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Tax Articles

IRS Fresh Start Initiative: Apply for Extension of Time to PAY with Form 1127A or Request an Installment Agreement with IRS Form 9465FS

If you don’t have the money to pay your taxes you should file your return on time and pay as much as you can with the return to eliminate the late filing penalty and minimize the late payment penalty/interest charges. For tax year 2011, qualifying individuals may request an extension of time to pay and…

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Statutory Employee

I’ve found myself needing to specifically clarify what the definition of statutory employee means for IRS employment tax purposes. Statutory employees include: 1. full-time life insurance agents, 2. certain agent or commission drivers, 3. traveling salespersons, and 4. certain homeworkers. Statutory employees do not owe self employment tax on these earnings, as Social Security and Medicare taxes…

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Start Up Expenses

The two major start up business expenses are the costs to organize and the costs of normal business expenses incurred prior to the beginning of business or the point where the business is ready to receive revenue. Sole proprietors do not normally have costs to organize because a business entity is not formed however they could expend substantial up-front business…

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Acquisition Debt and Divorce

Generally speaking IRS regulations provide that debt incurred to acquire the interest of a spouse or former spouse in a residence, incident to divorce or legal separation, may be treated as acquisition indebtedness under IRC Sec. 163 (mortgage interest deductions) without regard to the treatment of the transaction under IRC Sec. 1041 (spousal transfers). This debt is considered incurred to acquire a…

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IRS And the Trust Fund Recovery Penalty (TFRP) for Employment Tax Delinquencies

Here are 5 things I learned through experience regarding TFRP: 1. An IRS Revenue Officer makes a determination to “assess” or “not assess” the Trust Fund Recovery Penalty (TFRP). Bankruptcy does not stop the Assessment Statute even though it can stop the Collection effort. One of the major reasons why an IRS Revenue Officer won’t…

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IRS Undercover Operations STILL Lacks Sufficient Oversight

The Treasury Inspector General for Tax Administration released a report today dated February 3rd 2012 titled Criminal Investigation Can Take Steps to Strengthen Oversight of Its Undercover Operation. This audit was conducted as a follow up to an audit in tax years 2001 and 2002 – 10 YEARS AGO.  So it is fair to presume that the people at…

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Exclusion of Capital Gain from Sale of Personal Residence Does Not Always Apply

The US Tax Court case of David A. Gates, et ux. v. Commissioner 135 serves as best I can tell as precedent. Under §121, if married taxpayers own and use property as their principal residence for at least two of the five years ending on the date of sale, they can exclude up to $500,000 of capital gain on a…

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Reporting Back Pay

Reporting back pay is not as straight forward as one imagines. If you issued back pay you should report it on IRS Form W-2 (in boxes 1, 3, and 5) for the year payment is made. If any punitive damages are involved in a settlement they should be reported by the company on IRS Form 1099-MISC because they are…

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