Tax Relief For The Home Office Tax Deduction Available in 2013

Posted by Montgomery on with 0 Comment

The home office deduction, while useful, is complex and often the bait for an audit trap. Beginning in tax year 2013, Congress has implemented an optional standard home office deduction in order to make the home office deduction more available to taxpayers in the future.

Pursuant to Internal Revenue Service (IRS) Revenue Procedure 2013-13, beginning next tax season, there will be an optional safe harbor method that individual taxpayers may use to determine the amount of deductible expenses attributable to certain business uses of a residence throughout the tax year. This safe harbor method is an alternative to the burdensome calculation and substantiation of actual expenses needed to satisfy Internal Revenue Code § 280A. This new tax relief procedure is effective beginning on or after January 1, 2013.

These new tax relief provisions allow taxpayers who use their residences for qualifying business purposes to compute the allowable home office expense deduction on the basis of $5 per foot of qualifying home office space per year, up to 300 square feet. The maximum tax deduction allowed when using the new safe harbor provisions is the lesser of $1,500; or the gross income derived from the qualified business use of the home reduced by qualified business deductions.

The new safe harbor option for business home use does away with the previously time consuming calculations and record keeping of actual expenses. However, the traditional calculation method may allow for a greater deduction than allowed under the new safe harbor business home use provisions. Like the decision to take the standard deduction or itemize deductions on your tax return, give yourself time and review your tax situation carefully to ensure you’re not paying excessive taxes in exchange for convenience.

Only Tax Debt Blues For Utah Jazz Assistant Coach

Posted by Montgomery on with 0 Comment

Probably not a front page nab, but the North Carolina Department of Revenue recently set their crosshairs on Utah Jazz Assistant Coach and Former North Carolina State basketball head coach Sidney Lowe. The North Carolina Department of Revenue probably has more publicity to gain by seeking criminal charges against Lowe than the Internal Revenue Services does against Bubba (click here to read about the tax charges against Bubba Paris).

Lowe has been criminally charged with failing to file his North Carolina state income taxes for three years; 2009, 2010, and 2011. Lowe was booked at the Wake County jail Monday and released on a $10,000 unsecured bond. Lowe was a player for North Carolina State in the early 1980s and coached the Wolfpack for five seasons before resigning in 2011.

Currently an assistant coach for the Utah Jazz, this is a case where the tax local tax authorities may garner that infamous publicity tax authorities are notorious for. However, outside the devoted basketball fan or North Carolina booster fan, Lowe is likely an unknown. Reports on the alleged income earned bu Lowe for the years in question vary. If the case goes to trial we will likely learn if the government’s prosecution will cost more than the delinquent taxes to be gained, as is likely the case in the IRS’s criminal prosecution against Bubba Paris; or whether the criminal prosecution was worth the expense and deters the public from committing tax crimes. Again, this story proves that seeking the early help of a tax relief attorney may save you from doing hard time down the line.

Is This The Year You Should Itemize Your Deductions on Your IRS Tax Return

Posted by Montgomery on with 0 Comment

It’s now February, and tax day is just around the corner … but far enough away to allow you time to explore your options and minimize your tax exposure. While preparing your tax return the goal is always to legally minimize your tax debt and hopefully increase your tax refund. At its simplest, your tax debt is determined by your taxable income after deductible expenses.

Focusing on the deductible expenses side of the tax equation, according to the Internal Revenue Service (IRS), most taxpayers claim the standard deduction. Is this the year that you should itemize your deductions? My most common response to legal questions is apt; it depends. The analysis requires a determination of which is greater, the standard deduction or itemized allowable deductions?

What is the Standard Deduction?

The standard deduction is a preset amount that reduces the amount of income on which you are taxed. The standard deduction amount depends on your filing status, whether you are 65 or older, or blind, and whether an exemption can be claimed for you by another taxpayer. The standard deduction is generally adjusted annually based on inflation.

The standard deduction amounts for tax year 2012 are $5,950 for single filers and married couples filing separately, $8,700 for head of household filers, and $11,900 for married couples filing jointly and qualifying widow(er). If you are 65 or older, or legally blind you may receive an increased deduction per qualifying status. The additional standard deduction amounts for tax year 2012 are $1,450 for taxpayers who file single or head of household, and $1,150 for those filing married filing jointly, married filing separately, or qualifying widow(er).

Should You Itemize Your Deductions?

