#1099-INT Form Generator

[paystubusa]

The Best Tools for Generating Your 1099-Int Form Quickly

Do you want to know more details about the 1099-INT Form Generator Online? You are in the right spot. No doubt that managing financial documentation is a daunting task when it comes to the use of 1099 INT.

[form1099]

Which 1099 Form Do I Use?

Generally, payers use: Form 1099 MISC- To report miscellaneous income; 1099 NEC – To report non-employee compensation; IRS 1099 K- To report third-party network transactions; 1099 INT – To report interest income; Form 1099 DIV- To report dividends & distributions; 1099 R- Distributions from annuities, pensions, profit-sharing plans, etc. IRS Form 1099 A – Abandonment & acquisition of property; and many more.

[file1099]

Deadlines for the New Form and Name Changes

The introduction of a new Form called 1099-NEC Non-Employee Compensation is the biggest change from the previous year, and many people are unaware of it. Additionally, Miscellaneous Information has replaced Miscellaneous Income as the title and purpose of Form 1099-MISC. 

1099-NEC. Businesses must now file Form 1099-NEC for every individual they paid at least $600 to during the year in the course of their business. This payment would have been made in exchange for services rendered by a person or business that IS NOT an employee of the payor. 

1099-MISC. Form 1099-MISC is used to report "other income payments" that a payer pays over $600 for in the course of the payer's business, such as rent, prizes, and awards.

According to the "general rule," business owners are required to send a Form 1099-NEC to every individual to whom they have given at least $600 in rent, services (including components and materials), prizes and rewards, or other income distributions. Payment received for personal use is exempt from the 1099 reporting requirement. Only payments you received in the course of your trade or business are subject to the 1099-NEC reporting requirement.

 Additionally, keep in mind any additional 1099 Forms that may be relevant to you as a business owner or investor. I have links to the instructions for these additional Form 1099 types.

 1099-INT. All "payers" of interest income to investors or private lenders at year-end 1099-DIV utilize this tax form to declare their interest revenue. If you own and operate a C-Corporation with shareholders, this would be the Form to make payments to those investors 1099-R. Large banks and other financial institutions often use this Form to report dividends and other distributions to taxpayers and the IRS. The payouts of retirement benefits, such as pensions and annuities, are reported using this form.

[williamtruax]

What to Do Before the Tax Year Ends December 31st

For most taxpayers, Dec. 31st is the last day to take actions that will impact their 2021 tax returns. And with tax season just around the corner, we’d like to remind taxpayers there are several things they should do now to get ready for next year.

CHECK YOUR WITHHOLDING

Taxpayers should check their tax withholding before the end of the year as there are several new factors that could affect refunds in 2022. Taking a closer look at the taxes being withheld from your paycheck can help ensure the right amount is being taken out each period, either for tax refund purposes or to avoid an unexpected tax bill next year. You can use the IRS Withholding Calculator to estimate the amount you should have withheld and determine if you need to provide your employer with a new Form W-4.

RETIREMENT BENEFITS & CONTRIBUTIONS

Most workplace retirement account contributions should be made by the end of the year, but taxpayers can make 2021 IRA contributions until April 15, 2022. For 2021, the contribution limit to a 401(k) is $19,500 ($26,000 if you’re age 50 or older). For traditional and Roth IRAs, the combined contribution limit is $6,000 ($7,000 if age 50 or older).

Taxpayers who are over age 70 ½ are generally required to receive payments (required minimum withdrawals) from their individual retirement accounts and workplace retirement plans by the end of the year. However, a special rule allows those who reached 70 ½ in 2021 to wait until April 1, 2022 to receive them. This generally applies to the original owner of a traditional IRA, SIMPLE IRA, SEP IRA or a retirement plan, such as a 401(k) or 403(b). Roth IRAs do not have required minimum withdrawals.

