Family Tax Issues, General Information, REAL ESTATE, Self Employed, TAX DEBT RELIEF, Tax Reduction, TAXES

Are you a homeowner marrying a homeowner?

architecture building buy buyer

In our Chicago South Loop Tax Preparation office, we frequently meet with engaged couples for tax planning purposes. An issue that comes up often is the one of homeowners marrying each other. Engaged couples that each own a home have to decide which home to move into, & which home to rent out, or sell. Keep reading to see how you can sell your home and pay ZERO TAXES on up to $500,000!

1.) Don’t sell until AFTER THE WEDDING. If you sell your personal residence for a profit, you may be able to exclude up to $250,000 as a single person, and up to $500,000 if you’re married. In order to get the entire $500,000 both spouses must have used the home as their primary residence for at least 2 years out of the last 5 years. If only 1 spouse used the home as a residence, the maximum exclusion will be $250,000. 
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2.) File your taxes married filing jointly. Check with your tax professional to see if this is the best filing status for your situation. Tax debt, student loans, and child support obligations need to be taken into consideration before choosing this status.

3.) Sell the home that at least 1 of you have lived in for 24 months out of the last 5 years. In order to qualify for the personal residence capital gain exclusion you must meet the ownership and residency test. Per IRS.gov “If you owned the home for at least 24 months (2 years) out of the last 5 years leading up to the date of sale (date of the closing), you meet the ownership requirement. For a married couple filing jointly, only one spouse has to meet the ownership requirement.

HOWEVER, for the residence test, the IRS says: unlike the ownership requirement, each spouse must meet the residence requirement individually for a married couple filing jointly to get the full exclusion. If you owned the home and used it as your residence for at least 24 months of the previous 5 years, you meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period, and it doesn’t have to be a single block of time. All that is required is a total of 24 months (730 days) of residence during the 5-year period.

4.) If you’re going to rent the home, remember to account for any property improvements when figuring your basis for depreciation. For example, if you purchased the home for $100,000 & you’ve added a $10,000 porch, and a $20,000 roof, your basis (amount of money in the property) is now $130,000. There are other rules that need to be considered when figuring tax basis, so consult a tax professional.
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5.) If you rent to family, family includes only your spouse, brothers and sisters, half brothers and half sisters, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.). MAKE SURE TO CHARGE THEM FAIR MARKET VALUE FOR RENT so that you don’t lose out on valuable tax deductions!

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago 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.

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Family Tax Issues, General Information, Self Employed, TAXES

Is the Money on My Prepaid Card FDIC-Insured?

FDIC INSURED
To protect your funds, make sure your card is insurable and registered Banks insured by the FDIC offer a wide variety of financial products beyond traditional checking and savings accounts, including prepaid cards.

A prepaid card allows you to use a card to make purchases at stores, withdraw cash from ATMs, or to pay bills online without accessing a bank account or line of credit. Since these cards usually are not linked to a checking or savings account, consumers often ask, “Does the FDIC also insure the funds on my prepaid card?” The answer could be, “Yes,” but there are some important initial issues to understand.

If the FDIC-insured bank that issued the card was to fail, the funds available on your prepaid card may be insurable as long as:

  • your prepaid card is eligible for FDIC deposit insurance coverage,
  • you properly register the card, and
  • specific deposit insurance requirements are met (listed below).

The first step is to determine whether the prepaid card is eligible for FDIC deposit insurance coverage. The Consumer Financial Protection Bureau enacted new rules effective April 1, 2019 (to learn more visit New Protections for Prepaid Accounts), which require financial institutions to provide a disclosure as to whether or not your prepaid card is insurable for those cards linked to an FDIC-insured bank.

While the new disclosure rules make it easier to find information about FDIC insurance coverage for a specific prepaid card, you must also register your card with the card issuer if your card is designed to be insurable, so that the FDIC can identify you as the cardholder in the event the bank fails.

