Reporting Involuntary Conversion of Business Property IRC 1231

Generally when §1231 gains exceed §1231 losses during the year, the net §1231 gain is taxed as a long-term capital gain. However, if there are nonrecaptured §1231 losses from prior years, the net §1231 gain is taxed as ordinary income [§1231(c)]. Nonrecaptured §1231 losses are the aggregate net §1231 losses deducted in the five preceding…

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The 5 Tax Benefits of Procreating

Generally the five tax benefits of having children are the: dependency exemption, child tax credit, earned income credit (EIC), child and dependent care credit and head of household filing status. These benefits can be split only when the parents are separated under a divorce or separation agreement and one parent is the custodial parent. You cannot…

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Reporting Capital Gains and Losses to IRS

In tax year 2011 the IRS created Form 8949, Sales and Other Dispositions of Capital Assets, for taxpayers to calculate capital gains and losses. List all capital gain and loss transactions on this form. The subtotals from this form will then be carried over to Schedule D (Form 1040), where gain or loss will be…

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Moving Expenses – IRS Form 3903 – Publication 521

This post is an overview of IRS Form 3903 as well as IRS Publication 521, Moving Expenses Generally your move must be closely related to when you start work. You should be safe if moving expenses were incurred within one year from the date you first reported to a new location to fit within the intent of “closely…

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Tax Issues Surrounding U.S. Military Retirement

When adjusting to civilian life it is important to understand what is taxable and what is not taxable in regard to your pay after service to the US Military. This post is a rudimentary overview to some of those issues that were garnered from perusing the web site  www.military.com which offers detailed explanations of all things military.…

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Is Your Filing Status Head of Household – IRS Publication 501

According to IRS Publication 501 if you are not married, but provide a home for a qualifying dependent, you may be able to use the head of household filing status. The head of household filing status provides a higher standard deduction, lower tax brackets, and generally a better tax outcome than the single filing status or married filing separately status…

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IRS Form 8863 + Publication 970 – Hope and Lifetime Learning Credits

According to IRS Publication 970 the modified version of the Hope Credit is now referred to as the American Opportunity Tax Credit (AOTC) and extended through 2012. The AOTC is available for the first four years of post-secondary education. It has been expanded so that qualified tuition and related expenses now include expenses for course books, supplies, and equipment needed for a course…

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IRS Interim Changes for Individual Taxpayer Identification Number Application (ITIN)

Interim changes for issuing Individual Taxpayer Identification Numbers (ITIN) have been announced by the IRS. ITINs are only issued to people who are not eligible to obtain a Social Security Number. During this interim period WHICH IS TO LAST UNTIL THE START OF THE 2012 TAX FILING SEASON, the IRS will only issue ITINs when applications…

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Service Fee v. Tip – IRS Guidance to Examiners

According to IRS administrative guidelines to its examiners concerning Rev. Rul. 2012-18, published in the 2012-26 Internal Revenue Bulletin, when performing a tip examination (aka audit), IRS examiners must ensure that service fees or charges are properly characterized as wages and not tips. If the payment is not a tip then it is a service charge and…

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Tax Implications of Inherited IRAs

Taxpayers who inherit IRAs also inherit the decedent’s basis or amount invested in those IRAs, regardless of the relationship between the beneficiary and the decedent. Ideally, the decedent will have filed IRS Form 8606 (Nondeductible IRAs), showing the amount of basis in the IRA. Any remaining basis in the IRA shown on Form 8606 then becomes the beneficiary’s basis. However, if the decedent…

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