many ongoing, significant developments have affected tax law and, consequently, tax advice and strategies. Tax Facts Online is the only source that is reviewed daily and updated regularly by our expert editors.

In addition to completely current content not available anywhere else, Tax Facts Online gives you exclusive access to:

  • Robust search capabilities that enable you to locate detailed answers—fast
  • Time-saving calculators, tables and graphs
  • A copy/paste capability that speeds the production of presentations and enables you to easily incorporate Tax Facts content into your workPlus, the recent addition of current news, case studies, commentary and competitive intelligence serves our customers well as the only tax reference that a non-professional tax expert will ever need.

Tax Facts Online Core Content

Tax Facts on Insurance provides definitive answers to your clients’ most important tax-related insurance questions, while offering insightful analysis and illustrative examples. Numerous planning points direct you to the most recent and important insurance solutions.

Tax Facts on Employee Benefits provides current in-depth coverage of important client-related employee benefits questions. Employee benefits affect most everyone2015_tf_triple_combo_cover-m, and your clients must know how to deal with often complex issues and problems. Tax Facts on Employee Benefits provides the answers in a direct, concise, and practical manner.

Tax Facts on Investments provides clear, detailed answers to your difficult tax questions concerning investments. You must know what investments best suit your clients from a tax standpoint. You will discover questions that directly provide insightful answers, comparison of investment choices, as well as how investments have changed in recent years.

Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small buisnesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.

  • Charles Calello Enterprise/Group Inquiries 201-526-1259 Email Me
  • Customer Service 800-543-0874 8am – 6pm ET Monday – Thursday 8am – 5pm ET Friday Email Customer Service

Posted in Taxation, Uncategorized | Tagged: , , | 2 Comments »

Tax Facts for Choosing the Right Tax Filing Status

Posted by William Byrnes on December 14, 2015


Using the correct filing status is very important when filing a tax return. The right status affects how much is owed in taxes. It may even affect whether a tax return must be filed.

When choosing a filing status, keep in mind that marital status on Dec. 31 is the status for the entire year.  If more than one filing status applies, choose the one that will result in the lowest tax.

Note for same-sex married couples that new rules apply if legally married in a state or foreign country that recognizes same-sex marriage.  The same sex spouses generally must use a married filing status on the 2015 federal tax return and forward.  This is true even if the same sex spouses now live in a state or foreign country that does not recognize same-sex marriage.

Here is a list of the five filing statuses to help you choose:

1. Single.  This status normally applies if you aren’t married or are divorced or legally separated under state law.

2. Married Filing Jointly.  A married couple can file one tax return together. If your spouse died in 2013, you usually can still file a joint return for that year.

3. Married Filing Separately.  A married couple can choose to file two separate tax returns instead of one joint return. This status may be to your benefit if it results in less tax. You can also use it if you want to be responsible only for your own tax.

4. Head of Household.  This status normally applies if you are not married. You also must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Some people choose this status by mistake. Be sure to check all the rules before you file.

5. Qualifying Widow(er) with Dependent Child.  If your spouse died during 2014 or 2015 and you have a dependent child, this status may apply. Certain other conditions also apply.

Tax Facts Online is the premier practical, useful, actionable, and affordable reference on the taxation of insurance, employee benefits, investments, small tax-facts-online
business and individuals. This advisory service provides expert guidance on hundreds of the most frequently asked client questions concerning their most important tax issues.

Many ongoing, significant developments have affected tax law and, consequently, tax advice and strategies. Tax Facts Online is the only source that is reviewed daily and updated regularly by our expert editors.

In addition to completely current content not available anywhere else, Tax Facts Online gives you exclusive access to:

  • Robust search capabilities that enable you to locate detailed answers—fast
  • Time-saving calculators, tables and graphs
  • A copy/paste capability that speeds the production of presentations and enables you to easily incorporate Tax Facts content into your workPlus, the recent addition of current news, case studies, commentary and competitive intelligence serves our customers well as the only tax reference that a non-professional tax expert will ever need.

Tax Facts Online Core Content

Tax Facts on Insurance provides definitive answers to your clients’ most important tax-related insurance questions, while offering insightful analysis and illustrative examples. Numerous planning points direct you to the most recent and important insurance solutions.

Tax Facts on Employee Benefits provides current in-depth coverage of important client-related employee benefits questions. Employee benefits affect most2015_tf_triple_combo_cover-meveryone, and your clients must know how to deal with often complex issues and problems. Tax Facts on Employee Benefits provides the answers in a direct, concise, and practical manner.

Tax Facts on Investments provides clear, detailed answers to your difficult tax questions concerning investments. You must know what investments best suit your clients from a tax standpoint. You will discover questions that directly provide insightful answers, comparison of investment choices, as well as how investments have changed in recent years.

Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small buisnesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.

  • Charles Calello Enterprise/Group Inquiries 201-526-1259 Email Me
  • Customer Service 800-543-0874 8am – 6pm ET Monday – Thursday 8am – 5pm ET Friday Email Customer Service

Posted in Compliance, Taxation | Tagged: , , , | Leave a Comment »

Deducting Moving Expenses

Posted by William Byrnes on December 9, 2015


If you move because of your job, you may be able to deduct the cost of the move on your tax return. You may be able to deduct your costs if you move to start a new job or to work at the same job in a new location. The IRS offers the following tips about moving expenses and your tax return.

In order to deduct moving expenses, your move must meet three requirements:

1. The move must closely relate to the start of work.  Generally, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.

2. Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your previous job location. For example, if your old job was three miles from your old home, your new job must be at least 53 miles from your old home.

3. You must meet the time test.  After the move, you must work full-time at your new job for at least 39 weeks the first year. If you’re self-employed, you must meet this test and work full-time for a total of at least 78 weeks during the first two years at the new job site. If your income tax return is due before you’ve met this test, you can still deduct moving expenses if you expect to meet it.

If you can claim this deduction, here are a few more tips from the IRS:

  • Travel.  You can deduct transportation and lodging expenses for yourself and household members while moving from your old home to your new home.  BUT you cannot deduct your travel meal costs.
  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your things. You may be able to include the cost of storing and insuring these items while in transit. You can deduct the cost of connecting or disconnecting utilities.
  • Nondeductible expenses.  You cannot deduct as moving expenses any part of the purchase price of your new home, the cost of selling a home or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
  • Reimbursed expenses.  If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You report any taxable amount on your tax return in the year you get the payment.
  • Address Change.  When you move, be sure to update your address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address.

Tax Facts Online is the premier practical, useful, actionable, and affordable reference on the taxation of insurance, employee benefits, investments, small tax-facts-online
business and individuals. This advisory service provides expert guidance on hundreds of the most frequently asked client questions concerning their most important tax issues.

Many ongoing, significant developments have affected tax law and, consequently, tax advice and strategies. Tax Facts Online is the only source that is reviewed daily and updated regularly by our expert editors.

In addition to completely current content not available anywhere else, Tax Facts Online gives you exclusive access to:

  • Robust search capabilities that enable you to locate detailed answers—fast
  • Time-saving calculators, tables and graphs
  • A copy/paste capability that speeds the production of presentations and enables you to easily incorporate Tax Facts content into your workPlus, the recent addition of current news, case studies, commentary and competitive intelligence serves our customers well as the only tax reference that a non-professional tax expert will ever need.

Tax Facts Online Core Content

Tax Facts on Insurance provides definitive answers to your clients’ most important tax-related insurance questions, while offering insightful analysis and illustrative examples. Numerous planning points direct you to the most recent and important insurance solutions.

Tax Facts on Employee Benefits provides current in-depth coverage of important client-related employee benefits questions. Employee benefits affect most2015_tf_triple_combo_cover-meveryone, and your clients must know how to deal with often complex issues and problems. Tax Facts on Employee Benefits provides the answers in a direct, concise, and practical manner.

Tax Facts on Investments provides clear, detailed answers to your difficult tax questions concerning investments. You must know what investments best suit your clients from a tax standpoint. You will discover questions that directly provide insightful answers, comparison of investment choices, as well as how investments have changed in recent years.

Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small buisnesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.

  • Charles Calello Enterprise/Group Inquiries 201-526-1259 Email Me
  • Customer Service 800-543-0874 8am – 6pm ET Monday – Thursday 8am – 5pm ET Friday Email Customer Service

Posted in Taxation, Uncategorized | Tagged: , | Leave a Comment »

New Lexis Advance® Tax Platform Now Available to Law School Faculty & Students; Cutting-Edge International Tax Titles

Posted by William Byrnes on October 22, 2015


On June 1, LexisNexis launched its new online tax research platform called Lexis Advance® Tax.

Already available to America’s law school faculty and students, it includes a rich, comprehensive package of nearly 1,400 sources, including tax news, primary law, journals and nearly 300 treatises, practice guides and forms products for both tax and estates lawyers.

Along with news, another strong area for L.A. Tax is its subpage devoted to International Tax. There, users will find a selection01701_11_1_cover of titles examining hot, cutting-edge issues like: Lexis Guide to FATCA Compliance, the Lexis global guide to anti-money laundering laws around the world, and the recently-revised Foreign Tax & Trade Briefs, 2nd Ed, which provides summaries of each country’s tax system and laws.

All of these titles are produced by a team of tax experts led by Professor William H. Byrnes, Associate Dean, International Financial Law, at Texas A&M University Law School, in Fort Worth, the newest law school in Texas. See https://law.tamu.edu/

Looking for Lexis Advance Tax?
Sign in to www.lexisadvance.com, look for the pull-down menu called “Lexis Advance Research” in the upper-left corner. Click the down arrow and select Lexis Advance Tax.

If you have questions or would like to schedule a short training, please contact your LexisNexis® Account Executive.

– See more at: http://www.lexisnexis.com/lextalk/legal-content-insider/f/21/t/2525.aspx?utm_content=2015-10-20+15:00:04#sthash.szct2yk6.dpuf

Posted in BEPS, FATCA, Financial Crimes, Money Laundering, Taxation, Transfer Pricing | Tagged: , , , | Leave a Comment »

Taxable or Not?

Posted by William Byrnes on March 16, 2015


9dc30-6a00d8341bfae553ef01bb07b43355970d-piAll income is taxable unless the law excludes it. Here are some basic rules you should know to help you file an accurate tax return:

  • Taxed income.  Taxable income includes money you earn, like wages and tips. It also includes bartering, an exchange of property or services. The fair market value of property or services received is taxable.

Some types of income are not taxable except under certain conditions, including:

  • Life insurance.  Proceeds paid to you because of the death of the insured person are usually not taxable. However, if you redeem a life insurance policy for cash, any amount that you get that is more than the cost of the policy is taxable.
  • Qualified scholarship.  In most cases, income from this type of scholarship is not taxable. This means that amounts you use for certain costs, such as tuition and required books, are not taxable. On the other hand, amounts you use for room and board are taxable.
  • State income tax refund.  If you got a state or local income tax refund, the amount may be taxable. You should have received a 2014 Form 1099-G from the agency that made the payment to you. If you didn’t get it by mail, the agency may have provided the form electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some types of income that are usually not taxable:

  • Gifts and inheritances
  • Child support payments
  • Welfare benefits
  • Damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer for an item you buy
  • Reimbursements for qualified adoption expenses

Tax Facts on Individuals & Small Business

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor.  Financial advisors are continually looking for competitive information to help them provide the best answers for their clients and to obtain new clients.  National Underwriter’s Tax Facts series is the only resource written specifically for the financial advisor and producer providing fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts has been famous over 50 years.

Anyone interested can try Tax Facts Online risk-free for 30 days, with a 100% guarantee of complete satisfaction.  Call 1-800-543-0874.

Posted in Taxation | Tagged: , | 1 Comment »

Obtaining and Claiming a Health Coverage Exemption

Posted by William Byrnes on March 2, 2015


In its 9th Health Care Tax Tip, the IRS emphasized how a taxpayer may obtain and claim exemption from health care coverage required by law under the 9dc30-6a00d8341bfae553ef01bb07b43355970d-piAffordable Care Act (Obama Care).  The Affordable Care Act requires you and each member of your family to have minimum essential coverage, qualify for an insurance coverage exemption, or make an individual shared responsibility payment when you file your federal income tax return.

If a taxpayer meets certain criteria, then the taxpayer may claim to be exempt from the requirement to have “qualifying health coverage”.  If the taxpayer is found to be exempt, then the taxpayer will not have to pay the tax penalty called a “shared responsibility payment” when filing the 2014 federal income tax return.  But for any month that the taxpayer does not qualify for the exemption, then the taxpayer will need to have minimum essential coverage for that month or pay a month’s worth of penalty.

A taxpayer may seek exemption from coverage depending upon the type of exemption for which the taxpayer may be eligible.  A taxpayer can obtain some exemptions only from the Health Care Marketplace, while others exemptions may be claimed when filing the annual tax return.

A taxpayer may be exempt if:

  • The minimum amount for the annual premium is more than eight percent of the taxpayer’s household income
  • The Taxpayer has a gap in coverage that is less than three consecutive months
  • A taxpayer may qualify for an exemption for one of several other reasons, including having a hardship that prevents the taxpayer from obtaining coverage, or belonging to a group explicitly exempt from the requirement

A taxpayer must claim or report coverage exemptions on Form 8965, Health Coverage Exemptions, and attach it to Form 1040, Form 1040A, or Form 1040EZ.