Sometimes a card is issued directly by an FDIC-insured bank and sometimes by a third-party that will simply use a bank to hold prepaid card funds. If the third-party is managing the record-keeping for the prepaid card, the third-party will have the responsibility to provide the FDIC with the information about the owners of the cards and the balance on each prepaid card at the time the bank fails.

The bank’s records for FDIC insurable prepaid cards must meet the following requirements:

The account must be appropriately titled (names the owner or owners of the account) in the bank’s records and indicate that the prepaid account provider is going to be acting as the cardholder’s agent, which could include duties such as transferring funds on your behalf when you make a purchase and keeping track of the balance on your prepaid card as you add or withdraw funds.

If the bank fails, the card issuer as your agent will need to provide the FDIC a list identifying each cardholder and the balance on each card at the time the bank fails.

The contractual agreement among the financial institution, the prepaid card issuer and the cardholders must indicate that the individual cardholders are the owners of the funds.

Assuming you properly register your prepaid card, if the FDIC-insured bank that issued the card was to fail, you as the consumer would be insurable for up to $250,000, subject to aggregation with other similarly owned deposits you may have in the failed bank (for more information visit FDIC deposit insurance).

In addition, having FDIC deposit insurance coverage does not cover certain events, such as if your prepaid card is lost or if someone gains access to your prepaid card and steals the funds. In these situations, there could be other legal options available for you to try to recover your funds, such as those that may be described in your account agreement or provided under state or federal law.

It’s important to note that this information does not apply to gift cards. For information on gift cards, visit Giving or receiving gift cards? Know the terms and avoid surprises.

For more information about prepaid cards and similar products, see the FDIC’s webpage on prepaid accounts at Prepaid Cards and Deposit Insurance Coverage.

For more help or information, go to FDIC.gov or call the FDIC toll-free at 1-877-ASK-FDIC (1-877-275-3342). Please send your story ideas or comments to consumeraffairs3@fdic.gov

Family Tax Issues, General Information, Retirement Income, Self Employed

12 Things you need to know about your parent.

senior

While I am focused on helping small businesses grow by reducing their taxes, and organizing their books, I firmly believe that health of body and mind leads to wealth. To help you be better prepared in the event of an emergency involving your parents/loved ones, below (in order of importance) is a list of 12 things you need to know about your aging parents’ health.  If you have any questions, comments, or concerns, please don’t hesitate to call us!

WHAT ARE THE NAMES OF THEIR DOCTOR’S & SPECIALIST? If you don’t know anything else, this is probably the most important piece of information. Why? Chances are good that your parents’ doctors can provide much of the rest of the information needed as well as more details about your parents’ specific health histories.

Do they have any major medical problems? This includes such conditions as high blood pressure, diabetes, heart disease, etc.

What Medications are they on? Have a list of medications and supplements. It’s especially important that a doctor know if your parent uses blood thinners. It’s also important for your doctor to know if your parents take any vitamin or herbal supplements (as these might interact with medications given in an emergency situation.

What is their previous medical history? Have they had any surgeries and major medical procedures? List past medical procedures including implanted medical devices such as pacemakers.

What is their insurance information? Know the name of your parents’ health insurance provider and their policy numbers.

What Are their End-of-Life Wishes? For instance: Would you want a ventilator and feeding tube used to keep you alive even in an irreversible coma? Do you want CPR initiated if your heart stops, even if you are terminally ill? Make sure the health care proxy is aware of your parent’s decisions.

Do they have any ADVANCE DIRECTIVES? An advance directive (living will, Do Not Resuscitate aka DNR, etc) is a legal document that outlines a person’s decisions about his or her health care, such as whether or not resuscitation efforts should be made and the use of life-support machines.

Have they named a durable power of attorney to manage their finances, or healthcare?
The first step is to find out if they have named a Durable Power of Attorney (POA). Without a POA in place, you’ll have to go to court to get guardianship of your parent in order to access accounts on their behalf.

Where do they keep their financial records and important documents?
Whether they keep their money and documents in a bank, a safe, or under the mattress, you need to know where to find records when you need them. What is the location of keys or codes to lock boxes or safes?

