Injured Spouse – more facts

If you file a joint return and all or part of your refund is applied against your spouses’ past-due federal tax, state income tax, child or spousal support or federal nontax debt, such as a student loan, you may be entitled to injured spouse relief. To be considered an injured spouse, you must have made…

Details

Employee Business Expenses – IRS Form 2106

If you itemize deductions and are an employee, you may be able to deduct certain work-related expenses. Generally, report expenses on IRS Form 2106 to figure the deduction for employee business expenses and attach it to Form 1040. Deductible expenses are then carried over onto Form 1040, Schedule A, as a miscellaneous itemized deduction subject to…

Details

IRS Revenue Agent Site Inspection

Yikes!!! The IRS wants to pay you a visit.  You need to know that Reg. §301.7605-1(d)(3)(iii) states: “Regardless of where an examination takes place, the IRS may visit the taxpayer’s place of business or residence to establish facts that can only be established by direct visit, such as inventory or asset verification.” Generally, this visit will be on a normal…

Details

Deductibility of Charitable Contributions – IRS Form 8283

Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will…

Details

What Qualifies As Deductible Alimony Payments

The following items are deductible as alimony payments if part of a divorce decree, even if the payments are made directly to a bank or insurance company: Car Payments Health Insurance Premiums One half the interest on mortgage payments made on a jointly held home.  If you make the entire mortgage payment the other half…

Details

Marriage as Defined by the IRS

Thinking about one’s marriage in IRS terms quickly can turn anybody into a stand up comedian.  In all seriousness though the times appear to be ripe for change in how the tax law defines marriage.  I write this because the Justice Department announced that it will no longer defend the constitutionality of section 3 of the…

Details

Casualty and Theft Loss – IRS Form 4684

Your vehicle was hit by hail and the insurance company agreed to compensate you $4,600 AND allow you to keep the vehicle AND not issue you a salvage title.  In most situations this is non reportable.  However not always.  This may be reportable on IRS Form 4684 Casualty and Theft and quite possible on Schedule…

Details

If Your Child’s Investment Income is Greater Than $1,900 in 2010 It May Be Taxable at Your Tax Rate

Children with investment income may have part or all of this income taxed at their parents’ tax rate rather than at the child’s rate. Investment income includes interest, dividends, capital gains and other unearned income. Your child’s tax must be figured using the parents’ rates if the child has investment income of more than $1,900 and…

Details

Residential Rental Income + Expenses – IRS Publication 527

Rental income is any payment you receive for the use of or occupation of property. Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them. Publication 527, Residential Rental Property, includes information on the expenses you can deduct if you rent property.…

Details

Punitive Vs. Compensatory Determines if Payment is a Deductible Expense

Stephens V. Commissioner, 93 TC 108 showed that any payment labeled ‘restitution’ or ‘punitive’ is non-deductible as an expense.  If the payments are labeled ‘compensatory’ then in order for the payment to be a deductible expense the question of whether the ‘compensatory’ expense was ordinary and necessary would need to be addressed. So basically if…

Details