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Dear Valued Client,
This edition of our newsletter covers the IRS statute of limitations, reasonable compensation guidelines for S-Corp owners, ex-pat earnings and taxation, pitfalls of employee classification, and much more.
Just because the individual tax deadline has passed, it doesn't mean that critical life decisions don't pop up year-round. Careful planning can make a big difference in your financial outcome.
If you or your colleagues, family, or friends need help, we are here for you. We will continue to monitor the latest opportunities to keep all of our clients prosperous. Your kind reviews and referrals are appreciated.
Tax Pro Plus
This edition of our newsletter covers the IRS statute of limitations, reasonable compensation guidelines for S-Corp owners, ex-pat earnings and taxation, pitfalls of employee classification, and much more.
Just because the individual tax deadline has passed, it doesn't mean that critical life decisions don't pop up year-round. Careful planning can make a big difference in your financial outcome.
If you or your colleagues, family, or friends need help, we are here for you. We will continue to monitor the latest opportunities to keep all of our clients prosperous. Your kind reviews and referrals are appreciated.
Tax Pro Plus
Owe the IRS Money? How Long Do They Have to Collect?
Have you ever wondered how long the IRS has to question and assess additional tax on your tax returns? For most taxpayers who reported all their income, the IRS has three years from the date of filing the returns to examine them. This period is termed the statute of limitations. But wait – as in all things taxes, it is not that clean cut. Here are some complications:
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Tax Issues That Arise When Converting a Home into a Rental
With the current substantial appreciation in home values and demand for housing exceeding the available inventory, along with low home mortgage interest rates, more and more homeowners are converting their existing homes into rentals when they buy a new home. Other reasons individuals may make the conversion include maximizing the tax benefits for an elderly person who can no longer live alone by delaying the sale of that person’s home; and to ensure that a home provides value when its owner takes a temporary job assignment in a different location. Some homeowners even mistakenly think that, when a home has declined in value, converting it into a rental can allow them to deduct that loss. Regardless of why an individual considers making a conversion, several tax matters come into play when making that decision.
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S Corporations Reasonable Compensation Requirement
Unlike a C corporation, which itself pays the tax on its taxable income, an S corporation does not directly pay taxes on its income; instead, its income, losses, deductions, and credits flow through to its shareholders’ individual tax returns on a pro rata basis. These distributions are not subject to self-employment (Social Security and Medicare) taxes. As a result, many S corporations ignore the requirement that each shareholder-employee must take reasonable compensation in the form of W-2 wages in exchange for services performed for the corporation. These wages are subject to Social Security and Medicare taxes (which the corporation and the employee generally split equally); the corporation is also responsible for paying the Federal Unemployment Tax (as well as any state unemployment taxes).
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Working Abroad Has Huge U.S. Tax Benefits
U.S. citizens and resident aliens are taxed on their worldwide income, whether they live in the U.S. or in another country. However, qualifying U.S. citizens and resident aliens who live and work abroad may be able to exclude from their income all or part of their foreign salary or wages, or amounts received as compensation for their personal services. In addition, they may also qualify to exclude or deduct certain foreign housing costs.
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Why Employee Classification is of Paramount Importance
Ultimately, it all comes down to the difference between salary and hourly pay employees.
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The Ever-Changing Role of Tax and Accounting Professionals in the Modern Era
Accounting professionals were able to help many organizations avoid things like cash flow emergencies, burnout, and anxiousness. Learn more.
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Are Damage Awards Taxable?
Frequent questions that arise are: Are amounts received from settlement of lawsuits and other legal remedies taxable? Are the legal fees paid in connection with these payments tax deductible? The tax code specifies that all income is taxable from whatever source derived, unless exempted by the Internal Revenue Code. The tax code does provide an exclusion from income for certain damage awards but not for others. The companion issue to damage awards is the deductibility of the legal fees associated with the damage awards and settlements. This article looks at a variety of situations and the tax ramifications.
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Foreign Income and Tax Reporting Issues
Anymore, we have a worldwide economy and with that comes a variety of tax issues. Some of these may be relevant to you. The following issues, some of which you may not be aware of, apply to individuals. In addition, some are subject to severe penalties when not complied with.
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Too Many Transactions in QuickBooks Online? Create Rules
It’s important to categorize transactions, but it takes time. If every day brings several dozen into QuickBooks Online, you can automate this process.
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Disclaimer: The tax advice included in this newsletter is an overview of some complex tax rules and is not intended as a thorough in-depth analysis of the tax issues discussed. Do not act on the information included in this newsletter without first determining how these issues apply to your particular set of circumstances and if there are any special tax laws or regulations that might apply to your situation.
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