Here at Tax Resolution Center...

Here at Tax Resolution Center...

Friday, July 31, 2015

Ten Key Tax Facts about Home Sales

In most cases, gains from sales are taxable. But did you know that if you sell your home, you may not have to pay taxes? Here are ten facts to keep in mind if you sell your home this year.

  1. Exclusion of Gain.  You may be able to exclude part or all of the gain from the sale of your home. This rule may apply if you meet the eligibility test. Parts of the test involve your ownership and use of the home. You must have owned and used it as your main home for at least two out of the five years before the date of sale.
  2. Exceptions May Apply.  There are exceptions to the ownership, use and other rules. One exception applies to persons with a disability. Another applies to certain members of the military. That rule includes certain government and Peace Corps workers. For more on this topic, see Publication 523, Selling Your Home.
  3. Exclusion Limit.  The most gain you can exclude from tax is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.
  4. May Not Need to Report Sale.  If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.
  5. When You Must Report the Sale.  You must report the sale on your tax return if you can’t exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale, you should review the Questions and Answers on the Net Investment Income Tax on IRS.gov.
  6. Exclusion Frequency Limit.  Generally, you may exclude the gain from the sale of your main home only once every two years. Some exceptions may apply to this rule.
  7. Only a Main Home Qualifies.  If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.
  8. First-time Homebuyer Credit.  If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules, see Publication 523.
  9. Home Sold at a Loss.  If you sell your main home at a loss, you can’t deduct the loss on your tax return.
  10. Report Your Address Change.  After you sell your home and move, update your address with the IRS. To do this, file Form 8822, Change of Address. You can find the address to send it to in the form’s instructions on page two. If you purchase health insurance through the Health Insurance Marketplace, you should also notify the Marketplace when you move out of the area covered by your current Marketplace plan.

Wednesday, July 29, 2015

Five Ways to Protect Your Money This Summer

For Americans taking a vacation, attending a concert, or working on their home or garden this summer, this season comes with its own unique consumer challenges. Learn the top five money and scam alerts for this time of year:

1.     Don’t buy gas additives that claim to increase fuel mileage. Even though gas prices go up in the summer, the Environmental Protection Agency has not found any product that significantly improves gas mileage, and some could damage a car’s engine or increase exhaust emissions.
 
2.     Unlicensed home repair or landscaping contractors may come to your door to offer services. Always research contractors, pay for services upon completion--not ahead of time--and consider using a signed contract outlining the work to be done and the exact price.
 
3.     Interested in a summer concert or festival? If you buy tickets from a major vendor, remember surcharges and additional fees may be tacked onto the listed price. Some venues require the same credit card used to purchase tickets be presented when the tickets are picked up, so if you’re buying tickets for someone as a gift, they may have difficulty getting them at will-call.
 
4.     When renting a beach or lake house for vacation, make sure the property actually exists. Do your homework before paying--check out the owner or rental company, consult maps, and read the lease carefully. Pay with an online payment service or a credit card so you can dispute the charges if something goes wrong.
 

5.     When flying, make sure you’re aware of the airline’s baggage charges and their policy when it comes to bumping passengers. A lot of airlines “bump” depending on how late you checked in, so check in ASAP!


Tuesday, July 28, 2015

SBA Halts Small Business Loans

If you’re a small business owner looking to the government to help out with a 7(a) small business loan for new equipment or to expand your business, get in line. The Small Business Administration has already reached its $18.75 billion ceiling for fiscal 2015. Unless Congress agrees to raise the ceiling, small business owners will have to wait until October 1 for approval. But if you need cash now, or you just want to try another avenue, consider alternative lending.
Here are two options:
Crowdfunding: Turn to your peers, your friends, and friends of their friends. This can be an effective way to gather money needed to help a business, but be aware of the time it takes to get a strong campaign off the ground.  
Peer-to-peer lending: Apply online and get an answer quickly (generally in less than a week, sometimes sooner). It’s a fast-growing way to leverage money with no pre-payment penalties, low rates and better terms than a traditional bank.
If you do want to go the SBA route, applications will continue to be accepted and reviewed, but unless Congress loosens the purse strings, don’t expect any cash to flow until fall.