Now the hard part: is the standard deduction amount greater than the amount that may be claimed if you were to itemize your allowed expenses? If the standard deduction is greater, use the standard deduction. Determining what expenses you had throughout the year that may be itemized and deducted, is usually difficult because you need to maintain accurate records and the list of the various allowed deductions are exhaustive and riddled with exceptions, exemptions and limitations. Once you have a grasp of the type of deductions that may be claimed, you may find that your actual expenses, when itemized, far exceed the standard deduction provided by the government. This is why it truly pays to prepare your tax return early and not procrastinate so you have time to accurately determine the expenses you may itemize.

The types of expenses that may be itemized are typically a social economic incentivizing type of expenses. Generally, and subject to many exceptions and limitations, expenses paid for or associated with medical care, mortgage interest, student loan interest, taxes, education, charity, job search, relocation, earning income, and investments, may at times be itemized and could potentially reduce your taxes. Once tallied and accounted for, if the total amount spent on the qualified deductions, subject to the applicable exceptions and limitations, are more than your standard deduction, this may be the tax year you save on your taxes by itemizing your deductions; so don’t procrastinate and do your homework … or file an extension.

United States Files Criminal Tax Charges Against Bubba

Posted by Montgomery on with 0 Comment

According to the associated press, three time Super Bowl champion and former San Francisco 49er Bubba Paris has been charged with failing to file his federal income tax returns over a three year period.

The U.S. Department of Justice announced that Paris has been charged with three misdemeanor charges of failing to file tax returns in 2006, 2007 and 2008. Prosecutors allege that Paris received gross income of more than $57,000, nearly $84,000 and almost $42,000, respectively, in each of those years.

What interests me about this case, besides the 49er who was one of my favorites in the 1980’s, is the amount of money involved and Paris’ lack of true notoriety. While there are exceptions, the government generally prosecutes criminally for non-filing or non-payment of taxes only in cases of extreme income or evasion, or major notoriety i.e. the press garnered from the prosecution will warn the general public to timely file and pay their taxes. Here, the income levels alleged, if correct, are hardly kingpin status. In regards to Paris’ notoriety, the government missed their mark by about 25 years. Even in the Bay Area, most 49er fans may not know the difference between Bubba Paris and Bubba Gump.

Nonetheless, Paris now needs a tax attorney to get him tax relief. I suppose the government’s purpose would be to warn those with smaller incomes, that they too may be the subject of criminal prosecution for otherwise minor tax crimes. Be warned … if you earn approximately $45,000 a year and you miss a tax deadline … you may be doing hard time.

 

Tax Relief via the Earned Income Tax Credit (EITC)

Posted by Montgomery on with 0 Comment

The Earned Income Tax Credit (EITC) is a refundable tax credit you may be able to take advantage of this tax season to get the tax relief you need. Since the EITC is refundable, this means taxpayers may get money back, even if they have no tax withheld. However, to get the credit, taxpayers need to file a tax return and specifically claim the EITC, even if they don’t have a filing requirement.

Recent changes to the EITC make the credit available to more taxpayers than in years past. Eligibility for the EITC varies based on income and family size. Households with three or more qualifying children will receive a 2012 tax credit of $5,891 if their Adjusted Gross Income (AGI) is less than $45,060 when filing individually or $50,270 when married filing jointly. The equivalent credit for tax year 2011 was $5,751 for individuals with an annual AGI less than $43,998 or $49,078 when married filing jointly.

On the other end of the EITC spectrum, for tax year 2012, households with no qualifying children will receive a $475 tax credit if their AGI is less than $13,980 when filing individually or $19,190 when filing married filing jointly. Similar middle tier credit adjustments are available for taxpayers claiming one or two qualifying children.

Eligibility for the EITC is very fact specific as to eligibility requirements and prone to errors. Even if someone else prepares your tax return, a taxpayer is still responsible for the accuracy their own tax return. Taxpayers should seek tax advice if they are not sure whether they qualify for the EITC. Common EITC errors identified on the IRS website include:

  • Claiming a child who is not a qualifying child.
  • Filing as single or head of household when actually married.
  • Reporting incorrect income or expense amounts.
  • Missing or incorrect Social Security numbers for self, spouse or qualifying children.

While claiming the EITC will get you immediate tax relief, avoiding these common tax errors will give you stress relief.

 

It's Tax Season (Sort of)

Posted by Montgomery on with 0 Comment

So with the Super Bowl over, and pitchers and catchers reporting next week, these are the signs that tax season is in full swing, right? Wrong; depending on your situation. You still may not be able to file your 2012 tax return and get your refund, or resolve your tax debt.  Based on the last-minute shenanigans in Washington D.C. to avoid falling of the fiscal cliff, the Internal Revenue Service (IRS) is still preparing their systems to accept the remaining tax forms affected by the American Taxpayer Relief Act (ATRA) enacted by Congress on January 2, 2013.

