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Información y recursos gratis para empezar un negocio

Posted by Admin Posted on May 05 2022

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El Servicio de Impuestos Internos quiere que los contribuyentes sepan que hay recursos gratuitos en IRS.gov para aquellos que están empezando un negocio. Las pequeñas empresas juegan un papel fundamental en la economía de la nación. El IRS tiene una variedad de recursos disponibles para ayudar a los empresarios a cumplir con sus responsabilidades tributarias, así como para ayudar a sus empleados.

Selección de la estructura empresarial

Al iniciar un negocio, los contribuyentes deben decidir qué estructura de entidad empresarial establecer. La estructura de la empresa determina el formulario de declaración de impuestos que se debe presentar. Las estructuras empresariales más comunes son:

  • Empresario por cuenta propia - Cuando alguien es dueño de un negocio no incorporado por sí mismo.
  • Sociedad - La relación entre dos o más personas para hacer comercio o negocios.
  • Corporaciones - Al formar una corporación, los posibles accionistas intercambian dinero, propiedades, o ambos, por el capital en acciones de la corporación.
  • Corporaciones S - Son corporaciones que eligen pasar los ingresos corporativos, las pérdidas, las deducciones y los créditos a través de sus accionistas a efectos del impuesto federal.
  • Compañía de Responsabilidad Limitada (LLC por sus siglas en inglés) - Están permitidas por la ley estatal y pueden estar sujetas a diferentes regulaciones. El IRS tratará una LLC como una corporación, sociedad, o como parte de la declaración de impuestos del propietario (por ejemplo, empresario por cuenta propia) dependiendo de las elecciones hechas por la LLC y su número de miembros.

Entendiendo los impuestos de negocios

La estructura del negocio que se opera determina qué impuestos hay que pagar y cómo hacerlo. A continuación, están los cuatro tipos generales de impuestos empresariales:

  • Impuesto sobre los ingresos - Todas las empresas, excepto las sociedades, deben presentar una declaración anual del impuesto sobre los ingresos. Las sociedades colectivas presentan una declaración informativa.
  • Impuesto sobre el trabajo por cuenta propia - Es un impuesto de seguro social y Medicare que se aplica principalmente a las personas que trabajan por cuenta propia. Los pagos contribuyen a la cobertura de la persona bajo el sistema del seguro social.
  • Impuesto sobre el empleo - Cuando las pequeñas empresas tienen empleados, la empresa tiene ciertas responsabilidades tributarias sobre el empleo que debe pagar y formularios que debe presentar.
  • Impuestos especiales - Los impuestos especiales se aplican a diversos bienes, servicios y actividades. Estos impuestos pueden recaer sobre el fabricante, el minorista o el consumidor, dependiendo del impuesto específico.

Nota: Por lo general, los propietarios de empresas deben pagar los impuestos sobre los ingresos, incluyendo el impuesto sobre el trabajo por cuenta propia, realizando pagos regulares de impuestos estimados durante el año.

Saber cuándo hay que obtener un número de identificación del empleador (EIN por sus siglas en inglés)

El número de identificación del empleador (EIN) también se conoce como el Número Federal de Identificación de Impuestos y es usado para identificar a una entidad de negocios. Generalmente, las empresas necesitan un EIN. Este es un servicio gratuito ofrecido por el Servicio de Impuestos Internos y los propietarios de empresas pueden obtener su EIN inmediatamente.

Manteniendo buenos registros

El mantenimiento de registros adecuados ayudará a las pequeñas empresas a monitorear su progreso, a preparar estados financieros, a identificar las fuentes de ingresos, a hacer un seguimiento de los gastos deducibles, a hacer un seguimiento de su base en la propiedad, a preparar sus declaraciones de impuestos y a respaldar los elementos declarados en sus declaraciones de impuestos. Los contribuyentes deben mantener sus registros durante al menos 3 años.

Escogiendo un año comercial

Los pequeños negocios deben calcular sus ingresos tributables sobre la base de un año tributario. Un "año tributario" es un período de contabilidad anual para declarar los ingresos y los gastos. Los años tributarios que pueden utilizar las pequeñas empresas son

  • Año natural – 12 meses consecutivos que comienzan el 1 de enero y terminan el 31 de diciembre.
  • Año tributario – 12 meses consecutivos que terminan en el último día de cualquier mes excepto diciembre. Un año tributario de 52-53 semanas es un año tributario que varía de 52 a 53 semanas pero que no tiene que terminar en el último día de un mes.

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS        

Understanding taxpayer rights: The right to challenge the IRS's position and be heard

Posted by Admin Posted on May 05 2022

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Every taxpayer has a set of fundamental rights when working with the IRS which are known collectively as the Taxpayer Bill of Rights. One of these is the right to challenge the IRS's position and be heard.

Here are some details about what this right means for taxpayers.

Taxpayers have the right to:

  • Raise objections.
  • Provide additional documentation in response to formal or proposed IRS actions.
  • Expect the IRS to consider their timely objections.
  • Have the IRS consider any supporting documentation promptly and fairly.
  • Receive a response if the IRS does not agree with their position.

Here are some specific things this right provides taxpayers.

  • In some cases, the IRS will notify a taxpayer that their tax return has a math or clerical error. If this happens, the taxpayer:
    • Has 60 days to tell the IRS that they disagree.
    • Should provide copies of any records that may help correct the error.
    • May call the number listed on the letter or bill for assistance.
    • Can expect the agency to make the necessary adjustment to their account and send a correction if the IRS upholds the taxpayer's position.
  • Here's what will happen if the IRS does not agree with the taxpayer's position:
    • The agency will issue a notice proposing a tax adjustment. This is a letter that comes in the mail.
    • This notice provides the taxpayer with a right to challenge the proposed adjustment.
    • The taxpayer makes this challenge by filing a petition in U.S. Tax Court. The taxpayer must generally file the petition within 90 days of the date of the notice, or 150 days if it is addressed outside the United States.
       
  • Taxpayers can submit documentation and raise objections during an audit. If the IRS does not agree with the taxpayer's position, the agency issues a notice explaining why it is increasing the tax. Prior to paying the tax, the taxpayer has the right to petition the U.S. Tax Court and challenge the agency's decision.
     
  • In some circumstances, the IRS must provide a taxpayer with an opportunity for a hearing before an independent Office of Appeals. The agency must do this:
    • Before taking enforcement actions to collect a tax debt. These actions include levying the taxpayer's bank account. Immediately after filing a notice of federal tax lien in the appropriate state filing location. If the taxpayer disagrees with the decision of the Appeals Office, they can petition the U.S. Tax Court.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS       

Entender los derechos de los contribuyentes: El derecho de cuestionar la posición del IRS y de ser escuchado

Posted by Admin Posted on May 05 2022

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Cada uno de los contribuyentes tiene una serie de derechos fundamentales al tratar con el IRS que se conocen colectivamente como la Carta de Derechos del Contribuyente. Uno de ellos es el de cuestionar la posición del IRS y de ser escuchado.

Aquí hay algunos detalles acerca de lo que significa este derecho para los contribuyentes.

Los contribuyentes tienen derecho a:

  • Presentar objeciones.
  • Proveer documentación adicional como respuesta a acciones propuestas o acciones finales llevadas acabo por el IRS.
  • Esperar a que el IRS considere sus objeciones de manera oportuna.
  • Esperara que el IRS considere cualquier documentación de respaldo de manera oportuna y justa.
  • Recibir una respuesta si el IRS no está de acuerdo con su posición.

Aquí hay algunas cosas específicas que este derecho proporciona a los contribuyentes.

  • En algunos casos, el IRS notificará al contribuyente que su declaración de impuestos tiene un error matemático o administrativo. Si esto sucede, el contribuyente: 
    • Tiene 60 días para decirle al IRS que no está de acuerdo.
    • Debe proporcionar copias de cualquier documento que pueda ayudar a corregir el error.
    • Puede llamar al número que figura en la carta o factura para obtener ayuda.
    • Puede esperar que la agencia haga los ajustes necesarios a su cuenta y envíe una corrección si el IRS está de acuerdo con la posición del contribuyente.
       
  • Esto es lo que sucederá si el IRS no está de acuerdo con la posición del contribuyente:
    • La agencia emitirá un aviso proponiendo un ajuste de impuestos. Esta es una carta que viene en el correo.
    • Este aviso proporciona al contribuyente el derecho a impugnar el ajuste propuesto.
    • El contribuyente hace esta impugnación mediante la presentación de una petición en el Tribunal de Impuestos del los Estados Unidos. El contribuyente generalmente debe presentar la petición dentro de los 90 días a partir de la fecha del aviso, o 150 días si se dirige fuera de los Estados Unidos.
       
  • Los contribuyentes pueden presentar documentación y presentar objeciones durante una auditoría. Si el IRS no está de acuerdo con la posición del contribuyente, la agencia emite un aviso explicando por qué está aumentando el impuesto. Antes de pagar el impuesto, el contribuyente tiene derecho a presentar una petición ante el Tribunal de Impuestos del los Estados Unidos e impugnar la decisión de la agencia.
     
  • En algunas circunstancias, el IRS debe proveer al contribuyente la oportunidad de una audiencia ante una Oficina de Apelaciones independiente. La agencia debe hacer esto:
    • Antes de tomar medidas de cumplimiento para cobrar una deuda tributaria. Estas acciones incluyen el embargo de la cuenta bancaria del contribuyente. Inmediatamente después de presentar un aviso de gravamen por impuesto federal en el lugar de presentación estatal correspondiente. Si el contribuyente no está de acuerdo con la decisión de la Oficina de Apelaciones, puede presentar una petición ante el Tribunal de Impuestos del los Estados Unidos.

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS  

Here’s how taxpayers can resolve common after-tax-day issues

Posted by Admin Posted on May 04 2022

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This year’s deadline to file and pay federal income taxes has passed for most people. If a taxpayer is due a refund, there is no penalty for filing late. However, those who owe and missed the deadline without requesting an extension should file quickly to limit penalties and interest.

Here are some tips for taxpayers handling some of the most common after-tax-day issues.

Check refund status
Taxpayers can check on their refund using the Where's My Refund? tool. It is available on IRS.gov and the IRS2Go app. To use this tool, taxpayers need their Social Security number or ITIN, tax filing status and the exact amount of the refund claimed on their tax return. The tool updates once daily, so there's no need to check more often. Taxpayers without access to a computer can call 800-829-1954.

Check withholding
All taxpayers are encouraged to check their withholding using the Tax Withholding Estimator on IRS.gov. This will help them make sure their employers are withholding the right amount of tax from their paychecks. Doing this now will help avoid an unexpected amount due and possibly a penalty when they prepare and file their taxes next year.

Taxpayers can use the results from the Estimator to help complete a new Form W-4 and adjust their income tax withholding with their employer. Taxpayers who receive pension income can use the results to complete a Form W-4P and submit to their payer.

Review payment options
Taxpayers who owe taxes can review all payment options online. These include:

Carefully consider if they need to amend a tax return
After filing their tax return, taxpayers may find they made an error or forgot to enter something on it. The IRS strongly recommends taxpayers use the Interactive Tax Assistant, Should I File an Amended Return? to help determine if they should correct an error or make other changes to the tax return they already filed.

Common errors taxpayers should fix are those made about filing status, income, deductions, and credits. Taxpayers usually do not need to file an amended return to fix a math error or if they forgot to attach a form or schedule. Normally, the IRS will correct the math error and notify the taxpayer by mail. Similarly, the agency will send a letter requesting any missing forms or schedules.

Taxpayers expecting a refund should not file an amended return before their original return has been processed

The IRS issues most refunds in fewer than 21 days for taxpayers who filed electronically and chose direct deposit. However, some returns have errors or need more review and may take longer to process.

Things that can delay a refund:

The IRS will contact taxpayers by mail if it needs more information to process their return.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Contribuyentes con deuda tributaria que no cumplieron con plazo del 18 de abril deben presentar ahora para reducir multas e intereses; no es muy tarde para reclamar Crédito tributario por hijos

Posted by Admin Posted on May 04 2022

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WASHINGTON — El Servicio de Impuestos Internos, IRS, anima a los contribuyentes que no cumplieron con la fecha límite del lunes, 18 de abril para presentar su declaración de impuestos, a que presenten lo más pronto posible. Aunque los contribuyentes que esperan un reembolso no reciben multas por presentar después de la fecha límite, aquellos que deben impuestos y no cumplen con la fecha límite sin pedir una prórroga deben presentar rápidamente para reducir las multas e intereses.

Las familias que no deben impuestos al IRS aún pueden presentar su declaración de impuestos de 2021 y reclamar el Crédito tributario por hijos para el año tributario 2021 en cualquier momento hasta el 15 de abril de 2025, sin ninguna multa. Este año también marca la primera vez en la historia que muchas familias con niños en Puerto Rico serán elegibles para reclamar el Crédito tributario por hijos, que se ha ampliado para proporcionar hasta $3,600 por niño.

Algunos contribuyentes califican automáticamente para obtener tiempo adicional para presentar y pagar sus impuestos sin multas e intereses, e incluyen:

Presente sin multas para recibir un reembolso de impuestos

Algunas personas eligen no presentar una declaración de impuestos porque no ganaron lo suficiente para tener que presentar. Pero pueden pasar la oportunidad de recibir un reembolso de impuestos. La única manera de recibir un reembolso es al presentar una declaración de impuestos. No hay multas por presentar después de la fecha límite si se le debe un reembolso. Se anima a contribuyentes a que usen opciones para presentar electrónicamente, que incluyen Free File del IRS, disponible en IRS.gov hasta el 17 de octubre para preparar y presentar declaraciones electrónicamente.

Aunque la mayoría de los créditos tributarios pueden usarse para reducir la cantidad de impuestos adeudados, existen varios créditos que permiten a los contribuyentes recibir dinero después de pagar lo que deben. Ejemplos más comunes de estos créditos reembolsables son el Crédito tributario por ingreso del trabajoCrédito por gastos de cuidado de niños y dependientes (en inglés) y el Crédito tributario por hijos (en inglés). Aquellos que usualmente no presentan una declaración y no fueron elegibles para la tercera ronda de Pagos de impacto económico o que recibieron menos de la cantidad total pueden ser elegibles para reclamar el Crédito de recuperación de reembolso de 2021 al presentar su declaración de impuestos de 2021. Muchas veces los contribuyentes no presentan una declaración de impuestos para reclamar estos u otros créditos para los que pueden ser elegibles.

Generalmente, el IRS emite nueve de cada 10 reembolsos en menos de 21 días a contribuyentes que presentan electrónicamente y escogen depósito directo. Sin embargo, es posible que una declaración de impuestos requiera una revisión adicional o se demore. El IRS procesa declaraciones de impuestos de papel en el orden en el que se reciben.

Contribuyentes pueden verificar el estado de su reembolso a través de la herramienta ¿Dónde está mi reembolso? en IRS.gov, IRS2Go o al llamar a la línea automática de reembolsos al 800-829-1954. Contribuyentes necesitan el número de Seguro Social principal en la declaración de impuestos, el estado civil tributario y el monto de reembolso esperado. La herramienta se actualiza una vez al día, generalmente durante la noche, así que no hay necesidad de verificar con más frecuencia.

Presente para reducir multas e intereses

Contribuyentes deben presentar su declaración de impuestos, pedir una prórroga y pagar cualquier deuda lo más pronto posible para reducir multas e intereses. Una prórroga para presentar no es una prórroga para pagar deudas. Una prórroga le otorga seis meses adicionales con una nueva fecha límite del 17 de octubre. Multas e intereses aplican para impuestos adeudados después del 18 de abril y se cobra interés por impuestos y multas hasta que el monto se pague en su totalidad.

Presentar y pagar lo más que se pueda es clave ya que la multa por no presentar una declaración y la multa por pago tardío se suman rápidamente.

Aunque un contribuyente no pueda pagar de inmediato los impuestos adeudados, todavía debe presentar una declaración de impuestos lo antes posible para reducir posibles multas. El IRS tiene más información para los contribuyentes que adeudan al IRS, pero no pueden pagar.

Por lo general, la multa por no presentar una declaración es del 5 por ciento del impuesto adeudado por cada mes o parte de un mes en que una declaración de impuestos llega tarde. Pero si se presenta una declaración más de 60 días después de la fecha límite, la multa mínima es de $435 o 100 por ciento del impuesto no pagado, lo que sea menor.

La tasa básica de multa por incumplimiento de pago es generalmente del 0.5 por ciento del impuesto no pagado adeudado por cada mes o parte de un mes hasta que los impuestos se paguen en su totalidad o hasta que alcance el 25 por ciento. Para más información, vea la página de multas en IRS.gov.

Para obtener más información, consulte la página de reducción de multas por primera vez en IRS.gov.

Pague impuestos adeudados electrónicamente en IRS.gov/pagos

Aquellos que deben impuestos pueden pagar rápido y seguramente a través de su Cuenta en líneaPago Directo del IRS, con tarjeta de débito, crédito o billetera digital, o solicitando un plan de pago en línea (que incluye un acuerdo de pago a plazos). Contribuyentes que pagan electrónicamente reciben confirmación inmediata cuando envían su pago. Con Pago Directo y el Sistema Electrónico de Pago de Impuestos Federales (EFTPS), contribuyentes pueden optar por recibir notificaciones por correo electrónico sobre sus pagos.

Seleccionar un profesional de impuestos

El IRS ofrece consejos para ayudar a los contribuyentes a elegir un preparador de declaraciones de impuestos.

El Directorio de preparadores de impuestos federales con credenciales y calificaciones selectas (en inglés) puede ayudar a contribuyentes a encontrar preparadores de declaraciones de impuestos que poseen una credencial profesional reconocida por el IRS o que han completado los requisitos para el Programa anual de temporada de presentación del IRS.

Carta de Derechos del Contribuyente

Contribuyentes tienen derechos fundamentales bajo la ley que los protegen cuando interactúan con el IRS. La Carta de Derechos del Contribuyente presenta estos derechos en 10 categorías. La Publicación 1 del IRS, Derechos del Contribuyente, destaca estos derechos y la obligación de la agencia de protegerlos.

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS

IRS Tax Withholding Estimator helps taxpayers get their federal withholding right

Posted by Admin Posted on May 04 2022

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All taxpayers should review their federal withholding each year to make sure they're not having too little or too much tax withheld. Doing this now can help protect against facing an unexpected tax bill or penalty in 2023.The sooner taxpayers check their withholding, the easier it is to get the right amount of tax withheld.

Taxpayers whose employers withhold federal income tax from their paycheck can use the IRS Tax Withholding Estimator to help decide if they should make a change to their withholding. This online tool guides users through the process of checking their withholding to help determine the right amount to withhold for their personal situation. Taxpayers can check with their employer to update their withholding or submit a new Form W-4, Employee's Withholding Certificate.

Adjustments to withholding
Individuals should generally increase withholding if they hold more than one job at a time or have income from sources not subject to withholding. If they don't make any changes, they may owe additional tax and possibly penalties when filing their tax return.

Individuals should generally decrease their withholding if they qualify for income tax credits or deductions other than the basic standard deduction.

Either way, those who need to adjust their withholding must prepare a new Form W-4, Employee's Withholding Certificate. They need to submit the new Form W-4 to their employer as soon as possible since withholding occurs throughout the year.

Individuals who should check their withholding include those:

  • who experienced a marriage, divorce, birth or adoption of child, purchase of a new home or retirement
  • who are working two or more jobs at the same time or who only work for part of the year
  • who claim credits such as the child tax credit
  • with dependents age 17 or older
  • who itemized deductions on prior year returns
  • with other personal and financial changes

Tax Withholding Estimator benefits
The IRS Tax Withholding Estimator can help taxpayers:

  • determine if they should complete a new Form W-4.
  • know what information to put on a new Form W-4.
  • save time because the tool completes the form worksheets.

Taxpayers should prepare before using the Tax Withholding Estimator by having their most recent pay statements, information for other income sources and their most recent income tax return. The tool does not ask for sensitive information such as name, Social Security number, address, or bank account numbers.

Taxpayers shouldn't use the Tax Withholding Estimator if:

  • They have a pension but not a job. They should estimate their tax withholding with the new Form W-4P.
  • They have nonresident alien status. They should use Notice 1392, Supplement Form W-4 Instructions for Nonresident Aliens.
  • Their tax situation is complex. This includes alternative minimum tax, long-term capital gains or qualified dividends. See Publication 505, Tax Withholding and Estimated Tax.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Qué debe hacer si no cumplió con la fecha límite de abril para presentar y pagar impuestos

Posted by Admin Posted on May 04 2022

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La fecha límite del impuesto federal sobre los ingresos ya pasó para la mayoría de los contribuyentes individuales. Sin embargo, algunos no han presentado sus declaraciones de impuestos de 2021 ni han pagado los impuestos adeudados.

Algunas personas pueden optar por no presentar una declaración de impuestos porque no ganaron suficiente dinero para que se les exigiera presentar (en inglés). En general, no recibirán una multa si se les debe un reembolso. Sin embargo, pueden perder la oportunidad de recibir un reembolso.

Por otro lado, los impuestos adeudados y no pagados antes del 18 de abril de 2022 están sujetos a multas e intereses. Los contribuyentes en Maine y Massachusetts tenían hasta el 19 de abril para presentar y pagar debido al feriado del Día de los Patriotas en esos estados.

La persona que no haya presentado y adeuda impuestos debe presentar una declaración tan pronto como pueda y pagar todo lo que pueda para reducir las multas e intereses. Las opciones de presentación electrónica, incluido Free File del IRS, aún están disponibles en IRS.gov hasta el 17 de octubre de 2022.

La comunidad militar también puede presentar sus impuestos a través de MilTax (en inglés), un recurso tributario gratuito que se ofrece a través del Departamento de la Defensa. Los contribuyentes elegibles (en inglés) pueden usar MilTax para presentar electrónicamente una declaración de impuestos federales y hasta tres declaraciones estatales de forma gratuita.

Los contribuyentes deben revisar sus opciones de pago. El IRS brinda información para los contribuyentes que no pueden pagar los impuestos que adeudan.

Algunos contribuyentes pueden tener tiempo adicional para presentar sus declaraciones de impuestos y pagar los impuestos adeudados. Esto incluye algunas víctimas de desastres (en inglés)contribuyentes que viven en el extranjero (en inglés), ciertos miembros del servicio militar y personal de apoyo elegible en zonas de combate (en inglés).

Es muy importante que presenten sus impuestos pronto porque las multas e intereses por presentación tardía y pago fuera del plazo de impuestos no pagados se acumulan rápidamente. Sin embargo, en algunos casos, un contribuyente que presenta la declaración después de la fecha límite puede calificar para un alivio de la multa. Para aquellos que se les cobre una multa, pueden comunicarse con el IRS llamando al número que figura en su aviso y explicar por qué no pudieron presentar y pagar a tiempo.

Los contribuyentes que tienen un historial de presentación y pago oportuno a menudo califican para el alivio de sanciones administrativas. Un contribuyente generalmente califica si ha presentado y pagado a tiempo durante los últimos tres años y cumple con otros requisitos. Para obtener más detalles, los contribuyentes deben visitar la página de reducción de multa incurrida por primera vez en IRS.gov.

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS

Taxpayers should open and carefully read any mail from the IRS

Posted by Admin Posted on May 04 2022

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The IRS mails letters or notices to taxpayers for a variety of reasons including:

• They have a balance due.
• They are due a larger or smaller refund.
• The agency has a question about their tax return.
• They need to verify identity.
• The agency needs additional information.
• The agency changed their tax return.

If a taxpayer receives an IRS letter or notice, they should:

• Not ignore it. Most IRS letters and notices are about federal tax returns or tax accounts. The notice or letter will explain the reason for the contact and gives instructions on what to do.

 Not panic. The IRS and its authorized private collection agencies generally contact taxpayers by mail. Most of the time, all the taxpayer needs to do is read the letter carefully and take the appropriate action.

• Read the notice carefully and completely. If the IRS changed the tax return, the taxpayer should compare the information provided in the notice or letter with the information in their original return. In general, there is no need to contact the IRS if the taxpayer agrees with the notice.

• Respond timely. If the notice or letter requires a response by a specific date, taxpayers should reply in a timely manner to:

o avoid delays in processing their tax return
o minimize additional interest and penalty charges
o preserve their appeal rights if they don't agree

• Pay amount due. Taxpayers should pay as much as they can, even if they can't pay the full amount. People can pay online or apply online for a payment agreement, including installment agreements, or an Offer in Compromise. The agency offers several payment options.

• Keep a copy of the notice or letter. It's important that taxpayers keep a copy of all notices or letters with other tax records. They may need these documents later.

• Remember there is usually no need to call the IRS. If a taxpayer must contact the IRS by phone, they should use the number in the upper right-hand corner of the notice. The taxpayer should have a copy of their tax return and letter when calling. Typically, taxpayers only need to contact the agency if they don't agree with the information, if the IRS requests additional information, or if the taxpayer has a balance due. Taxpayers can also write to the agency at the address on the notice or letter. Taxpayer replies are worked on a first-come, first-served basis and will be processed based the date the IRS receives it.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS       

Así es como los contribuyentes pueden resolver problemas comunes después del día de impuestos

Posted by Admin Posted on May 04 2022

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La fecha límite de este año para presentar y pagar los impuestos federales sobre los ingresos ya pasó para la mayoría de las personas. Si a un contribuyente se le debe un reembolso, no hay multa por presentar la declaración tarde. Sin embargo, quienes deban y no hayan cumplido el plazo sin solicitar una prórroga deben presentarla rápidamente para limitar las multas y los intereses.

A continuación, se ofrecen algunos consejos para que los contribuyentes resuelvan algunos de los problemas más comunes después de la fecha límite para presentar la declaración de impuestos.

Verificar el estado del reembolso

Los contribuyentes pueden verificar el estado de su reembolso a través de la herramienta ¿Dónde está mi reembolso? Está disponible en IRS.gov y en la aplicación IRS2Go. Para usar esta herramienta, los contribuyentes necesitan su número de Seguro Social o ITIN, el estado de la declaración de impuestos y la cantidad exacta del reembolso reclamado en su declaración de impuestos. La herramienta se actualiza una vez al día, por lo que no es necesario verificar más a menudo. Los contribuyentes sin acceso a una computadora pueden llamar al 800-829-1954.

Verificar las retenciones

Se anima a todos los contribuyentes a que verifiquen sus retenciones a través del Estimador de Retención de Impuestos en IRS.gov. Esto les ayudará a asegurarse de que sus empleadores les retienen la cantidad correcta de impuestos de sus cheques de pago. Hacer esto ahora ayudará a evitar una cantidad inesperada a pagar y posiblemente una multa cuando preparen y presenten sus impuestos el próximo año.

Los contribuyentes pueden usar los resultados del Estimador para ayudar a completar un nuevo Formulario W-4 y ajustar su retención de impuestos con su empleador. Los contribuyentes que reciben ingresos por pensiones pueden usar los resultados para completar un Formulario W-4P y presentarlo a su pagador.

Revisar las opciones de pago

Los contribuyentes que deben impuestos pueden revisar todas las opciones de pago en línea que incluyen:

Considerar cuidadosamente si necesitan enmendar una declaración de impuestos

Después de presentar su declaración de impuestos, los contribuyentes pueden descubrir que cometieron un error u olvidaron ingresar alguna información. El IRS les recomienda encarecidamente a los contribuyentes que usen el Asistente Interactivo de Impuestos, ¿Debo presentar una declaración enmendada? (en inglés) para ayudar a determinar si deben corregir un error o hacer otros cambios en la declaración de impuestos que ya presentaron.

Los errores más comunes que los contribuyentes deben corregir son el estado civil, los ingresos, las deducciones y los créditos. Por lo general, los contribuyentes no necesitan presentar una declaración enmendada para corregir un error matemático o si se olvidaron de adjuntar un formulario o un anexo. Normalmente, el IRS corregirá el error matemático y notificará al contribuyente por correo. Asimismo, la agencia enviará una carta solicitando los formularios o anexos que falten.

Los contribuyentes que esperan un reembolso no deben presentar una declaración enmendada antes de que su declaración original haya sido procesada

El IRS emite la mayoría de los reembolsos en menos de 21 días para los contribuyentes que presentaron la declaración electrónicamente y eligieron el depósito directo. Sin embargo, algunas declaraciones tienen errores o necesitan más revisión y pueden tardar más tiempo en procesarse.

Cosas que pueden retrasar un reembolso:

El IRS se pondrá en contacto con los contribuyentes por correo si necesita más información para procesar su declaración.

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS   

Contribuyentes deben abrir y leer carta o aviso del IRS cuidadosamente

Posted by Admin Posted on May 04 2022

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El IRS envía cartas o avisos a los contribuyentes por diferentes razones que incluyen:

  • Tienen un saldo adeudado.
  • Se les debe un reembolso mayor o menor.
  • La agencia tiene una pregunta acerca de su declaración de impuestos.
  • Necesitan verificar la identidad.
  • La agencia necesita información adicional.
  • La agencia cambió su declaración de impuestos.

Lo que los contribuyentes deben hacer si reciben una carta o aviso del IRS:

  • No la ignore. La mayoría de las cartas y avisos del IRS son acerca de las declaraciones de impuestos federales o cuentas tributarias. El aviso o carta explicará el motivo del contacto y dará instrucciones acerca de qué hacer.
     
  • No se asuste. El IRS y sus agencias privadas de recaudación autorizadas generalmente se comunican con los contribuyentes por correo. La mayoría de las veces todo lo que el contribuyente necesita hacer es leer la carta cuidadosamente y tomar la acción apropiada.
     
  • Lea el aviso con cuidado y por completo. Si el IRS cambió la declaración de impuestos, el contribuyente debe comparar la información proporcionada en el aviso o carta con la información en su declaración original. En general, no es necesario comunicarse con el IRS si el contribuyente está de acuerdo con el aviso.
     
  • Tome medidas oportunas. Si el aviso o carta requiere una respuesta antes de una fecha específica, los contribuyentes deben responder oportunamente para:
    • evitar retrasos en el procesamiento de su declaración de impuestos
    • minimizar los intereses adicionales y cargos de multas
    • preservar sus derechos de apelación si no están de acuerdo
       
  • Pague la cantidad adeudada. Los contribuyentes deben pagar todo lo que puedan, incluso si no pueden pagar el monto total. Las personas pueden pagar en línea o solicitar un acuerdo de pago en línea, incluidos los planes de pagos a plazos, o un ofrecimiento de transacción. La agencia ofrece varias opciones de pago.
     
  • Guarde una copia del aviso o carta. Es importante que los contribuyentes mantengan una copia de todos los avisos o cartas con otros archivos tributarios. Es posible que necesiten estos documentos más adelante.
     
  • Recuerde que generalmente no hay necesidad de llamar al IRS. Si un contribuyente tiene que comunicarse con el IRS por teléfono, debe usar el número que aparece en la esquina superior derecha del aviso. El contribuyente debe tener una copia de su declaración de impuestos y la carta al llamar. Por lo general, los contribuyentes solo necesitan comunicarse con la agencia si no están de acuerdo con la información, si el IRS solicita información adicional o si el contribuyente tiene un saldo adeudado. Los contribuyentes también pueden escribir a la agencia a la dirección en el aviso o carta. Las respuestas de los contribuyentes se procesan por orden de llegada y procesaremos su repuesta a partir de la fecha en que el IRS lo reciba. 

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS

What someone should do if they missed the April deadline to file and pay taxes

Posted by Admin Posted on May 04 2022

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The federal income tax deadline has passed for most individual taxpayers. However, some haven't filed their 2021 tax returns or paid their tax due.

Some people may choose not to file a tax return because they didn't earn enough money to be required to file. Generally, they won't receive a penalty if they are owed a refund. However, they may miss out on receiving a refund.

On the other hand, tax owed and not paid by April 18, 2022, is subject to penalties and interest. Taxpayers in Maine and Massachusetts had until April 19 to file and pay due to the Patriots' Day holiday in those states.

Anyone who didn't file and owes tax should file a return as soon as they can and pay as much as they can to reduce penalties and interest. Electronic filing options, including IRS Free File, are still available on IRS.gov through October 17, 2022, to prepare and file returns electronically.

The military community can also file their taxes using MilTax, a free tax resource offered through the Department of Defense. Eligible taxpayers can use MilTax to electronically file a federal tax return and up to three state returns for free.

If taxpayers find that they owe taxes, they can review their available payment options. The IRS has information for taxpayers who can't pay taxes they owe.

Some taxpayers may have extra time to file their tax returns and pay any taxes due. This includes some disaster victims, taxpayers living overseas, certain military service members and eligible support personnel in combat zones.

Filing soon is very important because the late-filing and late-payment penalties and interest on unpaid taxes add up quickly. However, in some cases, a taxpayer filing after the deadline may qualify for penalty relief. For those charged a penalty, they may contact the IRS by calling the number on their notice and explain why they couldn't file and pay on time.

Taxpayers who have a history of filing and paying on time often qualify for administrative penalty relief. A taxpayer usually qualifies if they have filed and paid timely for the past three years and meet other requirements. For details, taxpayers should visit the first-time penalty abatement page on IRS.gov.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS       

Estimador de Retención de Impuestos del IRS ayuda a contribuyentes a obtener retención federal correcta

Posted by Admin Posted on May 04 2022

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Todos los contribuyentes deben revisar su retención federal cada año para asegurarse de que no se les retengan muy pocos o demasiados impuestos. Hacer esto ahora puede ayudar a evitar una cuenta o multa tributaria inesperada en el 2023. Cuanto antes los contribuyentes verifiquen su retención, más fácil será obtener la cantidad de retención de impuestos correcta.

Los contribuyentes que tienen empleadores que les retienen el impuesto federal de su cheque de pago pueden usar el Estimador de Retención de Impuestos del IRS para ayudar a decidir si deben hacer un cambio en su retención. Esta herramienta en línea orienta a los usuarios a través del proceso de verificación de su retención para ayudar a determinar la cantidad correcta de retención para su situación personal. Los contribuyentes pueden consultar con su empleador para actualizar su retención o enviar un nuevo Formulario W-4 (SP), Certificado de retenciones del empleado.

Ajustes a la retención

Generalmente, las personas deben aumentar la retención si tienen más de un trabajo a la vez o si tienen ingresos de fuentes no sujetas a retención. Si no hacen ningún cambio, es probable que deban impuestos adicionales y, posiblemente multas al presentar su declaración de impuestos.

Por lo general, las personas deben reducir su retención si califican para créditos o deducciones de impuestos sobre los ingresos que no sea la deducción estándar básica.

De cualquier manera, aquellos que necesitan ajustar su retención deben preparar un nuevo Formulario W-4 y enviarlo a su empleador lo antes posible, ya que la retención se realiza durante todo el año.

Las personas que deben verificar su retención incluyen aquellas:

  • que experimentaron matrimonio, divorcio, nacimiento o adopción de un hijo, compra de una nueva casa o jubilación
  • que tienen dos o más trabajos al mismo tiempo o que solo trabajan una parte del año
  • que reclaman créditos como el Crédito tributario por hijos
  • que tienen dependientes de 17 años o más
  • que realizaron deducciones detalladas en las declaraciones de años anteriores
  • que tienen otros cambios personales y financieros

Beneficios del Estimador de Retención de Impuestos

El Estimador de Retención de Impuestos del IRS puede ayudar a los contribuyentes a:

  • determinar si deben completar un nuevo Formulario W-4.
  • saber qué información incluir en un nuevo Formulario W-4.
  • ahorrar tiempo ya que la herramienta completa las hojas de trabajo del formulario

Los contribuyentes deben prepararse antes de usar el Estimador de Retención de Impuestos al tener sus comprobantes de pago más recientes, información de otras fuentes de ingresos y su declaración de impuestos más reciente. La herramienta no solicita información confidencial como nombre, número de Seguro Social, dirección o números de cuenta bancaria.

Los contribuyentes no deben usar el Estimador de Retención de Impuestos si:

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS  

TAX SAVING TECHNIQUE

Posted by Admin Posted on Apr 28 2022

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Charitable Giving - Instead of selling your appreciated long-term securities, donate the stock instead and avoid paying tax on the unrealized gain while still getting a charitable tax deduction for the full fair market value.

Health Savings Accounts (HSAs) - If you have a high deductible medical plan you can open an HSA and make tax deductible contributions to your account to pay for medical expenses. Unlike flexible spending arrangements (FSAs), the contributions can carry over for medical expenses in future years.

ROTH IRAs - Contributions to a ROTH IRA are not tax deductible but the qualified distributions, including earnings are tax-free.

Municipal Bonds - Interest earned on these types of investments is tax-exempt.

Own a home - most of the cost of this type of investment is financed and the interest (on mortgages up to $750,000) is tax deductible. When the property is sold, individuals may exclude up to $250,000 ($500,000 if married jointly) of the gain.

Retirement Plans - Participate in your employer sponsored retirement plan, especially if there is a matching component. You will receive a current tax deduction and the tax-deferred compounding can add up to a large retirement savings.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

Revisiting Worker Classification Rules

Posted by Admin Posted on Apr 28 2022

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Over the last year, many companies have experienced workforce fluctuations and have engaged independent contractors to address staffing needs. In May, the U.S. Department of Labor (DOL) announced that it had withdrawn the previous administration’s independent contractor rule that had been scheduled to go into effect earlier this year. That rule generally would have made it easier to classify certain workers as independent contractors for the purposes of the Fair Labor Standards Act (FLSA), and thus make them ineligible for minimum wage and other FLSA protections.

