Tag Archive for Barry Fowler

October 15 Extension Due Date Rapidly Approaching

If you could not complete your 2014 tax return by the normal April filing due date, and are now on extension, that extension expires on October 15, 2015, and there are no additional extensions. Failure to file before the extension period runs out can subject you to late-filing penalties.

There are no additional extensions, so if you still do not or will not have all of the information needed to complete your return by the extended due date, please call the office so that we can explore your options for meeting your October 15 filing deadline.

If you are waiting for a K-1 from a partnership, S-corporation, or fiduciary return, the extended deadline for those returns was September 15. So, if you have not received that Read More

Written by | Posted in Individual • Tax Planning

Sole Proprietorship – Is The Risk Worth It?

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

Written by | Posted in Small Business

Is The IRS Withholding Some or All of Your Refund?

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

Written by | Posted in IRS

Family Courts Don’t Always Pay Attention to Federal Tax Law

All too often, family law courts make rulings that are contradictory to federal tax law, causing confusion and inequity in divorce actions since family court rulings cannot trump federal tax law.

An issue for divorced parents is who gets to claim the children for tax purposes. Federal tax law provides that the parent with physical custody claims the child unless that parent releases the exemption to the other parent. Frequently, family courts award physical custody to one parent and the tax exemption to the other. To make matters worse, the courts assume that the exemption deduction will provide a financial benefit to the non-custodial parent. Then the court adjusts child support accordingly, leaving the non-custodial parent with two unpleasant surprises when filing his or her tax return: the Read More

Written by | Posted in Federal • Individual

Gifting Money or Property Can Have Serious Tax Consequences

Gift and inheritance taxes were created long ago to prevent an individual’s assets from being passed on to future generations free of tax. Congress has frequently tinkered with these taxes, and currently the gift and inheritance taxes are unified with a top tax rate of 40%. However, the law does provide the following two exclusions from the tax:

Lifetime exclusion – For 2015, $5.43 million per person is excluded from gift and inheritance tax. This amount is annually adjusted for inflation and applies separately to each spouse of a married couple. Where one of the couple dies and does not use the entire exclusion amount, the unused portion of the exclusion can be passed on to the surviving spouse by filing an estate tax return for the decedent, even if one is otherwise not required. Read More

Written by | Posted in Gift Tax

Are Charity Auction Purchases Deductible Contributions?

It is common practice for charities to hold auction events where attendees will bid upon and purchase items. The question often arises whether the money spent on the items purchased constitutes a charitable donation.

The answer to that question is some, but not all, of what’s paid for the item may be deductible. So if you purchase items at a charity auction, you may claim a charitable contribution deduction for the excess of the purchase price paid for the item over its fair market value. You must be able to show, however, that you knew that the value of the item was less than the amount you paid for it. For example, a charity may publish a catalog, given to each person who attends an auction, providing a good faith estimate of items that will be available for bidding. Assuming you have no reason to doubt the accuracy of the Read More

Written by | Posted in Tax Deductions

June 2015 Individual Due Dates

June 1 – Final Due Date for IRA Trustees to Issue Form 5498

Final due date for IRA trustees to issue Form 5498, providing IRA owners with the fair market value (FMV) of their IRA accounts as of December 31, 2014. The FMV of an IRA on the last day of the prior year (Dec 31, 2014) is used to determine the required minimum distribution (RMD) that must be taken from the IRA if you are age 70½ or older during 2015. If you are age 70½ or older during 2015 and need assistance determining your RMD for the year, please give this office a call. Otherwise, no other action is required and the Form 5498 can be filed away with your other tax documents for the year.

June 10 – Report Tips to Employer

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Written by | Posted in Individual • Tax Planning • Tax Tips

June 2015 Business Due Dates

June 15 – Employer’s Monthly Deposit Due

If you are an employer and the monthly deposit rules apply, June 15 is the due date for you to make your deposit of Social Security, Medicare and withheld income tax for May 2015. This is also the due date for the non-payroll withholding deposit for May 2015 if the monthly deposit rule applies.

June 15 – Corporations

Deposit the second installment of estimated income tax for 2015 for calendar year corporations.

June 30 – Taxpayers with Foreign Financial Interests

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Written by | Posted in Corporate • Small Business • Tax Provision/Tax Reporting

Are You Missing Out On The Earned Income Tax Credit?

The EITC is for people who work but have lower incomes. If you qualify, it could be worth up to $6,242 in 2015. So you could pay less federal tax or even get a refund. The credit is a refundable credit, so you can receive the benefits of the credit even if you do not owe any taxes. That’s money you can use to make a difference in your life.

Even though this credit can be worth thousands of dollars to a low-income family, the IRS estimates as many as 25 percent of people who qualify for the credit do not claim it simply because they don’t understand the criteria.

If you qualify for but failed to claim the credit on your return for 2012, 2013 and/or 2014, you can still claim it for those years by filing an amended return or an original return if you have Read More

Written by | Posted in Income Tax • Individual • IRS

Using The Home Sale Gain Exclusion For More Than Just Your Home

With careful planning, and provided the rules are followed, the tax code allows the home sale gain exclusion every two years.

Let’s assume you own a home, perhaps a second (vacation) home, or maybe are even thinking about buying a fixer-upper and flipping it. With careful planning, it is possible to apply the full home sale exclusion to all three of the properties.

Here is how it works. The tax code allows you to exclude up to $250,000 ($500,000 for married couples) of gain from the sale of your primary residence if you have lived in it and owned it for two of the five years immediately preceding Read More

Written by | Posted in Capital Gains • Real Estate • Tax Planning • Tax Provision/Tax Reporting

Home Mortgage Interest And Unmarried Couples

It is becoming increasingly common for couples to live together and remain unmarried, which can lead to potential tax problems when they share the expenses of a home but only one of them is liable for the debt on that home.

Home mortgage interest can generally be deducted only by a person who is legally obligated to pay the mortgage (in other words, a person who is named as an obligor on the mortgage document). However, there is an exception to the preceding general rule for interest paid on a real estate mortgage when a person is a legal or equitable owner of the real estate but is not directly liable for the debt.

For example, if the one who is not liable on the mortgage makes the payment, that Read More

Written by | Posted in Real Estate

When Fear of Filing Leads To Years of Failing To File Tax Returns

Have you ever heard the expression, “What you focus on expands”? I invite you to consider this idea for a moment as I discuss what gets so many people in trouble with the IRS.

Most of the time it starts out innocently enough. You prepare your tax returns and much to your surprise you owe the IRS a sum of money you simply do not have. It could be $1000, $2000, $10,000. It could be more or it could be less. Let’s just agree that whatever the amount it seems impossible for you to be able to pay all at once. So, what do you do? You decide not to file your taxes.

The next year, the same thing happens, and again you are afraid to file because now you owe more. You fear the IRS will demand payment in full.  Each successive year, the fear Read More

Written by | Posted in Income Tax • IRS • Tax Tips
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