RELOCATION AND NAME CHANGES

Taxpayers who have moved should tell the US Postal Service, their employers and the IRS. To notify the IRS, mail IRS Form 8822, Change of Address, to the address listed on the form’s instructions. For taxpayers who purchase health insurance through the Health Insurance Marketplace, they should also notify the Marketplace when they move out of the area covered by their current Marketplace plan. For name changes due to marriage or divorce, notify the Social Security Administration (SSA) so the new name will match IRS and SSA records. Also, notify the SSA if a dependent’s name changed in 2021. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

GATHER YOUR TAX RECORDS

While not the most exciting thing to do over your holiday break, organizing your tax records will make preparing a complete and accurate tax return much easier. This will help avoid errors that lead to processing delays and slow refunds. Having all needed documents on hand before taxpayers prepare your return helps them file it completely and accurately. These include:

Forms W-2 from employers

Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan

Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy

Form 1099-INT for interest received

Other income documents and records of virtual currency transactions

Taxpayers should keep copies of tax returns and all supporting documents for at least three years. Income documents can help taxpayers determine if they're eligible for deductions or credits. People who need to reconcile their advance payments of the child tax credit and premium tax credit will need their related 2021 information. Those who did not receive their full third Economic Impact Payments will need their third payment amounts to figure and claim the 2021 recovery rebate credit.

Taxpayers should also keep end of year documents including:

 Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments

Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit

Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance premium tax credits for Marketplace coverage

VIEW YOUR IRS ACCOUNT ONLINE

Taxpayers can securely access and view their IRS tax information anytime through their individual online account. You can see important information when preparing to file your tax return or following up on balances and notices.

To access your information online, taxpayers must register through Secure Access. This is the agency's two-factor authentication process that protects personal info. Taxpayers can review the Secure Access page process prior to starting registration. Reviewing and updating your federal tax information regularly can help protect your sensitive financial data from criminals and other bad actors.

If you have questions about any of this information or what you can do to prepare for the 2021 tax season, please don’t hesitate to CONTACT US. We’re here to help!

[utilitymonstermash]