The Internal Revenue Service announced today that taxpayers will be able to start filing two major tax forms next week covering education credits and depreciation. Beginning Sunday, February 10, 2013, the IRS will start processing tax returns that contain Form 4562, Depreciation and Amortization. Then, on Thursday, February 14, 2013, the IRS plans to start processing Form 8863, Education Credits. With these updates, almost all taxpayers may start filing their tax returns for 2012. These forms affected the largest groups of taxpayers who weren’t able to file following the abbreviated January 30, 2013, opening of the 2013 tax season.

However, more updates are still required to accommodate all taxpayers and tax forms. The remaining forms affected by the January 2013 legislation are anticipated to be accepted during the first week of March 2013.  A specific date will be announced later by the IRS. So, don’t delay, if you can help it, to get your taxes completed.

 

IRS Tax Relief Extended for Hurricane Sandy Victims

Posted by Montgomery on with 0 Comment

The Internal Revenue Service (IRS) has extended tax relief afforded to Hurricane Sandy victims. The IRS normally issues various forms of tax relief after major catastrophic events. For Hurricane Sandy, affected individuals and businesses will have until April 1, 2013, to file returns and pay any taxes due. This includes the fourth quarter individual estimated tax payments, normally due Jan. 15, 2013. It also includes payroll and excise tax returns and accompanying payments for the third and fourth quarters, normally due on Oct. 31, 2012 and Jan. 31, 2013 respectively, and calendar year corporate income tax returns due March 15. It also applies to tax-exempt organizations required to file Form 990 series returns with an original or extended deadline falling during this period.

Additionally, the IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply. The IRS automatically provides this relief to any taxpayer located in the disaster area. Qualifying taxpayers do not need to not contact the IRS to get this type of tax relief.

Beyond the relief provided to taxpayers in the FEMA-designated disaster counties, the IRS will work with any taxpayer who resides outside the disaster area but whose books, records or tax professional are located in the areas affected by Hurricane Sandy. Taxpayers who live outside of the impacted area and think they may qualify for this relief, however, do need to contact the IRS to obtain tax relief.

Be Charitable Today … Tax Relief in April

Posted by Montgomery on with 0 Comment

Get your check in the mail today! Charitable contributions are deductible in the year made, make you feel good immediately, and may give you some IRS Tax Relief in April. Therefore, donations paid by check still count for tax 2012 as long as they are mailed by today, the last day of 2012. Donations charged to a credit card before the end of 2012 count for 2012, even if the credit card bill isn’t paid until year 2013.

To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

To be deductible, clothing and household items donated to a charity generally must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances and linens.

But remember, only donations to qualified organizations are tax-deductible. A searchable online database listing most organizations that are qualified to receive deductible contributions is available here on IRS.gov. Additionally, churches, synagogues, temples, mosques and government agencies are usually eligible to receive deductible donations, even if they are not listed in the database.

Superstitions helped win the 2012 World Series for the SF Giants

Posted by Montgomery on with 0 Comment

You read it here first on April 6, 2012 at https://www.mwattorneys.com/blog/?p=319; the San Francisco Giants were going to, and did in fact win the 2012 World Series. Thank you to those who did their part to defeat the Dodgers, Reds, Cardinals, and the Tigers. While superstition, as you will read below, will win you a sacred World Series Championship, it will not get you the tax relief you deserve.

Included in those who deserved a World Series Championship and who did their part are of course two time Cy-Young winner Tim Lincecum, the horse Matt Cain, Pablo Sandoval (no longer “strand’em all), ZITTO, all of Giants nation, and of course, the tax attorneys at Montgomery and Wetenkamp.

“How?” you ask, could the IRS tax attorneys at Montgomery & Wetenkamp possibly have played a role in this historic sporting achievement? I will tell you: Like many baseball fans and Giants fans, we are superstitious when it comes to baseball. Some of the pundits, who also picked the Tigers to win, disregard baseball superstition…. Well, don’t disregard the baseball gods. One of my favorite talking heads, Damon Bruce, of the Damon Bruce Show on KTCT 1050 during the playoff run, compared Giants’ fans superstitions to that of a nine year old’s wishes, or something of the like. Well, Damon, even though I am a fan of yours, I will disagree. Additionally, if you paid homage to the baseball gods, maybe your Chicago Cubs would win a title, or two…. like the World Series Champion San Francisco Giants.

