Establishing Residency for State Tax Purposes

Have you been contemplating moving to another state with lower taxes? Your move could lower your state tax bill, but you want to make sure to establish that the new state is your place of legal residency (also known as your “domicile”) for state tax purposes. Otherwise, the old state could come after you for taxes after you’ve moved. In the worst-case scenario, your new state could expect to get paid, too. Here’s what you need to do to establish residency in the new state — and why moving your pet could be a deciding factor. (more…)

Maintain Adequate Records for Charitable Contribution Deductions

The IRS rules for substantiating deductions for charitable contributions are strict. But for those who adhere to those rules, donations to eligible causes may be rewarded at tax time. As year end approaches, along with the opportunity to reduce your tax bill, you may be feeling even more generous than usual. Before you follow your charitable inclinations, know what proof you’ll need to support your donations and secure your tax benefits. (more…)

Recent Developments May Affect Passive Investors with Losses

Do you materially participate in a business or rental activity — or are you just a passive investor who isn’t directly involved in a project’s day-to-day operations? The IRS has prescribed seven tests to help individuals classify income, gains and losses from activities as passive or nonpassive. (See “PAL Basics” below.) (more…)

What To Do With Unwanted Donations

Everyone agrees that donations are the lifeblood of not-for-profit organizations. At the top of most wish lists is cash, and depending on your situation, you may accept other assets and in-kind contributions.But what should you do when offered donations that are not usable or appropriate? For example, how should a charity react when it is offered an item so worn that the only option is to send it to the local dump? Unfortunately, this can be a drain on the charity’s staff. And if there’s a fee to use the dump, it can cost the organization. (more…)

Self-Employment Tax Reduction Strategies for Spouse-Owned Businesses

If you own a profitable, unincorporated business with your spouse, you’re probably fed up with high self-employment (SE) tax bills.

An unincorporated business in which both spouses are active is typically treated as a partnership that’s owned 50/50 by the spouses — or a limited liability company (LLC) that’s treated as a partnership for tax purposes and owned 50/50 by the spouses. In either case, you and your spouse must separately calculate your respective SE tax bills. (more…)

How S Corporations Can Save on Federal Employment Taxes

If you are self-employed, one option that may reduce your self-employment taxes is organizing your business as an S corporation. The following article provides a brief overview of the conversion process, as well as the pros and cons of S corporation status.

Michelle Graves, CPA, CVA – Principal

 

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Tax Alert: District of Columbia—Income Tax Refund Verification Process Announced

In an effort to combat identity theft, the District of Columbia is selecting returns for review. Notices will be issued to any taxpayer whose return has been selected. The official press release, with further details, is available below.

Irene Walsh, EA – Tax Manager

 
 
District of Columbia—Income Tax Refund Verification Process Announced

The District of Columbia Office of Tax (OTR) and Revenue has announced that, to combat identity theft tax fraud, it will contact some taxpayers to verify that personal income tax refund requests were filed by those taxpayers. Notices containing a Personalized Identification Number (PIN) along with detailed instructions on how to verify a return using the PIN will be sent to individual taxpayers whose returns have been selected for further review. Taxpayers can complete the verification process using OTR’s secure Taxpayer Access Portal, MyTax.DC.gov or calling the Refund Response Unit or visiting OTR’s Walk-in Center. (Click here to read the official press release).

IRS Reports a Significant Increase in Whistleblower Awards

The IRS Whistleblower Office is celebrating its 10-year anniversary this year. The office was created under the Tax Relief and Health Care Act of 2006 to oversee the IRS whistleblower program, which is a critical part of overall enforcement and compliance. (more…)