The first time I bet on a horse I was just 9. My family was vacationing in Ruidoso, New Mexico, and my dad put $2 on the quarter horse I selected the day we visited Ruidoso Downs. I can't remember why I chose that horse in that race, but I do remember it won. I also remember the last time I bet on a horse. It didn't win, but I do remember why I picked it. It had the same name as my cat. Arbitrarily picking ponies: Yeah, I'm one of those most casual of bettors. I don't look at odds or lineage or trainers or anything remotely logical in picking a pony. I go by my gut or how the animal looks or, yes, its name. So it's no surprise that when the thoroughbreds Run for the Roses at Churchill Downs this Saturday, May 4, I'll be pulling for if not actually betting on Tax. Yep, that's the name of one of the 3-year-olds entered in the fabled Kentucky Derby. The chestnut colt also will compete in the other Triple Crown races, the Preakness Stakes in two weeks in Baltimore and the Belmont Stakes on New York's Long Island in June. It is sponsored, fittingly, by Dean Dorton, a full-service accounting, technology and consulting firm with offices in the Derby's hometown of Louisville, as well as in Lexington, Kentucky, and Raleigh, North Carolina. More than just a name: If you're interested in putting down a few bucks on Tax and want more than just his name, here's what Horse Racing Nation has to say -- Tax, 20-1 (Danny Gargan, trainer/Junior Alvarado, jockey): Claimed out of his maiden win at Keeneland by the current connections, he has since made three starts, all 1 1/8-mile graded stakes at Aqueduct, including a victory in the Withers Stakes (G3). Gargan is a first-time Derby trainer with a colt looking fit to stalk the pace. The Lexington Herald-Leader also has a good piece by John Clay on how Tax and Gargan (and Dean Dorton) made it to the 145th running of the greatest two minutes in sports. You also can get the scoop directly from Dean Dorton on its foray into the sport of kings. Long, but better, odds: The 20-1 notation in the brief on Tax was the horse's odds of winning as of April 30 when the horse racing site posted its overview of the upcoming Kentucky Derby entrants. That's much better than the 60-1 odds cited by Richard Rubin, tax reporter for The Wall Street Journal, when he noted on social media the race entry reminiscent of the Internal Revenue Code.
Check out Rubin's full Twitter thread for added Tax and tax quips by him and his followers, which explain why tax geeks rarely are comedy writers. #RimShot! I do agree, however, with Rubin on why the horse is no longer the longest of Derby shots: "OK it was a 60-1 shot but now all the nerds and accountants are skewing the odds," wrote Rubin. I even joked (sorta) in response to Rubin's initial Tweet that I "gotta find a way to put a few dollars on this pony!" A Tax win means tax consequences: I'm not sure I'll actually get around to placing a bet, but I will be watching and pulling for Tax on Saturday. If you're going to be part of the Twitter hash tagged #ItsTaxTime team, welcome to the meeting of the horse racing-tax geek world! If you decide to take your support a step (or furlong) further and put a few (or more) dollars down on Tax at your local betting parlor, be ready (like the Texas woman last year who placed a lucrative Kentucky Derby bet) to face the tax consequences. Just in case your luck is as good this year, in addition to reviewing the Daily Racing Form, you also might want to check out my earlier post on how to report taxable gambling winnings. You also might find these items of interest:
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Happy May Day! It's the annual May 1 global holiday celebrating the contributions of workers. But the other mayday often comes to mind when taxes are involved. If it's a tax distress signal you're sending out as the merry month of May begins, here are some moves that could help ease your tax trepidations. 1. File your 2018 return. If you didn't file anything or, more importantly, didn't pay any due tax, Uncle Sam has been racking up penalty and interest charges since April 16 (or the 18th for Maine and Massachusetts filers). Getting a return in ASAP will stop those charges. Even if you officially got more time to file, just because you have until Oct. 15 to finish your taxes doesn't mean you should keep procrastinating. The sooner you get this tax task off your plate, the more time you'll have to do other, probably more fun, things in this merry month of May and the rest of the summer. 2. Find a camp for your kids. Even better, if you and, if your married, your spouse work, you can count day camp costs in claiming the Child and Dependent Care tax credit. There are income limits, but some parental taxpayers could get a credit — which is a dollar-for-dollar reduction of any tax owed — of up to $1,050 to look after one child or up to $2,100 if two are more kids are involved. 3. Get ready for a mean Mother Nature.
