What is Self Employment Income

Some kinds of income may or may not be self-employment income. The source of your income and your involvement in the activity from which your income is received will determine whether it is self-employment income. INTEREST – Interest is not self-employment income unless you receive it in your trade or business, such as interest on…

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IRS Examination Techniques for Cash based business

Since many businesses in industry are cash oriented, have weak internal controls, lack an audit trail, and have inadequate books and records, the examiner’s audit should focus on probing for unreported income.  It is the responsibility of the business owner to maintain the documents needed to verify their reported income.  When the source documents are…

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Estate Tax Planning Opportunities

Being able to make transfers of up to $5 million ($10 million per couple) without having to pay gift taxes allows for planning opportunities that, combined with leveraging strategies, can transfer huge amounts of wealth. These include: Simple Gifts – Being able to give up to $5 million ($10 million per couple) in a lifetime…

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American Opportunity and Lifetime Learning Tax Credits

Two federal tax credits available to help you offset the costs of higher education for yourself or your dependents.  To qualify for either credit, you must pay postsecondary tuition and fees for yourself, your spouse or your dependent.  The credit may be claimed by the parent or the student, but not by both. If the…

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Estate, Gift and Generation Skipping Transfer Tax

For 2011 and 2012, the gift, estate and GST tax exemptions are unified again, with the exemption set at $5 million and the tax rate at 35%. The $5 million exclusion is indexed for inflation beginning in 2012.  Remember these changes are effective only for the next two years. On January 1, 2013, if Congress does not…

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Capital Equipment Expense example – Bonus Depreciation

If in December 2010 you purchased and placed in service a new piece of capital equipment to use in your business – say for example a farmer buys a new tractor and placed it in service in his farming business. The tractor cost $300,000. The farmer can expense the entire cost of the tractor even…

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Tax Filing Status

The first step to filing your federal income tax return is to determine which filing status to use. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household…

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LOOKOUT SMALL BUSINESS OWNERS FILING IRS Form 1120-S or 1065 – Net Operating Loss (NOL) Carry backs trigger Alternative Minimum Tax (AMT)

Please be advised that Net Operating Losses carried back to previous tax years can trigger an Alternative Minimum tax liability in the previous tax year that the loss was carried to, even if you originally did not have a tax liability in the year the loss was carried to. More importantly the Internal Revenue Code…

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Who should and who must file an income tax return – refundable tax credits

To determine if you are obligated by law to file a US tax return and pay US income taxes you should consult the instruction book that accompanies the IRS form 1040.  You must file a federal income tax return if your income is above a certain level; which varies depending on your filing status, age…

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Situations that would not qualify for IRS Fast Track Mediation

Issues for which there is no legal precedent Issues where the courts have rendered opposing or differing decisions in different jurisdictions Industry Specialization Program issues An issue for which you filed a request for competent authority assistance Service Center penalty appeals cases Service Center Offer in Compromise cases Collection Appeals Program cases Automated Collection System cases Constitutional issues

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