Family Tax Issues – SMALL BIZ TAX LADY

business taxes, Family Tax Issues, General Information, RUNNING YOUR BUSINESS, Self Employed, signing agent, TAX DEBT RELIEF, Tax Reduction, TAXES

IRS says that some PPP (Paycheck Protection Program) loans that were forgiven improperly, are taxable.

September 21, 2022 Howard Tax Prep LLC

Photo by RODNAE Productions on Pexels.com

The IRS recently issued guidance addressing improper forgiveness of a Paycheck Protection Program loan (PPP loan).

To summarize, the guidance says that if a taxpayers PPP loan is forgiven based upon lies, or leaving things out (misrepresentations or omissions) the taxpayer cannot exclude the forgiven loan income from taxation; basically, you will have to pay taxes on the loan amount that you received.

According to the IRS, while many small business owners were entitled to receive the loan (and properly claimed the PPP loan forgiveness), there are many taxpayers who weren’t eligible for the loan, or loan forgiveness. Some taxpayers lied to receive the PPP loan funds, while other’s spent the loan proceeds on ineligible items.

Per IRS Issue Number IR-2022-162: “Under the terms of the PPP loan program, lenders can forgive the full amount of the loan if the loan recipient meets three conditions.

1 – The loan recipient was eligible to receive the PPP loan. An eligible loan recipient:

is a small business concern, independent contractor, eligible self-employed individual, sole proprietor, business concern, or a certain type of tax-exempt entity;
was in business on or before February 15, 2020; and
had employees or independent contractors who were paid for their services, or was a self-employed individual, sole proprietor or independent contractor.

2 – The loan proceeds had to be used to pay eligible expenses, such as payroll costs, rent, interest on the business’ mortgage, and utilities.

3 – The loan recipient had to apply for loan forgiveness. The loan forgiveness application required a loan recipient to attest to eligibility, verify certain financial information, and meet other legal qualifications.

If the 3 conditions above are met, then under the PPP loan program the forgiven portion is excluded from income. If the conditions are not met, then the amount of the loan proceeds that were forgiven but do not meet the conditions must be included in income and any additional income tax must be paid.”

Per IRS Issue Number IR-2022-162: “Taxpayers who inappropriately received forgiveness of their PPP loans are encouraged to take steps to come into compliance by, for example, filing amended returns that include forgiven loan proceed amounts in income.” In essence, if you know that you lied about how you spent the PPP (paycheck protection program) funds, take the lie back by amending (changing) your tax return to reflect the truth.

IRS Commissioner Chuck Retting said: “This action underscores the Internal Revenue Service’s commitment to ensuring that all taxpayers are paying their fair share of taxes.” “We want to make sure that those who are abusing such programs are held accountable, and we will be considering all available treatment and penalty streams to address the abuses.”

If you, or someone you know had a person “do your PPP loan” (complete the application, and get you the funds), and you need assistance with amending your tax return, please reach out to us for assistance.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth. Never miss another tip again! Join our newsletter, to receive tax reduction/wealth building tips delivered right to your inbox!

business taxes, Family Tax Issues, General Information, TAX DEBT RELIEF, Tax Reduction, TAXES

HIDING INCOME FROM THE IRS? HOW WILL THEY FIND OUT?

July 25, 2022 Howard Tax Prep LLC

In our South Loop Chicago tax preparation office, and in our Homewood, Il tax preparation office, we often receive calls from people that have not filed taxes in years, and they want to know how the IRS knows how much income they have receive. So how does the IRS know when a small business owner is POTENTIALLY hiding income? The IRS has many methods to detect the underreporting of income such as: taxpayer interviews, income probes, Indirect methods, accounting records; QuickBooks files, cash expenditures, bank deposits, net worth, and more; however, this article will be covering a method called the vertical analysis.

The vertical analysis method identifies the differences between gross income, and net profit reported by the business owner, and the industry standards gross income and net profit. In plain English, the IRS compares what businesses owners say their profit is in relation to expenses, to what other people in the same industry say their profit is in relation to expenses. So what data, or statistics does the IRS use to create the comparison? The IRS uses a website called Bizstats.

