As innocuous as it sounds, the Form 3115 is a tax form like no other. A Form 3115 that is inadvertently omitted from a tax return filing can result in sizable differences in tax and trigger significant tax penalties and interest. Given the amounts that are often reported on the Form 3115, errors could cost… Continue reading IRS Expands Sec. 9100 Relief for Late Forms 3115
Category: Federal Income Tax
Federal income tax advice, articles, tips, & more.
The Federal income tax is the largest expenditure for most individuals and businesses. It dwarfs the costs for insurance and basic necessities. This is only going to increase in the future. Tax planning is needed.
This page provides timely and thorough coverage of various Federal income tax law questions, court cases, and rulings.
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Converting Home to Rental to Get Tax Loss Deduction
If you move out of a house and rent it to a friend for less than fair market value rent, can you then take a tax loss on the subsequent sale of the house? If the home is not converted to a rental property, the loss is disallowed as a personal tax loss. If the… Continue reading Converting Home to Rental to Get Tax Loss Deduction
Meal & Entertainment: The IRS Auditors “Bread & Butter”
I once worked with an IRS agent who would only make two types of adjustments. He would make UNICAP/inventory adjustments and meal and entertainment adjustments. If either of these items could be adjusted for a tax return, he would adjust them. It didn’t matter what else was listed on the tax return. It did not… Continue reading Meal & Entertainment: The IRS Auditors “Bread & Butter”
Tax on Virtual Currency Received for Microtasks
Our Federal income tax laws take a broad view of what counts as income and gain. The tax law then imposes a ridged framework for classifying and computing tax on income or gain. By casting the net wide, the tax law is able to capture just about every type of transaction that one could dream… Continue reading Tax on Virtual Currency Received for Microtasks
What is a Rental Activity?
The ability to generate current year tax losses is a strong incentive for high-income taxpayers to own real estate. Real estate often produces tax losses, but not economic losses. This happens because the current operating expenses plus tax depreciation result in a current year loss. At the same time, the property likely increased in value… Continue reading What is a Rental Activity?
Divorce Payments & Tax Basis in Business
Our Federal income tax laws often build upon the presumption that seemingly adverse parties are actually adverse. Our tax laws do not always account for instances where the parties are actively working in concert to reduce the IRS’s cut. Transfers and payments made in relation to divorce are an example. With our tax laws, it… Continue reading Divorce Payments & Tax Basis in Business
When is Rental Real Estate a Business?
Our tax laws are not perfect. There are grey areas. Most of these grey areas are of little consequence as they do not have a significant impact on the amount of tax that is due. There are other grey areas that can significantly impact the amount of tax due. These tax disputes are frequently litigated.… Continue reading When is Rental Real Estate a Business?
Avoiding Tax on Discharge of a Mortgage
There are times in life when you may feel that you can’t get ahead. One step forward, two steps back–as they say. Paying income tax on debt that you avoid is an example. You negotiate with the lender or creditor and they agree to settle the balance for less. One step forward. Then a few… Continue reading Avoiding Tax on Discharge of a Mortgage
Avoiding the 60-Day IRA Rollover Requirement
If a taxpayer takes money out of their retirement account, they generally have to pay income tax on the amount distributed. What if the taxpayer wants to put the money back into the account? There have been several examples where Congress has allowed taxpayers to put money back into their accounts. The recent CARES Act… Continue reading Avoiding the 60-Day IRA Rollover Requirement
Avoid Tax by Returning Pay
There are times when a business structure or transaction no longer makes sense. This may be due to a change in the business environment, such as swings in the economy or unexpected gains or losses. It can also arise due to a change in the owners’ personal circumstances, such as a divorce or death of… Continue reading Avoid Tax by Returning Pay