Foreign tax credits are governed by some of the most complex sections of the tax code. There are some less common situations involving multiple foreign income sources that might require special handling. These less common situations may require special procedures to generate a return that can be e-filed. This guidance is intended to help explain what those special procedures are and when you need to use them. How TT Works Currently First, a little background on how TurboTax handles foreign income. We try to make it as easy as possible by identifying foreign income that is reported on Forms 1099-INT, 1099-DIV, and K-1. Whenever we identify foreign income, we offer to link this income to a Form 1116 when you start the Foreign Tax Credit interview. (Form 1116 is what is used to calculate the amount of your foreign tax credit). When different categories of income are present, or there are more than 3 different sources in the same category, multiple Forms 1116 must be generated. We generate those forms in a specific order. If there is any "General category" income reported on a K-1, we'll offer to generate a Form 1116 by linking that income first. Next you can generate copies of Form 1116 by linking to "Passive category" income that is reported on Form(s) K-1, Form(s) 1099-INT, Form(s) 1099-DIV, in that order. Finally you can generate additional copies of Form 1116 for other income by editing/creating more copies and entering income and taxes paid by category and country. When multiple copies of Form 1116 are required, this method will generate multiple copies of Form 1116 in the correct order required by the IRS for the vast majority of taxpayers. You simply report income from forms in the order they're presented in the interview. However, in a small number of cases, this will result in forms that are not in the order required by the IRS, and special instructions must be followed instead of the standard procedure. When Special Procedures Must Be Followed The IRS requires the copy of Form 1116 reporting the largest Foreign Tax Credit to be listed first in the return, and on this copy is a summary of the foreign tax credits claimed on additional copies. Since TurboTax generates the forms in the order in which they're linked, this sometimes results in the first copy NOT being the copy with the largest foreign tax credit. This can result in a return that can't be e-filed. This will usually happen if the foreign income on which you paid the most foreign tax is not the first copy of Form 1116 that you create in TurboTax. How To Create Copies Of Form 1116 In The Right Order In order to make sure TurboTax generates multiple copies of Form 1116 in the correct order, you should first identify which source of foreign income incurred the most taxes. This item will generally result in the largest credit and should be listed first. Once you know which income item to list first, make sure the first copy of Form 1116 includes this item. In the interview, you do this by NOT "reporting" income from any K-1's or 1099's the first time you visit the Foreign Tax Credit interview, except for the income item that generates the largest credit. ("Reporting" income in the Foreign Tax Credit interview creates a copy of a Form 1116 and links the income to the Form 1116). The first time through the interview, only report income from the item with the largest tax paid. After completing the interview the first time for the largest item, then you can revisit the interview and report any other items you have. (Note: "completing the interview" involves answering Yes to question about being done with "all Foreign Tax Credit Computation Worksheets.") This will generate the additional copies of Form 1116 that you need, and they should be in the correct order. Here are two sample situations to illustrate the process: Situation one-Taxpayer has a 1099-DIV with $1,000 in foreign-source dividends and $200 in foreign tax paid. In addition the W-2 reports $50,000 of wages, and $20,000 of this amount was earned in a foreign country with $4,000 of foreign tax paid on the $20,000. TurboTax will first offer to report the income from the 1099-DIV. But in this case, the largest foreign tax credit will be on the wages (which are general category income), so if the 1099-DIV is reported first then the copies will be out of order and the return can't be e-filed. The taxpayer should NOT report the income from the 1099-DIV the first time through the interview. Instead, the taxpayer will report General category income from the foreign wages and the tax paid on that income. After completing the interview with only General category income reported, the interview should be revisited. The second time through the interview the 1099-DIV income can be reported. This will create a return that can be e-filed. Situation two-Taxpayer is a partner in a partnership reporting general category foreign income on a K-1 of $10,000 and foreign taxes on that income of $2,000. The taxpayer also received $50,000 of foreign source dividend income on a 1099-DIV with $5,000 of taxes paid. When the Foreign Tax Credit interview is first visited, the taxpayer will first be asked to report the income from the K-1. Since the K-1 income is not the largest foreign tax item, the income should NOT be reported (at first). Next TurboTax will prompt you to report the dividend income, which is the largest foreign tax item, so it should be reported. After answering all the questions and completing the interview, the taxpayer can revisit the interview and report the K-1 income. This will create a return that can be e-filed. Due to complexities in how the foreign tax credit is computed it is possible in some situations that the income with the most taxes may not be the income that generates the largest foreign tax credit. If following these instructions still results in an error during Federal Review related to Form 1116, Line 22, then that is what occured. You'll need to revisit the Foreign Tax Credit interview and delete the first copy of the form. Complete the interview, and then start again and re-add the information from the copy you deleted. This will re-order the forms. Visit Federal Review again to see if the correct copy is now first (i.e. the error has gone away). Repeat this process until the form with the largest credit has moved to the beginning.

FUCK THE BUREAUCRACY STRONG MAN NOW

I bet Genghis Khan didn’t make anyone file a 50 page report when he confiscated their assets. 

[ledgerbench]

What is IRS Form 1099? All about 1099 - Ledger Bench

IRS Form 1099 is the IRS form for filing taxes. It is used by companies to report payments made other than salaries, regular wages or tips which are reported through W-2 form. The 1099 form is generated by the payer and must be sent to the payee by January 31st of each year, to reflect transaction amount from the previous year. 

There are many types of 1099 forms, the one used to depend on what the payment was for. 

Who gets the IRS form 1099?

The most common form a company issues IRS Form 1099-MISC. A business is required to fill it out for anyone they have paid $600 or more in a calendar year who is not an employee. For example, if a company has paid 50 different contractors over $600 then they are required to fill out and provide form 50. 

It applies to payment made for:

Rent

Freelance Workers

Attorney Payments

Cash prizes and awards

Other income payments

Medical and Healthcare     payments

Crop insurance proceeds

Fishing boat proceeds

Cash payments for purchase     of fish from commercial fisher

Cash paid to an individual,     estate, partnership from a notional principal contract. 