Information in Bizstats expresses expense categories as a percentage of revenue. Per the IRS “Potential underreporting of income which equals 10% or more of the reported income should be resolved with the taxpayer’s assistance.”

To give an example, let’s say that we have a caterer that reports $65,000 in gross sales, and $50,000 in expenses, leaving them with a profit of $15,000. The caterer’s expenses to sales ratio is 77% ($50,000 in cost to make sales (expenses)/revenue brought in.) If the industry standard is 60%, the IRS might believe that the taxpayer is hiding an additional $18,333 in revenue (50,000/60%=$83,333. $83,333-$65,000=$18,333).

So who is Bizstats? Per their website, “BizStats is owned and operated by Bizminer of Camp Hill, PA, a leader in online data analysis since 1998. Bizminer also publishes more than 9 million local and national industry statistical reports at its own web site at www.bizminer.com” Bizstats has business statistics and financial ratios for Sole proprietors, Corporations, S-Corporations, & Partnerships.

Where does Bizstats get it’s information? Per their website, Bizstats get it’s data from “the latest available IRS financial information in a useful, readable format.”

What are some drawbacks to Bizstats data? Bizstats are only available for 1 year, and the information is typically 3 years old. At the time of publication, the current stats were showing data from 2017.

How can I protect myself from a vertical analysis?

#1 Always report the GROSS income generated in your business. An accounting mistake that we often see in our Chicago South Loop tax preparation office, is that people don’t do bookkeeping, so instead of reporting their gross receipts, they report gross income less returns, refunds, etc. in the gross receipts area, which is not correct. Gross receipts are gross receipts, and you account for returns in a separate line item.

#2. Invoice clients, or keep copies of receipts if you’re in a business that doesn’t use invoicing.

#3. NEVER COMMINGLE YOUR FUNDS. Your business income and expenses need to be kept separate

P.S. For wealth building and tax reduction tips, please join Howard Tax Prep LLC newsletter!

business taxes, Family Tax Issues, General Information, RUNNING YOUR BUSINESS, Self Employed, signing agent, TAX DEBT RELIEF, Tax Reduction, TAXES

Two Ways to Fix Tax Return Mistakes Before the IRS Discovers Them.

July 2, 2021 Howard Tax Prep LLC

In our South Loop Chicago tax preparation office, and in our Homewood, Il tax preparation office, we often receive calls from people that have made an error (or errors) on their tax return. The tax law is complicated and constantly changing, so it’s easy to make a small, or large error that causes you to:

1.) underpay your tax, leaving you open to IRS penalties, or
2.) overpay your tax, meaning you gave a gift to the government.

However, if you made an error on your tax return, don’t worry; there’s good news: you can undo your mistake! Here’s even better news: there are two special ways to fix your incorrect tax return that will save you from paying more to the IRS than you would otherwise. We’ll tell you all about them in this article. —there are two easy ways to fix it:

A superseding return
A qualified amended return

A superseding return is an amended or corrected return filed on or before the original or extended due date. The IRS considers the changes on a superseding return to be part of your original return.

A qualified amended return is an amended return that you file after the due date of the return (including extensions) and before the earliest of several events, but most likely when the IRS contacts you with respect to an examination of the return. If you file a qualified amended return, you avoid the 20 percent accuracy-related penalty on that mistake.

Superseding Return Example

You file a joint Form 1040 tax return electronically on February 21, 2022, for tax year 2021, but you later decide you want to file a separate return. Since the joint-filing election is irrevocable, on or before April 15, 2022 (which is the unextended due date for your 2021 Form 1040), you must file a superseding return to undo the joint election.

IRS electronic filing rules for amended returns do not permit you to file this superseding return electronically, because you are changing your filing status (from married, filing jointly, to married, filing separately). That being said, your only other option is to use “snail mail.” Using a paper return via snail mail, you’ll submit either:

1.) A second original Form 1040 return using the married-filing-separately filing status, or
2.) An amended Form 1040X showing the change from joint to separate filing status.
Be sure to write “SUPERSEDING RETURN – IRM 21.6.7.4.10” in red at the top of page 1 of either Form 1040 or Form 1040X.

Qualified Amended Return Example

You realize your return preparer left a $30,000 IRA distribution off your 2019 tax return. Ouch!
Let’s assume you are in the 32 percent tax bracket and had no federal income tax withholding on the distribution: you owe an additional $9,600 in federal income tax on your 2019 tax return due to this distribution.