Monday, July 27, 2015

No Need to Wait Until Oct. 15 Extension Deadline to File

Oct. 15 is the last day to file 2014 tax returns for most people who requested an automatic six-month extension. However, you can file any time before Oct. 15 if you have all your required tax documents. If you are one of the nearly 13 million taxpayers who asked for more time to file your federal tax return this year, you don’t need to wait until Oct. 15 extension deadline to file your return. You can file now if you are ready. As you prepare to file, here are some things that you should know:
·         Use IRS Free File.  Even though it is after April 15, nearly everyone can use e-file their tax return for free through IRS Free File. It does the math, checks to see if you qualify for tax breaks that you might miss, and it works best for those who are used to doing their own taxes. The program is available on IRS.gov now through Oct. 15. IRS e-file is easy, safe and the most accurate way to file your taxes. E-file also helps you get all the tax benefits that you’re entitled to claim.
·         A Refund May be Waiting.  If you are due a refund, you should file as soon as possible to get it.
·         Try Easy-to-Use Tools on IRS.gov.  Use the EITC Assistant to see if you’re eligible for the credit. Use the Interactive Tax Assistant tool to get answers to common tax questions, including new Health Care Law topics. Use these interactive tools to find out if you’re eligible to claim the premium tax credit, qualify for an exemption or if you must make a payment.
·         Use IRS Direct Pay.  If you owe taxes the best way to pay them is with IRS Direct Pay. It’s the simple, quick and free way to pay from your checking or savings account. Just click on the ‘Pay Your Tax Bill’ icon on the IRS home page.
·         Understand the Health Care Law’s effect on your taxes. The Affordable Care Act requires you, your spouse, and your dependents to have qualifying health insurance for the entire year, report a health coverage exemption, or make a payment when you file. If you purchased coverage through the Marketplace, you may be eligible for the premium tax credit and need to use Form 8962, Premium Tax Credit, to reconcile any advance payments made on your behalf. If you do not file a 2014 tax return you will not be eligible for advance payments or cost-sharing reductions to help pay for your Marketplace health insurance coverage in 2016. Filing as soon as possible, using your most current Form 1095-A, Health Insurance Marketplace Statement, will substantially increase your chances of avoiding a gap in receiving this help.
·         Missed Deadline? File as Soon as You Can. If you did not request an extension by April 15, you should file and pay as soon as you can anyway. This will stop the interest and penalties that you will owe. IRS Direct Pay offers you a free, secure and easy way to pay your tax directly from your checking or savings account. There is no penalty for filing a late return if you are due a refund. The sooner you file, the sooner you’ll get it.
·         Don’t Forget the Oct. 15 Deadline.  If you aren’t ready to file yet, remember to file by Oct. 15 to avoid a late filing penalty. If you owe and can’t pay all of your taxes, pay as much as you can to reduce interest and penalties for late payment. Use the Online Payment Agreement tool to ask for more time to pay. In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty. So if you can’t pay in full, you should file your tax return as soon as you can and pay as much as you can.
·         More Time for the Military.  Some people have more time to file. This includes members of the military and others serving in a combat zone. If this applies to you, you typically have until at least 180 days after you leave the combat zone to both file returns and pay any taxes due.


Friday, July 24, 2015

Small Businesses Can Get IRS Penalty Relief for Unfiled Retirement Plan Returns

The Internal Revenue Service today encouraged eligible small businesses that did not file certain retirement plan returns to take advantage of a low-cost penalty relief program enabling them to quickly come back into compliance.
The program is designed to help small businesses that may have been unaware of the reporting requirements that apply to their retirement plans.
Small businesses that fail to file required annual retirement plan returns, usually Form 5500-EZ, can face stiff penalties — up to $15,000 per return. However, by filing late returns under this program, eligible filers can avoid these penalties by paying only $500 for each return submitted, up to a maximum of $1,500 per plan. For that reason, program applicants are encouraged to include multiple late returns in a single submission. Find the details on how to participate in Revenue Procedure 2015-32 on IRS.gov.
The program is generally open to small businesses with plans covering a 100 percent owner or the partners in a business partnership, and the owner’s or partner’s spouse (but no other participants), and certain foreign plans. Those who have already been assessed a penalty for late filings are not eligible.
The Department of Labor offers a similar relief program for businesses with retirement plans that include employees known as the Delinquent Filer Voluntary Compliance Program.
Started as a one-year pilot, the IRS program was made permanent in May 2015. The IRS has received about 12,000 late returns since the pilot program began in June 2014.

The IRS reminds retirement plan sponsors and administrators that in most cases, a return must be filed each year for the plan by the end of the seventh month following the close of the plan year. For plans that operate on a calendar-year basis, as most do, this means the 2014 return is due on July 31, 2015. For details, visit the Form 5500 Corner on IRS.gov.