While worker classification for DOL purposes isn’t necessarily the same for IRS purposes, now is a good time to revisit the federal tax implications of worker classification.

Tax obligations

The question of whether a worker is an independent contractor or an employee for federal income and employment tax purposes is a complex one. If a worker is an employee, the company must withhold federal income and payroll taxes, and pay the employer’s share of FICA taxes on the wages, plus FUTA tax. And there may be state tax obligations as well.

These obligations don’t apply if a worker is an independent contractor. In that case, the business simply sends the contractor a Form 1099-NEC for the year showing the amount paid (if the amount is $600 or more).

No uniform definition

The IRS and courts have generally ruled that individuals are employees if the organization they work for has the right to control and direct them in the jobs they’re performing. Otherwise, the individuals are generally independent contractors, though other factors are considered.

Some employers that have misclassified workers as independent contractors may get some relief from employment tax liabilities under Internal Revenue Code Section 530. In general, this protection applies only if an employer filed all federal returns consistent with its treatment of a worker as a contractor and treated all similarly situated workers as contractors.

The employer must also have a “reasonable basis” for not treating the worker as an employee. For example, a “reasonable basis” exists if a significant segment of the employer’s industry traditionally treats similar workers as contractors. (Note: Sec. 530 doesn't apply to certain types of technical services workers. And some categories of individuals are subject to special rules because of their occupations or identities.)

Asking for a determination

Under certain circumstances, you may want to ask the IRS (on Form SS-8) to rule on whether a worker is an independent contractor or employee. However, be aware that the IRS has a history of classifying workers as employees rather than independent contractors.

Consult a CPA before filing Form SS-8 because doing so may alert the IRS that your company has worker classification issues — and inadvertently trigger an employment tax audit. It may be better to ensure you are properly treating a worker as an independent contractor so that the relationship complies with the tax rules.

Latest developments

With growth in the “gig” economy and other changes to the ways Americans are working, the question of who is an independent contractor and who is an employee will likely continue to evolve. Stay tuned for the latest developments and contact us for any help you may need with worker classification.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

Source: Thomson Reuters  

REPORT YOUR VIRTUAL CURRENCY TRANSACTIONS.

Posted by Admin Posted on Apr 28 2022

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Virtual currency is a digital representation of value other than a representation of the U.S. dollar or a foreign currency (“real currency”). Virtual currency is used as a unit of account, a store of value, or a medium of exchange. TAS wants to help you understand the tax treatment of virtual currency that can be converted into, or exchanged for, real currency.

Bitcoin is one example of a convertible virtual currency. Bitcoin is a cryptocurrency, which is a specific type of virtual currency that uses cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain. A transaction involving cryptocurrency that is recorded on a distributed ledger is referred to as an “on-chain” transaction. A transaction that is not recorded on the distributed ledger is referred to as an “off-chain” transaction, where individuals can engage directly with each other without necessarily using a trusted third party like a cryptocurrency exchange.

Why are virtual currency transactions taxable?

Income is generally taxable regardless of the source it comes from. As such, virtual currency transactions are taxable just like ‘traditional’ transactions involving money for goods or services, or an exchange of property for other property or services. Virtual currency is treated as property by the IRS and general tax principles that apply to property transactions apply if you sell, exchange, or otherwise transact using virtual currency.

How are virtual currency transactions taxed?

In general, individuals who transact with virtual currency, including buying and selling virtual currency or exchanging virtual currency, hold the virtual currency as a capital asset and the transactions result in capital gain or capital loss. Since virtual currency is considered property, the same general principles apply. However, virtual currency received as compensation for services is treated the same as wages and results in ordinary income to the recipient who then holds the virtual currency as a capital asset.

The following examples illustrate several common transactions involving virtual currency:

  • Sales: When you sell virtual currency, it is generally a capital asset and you must report the transaction along with any capital gain or loss on the sale.
    • Example: If Mary purchased 5 Bitcoins for $50,000 in April and sold all of her Bitcoins in July for $52,000, she would have short-term capital gain of $2,000 (the sales price less the purchase price). If Mary sold the Bitcoins for $48,000, she would have a short-term capital loss on the sale, that must be reported too, but it would be subject to any limitations on capital loss deductions.
  • Exchanges: If you exchange virtual currency held as a capital asset for services or other property, including goods or another virtual currency, you must report the transaction and any capital gain or loss resulting from the exchange.
    • Example: If Bill buys 5 Bitcoins for $50,000 in April and exchanges them for another virtual currency in June worth $40,000 at the date and time of the exchange, Bill would report a $10,000 short-term capital loss on the transaction. In this case, Bill would have to look at his other capital losses and could potentially be limited in how much he could deduct in the current year. Likewise, if the exchanged virtual currency was worth $60,000 instead of $40,000, Bill would report a $10,000 short-term capital gain on the transaction.
  • Earnings: When you receive property, including virtual currency, in exchange for performing services, whether or not you perform the services as an employee, you must report the earnings as ordinary income. Compensation for services are reported and taxed the same regardless of how the compensation is received (dollars, virtual currencies, property, or other services).If you receive virtual currency in return for providing services as an employee, it’s considered wages and is subject to Federal income tax withholding, Federal Insurance Contributions Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported by your employer on Form W-2, Wage and Tax Statement, like traditional wages paid in U.S. dollars. If you receive virtual currency in return for providing services and are not an employee of the payor, you are self-employed, and may be considered an independent contractor. Income from self-employment is often reported on Form 1099-MISC, Miscellaneous Income.
    • Example: If Deng receives $100,000 for providing services as an employee, he should report this as “wages” on his income tax return. If Deng is not an employee, the compensation is reported on Schedule 1 or Schedule C. Deng must report this income on his income tax return regardless of whether he receives a W-2, 1099-MISC, or other information return.
  • Hard forks: A hard fork occurs when a cryptocurrency undergoes a protocol change resulting in a permanent diversion from the legacy distributed ledger. This may result in the creation of a new cryptocurrency in addition to the legacy cryptocurrency. If your cryptocurrency went through a hard fork, but you did not receive any new cryptocurrency you don’t have taxable income.
    • Example: Maria holds 10 units of cryptocurrency A that has a hard fork after which she also has 10 units of cryptocurrency B. Regardless of how she receives the new cryptocurrency B, she has income. If the 10 units of cryptocurrency B are worth $50 at the date and time she receives them, Maria will have taxable income of $50 that she must report in the year she receives the cryptocurrency B.
  • Unreported transactions: You must report income, gain, or loss from all taxable transactions involving virtual currency on your Federal income tax return for the year of the transaction, regardless of the amount or whether you receive a payee statement (like a Form W-2) or information return (like a Form 1099-MISC).

For more information on the tax treatment of property transactions, see Publication 544, Sales and Other Dispositions of Assets.

What virtual currency transactions are not taxable?

Generally, the same rules that apply to other property apply to virtual currency. Not all property transactions are taxable. For example, the following transactions are not taxable:

  • Transactions with yourself. If you transfer virtual currency from a wallet, address, or account belonging to you, to another wallet, address, or account that also belongs to you, the transfer is a non-taxable event, even if you receive an information return reporting the transfer.
  • Bona fide gifts. If you receive virtual currency as a bona fide gift, the gift is not taxable. You will report any income or loss when you sell, exchange, or otherwise dispose of the virtual currency.
  • Charitable donations. If you donate virtual currency to a charitable organization described in Internal Revenue Code Section 170(c), you will not report income, gain, or loss from the donation.
  • Soft forks. A soft fork occurs when a distributed ledger undergoes a protocol change that does not result in a diversion of the ledger and thus does not result in the creation of a new cryptocurrency. Because soft forks do not result in you receiving new cryptocurrency, you will be in the same position you were in prior to the soft fork, meaning that the soft fork will not result in any income to you.

Where Are Virtual Currency Transactions Reported?

Transactions conducted in virtual currency are generally reported on the same tax forms as transactions in other property. They are also reported on a new checkbox on Form 1040. Virtual currency transactions must be reported on:

What records do I need to maintain regarding my transactions using virtual currency?

The Internal Revenue Code and regulations require taxpayers to maintain records that are sufficient to establish the positions taken on tax returns. You should therefore maintain records documenting receipts, sales, exchanges, or other dispositions of virtual currency and the fair market value of the virtual currency for at least three years after reporting any taxable event or have other reporting requirements even if they’re not immediately taxable.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS      

PLANNING FOR THE NET INVESTMENT INCOME TAX

Posted by Admin Posted on Apr 28 2022

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Despite its name, the Tax Cuts and Jobs Act (TCJA) didn’t cut all types of taxes. It left several taxes unchanged, including the 3.8% tax on net investment income (NII) of high-income taxpayers.

You’re potentially liable for the NII tax if your modified adjusted gross income (MAGI) exceeds $200,000 ($250,000 for joint filers and qualifying widows or widowers; $125,000 for married taxpayers filing separately). Generally, MAGI is the same as adjusted gross income. However, it may be higher if you have foreign earned income and certain foreign investments.

To calculate the tax, multiply 3.8% by the lesser of 1) your NII, or 2) the amount by which your MAGI exceeds the threshold. For example, if you’re single with $250,000 in MAGI and $75,000 in NII, your tax would be 3.8% × $50,000 ($250,000 - $200,000), or $1,900.

NII generally includes net income from, among others, taxable interest, dividends, capital gains, rents, royalties and passive business activities. Several types of income are excluded from NII, such as wages, most nonpassive business income, retirement plan distributions and Social Security benefits. Also excluded is the nontaxable gain on the sale of a personal residence.

Given the way the NII tax is calculated, you can reduce the tax either by reducing your MAGI or reducing your NII. To accomplish the former, you could maximize contributions to IRAs and qualified retirement plans. To do the latter, you might invest in tax-exempt municipal bonds or in growth stocks that pay little or no dividends.

There are many strategies for reducing the NII tax. Consult with one of our tax advisors before implementing any of them. And remember that, while tax reduction is important, it’s not the only factor in prudent investment decision-making.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

 

WHAT LEVEL OF HOME INSURANCE SHOULD I BUY?

Posted by Admin Posted on Apr 21 2022

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Make sure that you are insured against whatever natural disasters are common in your area, because insurance against these differs. If you don't specifically ask, you may not be covered.

Be sure to insure for 100% of rebuilding costs. The price of rebuilding your home could differ greatly from the amount that your home is valued at today.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

MULTISTATE RESIDENT? WATCH OUT FOR DOUBLE TAXATION

Posted by Admin Posted on Apr 21 2022

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Contrary to popular belief, there’s nothing in the U.S. Constitution or federal law that prohibits multiple states from collecting tax on the same income. Although many states provide tax credits to prevent double taxation, those credits are sometimes unavailable. If you maintain residences in more than one state, here are some points to keep in mind.

Domicile vs. residence

Generally, if you’re “domiciled” in a state, you’re subject to that state’s income tax on your worldwide income. Your domicile isn’t necessarily where you spend most of your time. Rather, it’s the location of your “true, fixed, permanent home” or the place “to which you intend to return whenever absent.” Your domicile doesn’t change — even if you spend little or no time there — until you establish domicile elsewhere.

Residence, on the other hand, is based on the amount of time you spend in a state. You’re a resident if you have a “permanent place of abode” in a state and spend a minimum amount of time there — for example, at least 183 days per year. Many states impose their income taxes on residents’ worldwide income even if they’re domiciled in another state.

Potential solution

Suppose you live in State A and work in State B. Given the length of your commute, you keep an apartment in State B near your office and return to your home in State A only on weekends. State A taxes you as a domiciliary, while State B taxes you as a resident. Neither state offers a credit for taxes paid to another state, so your income is taxed twice.

One possible solution to such double taxation is to avoid maintaining a permanent place of abode in State B. However, State B may still have the power to tax your income from the job in State B because it’s derived from a source within the state. Yet State B wouldn’t be able to tax your income from other sources, such as investments you made in State A.

Minimize unnecessary taxes

This example illustrates just one way double taxation can arise when you divide your time between two or more states. Our firm can research applicable state law and identify ways to minimize exposure to unnecessary taxes.

Sidebar: How to establish domicile

Under the law of each state, tax credits are available only with respect to income taxes that are “properly due” to another state. But, when two states each claim you as a domiciliary, neither believes that taxes are properly due to the other. To avoid double taxation in this situation, you’ll need to demonstrate your intent to abandon your domicile in one state and establish it in the other.

There are various ways to do so. For example, you might obtain a driver’s license and register your car in the new state. You could also open bank accounts in the new state and use your new address for important financially related documents (such as insurance policies, tax returns, passports and wills). Other effective measures may include registering to vote in the new jurisdiction, subscribing to local newspapers and seeing local health care providers. Bear in mind, of course, that laws regarding domicile vary from state to state.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

REFUND, WHERE'S MY REFUND?

Posted by Admin Posted on Apr 21 2022

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Are you expecting a tax refund from the Internal Revenue Service this year? If you file a complete and accurate paper tax return, your refund should be issued in about six to eight weeks from the date IRS receives your return. If you file your return electronically, your refund should be issued in about half the time it would take if you filed a paper return — even faster when you choose direct deposit.

You can have a refund check mailed to you, buy up to $5,000 in U.S. Series I Savings Bonds with your refund, or you may be able to have your refund electronically deposited directly into your bank account (either in one account, or in multiple accounts). Direct deposit into a bank account is more secure because there is no check to get lost. And it takes the U.S. Treasury less time than issuing a paper check. If you prepare a paper return, fill in the direct deposit information in the “Refund” section of the tax form, making sure that the routing and account numbers are accurate. Incorrect numbers can cause your refund to be misdirected or delayed. Direct deposit is also available if you electronically file your return.

A few words of caution — some financial institutions do not allow a joint refund to be deposited into an individual account. Check with your bank or other financial institution to make sure your direct deposit will be accepted.

You may not receive your refund as quickly as you expected. A refund can be delayed for a variety of reasons. For example, a name and Social Security number listed on the tax return may not match the IRS records. You may have failed to sign the return or to include a necessary attachment, such as Form W-2, Wage and Tax Statement. Or you may have made math errors that require extra time for the IRS to correct.

To check the status of an expected refund, use "Check your Federal Refund" an interactive tool available on our Links page. Simple online instructions guide you through a process that checks the status of your refund after you provide identifying information from your tax return. Once the information is processed, results could be one of several responses.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

ARPA Provides More Than Just Direct Payments to Taxpayers

Posted by Admin Posted on Apr 11 2022

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On March 11, another round of COVID-19 relief legislation was signed into law. The American Rescue Plan Act (ARPA) includes funding for individuals, businesses, and state and local governments, but also some significant tax-related provisions.

ARPA extends and expands some tax provisions in the CARES Act and the Consolidated Appropriations Act (CAA) and also includes some new tax-related provisions.

A quick look

Here’s a quick look at some of the tax provisions that may affect you:

Individuals

Recovery rebates of up to $1,400 for singles and heads of households and $2,800 for married couples filing jointly — plus $1,400 per qualifying dependent (including adult dependents) — subject to adjusted gross income (AGI) phaseouts starting at $75,000 for singles, $112,500 for heads of households and $150,000 for joint filers and ending at $80,000, $120,000 and $160,000, respectively

Increased Child credit, including advance payments of part of the credit later this year

Expanded child and dependent care tax credit

Tax-free treatment of forgiven student loan debt

Exclusion from gross income of the first $10,200 in unemployment benefits received

Businesses and other employers

Extended and expanded tax credits for retaining employees, through Dec. 31, 2021

Extended and modified payroll tax credits for paid sick and family leave, through Sept. 30, 2021

Extended excess business loss limitation, through Dec. 31, 2026

Expansion of the Section 162(m) limits on the tax deduction public companies can take for executive compensation to cover the CEO, the CFO and the five next highest paid employees, beginning in 2027

How will you benefit?

This is just a brief overview of the tax-related provisions of ARPA. Additional rules and limits apply. Contact your tax advisor for more details on these provisions and how you might benefit.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters        

For the first time, maximum educator expense deduction rises to $300 in 2022; limit $250 for those filing 2021 tax returns

Posted by Admin Posted on Mar 30 2022

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WASHINGTON — The Internal Revenue Service today reminded teachers and other educators planning ahead for 2022 that they'll be able to deduct up to $300 of out-of-pocket classroom expenses when they file their federal income tax return next year.

This is the first time the annual limit has increased since the special educator expense deduction was enacted in 2002. For tax-years 2002 through 2021, the limit was $250 per year. This means for people currently filing their 2021 tax returns due in April, the deduction is limited to $250. The limit will rise in $50 increments in future years based on inflation adjustments.

For 2022, an eligible educator can deduct up to $300 of qualifying expenses. If they are married and file a joint return with another eligible educator, the limit rises to $600. But in this situation, not more than $300 for each spouse.

Who qualifies?

Educators can claim this deduction, even if they take the standard deduction. Eligible educators include anyone who is a kindergarten through grade 12 teacher, instructor, counselor, principal or aide in a school for at least 900 hours during the school year. Both public- and private-school educators qualify.

What's deductible?

Educators can deduct the unreimbursed cost of:

  • Books, supplies and other materials used in the classroom.
  • Equipment, including computer equipment, software and services.
  • COVID-19 protective items to stop the spread of the disease in the classroom. This includes face masks, disinfectant for use against COVID-19, hand soap, hand sanitizer, disposable gloves, tape, paint or chalk to guide social distancing, physical barriers, such as clear plexiglass, air purifiers and other items recommended by the Centers for Disease Control and Prevention (CDC).
  • Professional development courses related to the curriculum they teach or the students they teach. For these expenses, it may be more beneficial to claim another educational tax benefit, especially the lifetime learning credit. For details, see Publication 970, Tax Benefits for Education, particularly Chapter 3.

Qualified expenses don't include expenses for home schooling or for nonathletic supplies for courses in health or physical education. As with all deductions and credits, the IRS reminds educators to keep good records, including receipts, cancelled checks and other documentation.

Reminder for 2021 tax returns being filed now: Deduction limit is $250

With the tax deadline just around the corner, the IRS reminds any educator still working on their 2021 return that they can claim any qualifying expenses on Schedule 1, Line 11. For 2021, the deduction limit is $250. If they are married and file a joint return with another eligible educator, the limit rises to $500. But in this situation, not more than $250 for each spouse.

Whether a return is self-prepared or prepared with the assistance of a tax professional or trained community volunteer, the IRS urges everyone to file electronically and choose direct deposit for any refund. For details, visit IRS.gov/efile.

In addition, the IRS urges anyone with tax due to choose the speed and convenience of paying electronically, such as with IRS Direct Pay, a free service available only on IRS.gov. For information about this and other payment options, visit IRS.gov/payments.

This year, the tax-filing deadline is:

  • Monday, April 18 for most taxpayers.
  • Tuesday, April 19 for residents of Maine and Massachusetts.
  • Wednesday, June 15 for most Americans who live abroad.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811

Source: IRS

 

Taxpayers should file their tax return on time to avoid costly interest and penalty fees

Posted by Admin Posted on Mar 30 2022

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Taxpayers should file their tax return by the deadline even if they cannot pay their full tax bill. Taxpayers who owe tax and don't file on time, may be charged a failure-to-file penalty. This penalty is usually five percent of the tax owed for each month, or part of a month that the tax return is late, up to 25%.

If an individual taxpayer owes taxes, but can't pay in full by the April 18, 2022, deadline, they should:

File their tax return or request an extension of time to file by the April 18 deadline.

  • People who owe tax and do not file their return on time or request an extension may face a failure-to-file penalty for not filing on time.
  • Taxpayers should remember that an extension of time to file is not an extension of time to pay. An extension gives taxpayers until October 17, 2022, to file their 2021 tax return, but taxes owed are still due April 18, 2022.

To get an extension to file, taxpayers must do one of the following:

Pay as much as possible by the April 18 due date.

Set up a payment plan as soon as possible.

Interest is based on the amount of tax owed and for each day it's not paid in full. Interest rates are determined every three months and can vary, based on type of tax; for example, individual or business-tax liabilities. More information is available on the Interest on Underpayments and Overpayments page of IRS.gov.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811

Source: IRS

Valuable tax benefits for members of the military

Posted by Admin Posted on Mar 30 2022

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Members of the military may qualify for tax benefits not available to civilians. For example, they don't have to pay taxes on some types of income. Special rules may lower the tax they owe or allow them more time to file and pay their federal taxes.

Here are some of these special tax benefits:

  • Combat pay exclusion: If someone serves in a combat zonepart or all of their pay is tax-free. This also applies to people working in an area outside a combat zone when the Department of Defense certifies that area is in direct support of military operations in a combat zone. There are limits to this exclusion for commissioned officers.
     
  • Other nontaxable benefits: Base allowance for housing, base allowance for subsistence and uniform allowances are among several government pay items excluded from gross income, which means they are not taxed.
     
  • Moving expenses: Some non-reimbursed moving expenses may be tax deductible. To deduct these expenses, the taxpayer must be a member of the Armed Forces on active duty and their move must be due to a military order or result of a permanent change of station.
     
  • Deadline extensions: Some members of the military – such as those who serve overseas – can postpone most tax deadlines. Those who qualify can get automatic extensions of time to file and pay their taxes. 
     
  • Earned income tax credit: Special rules allow military members who get nontaxable combat pay to choose to include it in their taxable income. One reason they might do this is to increase the amount of their earned income tax credit. People who qualify for this credit could owe less tax or even get a larger refund. Also, taxpayers can use their 2019 earned income to figure their 2021 earned income credit if their 2019 earned income is more than their 2021 earned income.
     
  • Joint return signatures: Both spouses must normally sign a joint income tax return. However, if military service prevents that from happening, one spouse may be able to sign for the other or get a power of attorney. Service members may want to consult with their installation's legal office to see if a power of attorney is right for them.
     
  • Reserve and National Guard travel: Members of a reserve component of the Armed Forces may be able to deduct their unreimbursed travel expenses on their return. To do so, they must travel more than 100 miles away from home in connection with their performance of services as a member of the reserves.
     
  • ROTC allowances: Some amounts paid to ROTC students in advanced training are not taxable. However, active-duty ROTC pay is taxable. This includes things like pay for summer advanced camp.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811

Source: IRS

Get an automatic six more months to file; all taxpayers can use IRS Free File to request an extension

Posted by Admin Posted on Mar 30 2022

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WASHINGTON — The Internal Revenue Service reminds taxpayers that if they're unable to file their tax return by this year's April 18 deadline, there's an easy, online option to get more time to complete their return.

Taxpayers who need more time to complete their return can request an automatic six-month extension to file. An extension allows for extra time to gather, prepare and file paperwork with the IRS; however, taxpayers should be aware that:

  • An extension to file their return doesn't grant them an extension to pay their taxes,
  • They should estimate and pay any owed taxes by their regular deadline to help avoid possible penalties and
  • They must file their extension no later than the regular due date of their return.

E-file an extension form for free

Individual tax filers, regardless of income, can use IRS Free File to electronically request an automatic tax-filing extension. The fastest and easiest way to get an extension is through IRS Free File on IRS.gov. Taxpayers can electronically request an extension on Form 4868 PDF. Filing this form gives taxpayers until October 17 to file their tax return. To get the extension, taxpayers must estimate their tax liability on this form and should timely pay any amount due.

Get an extension when making a payment

Other fast, free and easy ways to get an extension include using IRS Direct Pay, the Electronic Federal Tax Payment System or by paying with a credit or debit card or digital wallet. There's no need to file a separate Form 4868 extension request when making an electronic payment and indicating it's for an extension. The IRS will automatically count it as an extension.

Important reminders on extensions

The IRS reminds taxpayers that a request for an extension provides extra time to file a tax return, but not extra time to pay any taxes owed. Payments are still due by the original deadline. Taxpayers should file even if they can't pay the full amount. By filing either a return on time or requesting an extension by the April 18 filing deadline, they'll avoid the late-filing penalty, which can be 10 times as costly as the penalty for not paying.

Taxpayers who pay as much as they can by the due date, reduce the overall amount subject to penalty and interest charges. The interest rate is currently four percent per year, compounded daily. The late-filing penalty is generally five percent per month and the late-payment penalty is normally 0.5 percent per month.

The IRS will work with taxpayers who cannot pay the full amount of tax they owe. Other options to pay, such as getting a loan or paying by credit card, may help resolve a tax debt. Most people can set up a payment plan on IRS.gov to pay off their balance over time.

Other automatic extensions

Certain eligible taxpayers get more time to file without having to ask for extensions. These include:

  • U.S. citizens and resident aliens who live and work outside of the United States and Puerto Rico get an automatic 2-month extension to file their tax returns. They have until June 15 to file. However, tax payments are still due April 18 or interest will be charged.
  • Members of the military on duty outside the United States and Puerto Rico also receive an automatic two-month extension to file. Those serving in combat zones have up to 180 days after they leave the combat zone to file returns and pay any taxes due. Details are available in Publication 3, Armed Forces' Tax Guide PDF.
  • When the President makes a disaster area declaration, the IRS can postpone certain taxpayer deadlines for residents and businesses in the affected area. People can find information on the most recent tax relief for disaster situations on the IRS website.

The deadline to submit 2021 tax returns or an extension to file and pay tax owed this year falls on April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots' Day holiday in those states.

 

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811

Source: IRS

WHAT CAN I DO TO ENSURE THAT I AM INSURED ADEQUATELY?

Posted by Admin Posted on Mar 22 2022

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Make a list of your possessions in your household. The better documented this is the more likely you will be to be able to replace them.

Make sure that you inform your agents of any changes that you make to the home so that if anything happens to the structure, the recent changes will be reflected in the payout.

Check to see if there are any specific limits to what is insured by your company. Sometimes a person may think they are covered for certain things, but the limits negate that.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters  

Deductible taxes

Posted by Admin Posted on Mar 22 2022

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Did you know that you may be able to deduct certain taxes on your federal income tax return? The IRS says you can if you file Form 1040 and itemize deductions on Schedule A. Deductions decrease the amount of income subject to taxation. There are four types of deductible non-business taxes:

1. State and local income taxes, or general sales taxes;

2. Real estate taxes; and

3. Personal property taxes

The Tax Cuts and Jobs Act (TCJA) limit the cumulative amount of the above taxes an individual can deduct in a calendar year to $10,000.

You can deduct estimated taxes paid to state or local governments and prior year's state or local income tax as long as they were paid during the tax year. If deducting sales taxes instead, you may deduct actual expenses or use optional tables provided by the IRS to determine your deduction amount, relieving you of the need to save receipts. Sales taxes paid on motor vehicles and boats may be added to the table amount, but only up to the amount paid at the general sales tax rate. Taxpayers will check a box on Schedule A, Itemized Deductions, to indicate whether their deduction is for income or sales tax.

Deductible real estate taxes are usually any state, local, or foreign taxes on real property. If a portion of your monthly mortgage payment goes into an escrow account and your lender periodically pays your real estate taxes to local governments out of this account, you can deduct only the amount actually paid during the year to the taxing authorities. Your lender will normally send you a Form 1098, Mortgage Interest Statement, at the end of the tax year with this information.

To claim a deduction for personal property tax you paid, the tax must be based on value alone and imposed on a yearly basis. For example, the annual fee for the registration of your car would be a deductible tax, but only the portion of the fee that was based on the car's value.

Call us or contact us today to find out how we can save you money!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Car donation to charity organizations

Posted by Admin Posted on Mar 22 2022

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The IRS reminds taxpayers that specific rules apply for taking a tax deduction for donating cars to charities. If the claimed value of the donated motor vehicle, boat or plane exceeds $500, you can deduct the smaller of the vehicle's FMV on the date of the contribution or the gross proceeds received from the sale of the vehicle.

People who want to take a deduction for the donation of their vehicle on their tax return should take quite a few steps, but here is the most obvious:

Check that the Organization is Qualified.

Taxpayers must make certain that they contribute their car to an eligible organization; otherwise, their donation will not be tax deductible. Taxpayers can search Tax Exempt Organization Search to check that an organization is qualified. In addition, taxpayers can call IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500. Be sure to have the organization's correct name and its headquarters location, if possible. Churches, synagogues, temples, mosques and governments are not required to apply for this exemption in order to be qualified.  Please contact us if you're considering a car donation for your tax return!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters          

Taxpayers must report tip money as income on their tax return

Posted by Admin Posted on Mar 22 2022

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For those working in the service industry, tips are often a vital part of their income. Like most forms of income, tips are taxable. Therefore, it's also vital that people understand the tax obligations that come with tip income. Here's some information to help taxpayers report tip income so they don't receive a surprise tax bill.

Taxpayers must include all tips they receive in their gross income. This includes:

Tips directly from customers.

Tips added using credit, debit or gift cards.

Tips from a tip-splitting arrangement with other employees.

The value of non-cash tips, such as tickets, passes or other items of value is also income and subject to tax.

Three things can help taxpayers to correctly report their tip income.

Keep a daily tip record.

Report tips to their employer.

Report all tips on their income tax return.

Use the Interactive Tax Assistant

This online tool provides answers to tax law questions. Taxpayers can use the Interactive Tax Assistant on IRS.gov to find out if their tip income is taxable.

What employers need to know

If an employee receives $20 or more in any month, they must report their tips for that month to their employer by the 10th day of the next month. The employer must withhold federal income, Social Security and Medicare taxes on the reported tips.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS       

Selling your home

Posted by Admin Posted on Mar 16 2022

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If you sold your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return. This exclusion is allowed each time that you sell your main home, but generally no more frequently than once every two years.

To be eligible for this exclusion, your home must have been owned by you and used as your main home for a period of at least two out of the five years prior to its sale. You also must not have excluded gain on another home sold during the two years before the current sale.

If you and your spouse file a joint return for the year of the sale, you can exclude the gain if either of you qualify for the exclusion. But both of you would have to meet the use test to claim the $500,000 maximum amount.

To exclude gain, a taxpayer must both own and use the home as a principal residence for two of the five years before the sale. The two years may consist of 24 full months or 730 days. Short absences, such as for a summer vacation, count as periods of use. Longer breaks, such as a one-year sabbatical, do not.

If you do not meet the ownership and use tests, you may be allowed to exclude a reduced maximum amount of the gain realized on the sale of your home if you sold your home due to health, a change in place of employment, or certain unforeseen circumstances. Unforeseen circumstances include, for example, divorce or legal separation, natural or man-made disaster resulting in a casualty to your home, or an involuntary conversion of your home.  Send us a message for more!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

How to keep your personal and tax information safe

Posted by Admin Posted on Mar 16 2022

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Here are some tips to follow to keep you and your private information safe in various situations.

Staying safe on social media

Don’t post or send private or tax related information anywhere on these types of platforms. Even if you have your social media accounts set to a limited audience under privacy settings, if you are using an open wi-fi network, like at the local coffee shop or in a hotel room, your information can be captured as it goes over that connection.

Don’t open or respond to direct messages coming from social media platforms. For example, anybody that can see your public profile on Facebook, can generate a direct message to you, even when they are not listed in your ‘friends’ categories. Opening these messages can often then let this sender begin a conversation with you. Fraudsters can use this new access to try to obtain information from you, which they can use to steal your identity.

See our TAS Tax Tips: Keep safe on social media at tax time – Don’t post or message tax info article for more information.

Staying safe while using email, phone or on a website

Don’t click links or open attachments in unsolicited emails or text messages about your tax return or those claiming to be from the IRS. These messages are fraudulent and could contain malware that could compromise your personal information.

Don’t provide personal information or send a payment to anyone claiming to be a government official before verifying their identity.

It’s important to remember that the IRS will never:

Call to demand immediate payment using a specific payment method such as a prepaid debit card, iTunes gift card, or wire transfer.

Ask a taxpayer to make a payment to a person or organization other than the U.S. Treasury.

Threaten to immediately bring in local police or other law-enforcement groups saying they can have the taxpayer arrested for not paying.

Demand taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.

Don’t visit or click on website addresses that doesn’t end in ‘.gov’. There are lots of times where websites are built to look like official government sites but are not the real thing. So, be wary if the link doesn’t use “https” at the beginning (which means it is secure) or ‘.gov’ at the end (.gov is the extension all official offices use.).

See Here’s how taxpayers can avoid the hooks of phishing scams for more information.

Staying safe by choosing a credible tax professional

Don’t use a ghost preparer. A ghost preparer won’t sign a tax return they prepare for you. Always check credentials before working with any tax return preparer. (See our Tax Tip Choosing the right tax return preparer for you for more on this topic.)

Don’t sign a blank tax return, even if it is a family member helping you. Wait to sign until after you have reviewed the completed information. You are responsible for what appears on tax returns filed with the IRS. Signing a blank tax return allows someone else the opportunity to potentially report incorrect information, which you may be held liable for later.

Don’t fall for false claims by preparers. If an individual or company offers to ‘save you thousands on taxes’ or ‘get you the biggest refund you’ve ever had’ be very cautious. Generally, if it sounds too good to be true, it probably is (video). Everyone pays a set amount of taxes, per the tax laws, and legally must follow those rules.

Visit the Abusive Tax Schemes and Abusive Tax Return Preparers – IRS Lead Development Center for more information on this topic.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS

Plug-In Electric Vehicles (PEVs)

Posted by Admin Posted on Mar 16 2022

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For vehicles acquired after December 31, 2009, the credit is equal to $2,500 plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500.

The credit is available only to the original purchaser of a new qualifying vehicle, and the vehicle must be placed in service in the same year the credit is being claimed on the return. If the qualifying vehicle is leased the credit is available only to the leasing company. Also, the vehicle must be used primarily in the United States.

Additional conditions regarding qualified manufacturers and phase out rules may also apply in determining credit eligibility. To find out whether your car qualifies for the Qualified Plug-in Electric Drive Motor Vehicle tax credit, you can go to the IRS.gov website and search for "plug-in vehicles" or contact us for more information.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Charitable contributions

Posted by Admin Posted on Mar 16 2022

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When preparing to file your federal tax return, don't forget your contributions to charitable organizations. Your donations can add up to a nice tax deduction for your corporation (if you are a member of a flow-through business entity) or your personal taxes if you itemize deductions on IRS Form 1040, Schedule A.

Here are a few tips to help make sure your contributions pay off on your tax return:

You cannot deduct contributions made to specific individuals, political organizations and candidates, the value of your time or services and the cost of raffles, bingo, or other games of chance.

To be deductible, contributions must be made to qualified organizations.

Organizations can tell you if they are qualified and if donations to them are deductible.Taxpayers can also search the Tax Exempt Organization Search (TEOS) online tool, to check that an organization is qualified. In addition, taxpayers can call IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500. Be sure to have the organization's correct name and its headquarters location, if possible. Churches, synagogues, temples, mosques and governments are not required to apply for this exemption in order to be qualified. Alternatively, contact us for more!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters          

Amended Tax Returns

Posted by Admin Posted on Mar 10 2022

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When preparing to file your federal tax return, don't forget your contributions to charitable organizations. Your donations can add up to a nice tax deduction for your corporation (if you are a member of a flow-through business entity) or your personal taxes if you itemize deductions on IRS Form 1040, Schedule A.

Here are a few tips to help make sure your contributions pay off on your tax return:

You cannot deduct contributions made to specific individuals, political organizations and candidates, the value of your time or services and the cost of raffles, bingo, or other games of chance.

To be deductible, contributions must be made to qualified organizations.

Organizations can tell you if they are qualified and if donations to them are deductible.Taxpayers can also search the Tax Exempt Organization Search (TEOS) online tool, to check that an organization is qualified. In addition, taxpayers can call IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500. Be sure to have the organization's correct name and its headquarters location, if possible. Churches, synagogues, temples, mosques and governments are not required to apply for this exemption in order to be qualified. Alternatively, contact us for more!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters 

Earned Income Tax Credit for Certain Workers

Posted by Admin Posted on Mar 10 2022

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Millions of Americans forgo critical tax relief each year by failing to claim the Earned Income Tax Credit (EITC), a federal tax credit for individuals who work but do not earn high incomes. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.

The IRS estimates that 25 percent of people who qualify don't claim the credit and at the same time, there are millions of Americans who have claimed the credit in error, many of whom simply don't understand the criteria.

EITC is based on the amount of your earned income and the number of qualifying children in your household. If you have children, they must meet the relationship, age and residency requirements. And, you must file a tax return to claim the credit.

Its easier than ever to find out if you qualify for EITC using the online tool, EITC Assistant. Please contact us for more information!

Are you eligible for any of these tax credits?

Taxpayers should consider claiming tax credits for which they might be eligible when completing their federal income tax returns, advises the IRS. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are refundable – taxes could be reduced to the point that a taxpayer would receive a refund rather than owing any taxes. Below are some of the credits taxpayers could be eligible to claim:

Earned Income Tax Credit This is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the EITC. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. For more information, see IRS Publication 596, Earned Income Credit (EIC).

Child Tax Credit This credit is for people who have a qualifying child under age 17. The maximum amount of the credit is $1,400 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see Pub. 972, Child Tax Credit.

