Which records should you keep? You should keep information that you and the IRS need to determine your correct tax. Everyone should keep the following records. Copies of tax returns. Keep copies of your tax returns as part of your tax records. Your tax returns can help you prepare future returns and amended returns. After you die, copies of your tax returns and other records can be helpful to your survivors or the [...]
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Taxpayers with cancelled debt can often exclude the cancellation of debt income to the extent they were insolvent immediately before the cancellation. If a cancelled debt is excluded from income, it is nontaxable. Cancellation of Debt Cancellation of debt (COD) is settlement of a debt for less than the amount owed. A debt may be cancelled by a lender voluntarily or through bankruptcy or other legal proceedings and may result [...]
Times can get tough. If you find yourself in a difficult situation when it comes to credit card debt, you may be able to make an arrangement with card companies to pay a fraction of the debt owed. The remaining portion of the debt is considered canceled debt or “forgiven debt.” When this occurs, the company will send you Form 1099-C, Cancellation of Debt. You need to be aware that there may be tax [...]
Single A taxpayer is unmarried in 2017 if: The taxpayer has never married, The taxpayer was legally separated, according to state law, under a decree of divorce or separate maintenance. The taxpayer’s spouse died before January 1, 2017, and the taxpayer did not remarry in 2017. If the taxpayer meets the definition of unmarried, file as Single unless the requirements for one of the following filing statuses are met. Head of Household, or Qualifying Widow(er) [...]
If you use your automobile for business, you may be entitled to tax deductions. Unless your car is used exclusively for business, you cannot claim a 100% business deduction. Deducting auto expenses requires diligent recordkeeping. There are two methods available for calculating your auto deductions—the standard mileage rate or actual expenses. These methods are available regardless of whether you own or lease your vehicle. Taxpayers who wish to use the standard mileage rate [...]
Gift Tax There is no dollar limit on the amount that one person is allowed to give to another. Gift tax rules do not prohibit a donor from making gifts in excess of the annual exclusion ($14,000 for 2017). However, if more than the annual exclusion is given to any one recipient, the amount over the annual exclusion is considered a “taxable gift.” Consequences of making taxable gifts: Donor is required to file a gift tax return (Form 709) for the [...]
One advantage of operating your own business is hiring family members. Not only is this a great way to teach your kids work ethics and money-management skills, but there are tax saving benefits to hiring your children as well. When your children are under age 18, you are not required to withhold social security and Medicare taxes from their wages. You are not required to pay federal unemployment taxes on their wages either until they reach age 21. Your children (or [...]
Estimated Taxes The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. There are two ways to pay as you go, either by employer withholding or estimated tax payments. Employer withholding If you are an employee, your employer generally withholds income tax from your pay. In addition, tax may be withheld from certain other income such as pensions, bonuses, commissions, and gambling winnings. [...]
Last month, the IRS started turning over to private collection agencies (PCA) the accounts of individual taxpayers who have inactive tax receivables. The IRS will be using these four collection agencies: ConServe Pioneer Performant CBE Group If your debt has been turned over to a PCA, the IRS will first notify you with a letter (CP40) that provides the name of the agency and a Taxpayer Authentication Number. The PCA will then contact you with a [...]
If you've been procrastinating on preparing and filing your tax return, you might be considering filing an extension. While obtaining a 6-month extension to file is relatively easy, there are both pros and cons to filing an extension. If you need to file an extension, here's what you need to know. What is an Extension? An extension of time to file is a formal way to request additional time from the IRS to file your tax return, which is [...]