If a company withholds any taxes on contractor payment, regardless of the amount paid then a 1099-MISC form must be issued. The forms need to be sent out by 31st January to the recipients of the money. 

Other often used IRS 1099 forms are:

1099-K

This form is required third party payment processors must file when the sales volume is greater than $20,000 and 200 transactions in a year. PayPal is An example of a third party payment processor. It is also required for credit, debit and stored value card transactions (prepaid cards) 

1099-R

1099-R form is required when distribution is greater than $10 have been made from the following:

Annuity

IRA (Individual Retirement     Account) 

Pension Plan

Retirement plan

Insurance Contract

Survivor Income Benefit Plan

Charitable Gift Annuity

Profit-sharing plan 

Also Read - IRS Form 8941

This form is also required for permanent and total disability payments (under a life insurance contract) 

1099- INT

This form is for interest earned in savings and checking accounts, as well as interest paid on treasury bills and saving bonds. The amount earned must be greater than $10.00 

What is the difference between 1099 and W2:

A W-2 form is a form that a company must fill out for each of its employees. This form reflects salaries, wages and tips. The W-2 form is sent by the company to both the IRS and the employee, and lists the amount of income a person has earned, plus all the taxes withheld including payments to Social Security and Medicare. The information from the form allows an employee to calculate his own personal income taxes and to know if he owns any money or if he should be receiving a refund.

IRS Form 1099 is a form company generates for payments to everyone. There are no deductions listed on this form, because the person receiving this form is not an employee. 

Can I get a tax refund with 1099 form?

A 1099 form is a document to report income, which may increase taxes owing or result in a refund. The 1099 firm can help taxpayers to complete their personal income tax return. 

How much money do you have to make to get IRS Form 1099?

This depends on the type of income one is receiving. Whether the company issues form 1099 or not, it does not change whether the individual or business should report it or not. All money earned must be reported to the IRS. 

Click Here - Bookkeeping services for small business

How do I send form 1099 to the IRS?

All versions of form 1099 except 1099-QA should be filed electronically using the FIRE system. FIRE stands for “Filing Information Returns Electronically”. 

The use of FIRE is required by law when a company files 250 or more information returns form for a calendar year. Paper is still an option if you are filing less than 250 forms, however the IRS encourages the use of FIRE for all filers. 

When filing for IRS form 1099, companies must also fill out the form 1096. The form 1096 consists of a summary tax report to show the total number of forms being submitted, total amount being reported and the total tax withheld. 

Form 1099-QA applies to people with disabilities with an ABLE (Achieving A Better Life Experience) account and it must be filed on paper.

Source URL - https://ledgerbench.com/knowledge-base/what-is-irs-form-1099/

[skullprincess]

And if you wanna file taxes yourself but TurboTax is charging you for extra forms or to file your state and federal together, it’s pretty easy to transfer your info from TurboTax to a paper copy if you’re filing really simply.

Like, I worked full time all year and I’m filing 1040 as single. If that’s all you’re doing you can generally file for free online so I’d recommend it. But I paid interest on student loans and I got interest in my savings account, so I have to fill out Schedule 1 and 1099-INT forms to get more money back, but TurboTax charges me like $50 to add them on. For two small spots I can fill in myself. Luckily TurboTax will tell me which forms I need and all I had to do was Google and print them and attach them to my federal. Plus TurboTax will estimate what you’re getting back so if you compare that with your math on the physical tax forms you fill out then you’ll have the right answer and be able to see if you did it right.

TurboTax also let me know I could file for a renters return (I believe this is California only? Perhaps other states) and I can get an extra $60 back since I rented an apartment for all of 2020.