What are their bank account numbers and names of their financial institutions?
In addition to knowing where they keep their money, you need specifics on all account numbers. What banks do they use? Who is their mortgage company? Do they have an investment firm?

What are your parent’s monthly expenses?
Gather information on their mortgage, car payment, credit card debt, electric bill and other expenses.

How do they pay their bills currently, ESPECIALLY THEIR LIFE INSURANCE!!
If there are automatic deductions being taken out of a checking account, you need to know about it. Do they use online banking, or are they mailing in paper checks? DO NOT ASSUME!

This list was provided to us by our partner nonprofit agency  Senior Resource Group Inc. The mission of Senior Resource Group Inc.

is to remove access barriers to service, empower seniors through education, lower prescription drug cost, consolidate resources, and mobilize assistance.

Senior Resource Group Inc. services range from locating no cost insulin for diabetics; applying clients for prescription drug grants; locating local/state/federal and private assistance programs; explaining Medicare; and identifying the lowest cost Medicare supplements, health plans, & insurance solutions. Each of our clients are given an extensive individual interview so that our advocates can uncover every transportation, tax, food, and medical discounts he/she may qualify for.

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

Impact of Death, Retirement, & Disability on the 179 Tax Deduction

hospital work process

What tax effect would death, retirement, or disability have on you or your business?

Here’s an easy example to illustrate.

Let’s say that in 2017, you purchased (for business use) a pickup truck with a gross vehicle weight rating greater than 6,000 pounds. Asserting that you use the pickup 100 percent for business, you expensed the entire $55,000 cost.

What happens to that $55,000 expensed amount if you die, retire, or become disabled before the end of the vehicle’s five-year depreciation period?

Death

If your heirs are not going to pay estate taxes, your death is about as good as it gets. Here’s why:

  • You get to keep your Section 179 deduction. (It goes to the grave with you.)
  • Your pickup truck gets marked up to fair market value. (Remember, you expensed it to zero, but now at your death, the fair market value is the new basis to your heir or heirs.)

Example. Using Section 179, you expensed the entire cost of your $55,000 pickup truck. You die. Your daughter Amy inherits the pickup at its fair market value, which is now $31,000, and sells it immediately for $31,000. Here are the results:

  • You get to keep your Section 179 deduction—no recapture applies.
  • Amy pays zero tax on her sale of the pickup truck.
  • Your estate includes the $31,000 fair market value of the pickup, and if your estate is less than $11.4 million, your estate pays no estate taxes.

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Disability

This is ugly. If you become disabled and you allow your business use of the pickup to fall to 50 percent or below during its five-year depreciable life, you must recapture and pay taxes on the excess deductions generated by the Section 179 deduction.

To make matters worse, you must use straight-line depreciation in making the excess-deduction calculation.

Retirement

With retirement, you have exactly the same problem as you would have if you became disabled. In fact, with retirement, you disable your business involvement, and that makes your pickup truck fail the more-than-50-percent-business-use test, resulting in recapture of the excess benefit over straight-line depreciation.

Takeaways

You need to consider what happens should you become disabled, or retire, or die.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago 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.

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

IRS PUBLISHES SUMMERTIME TAX TIPS.

person holding black pen

Buying a home? Working a summer job? Volunteering? Activities that are common in the summer often qualify for tax credits or deductions. And, while summertime and part-time workers may not earn enough to owe federal income tax, they should remember to file a return to get a refund for taxes withheld early next year.

Here are some summertime tax tips from the IRS that can help taxpayers during tax season next year:

Marital tax bliss. Newlyweds should report any name change to the Social Security Administration before filing next year’s tax return. Then, report any address change to the United States Postal Service, employers and the IRS to ensure receipt of tax-related items.

Cash back for summer day camp. Unlike overnight camps, the cost of summer day camp may count as an expense towards the Child and Dependent Care Credit. See IRS Publication 503, Child and Dependent Care Expenses, for more information.
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Part-time and summer work. Employers usually must withhold Social Security and Medicare taxes from pay for part-time and season workers even if the employees don’t earn enough to meet the federal income tax filing threshold. Self-employed workers or independent contractors need to pay their own Social Security and Medicare taxes, even if they have no income tax liability.

