IN July of each year, the Franchise Tax Board of the State of California mails Questionnaire Form 4803 to taxpayers who claimed Head of Household status the previous year. Do not ignore this questionnaire. Mail it back within 20 days; otherwise, it becomes final. You’d have to go to appeals to fight it. If filled…
HERE are 10 tips for students with summer jobs: 1. Fill out Form W-4 (Employee’s Withholding Allowance Certificate). This form is used by employers to determine the amount of tax that will be withheld from your paycheck. If you have multiple summer jobs, make sure all your employers withhold adequate amount of taxes to cover…
WHILE there are no guarantees to avoid an audit, there are creative ways to attract one. Below are 12 easy ways to increase your audit profile. Try any combination to help the IRS zero in on your return: 1. Opt out of e-file to use a name different from the one that appears on your…
IF YOU run your own business, consider employing your children this summer vacation. Employing your children gives you a triple benefit: 1. It teaches your children the virtue of work and the value of money. 2. It could save you around 27 percent by shifting income down from a maximum rate of 35 percent for…
Background A LIMITED Liability Company is referred to as “LLC.” A husband and wife can form an LLC for their real estate properties. You can choose the type of entity for tax purposes by “checking the box” for either partnership, corporation, or disregarded entity. A formal partnership has to file a separate partnership tax return….
A LIMITED Liability Company (LLC) is a new form of hybrid business association that combines the advantages of a corporation with the flexibility of a partnership. Let’s explore the advantages & disadvantages of this popular entity. Advantages of LLCs 1. Liabilities are limited to the equity invested by each member. 2. It gives some form…
1. E-FILE. When you e-file, your chance of getting an error notice from the IRS is significantly reduced. Besides, it’s faster. Your refunds arrive sooner. 2. Check your occupation. Your occupation must be consistent with your income and expenses. A waiter without tip income is inconsistent. So is an investor with no dividend income, real…
LET’S enjoy some of Murphy’s Laws as we recover from tax season stress. Law of the alibi If you tell the boss you were late for work because of a flat tire, you will have a flat tire the very next morning. Law of the bath The probability of your telephone ringing is directly proportional…
1. CALIFORNIA State Income Taxes in box 24 of your W2 are deductible. So are quarterly estimates paid by self-employed and subcontractor taxpayers. TIP: Time the payment of your estimates in the year with the higher income and higher tax. 2.Real Estate Taxes on your house, land, or rental property are deductible in the year…
FOR those of you who itemize, the table below should be of special interest. For those of you who play the odds (you know what I mean), this table should be of very special interest. Having claimed too many exemptions at work to increase your take-home pay, you suddenly find yourself owing Uncle Sam a…
MOST of us take medical expenses for granted because we have to spend more than 7 ½ % for 2012 (10% for 2013 if you are under 65) of our gross income before we can deduct medical expenses. However, changes in health care plans make this a good time to brush up on 10 medical…
1. YOU may deduct donations to qualified organizations. Qualified organizations include corporations or foundations organized in the US for religious, charitable, educational, scientific, literary, or prevention of cruelty to children and animals. 2. You cannot deduct contributions made to specific individuals – priests, nuns, victims, and political organizations or candidates. 3. File Form 1040 and…
THIS fiscal cliff legislation includes lots of tax changes; accordingly, I summarized the provisions for simple reading. Last week’s Part A dealt with individuals while this week’s Part B deals with business. Business depreciation and cost recovery provisions 50% Bonus Depreciation extended The Act extends the 50% first-year bonus depreciation for an additional year to…
THE AMERICAN TAXPAYER RELIEF ACT OF 2012 Tax breaks for education expenses American Opportunity Higher Education Tax Credit extended The American Opportunity Credit, which can be worth up to $2,500 and can be claimed for up to four years of undergraduate education, was extended by the Act through 2017. College tuition deduction extended -This write-off,…
THE AMERICAN TAXPAYER RELIEF ACT OF 2012 THIS fiscal cliff legislation includes lots of tax changes that could turn into a novel; accordingly, I summarized the provisions for simple reading. Even this condensed version is still long. In brief, the new law: – Cancels most other income tax increases that would have resulted in added…
YOU have just received an invitation to the offices of the Internal Revenue Service. They want to examine your return. Don’t panic. All these years, you have stashed funds for a rainy day. This is a rainy day. Compose yourself. Then go to battle. Don’t be over confident though. I am just boosting your morale….
