Form W-4: Follow Rules to Avoid Penalties
Be careful when filling out your W-4 form. The Internal Revenue Service requires that employees fill out a Form W-4 on or before the first day of employment. The W-4 form determines how much federal income tax an employer will withhold from an employee’s wages. The information on the W-4 is used when calculating the…
Take Advantage of the Retirement Savings Contribution Credit
For 2014 and 2015, income thresholds have been raised for the Retirement Savings Contribution Credit, known as the Saver’s Credit. The new income thresholds are as follows: 1. Married couples filing jointly with adjusted gross income of up to $60,000 in 2014 or $61,000 in 2015. 2. Heads of households with adjusted gross income of…
Cash-basis Taxpayers Must Pay Mortgage Interest to Deduct It
The US Tax Court denied taxpayers a deduction for mortgage interest that was capitalized into part of the principal of their new loan. The mortgage interest was never actually paid in the year at issue. This case involved Charles and Arlene Copeland (Charles Copeland and Arlene Copeland v. Commissioner, US Tax Court, T.C. Memo 2014-226,…
Real Estate Professional? Taxpayer Failed the Burden of Proof
A married couple was not allowed deductions for losses from rental real estate activities for tax years 2007 and 2008 in a 2014 Tax Court decision. The taxpayers’ position was that they were entitled to deduct the losses because the husband qualified as a real estate professional under a section of the Internal Revenue Code…
Unemployment Compensation is Taxable
In the difficult economy of the past six or seven years, many people have lost their jobs. Unfortunately for these people, if they qualify for unemployment benefits, they learn the harsh reality that these benefits are taxable and are included in their adjusted gross incomes. The federal government changed the rules slightly in 2009 when…
Wagering Losses – Some Useful Tips
If you participate in wagering, or gambling, your taxable gains from those transactions can be reduced by your wagering losses – even if the underlying dealings are illegal. However, wagering loss deductions are subject to a number of limitations: These losses can be used to offset winnings only during the same year, and not to…
Filing a Frivolous Tax Return Can Land You in Jail
A stiff prison sentence imposed by a district court on an individual convicted of filing a false refund claim and interfering with the administration of internal revenue laws has been upheld by the US Court of Appeals for the Eleventh Circuit. Taxpayer Donus R. Sroufe had submitted an unsigned Form 1040 return to the Internal…
NFL Threatened with Losing Tax-Exempt Status
In response to the domestic violence case of Ray Rice and other NFL football players, a senator has introduced legislation to end the tax-exempt status of the National Football League as well as a number of other sports leagues. Sen. Cory Booker, D-N.J., introduced the legislation which, if enacted, would end the tax-exempt status of…
High-Cost and Low-Cost Area Per Diem Rates Increase
The IRS has increased both the high- and low-cost per diem rates. An employer that pays a per diem allowance in lieu of reimbursing actual expenses that an employee pays or incurs for travel away from home may use the high-low method. Under the high-low method, a high rate applies to areas designated as high-cost…
More Medical Expenses Needed to Meet Deduction Threshold
There was a major change to the threshold percentage regarding the medical expense deduction in 2013. Starting in tax year 2013, your medical expenses now must exceed 10 percent of your adjusted gross income (AGI) for you to receive any tax benefit from those expenses. The rate prior to the change in 2013 was 7.5…