Like, TurboTax wanted me to pay $90 to attach two lines of forms to my federal and to file my federal and state taxes together. I realize some people just pay others to do their taxes for them but it’s not that difficult to do it yourself if you try. I’m saving $88 (I’m gonna mail these out so I’m guessing it’ll cost me like $2-3).

Tl;dr: File with TurboTax if you’re filing super simply or have way too many forms to add on/are filing jointly. If you need to add one or two forms to get extra money, TurboTax will charge you a lot so you might as well file the tax forms yourself by copying from what you filled out on TurboTax.

If you’re just filing for your own 1040 and have questions feel free to ask me cuz I’ve done my taxes by myself for a few years now. Always check the instruction booklet!!

Hey everyone, if you didn’t know; when filing for your taxes (I used turbotax free efile) and if you didn’t receive 1 or both your stimulus checks (I didn’t get my second but did get the first) there’s an option where you can place the amount owed (which you can check on the IRS website for status of your stimulus to put the right amount or just to double check status before filing) and that amount will be added to your subtotal! There’s also a free file version turbotax for low income folks here. I just filed and was able to add the 2nd stim check I aint get successfully. (**Reminder that you’d still have to wait to have the filing accepted before you can receive your money!)

[christophergill8]

7 tax record keeping FAQ

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? Well-organized records make it easier to prepare your tax return. Documentation, both the amount and in good order, also can help you provide answers if the Internal Revenue Service has any questions about your return.

2. What kinds of records should I keep? The quick answer is everything, but again, we're trying not to be too obsessive-compulsive. So let's break it down into key material in specific categories.

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? This is the question that flummoxes pack rats and well-adjusted taxpayers alike. As is the case with most tax questions, the answer is "it depends."

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?  When you start getting your records in order, either in real paper form or electronically, you might discover you're missing some documentation.

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?  Except in a few cases, which generally are related to business operation, the law doesn't require you to use any special kind of record keeping system. You may choose any method as long as it clearly shows your income and expenses.

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? Let's be real here. The main reason you hang onto your tax records is in case you're ever audited.

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?   OK, you've sorted through all your documents and have decided which ones you need to keep, at least for now, and which you can toss.

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:

Save space and trees: Digitize your tax records

The importance of good, and separate, business records

Reconstructing tax & other records after a natural disaster

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from Tax News By Christopher https://www.dontmesswithtaxes.com/2019/04/tax-record-keeping-questions-and-answers.html

[advancetaxreliefexperts]

WHO CAN GO TO PRISON FOR TAX EVASION?

Many people are afraid of IRS audits — and maybe even going to jail if they make a major mistake. In fact, fear of an IRS audit is one of the main reasons that people strive to file timely and accurate tax returns each year.

But here’s the reality: Very few taxpayers go to jail for tax evasion. In 2015, the IRS indicted only 1,330 taxpayers out of 150 million for legal-source tax evasion (as opposed to illegal activity or narcotics).

NEED HELP WITH IRS BACK TAXES, AUDIT REPRESENTATION OR SMALL BUSINESS TAX PREPARATION?

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The IRS mainly targets people who under state what they owe. Tax evasion cases mostly start with taxpayers who:

Misreport income, credits, and/or deductions on tax returns Don’t file a required tax return The IRS doesn’t pursue many tax evasion cases for people who can’t pay their taxes. But, if you conceal assets and income that you should use to pay your back taxes, that’s a different story.

WHAT GETS TAXPAYERS INTO CRIMINAL PROSECUTION WITH THE IRS

Usually, tax evasion cases on legal-source income start with an audit of the filed tax return. In the audit, the IRS finds errors that the taxpayer knowingly and willingly committed. The error amounts are usually large and occur for several years – showing a pattern of willful evasion.

Here’s more about what the IRS looks for:

Unreported income: This is the biggest issue that brings taxpayers under criminal investigation. This includes leaving out specific transactions, like the sale of a business, or entire sources of income, such as income from a side business. This issue has gotten many gig economy workers in trouble with the IRS, when they leave out income from their side hustle.

