The charitable contribution deduction is one of the main deductions most individuals claim on his or her personal tax return. It is also a deduction some taxpayers and practitioners claim without supporting documentation. What are the proper record keeping rules for the charitable contribution deduction? Continue reading…
Tax Preparer Due Diligence
Your tax return was selected for audit. The auditor reviewed your information and disallowed some of your deductions. As a result, you owe additional taxes including penalties and interest. How could this happen? You been using a trusted CPA for years to prepare your tax returns.
How Long Can the IRS Make Adjustments to My Tax Return?
On 4/15 of every year, us tax practitioners are happy for two reasons. First, the tax season is basically over. But more importantly is the number two reason. Tax returns filed more than 3 years ago can generally be no longer changed by the IRS. Continue reading…
“For-Profit” Business or Hobby, Analysis of Factors 5 – 9
If the business does make a profit three out of five consecutive years (two out of seven for training, showing, breeding, or racing horses), then the facts and circumstances will be evaluated to determine if the business is “For-Profit” or hobby. There are 9 factors that are evaluated. In the previous blog we evaluated Factors 1 – 4 of the 9 factors. This blog reviews Factors 5 – 9.
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“For-Profit” Business or Hobby, Analysis of Factors 1 – 4
If the business does make a profit three out of five consecutive years (two out of seven for training, showing, breeding, or racing horses), then the facts and circumstances will be evaluated to determine if the business is “For-Profit” or hobby. There are 9 factors to evaluate. This blog analyzes Factors 1 – 4.
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Tax Return Forms
What are the primary tax return forms and when are these forms due? If you are looking for an answer to these two questions then read further. We will provide you a high level overview on the main tax return forms.
How is a Limited Liability Corporation (LLC) Taxed?
You filed Limited Liability Corporation (LLC) paperwork to the state for your business. It was easy to do and now you have a business. Now what? The tax obligations for your new business LLC will depend on a few factors.
For-Profit Business or Hobby, Facts and Circumstances
Generally, a business is considered “For Profit” if the business generates a profit in at least three out of five consecutive years. For training, showing, breeding, or racing horses, then the business needs to generate a profit for two out of seven years. What if the business does not meet this test?
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Tax Consequences for Determining if a Business is For-Profit or Hobby
It’s important to understand the hobby loss rules when starting a side business. For the first couple of years, it is common for a start up business to lose money. If the side business loses money for several years, the business may be a hobby. The tax consequences of reporting a business as “for profit” versus a hobby can be significant.
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Are you a real estate professional?
If you own rental property, the rental activity is generally treated by the IRS as a “passive activity.” This is important to understand because if you operated rental property and sustained a loss, the loss can be claimed against active income, such as wages. This loss deduction is limited to $25,000 for the claimed tax year. The $25,000 loss deduction may be further limited by Adjusted Gross Income (AGI). However, if you are a bona fide real estate professional, the rental activity is treated as an “active activity.” Therefore, there is no limit on the amount of losses that can be deducted. Continue reading…