Child and Dependent Care Credit This is for expenses paid for the care of children under age 13, or for a disabled spouse or dependent, to enable the taxpayer to work. There is a limit to the amount of qualifying expenses. The credit is a percentage of those qualifying expenses. For more information, see Pub. 503, Child and Dependent Care Expenses.

Adoption Credit Adoptive parents can take a tax credit of up to $13,570 for 2017 and $13,810 for 2018 for qualifying expenses paid to adopt an eligible child. For more information, see Form 8839, Qualified Adoption Expenses.

Credit for the Elderly and Disabled This credit is available to individuals who are either age 65 or older or are under age 65 and retired on permanent and total disability, and who are U.S. citizens or residents. There are income limitations. For more information, see Pub.524, Credit for the Elderly or the Disabled.

Education Credits There are two credits available, the American Opportunity Credit (formerly called the Hope Credit) and the Lifetime Learning Credit, for people who pay higher education costs. The American Opportunity Credit is for the payment of the first four years of tuition and related expenses for an eligible student for whom the taxpayer claims as a dependent on the tax return. The Lifetime Learning Credit is available for all post-secondary education for an unlimited number of years. A taxpayer cannot claim both credits for the same student in one year. For more information, see Publication 970, Tax Benefits for Education.

Retirement Savings Contribution Credit Eligible individuals may be able to claim a credit for a percentage of their qualified retirement savings contributions, such as contributions SIMPLE plan. To be eligible, you must be at least age 18 at the end of the year and not a full-time student or an individual for whom someone else claims a personal exemption. Also, your adjusted gross income (AGI) must be below a certain amount. For more information, see chapter three in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).

There are other credits available to eligible taxpayers.  Please contact us so we may analyze your specific situation, and offer advice.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Foreign Income

Posted by Admin Posted on Mar 10 2022

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With more and more United States citizens earning money from foreign sources, the IRS reminds people that they must report all such income on their tax return, unless it is exempt under federal law. U.S. citizens are taxed on their worldwide income.

This applies whether a person lives inside or outside the United States. The foreign income rule also applies regardless of whether or not the person receives a Form W-2, Wage and Tax Statement, or a Form 1099 (information return).

Foreign source income includes earned income, such as wages and tips, and unearned income, such as interest, dividends, capital gains, pensions, rents and royalties.

An important point to remember is that citizens living outside the U.S. may be able to exclude up to $102,100 for 2017 and $103,900 for 2018, of their foreign source income if they meet certain requirements. However, the exclusion does not apply to payments made by the U.S. government to its civilian or military employees living outside the U.S. Please contact us if you feel you may have earned foreign income to learn more!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Credit for the elderly or disabled

Posted by Admin Posted on Mar 10 2022

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You may be able to take the Credit for the Elderly or the Disabled if you were age 65 or older at the end of last year, or if you are retired on permanent and total disability, according to the IRS. Like any other tax credit, it's a dollar-for-dollar reduction of your tax bill. The maximum amount of this credit is constantly changing.

You can take the credit for the elderly or the disabled if:

You are a qualified individual,

Your nontaxable income from Social Security or other nontaxable pension is less than $3,750 to $7,500 (also depending on your filing status).

Generally, you are a qualified individual for this credit if you are a U.S. citizen or resident at the end of the tax year and you are age 65 or older, or you are under 65, retired on permanent and total disability, received taxable disability income, and did not reach mandatory retirement age before the beginning of the tax year.

If you are under age 65, you can qualify for the credit only if you are retired on permanent and total disability. This means that:

You were permanently and totally disabled when you retired, and

You retired on disability before the end of the tax year.

Even if you do not retire formally, you are considered retired on disability when you have stopped working because of your disability. If you feel you might be eligible for this credit, please contact us for assistance.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Steps for tracking your 2021 federal income tax refund

Posted by Admin Posted on Mar 02 2022

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If you filed a 2021 federal income tax return and are expecting a refund from the IRS, you may want to find out the status of the refund or at least get an idea of when you might receive it. You can start checking on the status of your refund within 24 hours after the IRS has received your electronically filed return, or 4 weeks after you mailed a paper return. Currently you might be waiting a bit longer to receive a refund due to the effects of COVID-19, new tax law changes, and possible errors made on the tax return.

Follow these steps for tracking your 2021 federal income tax refund:

Gather the following information and have it handy:

Social security number (SSN) or Individual Taxpayer Identification Number (ITIN)

Your filing status

Your exact refund amount

You will need this information to use the first two refund status tools below.

Use one of these IRS refund status tools to check on the status of your return and refund:

Where’s My Refund?

IRS2Go mobile app

Also see “Tax Season Refund Frequently Asked Questions” for what these tools can tell you and what they can’t.

Or you can view your online account.

However, when accessing your online account, you will need to verify your identity through an online security process. If you are signing in for the first time, see our TAS Tax Tip: Verifying your identity to access certain IRS systems article for what information you will need to provide and how to finish the security process. You should also review the frequently asked questions listed on the sign-in page and these Online Account Frequently Asked Questions for more information.

Do not call the IRS unless instructed to by the application to call.

These online tools are updated every 24 hours and truly are the best way to get your refund status.

Be aware of processing delays

Again, this year some tax returns with errors or items on the return that need an IRS correction due to a tax law change will take longer than the normal timeframes to process, so expect delays. It may take the IRS more than the normal 21 days (for electronically filed returns) to issue refunds for some 2021 tax returns that require review, including but not limited to, ones that claim the Recovery Rebate Credit, the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). Note: For all tax returns that claim EITC and/or CTC, those refunds must be held, by law, until after mid-February and cannot be released before then.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS 

SHOULD I KEEP COLLISION COVERAGE ON MY OLD CAR?

Posted by Admin Posted on Mar 02 2022

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Collision coverage ensures the repair of your car whether you were at fault or not, even if your car is damaged by fire, flood, wind or hail. Depending on the value of your car, this coverage may not be cost effective.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

Refinancing your home

Posted by Admin Posted on Mar 02 2022

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Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans.

Generally, for taxpayers who itemize, the “points” paid to obtain a home mortgage may be deductible as mortgage interest. Points paid to obtain an original home mortgage can be, depending on circumstances, fully deductible in the year paid. However, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.

For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. Taxpayers may deduct points only for those payments made in the tax year. For example, a homeowner who paid $2,000 in points and who would make 360 payments on a 30-year mortgage could deduct $5.56 per monthly payment, or a total of $66.72 if he or she made 12 payments in one year.

However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at pay off.

Other closing costs — such as appraisal fees and other non-interest fees — generally are not deductible. Additionally, the amount of Adjusted Gross Income can affect the amount of deductions that can be taken.  Please contact us if you've recently refinanced, and we can be a big help!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Amended Tax Returns

Posted by Admin Posted on Feb 21 2022

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Oops! You've discovered an error after your tax return has been filed. What should you do? You may need to amend your return.

The IRS usually corrects math errors or requests missing forms (such as W-2s) or schedules. In these instances, do not amend your return. However, do file an amended return if any of the following were reported incorrectly:

Your filing status

Your total income

Your deductions or credits

Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed paper or electronically-filed Form 1040 return. Be sure to enter the year of the return you are amending at the top of Form 1040X. If you are amending more than one tax return, use a separate 1040X for each year and mail each in a separate envelope to the IRS processing center for your state. The 1040X instructions list the addresses for the centers.

Form 1040X has three columns. Column A is used to show original or adjusted figures from the original return. Column C is used to show the corrected figures. The difference between the figures in Columns A and C is shown in Column B. You should explain the items you are changing and the reason for each change on the back of the form.

If the changes involve another schedule or form, attach it to the 1040X. For example, if you are filing a 1040X because you have a qualifying child and now want to claim the Earned Income Tax Credit, you must complete and attach a Schedule EIC to the amended return.

If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional tax for the prior year, Form 1040X must be filed and the tax paid by April 15 of this year, to avoid any penalty and interest.

You generally must file Form 1040X to claim a refund within three years from the date you filed your original return, or within two years from the date you paid the tax, whichever is later. Please contact us for more!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters           

Check Withholding to Avoid a Tax Surprise

Posted by Admin Posted on Feb 21 2022

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Whether or not you owed taxes or received a refund last year, check your tax withholding to avoid not having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year. This is even more important due to the recent changes to the tax law for 2018 and beyond. On the other end, if you had a large refund you lost out on having the money in your pocket throughout the year. Changing jobs, getting married or divorced, buying a home or having children can all result in changes in your tax calculations.

The IRS withholding calculator on IRS.gov can help compute the proper tax withholding. The worksheets in Publication 505, Tax Withholding and Estimated Tax can also be used to do the calculation. If the result suggests an adjustment is necessary, you can submit a new W-4, Withholding Allowance Certificate, to your employer.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters  

Tax Incentives for Higher Education

Posted by Admin Posted on Feb 21 2022

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The tax code provides a variety of tax incentives for families who are paying higher education costs or are repaying student loans. You may be able to claim an American Opportunity Credit (formerly called the Hope Credit) or Lifetime Learning Credit for the qualified tuition and related expenses of the students in your family (i.e. you, your spouse, or dependent) who are enrolled in eligible educational institutions. Different rules apply to each credit and the ability to claim the credit phases out at higher income levels.

You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not have to itemize your deductions on Schedule A Form 1040. However, this deduction is also phased out at higher income levels.

If your student loan was canceled, you may not have to include any amount in income.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

5 Tips For Early Tax Preparation

Posted by Admin Posted on Feb 21 2022

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Earlier is better when it comes to working on your taxes. The IRS encourages everyone to get a head start on tax preparation. Not only do you avoid the last-minute rush, early filers also get a faster refund.

There are five easy ways to get a good jump on your taxes long before the April 15 deadline rolls around:

  • Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Don't forget to save a copy for your files.
  • Get the right forms. They're available around the clock on IRS.gov in the Forms and Publications section.
  • Take your time. Don't forget to leave room for a coffee break when filling out your tax return. Rushing can mean making a mistake — and that can be expensive!
  • Double-check your math and Social Security number. These are among the most common errors on tax returns. Taking care on these reduces your chances of hearing from the IRS.
  • Get the fastest refund. When you file early, you get your refund faster. Using e-filing with direct deposit gets you a refund in half the time as paper filing.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters 

Filing a Tax Extension

Posted by Admin Posted on Feb 21 2022

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If you can't meet the 2022 April 18 deadline to file your tax return, you can get an automatic six-month extension of time to file from the IRS. The extension will give you extra time to get the paperwork into the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amounts not paid by the April deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.

You must make an accurate estimate of any tax due when you request an extension. You may also send a payment for the expected balance due, but this is not required to obtain the extension.

To get the automatic extension, file Form 4868, Application for Extension of Time to File U.S. Individual Income Tax Return, with the IRS by the April 18 deadline, or make an extension-related electronic payment. You can file your extension request by computer or mail the paper Form 4868 to the IRS.

The system will give you a confirmation number to verify that the extension request has been accepted. Put this confirmation number on your copy of Form 4868 and keep it for your records. Do not send the form to the IRS.  As this is the area of our expertise, please contact us for more detailed information on how to file an extension properly!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters           

WITH A DIVORCE, WHAT ARE THE TAX IMPLICATIONS?

Posted by Admin Posted on Feb 15 2022

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Upon completion of a divorce, individual tax returns will be filed. There are a few areas that may result in tax consequences. The following are the most common:

  • Child Support
    It is not taxable to the recipient and is not deductible by the payer. If it is specially designated as child support in a divorce agreement or lessened by the occurrence of a contingency relative to the child, meaning a child reaches a specified age, it is considered as a payment.
  • Alimony
    It is taxable to the recipient and deductible by the payers. It is known as a payment in accordance with a divorce agreement other than child support or when allocated in the decree as something other than alimony. In a separation agreement, similar treatment is in accordance with separate maintenance payments. Payments may not end upon death of the recipient and may not be front-loaded.
  • Property Settlements
    When in accordance with the divorce or separation, they are not taxable. In the event of transfers of assets amongst spouses, they do not become taxable income, gains, loses, or deductions. The recipient spouse gets the cost basis of the property. Your spouse may provide you with an equal share of the property based on a fair market value, but be careful with the lower basis. In the end, it can produce a taxable gain at the asset's sale.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

INNOCENT SPOUSE RULES: PROTECTION UNDER SOME CIRCUMSTANCES

Posted by Admin Posted on Feb 15 2022

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Must one spouse pay the tax resulting from a fabrication or omission by another spouse on a jointly filed tax return? It depends. If the spouse qualifies, he or she may be able to avoid personal tax liability under the “innocent spouse” rules.

Joint filing status

Generally, married taxpayers benefit overall by filing a joint tax return on the federal level. This is particularly the case when one spouse earns significantly more than the other. Filing jointly may also help the couple maximize certain income tax deductions and credits.

But joint filing status comes with a catch. Each spouse is “jointly and severally” responsible for any tax, interest and penalties attributable to the return. And this liability continues to apply even if the couple gets a divorce or one spouse dies. In other words, the IRS may try to collect the full amount due from one spouse, even if all the income reported on the joint return was earned by the other spouse.

Basic rules

However, the tax law provides tax relief for an “innocent spouse.” Under these rules, one spouse may not be liable for any unpaid tax and penalties, despite having signed the joint return.

To determine eligibility for relief, the IRS imposes a set of common requirements. The spouses must have filed a joint return that has an understatement of tax, and that understatement must be attributable to one spouse’s erroneous items. For this purpose, “erroneous items” are defined as any deduction, credit or tax basis incorrectly stated on the return, as well as any income not reported.

From there, the other (“innocent”) spouse must establish that, at the time the joint return was signed, he or she didn’t know — or have reason to know — there was an understatement of tax. Finally, to qualify, the IRS needs to find that it would be unfair to hold one spouse liable for the understatement after considering all the facts and circumstances.

Additional notes

For many years, innocent spouse relief had to be requested within two years after the IRS first began its collection activity against a taxpayer. But, in 2011, the IRS announced that it would no longer apply the two-year limit on collection activities.

In addition, by law, when one spouse applies for innocent spouse relief, the IRS must contact the other spouse or former spouse. There are no exceptions even for victims of spousal abuse or domestic violence.

Help available

Historically, courts haven’t been particularly generous about upholding claims under the innocent spouse rules. State laws can also complicate matters. If you’re wondering whether you’d qualify for relief, please contact us for help.

Sidebar: What does the IRS consider?

The IRS considers “all facts and circumstances” in determining whether it would be inequitable to hold an “innocent” spouse liable for taxes due on a jointly filed tax return. One factor that may increase the likelihood of relief is that the taxes owed are clearly attributable to one spouse or an ex-spouse who filled out the errant return.

If one spouse was deserted during the marriage, or suffered abuse, it may also improve the chances that innocent spouse relief will be granted. In some cases, the IRS may examine the couple’s situation to determine whether the spouse applying for relief knew about the erroneous items.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters      

Beware of “wash sales” when selling securities

Posted by Admin Posted on Feb 15 2022

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If you’re planning to sell capital assets at a loss to offset gains that have been realized during the year, it’s important to beware of the “wash sale” rule. Under this tax rule, if you sell stock or securities for a loss and buy substantially identical stock shares or securities back within the 30-day period before or after the sale date, the loss can’t be claimed for tax purposes.

The rule

The wash sale rule is designed to prevent taxpayers from benefiting from a loss without parting with ownership in any significant way. Note that the rule applies to a 30-day period before or after the sale date to prevent “buying the stock back” before it’s even sold. (If you participate in any dividend reinvestment plans, the wash sale rule may be inadvertently triggered when dividends are reinvested under the plan, if you’ve separately sold some of the same stock at a loss within the 30-day period.)

Although the loss can’t be claimed on a wash sale, the disallowed amount is added to the cost of the new stock. So, the disallowed amount can be claimed when the new stock is finally disposed of (other than in a wash sale).

An example

Assume you buy 500 shares of XYZ Inc. for $10,000 and sell them on November 5 for $3,000. On November 30, you buy 500 shares of XYZ again for $3,200. Since the shares were “bought back” within 30 days of the sale, the wash sale rule applies. Therefore, you can’t claim a $7,000 loss. Your basis in the new 500 shares is $10,200: the actual cost plus the $7,000 disallowed loss.

If only a portion of the stock sold is bought back, only that portion of the loss is disallowed. So, in the above example, if you’d only bought back 300 of the 500 shares (60%), you would be able to claim 40% of the loss on the sale ($2,800). The remaining $4,200 loss that is disallowed under the wash sale rule would be added to your cost of the 300 shares.

No surprises

The wash sale rule can come as a nasty surprise at tax time. Contact us for assistance.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial  tatements, please give us a call at 305-274-5811.                                   

Source: Thomson Reuters   

WHAT AMOUNT OF LIFE INSURANCE SHOULD I HAVE?

Posted by Admin Posted on Feb 15 2022

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In order to figure out how much insurance you need, you will need to explore your current household expenses, debts, assets, and streams of income. If you need assistance in this, consult either your accountant or financial advisor.

The amount of money that you want to leave behind for your dependents should allow them to use some of the money to maintain their current standard of living, then reinvest another lump sum to ensure that they will be well off in the future.

When attempting to calculate the amount of money that you need to leave behind, be extremely meticulous. If you err low, your family may not receive the help that they need from the insurance company, and if you err the other way, you will be spending more than necessary in insurance premiums.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

 Source: Thomson Reuters

Tracking down donation substantiation

Posted by Admin Posted on Feb 02 2022

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If you’re like many Americans, letters from your favorite charities may be appearing in your mailbox acknowledging your 2021 donations. But what happens if you haven’t received such a letter? Can you still claim a deduction for the gift on your 2021 income tax return? It depends.

What’s required

To support a charitable deduction, you need to comply with IRS substantiation requirements. This generally includes obtaining a contemporaneous written acknowledgment from the charity stating the amount of the donation if it’s cash. If the donation is property, the acknowledgment must describe the property, but the charity isn’t required to provide a value. The donor must determine the property’s value.

“Contemporaneous” means the earlier of the date you file your tax return or the extended due date of your return. So, if you donated in 2021 but haven’t yet received substantiation from the charity, it’s not too late (as long as you haven’t filed your 2021 return). Contact the charity and request a written acknowledgment.

Keep in mind that, if you made a cash gift of under $250 with a check or credit card, generally a canceled check, bank statement or credit card statement is sufficient. However, if you received something in return for the donation, you generally must reduce your deduction by its value and the charity is required to provide you a written acknowledgment as described earlier.

Deduction for nonitemizers

Generally, taxpayers who don’t itemize their deductions (and instead claim the standard deduction) can’t claim a charitable deduction. But, under the CARES Act, individuals who didn’t itemize deductions could claim a federal income tax write-off for up to $300 of cash contributions to IRS-approved charities for the 2020 tax year.

Fortunately, the Consolidated Appropriations Act extended this tax break to cover $300 of cash contributions made in 2021. The law also doubled the deduction limit to $600 for married, joint-filing couples for cash contributions made in 2021.

Let us assist you

Additional substantiation requirements apply to some types of donations. We can help you determine whether you have sufficient substantiation for the donations you hope to deduct on your 2021 income tax return. We also can guide you on the substantiation you’ll need for gifts you’re planning this year to ensure you can enjoy the desired deductions on your 2022 return.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

Businesses can still deduct 100% of restaurant meals

Posted by Admin Posted on Feb 02 2022

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Business owners, 2022 is well underway. So, don’t forget that a provision tucked inside 2020’s Consolidated Appropriations Act suspended the 50% deduction limit for certain business meals for calendar years 2021 and 2022. That means your business can deduct 100% of the cost of business-related meals provided by a restaurant.

A closer look

As you may recall, previously you could generally deduct only 50% of the “ordinary and necessary” food and beverage costs you incurred while operating your business. Now you can deduct your full eligible costs.

What’s more, the legislation refers to food and beverages provided “by” a restaurant rather than “in” a restaurant. So, takeout and delivery restaurant meals also are fully deductible.

Remember the rules

Some familiar IRS requirements still apply:

  • The food and beverages can’t be lavish or extravagant under the circumstances.
  • The meal must involve a current or prospective customer, client, supplier, employee, agent, partner or professional advisor with whom you could reasonably expect to engage in the due course of business.
  • You or one of your employees must be present when the food or beverages are served.

Entertainment expenses still aren’t deductible, but meals served during entertainment events can be deductible if charged separately. If food or beverages are provided at an entertainment activity, further rules apply.

More information

Also be aware that, in November of last year, the IRS issued guidance on per diems related to the temporary 100% deduction for restaurant food and beverages. Contact us for further details about when you can deduct meal expenses.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Could your company reap tax benefits from a heavy SUV purchase?

Posted by Admin Posted on Feb 02 2022

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Many businesses need to invest in heavy sport utility vehicles (SUVs) to transport equipment and provide timely services. Fortunately, they may be able to claim valuable tax deductions for the purchases. If you’re thinking about buying one (or if your bought one in 2021), be sure to brush up on the tax rules.

Bonus depreciation

Under current law, first-year bonus depreciation is available for qualified new and used property that’s acquired and placed in service during the tax year. New and pre-owned heavy SUVs, pickups and vans acquired and put to business use in 2021 or 2022 are potentially eligible for 100% first-year bonus depreciation.

Be aware that this generous tax break is scheduled to begin to be reduced for vehicles that are acquired and placed in service after December 31, 2022. That’s added incentive to invest in a heavy SUV this year.

The 100% first-year bonus depreciation write-off will reduce your federal income tax bill and self-employment tax bill, if applicable. You might get a state income tax deduction, too.

Weight and use requirements

100% bonus depreciation is available only if the manufacturer’s gross vehicle weight rating (GVWR) is above 6,000 pounds. You can verify a vehicle’s GVWR by looking at the manufacturer’s label, usually found on the inside edge of the driver’s side door where the door hinges meet the frame.

Another requirement is that you must use the vehicle more than 50% for business. If your business use is between 51% and 99%, you can deduct that percentage of the cost in the first year the vehicle is placed in service.

Detailed, contemporaneous expense records are essential in case the IRS challenges your business-use percentage. So, keep track of the miles you’re driving for business purposes, compared to the vehicle’s total mileage for the year. Recordkeeping is easier today because of the many mobile apps designed for this purpose.

You could also simply keep a handwritten calendar or mileage log in your vehicle and record details as business trips occur. Maintaining contemporaneous records is critical; calendars or logs compiled after the fact may not withstand IRS scrutiny.

The right moves

Did you purchase an eligible vehicle and place it in service in 2021? Or are you considering doing so in 2022? Consult with us to help evaluate the right business tax moves.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters          

Get more worms by filing your tax return early

Posted by Admin Posted on Feb 02 2022

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They say the early bird gets the worm. Early federal income tax filers may get a couple worms, which is a good thing in this metaphor.

Although it may seem like a quaint tradition to wait until the deadline (usually April 15, but actually April 18 in 2022), there’s more than one valid reason for getting your return completed and submitted well before this date. But you have to have the necessary documents to do so.

Prevent identity theft

In one tax identity theft scheme, a thief uses another individual’s personal information to file a fraudulent tax return early in the filing season and claim a bogus refund. The real taxpayer discovers the fraud when he or she files a return and is told by the IRS that the return is being rejected because one with the same Social Security number has already been filed for the tax year.

While the taxpayer should ultimately be able to prove that his or her return is the legitimate one, tax identity theft can be a hassle to straighten out and significantly delay a refund. Filing early may be your best defense: If you file first, it will be the tax return filed by a potential thief that will be rejected, not yours.

Get a potentially earlier refund

Another reason to file early is you may put yourself closer to the front of the line to receive your tax refund (if you’re owed one). The IRS website still indicates that it expects to issue most refunds for the 2021 tax year within the usual 21 days, despite the massive pandemic-related delays that affected millions of 2020 tax returns.

The time is typically shorter if you file electronically and receive a refund by direct deposit into a bank account. Direct deposit also avoids the possibility that a refund check could be lost, stolen, returned to the IRS as undeliverable or caught in mail delays.

Look for your documents

To file your tax return, you need your Form W-2s (if you’re an employee) and Form 1099s (if you’ve worked as an independent contractor or “gig worker”). January 31 is the deadline for employers to issue 2021 Form W-2s to employees and, generally, for businesses to issue Form 1099s to recipients of any 2021 interest, dividend or reportable miscellaneous income payments (including those made to independent contractors).

If you haven’t received a W-2 or 1099 by February 1, first contact the entity that should have issued it. If that doesn’t work, you can contact the IRS for assistance.

Don’t wait!

As of this writing, some taxpayers may still be waiting to receive their 2020 federal income tax refunds. A few people (mostly on social media) have floated the idea of refusing to file their 2021 income tax returns until they receive their refund. Is this a good idea?

No, it’s not. Failing to file your return will only lead to bigger headaches later, possibly even penalties and criminal prosecution. Plus, if you’re owed a 2021 refund, you may receive that money before your 2020 refund. But the only way to get it is to file!

If you have questions or would like an appointment to prepare your return, please contact us. We can help you ensure you file an accurate return that takes advantage of all the breaks available to you.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

AFTER MARRIAGE, WHAT ARE THE TAX IMPLICATIONS?

Posted by Admin Posted on Jan 26 2022

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You are entitled to file a joint income tax return upon marriage. Although this simplifies the filing process, you will more than likely discover that your tax bill is either higher or lower than when you were single. It's higher when you file together, as more of your income is taxed in the higher tax brackets. This is commonly known as the marriage tax penalty. In 2003, a tax law that intended to reduce the marriage penalty went into effect, but this law didn't get rid of the penalty for higher bracket taxpayers.

Once married, you may not file separately in an attempt to avoid the marriage penalty. Actually, filing as married filing separately can raise your taxes. For the optimal filing status for your situation you should speak with your tax advisor.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

PERSONAL DOCUMENTS

Posted by Admin Posted on Jan 26 2022

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Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the "three-year law" and leads many people to believe they're safe provided they retain their documents for this period of time.

However, if the IRS believes you have significantly underreported your income (by 25 percent or more), it may go back six years in an audit. If there is any indication of fraud, or you do not file a return, no period of limitation exists. To be safe, use the following guidelines.

April 15 has come and gone and another year of tax forms and shoeboxes full of receipts is behind us. But what should be done with those documents after your check or refund request is in the mail?

Please be aware that if the IRS believes you have significantly underreported your income (by 25 percent or more), it may go back six years in an audit. If there is any indication of fraud, or you do not file a return, no period of limitation exists. To be safe, use the following guidelines.

Personal Documents To Keep For One Year

While it's important to keep year-end mutual fund and IRA contribution statements forever, you don't have to save monthly and quarterly statements once the year-end statement has arrived.

Personal Documents To Keep For Three Years

  • Credit Card Statements
  • Medical Bills (in case of insurance disputes)
  • Utility Records
  • Expired Insurance Policies

Personal Documents To Keep For Six Years

  • Supporting Documents For Tax Returns
  • Accident Reports and Claims
  • Medical Bills (if tax-related)
  • Sales Receipts
  • Wage Garnishments
  • Other Tax-Related Bills

Personal Records To Keep Forever

  • CPA Audit Reports
  • Legal Records
  • Important Correspondence
  • Income Tax Returns
  • Income Tax Payment Checks
  • Property Records / Improvement Receipts (or six years after property sold)
  • Investment Trade Confirmations
  • Retirement and Pension Records (Forms 5448, 1099-R and 8606 until all distributions are made from your IRA or other qualified plan)

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811

Source: Thomson Reuters

The Right to Quality Service

Posted by Admin Posted on Jan 26 2022

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Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to have a way to file complaints about inadequate service.

What This Means for You

  • The IRS must include information about your right to Taxpayer Advocate Service (TAS) assistance, and how to contact TAS, in all notices of deficiency. IRC § 6212(a)
  • When collecting tax, the IRS should treat you with courtesy. Generally, the IRS should only contact you between 8 a.m. and 9 p.m. The IRS should not contact you at your place of employment if the IRS knows or has reason to know that your employer does not allow such contacts. IRC § 6304
  • If you are an individual taxpayer eligible for Low Income Taxpayer Clinic (LITC) assistance (generally your income is at or below 250% of the federal poverty level), the IRS may provide information to you about your eligibility for assistance from an LITC. IRC § 7526

For more information, see IRS Publication 4134, Low Income Taxpayer Clinic List. Or find an LITC near you.

  • Certain notices written by the IRS must contain the name, phone number, and identifying number of the IRS employee, and all notices must include a telephone number that the taxpayer may contact. During a phone call or in-person interview, the IRS employee must provide you with his or her name and ID number. RRA 98 § 3705(a)
  • The IRS is required to publish the local address and phone number of the IRS in local phone books. RRA 98 § 3709

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

Source: TAS 

TAXABLE VS. TAX-ADVANTAGED: WHERE TO HOLD INVESTMENTS

Posted by Admin Posted on Jan 26 2022

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When investing for retirement or other long-term goals, people usually prefer tax-advantaged accounts, such as IRAs, 401(k)s or 403(b)s. Certain assets are well suited to these accounts, but it may make more sense to hold other investments in traditional taxable accounts.

Know the rules

Some investments, such as fast-growing stocks, can generate substantial capital gains, which may occur when you sell a security for more than you paid for it.

If you’ve owned that position for over a year, you face long-term gains, taxed at a maximum rate of 20%. In contrast, short-term gains, assessed on holding periods of a year or less, are taxed at your ordinary-income tax rate — maxing out at 37%. (Note: These rates don’t account for the possibility of the 3.8% net investment income tax.)

Choose tax efficiency

Generally, the more tax efficient an investment, the more benefit you’ll get from owning it in a taxable account. Conversely, investments that lack tax efficiency normally are best suited to tax-advantaged vehicles.

Consider municipal bonds (“munis”), either held individually or through mutual funds. Munis are attractive to tax-sensitive investors because their income is exempt from federal income taxes and sometimes state and local income taxes. Because you don’t get a double benefit when you own an already tax-advantaged security in a tax-advantaged account, holding munis in your 401(k) or IRA would result in a lost opportunity.

Similarly, tax-efficient investments such as passively managed index mutual funds or exchange-traded funds, or long-term stock holdings, are generally appropriate for taxable accounts. These securities are more likely to generate long-term capital gains, which have more favorable tax treatment. Securities that generate more of their total return via capital appreciation or that pay qualified dividends are also better taxable account options.

Take advantage of income

What investments work best for tax-advantaged accounts? Taxable investments that tend to produce much of their return in income. This category includes corporate bonds, especially high-yield bonds, as well as real estate investment trusts (REITs), which are required to pass through most of their earnings as shareholder income. Most REIT dividends are nonqualified and therefore taxed at your ordinary-income rate.

Another tax-advantaged-appropriate investment may be an actively managed mutual fund. Funds with significant turnover — meaning their portfolio managers are actively buying and selling securities — have increased potential to generate short-term gains that ultimately get passed through to you. Because short-term gains are taxed at a higher rate than long-term gains, these funds would be less desirable in a taxable account.

Get specific advice

The above concepts are only general suggestions. Please contact our firm for specific advice on what may be best for you.

Sidebar: Doing due diligence on dividends

If you own a lot of income-generating investments, you’ll need to pay attention to the tax rules for dividends, which belong to one of two categories:

  • Qualified. These dividends are paid by U.S. corporations or qualified foreign corporations. Qualified dividends are, like long-term gains, subject to a maximum tax rate of 20%, though many people are eligible for a 15% rate. (Note: These rates don’t account for the possibility of the 3.8% net investment income tax.)
  • Nonqualified. These dividends — which include most distributions from real estate investment trusts and master limited partnerships — receive a less favorable tax treatment. Like short-term gains, nonqualified dividends are taxed at your ordinary-income tax rate.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

 

IRS updates FAQs for 2021 Child Tax Credit and Advance Child Tax Credit Payments

Posted by Admin Posted on Jan 21 2022

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WASHINGTON — The Internal Revenue Service today updated frequently asked questions (FAQs) for the 2021 Child Tax Credit and Advance Child Tax Credit to help eligible families properly claim the credit when they prepare and file their 2021 tax return.

This extensive FAQ update PDF includes multiple streamlined questions for use by taxpayers and tax professionals and is being issued as expeditiously as possible.

The updates can be found in:

Recipients of advance Child Tax Credit payments will need to compare the amount of payments received during 2021 with the amount of the Child Tax Credit that can be claimed on their 2021 tax return.

Those that received less than the amount they are eligible for can claim a credit for the remaining amount. Those that received more than they are eligible for may need to repay some or all of the excess amount.

The IRS will send Letter 6419 in January of 2022 to provide the total amount of advance Child Tax Credit payments that were received in 2021. The IRS urges taxpayers receiving these letters to make sure they hold onto them to assist them in preparing their 2021 federal tax returns in 2022.

More information about reliance is available.

IRS-FAQ

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: IRS

2022 tax filing season begins Jan. 24; IRS outlines refund timing and what to expect in advance of April 18 tax deadline

Posted by Admin Posted on Jan 21 2022

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The Internal Revenue Service announced that the nation's tax season will start on Monday, January 24, 2022, when the tax agency will begin accepting and processing 2021 tax year returns.

The January 24 start date for individual tax return filers allows the IRS time to perform programming and testing that is critical to ensuring IRS systems run smoothly. Updated programming helps ensure that eligible people can claim the proper amount of the Child Tax Credit after comparing their 2021 advance credits and claim any remaining stimulus money as a Recovery Rebate Credit when they file their 2021 tax return.

"Planning for the nation's filing season process is a massive undertaking, and IRS teams have been working non-stop these past several months to prepare," said IRS Commissioner Chuck Rettig. "The pandemic continues to create challenges, but the IRS reminds people there are important steps they can take to help ensure their tax return and refund don't face processing delays. Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year. And we urge extra attention to those who received an Economic Impact Payment or an advance Child Tax Credit last year. People should make sure they report the correct amount on their tax return to avoid delays."

The IRS encourages everyone to have all the information they need in hand to make sure they file a complete and accurate return. Having an accurate tax return can avoid processing delays, refund delays and later IRS notices. This is especially important for people who received advance Child Tax Credit payments or Economic Impact Payments (American Rescue Plan stimulus payments) in 2021; they will need the amounts of these payments when preparing their tax return. The IRS is mailing special letters to recipients, and they can also check amounts received on IRS.gov.

Like last year, there will be individuals filing tax returns who, even though they are not required to file, need to file a 2021 return to claim a Recovery Rebate Credit to receive the tax credit from the 2021 stimulus payments or reconcile advance payments of the Child Tax Credit. People who don't normally file also could receive other credits.

April 18 tax filing deadline for most

The filing deadline to submit 2021 tax returns or an extension to file and pay tax owed is Monday, April 18, 2022, for most taxpayers. By law, Washington, D.C., holidays impact tax deadlines for everyone in the same way federal holidays do. The due date is April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia for everyone except taxpayers who live in Maine or Massachusetts. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots' Day holiday in those states. Taxpayers requesting an extension will have until Monday, October 17, 2022, to file.

Awaiting processing of previous tax returns? People can still file 2021 returns

Rettig noted that IRS employees continue to work hard on critical areas affected by the pandemic, including processing of tax returns from last year and record levels of phone calls coming in.

"In many areas, we are unable to deliver the amount of service and enforcement that our taxpayers and tax system deserves and needs. This is frustrating for taxpayers, for IRS employees and for me," Rettig said. "IRS employees want to do more, and we will continue in 2022 to do everything possible with the resources available to us. And we will continue to look for ways to improve. We want to deliver as much as possible while also protecting the health and safety of our employees and taxpayers. Additional resources are essential to helping our employees do more in 2022 – and beyond."

The IRS continues to reduce the inventory of prior-year individual tax returns that have not been fully processed. As of December 3, 2021, the IRS has processed nearly 169 million tax returns. All paper and electronic individual 2020 refund returns received prior to April 2021 have been processed if the return had no errors or did not require further review.

Taxpayers generally will not need to wait for their 2020 return to be fully processed to file their 2021 tax returns and can file when they are ready.

Key information to help taxpayers

The IRS encourages people to use online resources before calling. Last filing season, as a result of COVID-era tax changes and broader pandemic challenges, the IRS phone systems received more than 145 million calls from January 1 – May 17, more than four times more calls than in an average year. In addition to IRS.gov, the IRS has a variety of other free options available to help taxpayers, ranging from free assistance at Volunteer Income Tax Assistance and Tax Counseling for the Elderly locations across the country to the availability of the IRS Free File program.

"Our phone volumes continue to remain at record-setting levels," Rettig said. "We urge people to check IRS.gov and establish an online account to help them access information more quickly. We have invested in developing new online capacities to make this a quick and easy way for taxpayers to get the information they need."

Last year's average tax refund was more than $2,800. More than 160 million individual tax returns for the 2021 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline.

Overall, the IRS anticipates most taxpayers will receive their refund within 21 days of when they file electronically if they choose direct deposit and there are no issues with their tax return. The IRS urges taxpayers and tax professionals to file electronically. To avoid delays in processing, people should avoid filing paper returns wherever possible.

By law, the IRS cannot issue a refund involving the Earned Income Tax Credit or Additional Child Tax Credit before mid-February, though eligible people may file their returns beginning on January 24. The law provides this additional time to help the IRS stop fraudulent refunds from being issued.