This means not only buying supplies to help you weather potential bad weather, but knowing how the tax code might be able to help if you're in a storm's path. When you're hit by a major natural disaster, you still can claim your uninsured, unreimbursed losses on your taxes. You also can decide which year to use, either the one in which the disaster actually occurred or the prior year. Pick the year that will give you the best tax result and possibly a quicker refund that you can put toward recovery efforts. You can find more on preparing for, recovering from and even helping out storm victims on the ol' blog's special tax-related (of course!) Natural Disasters Resources pages. 4. Make refund adjustments. If either tax situation happened to you, you need to adjust your withholding ASAP. More May tax moves: Tweaking your withholding to get the type of refund you want or more in your paychecks throughout the rest of 2019 is the first item mentioned in the May Tax Moves over in the ol' blog's right-hand column. Just as every month, the monthly tax to-do list starts under the red Tax Moves image, which itself is just below the countdown clock ticking off the remaining filing extension days, hours, minutes and, yes, seconds. I know May is a busy month, what with transitioning from spring to full-blown summer and all the end-of-school and family vacation plans to be made. But take a little time to give the pieces of tax advice in this post and the sidebar a look. One or more of the May Tax Moves could help you start trimming your 2019 tax bill now. And that should make the rest of the year and next filing season very merry, too. Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/05/4-merry-tax-moves-to-make-in-may.html Uber is about to go public. It could mean billions for the company and its investors. That folks are so bullish on Uber's initial public offering (IPO) is astounding to most of us, considering the company's fiscal history. Uber lost about $3 billion in 2018 and has lost about $10 billion over the past three years. In its latest financial filing, Uber disclosed that it lost at least $1 billion in the first quarter of 2019. You wonder what the losses would have been if Uber hired employees instead of classifying its drivers as independent contractors. Why contractors often are preferred: That distinction is important to the bottom line of many companies, large and small, public or privately held, since even when a contractor is paid the same as a full-time employee, the independent workers tend to cost businesses less. Contractors aren't offered full benefits packages, such as medical and dental insurance. They don't get pensions, to which most employers put in at least a portion when they are defined contribution plans like 401(k)s. Businesses don't have to pay unemployment insurance costs, federal and state, for contractors. They also are off the hook for collecting the contracted workers' payroll taxes that go toward Social Security and Medicare, meaning they don't have to hand over the company portion of those taxes. Labor looks at a contracting company: That's why many companies welcomed a move this week by the U.S. Department of Labor (DoL). Under the new presidential administration, the Labor Department already had rescinded Obama-era guidance for gig drivers who work for Uber and Lyft. On Monday, April 29, it took another step, issuing an opinion letter to an unnamed but apparent home services related businesses about the classification of its workers. In it's missive, the DoL said the company "does not impose requirements on how its service providers must perform their work, such as what transportation route to take, the order in which to clean an apartment" or the type of materials they must use. The DoL letter, like Internal Revenue Service letter rulings on specific tax situations, applies only to the company that sought it. However, other businesses tend to view such communications as indicators of a federal agency's approach to similar cases. Many folks are freaked out by the opinion letter, which they say could be worth billions of dollars to gig-economy companies at the expense of, according to some estimates, as many as 5 million contract workers. They fear it's just another move by the current White House and DoL to make it harder for misclassified workers to get the rights, benefits and protections they should from employers. However, it looks like this Labor opinion letter hews pretty closely to the IRS guidelines on what distinguishes a full-time employee from a contractor. Employee vs. contractor overview: The IRS says that in determining whether a person providing a service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered. This basically is a formal way of saying all work situation are different and the facts and circumstances (yeah, we've heard this before) of each must be taken into account. The essential determinant, however, is control. Who is primarily in charge, the company or the worker doing the job? The facts that provide evidence of the degree of control and independence fall into three key categories, discussed below. Behavioral control: The key question is whether the company controls or has the right to control what the worker does and how the worker does his or her job? A business doesn't have to actually direct or control the way the work is done. It simply must have the right to direct and control the work. Behavioral control factors fall into the categories of:
Financial control: Financial control refers to facts that show whether or not the business has the right to control the economic aspects of the worker’s job. This includes things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc. Among the financial control factors are:
Type of work relationship: No, neither the IRS nor I are talking about whether you and your boss like each other. Rather, this deals with how a worker and business perceive their relationship to each other and the specifics surrounding that job relationship, such as:
Business decides: It is the responsibility of businesses to weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no magic number of factors that makes a worker an employee or an independent contractor. And no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another. The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination. Workers can appeal: When a worker believes that his or her job should rightly be that of an employee rather than a contractor, he or she can ask the IRS for a determination. Technically, a business can ask for IRS help in clearing up a worker's employee vs. contractor status, too. Practically speaking, though, it tends to be workers who believe they should be reclassified who tend to take steps to appeal their worker status. You get IRS help by filing Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. The IRS will review the facts and circumstances and officially determine the worker's status. Be patient. The agency says it can take at least six months for a determination. Penalties for misclassifying workers: If the IRS ultimately decides that a company improperly classified an employee as an independent contractor, it could be held liable for employment taxes for that worker. Where a company realizes that it has misclassified workers, it can look into the IRS' Voluntary Classification Settlement Program (VCSP). This is an optional program that allows the workplaces the chance to reclassify their workers as employees for future tax periods for employment tax purposes. It also offers partial relief from federal employment taxes for eligible taxpayers that agree to prospectively treat their workers (or a class or group of workers) as employees. As for workers who believe they have been improperly classified as independent contractors by an employer, they can file Form 8919, Uncollected Social Security and Medicare Tax on Wages, to figure and report the employee's share of uncollected Social Security and Medicare taxes due on their compensation. And you thought working for yourself was going to be easy! In most contractor situations, things are above-board and fair to both sides. But just in case you're ever in a situation where you think you're not being treated appropriately as far as your employment status, keep these employee vs. contractor guidelines handy. You also might find these items of interest:
Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/04/contractor-or-employee-irs-guidlines-help-you-decide-uber-ipo-department-of-labor.html Tax-exempt organizations became a landmine for the Internal Revenue Service in 2013. In May of that year, a Treasury Inspector General for Tax Administration report determined that the agency had used questionable tactics in reviewing applications by self-described social welfare organizations seeking the favorable 501(c)(4) tax-exempt status. You may remember it as the IRS/Tea Party Scandal. Now a new tax-exempt designation might open up the IRS for more criticism. This time, though, it doesn't involve nonprofit groups that might spend a little too much time lobbying the government. It's a church that invokes an alternative, and generally controversial deity. Specifically, the devil. Many types of tax-exempts: The Internal Revenue Code allows myriad tax-exempt designations. The one, though, that gets the most attention from us regular taxpayers is the 501(c)(3) category. These are IRS-approved public charities, most of which do good work for folks who need extra help. Educational institutions and religious organizations also are in this tax-exempt group. We know them and their Internal Revenue Code 501(c)(3) identifier because they individual taxpayers' donations are to them are tax deductible if the generous taxpayers itemize. Now donors can give to and write off on their taxes their gifts to the Satanic Temple in Salem, Massachusetts. Satanic Temple gets nonprofit approval: Yes, Satan, as in the Devil. As Dana Carvey's church lady would say, "Well, isn't that special?" And yes, Salem, as in the Massachusetts town known for its witch trials in the 1690s. The temple's co-founder Lucien Greaves announced last week via Instagram "that for the first time in history, a satanic organization has been recognized by the United States federal government as being a church." Not founded as a church: The IRS approval of the 501(c)(3) tax-exempt designation for The Satanic Temple is a bit curious, but not for the reason many would think. The Salem-based groups says on its website that despite using temple in its name, it does promote or worship Satan and does not believe in a symbolic evil. Rather, the group says it embraces the name Satan to emphasize its "rational inquiry removed from supernaturalism and archaic tradition-based superstitions." Those superstitions to which it refers are what most traditional worshipers call their religions. Facing off against other religions: So if the Satanic Temple didn't apply for the 501(c)(3) designation in order to be recognized as a church per se, why go to the trouble? Because, say Greaves and his colleagues — there are chapters in Atlanta, Chicago, Seattle, as well as in Canada — it was time to level the religious/government playing field. "This acknowledgment will help make sure The Satanic Temple has the same access to public spaces as other religious organizations, affirm our standing in court when battling religious discrimination, and enable us to apply for faith-based government grants," noted the new church on its Instagram page. Tempted by Trump action: But why now? Thank the current Oval Office occupant. In May 2017, Donald J. Trump signed an executive order "Promoting Free Speech and Religious Liberty." At that time, Greaves indicated that it might be appropriate for The Satanic Temple to "re-evaluate its prior principled refusal to accept religious tax-exemption." The order, added Greaves, allows "our theocratic counterparts [to] trample over the Constitution and all it previously stood for. It appears that now is a time in which a more principled stand is to meet our opponent on equal footing, so to as balance, as best we can, what has been a frighteningly asymmetrical battle." After the 501(c)(3) tax-exempt designation