Dodgy behavior during an audit: People who make false statements or purposely hide records (such as bank accounts) from an IRS auditor are headed for criminal prosecution. The IRS calls these behaviors “badges of fraud.” They’re hot buttons that indicate tax evasion.

Example: Concealing a Side Hustle

Here’s how a common tax evasion case unfolds. We’ve called out the fraud indicators the IRS looks for as proof of tax evasion.

1: A Side Job Generates Extra Cash

John Doe is a firefighter and works one 24-hour shift every fourth day. During his off hours, he has developed a lucrative plumbing side business. This leaves John with a good primary source of income, health and retirement benefits, and, mostly, a lot of extra time to earn more money.

On his off days, John does plumbing work for local builders and other clients he acquired through word of mouth. John deals in cash for most of his plumbing jobs, but sometimes he deposits plumbing income into a special savings account. From 2011 to 2013, John cleared about $35,000 a year, after expenses, from his side business.

When John visits his accountant each year to file his taxes, he doesn’t mention the side business, and his accountant doesn’t ask. John avoids the topic.

John gets a refund of about $1,000 each year.

Fraud indicator: Omission of an entire source of income

2: The Audit Letter Arrives In 2014, John gets an audit letter for his 2013 return. During the audit, the IRS auditor asks for any other income that John had, including business income.

John tells the auditor that his only income was from his firefighter job. The auditor also asks John whether he received any other funds (like gifts, loans, inheritances, etc.) for 2013. John repeats that he earns money only from his firefighting job and hasn’t received any other income or funds during the past five years.

When the auditor asks for copies of all of John’s bank records for all accounts for 2013, John gives the auditor only his primary checking account and says there’s no other account.

When the auditor asks John what he does on his off days, John says he enjoys fishing.

Fraud indicators:

Omission of an entire source of income Concealment of bank account False statements

3: What the IRS Knows, and John Doesn’t

Little does John know, the IRS received a Form 1099-MISC reporting $1,100 that ABC Builders paid to John Doe. The IRS also received a Form 1099-INT for $10.61 in interest income on John’s special savings account from Central Bank. John didn’t receive either of these statements because he moved in early 2014 and didn’t change his address with the bank or ABC Builders.

After John’s statements during the audit, the auditor is suspicious that John is hiding income. The auditor asks John whether he has an account at Central Bank.

After choking on his coffee, John says that he may have an account at that bank, but he forgot about it. The auditor asks him to provide the bank statements.

John comes back two weeks later and says he can’t find the statements. Puzzled, the auditor asks why John didn’t go online to print them or ask the bank for them. John provides a litany of excuses and stalls in providing the statements.

Ultimately, the auditor insists on the statements. When John drags his feet, the auditor summons the bank for the statements.

The auditor reads the statements and discovers $60,000 in deposited funds.

The auditor expands the audit to 2011 and 2012, asks John to agree to extend the statute of limitations on the 2011 tax year, and asks for the bank statements from those years.

John refuses. The auditor again summons the 2011 and 2012 bank statements, which reveal more than $60,000 in deposited funds for both years.

At this point, the auditor refers the case to the IRS Criminal Investigation Division to investigate John for probable tax fraud.

Fraud indicators:

Delay tactics False statements

4: The Ensuing Disaster

John hires several criminal defense and tax attorneys to defend him and ultimately pleads guilty to tax evasion. In addition to a jail sentence, John also must pay the back taxes, along with a 75% fraud penalty on the corrected tax. John loses his firefighting job, his community reputation, his savings and more, and is now a convicted felon.

Moral of the Story: The IRS Saves Criminal Prosecution for Exceptional Cases While the IRS does not pursue criminal tax evasion cases for many people, the penalty for those who are caught is harsh. They must repay the taxes with an expensive fraud penalty and possibly face jail time of up to five years.

But if you’re like most taxpayers who make a good faith effort to file and pay their taxes accurately and on time, you won’t end up like John.