Some returns, filed electronically or on paper, may need manual review, which delays the processing, if our systems detect a possible error or missing information, or there is suspected identity theft or fraud. Some of these situations require us to correspond with taxpayers, but some do not. This work does require special handling by an IRS employee so, in these instances, it may take the IRS more than the normal 21 days to issue any related refund. In those cases where IRS is able to correct the return without corresponding, the IRS will send an explanation to the taxpayer.

File electronically and choose direct deposit

To speed refunds, the IRS urges taxpayers to file electronically with direct deposit information as soon as they have everything they need to file an accurate return. If the return includes errors or is incomplete, it may require further review that may slow the tax refund. Having all information available when preparing the 2021 tax return can reduce errors and avoid delays in processing.

Most individual taxpayers file IRS Form 1040 or Form 1040-SR once they receive Forms W-2 and other earnings information from their employers, issuers like state agencies and payers. The IRS has incorporated recent changes to the tax laws into the forms and instructions and shared the updates with its partners who develop the software used by individuals and tax professionals to prepare and file their returns. Forms 1040 and 1040-SR and the associated instructions are available now on IRS.gov. For the latest IRS forms and instructions, visit the IRS website at IRS.gov/forms.

Free File available January 14

IRS Free File will open January 14 when participating providers will accept completed returns and hold them until they can be filed electronically with the IRS. Many commercial tax preparation software companies and tax professionals will also be accepting and preparing tax returns before January 24 to submit the returns when the IRS systems open.

The IRS strongly encourages people to file their tax returns electronically to minimize errors and for faster refunds – as well having all the information they need to file an accurate return to avoid delays. The IRS's Free File program allows taxpayers who made $73,000 or less in 2021 to file their taxes electronically for free using software provided by commercial tax filing companies. More information will be available on Free File later this week.

In addition to IRS Free File, the IRS's Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs free basic tax return preparation to qualified individuals. 

Watch for IRS letters about advance Child Tax Credit payments and third Economic Impact Payments

The IRS started sending Letter 6419, 2021 advance Child Tax Credit, in late December 2021 and continues to do so into January. The letter contains important information that can help ensure the return is accurate. People who received the advance CTC payments can also check the amount of the payments they received by using the CTC Update Portal available on IRS.gov.

Eligible taxpayers who received advance Child Tax Credit payments should file a 2021 tax return to receive the second half of the credit. Eligible taxpayers who did not receive advance Child Tax Credit payments can claim the full credit by filing a tax return.

The IRS will begin issuing Letter 6475, Your Third Economic Impact Payment, to individuals who received a third payment in 2021 in late January. While most eligible people already received their stimulus payments, this letter will help individuals determine if they are eligible to claim the Recovery Rebate Credit for missing stimulus payments. If so, they must file a 2021 tax return to claim their remaining stimulus amount. People can also use IRS online account to view their Economic Impact Payment amounts.

Both letters include important information that can help people file an accurate 2021 tax return. If the return includes errors or is incomplete, it may require further review while the IRS corrects the error, which may slow the tax refund. Using this information when preparing a tax return electronically can reduce errors and avoid delays in processing.

The fastest way for eligible individuals to get their 2021 tax refund that will include their allowable Child Tax Credit and Recovery Rebate Credit is by filing electronically and choosing direct deposit.

Tips to make filing easier

To avoid processing delays and speed refunds, the IRS urges people to follow these steps:

Organize and gather 2021 tax records including Social Security numbers, Individual Taxpayer Identification Numbers, Adoption Taxpayer Identification Numbers, and this year's Identity Protection Personal Identification Numbers valid for calendar year 2022.

Check IRS.gov for the latest tax information, including the latest on reconciling advance payments of the Child Tax Credit or claiming a Recovery Rebate Credit for missing stimulus payments. There is no need to call.

Set up or log in securely at IRS.gov/account to access personal tax account information including balance, payments, and tax records including adjusted gross income.

Make final estimated tax payments for 2021 by Tuesday, January 18, 2022, to help avoid a tax-time bill and possible penalties.

Individuals can use a bank account, prepaid debit card or mobile app to use direct deposit and will need to provide routing and account numbers. Learn how to open an account at an FDIC-Insured bank or through the National Credit Union Locator Tool.

File a complete and accurate return electronically when ready and choose direct deposit for the quickest refund.

Key filing season dates

There are several important dates taxpayers should keep in mind for this year's filing season:

  • January 14: IRS Free File opens. Taxpayers can begin filing returns through IRS Free File partners; tax returns will be transmitted to the IRS starting January 24. Tax software companies also are accepting tax filings in advance.
     
  • January 18: Due date for tax year 2021 fourth quarter estimated tax payment.
     
  • January 24: IRS begins 2022 tax season. Individual 2021 tax returns begin being accepted and processing begins
     
  • January 28: Earned Income Tax Credit Awareness Day to raise awareness of valuable tax credits available to many people – including the option to use prior-year income to qualify.
     
  • April 18: Due date to file 2021 tax return or request extension and pay tax owed due to Emancipation Day holiday in Washington, D.C., even for those who live outside the area.
     
  • April 19: Due date to file 2021 tax return or request extension and pay tax owed for those who live in MA or ME due to Patriots' Day holiday
     
  • October 17: Due date to file for those requesting an extension on their 2021 tax returns

Planning ahead

It's never too early to get ready for the tax-filing season ahead. For more tips and resources, check out the Get Ready page on IRS.gov.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: IRS

Tax filing step 1: Gather all year-end income documents

Posted by Admin Posted on Jan 13 2022

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As taxpayers are getting ready to file their taxes, the first thing they should do is gather their records. To avoid processing delays that may slow their refund, taxpayers should gather all year-end income documents before filing a 2021 tax return.

It's important for people to have all the necessary documents before starting to prepare their return. This helps them file a complete and accurate tax return. Here are some things taxpayers need to have before they begin doing their taxes.

  • Social Security numbers of everyone listed on the tax return. Many taxpayers have these numbers memorized. Still, it's a good idea to have them on hand to double check that the numbers on the tax return are correct. An SSN with one number wrong or two numbers switched will cause processing delays.
  • Bank account and routing numbers. People will need these for direct deposit refunds. Direct deposit is the fastest way for taxpayers to get their money and avoids a check getting lost, stolen or returned to IRS as undeliverable.
  • Don't have a bank account? Learn how to open an account at an FDIC-insured bank or through the National Credit Union Locator Tool. Veterans can access the Veterans Benefits Banking Program.
  • Forms W-2 from employer(s).
  • Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan.
  • Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy.
  • Form 1099-INT for interest received.
  • Other income documents and records of virtual currency transactions.
  • Form 1095-A, Health Insurance Marketplace Statement. Taxpayers will need this form to reconcile advance payments or claim the premium tax credit.
  • Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments.
  • Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the Recovery Rebate Credit.

Forms usually start arriving by mail or are available online from employers and financial institutions in January. Taxpayers should review them carefully. If any information shown on the forms is inaccurate, the taxpayer should contact the payer ASAP for a correction.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

 Source: IRS

Create an Online Account to view your balances, make payments, get transcripts, and more.

Posted by Admin Posted on Jan 13 2022

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The IRS offers an online account application for individual taxpayers. With online account access, you can view:

  • The total amount you owe, including balance details by year;
  • Your payment history and any scheduled or pending payments
  • Key information from your most recent tax return;
  • Payment plan details, if you have one;
  • Digital copies of select notices from the IRS;
  • Your Economic Impact Payments, if any;
  • Your address on file; and
  • Authorization requests from tax professionals.

You can also:

  • Make a payment online;
  • See payment plan options and request a plan via Online Payment Agreement;
  • Access your tax records via Get Transcript; and
  • Approve or reject authorization requests from tax professionals.

However, some taxpayers have difficulty satisfying the Identification (ID) authentication requirements of the application. These requirements are necessary to screen out unauthorized access and to prevent potential hacks of taxpayer information. Read on to learn how to pass these ID requirements and enroll.

To register for an online services account, you will need the following:

  • Email address;
  • Social Security Number (SSN) or Individual Tax Identification Number (ITIN);
  • Tax filing status and mailing address;
  • One financial account number linked to your name:
    • Last 8 digits of a credit card number (other than American Express, debit or corporate cards);
    • Student loan account number, unless issued by Nelnet;
    • Mortgage or home equity loan number;
    • Home equity line of credit (HELOC) account number; or
    • Auto loan number; and
  • Mobile phone linked to your name (for faster registration) or ability to receive an activation code by mail.

Please note that your account balance will update only once every 24 hours, usually overnight, and check/money order payments may take up to three weeks to appear on your account.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: TAS

I got a notice or letter from the IRS – now what do I do?

Posted by Admin Posted on Jan 13 2022

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The IRS will send a notice or a letter for any number of reasons, including:

  • Identifying a specific issue on your federal tax return or account that needs action;
  • Explaining changes to your return or account;
  • Asking for missing or more information; or
  • Requesting a payment.

You can handle most of this correspondence without calling, visiting an IRS office, or involving the Taxpayer Advocate Service (TAS) by following the instructions in the notice or letter.

However, sometimes these letters or notices can be confusing and hard to understand. Here are some tips to help you when you receive a notice or letter from the IRS.

1. Determine the reason the notice or letter was sent

Your notice or letter will explain the reason for the contact and give you instructions on how to handle the issue. If you need help understanding the information provided, the IRS has a Search Notice and Letters feature on the Understanding Your IRS Notice or Letter page. TAS also has a tool called the Taxpayer Roadmap, which includes copies of common letters and notices that you can use.

You can find the notice (CP) or letter (LTR) number on either the top or the bottom right-hand corner of your correspondence. Once you find it, you can enter that number in the search feature and you will be taken to a corresponding page that has more general information that may help.

The Taxpayer Advocate Service has a GET HELP section on various topics that can lead you through important information and steps and actions necessary to help you resolve many common tax issues.

2. Do I need to reply?

Whether you need to reply or not will depend on the issue.

If you agree with the information or change listed on the notice or letter, generally there is no need to reply. If the action causes a balance due, then you should take action immediately. Other times, even if you do agree, you may need to provide specific information to resolve the issue, particularly if you need to verify your identity.

If you disagree, you will need to act as soon as possible, as penalties and interest may be accruing, depending on the circumstances. The letter should outline what that action is and include a due date for your response.

Whether you agree or not, if it requires a reply – do not delay! Delaying can create more issues. See more on this below.

3. When to respond

If your notice or letter requires a response by a specific date, there are many reasons you’ll want to comply. Here are just a few:

  • minimize additional interest and penalty charges;
  • prevent further action from being taken on the account or against you; and
  • preserve your appeal rights if you don’t agree.

If you need more time to respond than the notice or letter indicates, contact the IRS using the contact information included on the notice or letter or call the general number, shown below, but only if a specific contact is not indicated.

4. How and where to reply

All notices and letters should tell you where to send your response, whether it’s to a mailing address or fax number. (Note: The IRS generally does not allow communication via email yet, although they are currently working on developing some alternative digital communication options.)

Follow the instructions in your notice or letter. See the IRS Operational status page for IRS customer service timeframes and updates as there are still some delays due to the ongoing pandemic.

5. What if I want to talk to someone?

Each notice or letter should include contact information. Some phone numbers on notices or letters are general IRS toll-free numbers, but if a specific employee is working your case, it will show a specific phone number to reach that employee or the department manager. The telephone number is usually found in the upper right-hand corner of your notice or letter.

As a last resort, you can use the IRS toll-free number at 800-829-1040. Have a copy of your tax return and the correspondence available when you call. But your best option is to use the specific number or address provided.

6. Wait – I still need help

You can resolve most notices or letters without help, but you can also get the help of a professional – either the person who prepared your return, or another tax professional.

If you can’t afford to hire a tax professional to assist you, you may be eligible for free or low cost representation from an attorney, certified public accountant, or enrolled agent associated with a Low Income Taxpayer Clinic (LITC). In addition, LITCs can help if you speak English as a second language and need help understanding the notice or letter. For more information or to find an LITC near you, see the LITC page at www.taxpayeradvocate.irs.gov/litcmap or IRS Publication 4134, Low Income Taxpayer Clinic List.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: TAS                                   

Decoding IRS Transcripts and the New Transcript Format: Part II

Posted by Admin Posted on Jan 13 2022

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While IRS transcripts can be helpful, reading and understanding them can be complicated. The IRS’s processing system, the Integrated Data Retrieval System (IDRS), uses a system of codes to identify a transaction the IRS is processing and to maintain a history of actions posted to a taxpayer’s account. These Transaction Codes (TCs) basically provide processing instructions to the IRS’s system. To make IRS transcripts user-friendly for the public, the IRS provides a literal description of each TC shown on a taxpayer’s IRS transcript. Although helpful, sometimes these descriptions don’t adequately explain the account transaction.  Document 11734, Transaction Code Pocket Guide, is a summarized list of TCs taken from section 8A of the IRS’s Document 6209, ADP and IDRS Information Reference Guide, both of which may be helpful when reviewing an IRS transcript.

A Closer Look at the IRS Record of Account Transcript

As shown in the fictitious example below, the Record of Account Transcript will summarize any balance due or overpayment on a taxpayer’s account for the specified year at the top of the form. If the account reflects a balance due, the transcript provides the date to which any accrued penalty and interest were calculated. Next, the transcript will show specific information from the taxpayer’s return – or the corrected amounts resulting from any changes to the return caused by either a request from the taxpayer or an IRS determination. This is noteworthy should a taxpayer find it necessary to file an amended return. The correct figures must be used as the starting point on Form 1040X, Amended US Individual Income Tax Return, when requesting any subsequent account adjustments – otherwise, processing problems may occur.

Figure 1

IRS Record of Account Transcript example

The Tax Account Portion of the Record of Accounts

This section of the Record of Accounts Transcript provides details regarding the taxpayer’s account activity, as shown in Figure 2.

Figure 2


Tax Account Portion of the Record of Accounts Transcript example

Some of the common TCs on the tax account portion of a transcript are:

  • TC 150 – Date of filing and the amount of tax shown on the taxpayer’s return when filed – or as corrected by the IRS when processed;
  • TC 196 – Interest Assessed;
  • TC 276 – Failure to Pay Tax Penalty;
  • TC 291 – Abatement Prior Tax Assessment;
  • TC 300 – Additional Tax or Deficiency Assessment by Examination Division or Collection Division;
  • TC 420 – Examination Indicator reflects that a return is under examination consideration though the return may or may not ultimately be audited;
  • TC 428 – Examination or Appeals Case Transfer;
  • TC 460 – Extension of Time for Filing;
  • TC 480 – Offer in Compromise Pending;
  • TC 494 – Notice of Deficiency;
  • TC 520 – IRS Litigation Instituted;
  • TC 530 – Indicates that an account is currently not collectible;
  • TC 582 – Lien Indicator;
  • TC 768 – Earned Income Credit;
  • TC 806 – Reflects any credit the taxpayer is given for tax withheld, as shown on the tax return and the taxpayer’s information statements such as Forms W-2 and 1099 attached to the taxpayer’s tax return; and
  • TC 846 – Represents the issuance of a taxpayer’s refund if the credits and withholding exceed the amount of tax due, and there are no issues with the return, the system will automatically generate a refund.

In the above example, tax credits, withholding credits, credits for interest the IRS owes to a taxpayer, and tax adjustments that reduce the amount of tax owed, are shown as negative amounts on the tax account transcript. In other words, negative amounts on an IRS transcript can be considered amounts “in the taxpayer’s favor.”

Because TCs on a taxpayer’s account are essentially instructions to the IRS system, it is important to note that some TCs are input for informational reasons not directly associated with an accounting-related dollar amount.

I hope we have not confused you. Using the IRS’s Pocket Guide should help you understand the transcript and provide you with the key information you are seeking.

The Tax Return Portion of the Record of Accounts

The tax return portion of the Record of Accounts depicts most of the line entries on the taxpayer’s tax return when it was filed. Figure 3 provides only the income section of our fictitious example; however, the actual Record of Accounts will depict all the sections of a taxpayer’s filed tax return and can be useful when the taxpayer has not maintained a copy of his or her return and needs to know what was reported to the IRS on his or her return. 

Figure 3


Tax Return Portion of the Record of Accounts transcript example

New Tax Transcript Format and Utilizing a Customer File Number

In July 2021, IRS updated a webpage on IRS.gov to educate taxpayers regarding the new transcript format and use of the “customer file number,” which was designed to better protect taxpayer data. This new format partially masks personally identifiable information. However, financial data will remain visible to allow for tax return preparation, tax representation, or income verification. These changes apply to transcripts for both individual and business taxpayers.

Here’s what is visible on the new tax transcript format:

  • Last four digits of any Social Security number on the transcript: XXX-XX-1234;
  • Last four digits of any Employer Identification Number on the transcript: XX-XXX1234;
  • Last four digits of any account or telephone number;
  • First four characters of first name and first four characters of the last name for any individual (first three characters if the name has only four letters);
  • First four characters of any name on the business name line (first three characters if the name has only four letters);
  • First six characters of the street address, including spaces; and
  • All money amounts, including wage and income, balance due, interest, and penalties.

For security reasons, the IRS no longer offers fax service for most transcript types to both taxpayers and third parties and has stopped its third-party mailing service via Forms 4506, 4506-T, and 4506T-EZ.

Lenders and others who use the Forms 4506 series to obtain transcripts for income verification purposes should consider other options such as participating in the Income Verification Express Service or having the customer provide the transcript.

Only individual taxpayers may use Get Transcript Online or Get Transcript by Mail.  Because the full Taxpayer Identification Number is no longer visible, the IRS created an entry for a Customer File Number. The Customer File Number is a ten-digit number assigned by the third-party, for example, a loan number that can be manually entered when the taxpayer completes his or her Get Transcript Online or Get Transcript by Mail request. This Customer File Number will then display on the transcript when it is downloaded or mailed to the taxpayer. The transcript’s Customer File Number serves as a tracking number that enables a lender or other third party to match the transcript to the taxpayer making the transcript request.      

Conclusion

Taxpayers needing tax return, tax account, or information return information may quickly find what they need through the IRS’s Get Transcript Online portal or their online account. I continue to urge the IRS to expand the Online Account functionality and increase its availability to practitioners and businesses. The current functionalities provide many basic and helpful information, and I look forward to continued expansion of functionality. Transcripts are free and provide a wealth of information. I encourage taxpayers to explore this option. If an IRS transcript can meet a taxpayer’s needs, it may be preferable to trying to contact the IRS or other more time-consuming methods of requesting tax account information.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: TAS         

Decoding IRS Transcripts and the New Transcript Format: Part I

Posted by Admin Posted on Jan 13 2022

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Many individuals may not know they can request, receive, and review their tax records via a tax transcript from the IRS at no charge. Transcripts are often used to validate income and tax filing status for mortgage applications, student loans, social services, and small business loan applications and for responding to an IRS notice, filing an amended return, or obtaining a lien release. Transcripts can also be useful to taxpayers when preparing and filing tax returns by verifying estimated tax payments, Advance Child Tax Credits, Economic Income Payments/stimulus payments, and/or an overpayment from a prior year return.

The IRS maintains records for all taxpayers – individuals, businesses, and other entities – and provides five types of transcripts. A requested transcript may provide information regarding the date the IRS received a return; payment history including refunds, transfers between tax years and overpayment credits; balance due amounts; interest assessed; refundable credits allowed; basic examination information; and Forms W-2 or 1099 information.

Taxpayers may be able to get answers to their questions quickly and efficiently by requesting and reviewing their transcript – that is, if they can decipher them. Taxpayers (and tax professionals with a properly executed Form 2848, Power of Attorney, or Form 8821, Tax Information Authorization) can request a transcript online through the IRS’s Get Transcript Online portal or their online accountby mail; or by calling the IRS’s automated phone transcript service at 800-908-9946. With the difficulty reaching the IRS by phone or correspondence during the last two filing seasons, using the portal or online account may be more efficient than calling the IRS due to long wait times, the potential inability to speak with an available customer service representative, or the length of time for the IRS to respond to a mailed transcript request. The IRS’s Get Transcript page is available in five languages, and the online application is also available in Spanish.

 

What Transcript Should Taxpayers Ask For?

There are several types of transcripts that can meet a taxpayer’s needs.

  • Tax Return Transcript: This shows most items reflected on a taxpayer’s original tax return, including adjusted gross income, and accompanying forms and schedules for the current year and three prior years. This transcript will often be accepted by lending institutions for student loan or mortgage purposes. Note: the secondary spouse on a joint return must use Get Transcript Online or Form 4506-T to request this transcript type. When using Get Transcript by Mail or phone, the primary taxpayer on the return must make the request.
  • Wage and Income Transcript: This provides data from the third-party information statements the IRS has received for a specific taxpayer, such as Forms W-2, 1099, 1098, or 5498, and can be useful if the taxpayer did not receive or retain a copy of these documents. Wage and Income Transcripts are available for up to ten years. While the Wage and Income transcript provides federal withholding amounts, it does not reflect state tax withholdings, which may limit its use when preparing state income tax returns.
  • Tax Account Transcript: This provides basic tax return data (marital status, adjusted gross income, taxable income) along with listing the activity on a tax account, such as tax adjustments, payments, etc., for the current year and up to ten prior years using Get Transcript Online. When using Get Transcript by Mail or phone, taxpayers are limited to the current tax year and returns processed during the prior three years.
  • Record of Account Transcript: This is the most comprehensive transcript. It combines the Tax Return Transcript and the Tax Account Transcript to provide a more complete picture of a taxpayer’s tax return and subsequent account activity for the current year and for returns processed in the three prior years.
  • Verification of Non-Filing Letter: This provides proof that the IRS has no record of a filed Form 1040-series tax return for the year requested. However, it doesn’t indicate whether a taxpayer was required to file a return for that year. This letter is available after June 15 for the current tax year or any time for the prior three tax years using Get Transcript Online.

Another Option: Log in to Your Personal Online Account

Individual taxpayers with an Online Account can immediately access the above transcript options for the current filing year and three prior years and in some cases up to ten years of data. They can also see the total amount owed, balance details by year, payment history and any scheduled or pending payments; key information from the most recent tax return; payment plan details, if the taxpayer has one; digital copies of select notices from the IRS; Economic Impact Payments received, if any; the address on file; and any authorization requests from tax professionals. If taxpayers have not created an online account, this may be the impetus to do so, but be aware many taxpayers are not able to pass the authentication process. The IRS will be updating its authentication process by the end of the year, which is anticipated to reduce the unsuccessful attempts to establish an online account.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source:TAS 

Common errors taxpayers should avoid

Posted by Admin Posted on Jan 13 2022

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Filing a tax return electronically reduces errors because the tax software does the math, flags common errors and prompts taxpayers for missing information.

Using a reputable tax preparer – including certified public accountants, enrolled agents or other knowledgeable tax professionals – can also help avoid errors. Mistakes can result in a processing delay, which can mean it takes more time to get a refund.

Here are some common errors to avoid when preparing a tax return:

  • Missing or inaccurate Social Security numbers. Each SSN on a tax return should appear exactly as printed on the Social Security card.

 

  • Misspelled names. Likewise, a name listed on a tax return should match the name on that person's Social Security card.

 

  • Incorrect filing status. Some taxpayers choose the wrong filing status. The Interactive Tax Assistant on IRS.gov can help taxpayers choose the correct status especially if more than one filing status applies. Tax software also helps prevent mistakes with filing status.

 

  • Math mistakes. Math errors are one of the most common mistakes. They range from simple addition and subtraction to more complex calculations. Taxpayers should always double check their math. Better yet, tax prep software does it automatically.

 

  • Figuring credits or deductions. Taxpayers can make mistakes figuring things like their earned income tax creditchild and dependent care credit, and the standard deduction. Taxpayers should always follow the instructions carefully. For example, a taxpayer who's 65 or older, or blind, should claim the correct, higher standard deduction if they're not itemizing. The Interactive Tax Assistant can help determine if a taxpayer is eligible for tax credits or deductions. Attach any required forms and schedules.

 

  • Incorrect bank account numbers. Taxpayers who are due a refund should choose direct deposit. This is the fastest way for a taxpayer to get their money. However, taxpayers need to make sure they use the correct routing and account numbers on their tax return.

 

  • Unsigned forms. An unsigned tax return isn't valid…period. In most cases, both spouses must sign a joint return. Exceptions may apply for members of the armed forces or other taxpayers who have a valid power of attorney Taxpayers can avoid this error by filing their return electronically and digitally signing it before sending it to the IRS.

 

  • Filing with an expired individual tax identification number. If a taxpayer's ITIN is expired, they should go ahead and file using the expired number. The IRS will process that return and treat it as a return filed on time. However, the IRS won't allow any exemptions or credits to a return filed with an expired ITIN. Taxpayers will receive a notice telling the taxpayer to renew their number. Once the taxpayer renews the ITIN, the IRS will process return normally.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: IRS     

HOW CREDITS AND DEDUCTIONS WORK

Posted by Admin Posted on Jan 03 2022

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Tax credits and deductions can change the amount of tax you owe so you pay less.

Credits can reduce the amount of tax you owe.

Deductions can reduce the amount of your income before you calculate the tax you owe.

Claim Federal Tax Credits and Deductions

Claim certain credits and deductions on your tax return and you may be able to get a larger refund, while others may give you a refund even if you don't owe any tax.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: IRS

BUDGETING FOR BABY

Posted by Admin Posted on Jan 03 2022

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Babies bring joy and excitement. They also bring substantial adjustments to the family budget! According to U.S. News and World Report, after adjusting for inflation, it costs about $267,233 in 2021 dollars to raise a baby to age 18 (based on previously published Bureau of Labor Statistics data). That’s a daunting number, to be sure. Fortunately, there are some things you can do to, shall we say, pacify the challenge.

Check your insurance

Life and disability insurance are critical. Life insurance provides financial protection if an income-earner in your family dies. Term insurance can be a cost-effective option. It offers protection for a specific period, such as 20 years (at which point many children will be relatively self-sufficient, and the loss of income less harmful). Of course, you’ll also need to ensure that your will names a guardian to look after your children in case of your death while they’re still minors.

Disability insurance provides financial protection if a breadwinner becomes disabled and no longer can earn a living. While some employers offer disability insurance, the policies often don’t provide enough income to cover all expenses. And Social Security disability benefits might not offer the protection you expect. For instance, to obtain the benefits, the breadwinner typically must be unable to work at any job. So, consider purchasing your own policy that will pay if you can’t continue in your current job. The distinction might make a difference.

Review tax breaks

Eligible parents can receive a valuable Child Tax Credit. And if you pay a caregiver to watch your baby so you can work, you may be able to claim the dependent care credit. For 2021, depending on your income, this can be up to 50% of eligible childcare expenses, up to $8,000 for one child, or $16,000 for two or more. The caregiver typically can’t be a dependent, your spouse or a parent of the child.

Another option is a dependent care Flexible Spending Account (FSA). This is an employer-sponsored program that allows parents to set aside up to $10,500 (for 2021) pretax annually (up to $5,250 if you’re married and file separately) to cover qualified childcare expenses. It’s important to note that you can’t use both the credit and the FSA for the same expenses.

Start saving for college early

The sooner you start saving for your baby’s education, the more you can leverage the value of compounding. If you save $200 per month starting at your baby’s birth and earn a 6% return, you’ll have nearly $78,000 in 18 years!

One of the best options, potentially, is a Section 529 education savings plan. It allows you to save for college expenses, as well as K-12 tuition expenses. Contributions aren’t tax-deductible for federal purposes, but many states offer tax benefits. Withdrawals used for qualified education expenses (limited to $10,000 per year for K-12 tuition) aren’t subject to federal income tax, and typically not subject to state income tax.

Get expert advice

Whether you have a baby on the way or your family expanded earlier in the year, it’s important to make sure you’re taking the right steps to ensure your child’s financial security. We can offer advice to help you evaluate various options and maximize your tax savings.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

FOLLOW THESE TIPS TO HELP PREVENT COMMON ISSUES AND AVOID REFUND DELAYS

Posted by Admin Posted on Jan 03 2022

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Ready to file your tax return? Stop and check out these tax tips below before you file to avoid tax errors and pass “go” with confidence.

Use your year-end income statements (e.g., Forms W-2/1099) to verify your income. Your income figures must match what is reported on year-end statements. Always use the information reported on any year-end income statements, such as Form W-2 or Form 1099, Schedule K-1, virtual currency statements, etc.).

In case you didn’t know, the IRS’s computer systems compare the income that you report on your tax return to what has been reported to them by payers. When income and/or federal income tax withholding don’t match, this will cause a delay in the processing of the return and any refund until the discrepancy is resolved.

Year-end statements can include corrections or bonuses and therefore wouldn’t match, for example, your last pay stub figures.

Review all forms for accuracy before filing. If you find any discrepancies, contact the payer immediately and request the payer issue a corrected statement as soon as possible.

Double check that your information is correct for yourself and your dependents. Check name spellings, taxpayer identification numbers, dates of birth, addresses, and your bank account information for accuracy. Be aware that you must have valid Social Security numbers for all your dependents before filing or that may not only delay processing of your tax return, but in certain instances disqualify you for some refundable credits, like the Earned Income Tax Credit.

Check for all credits and deductions for which you may be eligible. Review the tax form instructions to ensure you claim all the deductible items and credits for which you are eligible. You can also see the IRS’s Credits and Deductions pages. Complete any worksheets, schedules, or forms to support those items.

A lot of the eligibility requirements for these items often change yearly, and the forms and formulas used to calculate them can be complex to complete.

Generally, family-related credits and deductions are the areas that have the most errors and one of the main reasons (after income/wage mismatches we just mentioned) that cause return processing slow-downs.

So, follow the instructions carefully, double check your entry information and always re-check your math.

Don’t forget your W-2s, 1099s, and other required attachments. This includes Form 8962 if you are claiming the Premium Tax Credit and Form 1099-G if you received unemployment benefits. Any income document that shows federal income tax was withheld must be attached to your return, if you are filing by paper.

If you are filing electronically, follow the software provider’s instructions.

If you are unable to obtain your W-2 (or other information returns like Form 1099, Schedule K-1, etc.) from payers because they closed, you can call the IRS for assistance at 1-800-829-1040, but you must wait until after February 1.

If you received unemployment benefits in 2021, you will get a Form 1099-G, Certain Government Payments, from the agency paying the benefits. The agency will either automatically send a paper copy or, if the agency does not mail the form, recipients will need to visit the agency’s website to get an electronic version of the form. The agency usually provides a paper copy by January 31.

If you received a federal tax refund in 2021, you may have been paid interest. Refund interest payments are taxable and must be reported on federal income tax returns. See the Form 1040 Instructions for more details. In January 2022, the IRS will send Form 1099-INT to anyone who received interest totaling $10 or more.

If you received Economic Impact Payments in 2021, you will have to calculate whether you received the full amount for which you are eligible. If you did not receive the full amount to which you are entitled you should follow the tax return instructions on how to claim this on your tax return.

If you received Advance Child Tax Credit payments in 2021, you will need to reconcile these payments against the total credit for which you are eligible on your 2021 individual tax return. The advance payments you are receiving during 2021 cover only half of the total credit, so you will claim the remaining portion on the 2021 tax return.

Use Letter 6419 that the IRS sent to you in January 2022, to provide the total amount of advance Child Tax Credit payments that were disbursed to you and follow the tax return’s instructions carefully.

If you received any of these payments in error, you also have to report that information on the tax return.

Use E-file, and either Direct Deposit or Direct Pay too. We recommend electronically filing your tax return – it’s faster, more accurate and secure. If you’ve been hesitant in the past to switch over from paper, now’s the time to make the move!

If you are using the same software as the prior year, you’ll want to check that only the current year information is present, and that prior year data didn’t transfer over which may cause an error.

Always double check your figures before hitting submit.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: TAS

GIG WORKERS: HERE COMES AN ESTIMATED TAX DEADLINE

Posted by Admin Posted on Dec 16 2021

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If you’re a gig worker or otherwise self-employed, and you don’t have taxes withheld from a paycheck, you likely have to make quarterly estimated tax payments to the IRS. Be advised that the fourth quarter 2021 estimated tax payment deadline for individuals is coming up on Tuesday, January 18, 2022.

 A pay-as-you-go system

If you do have some withholding from paychecks or payments you receive but you receive other types of income such as Social Security, prizes, rent, interest and dividends, you may still have to make estimated payments. And if you fail to make the required payments, you may be subject to a penalty as well as interest.

Generally, you need to make estimated tax payments for 2021 if you expect withholding to be less than the smaller of 90% of your tax for 2021 or 100% of your 2020 tax. (The applicable amount is 110% of your 2020 tax if your 2020 adjusted gross income was more than $150,000, or $75,000 if married filing separately.)

Sole proprietors, partners and S corporation shareholders generally must make estimated tax payments if they expect to owe $1,000 or more in tax when filing a tax return.

Quarterly due dates

If you’re new to estimated tax payments, be prepared to submit them throughout the year. The due dates are typically April 15, June 15, September 15 and January 15 of the following year. However, if the date falls on a weekend or holiday, the deadline is the next business day.

Estimated tax is calculated by factoring in expected gross income, taxable income, deductions and credits for the year. The easiest way to pay estimated tax is electronically through the Electronic Federal Tax Payment System. You can also pay estimated tax by check or money order using the Estimated Tax Payment Voucher, or by credit or debit card.

Seasonal businesses

Most individuals make estimated tax payments in the four installments. You simply determine the required annual payment, divide the number by four and make four equal payments by the due dates.

However, you may be able to make smaller payments during some quarters under an “annualized income method.” This can be useful to people whose income isn’t uniform over the year, perhaps because of a seasonal business. You may also want to use the annualized income method if a large portion of your income comes from capital gains on the sale of securities that you sell at various times during the year.

The correct amount

Estimated tax payments are just like paying a traditional tax bill in that you want to fulfill your obligation without overpaying the federal government. Contact our firm with any questions you may have about setting up estimated tax payments or using the annualized income method.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters 

FOR BUSINESS FINANCING, WHAT KINDS OF LOANS EXIST?

Posted by Admin Posted on Dec 13 2021

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You must know the exact amount of money that you need, what your purpose is and how you will repay it in order to be successful in getting a loan. You must convince the lender in a written proposal that you are a good credit risk.

There are two basic kinds of loans, although terms vary by lender:

Short-term and long-term, maturity periods of up to one year are generally short-term, which include accounts receivable loans, working capital loans and lines of credit.

Maturities greater than a year and less than seven years is a typical long-term loan. Equipment and real estate loans can have maturity up to 25 years. Major business expenses such as purchasing real estate and facilities, durable equipment, construction, vehicles, furniture and fixtures, etc. are a few purposes for long-term loans.                                                

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

DEDUCTIBLE HOME OFFICE

Posted by Admin Posted on Dec 13 2021

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Whether you are self-employed or an employee, if you use a portion of your home exclusively and regularly for business purposes, you may be able to take a home office deduction.

You can deduct certain expenses if your home office is the principal place where your trade or business is conducted or where you meet and deal with clients or patients in the course of your business. If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.

Your home office will qualify as your principal place of business if you use it exclusively and regularly for the administrative or management activities associated with your trade or business. There must be no other fixed place where you conduct substantial administrative or management activities. If you use both your home and other locations regularly in your business, you must determine which location is your principle place of business, based on the relative importance of the activities performed at each location. If the relative importance factor doesn't determine your principle place of business, you can also consider the time spent at each location.

If you are an employee, you have additional requirements to meet. You cannot take the home office deduction unless the business use of your home is for the convenience of your employer. Also, you cannot take deductions for space you are renting to your employer.

Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction will be limited if your gross income from your business is less than your total business expenses. Please contact us for more!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

WHAT ARE THE POSSIBLE IMPLICATIONS IF I CO-SIGN FOR A LOAN?

Posted by Admin Posted on Dec 13 2021

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The co-signer enters an agreement to be responsible for the repayment of the loan if the borrower defaults. A lender will usually not go after the co-signer until the borrower defaults, but they can lawfully go after the co-signer at any time.

It has been stated by finance companies that in the case of a default most co-signers actually pay off the loans that they have co-signed for including the legal and late fees that end up being tacked on. Clearly this can be a large financial burden, and it can also reflect negatively on the co-signer's credit.

If you do agree to co-sign on a loan for someone, you can request that the financial institution agrees that it will refrain from collecting from you unless the primary borrower defaults. Also, make sure that your liability is limited to the unpaid principal and not any late or legal fees.

Upon co-signing you may have to brandish financial documents to the lender just as the primary borrower would have to.

Co-signing for a loan gives you the same legal responsibility for the repayment of the debt as the borrower. If there are late payments, this will affect your credit as well.

If you are asked to co-sign for someone, you may want to provide another option and suggest that they get a secured credit card. This way, they can build up their own credit history and not open themselves up to the possibility of taking on a debt too large, placing themselves, and you, in financial danger.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

LIVING THE DREAM OF EARLY RETIREMENT

Posted by Admin Posted on Dec 13 2021

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Many people dream of retiring early so they can pursue activities other than work, such as volunteering, traveling and pursuing their hobbies full-time. But making this dream a reality requires careful planning and diligent saving during the years leading up to the anticipated retirement date.