was official, Greaves stated: "In light of theocratic assaults upon the Separation of Church and State in the legislative effort to establish a codified place of privilege for one religious viewpoint, we feel that accepting religious tax exemption — rather than renouncing in protest — can help us to better assert our claims to equal access and exemption while laying to rest any suspicion that we don’t meet the qualifications of a true religious organization. Satanism is here to stay." Talk about your unintended White House consequences. Freedom of and from religion for all: I must admit that I'm not much of a traditional church goer. In fact, I generally support the good works done by most public charities, have established one myself (along with the hubby, a scholarship at our alma mater) and definitely have claimed the charitable donation deduction over the years. But as I've watched the various, and sometimes nebulous, nonprofits proliferate, I've come over the years to think that all these sundry tax exempt categories need to be re-evaluated and potentially eliminated. Given that, I'm definitely in no position whatsoever to comment on what goes on at the newly tax-exempt Satanic Temple. But that's never stopped me before, so here goes with some unsolicited advice. As noted, it's not a church in the way most of us think. But with their new tax-exempt status, the temple plans to hold get-togethers in public spaces. Since music is a popular way to attract attendees, I'd like to suggest Tenacious D's "Tribute" as a possible event theme song. Once it cranks up, it's an energetic rocker by of Jack Black and Kyle Gass, in the vein of The Charlie Daniels Band's more country "The Devil Went Down to Georgia." And since The Satanic Temple doesn't worship the Biblical demon, its members shouldn't be upset that that musical duo best Beelzebub in a classic guitar duel. Rock on, whatever your beliefs! You also might find these items of interest:
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Introduced on April 9 2019, the Token Taxonomy Act of 2019 (H.R. 2144) would “amend the Securities Act of 1933 and the Securities Exchange Act of 1934 to exclude digital tokens from the definition of a security, to direct the Securities and Exchange Commission to enact certain regulatory changes regarding digital units secured through public key cryptography, to adjust taxation of virtual currencies held in individual retirement accounts, to create a tax exemption for exchanges of one virtual currency for another, to create a de minimis exemption from taxation for gains realized from the sale or exchange of virtual currency for other than cash, and for other purposes.”
The proposed di minimis exemption is worded as follows:
“SEC. 139G. GAIN FROM SALE OR EXCHANGE OF VIRTUAL CURRENCY.
“(a) In General.—Gross income shall not include gain from the sale or exchange of virtual currency (as defined under section 408(m)) for other than cash or cash equivalents.
“(b) Limitation.--
“(1) IN GENERAL.—The amount of gain excluded from gross income under subsection (a) with respect to a sale or exchange of virtual currency shall not exceed $600.
“(2) AGGREGATION RULE.—For purposes of this subsection, all sales or exchanges which are part of the same transaction (or a series of related transactions) shall be treated as one sale or exchange.
“(c) Inflation Adjustment.—In the case of any taxable year beginning in a calendar year after 2018, the dollar amount in subsection (b) shall be increased by an amount equal to--
“(1) such dollar amount, multiplied by
“(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2017’ for ‘calendar year 2016’ in subparagraph (a)(ii) thereof.
Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $50.”
Sec. 10(c) of H.R. 2144 provides:
“Reporting Of Gains Or Losses.—The Secretary of the Treasury shall issue regulations providing for information returns on transactions in virtual currency (as defined under section 408(m)) for which gain or loss is recognized.”
Proposed new §408(m) defines virtual currency as: “For purposes of this subsection, the term ‘virtual currency’ means a digital representation of value that is used as a medium of exchange and is not currency (within the meaning of section 988).”
Also see sponsor Rep. Davidson’s press release of 4/9/19 on the proposal. It addresses the token and blockchain aspects of the proposal but not its tax proposals.
Observations/Queries: How broad are the reporting regulations intended to be? More should be specified in the bill. For example, are the sponsors aiming to be sure exchanges that exchange virtual currency for other virtual currency or U.S. dollars issue a reporting form? Or is this broader and any merchant would be issuing a report that it received virtual currency and the value it assigned to it (generally, the selling price of the goods or services exchanged)? Also, how broad should a $600 exclusion for gain from transactions be applied? After all, $100 of bitcoin in 2010, was worth about $4.3 million in fall 2017. And it is still worth a lot today. The exclusion would incentivize these holders to only purchase goods and services from merchants who take bitcoin and to never spend more than $600 at a time. This would enable them to exclude the gain although it might take a long time to fully exclude the gain on that $100 cost basis of bitcoin. A policy goal of an exclusion is to simplify tax reporting by not having to figure out the gain or loss when virtual currency is used to buy low-value items. The foreign currency exclusion at Section 988(e) is $200. Why not use that same amount for virtual currency? Also, consideration should be given to not allowing the exclusion for bitcoin acquired before a specified date due to the tremendous inherent gain that exists in it that arguably defeats the policy reason for a de minimis reporting rule. Also, I suspect including all of this highly appreciated virtual currency will make this bill cost too much and possibly not get enacted, when it can provide a helpful benefit to avoid tracking small gains and losses that might many times be less than $5.
