Kinds: Tax Tip

What Differentiates a Business from a Hobby?

A taxpayer lost his court case and was denied a deduction of business expenses because he was involved in an activity deemed to be a hobby rather than a business. Kurt Anthony Strode learned the hard way that, to deduct something as a valid business expense, a taxpayer must be engaged in a valid trade…

Read more ›

Previously Denied IRA Deduction not Allowed Later

When does the IRS deny a 2010 IRA contribution deduction? When it had already denied the deduction in 2008. Stephen Dunn, a 50-year-old married taxpayer, found himself in these circumstances in a recent U.S. Tax Court case. Dunn was employed by a law firm for the first part of 2008. Significantly, he was an active…

Read more ›

Whistleblower Payments Reduced in Fiscal 2016

The IRS recently announced that awards paid to whistleblowers under Code Section 7623 on or after Oct. 1, 2015, and on or before Sept. 30, 2016, will be reduced by 6.8 percent. Legislation passed in 1985, which was known as “The Balanced Budget and Emergency Deficit Control Act of 1985,” requires that whistleblower award payments…

Read more ›

Amount of Contribution Key to Record Needed

The record-keeping requirements for charitable contributions of property other than cash depend upon the amount of the charitable deduction claimed. Here are the basic rules for various contribution amounts: 1. Less than $250 – The charity is not required to provide the taxpayer with any documentation. The taxpayer should request a written receipt from the…

Read more ›

It’s a Dependency Exemption Question

Does an affidavit from the supposed dependent supply the IRS with enough evidence to justify a dependency exemption? It depends. Steven Shimanek lived in the state of Hawaii during 2008. He filed his 2008 Form 1040 late. On the return, he claimed his common-law wife, Aleta Napoleone, as a dependent, which allowed him to file…

Read more ›

To Deduct Business Expenses: Seek Profit

The U.S. Tax Court made it clear in a recent case that taxpayers can’t simply deduct business expenses unless they are actually trying to make a profit in a trade or business. Valery Pouemi had a full-time job at Verizon, which paid him about $60,000 per year and required him to work from 32 to…

Read more ›

Casual Clothing Rules Issued to First Responders

Whether the costs of casual yet distinctively marked clothing issued to first responders are includable in wages is dealt with in Revenue Ruling 70-474. Under the new rule, when determining the answer, a federal, state or local government employee should ascertain whether the governmental employer: 1. Requires the police officers and firefighters to wear the clothing…

Read more ›

Important IRS Information on Social Media

The IRS has jumped on the social media bandwagon. You can check on the status of your refund, get updates on new developments in the tax area and even get some helpful tax tips. The IRS is on the following types of social media: 1. Twitter – The IRS provides tax-related tips and news for…

Read more ›

Do You Have a Form W-9 for Each Vendor?

When dealing with vendors, make sure all of them fill out a Form W-9 before rendering payment to avoid backup withholding issues. It’s always a good policy for your business to have each vendor fill out a new W-9 form every year. The form requires vendors to disclose whether they are set up to do…

Read more ›

Health Care: 2015 Large Employer Reporting Requirements

Under the Affordable Care Act, large employers are required to file information returns with the IRS and provide statements to full-time employees. You are a large employer if you employed, on average, 50 full-time equivalent employees or more during 2014. You must include employees of other members of any companies under common control. A full-time…

Read more ›