It all starts with retirement savings accounts such as IRAs and 401(k)s. Among the best ways to retire early is to build up these accounts as quickly as possible by contributing the maximum amount allowed by law each year.

From there, consider other potential sources of retirement income, such as a company pension plan. If you have one, either under a past or current employer, research whether you can receive benefits if you retire early. Then factor this income into your retirement budget.

Of course, you’re likely planning on Social Security benefits composing a portion of your retirement income. If so, keep in mind that the earliest you can begin receiving Social Security retirement benefits is age 62 (though waiting until later may allow you to collect more).

The flip side of saving up enough retirement income is reducing your living expenses during retirement. For example, many people strive to pay off their home mortgages early, which can possibly free up enough monthly cash flow to make early retirement feasible.

By saving as much money as you can in your retirement savings accounts, carefully planning your Social Security strategies and cutting your living expenses in retirement, you just might be able to make this dream a reality. 

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

Source: Thomson Reuters    

-TAXABLE VS. TAX-ADVANTAGED: WHERE TO HOLD INVESTMENTS

Posted by Admin Posted on Dec 08 2021

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When investing for retirement or other long-term goals, people usually prefer tax-advantaged accounts, such as IRAs, 401(k)s or 403(b)s. Certain assets are well suited to these accounts, but it may make more sense to hold other investments in traditional taxable accounts.

Know the rules

Some investments, such as fast-growing stocks, can generate substantial capital gains, which may occur when you sell a security for more than you paid for it.

If you’ve owned that position for over a year, you face long-term gains, taxed at a maximum rate of 20%. In contrast, short-term gains, assessed on holding periods of a year or less, are taxed at your ordinary-income tax rate — maxing out at 37%. (Note: These rates don’t account for the possibility of the 3.8% net investment income tax.)

Choose tax efficiency

Generally, the more tax efficient an investment, the more benefit you’ll get from owning it in a taxable account. Conversely, investments that lack tax efficiency normally are best suited to tax-advantaged vehicles.

Consider municipal bonds (“munis”), either held individually or through mutual funds. Munis are attractive to tax-sensitive investors because their income is exempt from federal income taxes and sometimes state and local income taxes. Because you don’t get a double benefit when you own an already tax-advantaged security in a tax-advantaged account, holding munis in your 401(k) or IRA would result in a lost opportunity.

Similarly, tax-efficient investments such as passively managed index mutual funds or exchange-traded funds, or long-term stock holdings, are generally appropriate for taxable accounts. These securities are more likely to generate long-term capital gains, which have more favorable tax treatment. Securities that generate more of their total return via capital appreciation or that pay qualified dividends are also better taxable account options.

Take advantage of income

What investments work best for tax-advantaged accounts? Taxable investments that tend to produce much of their return in income. This category includes corporate bonds, especially high-yield bonds, as well as real estate investment trusts (REITs), which are required to pass through most of their earnings as shareholder income. Most REIT dividends are nonqualified and therefore taxed at your ordinary-income rate.

Another tax-advantaged-appropriate investment may be an actively managed mutual fund. Funds with significant turnover — meaning their portfolio managers are actively buying and selling securities — have increased potential to generate short-term gains that ultimately get passed through to you. Because short-term gains are taxed at a higher rate than long-term gains, these funds would be less desirable in a taxable account.

Get specific advice

The above concepts are only general suggestions. Please contact our firm for specific advice on what may be best for you.

Sidebar: Doing due diligence on dividends

If you own a lot of income-generating investments, you’ll need to pay attention to the tax rules for dividends, which belong to one of two categories:

  • Qualified. These dividends are paid by U.S. corporations or qualified foreign corporations. Qualified dividends are, like long-term gains, subject to a maximum tax rate of 20%, though many people are eligible for a 15% rate. (Note: These rates don’t account for the possibility of the 3.8% net investment income tax.)
  • Nonqualified. These dividends — which include most distributions from real estate investment trusts and master limited partnerships — receive a less favorable tax treatment. Like short-term gains, nonqualified dividends are taxed at your ordinary-income tax rate.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

TAX INCENTIVES FOR EDUCATION

Posted by Admin Posted on Dec 08 2021

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The tax code provides a variety of tax incentives for families who are paying higher education costs or are repaying student loans. You may be able to claim an American Opportunity Credit (formerly called the Hope Credit) or Lifetime Learning Credit for the qualified tuition and related expenses of the students in your family (i.e. you, your spouse, or dependent) who are enrolled in eligible educational institutions. Different rules apply to each credit and the ability to claim the credit phases out at higher income levels. 

If you don't qualify for the credit, you may be able to claim the "tuition & fees deduction" for qualified educational expenses. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. This deduction phases out at higher income levels. 

You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income, so you do not have to itemize your deductions on Schedule A Form 1040. However, this deduction is also phased out at higher income levels.  

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

ARPA Provides More Than Just Direct Payments to Taxpayers

Posted by Admin Posted on Dec 08 2021

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On March 11, another round of COVID-19 relief legislation was signed into law. The American Rescue Plan Act (ARPA) includes funding for individuals, businesses, and state and local governments, but also some significant tax-related provisions.

ARPA extends and expands some tax provisions in the CARES Act and the Consolidated Appropriations Act (CAA) and also includes some new tax-related provisions.

A quick look

Here’s a quick look at some of the tax provisions that may affect you:

Individuals

Recovery rebates of up to $1,400 for singles and heads of households and $2,800 for married couples filing jointly — plus $1,400 per qualifying dependent (including adult dependents) — subject to adjusted gross income (AGI) phaseouts starting at $75,000 for singles, $112,500 for heads of households and $150,000 for joint filers and ending at $80,000, $120,000 and $160,000, respectively

Increased Child credit, including advance payments of part of the credit later this year

Expanded child and dependent care tax credit

Tax-free treatment of forgiven student loan debt

Exclusion from gross income of the first $10,200 in unemployment benefits received

Businesses and other employers

Extended and expanded tax credits for retaining employees, through Dec. 31, 2021

Extended and modified payroll tax credits for paid sick and family leave, through Sept. 30, 2021

Extended excess business loss limitation, through Dec. 31, 2026

Expansion of the Section 162(m) limits on the tax deduction public companies can take for executive compensation to cover the CEO, the CFO and the five next highest paid employees, beginning in 2027

How will you benefit?

This is just a brief overview of the tax-related provisions of ARPA. Additional rules and limits apply. Contact your tax advisor for more details on these provisions and how you might benefit.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters        

Important information you need to know about refunds

Posted by Admin Posted on Dec 08 2021

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Planning for a refund this year? Use these tax tips and find out what you need to know and understand about tax refund timing, when you could receive it and why you may only get part or none at all.

General Information

Different factors can affect the timing of a refund. The IRS and partners in the tax industry continue to strengthen tax security reviews to help protect against identity theft and refund fraud.

While some tax returns require additional review and take longer to process than others, it may be necessary when a return has errors, is incomplete or is affected by identity theft or fraud. A refund delay can happen when the IRS must contact you by mail to request additional information needed to process your tax return.

Generally, the IRS issues most refunds in less than 21 days. However, if information from reporting sources such as your employer, your bank or others is not received timely when the IRS cross-checks your data, it can delay the issuance of your refund.
 

Direct deposit is the fastest way to get your refund. Simply request it in the software you are using or add your bank routing information to your paper return.

The quickest and easiest way to track your refund is to use the Where's My Refund? ‎tool on IRS.gov or download the IRS2Go app on your mobile device. You can also check the IRS’s What to Expect for Refunds web page for answers to frequently asked questions. The IRS “When Will I Get My Refund? video provides details on what info you’ll need to check your refund status.

Delayed Release

Refund timing for Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) filers is different than from anyone else. By law, neither the IRS nor the Taxpayer Advocate Service can release refunds related to these tax returns until after mid-February.

Generally, the earliest EITC/ACTC related refunds are available in taxpayer bank accounts or on debit cards by the first week of March, if you chose direct deposit and there are no other issues with the tax return. If there are other items that need addressing, the refund may be delayed further.

If you claim these two tax credits, you should know that you won’t see the status of your refund on Where's My Refund?, the IRS2Go app or through tax software packages until at least the end of February.

Certain Past-due Debts Can Reduce Refunds

By law, the Department of Treasury's Bureau of the Fiscal Service (BFS) issues IRS tax refunds and conducts the Treasury Offset Program (TOP). BFS may reduce a taxpayer’s refund and offset all or part of the refund to pay past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support or other federal nontax debts, such as student loans.

BFS will reduce the refund to pay off the debt owed and send a notice to the taxpayer if a refund offset occurs. Any portion of the remaining refund after offset is issued in a check or direct deposited to you as originally requested on your tax return.
 

Separate from the TOP, refund amounts may also be adjusted due to changes the IRS made to the tax return.

For more information on any of these refund offset possibilities, including lost or stolen refunds, see our website’s Get Help tax topic pages.

Financial Hardship

Have you tried to get your refund, and now are having financial hardship? There are certain types of issues where the IRS itself can generally provide the service you need, without our involvement.

However, if you've contacted the IRS and tried to get your refund unsuccessfully, unless it is because of a law, and not having the refund is causing you a financial hardship, the Taxpayer Advocate Service may be able to help. Our priority is always helping the taxpayers who need us most, so you may need to provide evidence to support your hardship claim in order to request an expedited refund.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

Source: TAS           

DOES MY CAR AFFECT MY INSURANCE RATE?

Posted by Admin Posted on Dec 08 2021

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It is a good idea to check the insurance rates that are given to certain cars before you buy them. Usually as the cost of the car rises, so does the insurance premium. The insurance rates on used cars are generally substantially lower than those of new cars.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters  

DURING A DIVORCE, WHAT ARE THE LEGAL ISSUES THAT MUST BE HANDLED?

Posted by Admin Posted on Dec 08 2021

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Make an agreement with your spouse to plan for the legal issues that will be dealt with in the future, such as division of property, alimony or support payments and child custody. The amount of time and money that will be spent trying to reach a legal solution will be lessened dramatically if this can be done, either with the help of lawyers or court.

The following are general tips to face the legal aspects of divorce:

  • If there are important issues with regards to child custody, alimony or assets, find your own attorney.
  • Use referrals from other professionals, trusted friends or the American Academy of Matrimonial Lawyers (www.aaml.org) to find a good matrimonial lawyer.
  • Verify that the agreement of divorce approaches all topics such as insurance coverage, life health and auto.
  • On IRA accounts, life insurance policies, pension plans, 401(k) plans, and other retirement accounts make sure to modify the beneficiaries.
  • Update your will.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

IS THE PERSON AT YOUR DOOR REALLY FROM THE IRS?

Posted by Admin Posted on Dec 08 2021

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In certain situations, the IRS may send an employee out to your residence or place of business to collect past due taxes or conduct an audit of your return. With in-person scams continuing to take place across the country, the Taxpayer Advocate Service wants you to know how and when the IRS may contact you in person to help you protect yourself against possible in-person scams.

Eight things to know about in-person contacts from the IRS:

The IRS initiates most contacts through regular mail delivered by the United States Postal Service.

There are special circumstances when the IRS will come to your home or business.

These include:

When you have an overdue tax bill;

When the IRS needs to secure a delinquent tax return or a delinquent employment tax payment;

To tour a business as part of an audit; or As part of a criminal investigation.


Revenue Officers are IRS employees who work cases that involve an amount owed or a delinquent tax return. Generally, Revenue Officer home or business visits are unannounced.

Revenue Officers carry two forms of official identification, a pocket commission and a HSPD-12 card. Both forms of ID have a photo of the employee and serial numbers. You can (and should) ask to see both IDs before discussing any sensitive or personal information. You may also call the IRS at a phone number provided by the Revenue Officer to confirm his or her identity.

The IRS can assign certain cases to private collection agencies (PCAs) after notifying you in writing. These PCAs will never visit you at your home or business.

The IRS will not ask you to make a payment to anyone other than to the U.S. Department of the Treasury.

Revenue Agents are IRS employees conducting audits. They may call you to set up appointments, but not without having first notified you by mail. Therefore, by the time a Revenue Agent visits you at your home or business, you will be aware of the audit.

An IRS Criminal Investigator may visit your home or business unannounced while conducting an investigation. However, these are federal law enforcement agents and they will not demand any sort of payment.

When interacting with you, Revenue Officers have the responsibility to educate you about the Taxpayer Bill of Rights (TBOR) and identify economic hardships if you have an outstanding federal tax debt and payment creates a hardship. They also have the responsibility to consider other means of resolving tax debts, including installment agreements and offers in compromise.

IRS employees do not:

Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer.

Demand that you pay taxes without the opportunity to question or appeal the amount they say you owe.

Threaten to bring in local police, immigration officers, or other law-enforcement to have you arrested for not paying. The IRS cannot revoke your driver’s license, business licenses, or immigration status. Threats like these are common tactics scam artists use to trick victims into buying into their schemes.

If you believe you were visited by someone impersonating the IRS, you can find information on how to report scams here.

Need help with a specific tax problem?

The Taxpayer Advocate Service is an independent organization within the IRS that helps taxpayers and protects taxpayers' rights. We can offer you help if your tax problem is causing a financial difficulty, you’ve tried and been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure just isn't working as it should. If you qualify for our assistance, which is always free, we will do everything possible to help you.
Visit www.taxpayeradvocate.irs.gov or call 877-777-4778.

Read more about the kinds of problems TAS handles and how we may be able to assist you with yours.

For current information about IRS operations during the COVID-19 pandemic, please visit irs.gov.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS   

WHO NEEDS TO BE NOTIFIED IF A SPOUSE CHANGES THEIR NAME AFTER MARRIAGE?

Posted by Admin Posted on Dec 08 2021

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All organizations that you had correspondence with while using your unmarried name should be notified. You can begin with the following list:

  • The Social Security Administration
  • Department of Motor Vehicles
  • Post Office
  • Investment and bank accounts
  • Employer
  • Voter's registration office
  • School alumni offices
  • Credit cards and loans
  • Club memberships
  • Retirement accounts
  • Subscriptions
  • Passport office
  • Insurance agents

 If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

SHOULD I REFINANCE?

Posted by Admin Posted on Dec 08 2021

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In order to refinance your home, the current market rate should be at least 2 percentage points lower than what you are paying on your mortgage. Speak with a lender to see what rate you may be able to get. Remember to factor in costs lie appraisals, points from the lender, and others, which may not be apparent in your initial price assessment.

After assessing that cost, get a quote of what your total payment would be after refinancing. The simplest way to find out how long it will take to recover the refinancing costs will be to divide your closing costs by the monthly savings with your new monthly payment.

Also take into consideration how long you plan on holding your home. It may not make sense to refinance the home if you plan on selling in the near future.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

WHAT SHOULD I ASK ABOUT THE CAR LEASE?

Posted by Admin Posted on Dec 08 2021

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Here are a few questions that should be answered before you sign a car lease:

  • What types of leases are obtainable and what are their differences? (Two were explained previously, but dealers may have variations.)
  • What will the initial costs of leasing be?
  • What will the continuing costs of leasing be?
  • Will my initial cost or continuing costs decrease due to a trade-in?
  • Can I exceed the specific mileage in my lease?
  • If I take an early termination or a purchase option, how will my mileage allowance be enforced?
  • If I fall behind in my payments or want to stop leasing, can I sublease?
  • If I want to terminate my lease before the agreement is up, what happens?
  • Do I have options at the end of my lease?
  • What can I expect to pay at the end of the lease?

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

IS MORE INSURANCE NECESSARY FOR MARRIED COUPLES?

Posted by Admin Posted on Dec 01 2021

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In the case of death, life insurance will provide a form of income for your dependents, children or whoever is your beneficiary. Because of this, married couples usually require more life insurance than singles.

Having someone dependent on your income will determine if you need to have life insurance. If someone such as a child, parent, spouse or other individual is dependent on your income, you should have life insurance. The following are situations where life insurance is necessary:

  • Single parents or families with young children or other dependents. The younger your children, the more insurance is necessary. Insurance should be in proportion to the amount earned. If both spouses are working, they should both be insured. If both earners cannot afford to be insured, the primary wage earner should be the first to be insured and the secondary will follow. To fill the insurance gap, a less expensive term policy may be used. Insurance should be bought to cover the absence of services such as childcare, bookkeeping, housekeeping, which are provided by the spouse that works within the home. The insurance that covers the non-wage earner is secondary to the insurance that covers the wage earner's life, if funds are scarce.
  • Adults that have no children or other dependents. You will need less insurance than people in the previous situation if your spouse can live comfortably without income. However, some form of life insurance is still necessary. You will want at least enough to cover burial expenses, to pay off any debts you may have acquired, and to provide an easy transition for the surviving spouse. You may want to buy more insurance if you think your spouse would go through financial hardship without your income or if your savings aren't adequate. This depends on your salary level as well as the amount of your spouse's, the amount of savings you have and the amount of debt incurred.
  • Single adults without dependents. Unless you would like to use insurance for the purposes of estate planning, you will only need insurance to cover expenses for burial and debts.
  • Children. Typically, children only need life insurance to cover burial expenses and medical debts. An insurance policy could also be used as a long-term savings instrument, in some instances.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

SPECIAL CIRCUMSTANCES

Posted by Admin Posted on Dec 01 2021

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When it comes to tax records, some are required to be kept under special circumstances.

However, if the IRS believes you have significantly underreported your income (by 25 percent or more), it may go back six years in an audit. If there is any indication of fraud, or you do not file a return, no period of limitation exists. To be safe, use the following guidelines.

  • Car Records (keep until the car is sold)
  • Credit Card Receipts (keep until verified on your statement)
  • Insurance Policies (keep for the life of the policy)
  • Mortgages / Deeds / Leases (keep 6 years beyond the agreement)
  • Pay Stubs (keep until reconciled with your W-2)
  • Sales Receipts (keep for life of the warranty)
  • Stock and Bond Records (keep for 6 years beyond selling)
  • Warranties and Instructions (keep for the life of the product)
  • Other Bills (keep until payment is verified on the next bill)
  • Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source : Thomson Reuters

TAX SAVING TECHNIQUE

Posted by Admin Posted on Dec 01 2021

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Charitable Giving - Instead of selling your appreciated long-term securities, donate the stock instead and avoid paying tax on the unrealized gain while still getting a charitable tax deduction for the full fair market value.

Health Savings Accounts (HSAs) - If you have a high deductible medical plan you can open an HSA and make tax deductible contributions to your account to pay for medical expenses. Unlike flexible spending arrangements (FSAs), the contributions can carry over for medical expenses in future years.

ROTH IRAs - Contributions to a ROTH IRA are not tax deductible but the qualified distributions, including earnings are tax-free.

Municipal Bonds - Interest earned on these types of investments is tax-exempt.

Own a home - most of the cost of this type of investment is financed and the interest (on mortgages up to $750,000) is tax deductible. When the property is sold, individuals may exclude up to $250,000 ($500,000 if married jointly) of the gain.

Retirement Plans - Participate in your employer sponsored retirement plan, especially if there is a matching component. You will receive a current tax deduction and the tax-deferred compounding can add up to a large retirement savings.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

DEDUCTING MORTGAGE INTEREST

Posted by Admin Posted on Dec 01 2021

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If you own a home, and you itemize your deductions on Schedule A, you can claim a deduction for the interest paid. To be deductible, the interest you pay must be on a loan secured by your main home or a second home (including a second home that is also rented out for part of the year, so long as the personal use requirement is met). The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. To be deductible, the loan must be secured by your home but the proceeds can be used for other than home improvements. You can refinance and use the proceeds to pay off credit card debt, go on vacation or buy a car and the interest will remain deductible. There are other financial reasons for not wanting to do this but it will not disqualify the deduction.

The interest deduction for home acquisition debt (that is, a loan taken out after October 13, 1987 to buy, build, or substantially improve a qualified home) is limited to debt of $750,000 ($375,000 if married filing separately).

In addition to the deduction for mortgage interest, points paid on the original purchase of your residence are also generally deductible. Taxpayers who are required to pay mortgage insurance premiums may also be able to deduct this amount subject to certain income limits. For more information about the mortgage interest deduction, see IRS Publication 936.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

HOW CAN I EASILY COMPARE PRICES BETWEEN INSURANCE COMPANIES?

Posted by Admin Posted on Dec 01 2021

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In most states there will be a set of rules laid down by a group of insurance regulators. Agents may be required to calculate two different types of indexes to aid in price shopping.

  • Net payment index
  • Surrender cost index

The net payment index calculates the cost of carrying the policy for ten to twenty years. This can be judged easily by remembering that the lower this number is, the more inexpensive the policy is. This is most helpful if you are more concerned with the death payout than the investment.

On the other hand, the surrender cost index is more useful to those who are concerned with the cash value of the investment. The lower this number is, the better.

The cash surrender value is what you will receive in return if you were to surrender the policy, which is different than the cash accumulation value. If you are checking the prices of universal life policies, if the policies have different premiums and death benefits, the policy with the higher cash surrender value would be the better investment.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source:Thomson Reuters

AMENDED RETURNS

Posted by Admin Posted on Dec 01 2021

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Oops! You've discovered an error after your tax return has been filed. What should you do? You may need to amend your return.

The IRS usually corrects math errors or requests missing forms (such as W-2s) or schedules. In these instances, do not amend your return. However, do file an amended return if any of the following were reported incorrectly:

  • Your filing status
  • Your total income
  • Your deductions or credits

Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed paper or electronically-filed Form 1040, 1040A, or 1040EZ return. Be sure to enter the year of the return you are amending at the top of Form 1040X. If you are amending more than one tax return, use a separate 1040X for each year and mail each in a separate envelope to the IRS processing center for your state. The 1040X instructions list the addresses for the centers.

Form 1040X has three columns. Column A is used to show original or adjusted figures from the original return. Column C is used to show the corrected figures. The difference between the figures in Columns A and C is shown in Column B. You should explain the items you are changing and the reason for each change on the back of the form.

If the changes involve another schedule or form, attach it to the 1040X. For example, if you are filing a 1040X because you have a qualifying child and now want to claim the Earned Income Tax Credit, you must complete and attach a Schedule EIC to the amended return.

If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional tax for the prior year, Form 1040X must be filed and the tax paid by April 15 of this year, to avoid any penalty and interest.

You generally must file Form 1040X to claim a refund within three years from the date you filed your original return, or within two years from the date you paid the tax, whichever is later.  Please contact us for more!

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

4 ways to withdraw cash from a corporation

Posted by Admin Posted on Nov 17 2021

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Owners of closely held corporations often want or need to withdraw cash from the business. The simplest way, of course, is to distribute the money as a dividend. However, a dividend distribution isn’t tax-efficient because it’s taxable to the owner to the extent of the corporation’s earnings and profits. It also isn’t deductible by the corporation. Here are four alternative strategies to consider:

1. Capital repayments. To the extent that you’ve capitalized the corporation with debt, including amounts that you’ve advanced to the business, the corporation can repay the debt without the repayment being treated as a dividend. Additionally, interest paid on the debt can be deducted by the corporation.

This assumes that the debt has been properly documented with terms that characterize debt and that the corporation doesn’t have an excessively high debt-to-equity ratio. If there isn’t proper documentation or the debt-to-equity ratio is too high, the “debt” repayment may be taxed as a dividend. If you make future cash contributions to the corporation, consider structuring them as debt to facilitate later withdrawals on a tax-advantaged basis.

2. Compensation. Reasonable compensation that you, or family members, receive for services rendered to the corporation is deductible by the business. However, it’s also taxable to the recipient(s). This same rule applies to any compensation (in the form of rent) that you receive from the corporation for the use of property.

In both cases, the compensation amount must be reasonable in terms of the services rendered or the value of the property provided. If it’s considered excessive, the excess will be a nondeductible corporate distribution (and taxable to the recipient as a dividend).

3. Property sales. You can withdraw cash from the corporation by selling property to it. However, certain sales should be avoided. For example, you shouldn’t sell property to a more than 50%-owned corporation at a loss, since the loss will be disallowed. And you shouldn’t sell depreciable property to a more than 50%-owned corporation at a gain, since the gain will be treated as ordinary income, rather than capital gain.

A sale should be on terms that are comparable to those in which an unrelated third party would purchase the property. You may need to obtain an independent appraisal to establish the property’s value.

4. Loans. You can withdraw cash tax-free from the corporation by borrowing money from it. However, to prevent having the loan characterized as a corporate distribution, it should be properly documented in a loan agreement or note. It should also be made on terms that are comparable to those in which an unrelated third party would lend money to you, including a provision for interest (at least equal to the applicable federal rate) and principal. Also, consider what the corporation’s receipt of interest income will mean.

These are just a few ideas. If you’re interested in discussing these or other possible ways to withdraw cash from a closely held corporation, contact us. We can help you identify the optimal approach at the lowest tax cost.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters        

Special tax deduction helps most people give up to $600 to charity, even if they don’t itemize

Posted by Admin Posted on Nov 17 2021

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The Internal Revenue Service reminds taxpayers that a special tax provision will allow more Americans to easily deduct up to $600 in donations to qualifying charities on their 2021 federal income tax return.

Ordinarily, people who choose to take the standard deduction cannot claim a deduction for their charitable contributions. But a temporary law change now permits them to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to qualifying charitable organizations. Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify.

Under this provision, individual tax filers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions made

to qualifying charities during 2021. The maximum deduction is increased to $600 for married individuals filing joint returns.

Included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, a more limited version of this temporary tax benefit originally only applied to tax-year 2020. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, generally extended it through the end of 2021.

Cash contributions include those made by check, credit card or debit card as well as amounts incurred by an individual for unreimbursed out-of-pocket expenses in connection with their volunteer services to a qualifying charitable organization. Cash contributions don't include the value of volunteer services, securities, household items or other property.

The IRS reminds taxpayers to make sure they're donating to a recognized charity. To receive a deduction, taxpayers must donate to a qualified charity. To check the status of a charity, they can use the IRS Tax Exempt Organization Search tool.

Cash contributions to most charitable organizations qualify. But contributions made either to supporting organizations or to establish or maintain a donor advised fund do not. Contributions carried forward from prior years do not qualify, nor do contributions to most private foundations and most cash contributions to charitable remainder trusts.

In general, a donor-advised fund is a fund or account maintained by a charity in which a donor can, because of being a donor, advise the fund on how to distribute or invest amounts contributed by the donor and held in the fund. A supporting organization is a charity that carries out its exempt purposes by supporting other exempt organizations, usually other public charities.

Keep good records

Special recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes obtaining an acknowledgment letter from the charity before filing a return and retaining a cancelled check or credit card receipt for contributions of cash.

For details on the recordkeeping rules for substantiating gifts to charity, see Publication 526, Charitable Contributions, available on IRS.gov.

Remind families about the Child Tax Credit

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS 

IRS issues another 430,000 refunds for adjustments related to unemployment compensation

Posted by Admin Posted on Nov 17 2021

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The Internal Revenue Service recently sent approximately 430,000 refunds totaling more than $510 million to taxpayers who paid taxes on unemployment compensation excluded from income for tax year 2020.

The IRS efforts to correct unemployment compensation overpayments will help most of the affected taxpayers avoid filing an amended tax return. So far, the IRS has identified over 16 million taxpayers who may be eligible for the adjustment. Some will receive refunds, while others will have the overpayment applied to taxes due or other debts.

The American Rescue Plan Act (ARPA) of 2021, enacted in March, excluded the first $10,200 in unemployment compensation per taxpayer paid in 2020. The $10,200 is the amount excluded when calculating one's adjusted gross income (AGI); it is not the amount of refund. The exclusion applied to individuals and married couples whose modified adjusted gross income was less than $150,000.

Earlier this year, the IRS began its review of tax returns filed prior to the enactment of ARPA to identify the excludible unemployment compensation. To date, the IRS has issued over 11.7 million refunds totaling $14.4 billion. This latest batch of corrections affected over 519,000 returns, with 430,000 taxpayers receiving refunds averaging about $1,189.

The review of returns and processing corrections is nearly complete as the IRS already reviewed the simplest returns and is now concentrating on more complex returns. The IRS plans to issue another batch of corrections before the end of the year.

Impacted taxpayers will generally receive letters from the IRS within 30 days of the adjustment, informing them of what kind of adjustment was made (refund, payment of IRS debt payment or payment offset for other authorized debts) and the amount of the adjustment.

The IRS also is making corrections for Earned Income Tax Credit, Additional Child Tax Credit, American Opportunity Credit, Premium Tax Credit and Recovery Rebate Credit amounts affected by the exclusion. Most taxpayers need not take any action and there is no need to call the IRS.

The IRS will be sending notices in November and December to individuals who did not claim the Earned Income Tax Credit or the Additional Child Tax Credit but may now be eligible for them.

These notices are not confirmation that they are eligible for these credits and will require a response from the taxpayer if eligible rather than filing an amended return. For taxpayers who become eligible for other credits and/or deductions after the exclusion is calculated but not claimed on their original return, they must file a Form 1040-X, Amended U.S. Individual Income Tax Return, to claim any new benefits.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS 

Is disability income taxable?

Posted by Admin Posted on Nov 17 2021

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Many Americans receive disability income. If you’re one of them or know someone who is, you may wonder whether it’s taxable. As is often the case with tax questions, the answer is “it depends.”

Key factor

The key factor is who paid the disability income (or who paid for the disability insurance funding the income). If the income is paid directly to you by your employer, it’s taxable to you as ordinary salary or wages would be. Taxable disability benefits are also subject to federal income tax withholding, though, depending on the disability plan, they sometimes aren’t subject to Social Security tax.

Frequently, disability payments aren’t made by the employer but by an insurer under a policy providing disability coverage or under an arrangement having the effect of accident or health insurance. In such cases, the tax treatment depends on who paid for the coverage. If your employer paid for it, then the income is taxable to you just as if paid directly to you by the employer. On the other hand, if it’s a policy you paid for, the payments you receive under it aren’t taxable.

Even if your employer arranges for the coverage (in other words, it’s a policy made available to you at work), the benefits aren’t taxed to you if you pay the premiums. For these purposes, if the premiums are paid by the employer but the amount paid is included as part of your taxable income from work, the premiums are treated as paid by you.

Two examples

Let’s say your salary is $1,000 a week ($52,000 a year). Under a disability insurance arrangement made available to you by your employer, $10 a week ($520 for the year) is paid on your behalf by your employer to an insurance company. A total of $52,520 is included in income as your wages for the year on your W-2 form: the $52,000 paid to you plus the $520 in disability insurance premiums. In this case, the insurance is treated as paid for by you. If you become disabled and receive benefits, they aren’t taxable income to you.

Now, let’s look at an example with the same facts as above but with one exception: Only $52,000 is included in income as your wages for the year on your W-2 because the amount paid for the insurance coverage qualifies as excludable under the rules for employer-provided health and accident plans. In this case, the insurance is treated as paid for by your employer. If you become disabled and receive benefits, they are taxable income to you.

Note: There are special rules in the case of a permanent loss (or loss of the use) of a part or function of the body, or a permanent disfigurement.

Any questions?

This discussion doesn’t cover the tax treatment of Social Security disability benefits, which may be taxed under different rules. Contact us if you’d like to discuss this further or have questions about regular disability income.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters        

TAX SAVING TECHNIQUE

Posted by Admin Posted on Nov 09 2021

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Charitable Giving - Instead of selling your appreciated long-term securities, donate the stock instead and avoid paying tax on the unrealized gain while still getting a charitable tax deduction for the full fair market value.

Health Savings Accounts (HSAs) - If you have a high deductible medical plan you can open an HSA and make tax deductible contributions to your account to pay for medical expenses. Unlike flexible spending arrangements (FSAs), the contributions can carry over for medical expenses in future years.

ROTH IRAs - Contributions to a ROTH IRA are not tax deductible but the qualified distributions, including earnings are tax-free.

Municipal Bonds - Interest earned on these types of investments is tax-exempt.

Own a home - most of the cost of this type of investment is financed and the interest (on mortgages up to $750,000) is tax deductible. When the property is sold, individuals may exclude up to $250,000 ($500,000 if married jointly) of the gain.

Retirement Plans - Participate in your employer sponsored retirement plan, especially if there is a matching component. You will receive a current tax deduction and the tax-deferred compounding can add up to a large retirement savings.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

CREDIT FOR THE ELDERLY OR DISABLED

Posted by Admin Posted on Nov 09 2021

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You may be able to take the Credit for the Elderly or the Disabled if you were age 65 or older at the end of last year, or if you are retired on permanent and total disability, according to the IRS. Like any other tax credit, it's a dollar-for-dollar reduction of your tax bill. The maximum amount of this credit is constantly changing.

You can take the credit for the elderly or the disabled if:

  • You are a qualified individual,
  • Your nontaxable income from Social Security or other nontaxable pension is less than $3,750 to $7,500 (also depending on your filing status).

Generally, you are a qualified individual for this credit if you are a U.S. citizen or resident at the end of the tax year and you are age 65 or older, or you are under 65, retired on permanent and total disability, received taxable disability income, and did not reach mandatory retirement age before the beginning of the tax year.

If you are under age 65, you can qualify for the credit only if you are retired on permanent and total disability. This means that:

  • You were permanently and totally disabled when you retired, and
  • You retired on disability before the end of the tax year.

Even if you do not retire formally, you are considered retired on disability when you have stopped working because of your disability. If you feel you might be eligible for this credit, please contact us for assistance.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

THE RIGHT TO BE INFORMED

Posted by Admin Posted on Nov 09 2021

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Taxpayers have the right to know what they need to do to comply with tax laws. They are entitled to clear explanations of the law and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.

What This Means for You

If you receive a notice fully or partially disallowing your refund claim, including a refund you claim on your income tax return, it must explain the specific reasons why the claim is being disallowed. IRC § 6402(l)

Generally, if you owe a penalty, each written notice of such penalty must provide an explanation of the penalty, including the name of the penalty, the authority under the Internal Revenue Code, and how it is calculated. IRC § 6751(a)

During an in-person interview with the IRS as part of an audit, the IRS employee must explain the audit process and your rights under that process. Likewise, during an in-person interview with the IRS concerning the collection of your tax, the IRS employee must explain the collection process and your rights under that process. IRC § 7521(b)(1)

Generally, the IRS uses Publication 1, Your Rights as a Taxpayer to meet this requirement.

The IRS must include on certain notices the amount (if any) of the tax, interest, and certain penalties you owe and must explain why you owe these amounts. IRC § 7522

The IRS must inform you in certain publications and instructions that when you file a joint income tax return with your spouse, both of you are responsible for all tax due and any additional amounts due for that tax year, unless “innocent spouse” relief applies. RRA 98 § 3501(a)

The IRS must inform you in Publication 1 Your Rights as a Taxpayer and all collection related notices that in certain circumstances you may be relieved of all or part of the tax owed with your joint return. This is sometimes referred to as “innocent spouse relief.” RRA 98 § 3501(b)

The IRS must explain in Publication 1 Your Rights as a Taxpayer how it selects which taxpayers will be audited. RRA 98 § 3503

If the IRS proposes to assess tax against you, it will send you a letter providing the examination report, stating the proposed changes, and providing you with the opportunity for a review by an Appeals Officer if you respond generally within 30 days. This letter, which in some cases is the first communication from the examiner, must provide an explanation of the entire process from examination (audit) through collection and explain that the Taxpayer Advocate Service may be able to assist you. RRA § 3504

Generally, Publication 3498, The Examination Process, or Publication 3498-A The Examination Process (Audits by Mail) is included with this letter.

If you enter into a payment plan, known as an installment agreement, the IRS must send you an annual statement that provides how much you owe at the beginning of the year, how much you paid during the year, and how much you still owe at the end of the year. RRA § 98 3506, Treas. Reg. § 301.6159-1(h)

You have the right to access certain IRS records, including instructions and manuals to staff, unless such records are required or permitted to be withheld under the Internal Revenue Code, the Freedom of Information Act, or the Privacy Act. Certain IRS records must be available to you electronically.

If the IRS is proposing to adjust the amount of tax you owe, you will typically be sent a statutory notice of deficiency, which informs you of the proposed change. This notice provides you with a right to challenge the proposed adjustment in Tax Court without first paying the proposed adjustment. To exercise this right, you must file a petition with the Tax Court within 90 days of the date of the notice being sent (or 150 days if the taxpayer’s address on the notice is outside the United States or if the taxpayer is out of the country at the time the notice is mailed). Thus, the statutory notice of deficiency is your ticket to Tax Court. IRC §§ 6212; 6213(b)

For more information about the United States Tax Court, see the Court’s taxpayer information page.

The IRS should ensure that its written guidance and correspondence is accessible, consistent, written in plain language, and easy to understand.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

Source: TAS               

EVERY BUSINESS OWNER NEEDS AN EXIT STRATEGY

Posted by Admin Posted on Nov 09 2021

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As a business owner, you have to keep your eye on your company’s income and expenses and applicable tax breaks. But you also must look out for your own financial future. And that includes creating an exit strategy.

Buy-sell agreement

When a business has more than one owner, a buy-sell agreement can be a powerful tool. The agreement controls what happens to the business if a specified event occurs, such as an owner’s retirement, disability or death. A well-drafted agreement provides a ready market for the departing owner’s interest in the business and prescribes a method for setting a price for that interest. It also allows business continuity by preventing disagreements caused by new owners.