GET TAX RELIEF HELP TODAY

If you think that you may need help filing your 2018/2019 tax return and past due tax returns, you may want to partner with a reputable tax relief company who can help you get the max refund and reduce your chances for an IRS AUDIT.

Advance Tax Relief is headquartered in Houston, TX with a branch office in Los Angeles, CA. We help many individuals just like you solve a wide variety of IRS and State tax issues, including penalty waivers, wage garnishments, bank levy, tax audit representation, back tax return preparation, small business form 941 tax issues, the IRS Fresh Start Initiative, Offer In Compromise and much more. Our Top Tax Attorneys, Accountants and Tax Experts are standing by ready to help you resolve or settle your IRS back tax problems.

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[kuwaiti-kid]

3 Things You Need to Do to Protect Your Side Hustles

Does it seem to you like everyone's talking about side hustles these days?

Side hustles 2020. How to make money in a side hustle. Side hustles you can do from home. These are some of the headlines I've seen.

We've jumped into the fray here at Your Money Geek the writing is about how to start a side hustle, the different types of side hustles, side hustles that generate passive income, and many other versions of the story.

I'm not suggesting that's a bad thing. Creating multiple streams of income from side hustles is the ticket to financial freedom for those willing to jump into the action.

What concerns me about the side hustle discussion is what's left out of it. I've not seen a single post about how to protect the income generated from the side hustle.

How does the IRS tax it?

How should I claim it? Should I set up a separate entity?

Do a sole proprietorship?

What are the liabilities associated with the side hustle?

Can I be sued? If so, how can I limit my liability?

In this post, we're going to dive into some of these questions. We'll offer some thoughts on how to keep more of what you earn through your side business.

What is a Side Hustle?

Let's start with a definition of what a side hustle is. For the record, I dislike the term side hustle. I'm not sure where it started. Perhaps it's been around for decades. I don't know.

To me, the term side hustle sounds a bit shady. When you think of a hustler, what's the first thing that comes to your mind? Is it someone who works hard and hustles to get ahead? Or does it represent someone a bit shady? You know, like, “that dude hustled me out of a hundred bucks.” For me, it's the ladder definition. Getting hustled is not something anyone wants to admit has happened to them. Perhaps I'm showing my age or my cynical side.

In its most basic form, it's any income produced outside of your regular job. It may be a part-time job. It may be owning rental properties. Maybe it means being an Uber driver or a Wall-Mart greeter. Whatever the means to produce additional income the popular (and accepted) term for it is the side hustle.

Even busy people get into side hustles.

Side Hustles 2020

As you might expect, side hustles come in many shapes and sizes. Below is a list of ten ideas that may offer some help if you're considering a side hustle. These are in no particular order, and there are dozens of others we could list.

Blogging – Probably the number one way that Millennials start their side businesses. With over 2,000 blogs on personal finance out there, you'll find course after course on how to make money blogging. Be careful. Blogging is hard. Making money at it is even harder. That doesn't stop bloggers from peddling their courses, eBooks, and such to generate some income.

Selling on eBay – Many people make decent money selling items on eBay. It takes some work, but those who stick with it make good money.

Driving for Uber –  If you own a car, you can make some extra money driving for Uber. Getting started is pretty straightforward. Like any side gig, there are pros and cons.

Airbnb – Do you own a home? If so, it's a potential asset to get some side income by renting it out via Airbnb. You can rent the entire house or a room — your choice.

Mystery shopping – Many companies will pay you to go into the store or shop online and share your experience.

Dog walking –  Pretty self-explanatory.

House-sitting –  Staying at someone's house while they travel. That can be a week's vacation, several months, or even longer.

Get a part-time job – Going old school here. Plain and simple, go find a part-time job doing something you like.

Passive income

Real estate – One of the more popular side hustles and one that's written about the most. Investors buy single-family homes or condos and rent them out to tenants. Another popular option is crowdfunded real estate. DiversyFund and Fundrise are two we've written about.