Review Your Taxes This Summer to Prevent a Surprise Next Spring

Each year, many people get a larger refund than they expected. Some find they owe a lot more tax than they thought they would. If this happened to you, review your situation to prevent another tax surprise. Did you marry? Have a child? Have a change in income? Some life events can have a major effect on your taxes. You can bring the tax you pay closer to the amount you owe. Here are some key IRS tips to help you come up with a plan of action:
·         New Job.   When you start a new job, you must fill out a Form W-4, Employee's Withholding Allowance Certificate and give it to your employer. Your employer will use the form to figure the amount of federal income tax to withhold from your pay. Use the IRS Withholding Calculator on IRS.gov to help you fill out the form. This tool is easy to use and it’s available 24/7.
·         Estimated Tax.  If you earn income that is not subject to withholding you may need to pay estimated tax. This may include income such as self-employment, interest, dividends or rent. If you expect to owe a thousand dollars or more in tax, and meet other conditions, you may need to pay this tax. You normally pay it four times a year. Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to figure the tax.
·         Life Events.  Check to see if you need to change your Form W-4 or change the amount of estimated tax you pay when certain life events take place. A change in your marital status, the birth of a child or buying a new home can change the amount of taxes you owe. In most cases, you can submit a new Form W–4 to your employer anytime.

·         Changes in Circumstances.   If you are receiving advance payments of the premium tax credit, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

Wednesday, July 22, 2015

Five Tax Tips about Hobbies that Earn Income

Millions of people enjoy hobbies. They can also be a source of income. Some of these types of hobbies include stamp or coin collecting, craft making and horse breeding. You must report any income you get from a hobby on your tax return. How you report the income is different than how you report income from a business. There are special rules and limits for deductions you can claim for a hobby. Here are five basic tax tips you should know if you get income from your hobby:

1.     Business versus Hobby.  A key feature of a business is that you do the activity to make a profit. This differs from a hobby that you may do for sport or recreation. There are nine factors to consider when you determine if you do the activity to make a profit. Make sure you base your decision on all the facts and circumstances of your situation. Refer to Publication 535, Business Expenses to learn more. You can also visit IRS.gov and type “not-for-profit” in the search box.

2.     Allowable Hobby Deductions.  You may be able to deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is helpful or appropriate. See Publication 535 for more on these rules.

3.     Limits on Expenses.  As a general rule, you can only deduct your hobby expenses up to the amount of your hobby income. If your expenses are more than your income, you have a loss from the activity. You can’t deduct that loss from your other income.

4.     How to Deduct Expenses.  You must itemize deductions on your tax return in order to deduct hobby expenses. Your costs may fall into three types of expenses. Special rules apply to each type. See Publication 535 for how you should report them on Schedule A, Itemized Deductions.

5.     Use IRS Free File.  Hobby rules can be complex. IRS Free File can make filing your tax return easier. IRS Free File is available until Oct. 15. If you make $60,000 or less, you can use brand-name tax software. If you earn more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. You can only access Free File through IRS.gov.



Keep Track of Miscellaneous Deductions

Miscellaneous deductions can cut taxes. These may include certain expenses you paid for in your work if you are an employee. You must itemize deductions when you file to claim these costs. So if you usually claim the standard deduction, think about itemizing instead. You might pay less tax if you itemize.  Here are some IRS tax tips you should know that may help you reduce your taxes:

Deductions Subject to the Limit.  You can deduct most miscellaneous costs only if their sum is more than two percent of your adjusted gross income. These include expenses such as

·        Unreimbursed employee expenses.
·        Job search costs for a new job in the same line of work.
·        Some work clothes and uniforms.
·        Tools for your job.
·        Union dues.
·        Work-related travel and transportation.
·        The cost you paid to prepare your tax return. These fees include the cost you paid for tax preparation software. They also include any fee you paid for e-filing of your return.

Deductions Not Subject to the Limit.  Some deductions are not subject to the two percent limit. They include:

·        Certain casualty and theft losses. In most cases, this rule applies to damaged or stolen property you held for investment.  This may include property such as stocks, bonds and works of art.
·        Gambling losses up to the total of your gambling winnings.
·        Losses from Ponzi-type investment schemes.

There are many expenses that you can’t deduct. For example, you can’t deduct personal living or family expenses. You claim allowable miscellaneous deductions on Schedule A, Itemized Deductions. For more about this topic see Publication 529, Miscellaneous Deductions. You can get it on IRS.gov/forms at any time.

Friday, July 17, 2015

Bad Review Comeback

A scathing review spread across a multitude of online channels can push the calmest business owner over the edge. But before your seething gets the better of you, consider your next move carefully—the damage has been done, don’t make it worse.
Take a breath and follow this advice:
·        Don’t ignore it.
·        Don’t deny that there was an issue.
·        Don’t argue with an upset customer online.
·        Don’t pay to have it removed or have someone write a fake review to counter the bad one.
·        Do respond—professionally and with tact—no matter how infuriated you may feel. Handling it well from the start can save face, time and a lot of headache for both parties
·        Do apologize (even if it hurts a little) and do what it takes to make it right. Provide a direct line of communication, so customers can get personalized attention, and you can get the conversation offline and out of public view.