Health Care Marketplace Exemption Certificate Number If a coverage exemption is granted from the Health Care Marketplace, then the Market Place will send a notice with a unique Exemption Certificate Number (ECN).  The taxpayer must enter the ECN in Part I, Marketplace-Granted Coverage Exemptions for Individuals, of Form 8965 in column C.  If the Marketplace has not sent the ECN before a taxpayer files a tax return, then the taxpayer must complete Part I of Form 8965 and enter “pending” in Column C for each person listed.

If a taxpayer claims the exemption on the tax return, then the taxpayer does not need an ECN from the Marketplace.  With the tax filing season underway, most exemptions for 2014 are only available by claiming them on the tax return.

If the taxpayer’s income is below the tax filing threshold and thus the taxpayer is not required to file a tax return, then the taxpayer is eligible for an exemption and does not have to file a tax return to claim it.  But if the taxpayer chooses to file a tax return, the taxpayer must use Part II, Coverage Exemptions for Your Household Claimed on Your Return, of Form 8965 to claim a health coverage exemption.

Other IRS-granted coverage exemptions may be claimed on your tax return using Part III, Coverage Exemptions for Individuals Claimed on Your Return, of Form 8965.

Tax Facts on Individuals & Small Business

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor.  Financial advisors are continually looking for competitive information to help them provide the best answers for their clients and to obtain new clients.  National Underwriter’s Tax Facts series is the only resource written specifically for the financial advisor and producer providing fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts has been famous over 50 years.

Anyone interested can try Tax Facts Online risk-free for 30 days, with a 100% guarantee of complete satisfaction.  Call 1-800-543-0874.

Posted in Taxation | Tagged: , , , | Leave a Comment »

IRS Checklist of Credits and Deductions for Children

Posted by William Byrnes on February 25, 2015


In Tax Tip 2015-14, the IRS discussed the potential reduction of the amount of taxes owed for a year that tax credits and deductions associated with children may provide to the parents.

9dc30-6a00d8341bfae553ef01bb07b43355970d-pi

• Dependents.  In most cases, a taxpayer can claim a child as a dependent.  For each dependent, the taxpayer may deduct $3,950 from taxable income.  However, for high income taxpayers, the amount of allowed deduction decreases.

• Child Tax Credit.  A taxpayer may be able to claim the Child Tax Credit for each of the qualifying children under the age of 17. The maximum credit is $1,000 per child.  However, if a taxpayer receives less than the full amount of the Child Tax Credit, then the taxpayer may be eligible for the “Additional Child Tax Credit”.

• Child and Dependent Care Credit. A taxpayer may be able to claim this credit if the taxpayer paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify.  The care must be paid for so that the taxpayer could work or could look for work.

• Earned Income Tax Credit (EITC).  If in 2014 a taxpayer earned less than $52,427 from work, the taxpayer may qualify for the EITC.  The EITC may be worth as much as $6,143.  The EITC is available regardless of whether the taxpayer has children.

• Adoption Credit.  A taxpayer may be eligible to claim a tax credit for certain costs paid for adoption of a child.

• Education tax credits.  An education credit can help a taxpayer with the cost of higher education.  There are two credits that are available. The American Opportunity Tax Credit and the Lifetime Learning Credit may both reduce the amount of tax owed.

If the credit reduces the tax owed to less than zero, the taxpayer may receive a refund of the extra amount.  Even if the taxpayer does not owe any taxes for the year, the taxpayer may still qualify.

• Student loan interest.  A taxpayer may be able to deduct interest paid on a qualified student loan.  This benefit is available even for taxpayers that do not itemize tax deductions.

• Self-employed health insurance deduction.  If a taxpayer was self-employed in 2014 and paid for health insurance, then the taxpayer may be able to deduct premiums paid during the year. This may include the cost to cover children under age 27, even if they are not claimed as a dependent!

Tax Facts on Individuals & Small Business

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor.  Financial advisors are continually looking for competitive information to help them provide the best answers for their clients and to obtain new clients.  National Underwriter’s Tax Facts series is the only resource written specifically for the financial advisor and producer providing fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts has been famous over 50 years.

Anyone interested can try Tax Facts Online risk-free for 30 days, with a 100% guarantee of complete satisfaction.  Call 1-800-543-0874.

Posted in Taxation | Tagged: , , , , , | Leave a Comment »

Are My Tips Taxable?

Posted by William Byrnes on February 23, 2015


9dc30-6a00d8341bfae553ef01bb07b43355970d-piThe IRS disclosed certain tax tips in a recent publication (2015-13) that may help a taxpayer file and report “tip” income correctly.

• Show all tips on the 1040 tax return.  All tips received during a calendar year must be added up and included on the federal tax return.  This even includes the value of tips that are not in cash.  Examples of non-cash tips include items such as tickets, passes or other items when provided by a customer for work or service.

• All tips are taxable.  Tips paid directly by a customer and tips added by a customer to a credit card are both to be included in taxable income. As well, tips received under a tip-splitting agreement with other employees, such as in a restaurant, are to be included.

• Report tips to the employer.  If an employee receives $20 or more in tips in any one month, the employee must report the tips for that month to the employer.  Tips reported to the employer include cash, check and credit card tips but does not include the value of any noncash tips.  The employer must withhold federal income, Social Security and Medicare taxes on these reported tips.

Daily tip log.  Use the IRS’ Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tips.

Tax Facts on Individuals & Small Business

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor.  Financial advisors are continually looking for competitive information to help them provide the best answers for their clients and to obtain new clients.  National Underwriter’s Tax Facts series is the only resource written specifically for the financial advisor and producer providing fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts has been famous over 50 years.

Anyone interested can try Tax Facts Online risk-free for 30 days, with a 100% guarantee of complete satisfaction.  Call 1-800-543-0874.

Posted in Taxation | Tagged: , | Leave a Comment »

IRS Provides Obamacare Relief With Removal of Tax Penalties for Advanced Premium Tax Credit Payment

Posted by William Byrnes on January 27, 2015


Notice 2015-09 provides limited relief for taxpayers who have a balance due on their 2014 income tax return as a result of reconciling advance payments of the premium tax credit against the premium tax credit allowed on the tax return.

9dc30-6a00d8341bfae553ef01bb07b43355970d-piThis Notice provides limited relief for taxpayers who have a balance due on their 2014 income tax return as a result of reconciling advance payments of the premium tax credit against the premium tax credit allowed on the tax return. Specifically, this Notice provides relief from the penalty under § 6651(a)(2) of the Internal Revenue Code for late payment of a balance due and the penalty under § 6654(a) for underpayment of estimated tax. To qualify for the relief, taxpayers must meet certain requirements.  This relief applies only for the 2014 taxable year.

This relief does not apply to any underpayment of the individual shared responsibility payment resulting from the application of § 5000A because such underpayments are not subject to either the § 6651(a)(2) penalty or the §6654(a) penalty.

A taxpayer may receive assistance in paying premiums for coverage in a qualified health plan through advance payments of the premium tax credit. Advance credit payments are made directly to the insurance provider. The amount of the advance credit payments is determined when an individual enrolls in a qualified health plan through an Exchange and is based on projected household income and family size for the year of coverage. A taxpayer claims the premium tax credit on the income tax return for the taxable year of coverage. The amount of the credit is based on actual household income an family size for the year reflected on the tax return. Under § 36B(f)(2) and § 1.36B- 4(a)(1)(i) of the Income Tax Regulations, a taxpayer must reconcile, or compare, the amount of premium tax credit allowed on the tax return with advance credit payments.

Changes in the circumstances on which the advance credit payments are based could result in a difference between the amount of advance credit payments and the premium tax credit to which the taxpayer is entitled. If advance credit payments are more than the premium tax credit allowed on the return, the difference (excess advance payments) is treated as additional tax and may result in either a smaller refund or a larger balance due (or, if the premium tax credit allowed is more than the advance credit payments made, the excess credit amount may result in a larger refund or lower balance due).

Taxable year 2014 is the first year for which taxpayers will be required to reconcile advance credit payments with the premium tax credit.

The Service will abate the § 6651(a)(2) penalty for taxable year 2014 for taxpayers who (i) are otherwise current with their filing and payment obligations; (ii) have a balance due for the 2014 taxable year due to excess advance payments of the premium tax credit; and (iii) report the amount of excess advance credit payments on their 2014 tax return timely filed, including extensions (Line 46 of Form 1040 or Line 29 of Form 1040A).

Further, the Service will waive the § 6654 penalty for taxable year 2014 for an underpayment of estimated tax for taxpayers who have an underpayment attributable to excess advance credit payments if the taxpayers (i) are otherwise current with their filing and payment obligations; and (ii) report the amount of the excess advance credit payments on a 2014 tax return timely filed, including extensions.

Posted in Taxation | Tagged: , , | Leave a Comment »

Premium Tax Credit Brings Changes to Your 2014 Income Tax Returns

Posted by William Byrnes on January 26, 2015


When filing your 2014 federal income tax return, you will see some 457c5-6a00d8341bfae553ef01b7c7029b32970b-pichanges related to the Affordable Care Act. Millions of people who purchased their coverage through a health insurance Marketplace are eligible for premium assistance through the new premium tax credit, which individuals chose to either have paid upfront to their insurers to lower their monthly premiums, or receive when they file their taxes. When you bought your insurance, if you chose to have advance payments of the premium tax credit, the Marketplace estimated the amount based on information you provided about your expected household income and family size for the year.

If you received the benefit of advance credit payments, you must file a federal tax return and reconcile the advance credit payments with the actual premium tax credit you are eligible to claim on your return.  You will use IRS Form 8962Premium Tax Credit (PTC) to make this comparison and to claim the credit. If your advance credit payments are in excess of the amount of the premium tax credit you are eligible for, based on your actual income, you must repay some or all of the excess when you file your return, subject to certain caps.

If you purchased your coverage through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace. You should receive this form by early February.

Form 1095-A will provide the information you need to file your taxes, including the name of your insurance company, dates of coverage, amount of monthly insurance premiums for the plan you and other members of your family enrolled in, amount of any advance payments of the premium tax credit for the year, and other information needed need to compute the premium tax credit.

Tax Facts on Individuals & Small Business

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor.  Financial advisors are continually looking for competitive information to help them provide the best answers for their clients and to obtain new clients.  National Underwriter’s Tax Facts series is the only resource written specifically for the financial advisor and producer providing fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  Call 1-800-543-0874.

Posted in Taxation | Tagged: , | Leave a Comment »

Tax Season: Ready, Set, Go !

Posted by William Byrnes on January 16, 2015


IRS Starts 2015 Tax Season; Free File Opens Today, 

IRS YouTube Videos:

9dc30-6a00d8341bfae553ef01bb07b43355970d-piThe nation’s 2015 tax filing season begins today and a growing array of online services is available to assist taxpayers.  Understanding the Affordable Care Act and how this impacts a taxpayer will be a popular feature this year.

Taxpayers have until Wednesday, April 15, 2015 to file their 2014 tax returns and pay any tax due. The IRS expects to receive about 150 million individual income tax returns this year. Like each of the past three years, more than four out of five returns are expected to be filed electronically.

The IRS Free File program, available at IRS.gov, will open Friday for taxpayers, and the IRS will begin accepting and processing all tax returns on Tuesday, Jan. 20.

This year’s return will include new questions to incorporate provisions of the Affordable Care Act (or ACA). The majority of taxpayers – more than three out of four – will simply need to check a box to verify they have health insurance coverage. For the minority of taxpayers who will have to do more, www.IRS.gov/aca features useful information and tips regarding the premium tax credit, the individual shared responsibility requirement and other tax features of the ACA.

“Our employees will be working hard again this season to help the nation’s taxpayers,” IRS Commissioner John Koskinen said. “We encourage people to use the tools and information available on IRS.gov, particularly given the long wait times we anticipate on our phone lines. As always, taxpayers can benefit by filing electronically.”

Koskinen announced that taxpayers can begin preparing their returns using the Free File system on Friday, Jan. 16. Available only at IRS.gov, Free File offers two filing options:

• Brand-name software, offered by IRS’ commercial partners to about 100 million individuals and families with incomes of $60,000 or less; or

• Online fillable forms, the electronic version of IRS paper forms available to taxpayers at all income levels and especially useful to people comfortable with filling out their own returns.

E-file, when combined with direct deposit, is the fastest way to get a refund. More than three out of four refund recipients now choose direct deposit. People who e-file make fewer mistakes, and it costs nothing for those who choose Free File.  In all, 14 software companies will be participating in this year’s Free File program.

Taxpayers who purchase their own software can also choose e-file, and most paid tax preparers are now required to file their clients’ returns electronically. In addition to Free File, commercial software companies also are currently available for taxpayer use.

The IRS will begin accepting and processing all returns – whether e-file, Free File or paper tax returns — on Jan. 20.

Like last year, the IRS expects to issue more than nine out of 10 refunds within 21 days. Again, the fastest way to get a refund is to e-file and choose direct deposit. It takes longer to process paper returns, it will likely take an additional week or more to process paper returns meaning that those refunds are expected to be issued in seven weeks or more.

Health Care Basics

The Affordable Care Act requires that a taxpayer and each member of their family either has qualifying health insurance coverage for each month of the year, qualifies for an exemption , or makes an individual shared responsibility payment when filing their federal income tax return.  Some moderate-income taxpayers may also qualify for financial assistance to help cover the cost of health insurance purchased through the Health Insurance Marketplace. Taxpayers will fall into one or more of the following categories:

• Check the box. Most taxpayers will simply check a box on their tax return to indicate that each member of their family had qualifying health coverage for the whole year. No further action is required.

