15 Exceptions to the 10 Percent Penalty of Early IRA Withdrawals
Early withdrawals from a traditional IRA before age 59 1/2 generally incur a 10 percent penalty tax on the taxable portion of the withdrawal. There are several exceptions to this rule that can help you avoid the penalty under specific circumstances. I have outlined...
Understanding Cost Segregation
One significant tax benefit of owning residential rental property or non-residential commercial or investment property is depreciation, a deduction you get without spending any additional money. However, regular depreciation for real property is slow. Residential...
Understanding Injured Spouse Tax Relief
Married taxpayers could still receive a refund when they jointly file their tax return even when the refund or part of the refund was applied or will be applied to pay a past due obligation of one spouse. You are an injured spouse if you filed a joint tax return...
Understanding Innocent Spouse Tax Relief
Marriage carry heavy tax consequences that could be alleviated through careful tax planning strategies. Marriage planning should include a discussion about tax liability. The subject of tax is even more important if you plan to execute a prenuptial or premarital...
Understanding the IRS Audit Procedure
The Internal Revenue Service, in some cases, audits tax returns to ensure that taxpayers correctly pay their tax due. Knowing what the IRS will look for during an audit and getting prepared in case of an audit save taxpayers time and money. A tax audit can go on for...
What is the IRS Status of Limitations for Audits?
There is is a statute of limitations on Internal Revenue Service audits and tax assessments. The time period is called Assessment Expiration Date (ASED). Once the limitations period expires, the IRS cannot audit your return or assess any additional tax. You may have...
What is the Lesson in the Taylor Case?
When you own and operate a business, you must exercise vigilant oversight, including watching over your payroll taxes even when you hire a reputable payroll company because you cannot transfer your responsibility for compliance with tax laws as demonstrated in the...
You Received a Letter from the IRS. What Should you Do?
Million of taxpayers could not pay their taxes or failed to file their tax returns. The number increases every year. Some taxpayers incorrectly filed their return. The Internal Revenue Service, in many cases, would send them a letter. Unfortunately, many taxpayers...
Are you Qualified for an Offer in Compromise?
An Offer in Compromise is a program offered by the IRS that allows taxpayers to settle their tax debts for less than what they owe. This program is designed to help taxpayers who are unable to pay their tax debts in full and are experiencing financial hardship. The...
What Happens When You Did Not File Your Tax Return?
Per the Internal Revenue Service, the Failure to File Penalty applies if taxpayers and businesses do not file their tax return by their respective due dates. This tax year, for S Corporations and Partnerships, the due dates were March 15, and September 16 for business...
Is BOI Reporting Constitutional?
On January 1, 2024, the Corporate Transparency Act (CTA) went into effect. The CTA requires most smaller corporations, most limited liability companies, and some other business entities to file a beneficial ownership information (BOI) report with the U.S. Department...
How to Reply to a Correspondence from the Internal Revenue Service?
Many taxpayers are currently receiving correspondence from the Internal Revenue Service. Notices that were on hold because of Covid-19 and lack of funding to enforce compliance are resumed. Some taxpayers are now realizing that the Service did not overlook the past...
Answers to Common Question on the Corporate Transparency Act
The Corporate Transparency Act (CTA) is effective. It takes effect on January 1, 2024, and imposes a new federal filing requirement for most corporations, limited liability companies (LLCs), and other business entities. Corporations, LLCs, and other entities subject...
How Long Can the IRS Audit your Tax Return?
There is a time period that the Internal Revenue Service can audit tax returns. There is is a statute of limitations on IRS audits and tax assessments. The time period is called Assessment Expiration Date (ASED). Once the limitations period expires, the IRS cannot...
Strategies to Take Advantage of the Main Home Sale Gain Exclusion
The principal residence gain exclusion is very valuable when an appreciated home is sold. Taxpayers should keep evidence of home repairs and improvements that increase their basis in the property to determine their gain on the sale. IRS Publication 523 has a long list...
Know your Tax Return to Save Money
Some tax returns could be very complicated for taxpayers. However, regardless of the level of complication, all taxpayers could greatly benefit by partially reviewing their tax return and by asking a few questions. Hiring a tax preparer to prepare a tax return does...
Requesting First Time Penalty Abatement
Many taxpayers are receiving notices of tax due from the Internal Revenue Service even years after filing their tax return, when they did not file, when they did not pay, or when they fail to deposit employment tax (TFRP- Trust Fund Recovery Penalty). Unfortunately,...