If you file an amended return before the IRS contacts you about the missing income, then it’s a qualified amended return, and you avoid $1,920 (20percent of $9,600) in audit penalties.

If you don’t file the amended return, and if the IRS contacts you about the missing income, the IRS will propose the $1,920 penalty. You may be able to request penalty relief, but you’ll have to make your case, and the facts may or may not be on your side.

In both circumstances, you’ll also pay interest on the $9,600 back to July 15, 2020 (the COVID-19-postponed 2019 Form 1040 due date). Of course, the earlier you pay the tax, the less interest you’ll accrue. You’ll pay less interest with a qualified amended return because you’re paying the tax sooner.

BUSINESS CREDIT, Business Strategies, business taxes, Family Tax Issues, Self Employed, TAX DEBT RELIEF, Tax Reduction, TAXES

Wow! Married, Filing Separately, May Be the Tax Year 2020 Strategy

April 8, 2021 Howard Tax Prep LLC

If you are married like many of our clients in our Chicago south loop tax preparation office, most likely you’ve always filed a joint tax return with your spouse. Most of the time, a joint return shows less overall tax than two separate tax returns do, because the married-filing-separately status has many tax disadvantages.

Fast-forward to the 2020 tax filing season, however—and nothing is as it was. This year, four tax provisions will be key to determining whether you’ll be better off filing a joint tax return or separate tax returns for tax year 2020:

Tax-free unemployment
Recovery rebate, round 1
Recovery rebate, round 2
Recovery rebate, round 3

Tax-Free Unemployment

The American Rescue Plan Act of 2021, which was signed into law on March 11, 2021, excludes from tax the first $10,200 of 2020 unemployment benefits paid to an individual with 2020 modified adjusted gross income (MAGI) of less than $150,000.

Recovery Rebate, Round 1

The recovery rebate, round 1, is a refundable tax credit on the 2020 tax return, equal to

$1,200 ($2,400 on a joint return), plus
$500 for each dependent under age 17.

Your credit decreases by 5 percent of the amount your adjusted gross income (AGI) exceeds

$150,000 if married, filing a joint return;
$112,500 if head of household; or
$75,000 if single or if married, filing separately.

The IRS gave you an advance payment of this credit based on either your 2018 or 2019 AGI and dependents. And now the IRS looks at your 2020 tax return and does the following:

Smiles on you if the tax credit based on your 2020 tax return exceeds the advance payment. What do we mean by “smiles on you”? You get the additional amount as a refundable tax credit.
Smiles on you (again!) if your actual credit is less than the advance payment. You keep the money. You don’t have to pay back any excess received.

Recovery Rebate, Round 2

This is a refundable tax credit on the 2020 tax return, equal to

$600 ($1,200 on a joint return), plus
$600 for each dependent under age 17.

Your credit decreases by 5 percent of the amount your AGI exceeds

$150,000 if married, filing jointly;
$112,500 if head of household; or
$75,000 if single or if married, filing separately.

The IRS gave you an advance payment of this credit based on your 2019 AGI and dependents. And now the IRS looks at your 2020 tax return and

Smiles on you if the tax credit based on your 2020 tax return exceeds the advance payment. What do we mean by smiles on you? Once again, you get the additional amount as a refundable tax credit.
Smiles on you (again!) if your actual credit is less than the advance payment. You keep the money. You don’t have to pay back any excess received.

Recovery Rebate, Round 3

This is a refundable tax credit on the 2021 tax return, equal to

$1,400 ($2,800 on a joint return), plus
$1,400 for each dependent, regardless of age.

Your credit phases out over the following AGI ranges:

$150,000 to $160,000 if married, filing jointly;
$112,500 to $120,000 if head of household; or
$75,000 to $80,000 if single or if married, filing separately.

The IRS will give you an advance payment of this credit based on your 2019 or 2020 AGI and dependents. If your first advance payment used your 2019 return information, then the IRS will send an additional payment based on your 2020 tax return if the IRS processes your 2020 tax return by August 15, 2021.

