Students Need Parents’ Guidance on W-4s
Proper withholding on your child’s W-4 can help prevent unnecessary tax return filing in 2015. If your children are normal high school or college students, they don’t have brokerage accounts set up in their names generating unearned income. In that case, they probably want to find jobs this summer. How should they fill out their…
Service Perk for Employees, Deduction for Employer
It’s always nice when an employer provides employees with a fringe benefit because its value is excluded from gross income, freeing it from federal income tax, and the employer gets a tax deduction. A no-additional-cost service is one type of fringe benefit. It’s defined as any service provided by an employer to an employee for…
It’s Wise to Honor Agreements with the IRS
The IRS allows taxpayers to make monthly payments through an installment agreement if they cannot pay their tax liability in full by the deadline – but they have to comply with certain requirements, primarily making timely, agreed-upon monthly payments and staying current on all taxes. Andrew and Vickie Hull, a married couple with a sizeable…
Couple Denied Mortgage Interest Deduction for Real Property
To claim a mortgage interest deduction, taxpayers must provide certain key information to the IRS. Is the claimed deduction for mortgage interest on a qualified residence? If so, is the taxpayer liable to pay the interest? Can the taxpayer substantiate legal ownership of the real property? Did the taxpayer actually pay the interest and provide…
Business Expense Deductions: What are Adequate Records?
If you travel for business purposes, you may be eligible to take tax deductions for ordinary and necessary job-related expenses – but your records can’t be haphazard if you want to satisfy the Internal Revenue Service’s substantiation requirements. To document a business expense properly, you should keep an account book, diary, log, statement of expense,…
Lack of Rollover Documentation Costs Lockheed Martin Employee
A Lockheed Martin employee who participated in the company’s retirement plan was ordered to pay tax on distributions because he couldn’t provide documentation that he had rolled over the account in time. Balvin A. McKnight was required to include in income two early distributions from his qualified retirement plan because he could not prove to…
Driving Expenses or Commuting? The Tax Court rules
It might seem like driving expenses to some, but to the IRS, it’s commuting. Lonnie Bartley, a construction supervisor for Far West Contractors Corp. in California, was denied a deduction for nearly $25,000 in business expenses because the Tax Court said they were actually nondeductible commuting expenses. Bartley’s job required him to travel to various…
New York Couple Hit by Tax Benefit Rule
A New York couple who had received an enterprise zone credit for property taxes were required to pay taxes on the amount because of the tax benefit rule. Yigal and Bonnie Elbaz were required to include in income $54,507 received in 2008 from a refund of New York state income taxes as a result of…
When Can You Deduct Your Elderly Parent as a Dependent?
To deduct your elderly parent as a dependent on your income tax return, you must first meet four tests. The tests are: 1. “Not a qualifying child” test 2. Member-of-household or relationship test 3. Gross income test 4. Support test The first test is the easiest to meet. By definition, a qualifying child is a…
Head of Household is a Tax-Favored Filing Status
If you qualify to file as head of household, you are generally entitled to a higher standard deduction and lower tax rates than single individuals. Two criteria must be met to file under the head-of-household status: You must be unmarried at the end of the year, not be a surviving spouse and not be a…