Is your Tax Preparer Liable for Incorrectly Prepared your Tax Return?
The 2024 tax season is underway. The IRS is constantly advising taxpayers to choose their tax preparers wisely by researching their credentials and qualifications. However, many taxpayers choose the tax preparers who will give them a refund or more refund. Many times,...
Understanding you Tax Filing Status
Taxpayers tax filing status is extremely important. They are 1) Single, 2) Married Filing Jointly, 3) Married Filing Separately, 4) Head of Household, and 5) Qualifying surviving spouse. Your filing status determines your filing requirements, your tax rates,...
Claiming Injured Spouse Relief When Filing your Tax Return
Married taxpayers who are injured spouses could still receive a refund when they jointly file their tax return even when the refund or part of the refund was applied or will be applied to pay a past due obligation of one spouse. You are an injured spouse if you...
Are you Eligible for the Education Tax Credits?
There are two types of education related tax credits that taxpayers may claim for qualified tuition and related education expenses paid or incurred during the tax year: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). For...
Are You Eligible for Earned Income Tax Credit?
The earned income tax credit (EITC) is not for every taxpayer. As your income increases, the credit is reduced and it is phased out at an income level. The earned income credit is a refundable tax credit that an eligible individual may claim based on a percentage of...
Checklist to Review for 2024 Tax Filing Season
There is a deadline for different tax documents to be sent to taxpayers. Generally, most forms must be mailed by January 31. Taxpayers should ensure that they have and produce all their required tax documents when filing their tax return. Taxpayers should have an open...
Getting Ready for 2024 Tax Filing Season
Taxpayers should ensure that they have and produce all their required tax documents when filing their tax return. Taxpayers should have an open discussion with their tax preparers before filing their tax return to ensure that all relevant documents are produced to...
2023Year End Tax Planning Strategy and Updates
his is the last week for this year that you should consider meeting with a tax professional to discuss any year end strategies that might reduce your 2023 taxes. The following are some of the tax breaks from which you may benefit, as well as the strategies that could...
Reducing Tax Liability During Transfer of Property in Divorce
Generally, no gain or loss is recognized by either party on a transfer of property from an individual to a spouse, or a former spouse if the transfer is incident to divorce. When nonrecognition treatment applies under this rule, the spouse who receives the property in...
2023 Year End Tax Planning Strategies and Updates
We are at that time of the year again where you should consider meeting with a tax professional to discuss any year end strategies that might reduce your 2023 taxes. The following are some of the tax breaks from which you may benefit, as well as the strategies that...
Reducing Tax Liability During Transfer of Property in Divorce
Taxpayers' tax liabilities could be drastically changed after a divorce. However, when a couple is contemplating a divorce, a discussion with their lawyers and tax advisors related to tax implications of their divorce could greatly help in assessing the tax...
Gain Exclusion from the Sale of your Principal Home
The principal residence gain exclusion is very valuable when an appreciated home is sold. Taxpayers should keep evidence of home repairs and improvements that increase their basis in the property to determine their gain on the sale. IRS Publication 523 has a long list...
What should Taxpayers Do when they Receive a Letter from the IRS?
Million of taxpayers could not pay their taxes or failed to file their tax returns. The number increases every year. Some taxpayers incorrectly filed their return. The Internal Revenue, in many cases, would send them a letter. Unfortunately, many taxpayers ignore the...
Could Taxpayers Shift Tax Liability to Tax Preparers?
Your tax return was filed as required. However, you found out that that it was not accurately prepared when you contacted a tax professional for a review, a bank or mortgage broker to apply for a loan. Many taxpayers have already received letters from the Internal...
Be Ready to Prove your Business Travel Deduction to the Internal Revenue Service
This tax tip provides some critical information on how to document expenses during a business travel to claim your tax deduction. Corporation or proprietorship - If you operate as a corporation, the corporation should reimburse you for the travel expenses or...
Do Taxpayers Need a Tax Resolution Firm to Resolve Tax Debts?
Getting a letter from the Internal Revenue Service (IRS) could be very stressful. It gets worse when you cannot reach the IRS through the phone number provided in the letter. A tax resolution professional who has access to the practitioner priority line could...
Tax Filing Deadlines are Over. What Happens When Taxpayers do not File?