You then reconcile your advance payment(s) on your 2021 tax return:

If your actual credit amount exceeds the advance payment, you get the difference as a refundable credit.
If your actual credit is less than the advance payment, you keep what you have. You don’t have to pay back the excess benefit.

There are two main reasons you may have net lower federal tax with separate returns versus a joint return. First, if your MAGI is $150,000 or more on a joint return, but the spouse who received the unemployment compensation earns under $150,000 on a separate return, then that spouse can take the full exclusion up to $10,200 (except possibly in a community property state).

Second, if one spouse has AGI of $75,000 or less, but your joint AGI is over $150,000, then that spouse can claim the dependents and get all the available round 1 and round 2 credits on the 2020 tax return as well as the entire round 3 advance payment.

When considering the above, keep two important notes in mind:

For a couple that got joint advance payment(s), the law says you allocate 50 percent of the payment to each spouse. The higher-earning spouse doesn’t pay back any of his or her allocated advance payment, while the lower-income spouse will get the difference as a refundable tax credit.
Married taxpayers who agree how to allocate dependents on separate returns do not have to use the “tiebreaker” rules and can choose who claims which dependents.

Important note. You may lose other deductions and credits on a separate return. The only way to know which is better in light of these temporary provisions is to run your tax returns both ways and see which puts you ahead. For example, separate returns can change your health insurance premium tax credit and perhaps some non-tax items such as your Medicare premiums.

Business Strategies, business taxes, Family Tax Issues, General Information, RUNNING YOUR BUSINESS, Self Employed, Tax Reduction, TAXES

2020 Last-Minute Vehicle Purchases to Save on Taxes

November 11, 2020 Howard Tax Prep LLC

We’re finally getting closer to the end of a tumultuous 2020, and (almost daily) in our South Loop Chicago tax preparation office, we’re handling phone calls from clients asking for more ways to save on their tax bills.

Here’s an easy question: Do you need more 2020 tax deductions? If yes, continue on.

Next easy question: Do you need a replacement business vehicle?

If yes, you can simultaneously solve or mitigate both the first problem (needing more deductions) and the second problem (needing a replacement vehicle), but you need to get your vehicle in service on or before December 31, 2020.

To ensure compliance with the “placed in service” rule, drive the vehicle at least one business mile on or before December 31, 2020. In other words, you want to both own and drive the vehicle to ensure that it qualifies for the big deductions. Now that you have the basics, let’s get to the tax deductions.

1. Buy a New or Used SUV, Crossover Vehicle, or Van

Let’s say that on or before December 31, 2020, you or your corporation buys and places in service a new or used SUV or crossover vehicle that the manufacturer classifies as a truck and that has a gross vehicle weight rating (GVWR) of 6,001 pounds or more. This newly purchased vehicle gives you four big benefits:

The ability to elect bonus depreciation of 100 percent (thanks to the Tax Cuts and Jobs Act)
The ability to select Section 179 expensing of up to $25,900
MACRS depreciation using the five-year table
No luxury limits on vehicle depreciation deductions

Example. On or before December 31, 2020, you buy and place in service a qualifying used $50,000 SUV for which you can claim 90 percent business use. Your business cost is $45,000 (90 percent x $50,000). Your maximum write-off for 2020 is $45,000.

2. Buy a New or Used Pickup

If you or your corporation buys and places in service a qualifying pickup truck (new or used) on or before December 31, 2020, then this newly purchased vehicle gives you four big benefits:

Bonus depreciation of up to 100 percent
Section 179 expensing of up to $1,040,000
MACRS depreciation using the five-year table
No luxury limits on vehicle depreciation deductions

To qualify for full Section 179 expensing, the pickup truck must have

a GVWR of more than 6,000 pounds, and
a cargo area (commonly called a “bed”) of at least six feet in interior length that is not easily accessible from the passenger compartment.

Short bed. If the pickup truck passes the more-than-6,000-pound-GVWR test but fails the bed-length test, tax law classifies it as an SUV. That’s not bad. The vehicle is still eligible for either expensing of up to the $25,900 SUV expensing limit or 100 percent bonus depreciation.

Business Strategies, business taxes, Family Tax Issues, General Information, Self Employed, TAXES

$5,000 Chicago Microbusiness Recovery Grant program. Lottery disbursement.

