Without a doubt one of the best ways for us middle-class folks to reduce our income tax burden is to donate charitably with intent. Most of my clients find themselves pleasantly surprised at the tax benefits received when they go through the exercise of donating gently used household items to charity.
A write-off, or a tax deduction, can be quite useful for taxpayers of all kinds. It’s particularly handy for those who are self-employed, including small business owners. How does a write-off work? Let’s go over what it is, as well as some tips on how to lower your taxable income.
You have decided to take the plunge and become a driver for Uber, Lyft or some other rideshare program. Congratulations! You are now a small business owner and your tax return just got more complicated. The income you earn from Uber is taxable and must be reported on Schedule C of your 1040. However, you may deduct expenses incurred in earning this income.
In January, you should receive a Form 1099-MISC from Uber or whatever company you drive for. The amount should be Read more
The Newly Issued Form 1042-S – Foreign Person’s U.S. Source Income Subject to Withholding
IRS has issued the 2016 version of Form 1042-S, Foreign Persons’ U.S. Source Income Subject to Withholding, and the instructions for that form. The form requests even more information then the 2015 version of this form!
Substitute forms. A substitute form furnished to a recipient must conform in format and size to the official IRS form and contain the exact same information as the copy filed with the IRS. However, the size of the form may be adjusted if the Read more
Who remembers when the IRS mailed a packet with blank tax forms and instructions AND your Social Security number printed on your mailing label? Several years ago the IRS reduced mailings such as when they could tell the taxpayer prepared their return with software the year before and for the past few years don’t mail forms. They do still print them to pick up at IRS service locations. All of the forms, instructions and publications can be read or printed from the IRS website. Read more
Transparency as a principle of good tax policy means taxpayers should understand taxes and how they apply to them. Despite lots of data on a filer’s Form 1040, the one number people focus on is the amount due or refund. Clearly the better number is total federal income tax liability. And better yet, people should also Read more
Obtaining and Claiming a Health Coverage Exemption
The Affordable Care Act requires you and each member of your family to have minimum essential coverage, qualify for an insurance coverage exemption, or make an individual shared responsibility payment for months without coverage or an exemption when you file your federal income tax return.You, your spouse or your dependents may be eligible to claim an exemption Read more
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: Read more
Several federal bills enacted in 2015 included tax changes. One of these was P.L. 114-41 (7/31/15), the Surface Transportation and Veterans Health Care Choice Improvement Act. Given the title, we might think that any tax change involved transportation, such as the gasoline excise tax. Wrong! This bill does not increase the gasoline excise tax. Its main purpose is to transfer money from the general fund to the Highway Trust Fund because our gasoline excise tax of 18.4 cents per gallon is insufficient to fund the HTF (and more fuel efficient cars means we buy less gas each year). [I’ve blogged on this a few times – here, for example.]
One of the tax change in P.L. 114-41 is to change due dates of certain returns, starting mostly for the 2016 tax year. The purpose is improved administration of our tax system. For example, one change is to move the due date for a Read more
In Reifler, TC Memo 2015-199TC Memo 2015-199, the Tax Court recently held that a joint return not signed by the wife was not a valid return and, as a result, imposed the failure-to-file penalty. In so doing, it rejected the taxpayer’s arguments that the return was valid either because it substantially complied with the valid return rules or because the wife intended to file a joint return and tacitly consented to the filing of a joint return.
Signatures on a tax return not only verify that a return has indeed been filed by the person indicated on the front page of a Form 1040 but also certify that all the statements in the tax return are made under penalty of perjury and are true, correct, and complete to the best of Read more
If you are considering starting a business, the simplest and least expensive form of business is a sole proprietorship. A sole proprietorship is a one-person business that reports its income directly on the individual’s personal tax return (Form 1040) using a Schedule C. There is no need to file a separate tax return as is required by a partnership or corporation (if the business is set up as an LLC with just one member, filing is still done on Schedule C, although an LLC return may also be required by the state). Generally, there are very few bureaucratic hoops to jump through to get started.
However, we strongly recommend that you open a checking account that is used solely for depositing business income and paying business expenses. You will also need to check and see if there is a need to register for a local government business license and permit Read more
If the IRS kept all or a portion of the federal refund you were expecting, it may be because you owe money for certain delinquent debts. If that is true, the IRS or the Department of Treasury’s Bureau of the Fiscal Service (BFS), which issues IRS tax refunds, can offset or reduce your federal tax refund or withhold the entire amount to satisfy the debt.
Here are some important facts you should know about tax refund offsets:
1. If you owe federal or state income taxes your refund will be offset to pay those tax liabilities. If you had other debt such as child support or student loan debt that was submitted for offset, BFS will take as much of your refund as is needed to pay off the debt, and send it to the agency authorized to collect the debt. Any portion of your refund Read more