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

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Posted in ITIN, Tax Guidance & Preparation, Tax Problems & Requests

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

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Posted in Audit Technique Guide, Business Expense, Disallowed Expenses, Employment Tax, IRS Enforcement, IRS Examination, Payroll Tax Problems, Tax Guidance & Preparation, Tax Problems & Requests, Taxable Income, Uncertain Tax Position

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

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Posted in IRA, Retirement, Tax Records, Taxable Income

Dependent Care Credit IRC 21

According to Internal Revenue Code Section 21, the maximum tax credit as of this posting date remains at $1,050 (35% of $3,000) for one qualifying individual and $2,100 (35% of $6,000) for two or more. This credit is for expenses paid for the

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Posted in Child Tax, Children, Deductible Expense, Dependent, Employment Tax, Tax Credit

Domestic Production Activity Deduction DPAD

I learned 2 things this week about the Domestic Production Activity Deduction (DPAD) on IRS Form 8903: 1. Business activity alone is not the only factor used in determining qualification for the Domestic Production Activity Deduction (DPAD). The actual deduction reported

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Posted in Business Expense, Tax Credit

First-Time Home Buyer Credit – Nievinski v. Commissioner

According to Cary A. Nievinski v. Commissioner TC Summary Opinion 2011-10 even though IRS Form 5405 and IRS Publication 4819 provide only general instructions and do not address all the rules and limitations applicable to the first-time home buyer credit, the apparent failure of some IRS

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Posted in Tax Court, Tax Credit, Tax Guidance & Preparation, Tax Problems & Requests

US Treasury SS-8 Determination of Worker Status for Purposes of Federal Employment Tax

In my dealings with the US Treasury Department regarding worker classification disputes I have learned that although in reality there may be shades of gray distinguishing between what constitutes an employee and what constitutes an independent contractor the US Treasury

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Posted in Appeals & Audit Resolution, Audit Reconsideration, Business Expense, Employee Business Expense, Employment Tax, FICA, Payroll Tax Problems, Self Employ, Small Business, Sub-chapter S, Tax Guidance & Preparation, United States Treasury, Worker Classification

Is Your Activity For Profit Allowing for Business Deductions – Rundlett v. Commissioner

You are allowed deductions for ordinary and necessary expenses incurred in the course of business under §162, but you must also keep adequate records to substantiate expenses which can at times seem esoteric if not convoluted. Deductible travel expenses for example under §274(d) are based

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Posted in Business Expense, Deductible Expense, Disallowed Expenses, Hobby, IRS Examination, Rental Real Estate, Tax Abuse, Tax Court, Tax Guidance & Preparation

Interest Deduction Determined Based on Use of Loan Proceeds – Ellington v. Commissioner

If you incur interest expense on loans you should use the tracing rules of Reg. §1.163-8T to determine whether the interest expense is for: 1. business 2. investment 3. passive activities. or is 4. personal in nature The regulation focuses on the

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Posted in Business Expense, Deductible Expense, Disallowed Expenses, Interest Expense, IRS Examination, Tax Court

IRS Guidelines for Determining Noncompliance – The Cohan Rule

As I understand the Cohan rule under the IRS' Guidelines For Determining Noncompliance, taxpayers are allowed a deduction for an estimated amount of expenses when it is clear the taxpayer is entitled to a deduction but is unable to establish the exact amount of

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Posted in Cash, Cash Transaction, Cohan, Tax Court, Tax Deductible Expenses, Tax Guidance & Preparation, Tax Problems & Requests
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