April 28, 2020 Howard Tax Prep LLC

Source: Copied & Pasted Email Received from The Chicago BACP

“The Chicago Microbusiness Recovery Grant Program will provide $5 million in grants to businesses with four or fewer employees in low- and moderate-income areas of the city. Grants of $5,000 will be disbursed via a lottery, with winners equitably distributed across eligible Community Areas based on population. Applications are available now and will be open until Monday, May 4^th at 5:00 pm.

BACP will be holding a series of webinars in multiple languages this week to inform prospective applicants about the Recovery Grant program and to answer questions. To register, please visit chicago.gov/businessworkshops.

You can find details on the grant below. To apply and learn more, please visit chicago.gov/recoverygrant.

Eligibility Requirements

To be eligible for a grant, businesses must meet the following requirements:

Four or fewer employees
Less than $250,000 annual revenue
Located in the City of Chicago
In business for one year
25% decrease in revenue due to COVID-19
Located in a low-income Community Area (view map)
Search for your Community Area

Required Documentation

Applicants must upload the following documents:

A business bank statement from 2020 that includes the business address and business name
A valid business license dated 05/01/19 or earlier
A valid identification card (driver’s license, CityKey, etc.)
A completed W9 form (access a fillable form here)

Grant Details

One-time grant of $5,000
Grant funds must be used for working capital (rent, payroll, utilities, taxes, insurance, operations)

Timeline

04/28: Grant application is available
05/04: Grant application closes at 5:00pm CDT
05/11: Grant recipients are chosen via lottery and notified of their acceptance. ACH payments are initiated – funds should be received within 2 business days.

Applications are available in Spanish and questions can be submitted to the Recovery Grant Team via these webforms in English or Spanish.

Please note that funds available through the Recovery Grant Program and the Chicago Small Business Resiliency Loan Fund are intended to complement the federal financing available through the U.S. Small Business Administration (SBA). The SBA resumed accepting Paycheck Protection Program applications from participating lenders on Monday, April 27 at 9:30am CDT. Click here to find an eligible Paycheck Protection Program lender. If you need assistance navigating the funding and resource landscape during the COVID-19 outbreak, please reach out to a Small Business Resource Navigator for individualized 1:1 support.

I want to thank all of you for your persistence and dedication during this incredibly difficult time. Your City government will continue to fight for our small businesses and we will continue providing information and resources to navigate this crisis.

Sincerely,

Rosa Escareno

BACP Commissioner”

business taxes, Family Tax Issues, General Information, Self Employed, TAXES

Economic impact payments: What you need to know.

March 30, 2020March 30, 2020 Howard Tax Prep LLC

Check IRS.gov for the latest information:

No action needed by most people at this time

THE INFORMATION HAS BEEN COPIED AND PASTED FROM IRS NEWSWIRE. ISSUE NUMBER:IR-2020-61, March 30, 2020

“WASHINGTON – The Treasury Department and the Internal Revenue Service today announced that distribution of economic impact payments will begin in the next three weeks and will be distributed automatically, with no action required for most people. However, some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment.

Who is eligible for the economic impact payment?
Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.

Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child.

How will the IRS know where to send my payment?
The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.

For people who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment amount. For those who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to calculate the payment. The economic impact payment will be deposited directly into the same banking account reflected on the return filed.

The IRS does not have my direct deposit information. What can I do?
In the coming weeks, Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail.

I am not typically required to file a tax return. Can I still receive my payment?
Yes. People who typically do not file a tax return will need to file a simple tax return to receive an economic impact payment. Low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file a tax return will not owe tax.

How can I file the tax return needed to receive my economic impact payment?
IRS.gov/coronavirus will soon provide information instructing people in these groups on how to file a 2019 tax return with simple, but necessary, information including their filing status, number of dependents and direct deposit bank account information.

I have not filed my tax return for 2018 or 2019. Can I still receive an economic impact payment?
Yes. The IRS urges anyone with a tax filing obligation who has not yet filed a tax return for 2018 or 2019 to file as soon as they can to receive an economic impact payment. Taxpayers should include direct deposit banking information on the return.

