IRS Innocent Spouse Consideration – Form 8857

By completing IRS Form 8857 (Request for Innocent Spouse Relief) the innocent spouse is attesting he or she should not be held responsible for the other spouse’s liability. If approved, it does not eliminate the liability; it effectively transfers all of it to the spouse who created the liability. A word of caution: By law the liable spouse will be made…

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Injured Spouse IRS Form 8379 Explained

IRS Form 8379 (Injured Spouse Allocation) helps calculate the allocation of income and tax liability to each spouse for the purpose of determining how much of an overpayment should be applied to a spouse’s liability and how much is refunded to the non-liable spouse. For tax purposes, a liability includes debts for federal or state taxes, child support, and delinquent student loans.…

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How to Determine What is a Business vs. What is a Hobby

Only by considering all the facts and circumstances of each situation can you determine whether an expense was incurred in a “trade or business,”and whether it was an “ordinary and necessary” expense for that business, making it a deductible expense. Before you can determine whether expenses may be deducted, to what extent they can be deducted, and how to report…

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Questions Asked by the IRS in an Initial Interview Audit

The following is a sample set of questions the IRS uses when conducting an initial ‘interview’ Mandatory Statements/Questions by IRS: IRS Agent /Officer Name? Taxpayer Name? Audit Date/time? Do you have concerns regarding the audit process? I have enclosed a copy of Pub 1 and Notice 609, which was included with your Internal Revenue Service…

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Retirement Plan Early Distribution Tax Consequences

Payments received from your Individual Retirement Arrangement before you reach age 59 ½ are generally considered early or premature distributions. Early distributions must be reported to the IRS and are usually subject to an additional 10 percent tax.  Distributions you rollover to another IRA or qualified retirement plan are not subject to the additional 10…

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Capital Gains and Losses – IRS form 1040 Schedule D

Everything you own and use for personal or investment purposes is a capital asset including a home, household furnishings and stocks and bonds held in a personal account.  When a capital asset is sold, the difference between the amount you paid for the asset and the amount you sold it for is a capital gain…

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Expanded 2011 Adoption Credit – IRS Form 8839

The Adoption Tax Credit in 2010 was increased to $13,170 and made refundable for qualified expenses paid to adopt an eligible child by the Affordable Care Act.  Basically this means that as a parent who completed an adoption in 2010 you can get money back as a tax refund even if you owe no taxes.…

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IRS Changes Lien Process

The IRS is making important changes to its lien filing practices that will lessen the negative impact on taxpayers. The changes include: Tax Lien Thresholds – The IRS will significantly increase the dollar thresholds when liens are generally filed. The new dollar amount is in keeping with inflationary changes since the number was last revised.…

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Noncustodial Parent and the Dependency Deduction

The bottom line is that if your estranged spouse or X spouse is inappropriately claiming your child as a dependent you may encounter problems with the IRS.  If you are the custodial parent one solution that seems to help is to file your taxes before the non-custodial parent.  Usually the second return claiming the same…

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What Income is Taxable? What Income is NOT Taxable? IRS Publication 525

Generally, most income you receive is considered taxable but there are situations when certain types of income are partially taxed or not taxed at all.  Examples of NON Taxable income include: Adoption Expense Reimbursements for qualifying expenses Child support payments Gifts, bequests and inheritances Workers’ compensation benefits Meals and Lodging for the convenience of your…

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