As per the Internal Revenue Service, the Failure to File Penalty applies if taxpayers and businesses do not file their tax return by the different due dates. This tax year, for S Corporations and Partnerships, the due dates were March 15, and September 15 for business...
Understanding the Tax Filing Process
Extended Tax Return is Due on Monday, October 16, 2023 Taxpayers should ensure that they have and produce all their required tax documents when filing their tax return. A tax preparer is hired to prepare the tax return of the clients. The said preparer could not...
Getting Ready to File Your Tax Return
Taxpayers should ensure that they have and produce all their required tax documents when filing their tax return. Checklist to Consider for Your Tax Filing Personal information Last year income tax return if you are a new client Name, address, Social...
Tax Information for Individuals Moving to the United States
Let us assume that you have an acquaintance, a friend or relative who moved to the United States from a foreign country. Here is a high-level look at eight tax considerations your friend or relative needs to know: 1. Tax residency. A foreign individual’s income tax...
Are you a Real Estate Investor or a Real Estate Dealer?
You can have in your real estate portfolio both investor and dealer properties. This distinction is significant for tax purposes. Here is a snapshot of the potential tax differences: Suppose you profit $90,000 from a property sale: As a dealer, your tax...
Should You Repair Your Real Estate Property or Improve it?
The distinction between repair expenses and improvement costs can impact your tax benefits. The tax law categorizes repair and improvement costs differently. Repair expenses are generally more beneficial for tax purposes, providing greater after-tax cash value than...
Getting a Tax Penalty Abatement
Taxpayers in many situations are receiving notices of tax due from the Internal Revenue Service after filing a tax return, when they did not file, when they did not pay, or when they fail to deposit employment tax (TFR- Trust Fund Recovery). Unfortunately, many...
Is your Real Estate Activity a Business or an Investment?
The ability to deduct the costs of your real estate seminars, boot camps , or similar expenses largely depends on the nature of your real estate activities. Are they considered a business or an investment? This distinction is crucial for understanding your tax...
Are Corporate Advances to the Owners Salary, Loans, or Dividends?
If you operate your business as a C or an S corporation, and if you loan money to the corporation or the corporation loans money to you, you need documentation that the loan is indeed a loan. With the S corporation, the loan that fails as a loan can result in taxable...
Tax Filing Implications for US Citizens and Resident Aliens Working Abroad
Many taxpayers who live and work in various parts of the world, such as Switzerland, have concerns about their U.S. tax obligations. We want to alert you to the tax implications you might encounter as a U.S. citizen or resident alien living or working abroad. We are...
Proving your Business Travel Expenses to the Internal Revenue Service
This tax tip provides some crucial information on how to document expenses during a business travel. Corporation or proprietorship - If you operate as a corporation, the corporation should reimburse you for the travel expenses or pay for them directly. Remember, you...
A False Payment Plan Statement is Evidence of Tax Evasion
In United States v. Crandell, 2023 PTC 178 (5th Cir. 2023), the Fifth Circuit held that a district court did not abuse its discretion by denying a taxpayer's motion for mistrial after a jury convicted him of tax evasion under Code Section 7201 for...
Taxpayer Properly Excluded canceled Debt from Income
In White v. Commissioner (White v. Comm'r, T.C. Memo. 2023-77), the Tax Court held that the discharge of White's indebtedness of $14,433 was excluded from gross income. The taxpayer was entitled to exclude cancellation of indebtedness income resulting from the...
Abused Taxpayer Gets Tax Debt Relief
In Gans v. Commissioner, the taxpayer prevailed over the Internal Revenue Service by establishing that she was abused by her husband, among others, and consequently qualified for relief from joint tax liability. Married taxpayers are jointly and severally liable for...
Innocent Spouse Tax Relief
Marriage could bring heavy tax consequences that could be alleviated through careful tax planning strategies. Marriage planning should include discussion about tax. The subject of tax is even more important if you plan to execute a prenuptial or premarital agreement....
Tax Treatment of Property in a Divorce – Part 2 of 2
Generally, no gain or loss is recognized by either party on a transfer of property from an individual to a spouse, or a former spouse if the transfer is incident to divorce. When nonrecognition treatment applies under this rule, the spouse who receives the property in...
Tax Treatment of Property Transferred in a Divorce
Taxpayers' tax liabilities could be drastically changed after a divorce. However, when a couple is contemplating a divorce, a discussion with their lawyers and tax advisors related to tax implications of their divorce could greatly help in controlling the tax...