A key issue with any buy-sell agreement is providing the buyer(s) with a means of funding the purchase. Life or disability insurance often helps fulfill this need and can give rise to several tax issues and opportunities. One of the biggest advantages of life insurance as a funding method is that proceeds generally are excluded from the beneficiary’s taxable income, provided certain conditions are met.

Succession within the family

You can pass your business on to family members by giving them interests, selling them interests or doing some of each. Be sure to consider your income needs, the tax consequences, and how family members will feel about your choice.

Under the annual gift tax exclusion, you can currently gift up to $15,000 of ownership interests without using up any of your lifetime gift and estate tax exemption. Valuation discounts may further reduce the taxable value of the gift.

With the gift and estate tax exemption approximately doubled through 2025 ($11.4 million for 2019), gift and estate taxes may be less of a concern for some business owners. But others may want to make substantial transfers now to take maximum advantage of the high exemption. What’s right for you will depend on the value of your business and your timeline for transferring ownership.

Get started now

To be successful, your exit strategy will require planning well in advance of retirement or any other reason for ownership transition. Please contact us for help.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

Source: Thomson Reuters                   

Is an Offer in Compromise Right for You?

Posted by Admin Posted on Oct 26 2021

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What is an Offer in Compromise?

An offer in compromise (offer) allows you to settle your tax debt for less than the full amount you owe. There are three types of offers. We will focus on Doubt as to Liability Offers first.

Doubt as to Liability (DATL) offer – You have a legitimate doubt you owe all or part of the tax debt.

  • DATL offers are submitted using Form 656-L, Offer in Compromise (Doubt as to Liability).
  • No deposit or application fee is required for this type offer. However, you do need to offer at least $1, based on what you believe the correct amount of tax should be. If you believe you don’t owe any tax, refer to the instructions in Form 656-L for other alternatives to a DATL offer.

What to send with a DATL offer

  •  Pages 5-8 of Form 656-L.
  •  A written statement explaining why the tax debt (or part of the debt) is incorrect.
  •  Supporting documentation that will help the IRS identify the reason(s) you doubt the accuracy.
  •  If supporting documentation is not available and you cannot reconstruct your books and records, you should provide a detailed explanation as to why the tax debt or portion of the tax debt is incorrect.

Where to send your DATL offer

Mail your offer package to:
Brookhaven Internal Revenue Service, COIC Unit
P.O. Box 9008, Stop 681-D
Holtsville, NY 11742-9008

Due to the ongoing impact of COVID-19 on IRS operations, please visit IRS Operations During COVID-19: Mission-critical functions continue for any updates before mailing your offer package.

Next, let’s discuss the other two types of offers.

Doubt as to Collectibility (DATC) offer – You agree that you owe the debt, but you can’t afford to pay it in full and pay your basic living expenses at the same time.

Effective tax administration (ETA) offer – You have enough income and assets to pay the full amount and there is no doubt that the tax is legally owed but doing so would create a hardship for you. ETA offers may also be considered if it would be unfair and inequitable to require you to pay the full amount because of exceptional circumstances. ETA offers are only available if you don’t qualify for the first two types of offers.

What you need to know before filing a DATC or ETA offer

For DATC and ETA offers, the IRS will first determine if your debt can be paid in full through a monthly installment agreement. You should consider if an installment agreement is an option. Since the amount of your offer will be based on your “reasonable collection potential,” TAS encourages you to use the Offer In Compromise Pre-Qualifier tool to see if you qualify for an offer. Use of this tool is not a guarantee of offer acceptance.

What to send with a DATC or ETA offer

  • Completed Form 656, Offer in Compromise. This form is part of the Form 656-Booklet, Offer in Compromise.
  • Financial forms to let the IRS know about your monthly income, expenses, assets, and liabilities. These forms are also part of the Form 656-Booklet.
  • Individuals submitting either a DATC or ETA offer should complete Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals. Be sure to consider national and local standards when you list your expenses.
  • Businesses submitting either a DATC or ETA offer should complete Form 433-B (OIC), Collection Information Statement for Businesses.
  • Copies of all verification documents listed in the checklist on Form 433-A (OIC) for individuals, or Form 433-B (OIC) for businesses.
  • Your offer payment and application fee. See the next section for more details.

How much to pay with your DATC or ETA offer

  • You must submit an initial payment with your offer in compromise unless you are an individual who qualifies for a low-income waiver.
  • If you want to pay your offer in a lump sum, you need to pay 20 percent of the amount you offer with your offer package.
  • If you want to pay your offer in periodic payments (over no more than a two-year period), you need to include your first payment with your offer package.
  • OIC application fee, currently $205, unless you qualify for the low-income waiver. If you qualify for this waiver, be sure to check the low-income certification box in Section 1 of Form 656.

Where to send your DATC or ETA offer

Mail your offer package based on where you live.

If you reside in:

Mail your offer package to:

AZ, CA, CO, HI, ID, KY, MS, NM, NV, OK, OR, TN, TX, UT, WA

Memphis IRS Center COIC Unit
P.O. Box 30803, AMC
Memphis, TN 38130-0803

AK, AL, AR, CT, DC, DE, FL, GA, IA, IL, IN, KS, LA, MA, MD, ME, MI, MN, MO, MT, NC, ND, NE, NH, NJ, NY, OH, PA, PR, RI, SC, SD, VA, VT, WI, WV, WY, or have a foreign address

Brookhaven IRS Center COIC Unit P.O. Box 9007 Holtsville, NY 11742-9007

Due to the ongoing impact of COVID-19 on IRS operations, please visit IRS Operations During COVID-19: Mission-critical functions continue for any updates before mailing your offer package.

When is the IRS unable to consider your DATC or ETC offer?

Your offer cannot be considered if:

  • You are in bankruptcy.
  • You did not include an application fee or check the low-income certification box on Form 656.
  • You did not include the required initial payment with the offer (20 percent of the offered amount for lump sum offers or the first payment for periodic offers) or check the low-income certification box in the applicable section of Form 656.
  • Your case is with the Department of Justice.
  • There are no debts on your account, i.e., your tax refund paid your debt in full and there are no other outstanding debts.
  • The collection statute expiration date (CSED) has expired for all tax liabilities included in your offer.

You have not filed all your tax returns and received a bill from the IRS for at least one tax liability.

  • You have not made all required estimated tax payments for the current year.
  • You are a business owner with employees, and have not made all required federal tax deposits for the current quarter.
  • Your debt is the result of a restitution amount ordered by a court or a tax debt that has been reduced to judgment.

More information

  • If the IRS is unable to consider your offer, it will return your application fee but not your partial payment.
  • Even if your offer can be considered, it may be returned for several reasons, for example if you don’t provide the necessary paperwork or you fail to stay in filing and payment compliance while the IRS considers your offer.
  • The employee assigned to your case may request additional documentation from you. It’s important to respond quickly and ask for more time if you need it.
  • If your offer is returned, you may have the right to contest that decision.
  • While your offer is being considered you can generally expect no new levies to be filed, but the IRS may file a Notice of Federal Tax Lien.
  • If your offer is accepted, the IRS will hold your refunds through the calendar year in which your offer is accepted.
  • If your offer is rejected, you can appeal that decision with Form 13711, Request for Appeal of Offer in Compromise.
  • You must file and pay your taxes on time for five years after your offer is accepted. If you don’t, the IRS can terminate the offer and reinstate your full liability including accrued penalties and interest, minus any OIC payments and refunds applied after acceptance of the offer.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS   

Decoding IRS Transcripts and the New Transcript Format: Part II

Posted by Admin Posted on Oct 26 2021

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Reading and Understanding IRS Transcripts 

While IRS transcripts can be helpful, reading and understanding them can be complicated. The IRS’s processing system, the Integrated Data Retrieval System (IDRS), uses a system of codes to identify a transaction the IRS is processing and to maintain a history of actions posted to a taxpayer’s account. These Transaction Codes (TCs) basically provide processing instructions to the IRS’s system. To make IRS transcripts user-friendly for the public, the IRS provides a literal description of each TC shown on a taxpayer’s IRS transcript. Although helpful, sometimes these descriptions don’t adequately explain the account transaction.  Document 11734, Transaction Code Pocket Guide, is a summarized list of TCs taken from section 8A of the IRS’s Document 6209, ADP and IDRS Information Reference Guide, both of which may be helpful when reviewing an IRS transcript. 

A Closer Look at the IRS Record of Account Transcript 

As shown in the fictitious example below, the Record of Account Transcript will summarize any balance due or overpayment on a taxpayer’s account for the specified year at the top of the form. If the account reflects a balance due, the transcript provides the date to which any accrued penalty and interest were calculated. Next, the transcript will show specific information from the taxpayer’s return – or the corrected amounts resulting from any changes to the return caused by either a request from the taxpayer or an IRS determination. This is noteworthy should a taxpayer find it necessary to file an amended return. The correct figures must be used as the starting point on Form 1040X, Amended US Individual Income Tax Return, when requesting any subsequent account adjustments – otherwise, processing problems may occur. 

Figure 1 

The Tax Account Portion of the Record of Accounts 

This section of the Record of Accounts Transcript provides details regarding the taxpayer’s account activity, as shown in Figure 2. 

Figure 2
 

Some of the common TCs on the tax account portion of a transcript are: 

  • TC 150 – Date of filing and the amount of tax shown on the taxpayer’s return when filed – or as corrected by the IRS when processed; 
  • TC 196 – Interest Assessed; 
  • TC 276 – Failure to Pay Tax Penalty; 
  • TC 291 – Abatement Prior Tax Assessment; 
  • TC 300 – Additional Tax or Deficiency Assessment by Examination Division or Collection Division; 
  • TC 420 – Examination Indicator reflects that a return is under examination consideration though the return may or may not ultimately be audited; 
  • TC 428 – Examination or Appeals Case Transfer; 
  • TC 460 – Extension of Time for Filing; 
  • TC 480 – Offer in Compromise Pending; 
  • TC 494 – Notice of Deficiency; 
  • TC 520 – IRS Litigation Instituted; 
  • TC 530 – Indicates that an account is currently not collectible; 
  • TC 582 – Lien Indicator; 
  • TC 768 – Earned Income Credit; 
  • TC 806 – Reflects any credit the taxpayer is given for tax withheld, as shown on the tax return and the taxpayer’s information statements such as Forms W-2 and 1099 attached to the taxpayer’s tax return; and 
  • TC 846 – Represents the issuance of a taxpayer’s refund if the credits and withholding exceed the amount of tax due, and there are no issues with the return, the system will automatically generate a refund. 

In the above example, tax credits, withholding credits, credits for interest the IRS owes to a taxpayer, and tax adjustments that reduce the amount of tax owed, are shown as negative amounts on the tax account transcript. In other words, negative amounts on an IRS transcript can be considered amounts “in the taxpayer’s favor.” 

Because TCs on a taxpayer’s account are essentially instructions to the IRS system, it is important to note that some TCs are input for informational reasons not directly associated with an accounting-related dollar amount. 

I hope we have not confused you. Using the IRS’s Pocket Guide should help you understand the transcript and provide you with the key information you are seeking. 

The Tax Return Portion of the Record of Accounts 

The tax return portion of the Record of Accounts depicts most of the line entries on the taxpayer’s tax return when it was filed. Figure 3 provides only the income section of our fictitious example; however, the actual Record of Accounts will depict all the sections of a taxpayer’s filed tax return and can be useful when the taxpayer has not maintained a copy of his or her return and needs to know what was reported to the IRS on his or her return.  

Figure 3
 

New Tax Transcript Format and Utilizing a Customer File Number 

In July 2021, IRS updated a webpage on IRS.gov to educate taxpayers regarding the new transcript format and use of the “customer file number,” which was designed to better protect taxpayer data. This new format partially masks personally identifiable information. However, financial data will remain visible to allow for tax return preparation, tax representation, or income verification. These changes apply to transcripts for both individual and business taxpayers. 

Here’s what is visible on the new tax transcript format: 

  • Last four digits of any Social Security number on the transcript: XXX-XX-1234; 
  • Last four digits of any Employer Identification Number on the transcript: XX-XXX1234; 
  • Last four digits of any account or telephone number; 
  • First four characters of first name and first four characters of the last name for any individual (first three characters if the name has only four letters); 
  • First four characters of any name on the business name line (first three characters if the name has only four letters); 
  • First six characters of the street address, including spaces; and 
  • All money amounts, including wage and income, balance due, interest, and penalties. 

For security reasons, the IRS no longer offers fax service for most transcript types to both taxpayers and third parties and has stopped its third-party mailing service via Forms 4506, 4506-T, and 4506T-EZ. 

Lenders and others who use the Forms 4506 series to obtain transcripts for income verification purposes should consider other options such as participating in the Income Verification Express Service or having the customer provide the transcript. 

Only individual taxpayers may use Get Transcript Online or Get Transcript by Mail.  Because the full Taxpayer Identification Number is no longer visible, the IRS created an entry for a Customer File Number. The Customer File Number is a ten-digit number assigned by the third-party, for example, a loan number that can be manually entered when the taxpayer completes his or her Get Transcript Online or Get Transcript by Mail request. This Customer File Number will then display on the transcript when it is downloaded or mailed to the taxpayer. The transcript’s Customer File Number serves as a tracking number that enables a lender or other third party to match the transcript to the taxpayer making the transcript request.       

Conclusion 

Taxpayers needing tax return, tax account, or information return information may quickly find what they need through the IRS’s Get Transcript Online portal or their online account. I continue to urge the IRS to expand the Online Account functionality and increase its availability to practitioners and businesses. The current functionalities provide many basic and helpful information, and I look forward to continued expansion of functionality. Transcripts are free and provide a wealth of information. I encourage taxpayers to explore this option. If an IRS transcript can meet a taxpayer’s needs, it may be preferable to trying to contact the IRS or other more time-consuming methods of requesting tax account information. 

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS         

Feel like you are not responsible for a debt owed by your spouse or ex-spouse?

Posted by Admin Posted on Oct 26 2021

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Saying “I do” doesn’t necessarily mean you’re responsible for your spouse’s or ex-spouse’s debts.

If your spouse has a debt (this debt could be for any number of things – child support, spousal support, a federal debt (e.g., student loans), or a federal tax debt) and you file your taxes using the Married-Filing-Joint tax filing status, the IRS can apply your refund to one of these debts, which is known as an “offset”. Or they can take a collection action against you for the tax debt you and your spouse owe, such as filing of the Notice of Federal Tax Lien or issuing a levy. However, if you’re not legally responsible for the past-due amount, you may still be entitled to receive your share of the refund or request relief from joint and several liability, depending on the facts of the situation.

In some situations, you may agree that you are responsible for the debt. If this is the case, you can either do nothing and let the refund be applied or if that doesn’t cover the entire debt, you can seek payment options with the agency the debt is owed to.

But if you feel you are not responsible for the debt, there are two way to request relief – through Injured Spouse and Innocent Spouse Procedures.

1.   An injured spouse status involves obtaining a refund of a spouse’s interest in an overpayment that has been offset by the IRS. See IRC Section 6402.

2.   Innocent spouse status relieves a spouse of the responsibility for paying taxes that are owed jointly and severally with the other spouse. See IRC Sections 66 and 6015.

Below is short introduction of the two procedures for which you may be eligible based on your particular facts and circumstances:

Injured Spouse: You can request that you be treated as an injured spouse, if you filed a joint tax return and all or part of a refund is taken to pay a debt owed only by your spouse and not you. See the Injured Spouse page for step-by-step instructions for filing this claim and what information is needed. We also have a short video that explains what injured spouse means and when to file a claim.

Innocent Spouse: In general, if you file married filing jointly both of you are responsible for federal taxes owed. This is called joint and several liability, meaning the IRS can collect a joint liability from either you or your spouse even if you’ve divorced after you filed a joint tax return.

However, for instances involving individual earned income or self-employment taxes only, by requesting innocent spouse relief, you can be considered for relief of responsibility from paying tax, interest, and penalties, if your spouse (or former spouse) improperly reported items or omitted items on your tax return. For example, Household Employment taxes, Individual Shared Responsibility payments, and business taxes and trust fund recovery penalty for employment taxes are not eligible for innocent spouse relief.

The three types of relief available are:

  • Innocent spouse relief
  • Separation of liability
  • Equitable relief

Each type of relief has different requirements. See IRS Publication 971 for more information.
If you still can’t find the information you need in Publication 971, see these other resources to help you determine if you should file for Innocent Spouse relief:

If you file an Innocent Spouse claim, but the IRS denies your claim and you still disagree, see Appeal an Innocent Spouse Determination for next steps to take.

Additional help

In either of the above situations, if you have taken the required steps and filed the proper claim information timely, but you are still unable to resolve the issue, see if you qualify for help from the Taxpayer Advocate Service.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS     

I got a notice or letter from the IRS – now what do I do?

Posted by Admin Posted on Oct 26 2021

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The IRS will send a notice or a letter for any number of reasons, including: 

  • Identifying a specific issue on your federal tax return or account that needs action; 
  • Explaining changes to your return or account; 
  • Asking for missing or more information; or 
  • Requesting a payment. 

You can handle most of this correspondence without calling, visiting an IRS office, or involving the Taxpayer Advocate Service (TAS) by following the instructions in the notice or letter. 

However, sometimes these letters or notices can be confusing and hard to understand. Here are some tips to help you when you receive a notice or letter from the IRS. 

1. Determine the reason the notice or letter was sent 

Your notice or letter will explain the reason for the contact and give you instructions on how to handle the issue. If you need help understanding the information provided, the IRS has a Search Notice and Letters feature on the Understanding Your IRS Notice or Letter page. TAS also has a tool called the Taxpayer Roadmap, which includes copies of common letters and notices that you can use. 

You can find the notice (CP) or letter (LTR) number on either the top or the bottom right-hand corner of your correspondence. Once you find it, you can enter that number in the search feature and you will be taken to a corresponding page that has more general information that may help. 

The Taxpayer Advocate Service has a GET HELP section on various topics that can lead you through important information and steps and actions necessary to help you resolve many common tax issues. 

2. Do I need to reply? 

Whether you need to reply or not will depend on the issue. 

If you agree with the information or change listed on the notice or letter, generally there is no need to reply. If the action causes a balance due, then you should take action immediately. Other times, even if you do agree, you may need to provide specific information to resolve the issue, particularly if you need to verify your identity. 

If you disagree, you will need to act as soon as possible, as penalties and interest may be accruing, depending on the circumstances. The letter should outline what that action is and include a due date for your response. 

Whether you agree or not, if it requires a reply – do not delay! Delaying can create more issues. See more on this below. 

3. When to respond 

If your notice or letter requires a response by a specific date, there are many reasons you’ll want to comply. Here are just a few: 

  • minimize additional interest and penalty charges; 
  • prevent further action from being taken on the account or against you; and 
  • preserve your appeal rights if you don’t agree. 

If you need more time to respond than the notice or letter indicates, contact the IRS using the contact information included on the notice or letter or call the general number, shown below, but only if a specific contact is not indicated. 

4. How and where to reply 

All notices and letters should tell you where to send your response, whether it’s to a mailing address or fax number. (Note: The IRS generally does not allow communication via email yet, although they are currently working on developing some alternative digital communication options.) 

Follow the instructions in your notice or letter. See the IRS Operational status page for IRS customer service timeframes and updates as there are still some delays due to the ongoing pandemic. 

5. What if I want to talk to someone? 

Each notice or letter should include contact information. Some phone numbers on notices or letters are general IRS toll-free numbers, but if a specific employee is working your case, it will show a specific phone number to reach that employee or the department manager. The telephone number is usually found in the upper right-hand corner of your notice or letter. 

As a last resort, you can use the IRS toll-free number at 800-829-1040. Have a copy of your tax return and the correspondence available when you call. But your best option is to use the specific number or address provided. 

6. Wait – I still need help 

You can resolve most notices or letters without help, but you can also get the help of a professional – either the person who prepared your return, or another tax professional

If you can’t afford to hire a tax professional to assist you, you may be eligible for free or low cost representation from an attorney, certified public accountant, or enrolled agent associated with a Low Income Taxpayer Clinic (LITC). In addition, LITCs can help if you speak English as a second language and need help understanding the notice or letter. For more information or to find an LITC near you, see the LITC page at www.taxpayeradvocate.irs.gov/litcmap or IRS Publication 4134, Low Income Taxpayer Clinic List. 

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS                                    

Create an Online Account to view your balances, make payments, get transcripts, and more

Posted by Admin Posted on Oct 26 2021

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The IRS offers an online account application for individual taxpayers. With online account access, you can view: 

  • The total amount you owe, including balance details by year; 
  • Your payment history and any scheduled or pending payments 
  • Key information from your most recent tax return; 
  • Payment plan details, if you have one; 
  • Digital copies of select notices from the IRS; 
  • Your Economic Impact Payments, if any; 
  • Your address on file; and 
  • Authorization requests from tax professionals. 

You can also: 

  • Make a payment online; 
  • See payment plan options and request a plan via Online Payment Agreement; 
  • Access your tax records via Get Transcript; and 
  • Approve or reject authorization requests from tax professionals. 

However, some taxpayers have difficulty satisfying the Identification (ID) authentication requirements of the application. These requirements are necessary to screen out unauthorized access and to prevent potential hacks of taxpayer information. Read on to learn how to pass these ID requirements and enroll. 

To register for an online services account, you will need the following: 

  • Email address; 
  • Social Security Number (SSN) or Individual Tax Identification Number (ITIN); 
  • Tax filing status and mailing address; 
  • One financial account number linked to your name: 
  • Last 8 digits of a credit card number (other than American Express, debit or corporate cards); 
  • Student loan account number, unless issued by Nelnet; 
  • Mortgage or home equity loan number; 
  • Home equity line of credit (HELOC) account number; or 
  • Auto loan number; and 
  • Mobile phone linked to your name (for faster registration) or ability to receive an activation code by mail

Please note that your account balance will update only once every 24 hours, usually overnight, and check/money order payments may take up to three weeks to appear on your account. 

you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at  If 305-274-5811.

Source: TAS                

USE CAPITAL LOSSES TO OFFSET CAPITAL GAINS

Posted by Admin Posted on Oct 26 2021

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When is a loss actually a gain? When that loss becomes an opportunity to lower tax liability, of course. Now’s a good time to begin your year-end tax planning and attempt to neutralize gains and losses by year end. To do so, it might make sense to sell investments at a loss in 2018 to offset capital gains that you’ve already realized this year.

Now and later

A capital loss occurs when you sell a security for less than your “basis,” generally the original purchase price. You can use capital losses to offset any capital gains you realize in that same tax year — even if one is short term and the other is long term.

When your capital losses exceed your capital gains, you can use up to $3,000 of the excess to offset wages, interest and other ordinary income ($1,500 for married people filing separately) and carry the remainder forward to future years until it’s used up.

Research and replace

Years ago, investors realized it could be beneficial to sell a security to recognize a capital loss for a given tax year and then — if they still liked the security’s prospects — buy it back immediately. To counter this strategy, Congress imposed the wash sale rule, which disallows losses when an investor sells a security and then buys the same or a “substantially identical” security within 30 days of the sale, before or after.

Waiting 30 days to repurchase a security you’ve sold might be fine in some situations. But there may be times when you’d rather not be forced to sit on the sidelines for a month.

Fortunately, there’s an alternative. With a little research, you might be able to identify a security in the same sector you like just as well as, or better than, the old one. Your solution is now simple and straightforward: Simultaneously sell the stock you own at a loss and buy the competitor’s stock, thereby avoiding violation of the “same or substantially identical” provision of the wash sale rule. You maintain your position in that sector or industry and might even add to your portfolio a stock you believe has more potential or less risk.

If you bought shares of a security at different times, give some thought to which lot can be sold most advantageously. The IRS allows investors to choose among several methods of designating lots when selling securities, and those methods sometimes produce radically different results.

Good with the bad

Investing always carries the risk that you will lose some or even all of your money. But you have to take the good with the bad. In terms of tax planning, you can turn investment losses into opportunities — and potentially end the year on a high note.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

Need options for when you owe federal taxes, but can’t pay in full?

Posted by Admin Posted on Oct 26 2021

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The best-case scenario is to pay your taxes in full (Easy Payment Methods explained video) by the due date of the tax return (May 17, 2021 for your 2020 returns), because otherwise both a failure to pay penalty and interest will may continue to be assessed until it is fully paid.

However, due to the lingering effects of COVID-19, many people are facing financial difficulties. So, if you are unable to pay your taxes in full, the IRS has several options that you can consider based on your financial situation.

Here’s a summary of some of the options available and links to get more information and how start the process of making the type of request you choose.

  • Payment Plans – the IRS provides a variety of payment plan options, including the ability to apply online for a payment plan. The benefit to applying online is once you complete your online application you will receive immediate notification of whether your payment plan has been approved. Also, if you run into trouble, this option allows you to “chat” online with an IRS assistor to help you finish the process or get other guidance on further options. Setup fees may be higher if you apply for a payment plan by phone, mail, or in-person.

The availability of a payment plan will depend on your income, the amount owed, and how long it will take to pay. In some cases, there are both short-term and long-term options available, again, depending on the amount you owe. The information on this page will tell you all you need to know about payment plans. In some cases, you can set up a payment plan to automatically deduct payments from banking accounts, paychecks or you can make payments electronically or mail-in payments yourself. In most instances, you can also choose your payment date too.

Can’t pay now – If the IRS determines that you cannot pay any of your tax debt at this time, they may report your account as currently not collectible (CNC) and temporarily delay collection until your financial condition improves. Being designated as CNC does not mean the debt goes away, it means the IRS has determined you cannot afford to pay the debt at this time. Prior to approving your request to delay collection, the IRS may ask you to complete a Collection Information Statement (Form 433-F PDFForm 433-A PDF or Form 433-B PDF and provide proof of your financial status (this may include information about your assets and your monthly income and expenses).

You should know that if the IRS does delay collecting from you, your debt will increase because penalties and interest continue to be charged until you pay the full amount. During a temporary delay, the IRS will again review your ability to pay, generally annually. The IRS may also file a Notice of Federal Tax Lien to protect the government’s interest in your assets.

You should also review our TAS Currently Not Collectible page and video, before you start the process. Also, be sure to file all prior year tax returns (if you were required to file a return), even if you can’t pay the amount you owe on any returns right now, before requesting this option. You can find filing help options on our page above as well.

If the IRS decides you can make some type of payment and you still disagree, you do have options. We recommend reading our TAS Currently Not Collectible page for more information about this.

Offer In Compromise – A Doubt as to Collectability or an Effective Tax Administration offer in compromise (OIC) allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability or doing so creates a financial hardship.

The OIC process is not for everyone and generally requires a non-refundable fee, so explore all other payment options before submitting an OIC. If you hire a tax professional to help you file an offer, be sure to check his or her qualifications.

Review our TAS OIC page and video about OICs before you start the process. You can also read “An offer in compromise may help some taxpayers settle their tax bill,” use the IRS Offer in Compromise Pre-Qualifier Tool to see if you may be eligible to make an offer, and the see links in the “Resources” section below, for additional information on OICs.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS   

Additional help is now available for visually impaired and other taxpayers with disabilities

Posted by Admin Posted on Oct 26 2021

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The Internal Revenue Service (IRS) Policy Statement 1-47, Reasonable Accommodations for People with Disabilities (see IRM 1.2.1.2.12), requires the IRS to take necessary actions to ensure taxpayers with disabilities have an equal opportunity to participate effectively in its programs, activities and services. If a taxpayer is unable to read IRS forms, publications and correspondence issued in standard print, they may request an accessible copy of that product in an alternative format.

The IRS has established an Accessibility Helpline at 833-690-0598, where taxpayers, who use assistive technology such as screen reading software, refreshable Braille displays and screen magnifying software may request assistance in getting certain IRS forms and products in an alternative media format (Section 508 compliant PDF, HTML, eBraille, text and large print).

Getting accessible forms and products

The IRS already provides a number of accessible tax forms, instructions and publications on the Accessible Forms and Publications page, including some Taxpayer Advocate Service (TAS) publications, so look there first. To request paper copies of tax forms, instructions or publications in Braille or large print, you can also call the tax form telephone number at 800-829-3676. However, if you are having trouble requesting these products or have questions about current and future accessibility services or other alternative media formats available to taxpayers with disabilities, please call the Accessibility Helpline at 833-690-0598.

Getting accessible IRS notice or letters

If you receive a notice or letter in print format and prefer it in Braille or large print, choose one of the three options below to request your preferred alternative media format:

  • Call the tax assistance number at 800-829-1040.
  • Fax your notice and a cover sheet to: Alternative Media Center, at 855-473-2006. On the cover sheet, write “Alternative Media Format” at the top and include your name, address, daytime phone number and your preferred format.
  • Mail your notice with a note stating your preferred format (Braille or large print) to: Internal Revenue Service, Alternative Media Center, 400 N. 8th St. Room G39, Richmond, VA 23219.

Once the IRS receives your request it will take up to 15 business days to convert the notice or letter and mail it back to you.

Note: The IRS is developing a process to make it easier for visually impaired taxpayers to request post-filing tax notices — such as notices about additional taxes or penalties owed — in Braille, large print, audio or electronic formats. The new process is expected to be in place by January 31, 2022.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS  

The right to finality

Posted by Admin Posted on Oct 20 2021

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Taxpayers interacting with the IRS have the right to finality. This right comes into play for taxpayers who are going through an audit. These taxpayers have the right to know when the IRS has finished the audit. This is one of ten basic rights — known collectively as the Taxpayer Bill of Rights.

Here's what taxpayers in the process of an audit, should know about their right to finality:

·  Taxpayers have the right to know:
 

o The maximum amount of time they have to challenge the IRS's position.

o The maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. 

o When the IRS has finished an audit.
 

·  The IRS generally has three years from the date taxpayers file their returns to assess any additional tax for that tax year.
 

·  There are some limited exceptions to the three-year rule, including when taxpayers fail to file returns for specific years or file false or fraudulent returns. In these cases, the IRS has an unlimited amount of time to assess tax for that tax year.
 

·  The IRS generally has 10 years from the assessment date to collect unpaid taxes. This 10-year period cannot be extended, except for taxpayers who enter into installment agreements or the IRS obtains court judgments.
 

·  There are circumstances when the 10-year collection period may be suspended. This can happen when the IRS cannot collect money due to the taxpayer's bankruptcy or there's an ongoing collection due process proceeding involving the taxpayer.
 

·  A statutory notice of deficiency is a letter proposing additional tax the taxpayer owes. This notice must include the deadline for filing a petition with the tax court to challenge the amount proposed.
 

·  Generally, a taxpayer will only be subject to one audit per tax year. However, the IRS may reopen an audit for a previous tax year, if the IRS finds it necessary. This could happen, for example, if a taxpayer files a fraudulent return.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source :  IRS                                   

REPORT YOUR VIRTUAL CURRENCY TRANSACTIONS.

Posted by Admin Posted on Oct 20 2021

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Virtual currency is a digital representation of value other than a representation of the U.S. dollar or a foreign currency (“real currency”). Virtual currency is used as a unit of account, a store of value, or a medium of exchange. TAS wants to help you understand the tax treatment of virtual currency that can be converted into, or exchanged for, real currency.

Bitcoin is one example of a convertible virtual currency. Bitcoin is a cryptocurrency, which is a specific type of virtual currency that uses cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain. A transaction involving cryptocurrency that is recorded on a distributed ledger is referred to as an “on-chain” transaction. A transaction that is not recorded on the distributed ledger is referred to as an “off-chain” transaction, where individuals can engage directly with each other without necessarily using a trusted third party like a cryptocurrency exchange.

Why are virtual currency transactions taxable?

Income is generally taxable regardless of the source it comes from. As such, virtual currency transactions are taxable just like ‘traditional’ transactions involving money for goods or services, or an exchange of property for other property or services. Virtual currency is treated as property by the IRS and general tax principles that apply to property transactions apply if you sell, exchange, or otherwise transact using virtual currency.

How are virtual currency transactions taxed?

In general, individuals who transact with virtual currency, including buying and selling virtual currency or exchanging virtual currency, hold the virtual currency as a capital asset and the transactions result in capital gain or capital loss. Since virtual currency is considered property, the same general principles apply. However, virtual currency received as compensation for services is treated the same as wages and results in ordinary income to the recipient who then holds the virtual currency as a capital asset.

The following examples illustrate several common transactions involving virtual currency:

  • Sales: When you sell virtual currency, it is generally a capital asset and you must report the transaction along with any capital gain or loss on the sale.
    • Example: If Mary purchased 5 Bitcoins for $50,000 in April and sold all of her Bitcoins in July for $52,000, she would have short-term capital gain of $2,000 (the sales price less the purchase price). If Mary sold the Bitcoins for $48,000, she would have a short-term capital loss on the sale, that must be reported too, but it would be subject to any limitations on capital loss deductions.
  • Exchanges: If you exchange virtual currency held as a capital asset for services or other property, including goods or another virtual currency, you must report the transaction and any capital gain or loss resulting from the exchange.
    • Example: If Bill buys 5 Bitcoins for $50,000 in April and exchanges them for another virtual currency in June worth $40,000 at the date and time of the exchange, Bill would report a $10,000 short-term capital loss on the transaction. In this case, Bill would have to look at his other capital losses and could potentially be limited in how much he could deduct in the current year. Likewise, if the exchanged virtual currency was worth $60,000 instead of $40,000, Bill would report a $10,000 short-term capital gain on the transaction.
  • Earnings: When you receive property, including virtual currency, in exchange for performing services, whether or not you perform the services as an employee, you must report the earnings as ordinary income. Compensation for services are reported and taxed the same regardless of how the compensation is received (dollars, virtual currencies, property, or other services).If you receive virtual currency in return for providing services as an employee, it’s considered wages and is subject to Federal income tax withholding, Federal Insurance Contributions Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported by your employer on Form W-2, Wage and Tax Statement, like traditional wages paid in U.S. dollars. If you receive virtual currency in return for providing services and are not an employee of the payor, you are self-employed, and may be considered an independent contractor. Income from self-employment is often reported on Form 1099-MISC, Miscellaneous Income.
    • Example: If Deng receives $100,000 for providing services as an employee, he should report this as “wages” on his income tax return. If Deng is not an employee, the compensation is reported on Schedule 1 or Schedule C. Deng must report this income on his income tax return regardless of whether he receives a W-2, 1099-MISC, or other information return.
  • Hard forks: A hard fork occurs when a cryptocurrency undergoes a protocol change resulting in a permanent diversion from the legacy distributed ledger. This may result in the creation of a new cryptocurrency in addition to the legacy cryptocurrency. If your cryptocurrency went through a hard fork, but you did not receive any new cryptocurrency you don’t have taxable income.
    • Example: Maria holds 10 units of cryptocurrency A that has a hard fork after which she also has 10 units of cryptocurrency B. Regardless of how she receives the new cryptocurrency B, she has income. If the 10 units of cryptocurrency B are worth $50 at the date and time she receives them, Maria will have taxable income of $50 that she must report in the year she receives the cryptocurrency B.
  • Unreported transactions: You must report income, gain, or loss from all taxable transactions involving virtual currency on your Federal income tax return for the year of the transaction, regardless of the amount or whether you receive a payee statement (like a Form W-2) or information return (like a Form 1099-MISC).

For more information on the tax treatment of property transactions, see Publication 544, Sales and Other Dispositions of Assets.

What virtual currency transactions are not taxable?

Generally, the same rules that apply to other property apply to virtual currency. Not all property transactions are taxable. For example, the following transactions are not taxable:

  • Transactions with yourself. If you transfer virtual currency from a wallet, address, or account belonging to you, to another wallet, address, or account that also belongs to you, the transfer is a non-taxable event, even if you receive an information return reporting the transfer.
  • Bona fide gifts. If you receive virtual currency as a bona fide gift, the gift is not taxable. You will report any income or loss when you sell, exchange, or otherwise dispose of the virtual currency.
  • Charitable donations. If you donate virtual currency to a charitable organization described in Internal Revenue Code Section 170(c), you will not report income, gain, or loss from the donation.
  • Soft forks. A soft fork occurs when a distributed ledger undergoes a protocol change that does not result in a diversion of the ledger and thus does not result in the creation of a new cryptocurrency. Because soft forks do not result in you receiving new cryptocurrency, you will be in the same position you were in prior to the soft fork, meaning that the soft fork will not result in any income to you.

Where Are Virtual Currency Transactions Reported?

Transactions conducted in virtual currency are generally reported on the same tax forms as transactions in other property. They are also reported on a new checkbox on Form 1040. Virtual currency transactions must be reported on:

What records do I need to maintain regarding my transactions using virtual currency?

The Internal Revenue Code and regulations require taxpayers to maintain records that are sufficient to establish the positions taken on tax returns. You should therefore maintain records documenting receipts, sales, exchanges, or other dispositions of virtual currency and the fair market value of the virtual currency for at least three years after reporting any taxable event or have other reporting requirements even if they’re not immediately taxable.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS

ABLE accounts: A valuable financial solution for people with disabilities

Posted by Admin Posted on Oct 20 2021

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Achieving a Better Life Experience or ABLE accounts are tax-advantaged savings accounts for individuals with disabilities and their families. These accounts help disabled people pay qualified disability-related expenses without affecting their eligibility for government assistance programs.

