Proper tax planning and tax preparation may alleviate the anxiety when a small business owner opens the envelope from the IRS and sees a letter that starts out “Notification of Possible Income Underreporting”. It is no secret that the IRS believes that small business owners do not report all of their income and that $140 billion of tax dollars go uncollectible because of this underground economy. To identify taxpayers who underreport their income, Congress requires that Form 1099-K, Payment Card and Third Party Network Transactions, be filed by merchant services providers, the companies that process those credit card sales. Thus the merchant service provider is reporting to the IRS [Read more…] about TAX PLANNING NEEDED – SMALL BUSINESSES UNDER IRS ATTACK
Archives for August 2013
WHY AMERICANS ARE RENOUNCING THEIR US CITIZENSHIP
Why are more Americans renouncing their US citizenship? Whereas most taxpayers likely don’t pay sufficient attention to part III of Schedule B when having their Form 1040 prepared, some Americans are renouncing their US citizenship because of these questions. The questions deal with Foreign Bank Account Reporting (FBAR). Since FBAR reporting and the severe penalties for non-compliance were covered in our blog postings dated June 4, 2013 and June 21, 2012, we suggest that you read those posting for the details of FBAR.
First, let’s focus on the number of Americans renouncing their U.S. citizenship. Bloomberg has reported a six-fold surge in Americans renounced their U.S. citizenship. 1,131 Americans renounced their citizenship in the second quarter of 2013 compared to 189 in the same quarter in 2012. During the first half of 2013, 1,810 Americans renounced their citizenship compared to a 235 Americans who renounced their citizenship in the entire 2008 calendar year. While we are not talking about millions or even hundreds or tens of thousands of Americans renouncing their U.S. citizenship, the trend is revealing.
Why are Americans renouncing their citizenship? According to Bloomberg, it is because the US government is preparing to introduce [Read more…] about WHY AMERICANS ARE RENOUNCING THEIR US CITIZENSHIP
TAX-FREE GIFTING TO FUND CHILD’S COLLEGE EDUCATION
You are financially successful and have a child who will be attending college. You begin the process of completing a FAFSA application (Free Application for Federal Student Aid) and quickly discover that you earn too much money to qualify for need-based college aid.
A typical scenario is that the parents use their investment funds to pay for their child’s college education, claim the child as a dependent on their tax return, and figure that they can claim the cost of the tuition on their tax return. What the parents may learn when their income tax return is prepared is that there are capital gains taxes due on the sale of the stocks or mutual funds, because they are subject to the AMT (alternative minimum tax) they receive no tax savings by claiming their dependent college-bound child, and they make too much money to claim an education tuition tax deduction or tax credit.
How can the parent better position themselves financially? Let’s look at [Read more…] about TAX-FREE GIFTING TO FUND CHILD’S COLLEGE EDUCATION
TAX TIPS FOR MARRIED COUPLES DIVORCING
Since we discussed tax tips for newlyweds last week, and since almost 50% of US marriages result in divorce, here are some additional tax tips and considerations for married couples contemplating divorce. Attorneys and couples do not always realize that there can be unintended tax consequences in divorce settlements. While this list is not all-inclusive, it hopefully illustrates the need to seek competent advice from an experienced tax professional.
- A spouse typically engages a divorce attorney. Unfortunately for their clients, attorneys don’t always recommend that the spousal client engage a CPA. Since most couples’ records are in disarray, it makes good sense to engage a CPA who can organize and analyze the financial records.
- Remember that good tax advice given to one spouse is not necessarily good advice if given to the other spouse.
- Alimony is taxable to the recipient spouse [Read more…] about TAX TIPS FOR MARRIED COUPLES DIVORCING