Qualifying health insurance coverage includes coverage under most, but not all, types of health care coverage plans. Taxpayers can use the chart on IRS.gov/aca to find out if their insurance counts as qualifying coverage.

• Exemptions. Taxpayers may be eligible to claim an exemption from the requirement to have coverage.  Eligible taxpayers need to complete the new IRS Form 8965, Health Coverage Exemptions, and attach it to their tax return.  Taxpayers must apply for some exemptions through the Health Insurance Marketplace. However, most of the exemptions are easily obtained from the IRS when filing a return.

• Individual Shared Responsibility Payment. Taxpayers who do not have qualifying coverage or an exemption for each month of the year will need to make an individual shared responsibility payment with their return for choosing not to purchase coverage. Examples and information about figuring the payment are available on the IRS Calculating the Payment page.

• Premium Tax Credit.  Taxpayers who bought coverage through the Health Insurance Marketplace should receive Form 1095-A, Health Insurance Marketplace Statement, from the Marketplace by early February. This form should be saved because it has important information needed to complete a tax return.

If the Form 1095-A is not received by early February, contact the Marketplace where coverage was purchased. Do not contact the IRS because IRS telephone assistors will not have access to this information.

Taxpayers who benefited from advance payments of the premium tax credit must file a federal income tax return. These taxpayers need to reconcile those advance payments with the amount of premium tax credit they’re entitled to based on their actual income. As a result, some people may see a smaller or larger tax refund or tax liability than they were expecting.  Use IRS Form 8962, Premium Tax Credit (PTC), to calculate the premium tax credit and reconcile the credit with any advance payments.

The IRS also reminded taxpayers that a trusted tax professional can also provide helpful information about the health care law. A number of tips about selecting a preparer and national tax professional groups is available on IRS.gov.

The IRS urges all taxpayers, especially those claiming the premium tax credit, to make sure they have all their year-end statements in hand before they file their return. This includes Forms W-2 from employers, Forms 1099 from banks and other payers, and, for those claiming the premium tax credit, and Form 1095-A from the Marketplace. Doing so will help avoid refund delays and the need to file an amended return later.

Tax Facts on Individuals & Small Business

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor.  Financial advisors are continually looking for competitive information to help them provide the best answers for their clients and to obtain new clients.  National Underwriter’s Tax Facts series is the only resource written specifically for the financial advisor and producer providing fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please call 1-800-543-0874.

Posted in Taxation, Uncategorized | Leave a Comment »

Health Care Law Brings Changes to IRS Tax Forms

Posted by William Byrnes on January 14, 2015


The IRS announced that the tax forms for the 2014 tax year have some dramatic modifications to allow for enforcement of Obama Care (aka the “Affordable Care Act” and “ACA”).

Existing forms have new lines integrated and the IRS has created two new forms that some taxpayers must now file with the tax return.

Many taxpayers will only need to check a box on their tax return if they had the requisite health coverage for all of 2014 as require by the ACA so as to avoid penalties.  Forms 1040, 1040A, and 1040EZ also have new lines to complete related to the health care law.

Two New Tax Forms for Taxpayers 

Form 8965, Health Coverage Exemptions

  • Complete this form to report a Marketplace-granted coverage exemption or claim an IRS-granted coverage exemption on the return.
  • Use the worksheet in the Form 8965 Instructions to calculate the shared responsibility payment.

Form 8962, Premium Tax Credit

  • Complete this form to reconcile advance payments of the premium tax credit, and to claim this credit on the tax return.

Additionally, if individuals purchased coverage through the Health Insurance Marketplace, they should receive Form 1095-A, Health Insurance Marketplace Statement, which will help complete Form 8962.

Modifications of Existing 2014 Tax Forms

Form 1040

  • Line 46: Enter advance payments of the premium tax credit that must be repaid
  • Line 61: Report health coverage and enter individual shared responsibility payment
  • Line 69: If eligible, claim net premium tax credit, which is the excess of allowed premium tax credit over advance credit payments

Form 1040A

  • Line 29: Enter advance payments of the premium tax credit that must be repaid
  • Line 38: Report health coverage and enter individual shared responsibility payment
  • Line 45: If eligible, claim net premium tax credit, which is the excess of allowed premium tax credit over advance credit payments

Form 1040EZ

  • Line 11: Report health coverage and enter individual shared responsibility payment
  • Form 1040EZ cannot be used to report advance payments or to claim the premium tax credit

Tax Facts on Individuals & Small Business

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor.  Financial advisors are continually looking for competitive information to help them provide the best answers for their clients and to obtain new clients.  National Underwriter’s Tax Facts series is the only resource written specifically for the financial advisor and producer providing fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to http://www.nationalunderwriter.com/2015-tax-facts-on-individuals-small-business.html or call 1-800-543-0874.

Posted in Taxation | Tagged: , , | Leave a Comment »

2014 Tax Extenders Last Minute Passage

Posted by William Byrnes on December 17, 2014


9dc30-6a00d8341bfae553ef01bb07b43355970d-piReports PwC, the spending bill provides $10.6 billion in funding for the IRS – a reduction of $345.6 million from the fiscal year 2014.

Tax Increase Prevention Act of 2014Title I: Certain Expiring Provisions – Amends the Internal Revenue Code to extend certain expiring tax provisions relating to individuals, businesses, and the energy sector.

Subtitle A: Individual Tax Extenders – Extends through 2014:

  • the tax deduction of expenses of elementary and secondary school teachers;
  • the tax exclusion of imputed income from the discharge of indebtedness for a principal residence;
  • the equalization of the tax exclusion for employer-provided commuter transit and parking benefits;
  • the tax deduction of mortgage insurance premiums;the tax deduction of state and local general sales taxes in lieu of state and local income taxes;
  • the tax deduction of contributions of capital gain real property for conservation purposes;
  • the tax deduction of qualified tuition and related expenses; and
  • the tax exemption of distributions from individual retirement accounts for charitable purposes.

Subtitle B: Business Tax Extenders – Extends through 2014:

  • the tax credit for increasing research activities;
  • the low-income housing tax credit rate for newly constructed non-federally subsidized buildings;
  • the Indian employment tax credit;
  • the new markets tax credit;the tax credit for qualified railroad track maintenance expenditures;
  • the tax credit for mine rescue team training expenses;
  • the tax credit for differential wage payments to employees who are active duty members of the Uniformed Services;
  • the work opportunity tax credit;
  • authority for issuance of qualified zone academy bonds;
  • the classification of race horses as three-year property for depreciation purposes;
  • accelerated depreciation of qualified leasehold improvement, restaurant, and retail improvement property, of motorsports entertainment complexes, and of business property on Indian reservations;
  • accelerated depreciation of certain business property (bonus depreciation);
  • the special rule allowing a tax deduction for charitable contributions of food inventory by taxpayers other than C corporations;
  • the increased expensing allowance for business assets, computer software, and qualified real property (i.e., leasehold improvement, restaurant, and retail improvement property);
  • the election to expense advanced mine safety equipment expenditures;
  • the expensing allowance for film and television production costs and costs of live theatrical productions;
  • the tax deduction for income attributable to domestic production activities in Puerto Rico;
  • tax rules relating to payments between related foreign corporations and dividends of regulated investment companies;
  • the treatment of regulated investment companies as qualified investment entities for purposes of the Foreign Investment in Real Property Tax Act (FIRPTA);
  • the subpart F income exemption for income derived in the active conduct of a banking, financing, or insurance business;
  • the tax rule exempting dividends, interest, rents, and royalties received or accrued from certain controlled foreign corporations by a related entity from treatment as foreign holding company income;
  • the 100% exclusion from gross income of gain from the sale of small business stock;
  • the basis adjustment rule for stock of an S corporation making charitable contributions of property;
  • the reduction of the recognition period for the built-in gains of S corporations;
  • tax incentives for investment in empowerment zones;
  • the increased level of distilled spirit excise tax payments into the treasuries of Puerto Rico and the Virgin Islands; and
  • the tax credit for American Samoa economic development expenditures.

Amends the Housing Assistance Tax Act of 2008 to extend through 2014 the exemption of the basic military housing allowance from the income test for programs financed by tax-exempt housing bonds.

Subtitle C: Energy Tax Extenders – Extends through 2014:

  • the tax credit for residential energy efficiency improvements;
  • the tax credit for second generation biofuel production;
  • the income and excise tax credits for biodiesel and renewable diesel fuel mixtures;
  • the tax credit for producing electricity using Indian coal facilities placed in service before 2009;
  • the tax credit for producing electricity using wind, biomass, geothermal, landfill gas, trash, hydropower, and marine and hydrokinetic renewable energy facilities;
  • the tax credit for energy efficient new homes;
  • the special depreciation allowance for second generation biofuel plant property;
  • the tax deduction for energy efficient commercial buildings;
  • tax deferral rules for sales or dispositions of qualified electric utilities; and
  • the excise tax credit for alternative fuels and fuels involving liquefied hydrogen.

Subtitle D: Extenders Relating to Multiemployer Defined Benefit Pension Plans – Extends through 2015 the automatic extensions of amortization periods for multiemployer defined benefit pension plans and for multiemployer funding rules under the Pension Protection Act of 2006.

Title II: Technical Corrections – Tax Technical Corrections Act of 2014Makes technical and clerical amendments to:

  • the American Taxpayer Relief Act of 2012;
  • the Middle Class Tax Relief and Job Creation Act of 2012;
  • the FAA Modernization and Reform Act of 2012;
  • the Regulated Investment Company Modernization Act of 2010;
  • the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010;
  • the Creating Small Business Jobs Act of 2010;
  • the Hiring Incentives to Restore Employment Act;
  • the American Recovery and Reinvestment Tax Act of 2009;
  • the Energy Improvement and Extension Act of 2008;
  • the Tax Extenders and Alternative Minimum Tax Relief Act of 2008;
  • the Housing Assistance Tax Act of 2008;
  • the Heroes Earnings Assistance and Relief Tax Act of 2008;
  • the Economic Stimulus Act of 2008;
  • the Tax Technical Corrections Act of 2007;
  • the Tax Relief and Health Care Act of 2006;
  • the Safe, Accountable, Flexible, Efficient Transportation Equity Act of 2005: A Legacy for Users;
  • the Energy Tax Incentives Act of 2005; and
  • the American Jobs Creation Act of 2004.

Eliminates provisions in the Internal Revenue Code that are not used in computing current tax liabilities (referred to as deadwood provisions).

Title III: Joint Committee on Taxation – Provides that any refund or credit in excess of $5 million due to a C corporation taxpayer may not be made until the Secretary of the Treasury submits a report to the Joint Committee on Taxation providing information on such refund or credit.

Title IV: Budgetary Effects – Prohibits the entry of the budgetary effects of this Act on certain PAYGO scorecards.

JCX-107-14R (December 03, 2014) Estimated Revenue Effects Of H.R. 5771, The “Tax Increase Prevention Act Of 2014,”

Posted in Taxation | Tagged: | Leave a Comment »

Must Santa Claus Pay Tax? End of Year Gift Tax Facts

Posted by William Byrnes on December 15, 2014


Find out which of your clients need to pay the federal gift tax and what the annual exclusion amount is for 2014 and 2015

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to http://www.nationalunderwriter.com/2015-tax-facts-on-individuals-small-business.html or call 1-800-543-0874.

Posted in Estate Tax, Taxation | Tagged: | Leave a Comment »

New IRS Standard Mileage Rates – Business Rate Rise in 2015

Posted by William Byrnes on December 12, 2014


The IRS issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

457c5-6a00d8341bfae553ef01b7c7029b32970b-pi

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

  • 57.5 cents per mile for business miles driven, up from 56 cents in 2014
  • 23 cents per mile driven for medical or moving purposes, down half a cent from 2014
  • 14 cents per mile driven in service of charitable organizations

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after claiming accelerated depreciation, including the Section 179 expense deduction, on that vehicle. Likewise, the standard rate is not available to fleet owners (more than four vehicles used simultaneously). Details on these and other special rules are in Revenue Procedure 2010-51, the instructions to Form 1040and various online IRS publications including Publication 17, Your Federal Income Tax.

Besides the standard mileage rates, Notice 2014-79, posted today on IRS.gov, also includes the basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost   that may be used in computing an allowance under  a fixed and variable rate plan.

2015_tf_on_indiv_sm_business_cover-mTax Facts on Individuals & Small Business focuses exclusively on what individuals and small businesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.

Organized in a convenient Q&A format to speed you to the information you need, Tax Facts on Individuals & Small Business delivers the latest guidance on:
• Healthcare & New Medicare Tax and Net Investment Income tax
• Business Deductions and Losses including Home Office
• Contractor vs. Employee — clarified!
• Business Life Insurance
• Small Business Entity Choices & Small Business Valuation
• Capital Gains & Investor Losses
• Accounting — including guidance on how standards change as the business grows

Posted in Taxation | Tagged: , , , | Leave a Comment »

Year-End Gifts to Charity – IRS Tax Facts

Posted by William Byrnes on December 1, 2014


9dc30-6a00d8341bfae553ef01bb07b43355970d-piThe Internal Revenue Service reminds individuals and businesses making year-end gifts to charity that several important tax law provisions have taken effect in recent years. Some of the changes taxpayers should keep in mind include:

Rules for Charitable Contributions of Clothing and Household Items

Household items include furniture, furnishings, electronics, appliances and linens. Clothing and household items donated to charity generally must be in good used condition or better to be tax-deductible. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return.