Here are some key things people should know about these accounts.

Annual contribution limit

  • The 2021 limit is $15,000.
  • Certain employed ABLE account beneficiaries may make an additional contribution up to the lesser of these amounts:
    • The designated beneficiary's compensation for the tax year.
    • The poverty line for a one-person household. For 2021, this amount is $12,880 in the continental U.S., $16,090 in Alaska and $14,820 in Hawaii. 

Saver's credit

  • ABLE account designated beneficiaries may be eligible to claim the saver's credit for a percentage of their contributions. 
  • The beneficiary claims the credit on Form 8880, Credit for Qualified Retirement Savings Contributions PDF. The saver's credit is a non-refundable credit available to individuals who meet these three requirements:
    • Are at least 18 years old at the close of the taxable year
    • Are not a dependent or a full-time student
    • Meet the income requirements

Rollovers and transfers from section 529 plans

  • Families may roll over funds from a 529 plan to another family member's ABLE account. 
  • The ABLE account must be for the same beneficiary as the 529 account or for a member of the same family as the 529 account holder. Rollovers from a section 529 plan count toward the annual contribution limit. For example, the $15,000 annual contribution limit would be met by parents contributing $10,000 to their child's ABLE account and rolling over $5,000 from a 529 plan to the same ABLE account.

Qualified disability expenses

  • States can offer ABLE accounts to help people who become disabled before age 26 or their families pay for disability-related expenses. These expenses include housing, education, transportation, health, prevention and wellness, employment training and support, assistive technology and personal support services.
  • Though contributions aren't deductible for federal tax purposes, distributions, including earnings, are tax-free to the beneficiary, if they are used to pay qualified disability expenses. 

 

Source: IRS     

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

  

Decoding IRS Transcripts and the New Transcript Format: Part I

Posted by Admin Posted on Oct 12 2021

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Many individuals may not know they can request, receive, and review their tax records via a tax transcript from the IRS at no charge. Transcripts are often used to validate income and tax filing status for mortgage applications, student loans, social services, and small business loan applications and for responding to an IRS notice, filing an amended return, or obtaining a lien release. Transcripts can also be useful to taxpayers when preparing and filing tax returns by verifying estimated tax payments, Advance Child Tax Credits, Economic Income Payments/stimulus payments, and/or an overpayment from a prior year return.

The IRS maintains records for all taxpayers – individuals, businesses, and other entities – and provides five types of transcripts. A requested transcript may provide information regarding the date the IRS received a return; payment history including refunds, transfers between tax years and overpayment credits; balance due amounts; interest assessed; refundable credits allowed; basic examination information; and Forms W-2 or 1099 information.

Taxpayers may be able to get answers to their questions quickly and efficiently by requesting and reviewing their transcript – that is, if they can decipher them. Taxpayers (and tax professionals with a properly executed Form 2848, Power of Attorney, or Form 8821, Tax Information Authorization) can request a transcript online through the IRS’s Get Transcript Online portal or their online accountby mail; or by calling the IRS’s automated phone transcript service at 800-908-9946. With the difficulty reaching the IRS by phone or correspondence during the last two filing seasons, using the portal or online account may be more efficient than calling the IRS due to long wait times, the potential inability to speak with an available customer service representative, or the length of time for the IRS to respond to a mailed transcript request. The IRS’s Get Transcript page is available in five languages, and the online application is also available in Spanish.

What Transcript Should Taxpayers Ask For?

There are several types of transcripts that can meet a taxpayer’s needs.

  • Tax Return Transcript: This shows most items reflected on a taxpayer’s original tax return, including adjusted gross income, and accompanying forms and schedules for the current year and three prior years. This transcript will often be accepted by lending institutions for student loan or mortgage purposes. Note: the secondary spouse on a joint return must use Get Transcript Online or Form 4506-T to request this transcript type. When using Get Transcript by Mail or phone, the primary taxpayer on the return must make the request.
  • Wage and Income Transcript: This provides data from the third-party information statements the IRS has received for a specific taxpayer, such as Forms W-2, 1099, 1098, or 5498, and can be useful if the taxpayer did not receive or retain a copy of these documents. Wage and Income Transcripts are available for up to ten years. While the Wage and Income transcript provides federal withholding amounts, it does not reflect state tax withholdings, which may limit its use when preparing state income tax returns.
  • Tax Account Transcript: This provides basic tax return data (marital status, adjusted gross income, taxable income) along with listing the activity on a tax account, such as tax adjustments, payments, etc., for the current year and up to ten prior years using Get Transcript Online. When using Get Transcript by Mail or phone, taxpayers are limited to the current tax year and returns processed during the prior three years.
  • Record of Account Transcript: This is the most comprehensive transcript. It combines the Tax Return Transcript and the Tax Account Transcript to provide a more complete picture of a taxpayer’s tax return and subsequent account activity for the current year and for returns processed in the three prior years.
  • Verification of Non-Filing Letter: This provides proof that the IRS has no record of a filed Form 1040-series tax return for the year requested. However, it doesn’t indicate whether a taxpayer was required to file a return for that year. This letter is available after June 15 for the current tax year or any time for the prior three tax years using Get Transcript Online.

Another Option: Log in to Your Personal Online Account

Individual taxpayers with an Online Account can immediately access the above transcript options for the current filing year and three prior years and in some cases up to ten years of data. They can also see the total amount owed, balance details by year, payment history and any scheduled or pending payments; key information from the most recent tax return; payment plan details, if the taxpayer has one; digital copies of select notices from the IRS; Economic Impact Payments received, if any; the address on file; and any authorization requests from tax professionals. If taxpayers have not created an online account, this may be the impetus to do so, but be aware many taxpayers are not able to pass the authentication process. The IRS will be updating its authentication process by the end of the year, which is anticipated to reduce the unsuccessful attempts to establish an online account.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source:TAS  

The Deductibility of Medical Expenses

Posted by Admin Posted on Oct 12 2021

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Individual taxpayers may be able to claim medical expense deductions on their tax returns. However, the rules can be challenging, and it can be difficult to qualify. Here are six points to keep in mind:

1. You must itemize to claim this deduction. To benefit from itemizing, your total itemized deductions must exceed your standard deduction. Besides medical expenses, itemized deductions may include property taxes, state and local income tax, mortgage interest, charitable donations, etc., subject to various rules and limits.

With the increased standard deduction that’s been available in recent years, far fewer taxpayers are benefitting from itemizing. For 2021, the standard deduction is $25,100 for married couples filing jointly, $18,800 for heads of households and $12,550 for singles.

2. Your expenses must be fairly significant. The medical expense deduction can be claimed only to the extent your eligible costs exceed 7.5% of your adjusted gross income (AGI). Remember, expenses paid via tax-advantaged accounts (such as Flexible Spending Accounts or Health Savings Accounts) or reimbursable by insurance aren’t deductible.

If you’ll benefit from itemizing deductions this year and your year-to-date medical expenses are close to exceeding the 7.5% of AGI “floor,” moving or “bunching” nonurgent medical procedures and other controllable expenses into this year may allow you to exceed the 7.5% floor and benefit from the medical expense deduction. If your expenses already exceed the floor, bunching can increase your deduction.

3. Health insurance premiums may help. This can total thousands of dollars a year. Even if your employer provides health coverage, you can deduct the portion of the premiums that you pay, unless you paid them pre-tax. (Check with your employer if you’re not sure).

Long-term care insurance premiums are also included as medical expenses, subject to limits based on age.

4. Transportation counts. The cost of getting to and from medical treatments counts as a medical expense. This includes taxi fares, public transportation or using your own car.

Car costs can be calculated at 16 cents a mile for miles driven in 2021, plus tolls and parking. Alternatively, you can deduct certain actual costs (such as for gas and oil) that directly relate to your medical transportation.

5. Controllable costs are key. These include the costs of glasses, hearing aids, dental work, mental health counseling and other ongoing expenses in connection with medical needs. Purely cosmetic expenses generally don’t qualify.

Prescription drugs (including insulin) qualify, but over-the-counter medications and vitamins don’t. Neither do amounts paid for treatments that are illegal under federal law (such as medical marijuana), even if state law permits them. The services of therapists and nurses can qualify if they relate to medical conditions and aren’t for general health.

6. Don’t overlook smoking-cessation and weight-loss programs. Amounts paid for participating in smoking-cessation programs and for prescribed drugs designed to alleviate nicotine withdrawal are deductible. However, nonprescription nicotine gum and patches aren’t.

A weight-loss program is deductible if undertaken as treatment for a disease diagnosed by a physician. Deductible expenses include fees paid to join a program and attend periodic meetings. The cost of diet food isn’t deductible.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters    

Being Prepared For An IRS Audit

Posted by Admin Posted on Oct 12 2021

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The IRS recently announced it intends to hire thousands of new employees as part of a tax-enforcement push. This could mean an uptick in audits sometime soon, likely focused on wealthier individuals and business owners. (Some tax returns are chosen randomly as well.)

The best way to survive an IRS audit is to prepare for one in advance. On an ongoing basis, you should systematically maintain documentation (invoices, bills, canceled checks, receipts and other proof) for the items that you report on your tax return. Maintain and back up these records safely. With that said, it also helps to know what might catch the tax agency’s attention.

Audit hot spots

Certain types of tax-return entries are known to the IRS to involve inaccuracies, so they may lead to an audit. One example is significant inconsistencies between tax returns filed in the past and your most current tax return. If you miscalculate deductions or try to claim unusually high ones, your return could be flagged. And if you’re a business owner, gross profit margin or expenses markedly different from those of similar companies could subject you to an audit.

Certain types of deductions, such as auto and travel expense write-offs, may be questioned by the IRS because there are strict recordkeeping requirements involved. In addition, an owner-employee salary that’s inordinately higher or lower than those of similar and similarly located companies can catch the IRS’s eye, especially if the business is a corporation.

Contact methods

The IRS normally has three years within which to conduct an audit, and often an audit doesn’t begin until a year or more after you file a return. If you’re selected for an audit, you’ll be notified by letter. Generally, the IRS doesn’t make initial contact by phone. If there’s no response to the letter, the agency may follow up with a call. Ignore unsolicited email messages about an audit. The IRS doesn’t contact people in this manner; these are scams.

Many audits simply request that you mail in documentation to support certain deductions that you’ve claimed. Others may ask you to provide receipts and other documents to a local IRS office. Only the harshest version, the field audit, requires you to meet personally with one or more IRS auditors.

Keep in mind that the tax agency won’t demand an immediate response to a mailed notice. You’ll be informed of the discrepancies in question and given time to prepare. You’ll need to collect and organize all relevant income and expense records. If any records are missing, you’ll have to reconstruct the information as accurately as possible based on other documentation.

How we can help

If the IRS chooses you for an audit, our firm can help you understand what the IRS is disputing (it’s not always clear) and then gather the documents and information needed. We can also help you respond to the auditor’s inquiries in the most expedient and effective manner.

Above all, don’t panic! Many audits are routine. By taking a meticulous, proactive approach to how you track, document and file your tax-related information, whether for an individual or business return, you’ll make an audit easier and even decrease the chances that one will happen in the first place.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters              

Important Reminders for October 15 Extension Filers

Posted by Admin Posted on Oct 07 2021

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Most taxpayers who requested an extension of time to file for their 2020 federal income tax return will have until Friday, October 15, 2021, to file.

Although October 15 is the last day for most people to file, some taxpayers may have more time. These taxpayers include:

Here are some key reminders for extension filers.

Tax Filing information

Nearly everyone can e-file their tax return for free through IRS Free File. The program is available on IRS.gov now through October 15. E-filing is easy, safe, and the most accurate way for people to file their tax returns. The TAS website has additional information on Free File options and additional information on options for filing a tax return.

Filing when a refund is due: Taxpayers who are able should use direct deposit to get their tax refund electronically deposited into their financial account. If you are filing a paper return, check the Where to File Tax Returns webpage or the Form instructions to determine the correct address for where to mail it.

Paying a tax balance: The deadline to pay 2020 federal income taxes was May 17, 2021. If you did not already make a payment, the best way to pay is online from a checking or savings account with IRS Direct Pay, by debit or credit card (this option has an associated fee), or by Electronic Funds Withdrawal when you e-file.

Those who owe and can’t pay their balance in full should pay as much as they can when they file to reduce interest and penalties. Taxpayers who cannot pay in full should evaluate payment options as soon as possible and choose one to resolve any remaining balance to help avoid or reduce any further potential penalties and interest. The TAS website has additional Get Help information on many topics related to paying taxes.

Taxpayers can always check their account balance, view payments made, view prior tax accounts or view and apply for payment options online. For more information about online accounts, see our TAS Tax Tip: Create an Online Account to view your balances, make payments, get transcripts, and more and the IRS’s Frequently Asked Questions About Online Account.

Missed tax filing deadline

What should taxpayers do about a missed filing deadline? Anyone who did not request an extension by this year’s May 17 deadline or misses the October 15 extension date should file and pay as soon as possible. (See the ‘Filing’ section above for more filing related information.) This will stop additional interest and penalties from accruing. See Filing Past Due Tax Returns for more information.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS         

WHAT DO I NEED TO INCLUDE IN A GOOD LOAN PROPOSAL?

Posted by Admin Posted on Sept 28 2021

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The following main points should be contained in a good loan proposal:

GENERAL INFORMATION        

  • Reason for the loan: the exact purpose of the loan and why it is necessary.
  • Amount needed: the specific amount needed to reach your goal.
  • Business name and address, names of officers and their social security numbers.

DESCRIPTION OF BUSINESS

  • Describe the type of business you have, its age, current business assets, and number of employees.
  • Structure of ownership: describe the legal structure of the company.

MANAGEMENT PROFILE

  • Prepare a short statement that is focused on each principal in your business; give details about education, background, accomplishments and skills.

MARKET INFORMATION

  • State clearly the products of your company as well as its markets. Name the competition and explain how you plan to compete in the market. Describe what the business will do to satisfy the needs of its customers.

FINANCIAL INFORMATION

  • Submit your own personal financial statements as well as those of the principal business owners.
  • Financial statements: the income statements and balance sheets for the past three years. If you have a new business, provide the projected balance sheet and income statement.
  • Specify the collateral that you are able and willing to give as security for the loan.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

Newly expanded ‘Closing a Business’ information provides step-by-step actions

Posted by Admin Posted on Sept 28 2021

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Closing your business can be a difficult and challenging task. The Taxpayer Advocate Service (TAS) partnered with IRS to expand its Closing a Business page to help business owners understand the specific actions needed, from a federal tax perspective, for each type of business.

However, before you make the decision to close, if it is due to financial reasons related to the coronavirus, please use TAS’s COVID-19 Business Tax Relief Tool to see if you qualify for new employer tax credits that may help you stay in business. Read more about the benefits of this tool before you try.

If ultimately you do need to close your business, whether you have a sole proprietorship, partnership or corporation, the information on this page will help you understand:

  • What forms you need to file;
  • How to report the income you receive; and,
  • How to claim the expenses you incur before closing your business.

Remember to also check your state responsibilities when closing a business.

TAS Resources

Taxpayer Advocate Service Help

The Taxpayer Advocate Service (TAS) is uniquely positioned to assist all taxpayers (and their representatives), including individuals, businesses, and exempt organizations. If you qualify for our help, an advocate will be with you at every turn and do everything possible to assist through the process.

Currently, TAS is open to virtually serve taxpayers who find themselves in hardship situations or dealing with IRS tax problems they’ve been unable to resolve directly with the IRS. Visit our Contact Us page to learn more.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial  tatements, please give us a call at 305-274-5811.                                   

Source : TAS 

The Right to Quality Service

Posted by Admin Posted on Sept 28 2021

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Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to have a way to file complaints about inadequate service.

What This Means for You

  • The IRS must include information about your right to Taxpayer Advocate Service (TAS) assistance, and how to contact TAS, in all notices of deficiency. IRC § 6212(a)
  • When collecting tax, the IRS should treat you with courtesy. Generally, the IRS should only contact you between 8 a.m. and 9 p.m. The IRS should not contact you at your place of employment if the IRS knows or has reason to know that your employer does not allow such contacts. IRC § 6304
  • If you are an individual taxpayer eligible for Low Income Taxpayer Clinic (LITC) assistance (generally your income is at or below 250% of the federal poverty level), the IRS may provide information to you about your eligibility for assistance from an LITC. IRC § 7526

For more information, see IRS Publication 4134, Low Income Taxpayer Clinic List. Or find an LITC near you.

  • Certain notices written by the IRS must contain the name, phone number, and identifying number of the IRS employee, and all notices must include a telephone number that the taxpayer may contact. During a phone call or in-person interview, the IRS employee must provide you with his or her name and ID number. RRA 98 § 3705(a)
  • The IRS is required to publish the local address and phone number of the IRS in local phone books. RRA 98 § 3709

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                  

Source: TAS 

WHAT ARE THE ADVANTAGES OF PREPAYING A MORTGAGE, AND SHOULD I IF I CAN?

Posted by Admin Posted on Sept 28 2021

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It is highly recommended that you prepay as much of your mortgage as possible every month, which will drastically reduce the total amount that you pay.

However, there are times where this could be disadvantageous.

If you are in a situation where you don't have funds to cover three to six months of expenses, it is recommended that you save that amount before you pay additional amounts on your mortgage.

If you have a large amount of credit card debt, over the long run, you will save more money by knocking down those high interest loans first.

There also may be times where that money would be more wisely invested in the market, depending on the expected rate of return versus how much you would save in early payments.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

REFINANCING YOUR HOME

Posted by Admin Posted on Sept 28 2021

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Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans.

Generally, for taxpayers who itemize, the “points” paid to obtain a home mortgage may be deductible as mortgage interest. Points paid to obtain an original home mortgage can be, depending on circumstances, fully deductible in the year paid. However, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.

For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. Taxpayers may deduct points only for those payments made in the tax year. For example, a homeowner who paid $2,000 in points and who would make 360 payments on a 30-year mortgage could deduct $5.56 per monthly payment, or a total of $66.72 if he or she made 12 payments in one year.

However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at pay off.

Other closing costs — such as appraisal fees and other non-interest fees — generally are not deductible. Additionally, the amount of Adjusted Gross Income can affect the amount of deductions that can be taken.  Please contact us if you've recently refinanced, and we can be a big help!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

WHAT CAN I DO TO ENSURE THAT I AM INSURED ADEQUATELY?

Posted by Admin Posted on Sept 28 2021

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Make a list of your possessions in your household. The better documented this is the more likely you will be to be able to replace them.

Make sure that you inform your agents of any changes that you make to the home so that if anything happens to the structure, the recent changes will be reflected in the payout.

Check to see if there are any specific limits to what is insured by your company. Sometimes a person may think they are covered for certain things, but the limits negate that.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters  

LIVING THE DREAM OF EARLY RETIREMENT

Posted by Admin Posted on Sept 28 2021

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Many people dream of retiring early so they can pursue activities other than work, such as volunteering, traveling and pursuing their hobbies full-time. But making this dream a reality requires careful planning and diligent saving during the years leading up to the anticipated retirement date.

It all starts with retirement savings accounts such as IRAs and 401(k)s. Among the best ways to retire early is to build up these accounts as quickly as possible by contributing the maximum amount allowed by law each year.

From there, consider other potential sources of retirement income, such as a company pension plan. If you have one, either under a past or current employer, research whether you can receive benefits if you retire early. Then factor this income into your retirement budget.

Of course, you’re likely planning on Social Security benefits composing a portion of your retirement income. If so, keep in mind that the earliest you can begin receiving Social Security retirement benefits is age 62 (though waiting until later may allow you to collect more).

The flip side of saving up enough retirement income is reducing your living expenses during retirement. For example, many people strive to pay off their home mortgages early, which can possibly free up enough monthly cash flow to make early retirement feasible.

By saving as much money as you can in your retirement savings accounts, carefully planning your Social Security strategies and cutting your living expenses in retirement, you just might be able to make this dream a reality. 

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

Source: Thomson Reuters           

-Important information you need to know about refunds

Posted by Admin Posted on Sept 28 2021

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Planning for a refund this year? Use these tax tips and find out what you need to know and understand about tax refund timing, when you could receive it and why you may only get part or none at all.

General Information

Different factors can affect the timing of a refund. The IRS and partners in the tax industry continue to strengthen tax security reviews to help protect against identity theft and refund fraud.

While some tax returns require additional review and take longer to process than others, it may be necessary when a return has errors, is incomplete or is affected by identity theft or fraud. A refund delay can happen when the IRS must contact you by mail to request additional information needed to process your tax return.

Generally, the IRS issues most refunds in less than 21 days. However, if information from reporting sources such as your employer, your bank or others is not received timely when the IRS cross-checks your data, it can delay the issuance of your refund.
 

Direct deposit is the fastest way to get your refund. Simply request it in the software you are using or add your bank routing information to your paper return.

The quickest and easiest way to track your refund is to use the Where's My Refund? ‎tool on IRS.gov or download the IRS2Go app on your mobile device. You can also check the IRS’s What to Expect for Refunds web page for answers to frequently asked questions. The IRS “When Will I Get My Refund? video provides details on what info you’ll need to check your refund status.

Delayed Release

Refund timing for Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) filers is different than from anyone else. By law, neither the IRS nor the Taxpayer Advocate Service can release refunds related to these tax returns until after mid-February.

Generally, the earliest EITC/ACTC related refunds are available in taxpayer bank accounts or on debit cards by the first week of March, if you chose direct deposit and there are no other issues with the tax return. If there are other items that need addressing, the refund may be delayed further.

If you claim these two tax credits, you should know that you won’t see the status of your refund on Where's My Refund?, the IRS2Go app or through tax software packages until at least the end of February.

Certain Past-due Debts Can Reduce Refunds

By law, the Department of Treasury's Bureau of the Fiscal Service (BFS) issues IRS tax refunds and conducts the Treasury Offset Program (TOP). BFS may reduce a taxpayer’s refund and offset all or part of the refund to pay past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support or other federal nontax debts, such as student loans.

BFS will reduce the refund to pay off the debt owed and send a notice to the taxpayer if a refund offset occurs. Any portion of the remaining refund after offset is issued in a check or direct deposited to you as originally requested on your tax return.
 

Separate from the TOP, refund amounts may also be adjusted due to changes the IRS made to the tax return.

For more information on any of these refund offset possibilities, including lost or stolen refunds, see our website’s Get Help tax topic pages.

Financial Hardship

Have you tried to get your refund, and now are having financial hardship? There are certain types of issues where the IRS itself can generally provide the service you need, without our involvement.

However, if you've contacted the IRS and tried to get your refund unsuccessfully, unless it is because of a law, and not having the refund is causing you a financial hardship, the Taxpayer Advocate Service may be able to help. Our priority is always helping the taxpayers who need us most, so you may need to provide evidence to support your hardship claim in order to request an expedited refund.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

Source : TAS   

WHY SHOULD I HAVE LIFE INSURANCE? DO I REALLY NEED IT?

Posted by Admin Posted on Sept 28 2021

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The main reason that people purchase life insurance is to know that in the event of their passing, their children and loved ones will be taken care of. Life insurance can also help with the distribution of your estate. Your payout could go to family, charity, or wherever you choose to distribute it.

The main reasons to buy life insurance would be because you have dependents that would be put in a tough position without you providing for them. For example, if you have a spouse, a child, or a parent who is dependent on your income, you should have life insurance.

If you have a spouse and young children, you will need more insurance than someone with older children, because they will be dependents for a longer amount of time than older children. If you are in a position where you and your spouse both earn for the family, then you should both be insured in proportion to the incomes that you garner.

If you have a spouse and older children or no children, you will still want to have life insurance, but you won't need the same level of insurance as in the first example, just enough to ensure that your spouse will be provided for, to cover your burial expenses, and to settle the debts that you have accumulated.

If you don't have children or a spouse, you will only need enough insurance to make sure that your burial expenses are covered, unless you would like to have an insurance policy in order to help in the distribution of your estate.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

Small business owners should see if they qualify for the home office deduction

Posted by Admin Posted on Sept 21 2021

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Many Americans have been working from home due to the pandemic, but only certain people will qualify to claim the home office deduction. This deduction allows qualifying taxpayers to deduct certain home expenses on their tax return when they file their 2021 tax return next year.

Here are some things to help taxpayers understand the home office deduction and whether they can claim it:

Employees are not eligible to claim the home office deduction.

  • The home office deduction, reported on Form 8829, is available to both homeowners and renters.
  • There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
  • Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.
  • The term "home" for purposes of this deduction:
    • Includes a house, apartment, condominium, mobile home, boat or similar property which provide basic living accommodations.
    • A separate structure on the property such as an unattached garage, studio, barn or greenhouse.
      • Any portion of a home used exclusively as a hotel, motel, inn or similar establishment does NOT qualify as a "home" and, therefore, does not qualify for a home office deduction.
  • Generally, there are two basic requirements for the taxpayer's home to qualify as a deduction:
    • There must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
    • The home must be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.
      • A portion of a home that is used exclusively for conducting business on a regular basis but not used as the principal place of business, will qualify for a home office deduction if either patients, clients or customers are met in the home or there is a separate structure that is used exclusively for conducting business on a regular basis.
  • Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:
    • Using the simplified method consisting of a rate of $5 per square foot for business use of the home which is limited to a maximum size of 300 square feet and a maximum deduction $1,500.
    • Using the regular method whereby deductions for a home office are based on the percentage of the home devoted to business use. Any use a whole room or part of a room for conducting their business will involve figuring out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS   

WHICH IS BETTER, BUYING OR LEASING MY NEXT CAR?

Posted by Admin Posted on Sept 21 2021

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It depends on factors such as 1) what kind of deal you can make with the dealership, 2) the typical mileage you put on your car, 3) how much you wear down a car, and 4) the primary use for the car.

To determine whether leasing or buying is best, compare the costs and other issues involved in a lease or purchase. The following factors should be considered:

  • Beginning costs
  • Continual costs
  • Total costs
  • Is there a possibility of deduction of any of the costs due to the car being used for business?
  • How important is it to have ownership of the car

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

BUSINESS OR HOBBY?

Posted by Admin Posted on Sept 21 2021

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It is generally accepted that people prefer to make a living doing something they like. A hobby is an activity for which you do not expect to make a profit. If you do not carry on your business or investment activity to make a profit, there is a limit on the deductions you can take. You must include on your return income from an activity from which you do not expect to make a profit. An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. You cannot use a loss from the activity to offset other income. Activities you do as a hobby, or mainly for sport or recreation, come under this limit. So does an investment activity intended only to produce tax losses for the investors.

The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. For additional information on these entities, refer to business structures. It does not apply to corporations other than S corporations. In determining whether you are carrying on an activity for profit, all the facts are taken into account. No one factor alone is decisive. Among the factors to consider are whether:

  • You carry on the activity in a business-like manner,
  • The time and effort you put into the activity indicate you intend to make it profitable,
  • You depend on income from the activity for your livelihood,
  • Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business),
  • You change your methods of operation in an attempt to improve profitability,
  • You, or your advisors, have the knowledge needed to carry on the activity as a successful business,
  • You were successful in making a profit in similar activities in the past,
  • The activity makes a profit in some years, and
  • You can expect to make a future profit from the appreciation of the assets used in the activity.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

 

IRS reminds business owners to correctly identify workers as employees or independent contractors

Posted by Admin Posted on Sept 21 2021

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The Internal Revenue Service reminds business owners that it's critical to correctly determine whether the individuals providing services are employees or independent contractors.

An employee is generally considered to be anyone who performs services, if the business can control what will be done and how it will be done. What matters is that the business has the right to control the details of how the worker's services are performed. Independent contractors are normally people in an independent trade, business or profession in which they offer their services to the public. Doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers or auctioneers are generally independent contractors.

Independent contractor vs. employee

Whether a worker is an independent contractor or an employee depends on the relationship between the worker and the business. Generally, there are three categories to examine:

  • Behavioral Control − Does the company control or have the right to control what the worker does and how the worker does the job?
  • Financial Control − Does the business direct or control the financial and business aspects of the worker's job. Are the business aspects of the worker's job controlled by the payer? (Things like how the worker is paid, are expenses reimbursed, who provides tools/supplies, etc.)
  • Relationship of the Parties − Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Misclassified worker 

Misclassifying workers as independent contractors adversely affects employees because the employer's share of taxes is not paid, and the employee's share is not withheld. If a business misclassified an employee without a reasonable basis, it could be held liable for employment taxes for that worker. Generally, an employer must withhold and pay income taxes, Social Security and Medicare taxes, as well as unemployment taxes. Workers who believe they have been improperly classified as independent contractors can use IRS Form 8919, Uncollected Social Security and Medicare Tax on Wages to figure and report their share of uncollected Social Security and Medicare taxes due on their compensation.

Voluntary Classification Settlement Program

The Voluntary Classification Settlement Program (VCSP) is an optional program that provides taxpayers with an opportunity to reclassify their workers as employees for future tax periods for employment tax purposes with partial relief from federal employment taxes for eligible taxpayers that agree to prospectively treat their workers (or a class or group of workers) as employees. Taxpayers must meet certain eligibility requirements, apply by filing Form 8952, Application for Voluntary Classification Settlement Program, and enter into a closing agreement with the IRS.

Who is self-employed?

Generally, someone is self-employed if any of the following apply to them.

Self-employed individuals generally are required to file an annual tax return and pay estimated tax quarterly. They generally must pay self-employment tax (Social Security and Medicare tax) as well as income tax. Self-employed taxpayers may be able to claim the home office deduction if they use part of a home for business.

What about the gig economy?

The gig economy − also called sharing economy or access economy−is activity where people earn income providing on-demand work, services or goods. Gig economy income must be reported on a tax return, even if the income is: from part-time, temporary or side work; not reported on a Form 1099-K, 1099-MISC, W-2 or other income statement; or paid in any form, including cash, property, goods or virtual currency.

Help spread the word - Advance Child Tax Credit

The IRS encourages employers to help get the word out about the advance payments of the Child Tax Credit during Small Business Week. Employers have direct access to many who may receive this credit. More information on the Advance Child Tax Credit is available on IRS.gov. The website has tools employers can use to deliver this information, including e-posters, drop-in articles (for paycheck stuffers, newsletters) and social media posts to share.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source : IRS     

 

Here’s how taxpayers can rebuild records after a natural disaster

Posted by Admin Posted on Sept 08 2021

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After a natural disaster, taxpayers need records to help them prove and recover disaster-related losses. This may be for tax purposes, getting support from federal assistance program or for insurance claims.

While personal or business property may have been destroyed, all hope is not lost. Here are some steps that can help people reconstruct important records.

Tax records

  • Get free tax return transcripts immediately using Get Transcript on IRS.gov.
  • Order transcripts by calling 800-908-9946 and following the prompts.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor's office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley's Blue Book, the National Automobile Dealers Association and Edmunds.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS      

Retirement and taxes: Understanding IRAs

Posted by Admin Posted on Sept 08 2021

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Individual Retirement Arrangements, or IRAs, provide tax incentives for people to make investments that can provide financial security for their retirement. These accounts can be set up with a bank or other financial institution, a life insurance company, mutual fund or stockbroker.

Here's a basic overview to help people better understand this type of retirement savings account.

  • Contribution. The money that someone puts into their IRA. There are annual limits to contributions depending on their age and the type of IRA. Generally, a taxpayer or their spouse must have earned income to contribute to an IRA.
     
  • Distribution. The amount that someone withdraws from their IRA.
     
  • Withdraws. Taxpayers may face a 10% penalty and a tax bill if they withdraw money before age 59 ½, unless they qualify for an exception.
     
  • Required distribution. There are requirements for withdrawing from an IRA:
  • Someone generally must start taking withdrawals from their IRA when they reach age 70½.
  • Per the 2019 SECURE Act, if a person's 70th birthday is on or after July 1, 2019, they do not have to take withdrawals until age 72.
  • Special distribution rules apply for IRA beneficiaries.
     
  • Traditional IRA. An IRA where contributions may be tax-deductible. Generally, the amounts in a traditional IRA are not taxed until they are withdrawn.
     
  • Roth IRA. This type of IRA that is subject to the same rules as a traditional IRA but with certain exceptions:
  • A taxpayer cannot deduct contributions to a Roth IRA.
  • Qualified distributions are tax-free.
  • Roth IRAs do not require withdrawals until after the death of the owner.
     
  • Savings Incentive Match Plan for Employees. This is commonly known as a SIMPLE IRA. Employees and employers may contribute to traditional IRAs set up for employees. It may work well as a start-up retirement savings plan for small employers.
     
  • Simplified Employee Pension. This is known as a SEP-IRA. An employer can make contributions toward their own retirement and their employees' retirement. The employee owns and controls a SEP.
     
  • Rollover IRA. This is when the IRA owner receives a payment from their retirement plan and deposits it into a different IRA within 60 days.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source : IRS        

September is National Preparedness Month; IRS urges taxpayers to prepare for natural disasters

Posted by Admin Posted on Sept 08 2021

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WASHINGTON — September is National Preparedness Month. With the height of hurricane season fast approaching and the ongoing threat of wildfires in some parts of the country, the Internal Revenue Service reminds everyone to develop an emergency preparedness plan.

All taxpayers, from individuals to organizations and businesses, should take time now to create or update their emergency plans.

Taxpayers can begin getting ready for a disaster with a preparedness plan that includes securing and duplicating essential tax and financial documents, creating lists of property and knowing where to find information once a disaster has occurred. Securing this information can help in the aftermath of a disaster, and it can help people more quickly take advantage of disaster relief available from the IRS.

Start secure

Taxpayers should keep critical original documents inside waterproof containers in a secure space. Documents such as tax returns, birth certificates, deeds, titles and insurance policies should also be duplicated and kept with a trusted person outside the area a natural disaster may affect.

Make copies

If original documents are available only on paper, taxpayers can use a scanner and save them on a USB flash drive, CD or in the cloud, which provide security and easy portability.

Document valuables

After a disaster hits, photographs and videos of a home or business's contents can help support claims for insurance or tax benefits. All property, especially expensive and high- value items, should be recorded. The IRS disaster-loss workbooks can help individuals and businesses compile lists of belongings or business equipment.

Employer fiduciary bonds

Employers using payroll service providers should check if their provider has a fiduciary bond in place to protect the employer in the event of a default by provider. Employers are encouraged to create an Electronic Federal Tax Payment System account at EFTPS.gov to monitor their payroll tax deposits and receive email alerts.

Know where to go

Reconstructing records after a disaster may be required for tax purposes, getting federal assistance or insurance reimbursement. Find out if financial institutions provide statements and documents electronically. Taxpayers who have lost some or all of their records during a disaster should visit IRS' Reconstructing Records webpage.

IRS is ready to help

Taxpayers living in a federally declared disaster can visit the IRS Tax Relief in Disaster Situations webpage or Around the Nation on IRS.gov and check for the available disaster tax relief. The IRS automatically identifies taxpayers located in the covered disaster area and applies filing and payment relief. Affected taxpayers can call 866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues.

A taxpayer impacted by a disaster outside of a federally-declared disaster area may qualify for disaster relief. This includes taxpayers who are not physically located in a disaster area, but whose records necessary to meet a filing or payment deadline postponed during the relief period are located in a covered disaster area.

For more information about National Preparedness Month, visit Ready.gov/september.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS    

Taxpayers can protect themselves from scammers by knowing how the IRS communicates

Posted by Admin Posted on Sept 08 2021

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If the IRS does call a taxpayer, it should not be a surprise because the agency will generally send a notice or letter first. Understanding how the IRS communicates can help taxpayers protect themselves from scammers who pretend to be from the IRS with the goal of stealing personal information.

Here are some facts about how the IRS communicates with taxpayers:

  • The IRS doesn't normally initiate contact with taxpayers by email. Do not reply to an email from someone who claims to be from the IRS because the IRS email address could be spoofed or fake. Emails from IRS employees will end in IRS.gov.
  • The agency does not send text messages or contact people through social media. Fraudsters will impersonate legitimate government agents and agencies on social media and try to initiate contact with taxpayers.
  • When the IRS needs to contact a taxpayer, the first contact is normally by letter delivered by the U.S. Postal Service. Debt relief firms send unsolicited tax debt relief offers through the mail. Fraudsters will often claim they already notified the taxpayer by U.S. Mail.
  • Depending on the situation, IRS employees may first call or visit with a taxpayer. In some instances, the IRS sends a letter or written notice to a taxpayer in advance, but not always. Taxpayers can search IRS notices by visiting Understanding Your IRS Notice or Letter. However, not all IRS notices are searchable on that site and just because someone references an IRS notice in email, phone call, text, or social media, does not mean the request is legitimate.
  • IRS revenue agents or tax compliance officers may call a taxpayer or tax professional after mailing a notice to confirm an appointment or to discuss items for a scheduled audit. The IRS encourages taxpayers to review, How to Know it's Really the IRS Calling or Knocking on Your Door: Collection.
  • Private debt collectors can call taxpayers for the collection of certain outstanding inactive tax liabilities, but only after the taxpayer and their representative have received written notice. Private debt collection should not be confused with debt relief firms who will call, send lien notices via U.S. Mail, or email taxpayers with debt relief offers. Taxpayers should contact the IRS regarding filing back taxes properly.
  • IRS revenue officers and agents routinely make unannounced visits to a taxpayer's home or place of business to discuss taxes owed, delinquent tax returns or a business falling behind on payroll tax deposits. IRS revenue officers will request payment of taxes owed by the taxpayer. However, taxpayers should remember that payment will never be requested to a source other than the U.S. Treasury.
  • When visited by someone from the IRS, the taxpayers should always ask for credentials. IRS representatives can always provide two forms of official credentials: a pocket commission and a Personal Identity Verification Credential.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source  : IRS       

Energize tax savings with an EV credit

Posted by Admin Posted on Sept 08 2021

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Electric vehicles (EVs) are increasing in popularity all the time — and more of them are qualifying for a federal tax credit. In fact, the IRS added several more eligible models over the summer.