I need to file a tax return. How long are the economic impact payments available?
For those concerned about visiting a tax professional or local community organization in person to get help with a tax return, these economic impact payments will be available throughout the rest of 2020.

Where can I get more information?
The IRS will post all key information on IRS.gov/coronavirus as soon as it becomes available.

The IRS has a reduced staff in many of its offices but remains committed to helping eligible individuals receive their payments expeditiously. Check for updated information on IRS.gov/coronavirus rather than calling IRS assistors who are helping process 2019 returns.”

Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance
assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

Never miss another tip again! Join our newsletter, to receive tax reduction/wealth building tips delivered right to your inbox!

Business Strategies, business taxes, Family Tax Issues, General Information, REAL ESTATE, Retirement Income, Self Employed, Tax Reduction, TAXES

Congress Reinstates Expired Tax Provisions—Some Back to 2018

January 13, 2020 Howard Tax Prep LLC

Congress let many tax provisions expire on December 31, 2017, making them dead for your already- filed 2018 tax returns.

In what has become much too common practice, Congress resurrected the dead provisions retroactively to January 1, 2018. That’s good news. The bad news is that we have to amend your tax returns in our Chicago south loop tax preparation office to make this work for you.

And you can relax when filing your 2019 and 2020 tax returns, because lawmakers extended the “extender” tax laws for both years. Thus, no worries until 2021—and even longer for a few extenders that received special treatment.

Back from the Dead

The big five tax breaks that most likely impact your Form 1040 are as follows:

Exclusion from income for cancellation of acquisition debt on your principal residence (up to $2 million)
Deduction for mortgage insurance premiums as residence interest
7.5 percent floor to deduct medical expenses (instead of 10 percent)
Above-the-line tuition and fees deduction
Nonbusiness energy property credit for energy-efficient improvements to your residence

Congress extended these five tax breaks retroactively to January 1, 2018. They now expire on December 31, 2020, so you’re good for both 2019 and 2020.
or click here to call us 1-855-743-5765.

Other Provisions Revived

Congress also extended the following tax breaks retroactively to January 1, 2018, and they now expire on December 31, 2020 (unless otherwise noted):

Black lung disability trust fund tax
Indian employment credit
Railroad track maintenance credit (December 31, 2022)
Mine rescue team training credit
Certain racehorses as three-year depreciable property
Seven-year recovery period for motorsports entertainment complexes
Accelerated depreciation for business property on Indian reservations
Expensing rules for certain film, television, and theater productions
Empowerment zone tax incentives
American Samoa economic development credit
Biodiesel and renewable diesel credit (December 31, 2022)
Second-generation biofuel producer credit
Qualified fuel-cell motor vehicles
Alternative fuel-refueling property credit
Two-wheeled plug-in electric vehicle credit (December 31, 2021)
Credit for electricity produced from specific renewable resources
Production credit for Indian coal facilities
Energy-efficient homes credit
Special depreciation allowance for second-generation biofuel plant property
Energy-efficient commercial buildings deduction

Temporary Provisions Extended

Congress originally scheduled these provisions to end in 2019 and now extended them through 2020:

New markets tax credit
Paid family and medical leave credit
Work opportunity credit
Beer, wine, and distilled spirits reductions in certain excise taxes
Look-through rule for certain controlled foreign corporations
Health insurance coverage credit

If you have questions about the extenders, please call us at 855-743-5765. Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance
assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

Never miss another tip again! Join our newsletter, to receive tax reduction/wealth building tips delivered right to your inbox!

Business Strategies, business taxes, Family Tax Issues, General Information, REAL ESTATE, RUNNING YOUR BUSINESS, Self Employed, signing agent, Tax Reduction, TAXES

Unlock Tax Deductions with a Rental Property Home Office

January 9, 2020 Howard Tax Prep LLC

With the start of a new tax year, you’re probably looking for new tax savings opportunities, like our Chicago South Loop Tax Preparation clients.

As you probably know, establishing a home office for your Schedule C or corporate business creates valuable tax deductions.

But it’s not available only for your proprietorship,partnership, or corporate business. If you have rental properties, you can establish a home office to manage your rental properties and deduct the cost on your Schedule E.
or click here to call us 1-855-743-5765.

Rentals as a Business

The first hurdle is that your rental activities have to qualify as a “trade or business” under the tax law.