Donors must get a written acknowledgement from the charity for all gifts worth $250 or more. It must include, among other things, a description of the items contributed.

Guidelines for Monetary Donations

A taxpayer must have a bank record or a written statement from the charity in order to deduct any donation of money, regardless of amount. The record must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.

Reminders

The IRS offers the following additional reminders to help taxpayers plan their holiday and year-end gifts to charity:

  • Qualified charities. Check that the charity is eligible. Only donations to eligible organizations are tax-deductible. Select Check, a searchable online tool available on IRS.gov, lists most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations. That is true even if they are not listed in the tool’s database.
  • Year-end gifts. Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2014 count for 2014, even if the credit card bill isn’t paid until 2015. Also, checks count for 2014 as long as they are mailed in 2014.
  • Itemize deductions. For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction. This includes anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2014 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
  • Record donations. For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
  • Special Rules. The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.

IRS YouTube Videos: 

Year-End Tax Tips: English
Charitable Contributions: English | Spanish | ASL
Exempt Organizations Select Check: English | Spanish | ASL

Posted in Tax Exempt Orgs, Taxation | Tagged: , | Leave a Comment »

Will the IRS Help Pay for Your Retirement ?

Posted by William Byrnes on November 17, 2014


IRS logoIf you are a low-to-moderate income worker, you can take steps now to save two ways for the same amount. With the saver’s credit you can save for your retirement and save on your taxes with a special tax credit. Here are six tips you should know about this credit:

1. Save for retirement.  The formal name of the saver’s credit is the retirement savings contributions credit. You may be able to claim this tax credit in addition to any other tax savings that also apply. The saver’s credit helps offset part of the first $2,000 you voluntarily save for your retirement. This includes amounts you contribute to IRAs, 401(k) plans and similar workplace plans.

2. Save on taxes.  The saver’s credit can increase your refund or reduce the tax you owe. The maximum credit is $1,000, or $2,000 for married couples. The credit you receive is often much less, due in part because of the deductions and other credits you may claim.

3. Income limits.  Income limits vary based on your filing status. You may be able to claim the saver’s credit if you’re a:

• Married couple filing jointly with income up to $60,000 in 2014 or $61,000 in 2015.

• Head of Household with income up to $45,000 in 2014 or $45,750 in 2015.

• Married person filing separately or single with income up to $30,000 in 2014 or $30,500 in 2015.

4. When to contribute.  If you’re eligible you still have time to contribute and get the saver’s credit on your 2014 tax return. You have until April 15, 2015, to set up a new IRA or add money to an existing IRA for 2014. You must make an elective deferral (contribution) by the end of the year to a 401(k) plan or similar workplace program.

If you can’t set aside money for this year you may want to schedule your 2015 contributions soon so your employer can begin withholding them in January.

5. Special rules apply.  Other special rules that apply to the credit include:

• You must be at least 18 years of age.

• You can’t have been a full-time student in 2014.

• Another person can’t claim you as a dependent on their tax return.

IRS Resources

Posted in Retirement Planning, Taxation | Tagged: , , | Leave a Comment »

8 Tax Facts for Deducting Charitable Contributions

Posted by William Byrnes on November 10, 2014


IRS logoIf you are looking for a tax deduction, giving to charity can be a ‘win-win’ situation. It’s good for them and good for you. Here are eight things you should know about deducting your gifts to charity:

1. You must donate to a qualified charity if you want to deduct the gift. You can’t deduct gifts to individuals, political organizations or candidates.

2. In order for you to deduct your contributions, you must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with your federal tax return.

3. If you get a benefit in return for your contribution, your deduction is limited. You can only deduct the amount of your gift that’s more than the value of what you got in return. Examples of such benefits include merchandise, meals, tickets to an event or other goods and services.

4. If you give property instead of cash, the deduction is usually that item’s fair market value. Fair market value is generally the price you would get if you sold the property on the open market.

5. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to vehicle donations.

6. You must file Form 8283, Noncash Charitable Contributions, if your deduction for all noncash gifts is more than $500 for the year.

7. You must keep records to prove the amount of the contributions you make during the year. The kind of records you must keep depends on the amount and type of your donation. For example, you must have a written record of any cash you donate, regardless of the amount, in order to claim a deduction. It can be a cancelled check, a letter from the organization, or a bank or payroll statement. It should include the name of the charity, the date and the amount donated. A cell phone bill meets this requirement for text donations if it shows this same information.

8. To claim a deduction for donated cash or property of $250 or more, you must have a written statement from the organization. It must show the amount of the donation and a description of any property given. It must also say whether the organization provided any goods or services in exchange for the gift.

Posted in Taxation | Tagged: , | Leave a Comment »

In 2015, Various Tax Benefits Increase Due to Inflation Adjustments

Posted by William Byrnes on November 5, 2014


The tax items for tax year 2015 of greatest interest to most taxpayers include the following dollar amounts –IRS logo

  • The tax rate of 39.6 percent affects singles whose income exceeds $413,200 ($464,850 for married taxpayers filing a joint return), up from $406,750 and $457,600, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.
  • The standard deduction rises to $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly, up from $6,200 and $12,400, respectively, for tax year 2014. The standard deduction for heads of household rises to $9,250, up from $9,100.
  • The limitation for itemized deductions to be claimed on tax year 2015 returns of individuals begins with incomes of $258,250 or more ($309,900 for married couples filing jointly).
  • The personal exemption for tax year 2015 rises to $4,000, up from the 2014 exemption of $3,950. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $258,250 ($309,900 for married couples filing jointly). It phases out completely at $380,750 ($432,400 for married couples filing jointly.)
  • The Alternative Minimum Tax exemption amount for tax year 2015 is $53,600 ($83,400, for married couples filing jointly). The 2014 exemption amount was $52,800 ($82,100 for married couples filing jointly).
  • The 2015 maximum Earned Income Credit amount is $6,242 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,143 for tax year 2014. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
  • Estates of decedents who die during 2015 have a basic exclusion amount of $5,430,000, up from a total of $5,340,000 for estates of decedents who died in 2014.
  • For 2015, the exclusion from tax on a gift to a spouse who is not a U.S. citizen is $147,000, up from $145,000 for 2014.
  • For 2015, the foreign earned income exclusion breaks the six-figure mark, rising to $100,800, up from $99,200 for 2014.
  • The annual exclusion for gifts remains at $14,000 for 2015.
  • The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) rises to $2,550, up $50 dollars from the amount for 2014.
  • Under the small business health care tax credit,  the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,800 for tax year 2015, up from $25,400 for 2014.

.01 Tax Rate Tables. For taxable years beginning in 2015, the tax rate tables under § 1 are as follows:

TABLE 1 – Section 1(a) – Married Individuals Filing Joint Returns and Surviving Spouses

If Taxable Income Is & The Tax Is:

  1. Not over $18,450 10% of the taxable income
  2. Over $18,450 but $1,845 not over $74,900 plus 15% of the excess over $18,450
  3. Over $74,900 but $10,312.50 not over $151,200 plus 25% of the excess over $74,900
  4. Over $151,200 but $29,387.50 not over $230,450 plus 28% of the excess over $151,200
  5. Over $230,450 but $51,577.50 not over $411,500 plus 33% of the excess over $230,450
  6. Over $411,500 but $111,324 not over $464,850 plus 35% of the excess over $411,500
  7. Over $464,850 $129,996.50 plus 39.6% of the excess over $464,850

TABLE 3 – Section 1(c) – Unmarried Individuals (other than Surviving Spouses and Heads of Households)

If Taxable Income Is & The Tax Is:

  1. Not over $9,225 10% of the taxable income
  2. Over $9,225 but $922.50 not over $37,450 plus 15% of the excess over $9,225
  3. Over $37,450 but $5,156.25 not over $90,750 plus 25% of the excess over $37,450
  4. Over $90,750 but $18,481.25 not over $189,300 plus 28% of the excess over $90,750
  5. Over $189,300 but $46,075.25 not over $411,500 plus 33% of the excess over $189,300
  6. Over $411,500 $119,401.25 not over $413,200 plus 35% of the excess over $411,500
  7. Over $413,200 $119,996.25 plus 39.6% of the excess over $413,200

Posted in Taxation | Tagged: , , | Leave a Comment »

Job Hunting Expenses

Posted by William Byrnes on November 3, 2014


If you look for a new job in the same line of work, you may be able to deduct some of your job hunting costs.IRS logo

Here are some key tax facts you should know about if you search for a new job:

  • Same Occupation.  Your expenses must be for a job search in your current line of work. You can’t deduct expenses for a job search in a new occupation.
  • Résumé Costs.  You can deduct the cost of preparing and mailing your résumé.
  • Travel Expenses.  If you travel to look for a new job, you may be able to deduct the cost of the trip. To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job. You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.
  • Placement Agency. You can deduct some job placement agency fees you pay to look for a job.
  • First Job.  You can’t deduct job search expenses if you’re looking for a job for the first time.
  • Work-Search Break.  You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.
  • Reimbursed Costs.  Reimbursed expenses are not deductible.
  • Schedule A.  You usually deduct your job search expenses on Schedule A, Itemized Deductions. You’ll claim them as a miscellaneous deduction. You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.

Posted in Taxation | Tagged: , , , | Leave a Comment »

IRS Announces 2015 Pension Plan Limitations; Taxpayers May Contribute up to $18,000 to their 401(k) plans in 2015

Posted by William Byrnes on October 23, 2014


The Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015.  Many of the pension plan IRS logolimitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.  However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment.  Highlights include the following:

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
  • The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500.  The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014.  For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000.  For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000.  For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014.  For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000.  For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.

Below are details on both the adjusted and unchanged limitations.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.  Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases.  Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415.  Under Section 415(d), the adjustments are to be made under adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

Effective January 1, 2015, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $210,000.  For a participant who separated from service before January 1, 2015, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2014, by 1.0178.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A).  After taking into account the applicable rounding rules, the amounts for 2015 are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,500 to $18,000.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $260,000 to $265,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000.

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is increased from $1,050,000 to $1,070,000, while the dollar amount used to determine the lengthening of the 5 year distribution period remains unchanged at $210,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $115,000 to $120,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $5,500 to $6,000.  The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $2,500 to $3,000.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $385,000 to $395,000.

The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) is increased from $550 to $600.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,000 to $12,500.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $17,500 to $18,000.

The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $105,000.  The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $210,000 to $215,000.

The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3).  After taking the applicable rounding rules into account, the amounts for 2015 are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $36,000 to $36,500; the limitation under Section 25B(b)(1)(B) is increased from $39,000 to $39,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $60,000 to $61,000.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $27,000 to $27,375; the limitation under Section 25B(b)(1)(B) is increased from $29,250 to $29,625; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $45,000 to $45,750.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $18,000 to $18,250; the limitation under Section 25B(b)(1)(B) is increased from $19,500 to $19,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $30,000 to $30,500.

The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $96,000 to $98,000.  The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $60,000 to $61,000.  The applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.  The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $181,000 to $183,000.

The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $181,000 to $183,000.  The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $114,000 to $116,000.  The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.

The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,084,000 to $1,101,000.

 

Posted in Taxation | Tagged: , , | Leave a Comment »

Ten Things to Know About the Taxpayer Advocate Service

Posted by William Byrnes on October 20, 2014


Taxpayer AdvocateTen Things to Know About the Taxpayer Advocate Service

1. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS and is your voice at the IRS.

2. We help taxpayers whose problems are causing financial difficulty. This includes businesses as well as individuals.

3. You may be eligible for our help if you’ve tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn’t working as it should.

4. The IRS has adopted a Taxpayer Bill of Rights that includes 10 fundamental rights that every taxpayer has when interacting with the IRS:

Taxpayer Bill of Rights

  • The Right to Be Informed.
  • The Right to Quality Service.
  • The Right to Pay No More than the Correct Amount of Tax.
  • The Right to Challenge the IRS’s Position and Be Heard.
  • The Right to Appeal an IRS Decision in an Independent Forum.
  • The Right to Finality.
  • The Right to Privacy.
  • The Right to Confidentiality.
  • The Right to Retain Representation.
  • The Right to a Fair and Just Tax System.

Our TAS Tax Toolkit at TaxpayerAdvocate.irs.gov can help you understand these rights and what they mean for you. The toolkit also has examples that show how the Taxpayer Bill of Rights can apply in specific situations.

5. If you qualify for our help, you’ll be assigned to one advocate who will be with you at every turn. And our service is always free.

6. We have at least one local taxpayer advocate office in every state, the District of Columbia, and Puerto Rico.  You can call your advocate, whose number is in your local directory, in Pub. 1546, Taxpayer Advocate Service — Your Voice at the IRS, and on our website at irs.gov/advocate. You can also call us toll-free at
877-777-4778.

7. The TAS Tax Toolkit at TaxpayerAdvocate.irs.gov has basic tax information, details about tax credits (for individuals and businesses), and much more.

8. TAS also handles large-scale or systemic problems that affect many taxpayers. If you know of one of these broad issues, please report it to us at www.irs.gov/sams.

9. You can get updates at

10. TAS is here to help you, because when you’re dealing with a tax problem, the worst thing you can do is to do nothing at all.