Worker classification matters. Business owners must correctly determine whether summer workers are employees or independent contractors. Independent contractors are not subject to withholding, making them responsible for paying their own income taxes plus Social Security and Medicare taxes. Workers can avoid higher tax bills and lost benefits if they know their proper status.

Though the higher standard deduction means fewer taxpayers are itemizing their deductions, those that still plan to itemize next year should keep these tips in mind:

Deducting state and local income, sales and property taxes. The total deduction that taxpayers can deduct for state and local income, sales and property taxes is limited to a combined, total deduction of $10,000 or $5,000 if married filing separately. Any state and local taxes paid above this amount cannot be deducted.

Refinancing a home. The deduction for mortgage interest is limited to interest paid on a loan secured by the taxpayer’s main home or second home that they used to buy, build, or substantially improve their main home or second home.
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Buying a home.

New homeowners buying after Dec. 15, 2017, can only deduct mortgage interest they pay on a total of $750,000, or $375,000 if married filing separately, in qualifying debt for a first and second home.

For existing mortgages if the loan originated on or before Dec. 15, 2017, taxpayers continue to deduct interest on a total of $1 million in qualifying debt secured by first and second homes.

Donate items. Deduct money. Those long-unused items in good condition found during a summer cleaning and donated to a qualified charity may qualify for a tax deduction. Taxpayers must itemize deductions to deduct charitable contributions and have proof of all donations.

Donate time. Deduct mileage. Driving a personal vehicle while donating services on a trip sponsored by a qualified charity could qualify for a tax break. Itemizers can deduct 14 cents per mile for charitable mileage driven in 2019.

Reporting gambling winnings and claiming gambling losses. Taxpayers who itemize can deduct gambling losses up to the amount of gambling winnings.
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The last two tips are for taxpayers who have not yet filed but may be due a refund and those who may need to adjust their withholding.

Refunds require a tax return.

 Although workers may not have earned enough money from a summer job to require filing a tax return, they may still want to file when tax time comes around.

It is essential to file a return to get a refund of any income tax withheld. There is no penalty for filing a late return for those receiving refunds, however, by law, a return must be filed within three years to get the refund. See the Interactive Tax Assistant, Do I need to file a tax return?

Check withholding. Newlyweds, summertime workers, homeowners and every taxpayer in between should take some time this summer to check their tax withholding to make sure they are paying the right amount of tax as they earn it throughout the year.  Taxpayers should remember that, if needed, they should submit their new W-4 to their employer, not the IRS.

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

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

HOW TO WRITE OFF YOUR 4TH OF JULY PARTY.

Author: Trudy M. Howard

In our Chicago South Loop Tax preparation office, everyone enjoys a BBQ, and a good party. While we enjoy having a good time, we LOVE saving clients money through effective tax planning. Below are a few tips on how you can reduce your taxable income with your 4th of July party.

INVITE ALL STAFF & FEW FRIENDS: Invite your ENTIRE STAFF to the 4th of July BBQ to get a tax deduction. NON EMPLOYEES WILL NOT give you a tax deduction. For example, if you invite 15 employees & their family to a 4th of July picnic, and you invite 5 of your friends & family members you have a total of 20 guest.If your party cost $2,500 you can write off 3/4 or 75% (20 guest total, 1/4 friends 5/20) of the expense at 100%. $2,500 x .75= $1,875 tax deduction.

Per IRS PUBLICATION 15-B: “Food or beverage expenses related to employee recreation, such as holiday parties or annual picnics, aren’t subject to the 50% limit on deductions when made primarily for the benefit of your employees other than employees who are officers, shareholders or other owners who own a 10% or greater interest in your business, or other highly compensated employees.”

Schedule-button-nb INVITE POTENTIAL BUSINESS PROSPECTS: 1/2 of something is better than 0 of something. You can deduct 50% of the FOOD COST ONLY if you invite current or potential business customer, client, consultant, or similar business contact. Your food cost must be on SEPARATE RECEIPT to be tax deductible. You cannot deduct the cost of the fireworks display, chairs, DJ, etc.

