The ABCs of the Dependent Care Credit
Do you pay someone to watch your young child or another qualifying dependent while you’re at work? If so, you may be entitled to claim the dependent care credit on your 2022 return, but you must file by April 18. Recent enhancements provided under the American Rescue Plan Act (ARPA) expired at the end of…
How to Claim Casualty Loss Deductions and Avoid Pitfalls
Every year, the United States experiences disasters, ranging from hurricanes and earthquakes to wildfires and electrical grid failure. If you’re unlucky enough to suffer a disaster-related loss, you’ll need to understand the federal income tax rules to determine whether you’re eligible for a casualty loss deduction. Personal Casualty Loss Deduction Basics You can potentially claim…
What Differentiates a Business from a Hobby?
A taxpayer lost his court case and was denied a deduction of business expenses because he was involved in an activity deemed to be a hobby rather than a business. Kurt Anthony Strode learned the hard way that, to deduct something as a valid business expense, a taxpayer must be engaged in a valid trade…
Previously Denied IRA Deduction not Allowed Later
When does the IRS deny a 2010 IRA contribution deduction? When it had already denied the deduction in 2008. Stephen Dunn, a 50-year-old married taxpayer, found himself in these circumstances in a recent U.S. Tax Court case. Dunn was employed by a law firm for the first part of 2008. Significantly, he was an active…
Whistleblower Payments Reduced in Fiscal 2016
The IRS recently announced that awards paid to whistleblowers under Code Section 7623 on or after Oct. 1, 2015, and on or before Sept. 30, 2016, will be reduced by 6.8 percent. Legislation passed in 1985, which was known as “The Balanced Budget and Emergency Deficit Control Act of 1985,” requires that whistleblower award payments…
Amount of Contribution Key to Record Needed
The record-keeping requirements for charitable contributions of property other than cash depend upon the amount of the charitable deduction claimed. Here are the basic rules for various contribution amounts: 1. Less than $250 – The charity is not required to provide the taxpayer with any documentation. The taxpayer should request a written receipt from the…
It’s a Dependency Exemption Question
Does an affidavit from the supposed dependent supply the IRS with enough evidence to justify a dependency exemption? It depends. Steven Shimanek lived in the state of Hawaii during 2008. He filed his 2008 Form 1040 late. On the return, he claimed his common-law wife, Aleta Napoleone, as a dependent, which allowed him to file…
To Deduct Business Expenses: Seek Profit
The U.S. Tax Court made it clear in a recent case that taxpayers can’t simply deduct business expenses unless they are actually trying to make a profit in a trade or business. Valery Pouemi had a full-time job at Verizon, which paid him about $60,000 per year and required him to work from 32 to…
Casual Clothing Rules Issued to First Responders
Whether the costs of casual yet distinctively marked clothing issued to first responders are includable in wages is dealt with in Revenue Ruling 70-474. Under the new rule, when determining the answer, a federal, state or local government employee should ascertain whether the governmental employer: 1. Requires the police officers and firefighters to wear the clothing…
Important IRS Information on Social Media
The IRS has jumped on the social media bandwagon. You can check on the status of your refund, get updates on new developments in the tax area and even get some helpful tax tips. The IRS is on the following types of social media: 1. Twitter – The IRS provides tax-related tips and news for…