Luckily for you, that’s relatively simple—you’ll need regular and continuous involvement with your rental activities to meet this requirement.

Whether or not your rental activities are a trade or business depends on the facts and circumstances of your particular situation, and tax court cases give us guidance on that.

Qualifying Area

Your second hurdle is setting aside space in your home that qualifies for the home-office deduction.

For this to work, you need to use that space in your residence regularly and exclusively as the principal place of business for your rental activities.
or click here to call us 1-855-743-5765.

This sounds hard, and it was hard—before lawmakers changed the rules to include, as a principal place of business, the space you use for administrative or management activities, provided there is no other fixed location where you conduct substantial administrative or management activities.

Home-Office Deduction

Establishing a rental property home office does two things to your household expenses:

Turns non-deductible household expenses into tax deductions.
Moves household expenses normally deductible on Schedule A to your rental properties on Schedule E.

The latter is especially important after passage of the Tax Cuts and Jobs Act

put a $10,000 limit on your Schedule A state and local tax deductions, and
lowered the amount of your mortgage on which you deduct mortgage interest from $1 million to $750,000.

Eliminate Commuting

Without a qualifying home office, your mileage from home to your first business stop and then from your last business stop back home is non-deductible commuting mileage.

But here is what happens with the rental property’s principal office in your home:

You have no commuting mileage from your home to and from your rentals, if the rentals are in the area of your tax home (say, within 50 miles).
You establish your rental property tax home, and if your rentals are outside the area of your tax home, then the mileage from your home to and from the rentals is deductible business mileage because you are traveling outside the area of your tax home.

Real Estate Professional

If you qualify as a real estate professional under the tax law, then you can deduct 100 percent of your rental losses in the year you incur them.

But there’s a big hurdle to the tax law classification as a real estate professional. You must show that you spend

more than 50 percent of your personal service work time in real property trades or businesses in which you materially participate, and
more than 750 hours of service during the tax year in real property trades or business in which you materially participate.

Having a rental property home office that qualifies as a tax-code-defined principal place of business makes it easier to qualify as a real estate professional, because your time spent on deductible travel to and from your rental properties counts toward the time requirements.

Claiming Your Deduction

The Schedule E instructions not only fail to provide any explanation about where to put your home-office deduction, but they also do not even mention a home office.

But the instructions do say that you can deduct ordinary and necessary business expenses, and the home office meets that rule. Also, as established in Curphey (a precedent-setting case), the home office is allowable as an expense against income from a rental business.

If you would like to discuss your rental properties with me, please call us directly at 855-743-5765. Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance
assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

Never miss another tip again! Join our newsletter, to receive tax reduction/wealth building tips delivered right to your inbox!

business taxes, Family Tax Issues, General Information, Self Employed, TAX DEBT RELIEF, Tax Reduction, TAXES

How Serious Is your IRS Letter?

November 22, 2019 Howard Tax Prep LLC

Has the IRS sent you a collections letter? How serious is that letter? Can you stroll to the phones, or do you need to break and run to the phones and call for help?

Listed below are the most common IRS collection letters that one may receive when they have tax debt. I’ve listed them in order from stroll to the phones (low detection on the IRS radar) to break and run to the phone lines & get help (requires immediate action).

CP14 – Casually stroll (No sense of real urgency).

CP501 – Put a little pep in your step (Take notice).

CP503 – Speed walk (Decide to do something).

CP504 – Start Jogging (things are getting very serious).

Letter 1058/LT11 – (Final Levy Notice)—Run like you’re trying to lose weight. —act now or lose your collection due process rights (your right to a hearing and a stop of collection).

CP90/CP91 – Run like you’re trying to lose weight. Another form of Final Notice of Intent to Levy.

CP71 – 10 Day Final Notice of Intent to Levy. RUN LIKE YOU’RE BEING CHASED IN A HORROR MOVIE. Act now, you are out of time.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance
assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

Never miss another tip again! Join our newsletter, to receive tax reduction/wealth building tips delivered right to your inbox!

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THE INFORMATION HAS BEEN COPIED AND PASTED FROM IRS NEWSWIRE. ISSUE NUMBER:IR-2020-61, March 30, 2020

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