Per IRS PUBLICATION 463: “As discussed above, entertainment expenses are generally nondeductible. However, you may continue to deduct 50% of the cost of business meals if you (or an employee) is present and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant, or similar business contact.

Food and beverages that are provided during entertainment events are not considered entertainment if purchased separately from the entertainment, or if the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts.”

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago 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.

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BUSINESS CREDIT, Business Strategies, business taxes, Family Tax Issues, General Information, Retirement Income, RUNNING YOUR BUSINESS, Self Employed, TAX DEBT RELIEF, Tax Reduction, TAXES

How I went to IRS tax jail, aka IRS withholding compliance program.

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Author: Trudy M. Howard

Have you ever gotten away with something, and found yourself doing it again? Did you keep doing it thinking that you would never get caught, or if you did get caught, you could talk your way out of it? Well that was also me when it came to going exempt on my Federal taxes.

When I was 25 I started working for a major phone company, and I was earning about $70,000 per year. $70,000 wasn’t a shabby salary for a 25 year old single mother, but when the Federal taxes were deducted, I felt as if I was paying more in taxes than I was earning. With the increase in salary I no longer qualified for the earned income tax credit, I didn’t qualify for daycare assistance programs, and I was kicked out of the welfare office when I asked for medical help or food stamps! So what was a girl to do when she felt that she needed more money to survive? Was I supposed to create a budget and stick to it? Should I have stopped dining out? Maybe I should have picked up a side business (which would have created tax planning opportunities) and supplemented my income? While all of these things sound like viable, and reasonable options, 25 year old Trudy was not reasonable, and she certainly wasn’t going to discipline herself to stick to a budget. While discussing my financial crisis (don’t judge me) with a friend, she told me about a “magical thing” called “going exempt from Federal income tax.”
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In order to stop the government from taking $300 and $400 out of my paychecks, “all I had to do (which is the opening statement for all bad ideas)” was write exempt on my W4, hand the form to my employer, and magically, all of the deductions would stop. The first time that I went exempt I was afraid. Was the IRS going to come after me? Was my job going to fire me for not paying taxes? Would I owe the IRS a gazillion dollars? To my surprise (and eventual demise) none of these things happened. In fact, nothing happened, life continued on, and I was happy as jay bird; that is until tax time arrived.

In June of 2002 I received my first IRS tax bill (notice CP51A). I ignored it. More letters came; I ignored them. Certified letters came; I refused to pick them up. The only letter that caught my attention was the CP504 intent to levy, and it only caught my attention because it mentioned the word assets. Me being me, I waited until the last minute to contact the IRS, and after my bank account was levied, I finally understood that when the IRS sends letters, it’s best to call them immediately. One would think that the levy would have changed my ways, but nope! All the levy did was teach me to get tax debt help, and work out a payment plan with the IRS.

Schedule-button-nbor an with the IRS click here to call us 1-855-743-5765.

After resolving my tax debt issues, I began the crazy cycle of racking up tax debt, and asking for an installment plan. 10 years into this cycle I finally reached the mother of all IRS agents, and she told me “be careful, because an IRS agents can see that you keep racking up debt, and that you don’t have enough withholding. When you don’t have enough withholdings, the IRS can force you to increase your withholding.” My internal response was “girl bye… I’ve been doing this for years, run the payment plan and shut up” but my external response was “Really they can do that? I always figured that I would settle up with the IRS at the end of the year. I’ll do better this year, I promise.” Little did I know the gig was up, and I was on my way to IRS tax jail.

Merriam Webster defines prison as: “a state of confinement or captivity, or  a place of confinement especially for lawbreakers.” While IRS tax jail is not a physical jail with walls, those that have been placed into the IRS withholding compliance program can tell you that it certainly feels like jail! Once the taxpayer becomes a lawbreaker (by not paying their taxes as they go), they are eventually placed into the IRS withholding compliance program (aka IRS tax jail), and held captive for a minimum of 3 years. During this 3 year period the IRS states that: “your employer must withhold income tax from your wages as if you’re single with zero allowances.”