Posted in Taxation | Tagged: | 1 Comment »

Miscellaneous Deductions Can Cut Taxes

Posted by William Byrnes on October 15, 2014


IRS logoMiscellaneous Deductions Can Cut Taxes

You may be able to deduct certain miscellaneous costs you pay during the year. Examples include employee expenses and fees you pay for tax advice. If you itemize, these deductions could lower your tax bill. Here are some things the IRS wants you to know about miscellaneous deductions:

Deductions Subject to the Two Percent Limit.  You can deduct most miscellaneous costs only if their total is more than two percent of your adjusted gross income. These include expenses such as:

  • Unreimbursed employee expenses.
  • Expenses related to searching for a new job in the same line of work.
  • Certain work clothes and uniforms.
  • Tools needed for your job.
  • Union dues.
  • Work-related travel and transportation.

Deductions Not Subject to the Two Percent Limit.  Some deductions are not subject to the two percent limit. They include:

  • Certain casualty and theft losses. Generally, this applies to damaged or stolen property that you held for investment. This includes items such as stocks, bonds and works of art.
  • Gambling losses up to the amount of your gambling winnings.
  • Losses from Ponzi-type investment schemes.

There are many expenses that you can’t deduct. For example, you can’t deduct personal living or family expenses. You claim allowable miscellaneous deductions on Schedule A, Itemized Deductions.

Posted in Taxation | Tagged: , | 2 Comments »

4 Tax Facts about Hobbies

Posted by William Byrnes on September 29, 2014


IRS logo“Millions of people enjoy hobbies that are also a source of income. Some examples include stamp and coin collecting, craft making, and horsemanship.” the IRS stated in its Summertime Tax Tip 2014-15.

A taxpayer must report on the tax return the income earned from a hobby.  The rules for how a taxpayer reports the income and expenses depend on whether the activity is a hobby or a business.  There are special rules and limits for deductions a taxpayer can claim for a hobby.  Five tax tips  about hobbies:

1. Is it a Business or a Hobby?  A key feature of a business is that a taxpayer do it to make a profit.  Taxpayers often engage in a hobby for sport or recreation, not to make a profit. A taxpayer should consider nine factors when to determine whether an activity is a hobby.  A taxpayer must base the determination on all the facts and circumstances of the situation.

2. Allowable Hobby Deductions.  Within certain limits, a taxpayer can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.

3. Limits on Hobby Expenses.  Generally, a taxpayer can only deduct your hobby expenses up to the amount of hobby income.  If hobby expenses are more than the hobby’s income, then a loss results from the activity.  That loss is not deductible from other income.

4. How to Deduct Hobby Expenses.  A taxpayer must itemize deductions on a tax return in order to deduct hobby expenses.  Expenses may fall into three types of deductions, and special rules apply to each type.  See of Publication 535 for the rules about how you claim them on Schedule A, Itemized Deductions.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation | Tagged: , | Leave a Comment »

IRS Video Helps Same-Sex Couples

Posted by William Byrnes on September 24, 2014


The new video, less than two minutes long, is designed to help same-sex couples file their federal income tax returns.

 

 

 

 

Posted in Taxation | Tagged: | Leave a Comment »

Four Things to Know about Net Investment Income Tax

Posted by William Byrnes on September 17, 2014


IRS Tax Tip 2014-48

Starting in 2013, some taxpayers may be subject to the Net Investment Income Tax. You may owe this tax if you have income from investments and your income for the year is more than certain limits. Here are four things from the IRS that you should know about this tax:

1. Net Investment Income Tax.  The law requires a tax of 3.8 percent on the lesser of either your net investment income or the amount by which your modified adjusted gross income exceeds a threshold amount based on your filing status.

2. Net investment income.  This amount generally includes income such as:

  • interest
  • dividends
  • capital gains
  • rental and royalty income
  • non-qualified annuities

This list is not all-inclusive. Net investment income normally does not include wages and most self-employment income. It does not include unemployment compensation, Social Security benefits or alimony. Net investment income also does not include any gain on the sale of your main home that you exclude from your income.

After you add up your total investment income, you then subtract your deductions that are properly allocable to this income. The result is your net investment income. Refer to the instructions for Form 8960, Net Investment Income Tax for more on how to figure your net investment income or MAGI.

3. Income threshold amounts.  You may owe the tax if you have net investment income and your modified adjusted gross income is more than the following amount for your filing status:

Filing Status                            Threshold Amount
Single or Head of household            $200,000
Married filing jointly                        $250,000
Married filing separately                  $125,000
Qualifying widow(er) with a child       $250,000

4. How to report.  If you owe this tax, you must file Form 8960 with your federal tax return. If you had too little tax withheld or did not pay enoughestimated taxes, you may have to pay an estimated tax penalty.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation, Uncategorized | Tagged: | Leave a Comment »

Back-to-School Tax Credits

Posted by William Byrnes on September 15, 2014


IRS logoThe IRS revealed in its Summertime Tax Tip 2014-23 that some of the costs a taxpayer pays for higher education can lead to a taxpayer owing less tax.  Here are several important tax facts about “education tax credits” from the IRS:

  • American Opportunity Tax Credit.  The AOTC can be up to $2,500 annually for an eligible student. This credit applies for the first four years of higher education. Forty percent of the AOTC is refundable. That means a taxpayer may be able to get up to $1,000 of the credit as a refund payment from the IRS, even if no tax is owed.
  • Lifetime Learning Credit.  With the LLC, a taxpayer may be able to claim a tax credit of up to $2,000 on the federal tax return. There is no limit on the number of years the LLC can be claimed for an eligible student.
  • One credit per student.  A taxpayer may claim only one type of education credit per student on the federal tax return each year. If more than one student qualifies for a credit in the same year, then the taxpayer can claim a different credit for each student.
  • Qualified expenses.  A taxpayer may include qualified expenses to calculate the credit.  This may include amounts paid for tuition, fees and other related expenses for an eligible student.
  • Eligible educational institutions.  Eligible schools are those that offer education beyond high school. This includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify.
  • Form 1098-T.  In most cases, a taxpayer will receive Form 1098-T, Tuition Statement, from the school.  This form reports the qualified expenses to the IRS and to the taxpayer. A taxpayer may notice that the amount shown on the form is different than the amount actually paid.  Some of the paid costs may not appear on Form 1098-T.  For example, the cost of textbooks may not appear on the form, but these textbook costs still may be able to be claimed as part of the credit.
  • Nonresident alien.  A F-1 student visa usually files a federal tax return as a nonresident alien.  A nonresident alien may not claim an education tax credit for any part of the tax year unless electing to be treated as a resident alien for federal tax purposes.
  • Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on the taxpayer’s income.

<iframe width=”560″ height=”315″ src=”//www.youtube.com/embed/Q3anIwlsvLQ” frameborder=”0″ allowfullscreen>

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation | Tagged: , , | Leave a Comment »

Tax Information for Students Who Had a Summer Job

Posted by William Byrnes on September 3, 2014


In IRS Special Edition Tax Tip 2014-13, it discussed the tax issues of students who work summer jobs.  Many students take a job in the summer after school lets out. The IRS provided eight tax tips for students who take a summer job.

1. The IRS stated that a student should not be surprised when an employer withholds taxes from the paycheck.  But if the student is self-employed, then he or she may have to pay estimated taxes directly to the IRS on certain dates during the year. This is called a “pay-as-you-go” tax system.

2. As a new employee, a student must complete a Form W-4, Employee’s Withholding Allowance Certificate.  An employer will use it to figure how much federal income tax to withhold from the paycheck. The IRS Withholding Calculator tool on IRS.gov can help a student fill out the form.

3. Keep in mind that all tip income is taxable. If a student receives tips, then the student must keep a daily log so that he or she can report them to the IRS.  A student must report $20 or more in cash tips in any one month to the employer.  All yearly tips must be reported on the tax return.

4. Money earned doing work for others is taxable.  Some work may count as self-employment. This can include jobs like baby-sitting and lawn mowing. Keep good records of expenses related to this work.  Some expenses may be deducted from the income on the tax return. A deduction may help lower the final tax due.

5. If a student is ROTC, then active duty pay, such as pay received for summer camp, is taxable.  But the subsistence allowance while in advanced training is not taxable.

6. A student may not earn enough from a summer job to owe income tax.  But an employer usually must withhold Social Security and Medicare taxes from any pay. If a student is self-employed, then the student must pay these directly to the IRS.  Yet, these count toward coverage under the Social Security system.

7. If a student is a newspaper carrier or distributor, special rules apply. If certain conditions, then the student is considered self-employed.  But if those conditions are not met and the student is under age 18, then the student is usually exempt from Social Security and Medicare taxes.

8. The student may not earn enough money from a summer job to be required to file a tax return. Even if that is true, the student will probably want to file.  For example, if an employer withheld income tax from the paycheck, then the employee will need to file a return to receive a refund of those taxes.  The student can prepare and e-file a tax return for free using IRS Free File.

Finally, see tax rules for students.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation, Uncategorized | Tagged: , | Leave a Comment »

Tax Facts for Travel For Charities

Posted by William Byrnes on September 1, 2014


In the IRS Summertime Tax Tip 2014-06, it discussed the tax tips associated with travelling for a charity.  The IRS directed the tax tips to taxpayers that plan to donate services to charity this summer, such as travel as part of the service.

The IRS disclosed five tax tips to assist with using the travel expenses to help lower taxes when filing the tax return for 2014.

1. A taxpayer cannot deduct the value of your services that is provided to charity.  the taxpayer may be able to deduct some out-of-pocket costs paid to provide the services.  This can include the cost of travel.

The out-of pocket costs must be:

• unreimbursed,

• directly connected with the services,

• expenses you had only because of the services you gave, and

• not personal, living or family expenses.

2. The volunteer work must be for a qualified charity. Most groups other than churches and governments must apply to the IRS to become qualified.  Ask the group about its IRS status before donating services that include out-of-pocket expenses. The Select Check tool on IRS.gov can be used to check a charity’s IRS status.

3. Some types of travel do not qualify for a tax deduction. For example, a taxpayer cannot deduct costs if a significant part of the trip involves recreation or a vacation.

4. A taxpayer can deduct travel expenses if the work is real and substantial throughout the trip.  But the expenses may not be deducted if the taxpayer only has nominal duties or does not have any duties for significant parts of the trip.

5. Deductible travel expenses may include:

• air, rail and bus transportation,

• car expenses,

• lodging costs,

• the cost of meals, and

• taxi or other transportation costs between the airport or station and your hotel.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation, Uncategorized | Tagged: , , , | Leave a Comment »

revised IRS procedure for verifying social security numbers

Posted by William Byrnes on August 28, 2014


IRS logoRevenue Procedure 2014-43 provides guidance to individual payees on verifying social security numbers.

This revenue procedure provides revised procedures for individual payees who are required under Treas. Reg. § 31.3406(d)-5(g)(5) to obtain validation of social security numbers (SSNs) from the Social Security Administration (SSA) to prevent or stop backup withholding under section 3406 of the Internal Revenue Code following receipt of a second backup withholding notice from a payor within a three-year period.

This revenue procedure sets forth revised procedures for an individual payee to obtain validation of the payee’s name and SSN from SSA on or after August 1, 2014.  Following receipt of a second B notice, a copy of a social security card, as described in section 4, is validation from the SSA of a name and SSN combination.

Posted in Taxation | Tagged: , | Leave a Comment »

7 Tax Facts for Vacation Home Rentals

Posted by William Byrnes on August 25, 2014


IRS logoIRS Summertime Tax Tip 2014-13 addressed the topic of a taxpayer renting to others, such as summer vacation rentals in San Diego.

The IRS stated that of a taxpayer rents a home to others, then usually the taxpayer must report the rental income on the tax return.  But the taxpayer may not have to report the income if the rental period is less than 15 days and the property is also the taxpayer’s home.

In most cases, a taxpayer can deduct the costs of renting a property.  However, the deduction may be limited if the property is also the taxpayer’s home.

The IRS provided 7 tax facts about renting out a vacation home.

  1. Vacation Home.  A vacation home can be a house, apartment, condominium, mobile home, boat or similar property.
  2. Schedule E.  A taxpayer will report rental income and rental expenses on Schedule E, Supplemental Income and Loss.  The rental income may also be subject to Net Investment Income Tax.
  3. Used as a Home.  If the property is “used as a home,” then the rental expense deduction is limited.  This means that the deduction for rental expenses can not be more than the rental income received.  See Publication 527, Residential Rental Property (Including Rental of Vacation Homes).
  4. Divide Expenses.  If a taxpayer uses the property and also rents it to others, then special rules apply.  The taxpayer must divide the expenses between the rental use and the personal use.  To figure how to divide the costs, compare the number of days for each type of use with the total days of use.
  5. Personal Use.  Personal use may include use by the taxpayer’s family.  It may also include use by any other property owners or their family.  Use by anyone who pays less than a fair rental price is also personal use.
  6. Schedule A.  Report deductible expenses for personal use on Schedule A, Itemized Deductions. These may include costs such as mortgage interest, property taxes and casualty losses.
  7. Rented Less than 15 Days.  If the property is “used as a home” and rented out fewer than 15 days per year, then the taxpayer does not have to report the rental income.

Posted in Taxation | Tagged: , , , | Leave a Comment »

8 Tax Facts a Home Seller Should Know

Posted by William Byrnes on August 18, 2014


IRS logoIn its 8th tax tip of summer, the IRS revealed that if a taxpayer sells a home for a profit, the gain may not be taxable.  The IRS provided eight tax facts about selling a home in 2014.