For more on virtual currency and blockchaing, please visit my website on these topics.
What do you think? from http://21stcenturytaxation.blogspot.com/2019/04/tax-tokens-and-blockchain-hr-2144-of.html It's a busy time for professional sports fans. National Basketball Association (NBA) and National Hockey League (NHL) playoffs are in full swing. Major League Baseball's (MLB) early season is already full of surprises. Just what is wrong with the World Series champion Red Sox and Chris Sale? The National Football League (NFL) just completed its annual player draft. Now another acronym, this one tax-related, is getting into the games. Exchange alterations: On Monday, April 29, Internal Revenue Service (IRS) Revenue Procedure 2019-18 will be officially published, solving a player valuation problem created by the Tax Cuts and Jobs Act (TCJA). The new tax law enacted in late 2017 made changes to the Internal Revenue Code's Section 1031, which covers what is commonly referred to as like-kind exchanges of business property. Before the new law, professional sports teams generally treated personnel trades as like-kind property. That way, they didn't have to recognize gains in the years the transactions were made. The TCJA, however, restricts 1031 exchanges to real property. Under the new law, sports teams that trade players would effectively be trading players' contracts, which are regarded as assets for tax purposes. Tax costs of trades: The TCJA change meant that teams would have to pay taxes every time they traded players instead of using the prior Section 1031 application that let them make the trades on a tax-free basis. And that possibility, complained team owners and managers, likely would discourage trades. Grant Thornton's national tax office elaborates on the tax problem facing the sports franchises: Over the life of a player's contract, the value may fluctuate based on many factors, including performance, the needs of the team, fan attendance, size of the team’s market, injuries and the expectations of the player’s team. Generally, each team that makes a trade of player contract or draft pick believes that it is receiving something of equal or greater value than what it gave up. However, the determination of whether a player is paid above or below market may be different for each team involved in the trade, because of the difficulties in valuing a player’s contract. As a result, assigning a monetary value to the player contract would likely be different for each team involved in a trade, which makes the determination of an amount realized in the exchange difficult. Exemption for team trades: Rev. Proc. 2019-18 rectifies that. It provides a safe harbor for a professional sports team to treat certain player and staff-member contracts and draft picks as having a zero value for determining gain or loss to be recognized for federal income tax purposes on the trade of player and staff-member contracts or draft picks. If the exchange qualifies for the safe harbor method, there is generally no gain or loss on the trade. However, if cash is involved things change. When a team receives cash, that amount becomes an amount realized and, to the extent there is no basis in the player contract given up, the cash will be an amount recognized as a gain. The reason for the safe harbor, according to the IRS revenue procedure, is "to avoid highly subjective, complex, lengthy and expensive disputes upon exam. In order to qualify: (1) all parties to the exchange must use the safe harbor; (2) the exchange may only include player contracts, draft picks and cash; (3) no personnel contract or draft pick may be a Section 197 intangible; and (4) the financial statements of the teams must not reflect assets or liabilities from the trades, other than cash." Be sure to keep all this in mind, along with the harsh reality that the game you love and often breaks your heart is at its core a money-making business, the next time your teams trade players. I know I will, once I finish cheering or cursing the move. Yay team, if not tax policy: I have mixed feelings here. Major league sports teams owned by incredibly rich owners getting specific tax relief is galling when it comes to overall tax fairness. But then I've grown used to, if not happy with, such tax benefits getting doled out like this. It's going to take a lot more than periodic tax bills to change our continual them that's got shall get tax policy approach. On the other hand, however, I want my favorite teams to make trades based on club needs without having them potentially torpedoed by taxes. These dueling tax and sports feelings are why RP 2019-18 earns this week's By the Numbers recognition. You also might find these items of interest:
Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/04/pro-athlete-trades-get-tax-relief-from-irs.html Most of us don't cheat on our taxes. And by cheating, I mean intentionally enter false information on our returns. Sure, we don't like paying taxes, even after they're trimmed a bit via periodic federal tax law changes. Still, we suck it up every spring and do our tax duties. But most is not all. Some folks do fiddle with the figures they put on their 1040 forms. The Internal Revenue Service does what it can to stop and/or catch such evasive entries. Budget cuts and staff attrition, however, hamper such audit efforts. That's why the IRS takes all the help it can get. And in some instances, Uncle Sam pays for tips leading to the discovery and conviction of tax evaders. Boom times for tax snitches: Such tipsters are known as rats or snitches, especially by those whose tax tactics get turned into the tax agency. The IRS prefers the term whistleblower . Regardless of what you call it, these are boom times for folks who turn in tax cheats, according to Wall Street Journal tax reporter Laura Saunders. Saunders took a deep dive into the IRS Whistleblower Program's fiscal year 2018 annual report and in an article for the newspaper last week shared these tidbits:
Her piece on the literal rewards of tax snitching earns this weekend's Saturday Shout Out. Tax snitching isn't quick: While such payouts for ratting out tax cheats make for fun (and envious) reading, Saunders notes that the whistleblower rewards are not quick cash. The IRS typically rejects around three-quarters of the tax cheat tip claims from whistleblower claims right away. Most of the reward potential is for smaller whistleblower payouts. It takes years for the claims to be processed and paid. When you do get a reward, you likely will pay a portion of it to the professionals that most whistleblowers hire to help make the claims. And remember, if you do eventually get some whistleblower cash, your eventual net amount will be subject to federal income tax, too. If you know of someone or some company that's been skimming taxes due the U.S. Treasury, make Saunders' story part of your weekend reading. You also might find these posts of interest:
Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/04/2018-was-a-good-year-for-tax-snitches.html Michael Cohen, Donald J. Trump's former attorney and previously self-described fixer, is heading to federal prison in a couple weeks. But in a recent conversation with actor Tom Arnold, Cohen said he didn't commit all of the crimes for which he will do time. Specifically, according to the story on the telephone discussion that the Wall Street Journal broke, Cohen says he's not guilty of tax evasion, one of the charges for which he's going to jail. According to Arnold and a tape of his conversation with Cohen, the former New York City lawyer pleaded guilty to the tax crime simply to protect his family, specifically his wife. "I am not going to let her get dragged into the mud of this crap, and I never thought the judge was going to throw a three-year fricking sentence," says Cohen, who apparently did not know he was being recorded. Earlier arguments against the tax charge: Even before his recent heart-to-heart with Arnold, Cohen's lawyer had argued during the sentencing that the tax cheating charges were a stretch. Cohen had simply failed to identify all his income on bank records he gave his accountant, according to the lawyer's logic. That obviously didn't sway the judge. Family motives aside, Cohen will start serving his three-year sentence for tax evasion and other federal crimes on May 6. Reasons for not reporting income: We can debate Cohen's latest characterization of his legal predicament, his motives for cutting a deal with the feds and whether he deserve his court-ordered fate ad infinitum. But what is cut-and-dried is that failure to report some or all of your income to the Internal Revenue Service also is one common way that many taxpayers cheat on their taxes every year. Generally, failure to report some or all taxable income — which, for the most part is basically is every cent you get — falls into three categories. 1. Sometimes the non- or under-reporting of earnings is inadvertent and totally innocent. You did that one job way back at the beginning of the tax year and got a couple of hundred dollars. That was so long ago. And since you didn't get a 1099 — you must earn $600 or more before the payer is required to issue the official earnings statement — you simply forgot about it. 2. Sometimes it's ignorance or misunderstanding of the tax law. You thought that if you didn't get a form that's copied to the IRS, the money isn't taxable. Sorry. That's wrong. Even without a 1099-MISC or similar income document, tax law requires you to report all your income. It doesn't matter how small the payment is. It doesn't matter whether the payment is cash or property. Bartered earnings still are taxable earnings. You're supposed to count the fair market value of the exchange of property and services. For example, you did some plumbing repairs for your neighbor and got his old scooter as payment. That vehicle value is the taxable payment amount for your work. Yes, restaurant servers, that includes all your tips, including the basketball tickets one customer left you instead of cash. Technically, you're supposed to be telling your boss about your gratuities every month if you get more than $20. (More on that over in the ol' blog's Time for Tax Tasks item in the righthand column that shows up around the 10th of each month.) It also doesn't even matter if you illegally obtained the income. The IRS doesn't care about the source. It just wants its cut of what you earned in any form or fashion. See Al Capone and his other convicted tax crime buddies. And yes, taxable income includes gambling proceeds, again regardless of whether your winning wagers are done through legal sportsbooks or under the table with your friend's cousin's neighborhood bookie. 3. Finally, sometimes folks just flat-out cheat on their taxes. They know they are supposed to report the income, but decide not to for a variety of reasons. It will push you into a higher tax bracket. You don't want your spouse to know you pocketed some extra cash — or how you got it. See illegal earnings mentioned earlier. And husbands and wives, if you find yourself suspicious of something your partner does or doesn't put on your joint Form 1040, it might be time to consider filing separately. Or you just hate paying taxes, period, so you're not going to give Uncle Sam his due on money he doesn't know about. Hard to catch, but not impossible: I know what some of y'all are thinking. In many of these cases, it's going to be very difficult for the IRS to find out about the cash you're keeping secret. True. The agency's budget limits and personnel attrition mean that it has to focus its tax evasion investigations on areas that tend to provide larger returns than it could get from closely examining every line of every 1040 from all of us average Joe and Jane Taxpayers. But, and maybe I'm just too much of a worrier, I know that if I knowing hid earnings from the IRS, I'd be spending way too much of my time thinking about what could happen if (or when) my tax fudging was caught. Your mileage may vary. I'm not here to judge you if you feel comfortable trying to slide one (or more) past the IRS. I did, however, want to remind you of your full tax responsibilities. If you now realize you overlooked some reportable, taxable income, you always can file an amended tax return to get right with Uncle Sam. And probably sleep a bit better every night. You also might find these items of interest:
Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/04/3-reasons-taxpayers-dont-report-all-their-income.html Tax season is over for another year. Now all that's left cleaning up after the filing crunch. I know many of y'all are tempted to simply toss everything in the trash. Don't. You don't have to the tax version of television's Hoarders, but there are some tax-related documents you need to hang onto, at least for a while. These 7 frequently asked questions and answers can help you get a better handle on your tax record keeping. 1. Why should I keep records? 2. What kinds of records should I keep? It is an income tax, so to verify your earnings you need to keep copies of W-2 forms, all types of 1099 forms (MISC, DIV, INT, G and R), gambling and prize winnings not reported on a 1099, bank statements, brokerage statements and K-1 forms. If you're getting retirement money, hang onto the official statements detailing retirement distributions. This will help you and the IRS know how much, if any, of a cut due the federal government. In addition, Form 5498, Roth and traditional IRA contributions, and Form 8606, nondeductible IRA contributions, can help you differentiate taxable and nontaxable retirement money. When it comes to expenses and deductions, hang onto receipts, sales slips, invoices, canceled checks, credit card statements, gambling losses and written statements from charities. Your home is likely your biggest investment, so keep all your residential records, not just those related to your taxes. These include closing statements, purchase and sales invoices, proof of payment, insurance records, property tax assessments and payments, receipts and documents related to disaster losses and receipts for improvement costs. These could affect not only your annual filings, but also any potential tax bill when you sell. The same is true for investment documentation. Hold your transaction data, including individual purchase or sale receipts as well as annual statements. In some cases, photos also are helpful, such as when you claim property losses after going through a disaster. And, of course, you'll want to keep a copy of each year's tax return that you file. This includes not just the 1040 itself, but also any associated schedules that sent to the IRS that year. You'll be glad you have them at your fingertips when you apply for a loan or other financial assistance, such as college money. 3. How long should I keep records? Generally, you must keep your tax records as long as they may be needed to prove the income or deductions you entered on a tax return. But the length of time you should keep certain tax documents is based on the action, expense or event the documents record. The IRS also has a statute of limitations framework it follows. For basic annual return filing, the tax man has three years to review your return. When IRS examiners believe you've shorted your income entry on a return by 25 percent or more, they can come asking questions up to six years later. The period of limitations goes to seven years if you file a claim for a loss from worthless securities. When it comes to real property, keep relevant records until the period of limitations expires for the year in which you dispose of the property. These records help figure your basis for computing gain or loss when you sell or otherwise dispose of the property. Then there's fraud. When Uncle Sam suspects you've intentionally tried to escape your rightful tax liability, his tax collecting agents get a lot of leeway. A whole lot. Like forever. There is no statute of limitations for folks who commit tax fraud. IRS agents can investigate you at any time it suspects you entered illegal information on your return. So if you tend to be a bit aggressive with your Form 1040 entries, keep your records for those claims in perpetuity. Just in case. There's also no limitation on the time the IRS can ask you questions if you don't file a tax return. That's why you should keep documentation of why you didn't file a return in a particular year or two or more. Don't freak out. It's not as difficult as trying to prove a negative. Say, for example, you spent a year taking care of sick relative and didn't earn any or enough income to require that you file. Proof of how you spent your non-income-producing time will short-circuit a detailed IRS examination of your missing tax year. And about those copies of the 1040s you filed, hang onto those forever, too. You never know when an old tax return might be necessary or at least handy. They also can be a fun time capsule. When I'm feeling nostalgic, I go back and peruse the first joint tax return the hubby and I ever sent the IRS. 4. How do I fill in tax record gaps? The IRS can help you fill in the gaps. You can order transcripts of your filing history. You have two options. Complete Form 4506-T or Form 4506T-EZ to order a tax return transcript. This document shows most line items on your return as it was originally filed, plus information on any accompanying forms and schedules. It will cost you $50 for each tax return transcript you need. Or request a tax account transcript. This shows your return's basic data, including marital status, type of return filed, adjusted gross income, taxable income, payments and adjustments made on your account. An