Did you transfer your home or property to your children? Even if they weren’t technically gifted, did you “sell” them for a dollar? If you failed to file a gift tax return, there may be an unwelcome IRS letter arriving in your mailbox soon. The IRS is currently scrutinizing real estate transfers in 15 states – yes, New Jersey and rest of tri-state area included – with additional states likely to be added. It has found that 60-90% of gratuitous non-spousal real estate transfers were not reported on gift tax returns. Perhaps you are thinking “OK, so I’ll be more careful about this in the future but unless the IRS audits me I’m fine”-think again! If you make future taxable gifts requiring the filing of gift tax returns, those returns must disclose your prior gifts. If you do not include a gift from a prior year, the future return is false. [Read more…] about Forgot to File a Gift Tax Return? IRS Letter May Be On Its Way
Taxes
How Litigation Affects Your Taxes
You have money coming to you from a pending law suit, but you’re wondering whether Uncle Sam will want a share of it. The answer varies, depending on various factors such as how you were damaged, how the case is resolved and more. Here are a few facts you should know before negotiating a settlement. [Read more…] about How Litigation Affects Your Taxes
Have an Office Outside the Home? You Can Still Deduct Home Office Expenses
You may have heard that your home office expenses may not be deducted if you already have an office outside the home. This is a common misconception. While it is important to carefully examine the language of the Tax Code, in most instances it is perfectly permissible. IRS publication 463 states, “You can have more than one business location, including your home, for a trade or business.” Sounds good, but what qualifies as an administrative office for your business? The IRS in publication 587 says: “Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements: [Read more…] about Have an Office Outside the Home? You Can Still Deduct Home Office Expenses
Form 8938: Statement of Specified Foreign Assets
The IRS has added Form 8938 to the individual 1040 tax return, taking another step to collect tax on unreported interest on overseas accounts. In addition to the risk of a third party disclosing the taxpayer’s foreign accounts to the IRS, this form now puts an affirmative duty on the taxpayer to disclose his foreign accounts. The sanctions for not completing and attaching the form (when required) include numerous severe civil penalties and potential prosecution followed by a term in federal prison. If you fail to file Form 8938 or fail to report a specified foreign financial asset, the statute of limitations for the tax year may remain open for all or part of your income tax return (Form 1040) until three years after the date you filed Form 8938. [Read more…] about Form 8938: Statement of Specified Foreign Assets
Three Common IRS Audit Red Flags You Can Avoid
No one likes to get audited. It probably ranks somewhere between a root canal and having your e-mail account hacked on the misery scale. While only about 1% of all individual tax returns are selected, certain factors can bring your return under the IRS radar. Some may be unavoidable, such as the nature of your business, but here are a few red flags you can avoid: [Read more…] about Three Common IRS Audit Red Flags You Can Avoid
New In 2011: IRS Adds 1099 Questions
If your business paid $600 or more in 2011 to a landlord, accountant, lawyer or any other entity that requires a Form 1099 , you should be aware of an important change in the 2011 individual and corporate business tax returns. The IRS has added two questions to the business income tax returns (both to the Schedule C on the 1040 and the Forms 1120 and 1065): [Read more…] about New In 2011: IRS Adds 1099 Questions