1. A capital gain, or a part of it, on the sale of a home may not be taxable.  This rule may apply if the home is owned and used it as the main home for at least two out of the five years before the date of sale.  However, there are exceptions to the “ownership and use” rules. Some exceptions apply to persons with a disability. Some apply to certain members of the military and certain government and Peace Corps workers.

2. Up to $250,000 of gain will not be taxable for an individual, and $500,000 for married, filing a joint return.  The Obama Care Net Investment Income Tax will also not apply to the excluded gain.

3. If the gain is not taxable because it falls beneath the threshold, then the taxpayer may not be required to report the sale to the IRS on the 2014 tax return, filed in 2015.

4. However, a taxpayer must report the sale on the 2014 tax return if part or all of the gain cannot be excluded from tax, or if the taxpayer receives a Form 1099-S, Proceeds From Real Estate Transactions.  The additional Net Investment Income Tax may apply to the gain.

5. Generally, a taxpayer can only exclude the gain from the sale of a main home once every two years.

6.  If a taxpayer has more than one home, then the taxpayer may only exclude the gain on the sale of the main home, which is usually the home lived in most of the time.

7. If a taxpayer claimed the first-time homebuyer credit when purchasing the home, then special rules apply to the sale.

8. A loss on a home sale can not be deducted.

Posted in Taxation | Tagged: , , , | Leave a Comment »

5 Tax Tips for New Business

Posted by William Byrnes on August 11, 2014


IRS logoIn its summer time Tax Tips 9-2014, the IRS provided 5 tax tips to taxpayers who start a new business during 2014.

1. Business Structure.  The IRS stated that taxpayers should choose the business type for the new business. Some common types of entities include sole proprietorship, partnership, S corporation, Limited Liability Company (LLC) and C corporation (normally just referred to as a ‘corporation’).  The type of business chosen will determine the IRS form(s) that must be used to annually report information and to determine tax owing to the IRS.

2. Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. The type of taxes a business pays usually depends on which type of business the taxpayer chose to set up.

3. Employer Identification Number.  A taxpayer may need to get an EIN for federal tax purposes in order to file the tax form necessary for the business type.

4. Accounting Method.  An accounting method is a set of rules that determine when to report income and expenses. A business must use a consistent method. The two that are most common are the cash method and the accrual method. Under the cash method, income is reported in the year received and expenses are deducted in the year paid.  Under the accrual method, income is reported in the year earn, regardless of when payment was actually made, and expenses are deducted in the year incur, regardless of when paid.

5. Employee Health Care.  The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees.  A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. Beginning in 2014, the maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.

For 2015 and after, employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the Employer Shared Responsibility provision.

Posted in Taxation | Tagged: , , , , , , , | Leave a Comment »

Are you paying too much or too little tax?

Posted by William Byrnes on August 7, 2014


IRS logoIn Summer Tax Tip 10-2014, the IRS disclosed that that many taxpayers will discover that they either get a larger refund or owe more tax than they expected next April 15, 2015.  But, the IRS stated, this type of tax surprise is controllable by the taxpayer.

One way to prevent owing more tax next April 15, plus interest and any penalty, or to avoid having too much tax withheld, is to adjust the amount of tax withheld from salary.

Another way to prevent interest and penalties on April 15th is to change the amount of estimated tax paid during the year.

Factors the IRS wants taxpayers to consider during the summer include:

•    New Job.   A taxpayer must fill out and submit Form W-4, Employee’s Withholding Allowance Certificate in order to begin new employment.  The employer will use the information provided by the taxpayer on this form to calculate the amount of federal income tax to withhold from the paycheck.

•    Estimated Tax.  A taxpayer may need to pay estimated tax directly to the IRS during 2014 BEFORE filing the April 15 tax return in 2015.  If a taxpayer earns income without withholding, such as self-employment, interest, dividends or rent, then it is likely that the taxpayer owes estimated tax.  For the year 2014, tax may be due also on June 16, 2014, on Sept. 15 in 2014, on Jan. 15, 2015, and of course, also on Wednesday, April 15, 2015.  Read more about estimated tax here.

•    Life Event Change.  Married?  New Child?  New House?  The Form W-4 or Estimated Tax calculation needs to be updated to reflect a marriage, a child, or the purchase of a new home.

•    Changes in Circumstances.  A taxpayer that receives advance payment of the Obama Care premium tax credit in 2014 must report changes in circumstances, such as changes in income or family size, to the Health Insurance Marketplace where the medical insurance was bought for the year.  Also, a taxpayer must notify the Marketplace if moving away from the geographic area covered by the Marketplace plan.  Read more here.

 

 

Posted in Taxation | Tagged: , , , | Leave a Comment »

Getting Married – How Must I Include the IRS In My Wedding Plans?

Posted by William Byrnes on July 28, 2014


Why would a taxpayer want to include the IRS in his or her wedding plans?  Well, “its the law”.

No, the taxpayer does not need to send a wedding invitation to the closest IRS office.  But a 2014 marriage results in changes to the new married “couple’s” 2014 tax filing and possibly amount owed in tax for 2014.  Whether the couple will owe more in tax each year, including the year of marriage, over that of the combined amount of each individual’s tax due, depends on several factors, such as whether both spouses have income and how much that income is.  In general, a married couple, when both spouses are employed, pay more income tax than if they remained single and filed individual tax returns.  Also, the married couple may owe, and may owe more, of the additional 3.8% Net Investment Income Tax.

The IRS’ Summer Tax Tip 2014-2 reminds taxpayers that marriage has certain tax consequences from at least a filing persepctive.  These include:

Change in filing status.  If a couple is married before, or even on Dec. 31, 2014 at 11:59pm, then for the whole year of 2014 for tax purposes the IRS considers the couple married. Thus, neither spouse may file an individual’s tax return any longer.  Instead, the married couple must choose to file your federal income tax return either jointly or separately (as a married couple) for 2014.

Same-sex married couples:  If the couple is legally married in a state or country that recognizes same-sex marriage, then the couple must file as married for the federal tax return. This is true even if you and your spouse later live in a state or country that does not recognize same-sex marriage.

Name change. The names and Social Security numbers listed on a tax return must match the Social Security Administration records. If a spouse changes the family name, then that name change must be reported to SSA.

Change tax withholding.  A change in marital status requires that a new Form W-4 for each spouse’s employer (Employee’s Withholding Allowance Certificate).  If it normal that when both spouse have income, the combined incomes moves each into a higher tax bracket for withholding at work.  Use the IRS Withholding Calculator tool to assist completing a new Form W-4.

Obama Care Premium Tax Credit changes in circumstances.  If a taxpayer took advantage of receiving the advance payment of the premium tax credit in 2014, then it is required to report changes in circumstances, such as changes in income, marriage, or family size, to the Health Insurance Marketplace.  Moreover, if one spouse will move out of the area covered of a current Marketplace plan, then that spouse must notify the Marketplace.

Address change for IRS letters.  A taxpayer has the responsibility to inform that IRS of an address changes.  To do that, file Form 8822, Change of Address, with the IRS.  Also, separately, the taxpayer should ask the U.S. Postal Service online at USPS.com to forward any mail sent to the former address.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation | Tagged: , , , , , | 1 Comment »

An unconventional retirement planning tool

Posted by William Byrnes on June 30, 2014


When it comes to retirement income planning for most clients, less is not more, and the contribution limits placed on traditional tax-preferred retirement vehicles have many of these clients searching for creative ways to ensure a comfortable retirement income level. Enter the health savings account (HSA), which, though traditionally intended to function as a savings account earmarked for medical expenses, can actually function as a powerful retirement income planning vehicle for clients looking to supplement their retirement savings.

For the strategy to work, however, it is important that your clients understand the rules of the game, and the potential penalties that can derail the substantial tax benefits that an HSA can offer.

The HSA income strategy …

Read William Byrnes & Robert Bloink’s analysis of an unconventional retirement planning tool on LifeHealthPro

 

If you are interested in discussing the Master or Doctoral degree in the areas of international taxation or anti money laundering compliance, please contact me profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

 

Posted in Retirement Planning, Taxation | Tagged: , , | Leave a Comment »

5 Tax Facts about IRS Notices and Letters

Posted by William Byrnes on June 25, 2014


In Tax Tip 2014-60, the IRS disclosed that it sends millions of notices and letters to taxpayers.   Not surprising, given that over 150 million returns are filed each year.   The IRS informed taxpayers of 6 important tips about such notices and letters:

1. The IRS sends letters and notices by mail, never by email nor by social media.  Each notice has specific instructions about what the taxpayer must do to respond.  Often, a taxpayer only needs to respond by mail to deal with whatever the notice requests.  Keep copies of any notices and responses with the annual tax records.

2. The IRS may send a letter or notice for a variety of very different reasons.  Typically, a letter or notice is only about one specific issue on a taxpayer’s federal tax return or about the taxpayer’s tax account.   A notice may simply inform the taxpayer about changes to the tax account or only ask you for more information about an item on the tax return.  However, it may inform the taxpayer that a tax payment is due.

3. A taxpayer may receive a notice that states the IRS has made a change or correction to the tax return.  In this case, the taxpayer should review the information received and then compare it with the original tax return.  If the taxpayer agrees with the IRS notice, then the taxpayer usually does not need to reply except to make a payment.

4. However, if the taxpayer does not agree with the notice, then the taxpayer must respond.  The taxpayer must write a letter to explain why the taxpayer disagrees with the IRS notice, including any information and documents that supports the taxpayer’s position.  The taxpayer must mail a reply, with the bottom tear-off portion of the notice, to the address shown in the upper left-hand corner of the notice.  Allow at least 30 days for a response.

5. A taxpayer does not need to call or visit an IRS office for most notices.  However, if a taxpayer has questions, then call the phone number in the upper right-hand corner of the notice. Have a copy of the tax return and the notice for the call.

tax-facts-online_medium

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.” said Rick Kravitz.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

 Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

2014 Tax Facts on Investments provides clear, concise answers to often complex tax questions concerning investments.  2014 expanded sections on Limitations on Loss Deductions, Charitable Gifts, Reverse Mortgages, and REITs.

 

Posted in Taxation | Tagged: , , , , , | Leave a Comment »

11 health insurance tax facts a taxpayer needs to know about

Posted by William Byrnes on June 24, 2014


Employers and those who advise them may have questions about what expenses qualify for deductions, which tax credits they can take advantage of, and what the new rules mean for grandfathered plans. Individuals may be wondering how HSA distributions are taxed, or whether benefits received under a personal health insurance policy are taxable. 

1. Are premiums paid for personal health insurance deductible as medical expenses?

2. May an employer deduct as a business expense the cost of premiums paid for accident and health insurance for employees?

3. What credit is available for small employers for employee health insurance expenses?

4. Are benefits received under a personal health insurance policy taxable income?

5. How is employer-provided disability income coverage taxed?

6. How is personal disability income coverage taxed?

William Byrnes and Robert Bloink have the well-researched answers you’re looking for on LifeHealthPro !

 


If you are interested in discussing the Master or Doctoral degree in the areas of financial planning, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 

 

 

Posted in Taxation, Uncategorized | Tagged: , , , | Leave a Comment »

Do you Owe a Health Care Coverage Penalty for 2014?

Posted by William Byrnes on June 20, 2014


Deadline to Enroll has Passed

The deadline to enroll in minimum essential health insurance passed on March 30, 2014.   According to estimates by the Federal Department of Health and Human Services (HHS), it met its goal of at least 7 million persons enrolling for health care via the health insurance market places established by the federal government on behalf of various states. Some states, such as California, established their own insurance marketplaces, and thus it is likely that the 7 million figure has indeed been achieved, if not surpassed.

Did Enough Healthy People Enroll to Pay for The System?

The primary question for the federal government that remains is whether the balance of persons enrolling that are “healthy” individuals who must simply pay the annual premium in 2014 but will not actually take dollars from the medical coverage in 2014, will outweigh the payouts to individuals that will take more from health insurance than they pay in.

But What About the Medicaid Expansion?

Moreover, the Affordable Care Act pushed states to expand the definition of when an individual may be covered by the Medicaid, and thus receive medical care substantively paid for by a combination of the federal and state government.  The federal government upfront will provide 90% of a state’s additional medicare cost.  The state must shoulder more of this burden in the future though.

How Will This Be Paid For?

How will the federal government pay for its share of the additional medicare costs and for any additional costs associated with this new federally mandated system?  Some government officials state that Obama Care is already set up to pay for itself because the medical profession, insurance companies, and taxpayers will pick up the additional costs.  Insurance companies will reduce their own administrative costs, the medical profession will offer its services at cheaper prices, and Congress has already raised taxes in the forms of the increased medicare payroll tax and medicare tax on investment income.

The New “Shared Responsibility Payment” Tax, Penalty, Fine

But also, Congress imposed a required payment (some pundits call it a penalty, some call it a tax, others a fine like a parking ticket) on taxpayers who do not obtain and maintain health coverage, that will over time increase.  As the required penalty increases over the coming years, in principle at least, it should be cheaper for a taxpayer to simply buy the lowest cost health insurance than to pay this penalty.  This assumes that the cost of the lowest quality health insurance in these marketplaces does not sky rocket to over come the penalty.

Congress did not call the penalty a “penalty” in the actual law. Instead, Congress used a more ‘voter friendly’ expression “individual shared responsibility payment”.