Why Taxpayers Need Representation to Resolve Tax Problems?
Getting a letter from the IRS could be very stressful. It gets worse when you spend time trying to resolve the problem yourself and you are not getting any positive result. IRS tax debt affects many aspects of our life. IRS problems could be extremely complicated....
The Tax Audit Procedure
The Internal Revenue Service would, in some cases, audit tax returns to ensure that taxpayers adequately pay their tax. Knowing what the IRS will look for during an audit and getting prepared in case of an audit save taxpayers time and money. A tax audit can go on for...
Tax Court Ruled Doctor Misclassified Workers
In Cardiovascular Center LLC v. Commissioner of Internal Revenue Service, the Tax Court had to determine the employment status of the workers at cardiovascular Center, LLC pursuant to IRC section 7436. In a Notice of Employment Tax Determination of Worker...
Hiring your Children to Reduce Tax Liability
Business Owners Can Hire their Children to Lower their Tax Liabilities Summer is coming! If you have not taken advantage of the tax benefit of hiring your kids because you want them to focus on their school activities, why not change your focus to get a huge tax...
The Expanded Home Energy Tax Credits
Taxpayers can save in tax by making certain energy efficient upgrades to their homes. The Inflation Reduction Act of 2022 expanded the credit amounts and types of qualifying expenses. Taxpayers can claim the Residential Clean Energy Credit and the ...
Understanding Offer in Compromise (OIC)
There are many ways to resolve a tax debt. We discussed several of them in previous tips. on this tip, we turn to Offer in Compromise (OIC). Taxpayers could consider applying for an Offer in Compromise when paying the full tax due could cause financial hardship. An...
You Could be Qualified for an Abatement of the Tax Penalty
The Internal Revenue Service will send notices to taxpayers in many situations after filing a tax return, when they did not file, when they did not pay, or when they fail to deposit (TFR- Trust Fund Recovery). Unfortunately, many taxpayers ignore the notices to their...
Could a Taxpayer Shift the Liability to the Tax Preparer for a Tax Problem?
Taxpayers are liable for every position taken on their tax return. You take a position on the return by reporting certain items of income and taking some deductions. When a taxpayer signs the return, the taxpayer attests under penalty of perjury that the statement...
Tax Collection Enforcement on the Rise and the Need for Representation
The 2023 tax filing season has come to its end. Many taxpayers have not filed their returns or have a tax due. The Internal Revenue Service (IRS) has been actively hiring employees, in part, to help in the collection of taxes due. In his address to Congress recently,...
An Installment Agreement Could be a Best Option When there is a Tax Due
The Internal Revenue Service send notices to some taxpayers after filing a tax return or when they did not file. Unfortunately, many taxpayers ignore the notices resulting in some severe consequences. Taxpayers must answer to correspondence from the Internal Revenue...
Are you Requesting an Extension to File Your Tax Return?
The deadline for taxpayers to file their tax return is April 18, 2023. An extension could be requested to file by October 16. It is reported by the IRS that an estimated 11,000,000 taxpayers do not file their tax return each tax year. As a result, every tax year...
How is your Lawsuit Settlement Taxed?
Lawsuit settlements are not all taxed similarly. Taxpayers may receive a substantial amount of money resulting from a lawsuit. There are some tax consequences of which you should be aware. The money you receive may be taxable and, in many cases, the attorney fees that...
An Overview of the IRS Audit Process
Taxpayers, in general, are in a partnership with the Internal Revenue Service. However, unlike in the case of traditional partnerships where two or more individuals mutually agree on the terms of the partnership, in this partnership with the IRS, the IRS sets the...
How to Resolve a Tax Issue
Taxpayers should explore their tax resolution options available. Million of taxpayers could not pay their taxes or failed to file their tax returns. The number gets higher every year. Some taxpayers incorrectly filed their return. Unfortunately, many taxpayers ignore...
A Lesson for New Business Owners
New business owners could learn from Gregg M. Kellett’s court experience (Gregg M. Kellett, T.C. Memo. 2022-62). In 2013, while working for the Bloomberg Industry Group, Kellett purchased the vizala.com domain name and formed Vizala, LLC of which he was the sole...
The Foreign Tax Credit
Your tax filing obligations follow you worldwide. However, there are several tax rules to avoid double taxation and to lower your tax liabilities. Taxpayers should keep track of their worldwide financial transactions. There are 7 categories of income: 1- Section 951A...
