Flexible Spending Account (FSA) vs. Health Savings Account (HSA)

January 2nd, 2018 No comments

FSAs and HSAs allow taxpayers to make tax-free contributions to pay for out-of-pocket (co-pays and deductibles) medical expenses. The monies contributed to these plans are shielded from personal income and payroll taxes (social security & Medicare). However, the payroll tax exclusion does not apply to self-employed individuals.

What are some of the differences between these two plans? Read more…


How to Lose Social Security Benefits

December 26th, 2017 No comments

If you are self-employed and procrastinate filing your personal income tax returns, you not only run the risk of losing a tax refund because your Form 1040 return was filed after the statute of limitations for claiming a refund had expired, but you will also lose social security credits which may impact your social security benefits.

The social security code (42 U.S.C. 405(c)(4)) says you have to report the SE income Read more…


Crypto Currency and Taxes

December 19th, 2017 No comments

Remember the days when Swiss banks (as well as banks in other countries) refused to reveal their customers’ names? Some very wealthy Americans placed their assets in these foreign banks to hide them from the IRS to avoid paying income taxes. The IRS began serving “John Doe” warrants to foreign banks to compel those banks to release the names of account holders on certain bank accounts. This was followed by a tough crackdown by the IRS on taxpayers who failed to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), which certain foreign bank account holders are required to file (and face stiff penalties for not filing, including jail time).

You may not have heard of crypto currency. However, you likely have heard of Bitcoin which is a form of crypto currency. The use of crypto currency has definitely caught the attention of the IRS just like foreign banks did many years ago. Why is the IRS interested in crypto currency? Read more…


Tax Rule Changes Regarding Sale of Stock

December 12th, 2017 No comments

Tax Rule Changes Regarding Sale of Stock

New Rule Becomes Effective January 1, 2018

Effective January 1, 2018, assuming that the proposed tax law changes go into effect, taxpayers will no longer be able to choose which lot of stock they own is sold. This choosing of the lot that was being sold was referred to as specific identification.  Taxpayers could choose which lot of stock was sold (usually the one(s) with the highest tax basis (cost), to minimize the gain on the sale of stock or to generate the largest capital loss to offset capital gains from other sales. Effective January 1, 2018, taxpayers Read more…


$10,000 Self-Prepared Form 1040 Error

December 6th, 2017 No comments

A new client recently walked into our office. He had been self-preparing his personal tax returns for quite a few years using TurboTax and received an audit inquiry from the IRS. He did what many taxpayers do, he ignored the letter. The IRS got his attention Read more…


Required Minimum Distributions (RMDs) – The Basics

November 28th, 2017 No comments

Once age 70 ½ is reached, you need to take your first required minimum distribution (RMD) from your IRA accounts. You turned 70 ½ in 2017 if you were born between July 1, 1946 and June 30, 1947. You always use the age you are on the last day of the year.

Generally, you need to take your RMDs by December 31st of the year for which it is due. But for your first RMD, you can defer the distribution to April 1st of the following year. Isn’t it always best to defer income if you can? If you decide to defer that first RMD from 2017 to 2018, you need to realize that you will end up with two RMDs in 2018 (the 2017 & 2018 RMDs). Generally for many taxpayers, the bunching of income is not a good thing.

Who is responsible for computing and remitting the RMD? Many taxpayers mistakenly think Read more…


US Treasury Bond Planning

November 21st, 2017 No comments

You find yourself in a position where you or an elder parent has U.S. Treasury Bonds as part of an investment portfolio and you are wondering if the bonds should be redeemed.

You are concerned because the interest earned on those bonds would be taxable income and would affect the individual’s income tax bracket, outflow of cash to pay the taxes, and could possibly affect the financial statements presented to an Assisted Living or a Continuing Care Retirement Community.

You are asking yourself what is the most effective plan to implement. While this blog will consider some of the more pertinent tax issues, a senior care attorney should always be consulted in these situations.

Let’s first look at the rules regarding the reporting of the interest earned on those bonds. Read more…


IRS To Allow Truncated SSNs

November 14th, 2017 No comments

In an effort to reduce identity theft, the IRS issued proposed regulations that would permit employers to use truncated taxpayer identification numbers (TTINs) on Forms W-2, Wage and Tax Statement, issued to employees. Permissible TTINs are Social Security numbers (SSNs) with the first five digits of the nine-digit number replaced with asterisks or XXXs in the following formats: ***-**-1234 or XXX-XX-1234.

Although this change was effective on the date of enactment, December 18, 2015, the IRS is delaying the effective date of the proposed regulations until Read more…


Increasing State Income Taxes – Panacea or Pain

November 7th, 2017 No comments

Discussions about eliminating the state and local income tax deduction as part of President Trump’s agenda for a new tax act have taxpayers in New York, New Jersey, Connecticut, and California up in arms because they would lose a very significant itemized tax deduction if this provision was enacted by Congress resulting in an increased tax burden.

Some would argue that perhaps it is time Read more…


What? The IRS does not follow its own publications?

October 31st, 2017 No comments

Our tax law is overly complicated. Many of its laws have exceptions, and sometimes those exceptions have exceptions. If you are a DIYer and rely upon the IRS’s published materials to prepare your tax return, you may just find yourself at the wrong end of an IRS audit examination.

The first rule that you need to understand is that you cannot rely upon IRS oral advice. So if you are calling the IRS to seek guidance, the IRS says that you cannot rely upon that oral advice. For years the IRS had a reputation of putting its most inexperienced employees (new hires) on its taxpayer assistance call lines. Thus it was possible that the person calling knew more about federal income taxes than the IRS person on the other end of the call. Today, due to IRS staff cutbacks and long wait times, it is difficult to make contact with an IRS employee by phone. Furthermore, the IRS has closed many of its walk-in offices to the public so many taxpayers can no longer walk into an IRS office and seek oral advice.

We are now in the information age and many taxpayers will look for tax advice on the Internet. The IRS website has its own search engine to allow taxpayers to “research” a tax issue. This website contains a wealth of information. Surely taxpayers can rely on that official IRS information, correct? Read more…

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