An Example Decision Maker Deciding What to do in 2014

Other factors will play a role in this decision process, such as a individual’s appetite to take on catastrophic medical risk  (like breaking all their bones in an accident) and weighing the cost of the insurance and the required deductible. If an individual’s annual premium will cost by example approximately $7,200 and the annual deductible is $6,000 (this is an actual example from an insurance policy offered via the 2014 California Marketplace), and the individual thinks that it is extremely unlikely that he or she will spend more than $13,200 in medical costs in 2014, then the individual may opt for the “shared responsibility payment”.

If nothing medically happens during 2014, the taxpayer will only owe the contribution, and thus have saved over $13,000!  However, if something catastrophic happens in 2014 requiring substantial medical expenses over $13,200, the taxpayer will have been better off with the insurance.  Another economic factor in this economic decision making process includes the amount of co-pay required per type of medical procedure.  Another factor in the risk decision making process is the individual’s belief of potentially requiring a certain level of medical expenses, such as perhaps just a stomach virus and the likely out of pocket cost of that care, versus breaking a bone.

How much is the penalty for 2014 if a taxpayer did not have “minimum essential coverage’ by March 30, 2014?

If a taxpayer (or any dependents) do not maintain health care coverage and do not qualify for an exemption, then the taxpayer must make an individual shared responsibility payment with the 2014 tax return.  In general, this health care coverage penalty is either a percentage of the taxpayer’s income or a flat dollar amount, whichever is greater.  High income taxpayers will pay a higher penalty.  A taxpayer will owe 1/12th of this penalty for each month of the taxpayer or taxpayer’s dependents gap in coverage.  The annual payment amount for 2014 is the greater of:

  • one percent (1%) of the household income that is above the tax return threshold for the taxpayer’s filing status, such as Married Filing Jointly or single, or
  • a family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a maximum of $285.

This individual shared responsibility payment is capped at the cost of the national average premium for the bronze level health plan available through the Marketplace in 2014.  The taxpayer will pay the due amount with the 2014 federal income tax return filed in 2015.  For example, a single adult under age 65 with household income less than $19,650 (but more than $10,150) would pay the $95 flat rate.  However, a single adult under age 65 with household income greater than $19,650 would pay an annual payment based on the one percent rate.  

Why greater than $19,650?  The filing threshold for a single adult in 2014 is 10,150, subtract that from $19,650, leaving a base amount of $9, 500.  Multiply 1% to that base amount and the penalty is $95, the same as the flat rate.

So, from the beginning of this year (January 1, 2014) a taxpayer and the family must either have “qualifying” health insurance coverage throughout the year, qualify for an exemption from coverage, or make the above payment when filing the 2014 federal income tax return in 2015.

What is “Minimum Essential Coverage” Under the Affordable Care Act (“ACA”)?

In Health Care Tax Tip 12, the IRS explained for a taxpayer how to determine if his or her health care coverage qualifies as “minimum essential coverage” to avoid the health care coverage penalty for 2014 that must be paid by April 15, 2015 when filing the tax return.

The Affordable Care Act calls for individuals to have and maintain qualifying health insurance coverage for each month of the year, or have an exemption, or make a shared responsibility payment (pay a ‘penalty’) when filing their federal income tax return next year by April 15, 2015.

Qualifying health insurance coverage, called minimum essential coverage, includes coverage under various, but not all, types of health care coverage plans. The IRS stated that the majority of coverage that people have today counts as minimum essential coverage.

The IRS provided examples of minimum essential coverage:

  • Health insurance coverage provided by an employer,
  • Health insurance purchased through the Health Insurance Marketplace,
  • Coverage provided under a government-sponsored program (including Medicare, Medicaid, and health care programs for veterans), and
  • Health insurance purchased directly from an insurance company.

Minimum essential coverage does not include coverage providing only limited benefits, such as:

  • Coverage consisting solely of excepted benefits, such as:
    • Stand-alone vision and dental insurance
    • Workers’ compensation
    • Accident or disability income insurance
  • Medicaid plans that provide limited coverage such as only family planning services or only treatment of emergency medical conditions.

tax-facts-online_medium

Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation | Tagged: , , , | Leave a Comment »

6 Tax Facts About the Additional Medicare Tax

Posted by William Byrnes on June 19, 2014


In Tax Tip 54, the IRS alerted taxpayers that if their income exceeds certain limits, then they may be liable for an Additional Medicare Tax.  6 Tax Tips Regarding the Additional Medicare Tax are:

1. The Additional Medicare Tax is 0.9%.  It applies to the amount of a taxpayer’s wages, self-employment income and railroad retirement (RRTA) compensation that is more than a “threshold” amount. The threshold amount that applies is based on your filing status.  If a taxpayer is married and file a joint return, then the taxpayer must combine both spouse’s wages, compensation, or self-employment income to determine if that income exceeds the “married filing jointly” threshold.

2. The threshold amounts are:

 Filing Status                   Threshold Amount
Married filing jointly           $250,000
Married filing separately   $125,000
Single                                         $200,000
Head of household               $200,000
Qualifying widow(er) with dependent child      $200,000

3. A taxpayer must combine all wages and all self-employment income to determine if the total income exceeds the threshold.  A taxpayer may not consider a loss from self-employment when calculating this additional medicare tax.  The taxpayer must compare RRTA compensation separately to the threshold.  See the instructions for Form 8959, Additional Medicare Tax, for examples.

4. Employers must withhold this tax from wages or compensation when paying a taxpayer more than $200,000 in a calendar year, without regard to filing status.  The employer does not combine the wages for married couples to determine whether to withhold Additional Medicare Tax.

5. A taxpayer may owe more tax than the amount withheld, depending on the filing status and other income. In that case, the taxpayer must make estimated tax payments /or request additional income tax withholding using Form W-4, Employee’s Withholding Allowance Certificate.  If a taxpayer has too little tax withheld, or did not pay enough estimated tax, the taxpayer may owe an estimated tax penalty. For more on this topic, see Publication 505, Tax Withholding and Estimated Tax.

6. File Form 8959 with the tax return if owing Additional Medicare Tax.  The taxpayer must also report any Additional Medicare Tax withheld by an employer on Form 8959.

IRS Examples:

How do individuals calculate Additional Medicare Tax if they have wages subject to Federal Insurance Contributions Act (FICA) tax and self-employment income subject to Self-Employment Contributions Act (SECA) tax?

Individuals with wages subject to FICA tax and self-employment income subject to SECA tax calculate their liabilities for Additional Medicare Tax in three steps:

Step 1. Calculate Additional Medicare Tax on any wages in excess of the applicable threshold for the filing status, without regard to whether any tax was withheld.

Step 2. Reduce the applicable threshold for the filing status by the total amount of Medicare wages received, but not below zero.

Step 3. Calculate Additional Medicare Tax on any self-employment income in excess of the reduced threshold.

Example 1. C, a single filer, has $130,000 in wages and $145,000 in self-employment income.

  1. C’s wages are not in excess of the $200,000 threshold for single filers, so C is not liable for Additional Medicare Tax on these wages.
  2. Before calculating the Additional Medicare Tax on self-employment income, the $200,000 threshold for single filers is reduced by C’s $130,000 in wages, resulting in a reduced self-employment income threshold of $70,000.
  3. C is liable to pay Additional Medicare Tax on $75,000 of self-employment income ($145,000 in self-employment income minus the reduced threshold of $70,000).

Example 2. D and E are married and file jointly. D has $150,000 in wages and E has $175,000 in self-employment income.

  1. D’s wages are not in excess of the $250,000 threshold for joint filers, so D and E are not liable for Additional Medicare Tax on D’s wages.
  2. Before calculating the Additional Medicare Tax on E’s self-employment income, the $250,000 threshold for joint filers is reduced by D’s $150,000 in wages resulting in a reduced self-employment income threshold of $100,000.
  3. D and E are liable to pay Additional Medicare Tax on $75,000 of self-employment income ($175,000 in self-employment income minus the reduced threshold of $100,000).

tax-facts-online_medium

Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation | Tagged: , , , | 1 Comment »

8 Tax Facts about Penalties for Late Filing and Paying Taxes

Posted by William Byrnes on June 18, 2014


In Tax Tip 2014-56, the IRS provided 9 tax facts that a taxpayer needs to know about late filing and late paying tax penalties after the deadline of April 15.  By example, taxpayers should be made aware that the failure-to-file penalty is usually 10 times greater than the failure-to-pay penalty.  So the IRS encourages taxpayers to file on time, even if they cannot pay on time.

1. If a taxpayer is due a federal tax refund then there is no penalty if the tax return is filed later than April 15.  However, if a taxpayer owes taxes and fails to file the tax return by April 15 or fails to pay any tax due by April 15,  then the taxpayer will probably owe interest and penalties on the tax still after April 15.

2. Two federal penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.

3. The failure-to-file penalty is usually much more than the failure-to-pay penalty.  In most cases, it is 10 times more!!!  So if a taxpayer cannot pay what is owe by April 15, the taxpayer should still file a tax return on time and pay as much as possible to reduce the balance.

4. The failure-to-file penalty is normally 5% of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25% of the unpaid taxes.

5. If a taxpayer files a return more than 60 days after the due date (or extended due date), the minimum penalty for late filing is the smaller of $135 or 100% of the unpaid tax.

6. The failure-to-pay penalty is generally 0.5% per month of your unpaid taxes.  It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due.  It can build up to as much as 25% of the unpaid taxes.

7. If the 5% failure-to-file penalty and the 0.5% failure-to-pay penalty both apply in any month, the maximum penalty amount charged for that month is 5%.

8. If a taxpayer requested the 6-month extension of time to file the income tax return (until October 15) by the tax due date of April 15 and paid at least 90% of the taxes that are owed, then the taxpayer may not face a failure-to-pay penalty.  However, the taxpayer must pay the remaining balance by the extended due date.  The taxpayer will still owe interest on any taxes paid after the April 15 due date.

9. A taxpayer may avoid a failure-to-file or failure-to-pay penalty if able to show reasonable cause for not filing or paying on time.

tax-facts-online_medium

Because of the constant changes to the tax law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. For over 110 years, National Underwriter has provided fast, clear, and authoritative answers to financial advisors pressing questions, and it does so in the convenient, timesaving, Q&A format.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.


If you are interested in discussing the Master or Doctoral degree in the areas of financial services or international taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 

Posted in Taxation | Tagged: , , , , , , | Leave a Comment »

Filing Requirement for NRA with US Source Income?

Posted by William Byrnes on June 10, 2014


Nonresident Aliens with US Source Income?

Nonresident aliens (“NRA”) who received income from U.S. sources in 2013 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 16 depending on sources of income. See Taxation of Nonresident Aliens.

Who is a Nonresident Alien for US tax Purposes?

An alien is any individual who is not a U.S. citizen or U.S. national.

A resident alien is an alien who has passed either the green card test or the substantial presence test.  A nonresident alien is everyone other alien.

Who Must File a US tax Return?

If an alien is covered under either of the following 2 categories , then the alien must file a US tax return:

  1. A nonresident alien individual engaged or considered to be engaged in a trade or business in the United States during the year.
  2. A nonresident alien individual who is not engaged in a trade or business in the United States and has U.S. income on which the tax liability was not satisfied by the withholding of tax at the source.

Which Income to Report?

A nonresident alien’s income that is subject to U.S. income tax must generally be divided into 2 categories:

Effectively Connected Income, after allowable deductions, is taxed at graduated rates. These are the same rates that apply to U.S. citizens and residents. Effectively Connected Income should be reported on page one of Form 1040NR, U.S. Nonresident Alien Income Tax Return.

FDAP income generally consists of passive investment income; however, in theory, it could consist of almost any sort of income. FDAP income is taxed at a flat 30% (or lower treaty rate) and no deductions are allowed against such income. FDAP income should be reported on page four of Form 1040NR.

Which Form to File?

Nonresident aliens who are required to file an income tax return must use:

What is US Source Income Subject to US tax?

A nonresident alien (NRA) usually is subject to U.S. income tax only on U.S. source income. The general rules for determining U.S. source income that apply to most nonresident aliens are shown below:

Summary of Source Rules for Income of Nonresident Aliens
Item of Income Factor Determining Source

Salaries, wages, other compensation

Where services performed

Business income: Personal services Where services performed
Business income: Sale of inventory -purchased Where sold

Business income: Sale of inventory -produced

Where produced (Allocation may be necessary)

Interest

Residence of payer

Dividends

Whether a U.S. or foreign corporation*

Rents

Location of property

Royalties: Natural resources Location of property

Royalties: Patents, copyrights, etc.

Where property is used

Sale of real property

Location of property

Sale of personal property

Seller’s tax home (but see Personal Property, in Chapter 2 of Publication 519, for exceptions)

Pensions

Where services were performed that earned the pension

Scholarships – Fellowships Generally, the residence of the payer

Sale of natural resources

Allocation based on fair market value of product at export terminal. For more information, see IRC section 1.863–1(b) of the regulations.

*Exceptions include: a) Dividends paid by a U.S. corporation are foreign source if the corporation elects the Puerto Rico economic activity credit or possessions tax credit. b) Part of a dividend paid by a foreign corporation is U.S. source if at least 25% of the corporation’s gross income is effectively connected with a U.S. trade or business for the 3 tax years before the year in which the dividends are declared.

tax-facts-online_medium

Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

  If you are interested in discussing the Master or Doctoral degree in the areas of financial services or international taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

Posted in Taxation | Tagged: , , , | Leave a Comment »

What are the tax advantages of owning exchange-traded funds (ETFs)? 10 tax tips to investments …

Posted by William Byrnes on June 5, 2014


What are the tax advantages of owning exchange-traded funds (ETFs)?

