You must report the cancellation of personal debt on your income tax return. When an owed debt by either a person or business entity is cancelled or forgiven, some amount of taxable debt income may be generated since the benefit of the amount borrowed in the past is no longer associated with the burden of repayment now or in the future. Cancellation of debt (COD) is reported to both taxpayer and the tax authority on IRS Form 1099-C. This information is transferred, for personal debt, to Line 21 on IRS Form 1040. Business debt, depending on the nature of the business, is transferred to IRS Form 1040 Schedules C, E or F. Continue reading ‘Preparing Income Taxes – Reporting the Cancellation of Debt’ »
Archive for the ‘Taxes-Income’ Category
When it comes to tax season, people are not always ready file their federal income tax forms. This is no reason to panic: all you need to do file a federal income tax extension form. Yet there are so many forms out there that people use file income tax forms and how should you file them? The best way to go about doing this for those new to the field of tax extensions is to go to the IRS for assistance. The second wise thing to be done would be to go see a professional tax preparer to assist you choose the the proper forms used for extensions of federal income tax that you should fill out and send to the IRS.
When it comes to taxes if you need help, go out and find it so it so you don’t get punished for filing your taxes let or filling out the extension forms improperly. While many people do dislike the IRS, if you need assistance or have questions regarding which forms for federal income tax extensions should be used, do not hesitate to ask. You can do one of two things to seek assistance on your tax extensions; go to the IRS or check the IRS website for information. Continue reading ‘Forms Used For Extension of Federal Income Tax’ »
It’s tax time, and most of us are concerned about paying what we owe for this year. After all, taxes can be pretty complicated for the self employed. However, what you should also be thinking about right now is next year’s taxes!
A little bit of planning now can make an enormous difference in how things go in the next tax year for your home business. Let’s look at some of the benefits of doing early planning, how to reduce the amount you’re going to owe, and some commonly forgotten exemptions that could make a difference.
Planning in advance for your tax’s next year gives you control. If you’ve been letting your taxes slide until the last minute – something many people do – it’s probably an unpleasant and overwhelming process. Continue reading ‘Planning Next Year’s Home Business Now’ »
The news related to IRS actions usually goes unnoticed by the vast majority of people unless it involves something they have a financial interest in. The IRS has been making a lot of news the last few years related to hunting down Americans who hide money offshore and don’t pay taxes. What if you find yourself in this situation?
It all seemed so clear. You read a story on the web about how going offshore would provide you with asset protection and “tax advantages”. After all, who would really know about a bank account or trust in the Cayman Islands? You took the plunge and stuck some money offshore. Now you’ve watched the IRS penetrate Swiss banking privacy laws and have read they’ll be turning to the Caribbean next. What do you do?
The first thing to understand is that going offshore with your finances is not illegal. “Offshore” sounds glamorous, but it simply means any country outside of the United States. If you have a bank account in Canada, you’ve gone offshore. It really isn’t all it is cracked up to be, eh? Continue reading ‘Tax Issues – Dealing With Unreported Offshore Transactions’ »
Reducing weight is almost everybody’s dream. You join gym, take medicines and improve your diet. All of these are expensive propositions and the taxman was not at all concerned about your expense on them. However, obesity is now considered as a serious threat to health and your spending to control it may be eligible for deduction out of your income.
If you are diagnosed by your doctor for obesity, he will advise you for weight loss treatment. Some other problems related to obesity like heart disease, hypertension or high levels of cholesterol may also force your doctor to prescribe for such treatment.
This treatment may include a lot of things – hospital based treatment including surgery, use of medicines, counseling for diet, joining programs like weight watchers and behavioral counseling. Expenses on all of these can be legitimately claimed as deduction on your tax return.
However, you cannot claim this deduction without knowing the requirements of IRS. Here are some important tips if you want to claim your expenditure on weight loss treatment – Continue reading ‘Tax Deduction For Losing Your Weight!’ »
Many people know that taxes are due on April 15th, but what if you miss that deadline? What then? The poor house? Jail!? What most people don’t know is that you can easily file for a tax extension, a simple process that could save you thousands in auditing fees.
