Category: IRS

If you’re looking for money to buy a new car or pay off some bills, your 401(k) plan may seem like a pot of untapped gold. The temptation to tap your retirement funds often comes when you switch jobs and must decide how to handle your account. But in most cases, breaking into a retirement plan early is a mistake that will just melt away your savings. Unfortunately, many people make the unfortunate decision to “cash out” their retirement accounts… Read more ›

“I’ll do your family’s dental work for free if you build a deck onto my house.” If you’re in the construction industry, you’ve probably received an offer like this or made a similar offer to someone else in a different line of business. It’s a modern variation of the age-old practice of barter. What makes it especially intriguing in this day and age is the idea that you can exchange services or products with someone without exchanging money. Keep in… Read more ›

Sooner or later, your firm will encounter the issue of buying out a partner. This may be due to the partner’s retirement, death or other reasons. The federal income tax rules for partnership payments to buy out an exiting partner’s interest are tricky, but they also open up tax planning opportunities. The Basic Tax Rules Payments made by a partnership to liquidate (or buy out) an exiting partner’s entire interest are covered by Section 736 of the Internal Revenue Code…. Read more ›

Organizations that are created to provide goods or services exclusively (or primarily) to Section 501(c)(3) organizations (or governmental entities) may think that this purpose is sufficient to also qualify them under tax law. However, providing commercial-type services exclusively to exempt organizations is not by itself an exempt purpose. Much more is required for qualification under the rules of Internal Revenue Code Section 501(c)(3) than just having a mission to assist charitable organizations. Basic Requirements An exemption under tax code Section… Read more ›

The IRS recently announced that it’ll increase the standard mileage rate for qualified business driving for the second half of 2022. The adjustment reflects the soaring cost of gasoline this year. In fact, as of June 13, the nationwide average price of regular unleaded gas was $5.01 a gallon, according to the AAA Gas Prices website. This is compared with $3.08 a gallon a year ago. Beginning July 1, 2022, the standard mileage rate for business travel will be 62.5… Read more ›

The IRS’ “Where’s My Refund?” tool has been expanded to share taxpayers’ refund status to the two previous years. The IRS refund tool has provided taxpayers with the status of their refund payment during the current filing year. Now, taxpayers may also review their tax refund for the past two years according to the following details: • Information about a refund from a 2021 tax return will be available 24 hours after e-filing the return • Information about a refund… Read more ›

It’s difficult for many people to write off medical expenses because of the limits imposed under the tax laws. But you may qualify by including every expense allowed. Some of the qualified procedures may surprise you. For example, most insurance plans won’t cover laser eye surgery, such as radial keratotomy or “Lasik,” because they consider it a cosmetic procedure. But it generally qualifies for a medical deduction and as an expense in a flexible spending account. (The IRS used to… Read more ›

  Let’s say you have an unincorporated sideline activity that you think of as a business, including an activity involving horses. If you have a net loss (deductible expenses exceed revenue) on that activity and you think you can deduct that loss on your personal federal income tax return, think again! In IRS audits and in court cases involving money-losing sidelines, the tax agency frequently argues the activities are hobbies, rather than businesses. Be aware that the federal income tax… Read more ›

Court Determines that an Activity Was Engaged in for Profit Taxpayers who are in business to make a profit can generally deduct related expenses on their tax returns. If the IRS doubts a profit motive exists, it may deem an activity to be a hobby with a limited ability to deduct costs. The burden to prove there’s a profit motive is on the taxpayer. In one recent case, the IRS found a “green” home construction partnership was engaged in for… Read more ›

  The IRS continues to zero in on what it calls the “tax gap” — the amount between the taxes that are voluntarily paid and the amount the tax agency believes is actually due. To this end, the IRS has issued a series of documents to provide better understanding of the tax code. One example is specifically directed at the construction industry. The tax agency emphasizes instances where taxpayers failed to report, or under-reported, income from construction activities. This applies… Read more ›