No matter how customer-centric you are, unhappy customers are an inevitable reality for every business. And although unpleasant, these issues can be eye-opening. They may reveal blind spots in service or where improvements can be made—a true silver lining take away after a stormy experience.



Thursday, July 16, 2015

Small Businesses Can Get IRS Penalty Relief for Unfiled Retirement Plan Returns

The Internal Revenue Service today encouraged eligible small businesses that did not file certain retirement plan returns to take advantage of a low-cost penalty relief program enabling them to quickly come back into compliance.

The program is designed to help small businesses that may have been unaware of the reporting requirements that apply to their retirement plans.

Small businesses that fail to file required annual retirement plan returns, usually Form 5500-EZ, can face stiff penalties — up to $15,000 per return. However, by filing late returns under this program, eligible filers can avoid these penalties by paying only $500 for each return submitted, up to a maximum of $1,500 per plan. For that reason, program applicants are encouraged to include multiple late returns in a single submission. Find the details on how to participate in Revenue Procedure 2015-32 on IRS.gov.

The program is generally open to small businesses with plans covering a 100 percent owner or the partners in a business partnership, and the owner’s or partner’s spouse (but no other participants), and certain foreign plans. Those who have already been assessed a penalty for late filings are not eligible.

The Department of Labor offers a similar relief program for businesses with retirement plans that include employees known as the Delinquent Filer Voluntary Compliance Program.

Started as a one-year pilot, the IRS program was made permanent in May 2015. The IRS has received about 12,000 late returns since the pilot program began in June 2014.


The IRS reminds retirement plan sponsors and administrators that in most cases, a return must be filed each year for the plan by the end of the seventh month following the close of the plan year. For plans that operate on a calendar-year basis, as most do, this means the 2014 return is due on July 31, 2015. For details, visit the Form 5500 Corner on IRS.gov.


Wednesday, July 15, 2015

Check out Aging.gov

Everyday more than 10,000 Americans join the senior citizen community where healthy eating habits, positive behaviors and social involvement become as important as ever. Which is why the Department of Health and Human Services (HHS) launched, Aging.gov a resource to help older adults and caretakers. Learn more about:



What’s Your Worth?

Getting your dream off the ground and making your small business a reality is a huge success and one that should be rewarded. But, when it comes to the numbers, how do new business owners decide on salary? Should you receive just enough to sustain yourself or take what you believe you’re worth?
Before you start banking money, consider the following:
·        At the end of the day, there’s no magic formula, but there are experts to help. Seek advice from your CPA or financial planner to make sure you’re making all the right considerations—and looking at it from a big picture view.
·        Calculate your personal expenses and needs, and—if it’s available—review previous years’ business financials (or estimates) to see what your business can feasibly afford.
·        Evaluate the average salary of people in your field, in your area? Even if you have more experience or think you do it best, don’t price yourself out of business. Keep it comparable, but reasonable.

And as you go through the process, stay honest with yourself to ensure where you land makes sense for you and your business.


Tuesday, July 14, 2015

If You Get an IRS Notice, Here’s What to Do

Each year the IRS mails millions of notices and letters to taxpayers. If you receive a notice from the IRS, here is what you should do:

  • Don’t Ignore It. You can respond to most IRS notices quickly and easily. It is important that you reply right away.

  • Focus on the Issue. IRS notices usually deal with a specific issue about your tax return or tax account. Understanding the reason for your notice is important before you can comply.

  • Follow Instructions. Read the notice carefully. It will tell you if you need to take any action to resolve the matter. You should follow the instructions.

  • Correction Notice. If it says that the IRS corrected your tax return, you should review the information provided and compare it to your tax return.

    If you agree, you don’t need to reply unless a payment is due.

    If you don’t agree, it’s important that you respond to the IRS. Write a letter that explains why you don’t agree. Make sure to include information and any documents you want the IRS to consider. Include the bottom tear-off portion of the notice with your letter. Mail your reply to the IRS at the address shown in the lower left part of the notice. Allow at least 30 days for a response from the IRS.

  • Premium Tax Credit. The IRS may send you a letter asking you to clarify or verify your premium tax credit information. The letter may ask for a copy of your Form 1095-A, Health Insurance Marketplace Statement. You should follow the instructions on the letter that you receive. This will help the IRS verify information and issue the appropriate refund.

  • No Need to Visit IRS. You can handle most notices without calling or visiting the IRS. If you do have questions, call the phone number in the upper right corner of the notice. You should have a copy of your tax return and the notice with you when you call.

  • Keep the Notice. Keep a copy of the notice you get from the IRS with your tax records.

  • Watch Out for Scams. Don’t fall for phone and phishing email scams that use the IRS as a lure. The IRS first contacts people about unpaid taxes by mail – not by phone. The IRS does not initiate contact with taxpayers by email, text or social media.