Has this ever happened to you?: you planned your vacation over tax day and forgot to file. Or maybe you forgot until you saw lines of people at the post office. Or maybe you didn’t have the money to pay the IRS
right then, but would have in a month. Maybe as a result of those actions, you got audited and lost thousands in accountant fees and to the government.
Always remember that tax extensions are available. Tax extensions are the best way to make sure you give the IRS your tax money without getting in trouble. Never worry about missing April 15th ever again. Continue reading ‘How to File Tax Extensions (It’s Not Too Late!)’ »
The great Boomer migration is underway. What am I talking about? The Boomer migration refers to all the Baby Boomers that are starting to retire. Part and parcel to retirement is the payment of social security benefits. The money is not huge, but it can help out. The question for most Boomers is whether they have to pay taxes on it.
For years and years, you’ve been paying into social security with every paycheck. The government thanks you for doing so! While saving for your retirement, you also gave the federal government a pool of money to borrow from to pay for other things. Alas, that is a subject for another article. Now that you are retiring, it is time to reap the benefit of all those payments. Continue reading ‘Retirement Primer – Do You Have to Pay Taxes on Social Security Benefits?’ »
Tax deductions are lucrative things but they differ for every profession. For nurses, there are many such specific tax deductions. Do take their benefit on your tax return to make your income healthier.
If you are a nurse, do not forget to claim the following deductions -
1. Uniforms – The cost of acquiring uniforms and the cost of their cleaning and maintenance is an important expense for a nurse. As they are directly related to job, you can claim such cost as deduction on your tax return.
2. Specialized equipment – If you are required to buy some specific shoes or if equipment like stethoscopes or clamps, you can claim that cost as your deduction. If you are required to buy a PDA for coping up with the job, its cost can also be taken as legitimate deduction.
3. Fees for license and training – The fees which you pay for renewal of your license are deductible. If you buy any books or medical journals for keeping tract with the latest in your field, their costs will be deductible. Continue reading ‘‘Nursing’ Your Deductions For a Healthy Income!’ »
The work of preparing and filing your tax return is relatively easier than defending your return in the event of tax audits. Around 1.5 million taxpayers face tax audit every year. There is no ideal formula to avoid tax audit but you can look out for red flags.
Here are top 10 red flags which may trigger tax audits -
1. Unreasonable deductions for home office – If you operate your business from home, you are tempted to deduct most of your spending as business expenditure. There are specific rules published by IRS to classify business and personal expenditure. If you miss out on some of them, you are inviting a tax audit.
2. Mismatching your Federal and state tax returns – If there is a difference between the incomes declared on these two tax returns, it will be immediately picked up by IRS computers and you will soon get a notice for tax audit.
3. High earnings – If your annual income crosses $100,000, it may attract the attention of IRS.
4. Excessive charitable contributions – If your contributions to charity range between 5 to 10 percent of your income, IRS feel it is a good reason to ask you explanation.
5. Mess up in alternative minimum tax (AMT) – If you are subject to AMT, you should approach a tax professional in order to avoid calculation mistakes. Even if you feel to submit AMT schedule, you become prominent to attract attention of IRS. Continue reading ‘Top 10 Red Flags Which Show the Danger of Tax Audits’ »
IRS selects around 1.5 million taxpayers in a year and ‘invites’ those to explain inconsistencies in their tax return. How does it select these taxpayers out of 135 million returns filed every year? Well most of the times it applies some criteria to pick a ‘deserving’ taxpayer. Here are some important ones.
1. Mathematical corrections – Usually IRS computers generate these audits. If you have made mistakes while filing your tax return, these computers are most likely to catch you. These are silly mathematical mistakes which you would have avoided easily. Some of these mistakes are – entering incorrect spelling of your name on your tax return, entering incorrect social security number, entering the incorrect status, making a wrong calculations about earned income credit and improper assessment of estimated tax.
Usually IRS assumes that your details are correct and makes the calculation of your tax figures based on them. If there is any additional tax liability, they will add interest and penalties to it and you will be sent a notice demanding such money.
You will have a period of 30 days to contact IRS and schedule an appointment to prove that your original data is correct. Continue reading ‘How You Enter the Cage of Tax Audit’ »