Archive for January, 2022

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Do You Use An Area of Your Home For Your Business? Are the Costs Deductible?

Sunday, January 23rd, 2022

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

In my many years of practice this has been one of the most difficult tax deductions to explain to my tax clients, and to test for meeting all of the requirements for this tax deduction.  If you search the Internet or talk with tax preparers, it’s one of the IRS “Red Flag” areas that is guaranteed to be scrutinized carefully when your filed  tax return is evaluated and reviewed.   The IRS guidelines and requirements are very specific:

2006IRSpolicyforbusinessuseofthehome.doc (live.com)

If your tax return is examined, you’ll receive several, specific questions and you will be asked to fulfill  certain criteria to first determine if you meet these requirements.

Next, how are these business expenses determined and calculated?  There are two options that are available to you:

1.  You can use the “IRS Simplified Method” – # of square feet used for business x $5.00 per square foot, or

2.  IRS Form 8829 “Expenses For The Business Use of Your Home” – 2021 Form 8829 (irs.gov)

a.  The business expenses from Form 8829 will be reported on Schedule C of your tax return – “Profit and Loss From Business”

b.  The remaining non-business expenses are reported on Schedule A (“Itemized Deductions”)

Be sure to test your tax return software for accuracy and mathematical accuracy!

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Take Your Time When Preparing Your Tax Returns-Errors & Mistakes Are Costly!

Sunday, January 23rd, 2022

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

Preparing and filing tax returns is certainly not one of the most enjoyable activities that we are required to do.  With all of the other tasks that also have to be done, there  is a human tendency to hurry through the task, fail to read the fine print or specific instructions, or just make simple mathematical errors.  It is important to remember that, for the most part, the Internal Revenue Service (Federal and State) already know what your reported income must be BEFORE you file that tax return.  If your records and documents don’t agree with their records and documents, you’ll probably be provided with an opportunity to explain yourself.  IF this situation occurs, you can be assured that it will be a time-consuming, labor intensive activity for you.  As you have always been encouraged to do since elementary school days, take your time and do it correctly the first time!  

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Use The Internet To Your Advantage Throughout This Tax Season!!!

Thursday, January 13th, 2022

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

Previous posts below  provide detailed information regarding what to expect this tax season, actions that are not advisable at all (paper filing, not using direct deposit, etc.).  This article provides information regarding options that are available to you to save time, reduce your frustration, stress and headaches.  The methods that are recommended will require the use of your computer and the Internet.  You will also need to use tax return preparation software yourself, utilize a tax return preparation service, or engage a Certified Public Accountant.

It is essential that whatever method that you use, your tax return must be current, accurate, and complete when filed.  There is a “2021 Tax Return Questionnaire” from the “Information Center” page of this website that will guide you through the assembly of all of the information that you need to have available.   Additionally, be cognizant of the fact that some third parties often identify errors in the reports that have been previously provided to you and the IRS.  When identified the issuer will send you and the IRS an “Updated” or “Corrected” report or return.  Therefore, IF you have already filed your tax returns, it will probably be necessary to file an “Amended” tax return.  This is not a good circumstance in which to be!!

My practice experience has caused me to wait 60-90 days after the original tax returns were filed before an amended tax return is filed to provide the IRS with the time to process the original or initial tax returns.  The IRS is a very large organization with many offices and employees.  If you file the amended return prematurely, there is a relatively high risk that your amended return may be processed BEFORE the original tax return.  This is also a very bad situation!!

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2021 Report From the National Taxpayer Advocate-Very Important Information!!

Thursday, January 13th, 2022

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

The National Taxpayer Advocate performs several important tasks for all taxpayers – “The National Taxpayer Advocate is the head of the Office of the Taxpayer Advocate, is appointed by the Secretary of Treasury, and reports directly to the Commissioner of Internal Revenue. The Advocate acts as an ombudsman for the taxpayer.”  If you are unable to contact and speak with someone at the Internal Revenue Service, contact the National Taxpayer Advocate!

The latest report is provided below.  Some of the major issues that taxpayers have been, and will be facing are:

  1.  The 2021 tax season will essentially be a “mine field” for all taxpayers;
  2.  Any form that is “paper filed” will probably not be successfully processed with issues and problems;
  3.  Any discrepancies or differences between a filed return and the IRS records and files will encounter extended or protracted processing problems;
  4.   The historical rate for telephone calls made to the IRS and the calls actually answered are ~ 10%.  Expect to have your call unanswered multiple times;
  5.   Note the “administrative recommendations to the IRS” in the report below.

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Are You Required To File A Personal Tax Return???

Thursday, January 13th, 2022

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

There are certain circumstances in which you are not REQUIRED to file a personal income tax return (see page nine of 2021 Instruction 1040 (irs.gov) under “Filing Requirements”) including Charts A, B, or C.  However, there are also situations in which you may decide to file anyway, for example Federal and state income taxes were withheld from your income (Form 1099 MISC, Form 1099 NEC, or W-2), you do not owe any Federal or state income taxes, and you wish to have the withheld funds returned to you.  Additionally, there are situations in which you are entitled to a “refundable tax credit”  [“refundable tax credits” provide you a tax refund when you don’t owe any tax.].

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