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To illustrate, in 2019, if a person is earning $70,000 (and there were thrown into IRS tax jail aka withholding compliance program), they would have $400.87 withheld from each paycheck to cover their Federal income taxes. In addition to the Federal tax deduction, every paycheck would also have deductions for Social Security ($166.92), Medicare ($39.04), and state taxes ( I live in Illinois, and in IL the tax would be $133.27. After taxes, the taxpayer would be left with a net pay of $1,952.21, not including deductions for health insurance, dental, vision, life insurance, disability, union dues, and so on. So if the IRS tax jail isn’t physical, how is one cast into IRS tax jail? The IRS sends tax payers to IRS tax Jail by sending letter 2800C to the taxpayers employer. 

Once your employer receives letter 2800C per IRS.gov: “within 60 days the employer must “begin withholding income tax from this employee’s wages based on a withholding rate (or marital status) single, and withholding allowances of 0.” No amount of pleading, threatening, or arguing with your employer will change this. If you switch employers, the IRS will find you. The only thing that you can do is contact the IRS yourself (for the DIY crowd), or you can work with a professional tax debt resolution firm to negotiate with the IRS on your behalf.. Depending on your number of dependents, and marital status, the IRS may show you some mercy. There is always the option of doing nothing, and if you choose to do nothing, you can expect your lock in rate to begin within 60 days, and you will remain in IRS tax jail for a minimum of 3 years.

As with every good story, there is always a silver lining. If during your 3 year bid, you remain a good little taxpayer (by paying your taxes & staying in tax compliance) the warden can release you from IRS tax jail. 

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago 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.

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

Avoid This S Corporation Health Insurance Deduction Mistake

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If you have family members working for you in your S corporation, stop and read this article now.

In our SOUTH LOOP OF CHICAGO TAX PREPARATION office, when providing TAX PREPARATION FOR SMALL BUSINESS OWNERS, we often see a common mistake being made amongst S-CORP owners.

Think of this: You own 100 percent of your S corporation. Your 30-year-old daughter works for your S corporation. She owns no stock. Your S corporation covers her with a group health policy. Did your S corporation claim an insurance deduction for the cost of the premiums attributable to your daughter? If yes, that’s wrong. The health insurance is not deductible by the S corporation as health insurance.

With the incorrect setup, your family is simply out the money it paid for the health insurance. This is bad. It means a zero deduction for the S CORPORATION and a lost health insurance deduction for your daughter.

If you own more than 2 percent of an S corporation, you have to do three things to claim a deduction for your health insurance:

  1. You must get the cost of the insurance on the S corporation’s books.
  2. Your S corporation must include the health insurance premiums on your W-2 form.
  3. You must (if eligible) claim the health insurance deduction as an above-the-line deduction on Form 1040.

The three-step procedure also applies (and this could be a surprise) to your spouse, children, grandchildren, and parents if they work for your S corporation and get health insurance coverage, even if they don’t own a single share of S corporation stock directly.

You need to get this right. Without the W-2 treatment, the S corporation does not get a tax deduction.

With the correct W-2 treatment, the more than 2 percent shareholder who finds the health insurance premiums on his or her W-2 can claim the self-employed health insurance deduction on Form 1040, provided he or she is not eligible for employer-subsidized health insurance through another job or a spouse’s job.

If you or your S corporation did not handle this correctly in the past, we need to get busy amending those returns to create and protect the proper tax deductions. If this is the situation, please call Howard Tax Prep LLC at 855-743-5765.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago 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.

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

Fraud by Tax Preparer Creates Big Trouble for Client

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Is your tax preparer honest? You likely see indicators one way or the other. If your tax preparer commits fraud that benefits you, that can create trouble for you. In our Chicago South Loop tax preparation office,  we see a lot of clients that need tax debt relief. Many tax debt cases happen because a taxpayer unknowingly hired a dishonest tax preparer to file their tax return.  Let’s see how this works in real life.

Situation

The government indicted, tried, and convicted tax preparer Gregory D. Goosby of 30 fraud violations where he willfully aided and assisted in the preparation of false and fraudulent income tax returns.

Vincent Allen engaged Goosby to prepare his tax returns before Goosby’s fraud conviction. Allen gave Goosby his W-2, 401(k) statement, mortgage interest statement, and property tax statements. Goosby used those deductions but also added others, claiming false and fraudulent deductions for charitable contributions, meals and entertainment, and pager and computer expenses.

Guys with Guns 

Two special agents from the IRS’s Criminal Investigation Division interviewed Allen concerning Goosby’s preparation of his income tax returns. Allen agreed with the IRS that the deductions were false and fraudulent, but both the IRS and Allen blamed Goosby. The IRS did not charge Allen with intent to evade taxes (fraud).
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Statute of Limitations

In general, the IRS has three years from the date you file your tax return to audit it and propose adjustments. In the case of fraud, the IRS can audit your return at any time. There is no limit on how far back the IRS can go.

In this case against Allen, the first-ever case of this nature decided by the Tax Court, the fraud was committed by Goosby, the preparer, not by Allen, the taxpayer. So the Tax Court had to decide whether the fraud by the tax preparer extended the statute of limitations on the client’s return.

And that’s exactly what the Tax Court decided in this precedent-setting case. The tax preparer’s fraud extends the statute of limitations for fraud to the client even when the client is not charged with fraud. This means that if your tax preparer fraudulently prepares your return and you file it, the law extends the period during which the IRS can audit that tax return from the usual three years to forever.

Allen Was Lucky

Although Allen may not have felt lucky after he paid his lawyer fees and also handed over $10,000 in taxes, the IRS did not charge him with fraud and the court did not make him pay the 75 percent fraud penalty on the taxes due.
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Beware

Using a dishonest tax preparer is a mistake. When the IRS catches the dishonest preparer, it likely catches you, too. And as the Tax Court has now ruled, fraud is fraud, and that opens your tax return up to IRS examination forever.

Protect yourself. Do not engage dishonest tax preparers. With Howard Tax Prep LLC, you will always have an honest tax preparer. We will always do our best to help you lower your taxes, but we will never cheat.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago 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.

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

DID YOUR CPA REALLY FILE YOUR TAXES?

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Here in our Chicago South Loop Tax Preparation office, we’ve seen an increase in the number of people that have paid CPA’s to file their taxes, only to find that their taxes were never filed! Many people aren’t aware of the fact that their taxes haven’t been filed until they receive a letter or notice from the IRS requesting tax returns for the years in questions.
While you can file a complaint against professional tax preparers, the IRS still holds individual taxpayers responsible for ensuring that their tax returns were filed. Because individual taxpayers are responsible for filing their returns (and for what’s on their returns) we recommend that every taxpayer request a copy of their tax return transcript every 2-3 years. Keep reading to find out how to access your tax return transcript.
4 Ways to Get IRS Transcripts

1.) ONLINE: Access the IRS online system at Get Transcript Online . You will need to have the following:

  • A wireless phone IN YOUR NAME.
  • Most recent tax return.
  • Account number from a credit card, mortgage, home equity loan/ line of credit or auto loan.

2.) BY MAIL: If you’re unable to register online, or you prefer not to use Get Transcript Online, you may order a tax return transcript and/or a tax account transcript using Get Transcript by Mail Please allow 5 to 10 calendar days for delivery.

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3.) BY PHONE: call 800-908-9946. Please allow 5 to 10 calendar days for delivery.

4.) BY FAX/MAIL: Complete Form 4506-T, Request for Transcript of Tax Return to 855-298-1145, unless you live in Maine, Massachusetts, New Hampshire, New York,
Pennsylvania, Vermont. If you live in one of the aforementioned states, you will fax your form to 855-821-0094.
We’ve included a sample of how to complete form 4506 below.

f4506T Transcript Tax Return EXAMPLE_Page_1.jpg

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago 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.

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

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