The Education Tax Credits
There are two (2) types of education related tax credit that taxpayers may claim for qualified tuition and related expenses paid or incurred during the tax year: The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). The Protecting...
The Earned Income Tax Credit (EITC)
The earned income tax credit (EITC) is not for every taxpayer. As your income increases, the credit is reduced and it is phased out at an income level. Taxpayers should be more alert by looking for any schedule A and schedule C on their tax return if they are not...
Your Tax Filing Status
Taxpayers tax filing status is extremely important. They are 1) Single, 2) Married Filing Jointly, 3) Married Filing Separately, 4) Head of Household, and 5) Qualifying surviving spouse. Your filing status determines your filing requirements, your tax rates,...
Knowing Your Tax Return Could Save You Money
The IRS (IR-2023-05) announced on Thursday, January 12 that 2023 tax filing season will officially start on Monday 23, 2023. Tax returns could be very complicated for taxpayers. Regardless of the level of complication, all taxpayers could benefit by partially...
Tax Law Changes Affecting 2022 Tax Return
It is important to note that some tax credits return to 2019, post Covid-19, levels. Consequently, affected taxpayers will likely receive a significantly smaller refund this tax season compared with the previous tax year. Some changes include amounts for...
Getting Ready to File 2022 Tax Return
Taxpayers should only prepare their tax return when they have all their required tax documents. The IRS has not yet published the beginning and the end of the 2023 tax season. The returns cannot be sent to the IRS before the official start date of the tax season....
Year End Tax Planning Strategies. Part 4 of 4.
It is that time of year again where you should consider meeting with a tax professional to discuss any year end strategies that might reduce your 2022 taxes. The following are some of the tax breaks from which you may benefit, as well as the strategies that you could...
Year End Tax Planning Strategies. Part 3 of 4.
It is that time of year again where you should consider meeting with a tax professional to discuss any year end strategies that might reduce your 2022 taxes. The following are some of the tax breaks from which you may benefit, as well as the strategies that you could...
Year End Tax Planning Strategies. Part 2 of 4.
It is that time of year again where you should consider meeting with a tax professional to discuss any year end strategies that might reduce your 2022 taxes. The following are some of the tax breaks from which you may benefit, as well as the strategies that you could...
Year End Tax Planning Strategies. Part 1 of 4
It is that time of year again where you should consider meeting with a tax professional to discuss any year end tax planning strategies that might reduce your 2022 taxes. The following are some of the tax breaks from which you may benefit, as well as the strategies...
The IRS Could Levy on Taxpayers Social Security Benefit Beyond SOL.
The IRS could levy taxpayers social security benefit even after the expiration of the statute of limitation (SOL) In Ward Franklin Dean v. United States (USCA11 Case: 20-1442) on Appeal from the United States District Court for the Northern District of...
Why Taxpayers Need Representation before the IRS?
IRS Tax Collection Enforcement is on the RiseThe Internal Revenue Service has been actively hiring employees, in part, to help collect taxes due. IRS tax debt affects many aspects of our life. IRS problems could be extremely complicated. People often do not know where...
Getting Tax Penalty Relief Using Reasonable Cause Exception
Taxpayers are liable for every position taken on their tax return. When a taxpayer signs the return, the taxpayer attests under penalty of perjury that the statement made or the position taken on the return is accurate to the best of his or her ability. However, the...
Understanding what to Do when you Receive an IRS Notice
Taxpayers should take their tax notices seriously and explore their resolution options available. The 2021 tax season is officially over. Taxpayers who requested an extension had until October 17, 2022 to file their returns to avoid the late filing penalty. The...
2022 Inflation Reduction Act. Part 4 of 4
President Biden signed into law the 2022 Inflation Reduction Act (the Act), a major tax, healthcare, and climate bill that includes numerous provisions affecting businesses. Much of the Act is paid for by a minimum tax on corporations with more than $1 billion in...
2022 Inflation Reduction Act. Part 2 of 4
President Biden signed into law the 2022 Inflation Reduction Act (the Act). The Act includes numerous tax provisions for individuals - most notably an array of new tax credits relating to energy efficient homes, businesses, and vehicles. It also provides several new...
2022 Inflation Reduction Act. Part 1 of 2
President Biden signed into law the 2022 Inflation Reduction Act (the Act). The Act includes numerous tax provisions - most notably an array of new tax credits relating to energy efficient homes, businesses, and vehicles. It also provides several new healthcare and...