Tax Tips

Principal Residence Gain Exclusion Break

Here’s a look at how to apply the $250,000 ($500,000, if married) principal residence tax break when getting married or divorced, or when converting another property into your home. In both marriage and divorce situations, a home sale often occurs. Of course, the...

Tax-Home Rules You Should Know

When you travel out of town overnight, you need to know the tax-home rule. The IRS defines your tax-home, and it’s not necessarily in the same town where you have your personal residence.   Tax Law If you have more than one business location, one of the locations...

Taxation of 529 College Savings Account Withdrawals

The big advantage of 529 plans is that qualified withdrawals are always federal-income-tax-free—and usually state-income-tax-free too. What you may not know is that not all 529 withdrawals are tax-free qualified withdrawals, even in years when you have heavy college...

Save Your Employee Retention Credit

In what clearly must have been a mistake, the IRS issued Notice 2021-49 to deny the employee retention credit (ERC) on the wages paid to most C and S corporation owners. According to the IRS: • Your corporation can qualify for the ERC on the wages paid to a more than...

Prorated Principal Residence Gain Exclusion Break

Here’s good news. IRS regulations allow you to claim a prorated (reduced) gain exclusion—a percentage of the $250,000 or $500,000 exclusion in select circumstances. The prorated gain exclusion equals the full $250,000 or $500,000 figure (whichever would otherwise...

Is Your Travel Day Personal or a Tax-Deductible Business Day?

When you travel to a business location where you spend the night, you are in travel status. But will the tax rules make this a business or personal night?   Tax Law The rules also affect your costs during the day. When you have an overnight business travel day,...

2 Ways to Fix Tax Return Mistakes Before the IRS Discovers Them

If you made an error on your tax return, don’t worry—there are two easy ways to fix it: 1. A superseding return2. A qualified amended return A superseding return is an amended or corrected return filed on or before the original or extended due date. The IRS considers...

Find the Winning Tax Law for Your IRS Audit

If you are suffering or about to suffer an IRS audit, you should know how your tax positions stack up against the IRS examiners’ positions. In most cases, you are discussing the facts, not the law, and you prove your facts with receipts, canceled checks, and logbooks....

Garage Space as a Home Office

Do you claim a tax deduction for a home office? Should you include or exclude your garage space in your calculations of business-use percentage?   The Culp's Case Ronald Culp earned an office deduction for 78 percent of his home. That’s a nice percentage, but...

Don’t Make a Big Mistake by Filing Your Tax Return Late

Three bad things happen when you file your tax return late. What’s Late? You can extend your tax return and file during the period of extension; that’s not a late-filed return. The late-filed return is filed after the last extension expired. That’s what causes the...

The Principal Residence Gain Exclusion Break

The $250,000 ($500,000, if married) home sale gain exclusion break is one of the great tax-saving opportunities. Unmarried homeowners can potentially exclude gains up to $250,000, and married homeowners can potentially exclude up to $500,000. You as the seller need...

IRS Defines Real Property for Section 1031 Like-Kind Exchanges

Do you own business or investment property that has gone up in value? Would you like to acquire new property? If you sell the old property, you’ll have to pay tax on your profits. Don’t do that. Instead, do a tax-deferred Section 1031 transaction. With a properly...

Know These Four Magic Business Mileage Rules

When you know the rules related to business mileage, you protect yourself in the event of an IRS audit, and pay less tax.   Take Henry, for example. Before he knew the mileage rules, he deducted 30 percent of his SUV’s cost. Once he learned the rules, he deducted...

IRS Audit Issue: SUV Built on Car Chassis

Here’s a vehicle story that you will find of interest. Taxpayer DJ is in an IRS audit of his 2018 tax return. It is now at the IRS appeals level.   Example The vehicle in question is an SUV with a curb weight of 5,700 pounds and a gross vehicle weight of 6,100...

Congress Closes the PayPal 1099-K Reporting Loophole

The PayPal loophole is going away in a little over six months from now.    In Practice You used to be able to avoid giving 1099s to contractors and vendors when you use PayPal or a similar service as your payment platform. This pushed the reporting requirements...

IRS Focuses on Cryptocurrency

Cryptocurrencies have gone mainstream. For example, you can use bitcoin to buy far more than you would think. To see, try googling “What can I buy with bitcoin?” You will get more than 350,000 hits. But using cryptocurrencies has federal income tax implications that...

Tax Planning for the New $142,800 Base for Self-Employment Taxes

What happens when lawmakers enact a new tax? It starts small. It looks easy. In 1935, the self-employment tax topped out at $60. Those 1935 lawmakers must be twirling in their graves with the new rules for 2021, which levy the following taxes: • A self-employment tax...