ETFs enjoy a more favorable tax treatment than mutual funds due to their unique structure. …

How are ETFs taxed? …

How are dividends received from a mutual fund taxed?

… may pay three types of dividends to their shareholders …

These and 7 other tax questions about investments are answered in our article and analysis on LifeHealthPro

 

If you are interested in discussing the Master or Doctoral degree in the areas of financial planning, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 

Posted in Taxation, Wealth Management | Tagged: , , , , | Leave a Comment »

3 Tax Facts for US Taxpayers Living Abroad or With Foreign Assets

Posted by William Byrnes on June 2, 2014


In Newswire 2014-52, IRS reminded US taxpayers living abroad of 3 Tax Facts concerning filing requirements.

1. Filing Requirements of a US taxpayer Living and / or Working in a Foreign Country?

The Internal Revenue Service reminds U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2013, that they may have a U.S. tax liability and a filing requirement in 2014.

The filing deadline for a tax return for a US taxpayer who lives or works outside the US (or serving in the military outside the U.S.) is Monday, June 16, 2014.  To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies. See U.S. Citizens and Resident Aliens Abroad for details.

2. Foreign Assets Reporting?

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.

Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.

3. FBAR Reporting Also Required?

Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2013 must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). This form replaces TD F 90-22.1, the FBAR form used in the past. It is due to the Treasury Department by June 30, 2014, must be filed electronically and is only available online through the BSA E-Filing System website. For details regarding the FBAR requirements, see Report of Foreign Bank and Financial Accounts (FBAR).

Any U.S. taxpayer here or abroad with tax questions can use the online IRS Tax Map and the International Tax Topic Index to get answers.

tax-facts-online_medium

Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

For an indepth analysis of deductions for donations to U.S. charities (and the government’s policy encouraging or discouraging these donations), download my article at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2304044

If you are interested in discussing the Master or Doctoral degree in the areas of financial services or international taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

Posted in Compliance, FATCA, Taxation | Tagged: , , , , | 1 Comment »

Can’t Pay Your Tax Debt? What is an Offer in Compromise?

Posted by William Byrnes on May 28, 2014


What is an Offer in Compromise?

An offer in compromise allows a taxpayer in certain situations to settle a tax debt for less than the full amount of that debt.  An offer in compromise may be a legitimate option when a taxpayer cannot pay a full tax liability, or paying the full tax liability will create a financial hardship.

The IRS considers the taxpayer’s following unique set of facts and circumstances:

  • Ability to pay;
  • Income;
  • Expenses; and
  • Asset equity.

The IRS states that it will generally approve an offer in compromise when the amount offered represents the most that the IRS thinks that it can expect to collect within a reasonable period of time.

Who is Eligible for an Offer in Compromise?

Before the IRS is able to consider an offer in compromise from a taxpayer, the taxpayer must first be current with all filing and payment requirements.  A taxpayer is not eligible if the taxpayer is in an open bankruptcy proceeding.  Use the Offer in Compromise Pre-Qualifier to confirm eligibility and to prepare a preliminary offer in compromise proposal.

How to Submit an Offer in Compromise?

Step-by-step instructions and all the forms for submitting an Offer in Compromise may be found in the Booklet Form 656-B (PDF).  The Offer in Compromise must include:

How to Select a payment option?

The initial payment will vary based on the offer and the payment option chosen with the offer:

  • Lump Sum Cash: Submit an initial payment of 20 % of the total offer amount with the application for Offer in Compromise.  Wait for written acceptance, then pay the remaining balance of the offer in five or fewer payments.
  • Periodic Payment: Submit the initial payment with the application. Continue to pay the remaining balance in monthly installments while the IRS considers the offer in compromise.  If accepted, continue to pay monthly until it is paid in full.

If a taxpayer meets the Low Income Certification guidelines, then the taxpayer does not need to send the application fee or the initial payment and will not need to make monthly installments during the evaluation of the offer in compromise.

What Happens During the Evaluation of the Offer in Compromise?

  • Non-refundable payments and fees will be applied to the tax liability, payments may be designated to a specific tax year and tax debt;
  • A Notice of Federal Tax Lien may be filed;
  • Other collection activities are temporarily suspended;
  • The legal assessment and collection period is extended;
  • Make all required payments associated with the offer;
  • Payments on an existing installment agreement may be temporarily suspended; and
  • The Offer in Compromise is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.
If the offer is accepted If your offer is rejected
  • Meet all the Offer Terms listed in Section 8 of Form 656, including filing all required tax returns and making all payments;
  • Any refunds due within the calendar year in which your offer is accepted will be applied to the tax debt;
  • Federal tax liens are not released until the offer terms are satisfied; and
  • Certain offer information is available for public review at designated IRS offices.
  • A taxpayer may appeal a rejection within 30 days using Request for Appeal of Offer in Compromise, Form 13711 (PDF).

2014_tf_on_individuals_small_businesses-m_1For over 110 years, National Underwriter has provided fast, clear, and authoritative answers to financial advisors pressing questions, and it does so in the convenient, timesaving, Q&A format.  “Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Businessrisk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

For an indepth analysis of deductions for donations to U.S. charities (and the government’s policy encouraging or discouraging these donations), download my article at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2304044

If you are interested in discussing the Master or Doctoral degree in the areas of financial services or international taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 

Posted in Taxation | Tagged: | Leave a Comment »

9 Tax Facts about Amending a Tax Return

Posted by William Byrnes on May 21, 2014


The IRS in Tax Tip 2014-51 alerted taxpayers to their ability to amend a tax return after it has already been filed with the IRS.  By example, if a taxpayer discovers that a mistake was made on the return, such as a mis-statement of income or inadvertent inclusion or exclusion of a deduction, the taxpayer can correct the mistake by filing an amended tax return.

9 tax facts that a taxpayer should know about filing an amended tax return include:

1. Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct errors on a tax return.  But the amended return must be filed on paper.  Amended returns cannot be e-filed.

2. A taxpayer should file an amended tax return if there is an error claiming a filing status, income, deductions or credits on the original return.

3. However, a taxpayer normally will not need to file an amended return to correct simple math calculation errors on the return.  The IRS computers will find those math errors and automatically make those changes.  Such changes may effect the tax due or increase or decrease a refund.  Also, a taxpayer does not to file an amended return because of a forgotten tax form attachment, such as a W-2 or schedule. The IRS will normally later send a request for those to be sent separately.

4. A taxpayer normally has 3 years from the filing date of the original tax return to amend the tax return to claim a refund by filing Form 1040X . A taxpayer may file the amended return within two years from the date of paying the tax due, if that date is later than the filing date of the tax return.  Thus, generally the last day for most taxpayers to file a 2010 claim for a refund is April 15, 2014, unless a special exception applies.

5. If a taxpayer needs to amend more than one tax return, then a 1040X must be prepared for each year. Each 1040X form must be mailed in a separate envelope.  Note the tax year being amended on the top of Form 1040X.  Form 1040X’s instructions include the address where to mail the form.

6. If a taxpayer has other IRS forms or schedules that required changes, then attach them to the Form 1040X.

7. If a taxpayer is due an additional refund because of a potential amendment from the original return, then the taxpayer should wait to receive that first refund before filing Form 1040X to claim the additional refund.  Amended returns require as much as 12 weeks to process.

8. If a taxpayer ends up owing more tax, then file the Form 1040X and pay the tax as soon as possible. This will reduce any interest and penalties on that amount owing.

9. An amended tax return can be tracked three weeks after it is filed with the IRS tool: ‘Where’s My Amended Return?’ or by phone at 866-464-2050.  This tool can track the status of an amended return for the current year and up to three years back.  The ‘Where’s My Amended Return?’ tool requires a taxpayer identification number, normally the Social Security number, and the date of birth and zip code.

tax-facts-online_medium

Because of the constant changes to the tax law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. For over 110 years, National Underwriter has provided fast, clear, and authoritative answers to financial advisors pressing questions, and it does so in the convenient, timesaving, Q&A format.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation | Tagged: , , , | Leave a Comment »

6 Tax Facts for Making Required Estimated Tax Payments To Avoid Interests and Penalties

Posted by William Byrnes on May 19, 2014


In Tax Tip 2014-49, the IRS reminds taxpayers that tax must be paid throughout the year to avoid interest and penalties, that is, tax may not only be due on April 15 for some taxpayers. For the year 2014, tax may be due also on June 16, 2014, on Sept. 15 in 2014, on Jan. 15, 2015, and of course, also on Wednesday, April 15, 2015.

Who must make estimated tax payments?

Taxpayers that do not have taxes withheld from a paycheck, or who do not have enough tax withheld during the year, may need to make additional “estimated” tax payments during the year ‘to catch up’ if normal withholding was being applied.  This is especially true for self-employed taxpayers whose income is generally are not withheld upon.  A taxpayer filing as a sole proprietor, partner in a partnership, S corporation shareholder, and/or a self-employed individual, generally needs to make estimated tax payments during the year.  If a taxpayer had a tax liability for 2013, then normally the taxpayer will need to make estimated tax payments during 2014.

A corporation will generally need to make estimated tax payments if it expects to owe tax of $500 or more when it files its corporate tax return in 2015.

Why estimated tax payments?

Through estimated tax payments, government funds its activities throughout the year, keeps tabs on what is going on with the economy (are taxpayers earning more or less income than previous years) and also ensures tax payment compliance by limiting the amount of tax actually due April 15th for the previous years.  As infamous jurist and U.S. Supreme Court Justice Oliver Wendell Holmes is oft quoted: “Taxes are what we pay for civilized society…” (Compania General De Tabacos De Filipinas v. Collector of Internal Revenue, 275 U.S. 87, 100, dissenting; opinion (21 November 1927)).  Without estimated tax payments, many taxpayers on April 15 would find tax bills larger than the amount saved from which to pay them, be it that other personal spending priorities rise up during the year.

Tax penalty for not paying enough estimated tax?

If in 2014 a taxpayer does not pay enough estimated tax throughout the year, either through withholding or by making estimated tax payments, then a penalty for underpayment of estimated tax will be due on April 15, 2015.  Generally, most taxpayers will avoid this penalty if

EITHER owing less than $1,000 in tax after subtracting all tax withholdings by 3rd parties and after subtracting all tax credits the taxpayer claims for 2014,

OR if they paid at least 90% of the tax that turns out to be owed for 2014, or 100% of the tax shown on the return for 2013, whichever amount is smaller. 

6 tax tips for estimated taxes:

1. A Taxpayer must pay estimated taxes throughout 2014 if expecting to owe $1,000 or more when filing the federal tax return on April 15, 2015.  However, special rules apply to farmers and fishermen.

2. Estimate the amount of income expected to be received for the entire year 2014 to determine the amount of taxes that are estimated to be owed for 2014.  But also, take into account any tax deductions and credits that will be claimed.  Life changes during the year, such as a change in marital status or the birth of a child, can affect the estimated taxes owed.

3. Normally a taxpayer must make estimated tax payments four times a year. The 4 dates that apply to most people this year are April 15, 2014; June 16, 2014; and Sept. 15, 2014, then Jan. 15, 2015.

4. An estimated tax payment may be paid online or by telephone, by check or by money order, and even by credit or debit card.  If a taxpayer mails a tax payment to the IRS, then it is important to use a payment voucher that comes with Form 1040-ES, Estimated Tax for Individuals, that the tax payment may be credited correctly.  Remember that the IRS processes hundreds of millions of tax payments and forms each year!

5. Check out the electronic payment options.  The Electronic Filing Tax Payment System is a free and easy way to make payments electronically.

6. Use Form 1040-ES and its instructions to calculate estimated taxes.

tax-facts-online_medium

Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Businessrisk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

For an indepth analysis of deductions for donations to U.S. charities (and the government’s policy encouraging or discouraging these donations), download my article at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2304044

If you are interested in discussing the Master or Doctoral degree in the areas of financial services or international taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”

Posted in Taxation | Tagged: , | 1 Comment »

Is Your Child Required to File a Tax Return?

Posted by William Byrnes on May 16, 2014


2014_tf_on_investments-mChildren are potential taxpayers too!  That is the message from the IRS in Tax Tip 2014-38.  A child may be required to a federal tax return, or if a child can not file his or her own return, then the parent or guardian is normally responsible for filing their tax return.

Here are 4 tax facts from the IRS that about a child’s investment income:

1. Investment income normally includes interest, dividends and capital gains. It also includes other unearned income, such as from a trust.

2. Special rules apply if a child’s total investment income is more than $2,000. The parent’s tax rate may apply to part of that income instead of the child’s (lower) tax rate.

3. If a child’s total interest and dividend income was less than $10,000 in 2013, the taxpayer may be able to include the income on the taxpayer’s tax return. If the taxpayer elects this choice, the child does not then file a return. See Form 8814, Parents’ Election to Report Child’s Interest and Dividends.

4. Children whose investment income was $10,000 or more in 2013 must file their own tax return. File Form 8615, Tax for Certain Children Who Have Investment Income, along with the child’s federal tax return.

Starting in 2013, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax. NIIT is a 3.8% tax on the lesser of either net investment income or the excess of the child’s modified adjusted gross income that is over a threshold amount. Use Form 8960, Net Investment Income Tax, to calculate this tax.

Posted in Taxation | Tagged: , , , | Leave a Comment »

 
%d bloggers like this: