Archive for John Stancil

Misguided Thinking in Washington—Tax Exempt Status

John Stancil

Utah Senator Orrin Hatch (R) recently sent a letter to IRS Commissioner John Koskinen. At the heart of the issue raised by Senator Hatch was his concern that many private museums should not receive 501(c)(3) tax-exempt status. Much of his reasoning seems to indicate a lack of understanding in regard to many of the smaller museums that dot the landscape of the United States. While not major tourist attractions, these museums do much to help preserve the history of a particular segment of our past. Many may not have wide appeal, but there frequently are a small cadre of dedicated adherents. I will, however, be the first to admit that 501(c)(3) tax-exempt status may be abused by an individual seeking to shield his hobby from any tax consequences while generating a revenue stream or other tax benefits. But don’t penalize all small museums due to a few bad apples.

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Written by | Posted in Exemptions

Form 1098-T Now Required When Taking Education Credits

Not surprisingly, tax fraud is rampant in the area of education credits and the tuition deduction. According to the Treasury inspector General for Tax Administration (TIGTA) 3.6 million taxpayers claimed over $5.6 billion in potentially
erroneous education tax credits in 2012. Of over 10 million claims for the American Opportunity Tax Credit, 2.5 million were not supported by a Form 1098-T. As a result of this report, the IRS will audit more returns on which education credits are taken. Also of interest in the report is that in 2013 there were 2,300 claims for individuals under the age of 14 and 3,000 over age 80.

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Written by | Posted in Form 1098-T

Changes in Your Mortgage Interest Statement

Next January when you receive your mortgage interest statement from your lender, you might notice some changes on the Form 1098. Beginning in 2016, the mortgage interest statements must reflect the outstanding principal balance, the loan origination date, and the address of the property that secures the mortgage. All of this is information that has not traditionally been included on the mortgage interest statement. However, due to the complexity in the laws in regard to the deductibility of mortgage interest, these are welcome changes. In a perfect world, everything would be simple and there would be no need for this information, but we must play the hand we are dealt. Let’s look at each of these requirements and the reasons for each.

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Written by | Posted in Form 1098 • Mortgages

When Is a Tip not a Tip?

John Stancil

When is a tip not a tip? According to the IRS, “when it is a service charge.” Under rules effective January 1, 2014, the IRS has redefined the terms “tip” and “service charge” for tax purposes. Under these rules, restaurants that charge an automatic percent charge for large parties may no longer treat these amounts as tips. Read More

Written by | Posted in FICA • Form 4666 • IRS • Tax Compliance

Driving For Uber – The Tax Consequences

John Stancil

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

Written by | Posted in Individual • Self Employment Tax • Small Business

Are you Using the Correct Private Delivery Service?

John Stancil

Most taxpayers today do not mail their tax returns as the use of e-filing continues to increase. However, some still mail in paper returns, and there are occasions in which correspondence with the IRS must be done through the mail. Most taxpayers utilize the United States Postal Service in these cases. But there are Read More

Written by | Posted in IRS • Private Delivery Service • Tax Return

Pay your Taxes at 7-Eleven

John Stancil

Partly in response to the problem faced by dealers in medical marijuana or those in states where marijuana sales are legal, the IRS has partnered with PayNearMe to allow taxpayers to make cash payment on their taxes at participating 7-Eleven stores in 34 states. This allows anyone without a bank account a more Read More

Written by | Posted in Tax Advice

The Complex Home Mortgage Interest Deduction

One would think that the deduction for home mortgage interest would be rather straightforward, but with Congress and the IRS involved, that assumption is not always a correct one.  If you itemize deductions, home mortgage interest may be deducted on Schedule A. Note also that interest paid on a rental property falls under different rules and is not the subject of this article. Read More

Written by | Posted in Mortgages

Is Your “Business” Actually A Hobby?

You may have started a home-based business and now it is tax time and you don’t know what to do. You’re operating a business, so your expenses are deductible, right? Not. So. Fast.

If you’re not making a profit, the IRS may regard your business as a hobby. If this happens, you may not be able to deduct your losses. You would still report the income from the hobby activity, but it would be Other Income on line 21 of the Read More

Written by | Posted in Income Tax • Individual • IRS

Tax Issues For A Marijuana Business – Legal And Illegal

In recent years, the use of medical marijuana has been on the increase. Indeed, at least 24 states plus the District of Columbia have made medical marijuana legal with more likely to follow. Can the widespread sale of recreational marijuana be far behind? It is already legal for recreational use in four states plus DC. This is not about whether or not marijuana should be legal for medical or recreational use, it is about the tax hurdles faced by businesses that sell marijuana. Read More

Written by | Posted in Income Tax • IRS • Marijuana Taxes

Exceptions to the 10% Early Withdrawal Penalty

When one takes a distribution from an IRA or other retirement account, there may be penalty of ten percent of the withdrawn amount. This penalty is in addition to any income tax that may be due on the withdrawal.  There are, however, exceptions which will allow a distribution without penalty. Individuals often assume that a distribution may be made without penalty in the event of a hardship situation. This is true, but you must keep in mind that a hardship is defined by the IRS and they probably don’t define hardship the same as you. Read More

Written by | Posted in TaxConnections

Misclassified Workers? – Relief is Available

An ongoing issue with the IRS is the misclassification of employees as independent contractors. For the employee, it creates a burden of additional taxes on earnings, along with having to file a Schedule C with the 1040 at the end of the year. For the employer, a short-term benefit is reaped as the employer avoids payroll taxes and other costs associated with having employees. But this is not always the legal approach to take. The IRS is vigilant about seeking out misclassified workers. Read More

Written by | Posted in IRS
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