The tax code provides a credit to buyers of qualifying plug-in electric drive motor vehicles, including passenger vehicles and light trucks. The credit is equal to $2,500 plus an additional amount, based on battery capacity, that can’t exceed $5,000. Therefore, the maximum credit allowed for a qualifying EV is $7,500.

EV definition

For purposes of the tax credit, a qualifying vehicle is defined as one with four wheels that’s propelled to a significant extent by an electric motor, which draws electricity from a battery. The battery must have a capacity of not less than four kilowatt hours and be capable of being recharged from an external source of electricity.

However, depending on the EV you purchase, the credit may not be available because of a per-manufacturer cumulative sales limitation. Specifically, it phases out over six quarters beginning when a manufacturer has sold at least 200,000 qualifying vehicles for use in the United States (determined on a cumulative basis for sales after December 31, 2009). For example, Tesla and General Motors vehicles are no longer eligible for the tax credit.

The IRS provides a list of qualifying vehicles on its website and, as mentioned, recently added more eligible models. You can access the list here: https://bit.ly/2Yrhg5Z. Additional points

There are some additional points about the plug-in EV tax credit to keep in mind. It’s allowed only in the year you place the vehicle in service, and the vehicle must be new. Also, an eligible vehicle must be used predominantly in the United States and have a gross weight of less than 14,000 pounds.

There’s a separate 10% federal income tax credit for the purchase of qualifying electric two-wheeled vehicles manufactured primarily for use on public thoroughfares and capable of at least 45 miles per hour (in other words, electric-powered motorcycles). It can be worth up to $2,500. This electric motorcycle credit was recently extended to cover qualifying 2021 purchases.

Basic rules

These are only the basic rules. There may be additional incentives provided by your state. Contact us if you’d like to receive more information about the federal plug-in EV tax break.

 

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters 

Which business website costs are deductible?

Posted by Admin Posted on Sept 08 2021

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Every business needs a website, but it’s not always easy to determine which costs of running one are deductible. Fortunately, established rules that generally apply to the deductibility of more long-standing business costs provide business owners with a basic idea of how to anticipate and handle the tax impact of a website. And the IRS has issued guidance that applies to software costs.

Hardware considerations

Hardware costs generally fall under the standard rules for depreciable equipment. Specifically, once website-related assets are up and running, you can deduct 100% of the cost in the first year they’re placed in service (before 2023). This favorable treatment is allowed under the 100% first-year bonus depreciation break.

In later years, you can probably deduct 100% of these costs in the year the assets are placed in service under the Section 179 first-year depreciation expensing privilege. However, Sec. 179 deductions are subject to several limitations.

For the 2021 tax year, the maximum Sec. 179 deduction is $1.05 million, subject to a phaseout rule. Under the rule, the deduction is phased out if more than a specified amount of qualified property is placed in service during the year. The threshold amount for 2021 is $2.62 million.

There’s also a taxable income limit. Under it, your Sec. 179 deduction can’t exceed your business taxable income. In other words, Sec. 179 deductions can’t create or increase an overall tax loss. However, any Sec. 179 deduction amount that you can’t immediately deduct is carried forward and can be deducted in later years (to the extent permitted by the applicable limits).

Software issues

Similar rules apply to off-the-shelf software that you buy for your business. However, software license fees are treated differently from purchased software costs for tax purposes. Payments for leased or licensed software used for your website are currently deductible as ordinary and necessary business expenses.

An alternative position is that your software development costs are currently deductible research and development costs under the tax code. To qualify for this treatment, the costs must be paid or incurred by December 31, 2022. A more conservative approach would be to capitalize the costs of internally developed software. Then you would depreciate them over 36 months.

If your website is primarily for advertising, you can also currently deduct internal website software development costs as ordinary and necessary business expenses.

Are you paying a third party for software to run your website? This is commonly referred to as “software as a service.” In general, payments to third parties are currently deductible as ordinary and necessary business expenses.

Still important

So much of business today seems to happen in virtual places other than your website — such as social media, apps and teleconferencing calls. Nonetheless, a central website where you can provide a solid overview of your company is still important. We can help you determine the appropriate tax treatment of website costs.

 

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters          

Interest rates remain the same for the fourth quarter 2021

Posted by Admin Posted on Sept 08 2021

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WASHINGTON — The Internal Revenue Service announced that interest rates will remain the same for the calendar quarter beginning October 1, 2021. The rates will be:

  • 3% for overpayments (2% in the case of a corporation);
     
  • 0.5 % for the portion of a corporate overpayment exceeding $10,000;
     
  • 3% percent for underpayments; and
     
  • 5% percent for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during July 2021 to take effect August 1, 2021, based on daily compounding.

Revenue Ruling 2021-17, announcing the rates of interest, will appear in Internal Revenue Bulletin 2021-37, dated September 13, 2021.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source : IRS       

IRS: Tax relief now available to victims of Hurricane Ida; Oct. 15 deadline, other dates extended to Jan. 3

Posted by Admin Posted on Sept 08 2021

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WASHINGTON — Victims of Hurricane Ida that began on August 26 now have until January 3, 2022, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance. Currently this includes the entire state of Louisiana, but taxpayers in Ida-impacted localities designated by FEMA in neighboring states will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

"During this difficult time, the IRS stands ready to help victims of Hurricane Ida," said IRS Commissioner Chuck Rettig. "We want people affected by this devastating hurricane focused on their safety and recovery for themselves and their families. To provide assistance now and in the weeks ahead, we have a variety of different types of relief available to help people and businesses affected by this disaster."

The tax relief postpones various tax filing and payment deadlines that occurred starting on August 26, 2021. As a result, affected individuals and businesses will have until January 3, 2022, to file returns and pay any taxes that were originally due during this period. This means individuals who had a valid extension to file their 2020 return due to run out on October 15, 2021, will now have until January 3, 2022, to file. The IRS noted, however, that because tax payments related to these 2020 returns were due on May 17, 2021, those payments are not eligible for this relief.

The January 3, 2022 deadline also applies to quarterly estimated income tax payments due on September 15, 2021, and the quarterly payroll and excise tax returns normally due on November 1, 2021. It also applies to tax-exempt organizations, operating on a calendar-year basis, that had a valid extension due to run out on November 15, 2021. Businesses with extensions also have the additional time including, among others, calendar-year corporations whose 2020 extensions run out on October 15, 2021.

In addition, penalties on payroll and excise tax deposits due on or after August 26 and before September 10, will be abated as long as the deposits are made by September 10, 2021.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2021 return normally filed next year), or the return for the prior year (2020). Be sure to write the FEMA declaration number – 4611 − for Hurricane Ida in Louisiana on any return claiming a loss. See Publication 547 for details.

The tax relief is part of a coordinated federal response to the damage caused by Hurricane Ida and is based on local damage assessments by FEMA. For information on disaster recovery, visit DisasterAssistance.gov.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS       

Taxpayers should be on the lookout for new version of SSN scam

Posted by Admin Posted on Aug 24 2021

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Taxpayers should be on the lookout for new variations of tax-related scams. In the latest twist on a scam related to Social Security numbers, scammers claim to be able to suspend or cancel the victim’s SSN. It’s yet another attempt by con artists to frighten people into returning ‘robocall’ voicemails.

Scammers may mention overdue taxes in addition to threatening to cancel the person’s SSN. If taxpayers receive a call threatening to suspend their SSN for an unpaid tax bill, they should just hang up.

Make no mistake…it’s a scam.

Taxpayers should not give out sensitive information over the phone unless they are positive they know the caller is legitimate. When in doubt –hang up. Here are some telltale signs of this scam. The IRS and its authorized private collection agencies will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, iTunes gift card or wire transfer. The IRS does not use these methods for tax payments.
  • Ask a taxpayer to make a payment to a person or organization other than the U.S. Treasury.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.

Taxpayers who don’t owe taxes and have no reason to think they do should:

Taxpayers who owe tax or think they do should:

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS          

Know the Nuances of the Nanny Tax

Posted by Admin Posted on Aug 24 2021

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Many families hire household workers to care for their children, their home or their outdoor spaces. If you’re among them, be sure you know the nuances of the “nanny tax.”

Withholding taxes

For federal tax purposes, a household worker is anyone who does household work for you and isn’t an independent contractor. Common examples include child care providers, housekeepers and gardeners.

If you employ such a person, you aren’t required to withhold federal income taxes from the individual’s pay unless the worker asks you to and you agree. In that case, the worker would need to complete a Form W-4. However, you may have other withholding and payment obligations.

You must withhold and pay Social Security and Medicare taxes, otherwise known as “FICA” taxes, if your worker earns cash wages of $2,300 or more (excluding food and lodging) during 2021. If you reach the threshold, all wages (not just the excess) are subject to FICA taxes.

Employers are responsible for withholding the worker’s share and must pay a matching employer amount. The Social Security tax portion of FICA taxes is 6.2% for both the employer and the worker (12.4% total). Medicare tax is 1.45% each for the employer and the worker (2.9% total). If you prefer, you can pay your worker’s share of Social Security and Medicare taxes, instead of withholding it from pay.

However, if your worker is under 18 and child care isn’t his or her principal occupation, you don’t have to withhold FICA taxes. Therefore, if your worker is really a student/part-time babysitter, there’s no FICA tax liability.

Reporting and paying

You pay nanny tax by increasing your quarterly estimated tax payments or increasing withholding from your wages rather than by making an annual lump-sum payment. You don’t have to file any employment tax returns — even if you’re required to withhold or pay tax — unless you own a business. Instead, your tax professional will report employment taxes on Schedule H of your individual Form 1040 tax return.

On your return, your employer identification number (EIN) will be included when reporting employment taxes. The EIN isn’t the same as your Social Security number. If you need an EIN, you must file Form SS-4.

A keen awareness

Retaining a household worker calls for careful recordkeeping and a keen awareness of the applicable rules. Keep in mind that you may also have federal unemployment tax (FUTA) liability, as well as state and local tax obligations. Contact us for assistance complying.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters       

Seniors and immigrants to watch out for predators

Posted by Admin Posted on Aug 24 2021

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The Internal Revenue Service continued its "Dirty Dozen" tax scams with a warning for people to watch out for predators using tax-related schemes ranging from fake charities to scams targeting seniors and immigrants.

The IRS continues to see a group of ruses by dishonest people who trick others into doing something illegal or which ultimately causes them harm. Predators encourage otherwise honest people to do things they don't realize are illegal or prey on their good will to take something from them.

Several schemes involve fraudsters targeting groups like seniors or immigrants, posing as fake charities impersonating IRS authorities, charging excessive fees for Offers in Compromise, conducting unemployment insurance fraud and unscrupulously preparing tax returns.

Here are five of this year's "Dirty Dozen" scams.

Fake charities

The IRS advises taxpayers to be on the lookout for scammers who set up fake organizations to take advantage of the public's generosity. They especially take advantage of tragedies and disasters, such as the COVID-19 pandemic.

Scams requesting donations for disaster relief efforts are especially common on the phone. Taxpayers should always check out a charity before they donate, and they should not feel pressured to give immediately.

Taxpayers who give money or goods to a charity may be able to claim a deduction on their federal tax return by reducing the amount of their taxable income. But taxpayers should remember that to receive a deduction, taxpayers must donate to a qualified charity. To check the status of a charity, use the IRS Tax Exempt Organization Search tool. (It's also important for taxpayers to remember that they can't deduct gifts to individuals or to political organizations and candidates.)

Here are some tips to remember about fake charity scams:

  • Individuals should never let any caller pressure them. A legitimate charity will be happy to get a donation at any time, so there's no rush. Donors are encouraged to take time to do the research.
  • Potential donors should ask the fundraiser for the charity's exact name, web address and mailing address, so it can be confirmed later. Some dishonest telemarketers use names that sound like large well-known charities to confuse people.
  • Be careful how a donation is paid. Donors should not work with charities that ask them to pay by giving numbers from a gift card or by wiring money. That's how scammers ask people to pay. It's safest to pay by credit card or check — and only after having done some research on the charity.

For more information about fake charities see the information on fake charity scams on the Federal Trade Commission web site.

Immigrant/senior fraud

IRS impersonators and other scammers are known to target groups with limited English proficiency as well as senior citizens. These scams are often threatening in nature.

While it has diminished some recently, the IRS impersonation scam remains a common scam. This is where a taxpayer receives a telephone call threatening jail time, deportation or revocation of a driver's license from someone claiming to be with the IRS. Taxpayers who are recent immigrants often are the most vulnerable and should ignore these threats and not engage the scammers.

The IRS reminds taxpayers that the first contact with the IRS will usually be through mail, not over the phone. Legitimate IRS employees will not threaten to revoke licenses or have a person deported. These are scare tactics.

As phone scams pose a major threat to people with limited access to information, including individuals not entirely comfortable with the English language, the IRS has added new features to help those who are more comfortable in a language other than English. The Schedule LEP PDF allows a taxpayer to select in which language they wish to communicate. Once they complete and submit the schedule, they will receive future communications in that selected language preference.

Additionally, the IRS is providing tax information, forms and publications in many languages other than English. IRS Publication 17, Your Federal Income Tax, is now available in Spanish, Chinese (simplified and traditional), Vietnamese, Korean and Russian.

Seniors beware

Senior citizens and those who care about them need to be on alert for tax scams targeting older Americans. The IRS recognizes the pervasiveness of fraud targeting older Americans, along with the Department of Justice and FBI, the Federal Trade Commission and the Consumer Financial Protection Bureau (CFPB), among others.

In an effort to make filing taxes easier for seniors, the IRS reminds seniors born before Jan. 2, 1956 that the IRS has re-designed the Form 1040 and its instructions, and that they can use the Form 1040SR and related instructions.

The IRS reminds seniors that the best source for information about their federal taxes is the IRS website.

Offer in Compromise "mills"

Offer in Compromise mills contort the IRS program into something it's not – misleading people with no chance of meeting the requirements while charging excessive fees, often thousands of dollars.

"We're increasingly concerned that people having trouble paying their taxes are being duped into misleading claims about settling their tax debts for 'pennies on the dollar'," said IRS Commissioner Chuck Rettig. "The IRS urges people to take a few minutes to review information on IRS.gov to see if they might be a good candidate for the program – and avoiding costly promoters who advertise on radio and television."

The IRS reminds taxpayers to beware of promoters claiming their services are needed to settle with the IRS, that their tax debts can be settled for "pennies on the dollar" or that there is a limited window of time to resolve tax debts through the Offer in Compromise (OIC) program.

An "offer," or OIC, is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt. The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment under certain circumstances. However, some promoters are inappropriately advising indebted taxpayers to file an OIC application with the IRS, even though the promoters know the person won't qualify. This costs honest taxpayers money and time.

Taxpayers should be especially wary of promoters who claim they can obtain larger offer settlements than others or who make misleading promises that the IRS will accept an offer for a small percentage. Companies advertising on TV or radio frequently can't do anything for taxpayers that they can't do for themselves by contacting the IRS directly.

Taxpayers can go to IRS.gov and review the Offer in Compromise Pre-Qualifier Tool to see if they qualify for an OIC. The IRS reminds taxpayers that under the First Time Penalty Abatement policy, taxpayers can go directly to the IRS for administrative relief from a penalty that would otherwise be added to their tax debt.

Unscrupulous tax return preparers

Although most tax preparers are ethical and trustworthy, taxpayers should be wary of preparers who won't sign the tax returns they prepare, often referred to as ghost preparers. For e-filed returns, the "ghost" will prepare the return, but refuse to digitally sign as the paid preparer.

By law, anyone who is paid to prepare, or assists in preparing federal tax returns, must have a valid Preparer Tax Identification Number (PTIN). Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund.

Unscrupulous tax return preparers may also:

  • Require payment in cash only and will not provide a receipt.
  • Invent income to qualify their clients for tax credits.
  • Claim fake deductions to boost the size of the refund.
  • Direct refunds into their bank account, not the taxpayer's account.

It's important for taxpayers to choose their tax return preparer wisely. The Choosing a Tax Professional page on IRS.gov has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.

Taxpayers should also remember that they are legally responsible for what is on their tax return even if it is prepared by someone else. Consumers can help protect themselves by choosing a reputable tax preparer.

Unemployment insurance fraud

Unemployment fraud often involves individuals acting in coordination with or against employers and financial institutions to get state and local assistance to which they are not entitled. These scams can pose problems that can adversely affect taxpayers in the long run.

States, employers and financial institutions need to be aware of the following scams related to unemployment insurance:

  • Identity-related fraud: Filers submit applications for unemployment payments using stolen or fake identification information to perpetrate an account takeover.
  • Employer-employee collusion fraud: The employee receives unemployment insurance payments while the employer continues to pay the employee reduced, unreported wages.
  • Misrepresentation of income fraud: An individual returns to work and fails to report the income to continue receiving unemployment insurance payments, or in an effort to receive higher unemployment payments, applicants claim higher wages than they actually earned.
  • Fictitious employer-employee fraud: Filers falsely claim they work for a legitimate company, or create a fictitious company, and supply fictitious employee and wage records to apply for unemployment insurance payments.
  • Insider fraud: State employees use credentials to inappropriately access or change unemployment claims, resulting in the approval of unqualified applications, improper payment amounts, or movement of unemployment funds to accounts that are not on the application.

Below is a short list of financial red flag indicators of unemployment fraud:

  • Unemployment payments are coming from a state other than the state in which the customer reportedly resides or has previously worked.
  • Multiple state unemployment payments are made within the same disbursement timeframe.
  • Unemployment payments are made in the name of a person other than the account holder or in the names of multiple unemployment payment recipients.
  • Numerous deposits or electronic funds transfers (EFTs) are made that indicate they are unemployment payments from one or more states to people other than the account holder(s).
  • A higher amount of unemployment payments is seen in the same timeframe compared to similar customers and the amount they received.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS  

How to know it’s really the IRS calling or knocking on your door

Posted by Admin Posted on Aug 24 2021

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Many taxpayers have encountered individuals impersonating IRS officials – in person, over the telephone and via email. Don’t get scammed. We want you to understand how and when the IRS contacts taxpayers and help you determine whether a contact you may have received is truly from an IRS employee.

The IRS initiates most contacts through regular mail delivered by the United States Postal Service.

However, there are special circumstances in which the IRS will call or come to a home or business, such as when a taxpayer has an overdue tax bill, to secure a delinquent tax return or a delinquent employment tax payment, or to tour a business as part of an audit or during criminal investigations.

Even then, taxpayers will generally first receive several letters (called “notices”) from the IRS in the mail.

Note that the IRS does not:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
  • Demand that you pay taxes without the opportunity to question or appeal the amount they say you owe. You should also be advised of your rights as a taxpayer.
  • Threaten to bring in local police, immigration officers or other law-enforcement to have you arrested for not paying. The IRS also cannot revoke your driver’s license, business licenses, or immigration status. Threats like these are common tactics scam artists use to trick victims into buying into their schemes.

If you owe taxes:

The IRS instructs taxpayers to make payments to the “United States Treasury.” The IRS provides specific guidelines on how you can make a tax payment at irs.gov/payments.

Here is what the IRS will do:

If an IRS representative visits you, he or she will always provide two forms of official credentials called a pocket commission and a HSPD-12 card. HSPD-12 is a government-wide standard for secure and reliable forms of identification for federal employees and contractors. You have the right to see these credentials. And if you would like to verify information on the representative’s HSPD-12 card, the representative will provide you with a dedicated IRS telephone number for verifying the information and confirming their identity.

Collection

IRS collection employees may call or come to a home or business unannounced to collect a tax debt. They will not demand that you make an immediate payment to a source other than the U.S. Treasury.

Learn more about the IRS revenue officers’ collection work.

The IRS can assign certain cases to private debt collectors but only after giving the taxpayer and his or her representative, if one is appointed, written notice. Private collection agencies will not ask for payment on a prepaid debit card or gift card. Taxpayers can learn about the IRS payment options on IRS.gov/payments. Payment by check should be payable to the U.S. Treasury and sent directly to the IRS, not the private collection agency. 

Learn more about how to know if it’s really an IRS Private Debt Collector.

Audits

IRS employees conducting audits may call taxpayers to set up appointments or to discuss items with the taxpayers, but not without having first attempted to notify them by mail. After mailing an official notification of an audit, an auditor/tax examiner may call to discuss items pertaining to the audit. 

Learn more about the IRS audit process.

Criminal Investigations

IRS criminal investigators may visit a taxpayer’s home or business unannounced while conducting an investigation. However, these are federal law enforcement agents and they will not demand any sort of payment. 

Learn more about the What Criminal Investigation Does and How Criminal Investigations are Initiated.

Beware of Impersonations

Scams take many shapes and forms, such as phone calls, letters and emails. Many IRS impersonators use threats to intimidate and bully people into paying a fabricated tax bill. They may even threaten to arrest or deport their would-be victim if the victim doesn’t comply.

For a comprehensive listing of recent tax scams and consumer alerts, visit Tax Scams/Consumer Alerts.

Know Who to Contact

  • Contact the Treasury Inspector General for Tax Administration to report a phone scam. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.
  • Report phone scams to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" in the notes.
  • Report an unsolicited email claiming to be from the IRS, or an IRS-related component like the Electronic Federal Tax Payment System, to the IRS at phishing@irs.gov.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

 Source: IRS            

Identity Theft and Unemployment Benefits

Posted by Admin Posted on Aug 23 2021

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States have experienced a surge in fraudulent unemployment claims filed by organized crime rings using stolen identities. Criminals are using these stolen identities to fraudulently collect benefits across multiple states.

Because unemployment benefits are taxable income, states issue Form 1099-G, Certain Government Payments, to recipients and to the IRS to report the amount of taxable compensation received and any withholding. Box 1 on the form shows "Unemployment Compensation." You should report fraud to the issuing state agency and request a corrected Form 1099-G.

For details on how to report fraud to state workforce agencies, how to obtain a corrected Form 1099-G, a list of state contacts and other steps you should take if you are a victim, see the U.S. Department of Labor’s DOL.gov/fraud page. Please follow Department of Labor guidance on reporting fraud and protecting yourself from additional scams.

You may be a victim of unemployment identity theft if you received:

  • Mail from a government agency about an unemployment claim or payment and you did not recently file for unemployment benefits. This includes unexpected payments or debit cards and could be from any state.
  • An IRS Form 1099-G reflecting unemployment benefits you weren't expecting. Box 1 on this form may show unemployment benefits you did not receive or an amount that exceeds your records for the unemployment benefits you did receive. The form itself may be from a state in which you did not file for benefits.
  • While you are still employed, a notice from your employer indicating that your employer received a request for information about an unemployment claim in your name.

IRS Information for Taxpayers

When you file your income taxes, ONLY include income you received, even if you have not yet received a corrected 1099-G from the state.
 

  • The processing of your tax return should not be delayed while your report of unemployment identity theft is under investigation.
  • Do not report the incorrect 1099-G income on your tax return.
  • The American Rescue Plan of 2021 provides for a one-time exemption of $10,200 per person in unemployment benefits to individuals and couples who earned $150,000 or less last year. If you have already filed your taxes, do not file an amended return. The IRS will issue additional guidance.
  • There is no requirement to file a Form 14039, Identity Theft Affidavit. A Form 14039 should be filed only if the taxpayers' e-filed tax return is rejected because a duplicate return with their Social Security number is already on file or if the IRS instructs them to file a Form 14039.
  • Taxpayers who were victims of an unemployment benefits identity theft scheme should consider opting into the IRS Identity Protection PIN program. An IP PIN is a six-digit number that helps prevent thieves from filing federal tax returns in the names of identity theft victims. The IP PIN is a voluntary program open to any taxpayer who can verify his or her identity. See details at Get an IP PIN.

IRS Information for Employers

Employers are often the first line of defense against unemployment fraud. Employers should:

  • Respond quickly to state notices that its employees have filed for unemployment claims, especially if the names on the notices are not employees;
  • Be alert to misuse of the IRS-issued Employer Identification Number that fraudsters may use to file jobless claims;
  • File a Form 14039-B PDF, Business Identity Theft Affidavit, if the company’s EIN is being used to generate fraudulent unemployment benefit claims.
  • Write to the IRS to close out the business tax account if the company is going out of business; this will help curtail the misuse of dormant EINs.

Justice Department Warns on Fake Unemployment Benefit Websites

The Department of Justice recently warned that fraudsters are creating websites mimicking unemployment benefit websites, including state workforce agency (SWA) websites, for the purpose of unlawfully capturing consumers’ personal information.
To lure consumers to these fake websites, fraudsters send spam text messages and emails purporting to be from an SWA and containing a link. The fake websites are designed to trick consumers into thinking they are applying for unemployment benefits and disclosing personally identifiable information and other sensitive data. That information can then be used by fraudsters to commit identity theft.

Help stop these scams by reporting them and using the list of state contacts at DOL.gov/fraud.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source : IRS                                 

5 Key Points About Bonus Depreciation

Posted by Admin Posted on Aug 23 2021

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Like most business owners, you’ve probably heard about 100% bonus depreciation — and hopefully you’ve been claiming it when appropriate. It’s available for a wide range of qualifying asset purchases and allows you to deduct the entire expense of an eligible asset in the year it’s placed in service.

But there are many important details to keep in mind as you plan your asset purchases for 2021 and beyond. Here are five key points about this powerful tax-saving tool:

1. It’s scheduled to be reduced and eliminated. Under current law, 100% bonus depreciation will be gradually reduced and eliminated for property placed in service in 2023 through 2026. Thus, an 80% rate will apply to property placed in service in 2023, 60% in 2024, 40% in 2025, and 20% in 2026. Bonus depreciation will be eliminated for 2027 and later years.

For some aircraft (generally, company planes) and for costs of certain property with a long production period, the reduction is scheduled to take place beginning a year later, from 2024 through 2027. Then it will be eliminated beginning in 2028.

Of course, Congress could pass legislation to extend bonus depreciation.

2. It’s available for new and most used property. Before a Tax Cuts and Jobs Act (TCJA) provision went into effect in late 2017, used property didn’t qualify for bonus depreciation. It currently qualifies unless the taxpayer is the party that previously used the property or unless the property was acquired in ineligible transactions. (These are, generally, acquisitions that are tax-free or from a related person or entity.)

3. In some situations you should elect to turn it down. Taxpayers can elect out of bonus depreciation for one or more classes of property. The election out may be useful for certain businesses. These include sole proprietorships and pass-through entities, such as partnerships, S corporations and, typically, limited liability companies, that want to prevent the “wasting” of depreciation deductions from applying them against lower-bracket income in the year property was placed in service — instead of applying them against anticipated higher-bracket income in future years.

C corporations are currently taxed at a flat rate. But because an increase to the corporate rate has been proposed, it could also make sense for C corporations to elect out of bonus depreciation this year.

4. Certain building improvements are eligible. Before the TCJA, bonus depreciation was available for two types of real property: 1) land improvements other than buildings, such as fencing and parking lots, and 2) qualified improvement property (QIP), a broad category of internal improvements made to nonresidential buildings after the buildings have been placed in service.

The TCJA inadvertently eliminated bonus depreciation for QIP. However, 2020’s CARES Act made a retroactive technical correction to the TCJA that makes QIP placed in service after December 31, 2017, eligible for bonus depreciation.

5. 100% bonus depreciation has — temporarily — reduced the importance of Section 179 expensing. If you own a smaller business, you’ve likely benefited from Sec. 179 expensing. This is an elective benefit that, subject to dollar limits, allows an immediate deduction of the cost of equipment, machinery, off-the-shelf computer software and certain building improvements.

Sec. 179 has been enhanced by the TCJA, but the availability of 100% bonus depreciation is economically equivalent and has greatly reduced the cases in which Sec. 179 expensing is useful. If bonus depreciation is reduced and eliminated as scheduled, then the importance of Sec. 179 will return for many taxpayers.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.       

Source: Thomson Reuters                 

AFTER MARRIAGE, WHAT ARE THE TAX IMPLICATIONS?

Posted by Admin Posted on July 30 2021

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You are entitled to file a joint income tax return upon marriage. Although this simplifies the filing process, you will more than likely discover that your tax bill is either higher or lower than when you were single. It's higher when you file together, as more of your income is taxed in the higher tax brackets. This is commonly known as the marriage tax penalty. In 2003, a tax law that intended to reduce the marriage penalty went into effect, but this law didn't get rid of the penalty for higher bracket taxpayers.

Once married, you may not file separately in an attempt to avoid the marriage penalty. Actually, filing as married filing separately can raise your taxes. For the optimal filing status for your situation you should speak with your tax advisor.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

Ten Things to Know About Advance Child Tax Credit Payments

Posted by Admin Posted on July 30 2021

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For taxpayers wanting more information about the 2021 Child Tax Credit and advanced payment option, here’s ten things you need to know.

  1. The IRS is determining potential Advanced Child Tax Credit Payment (AdvCTC) eligibility* using information from:
    • taxpayer’s 2020 tax return (or, in some cases, taxpayer’s 2019 tax return),
      or
    •  taxpayer’s information submitted by using the Non-Filers tool on IRS.gov last year (to register for an Economic Impact Payment),
      or
    • taxpayer’s information submitted using the new non-filer tool this year.
      *Note that this is not necessarily the same as the information that the IRS will use to determine your bank account information.
  2. If taxpayer is unsure if they qualify, they can use the Advance Child Tax Credit Eligibility Assistant tool to find out.
  3. Families who are eligible for AdvCTC (based on the above) will receive three letters.
  4.  The monthly payment amount will be up to $300 per month for each qualifying child under age 6, and up to $250 per month for each qualifying child ages 6 to 17.
  5.  Payments start July 15, 2021. Additional payments will be issued:
    Aug. 13 | Sept. 15 | Oct. 15 | Nov. 15 | and Dec. 15.
  6. Payments will be issued either by direct deposit or paper check.
  7. Taxpayers will be able to use the IRS Child Tax Credit Update Portal to:
    • Check if they are enrolled to receive advance payments.
    • Unenroll to stop getting advance payments. Important note: if taxpayers are married filing joint, both must unenroll.
    • Provide or update bank account information for monthly payments sent in August or later.
      Note: More functionality within this tool will be added later this year that will allow taxpayers to:
    • Make changes to your address;
    • Report a change to your dependents;
    • Report a change in marital status; and
    • Report a change in income.
  8. Taxpayers who unenroll can still report the Child Tax Credit on their 2021 individual income tax return.
  9.  All taxpayers who receive AdvCTC will be required to reconcile the total payments received versus the total Child Tax Credit they qualify for on their 2021 Individual Tax Return, when they file in 2022.

10. The best places to find more information about AdvCTC are:

 If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS                                 

IRS readies nearly 4 million refunds for unemployment compensation overpayments

Posted by Admin Posted on July 30 2021

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The Internal Revenue Service announced that it will issue another round of refunds to nearly 4 million taxpayers who overpaid their taxes on unemployment compensation received last year.

The American Rescue Plan Act of 2021, which became law in March, excluded up to $10,200 in 2020 unemployment compensation from taxable income calculations. The exclusion applied to individuals and married couples whose modified adjusted gross income was less than $150,000.

Refunds by direct deposit will begin July 14 and refunds by paper check will begin July 16. The IRS previously issued refunds related to unemployment compensation exclusion in May and June, and it will continue to issue refunds throughout the summer.

To ease the burden on taxpayers, the IRS has been reviewing the Forms 1040 and 1040SR that were filed prior to the law's enactment to identify those people who are due an adjustment. For taxpayers who overpaid, the IRS will either refund the overpayment, apply it to other outstanding taxes or other federal or state debts owed.

For this round, the IRS identified approximately 4.6 million taxpayers who may be due an adjustment. Of that number, approximately 4 million taxpayers are expected to receive a refund. The refund average is $1,265, which means some will receive more and some will receive less.

Most taxpayers need not take any action and there is no need to call the IRS. However, if, as a result of the excluded unemployment compensation, taxpayers are now eligible for deductions or credits not claimed on the original return, they should file a Form 1040-X, Amended U.S. Individual Income Tax Return.

Taxpayers should file an amended return if they:

  • did not submit a Schedule 8812 with the original return to claim the Additional Child Tax Credit and are now eligible for the credit after the unemployment compensation exclusion;
  • did not submit a Schedule EIC with the original return to claim the Earned Income Tax Credit (with qualifying dependents) and are now eligible for the credit after the unemployment compensation exclusion;
  • are now eligible for any other credits and/or deductions not mentioned below. Make sure to include any required forms or schedules.

Taxpayers do not need to file an amended return if they:

  • already filed a tax return and did not claim the unemployment exclusion; the IRS will determine the correct taxable amount of unemployment compensation and tax;
  • have an adjustment, because of the exclusion, that will result in an increase in any non-refundable or refundable credits reported on the original return;
  • did not claim the following credits on their tax return but are now eligible when the unemployment exclusion is applied: Recovery Rebate Credit, Earned Income Credit with no qualifying dependents or the Advance Premium Tax Credit. The IRS will calculate the credit and include it in any overpayment;
  • filed a married filing joint return, live in a community property state, and entered a smaller exclusion amount than entitled on Schedule 1, line 8.

Taxpayers will generally receive letters from the IRS within 30 days of the adjustment, informing them of what kind of adjustment was made (such as refund, payment of IRS debt payment or payment offset for other authorized debts) and the amount of the adjustment.

 If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source : IRS        

Can Your Business Benefit From the Enhanced Employee Retention Credit?

Posted by Admin Posted on July 30 2021

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Over the course of the COVID-19 pandemic, many businesses have had to shut down or reduce operations, causing widespread furloughs and layoffs. Fortunately, employers that have kept workers on their payrolls may be eligible for a refundable employee retention credit. Three laws have created, extended and enhanced the credit.

The original law

The CARES Act created the employee retention credit in March of 2020. The credit originally:

Equaled 50% of qualified employee wages paid by an eligible employer in an applicable 2020 calendar quarter,

Was subject to an overall wage cap of $10,000 per eligible employee, and

Was available to eligible large and small employers.

The credit covered wages paid from March 13, 2020, through Dec. 31, 2020.

What’s changed

The Consolidated Appropriations Act (CAA), signed into law in December of 2020, extended the covered wage period to include the first two calendar quarters of 2021, ending on June 30, 2021. And now the American Rescue Plan Act (ARPA), signed into law on March 11, has extended it again through Dec. 31, 2021.

In addition, for the first two quarters of 2021, the CAA increased the overall covered wage ceiling to 70% of qualified wages paid during the applicable quarter. And it increased the per-employee covered wage ceiling to $10,000 of qualified wages paid during the applicable quarter (versus a $10,000 annual ceiling under the original rules). Because of the ARPA extension, these higher wage ceilings now apply to all four quarters of 2021.

Substantial tax savings

Additional rules and limits apply to the employee retention credit, and these are just some of the changes made to it. But the potential tax savings can be substantial. Contact your tax advisor for more information about this tax saving opportunity.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters     

The IRS begins adjusting tax returns for unemployment compensation exclusion

Posted by Admin Posted on July 30 2021

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On May 14, the IRS issued notification that it began making adjustments to 2020 tax returns to allow the exclusion of unemployment compensation of up to $10,200, as included in the American Rescue Plan Act of 2021.

Here’s some quick facts you need to know:

  • The adjustments will be done in phases.
  1. The first phase, began on May 6, 2021, and includes single taxpayers who had the simplest tax returns, such as those filed by taxpayers who did not claim children or any refundable tax credits.
  2. The second phase is scheduled to begin after the completion of the first phase and will include married filing joint taxpayers with more complex tax returns.
  • The $10,200 per person exclusion applies to taxpayers, single or married filing jointly, with modified adjusted gross income of less than $150,000. The $10,200 is the amount of income exclusion, not the amount of the refund.
  • A notice, CP 21 or CP 22, will be issued within 30 days to inform you of the adjustment and let you know if the adjustment created a balance due, refund, or no change. You should keep any Notice you receive for your tax records.
  • Refund amounts will vary and not all adjustments will result in a refund.
  • If the adjustment results in a refund, it will be issued as a direct deposit (if the IRS has your bank account information) or a check (if no valid bank account information is available), as long as no other past due amounts are owed which the IRS is obligated to collect.
  1. If other amounts are owed, such as past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support or certain federal nontax debts (e.g., student loans), the refund will be offset to pay them.
  2. The IRS will send a separate notice to you if the refund is sent to pay unpaid debts.

 If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS   

 

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