So, what superstitions did the tax attorneys at Montgomery & Wetenkamp do to win the ultimate baseball prize? Here is list, beginning well before the playoffs. However, our agreement with the Baseball Gods mandates that we don’t specify beginning dates, or ending dates of any of the listed superstition actions as some overlap and may still be ongoing through the off season:

  • Do not blog excessively about the San Francisco Giants’ dominance of the NL West;
  • Do not rub in Giants’ dominance of the Los Angeles Dodgers to those poor souls who are Dodger fans;
  • Do not wear black SF Giants jersey;
  • Only wear standard SF Giants cap with 2010 World Series patch;
  • Let game watching visitors only enter through the garage;
  • Do not wear game jerseys;
  • Do not change the baby’s clothes (diapers were okay);
  • Wear the same shirt during games;
  • Do not watch games live (use the DVR);
  • Watch the game live with baby on the lap;
  • Sit on the right side of the couch while watching games using the DVR (not live);
  • Don’t watch the game with the baby;
  • Use the San Francisco Giants 2010 World Series Championship beer mug to drink beer during the game;
  • Alternate San Francisco Giants 2010 World Series Championship beer mug with generic San Francisco Giants beer mug to drink beer during the game;
  • Alternate San Francisco Giants 2010 World Series Championship beer mug with generic San Francisco Giants beer mug to drink beer game to game;
  • Drink a beer with corresponding beer mug when the game actually starts, but do not finish. Stop drinking the beer by the time you watch the game on DVR, but keep some beer in the mug until the Giants’ next win…. then drink;
  • Do not let visitors in the house to watch the game in through the garage door;
  • Do not hate on the Dodgers;
  • Superstitions reset series to series;
  • No Visitors;
  • KNBR Radio coverage only – Do not watch the games on television (this was more or less out of necessity given the poor and biased broadcasting by Joe Buck and Tim McCarver. The worst commentators in the history of the game);
  • Wear 2010 National League Championship hat;
  • Wash a car during the game;
  • Wash a car during the game;
  • Do not wash cars;
  • Listen to entire game on KNBR outside (this included a severe rain storm);
  • Only go inside during commercial breaks;
  • Do not go inside ever!!!!;
  • Going inside is okay, only if changing diapers;
  • Do not wear socks or shoes, only sandals;
  • Socks are okay only for half the game… choose the half wisely;
  • There’s no such thing as superstition;
  • Eat standing up;
  • Wear 2010 World Series Championship hat;
  • There’s no such thing as superstition;
  • Do not gloat;
  • Do not eat;
  • Tape the KNBR audio feed in 90 minute increments, then sync up with the game on television using the DVR, then watch with the volume at “3” not muted;
  • There’s no such thing as superstition;
  • Do not gloat;
  • Visitors are Okay;
  • Watch games on the left side of the couch;
  • There’s no such thing as superstition;
  • Make sure that everyone you know, knows that your team won the World Series of Baseball.

Anyone who counted the Giants out was not paying attention to the team throughout the season let alone the post season. Anyways, these were the things the tax relief attorneys at Montgomery & Wetenkamp did to bring a World Series title home…. What did you do to bring the title home? Please comment to let us know…. it takes a village (to win a World Series).

Fresh Start Tax Relief Deadline Looms

Posted by Montgomery on with 0 Comment

The Tax Penalty Relief provisions of the Internal Revenue Service’s (IRS) Fresh Start Tax Relief programs announced earlier this year, have a crucial deadline of October 15, 2012, next Monday. The IRS announced earlier in the year new penalty relief for the unemployed on failure-to-pay penalties, which are one of the biggest penalties a financially distressed taxpayer faces on an IRS tax bill.

To assist those most in need, a six-month grace period on failure-to-pay penalties was made available to certain wage earners and self-employed individuals. The request for an extension of time to pay will result in relief from the failure to pay penalty for tax year 2011 only if the tax, interest and any other penalties are fully paid by October 15, 2012.

The penalty relief is available to two categories of taxpayers:

  • Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return earlier this year.
  • Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.

This specific penalty relief is subject to income limits. A taxpayer’s income must not exceed $200,000 if he or she files as married filing jointly or not exceed $100,000 if he or she files as single or head of household. This penalty relief is also restricted to taxpayers whose calendar year 2011 balance due does not exceed $50,000.

The failure-to-pay penalty is generally half of 1 percent per month with an upper limit of 25 percent. Under this new relief, taxpayers can avoid that penalty until next Monday, October 15, 2012. However, the IRS is still legally required to charge interest on unpaid back taxes and does not have the authority to waive this charge, which is currently 3 percent on an annual basis.