account transcript is free and it arrives in about 10 days. You can request either a tax return or tax account transcript online from the IRS. 5. What kind of record keeping system should I use? If you're happy still using paper documentation and have the space, fill up as many filing cabinets with tax records as you need. Or you can maintain your records on a flash drive or in the cloud. The IRS has been accepting digital records for 22 years. Back in 1997, the IRS referenced optical disks as the storage option, but as Uncle Sam has gotten more tech savvy, it recognizes today's wide variety of options. All the IRS requires is that your electronic record storage meet the same standards as apply to hard copy books and records. That means when you replace the paper versions, you must maintain the electronic storage systems for as long as they might be needed under the tax statutes of limitation. You also want the records' format to be one that makes it easy for you to produce the material if the IRS asks. And be sure you back up your electronic tax records and keep a separate copy in a safe place in case something happens to the original. 6. What is the burden of proof during an audit? And here's the really disconcerting part of such an encounter. Unlike the U.S. legal system, where you're presumed innocent until proved guilty, it's the opposite when you're facing the federal tax collector. During an audit, you are considered tax guilty until proven otherwise. The burden of proving your tax innocence, or at least showing that the information on your Form 1040 is correct, falls squarely on you. Good thorough and well-organized tax records can help you do that. 7. When I do discard tax records, what's the best way? Let me repeat what I said at the start of this post. Don't just toss them into the nearest trash can. Most tax-related documents are full of personally identifying information. That's exactly what identity thieves want. If someone digs through your garbage and finds your Social Security number or bank account of credit card numbers, they've got what they need to take over your life in the most destructive of ways. True, literal dumpster diving for financial data isn't that common as it once was. But don't take any chances. Shredding the documents is still the best route here. It is time-consuming, so consider hanging onto to your tax and personal records until a bulk shredding option arrives. Many office supply stores periodically hold these events, often around the end of tax time, allowing you to bring in your documents to be securely scrapped for free. If you keep your records digitally, make sure they also are properly destroyed. You can find more on various options for erasing electronic records options in this article from the Records Management Assistance unit of the State and Local Records Management division of the Texas State Library and Archives Commission (there's a mouthful for you!). The bottom line is that you need to keep some records connected to your taxes. Some you need to keep forever. Knowing which documents, why they are important and how long you need to keep them can, at the very least, help you establish a manageable record keeping system. You also might find these items of interest:
Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/04/tax-record-keeping-questions-and-answers.html The last day of school, your birthday and Halloween have nothing on the day after Tax Day to a tax preparer. A lot of people imagine that a list of the top 5 things tax preparers do after tax day might look something like this: Top 5 Things Tax Preparers Would LIKE to Do After Tax Day5. Sleep in. 4. Start planning a resort vacation to Europe or the Caribbean. 3. Re-introduce themselves to their family and friends. 2. Binge watch all the shows they’ve missed for the past four months. 1. Throw a massive throw-down party to celebrate their newfound freedom at the end of Tax Season! Ah, if only it were like this in real life! Tax preparers everywhere would rejoice! In reality, these days tax preparation is more likely to be a year-round business. Sure, Americans have a “tax season” for filing their individual tax returns. However, businesses have to file their taxes on a quarterly basis. If they have employees, they have to file payroll taxes on a quarterly basis. And then there is usually plenty of off-season work to go around, from people who filed extensions to people who just haven’t filed at all and need to play a little catch-up. So, if you’re a tax preparer with a thriving, growing business, your 5 top things list might look a little more like this: Top 5 Things Tax Preparers ACTUALLY Do After Tax Day5. Set up appointments for financial advising and consulting to help clients get ready for next year. 4. Sending out client surveys and evaluating the tax season. 3. Prepare for next year by developing a marketing plan that keeps up with current clients while reaching out to new ones. 2. Work with businesses to prepare payroll taxes and quarterly taxes. 1. Finish all the tax returns they had to file extensions for because people brought their stuff in late. Sure, many tax preparers plan to take at least a little well-deserved break after the end of a busy, stressful tax season. And that’s a great idea, because you should celebrate your hard work. Taking a little time for yourself is a great way to recharge after so much activity. However, just like any other business owner (if they’re serious about what they do and want to be successful), they’re using the momentum from tax season to propel them into preparations for next year – for themselves and for their clients. Happy post-tax season! Here’s to another successful year ahead! More Great Reads: 3 Easy Ways to Destress After Tax Season 5 Ways to Seize the Summer and Make More Money from https://www.theincometaxschool.com/blog/top-5-things-tax-preparers-do-after-tax-day/ |