YOU should have received Form W-2 (Wage and Tax Statement) from your employer by now. If you did not, here are 10 tips to help you file: 1. Employers have until January 31 to furnish your W-2. 2. If you have not yet received your Form W-2, ask your employer when the W-2 was mailed….
Part B: Driving and motor vehicles Cell phones and texting while driving: ASSEMBLY Bill 1536 clarifies existing law by allowing drivers to dictate, send, or listen to text-based communications while driving as long as they use voice-operated, hands-free operation. This clarification makes the texting-while-driving ban consistent with current law that prohibits use of cell phones…
NEW Income Tax and Sales Tax Laws Income tax California’s maximum income tax rate increases from 9.3% to 12.3% for taxpayers with taxable income of more than $250,000. The rate increases even more for taxpayers with adjusted gross income in excess of $1 million to 13.3% after adding a recent 1% mental health surcharge. Higher…
1. FORGETTING to sign and date the return: An unsigned tax return is considered unfiled. 2. Missing or wrong Social Security Numbers: When entering SSNs for anyone listed on your tax return, be sure to enter them exactly as they appear on the Social Security cards. 3. Misspelled or wrong dependent’s last name: When entering…
1. DON’T ignore the IRS. 2. Don’t mess with the IRS. 3. Don’t go to your appointment unprepared. 4. Don’t be late for the appointment. 5. Don’t volunteer information. 6. Don’t be condescending of education, experience, age, or gender. 7. Don’t be arrogant, even if you clearly have an upper hand. 8. Don’t flaunt your…
ANY individual who has worked and contributed to the FICA/Social Security System for 10 years (40 quarters) can start receiving Social Security Retirement benefits at age 67. You may elect to start receiving your SS benefits as early as age 62. You permanently lose about 30 percent of benefits if you retire early at 62….
YOU have worked for about 10 years and have paid to the Social Security (SS) administration through FICA deductions from your paycheck. Do you ever wonder if you are indeed covered after all these years? If not, how much more do you need to contribute before being fully covered? Here are 20 tips for your…
HOW long should you retain records? I have some clients who throw away everything instantly. Can’t stand records. I also have clients who keep records forever. Rat packs. There must be some balance in between. Unfortunately, there is limited guidance from the IRS. Fortunately, there are relevant statutes of limitation – the period when you…
WHY would single or separated taxpayers file as Heads of Household? Let us count the ways: 1. You have a lower tax rate than a single or married person filing separately. 2. You receive a higher standard deduction ($8,500 versus $5,800 for single and separate filers). 3. You may be entitled to childcare credit, 4….
1. GAMBLING winnings are always taxable and must be reported on your tax return – with or without form W-2G. 2. Gambling income includes winnings from lotteries, raffles, horse and dog races and casinos. It also includes the fair market value of prizes such as cars, houses, trips or other noncash prizes. 3. Complimentary goods…
THE name of the game is keeping a low audit profile. It means getting lost in the crowd. It reduces the risk of an audit. Here are 12 tips to keep the IRS from auditing your tax returns: 1. Make sure that social security numbers and names that you use on your income tax match…
YOU are still upset from losing an IRS audit. You have two choices: pay or fight. If you choose to fight, go to appeals. Let me give you 10 tips on how to prepare for the appeals conference: 1. Request access to your case files. Take a look at any dossier they have on you….
WHILE IRS audits decreased from the mid-90s, the Service reorganized, retrenched, and retrained its personnel during years of inactivity. They are back. I have personally handled more audit defense cases in the last year than in the previous five years. This new activity has been dominated by audits of Schedule C for taxpayers who conduct…