Dividend investing  – Another topic that's written about a lot is using high dividend-paying stocks to generate passive, tax-favored income. Qualified dividends have favorable tax rates from the IRS. A lot of blogs focus their writing on teaching people how to do invest in dividend-paying stocks.

Whether income is active or passive depends on many factors. My advice is to investigate those things very carefully before starting.

Side hustles 2020 –  Protecting Your Income

Alright. You've selected your side hustle, and you're generating some income. From what does that income need protected? For one thing, taxes. Another oft-overlooked risk is being sued. Making sure you understand how both of these things place risk on your income is essential before starting your side hustle.

We'll look at each one separately.

Taxes

The IRS taxes income. Period. Whether it's passive or active determines the tax rate. Here's how the income works in most cases. The entity from which the income comes issues a 1099 tax form to the recipient of that income. There are numerous types of 1099's issued depending on the source of the income. If the income comes from dividends, you'll receive a 1099-DIV. When the income is from interest income, you receive a 1099-INT. If it doesn't fall into any specific category, the catch-all form is the  1099-MISC. The majority of the income generated from side hustles comes in the form of a 1099-MISC.

In contrast, income from an employer comes in the form of a W2. What's the difference? A big one. In a W2 income, the employer withholds taxes from your paycheck and sends it to the IRS on your behalf. How much they withhold depends on your income.

In addition to Federal taxes, they withhold taxes for your state as well. Finally, there are FICA (Federal Insurance Contribution Act) taxes. That's tax withheld for Social Security and Medicare. In W2 income, employers withhold 6.20% of the first 132,900. The employer pays the other 6.20%. Additionally, there is a tax for Medicare. The Medicare tax has no upper-income limit. You will pay a tax of 1.45% of all income. Incomes over $200,000 ($250,000 if married) pay an additional 0.9% tax.

Self-Employment Tax

Guess who's responsible for these taxes if you get 1099 income? You guessed it, you are. It's critical to understand this when thinking about generating additional income. If you expect your total tax bill for 2019 to be over $1,000, the IRS requires you to pay estimated quarterly taxes.

FICA taxes are killer when self-employed. Remember, on W2 income, The employer withholds 6.20% and pays the other 6.20% of the FICA tax. They also withhold the Medicare tax. Total that up, and that's 15.3%! If you fail to pay your estimated taxes, the penalties and interest are killers.

Suffice it to say neglecting the taxes on side income can cost you a lot of money.

Liability

The second major issue that can derail your side hustles is getting sued. Liability can ruin your day in a hurry. Why would someone want to sue you? It doesn't take much. Here are some examples.

Let's say you own rental properties. You have a sidewalk in need of repair that you haven't gotten around to fixing. Someone comes to the house, trips on the raised concrete, and breaks their arm. Or worse. At the very least, you will be responsible for the medical bills for the individual. Assuming you have a decent homeowners insurance policy, you should be okay. Then an attorney from Dewey Cheatem and How finds the injured party. They convince them they should sue.

Rest assured, they want much more than your medical bills paid. They want damages over and above that. Homeowners policies have a maximum liability for these lawsuits. Being underinsured could be very costly. Almost any of the side hustles listed above come with liability.

Blogging risks

Blogging seems like a low-risk venture at first glance. For the most part, it is. In the personal finance space, it may not be. Why?

Most personal finance bloggers write about investing, saving money, spending, and other of these types of topics. Most of them give investment advice to their readers. The vast majority have no formal training in investment management, financial planning, or many other topics they write about. Most of them have a disclaimer saying they aren't giving investment or professional advice. Fair enough.

Let's say you have an article (one of the hundreds of them) about investing in the three-fund portfolio from Vanguard. You read that this is one of the most straightforward, least expensive portfolios that cover the entire market. For the most part, that's true. So you invest in the three fund cure-all portfolio during this one of the longest-running bull markets and go about your business. Then it happens. A 2008 type of financial crisis rears its ugly head again. This time it's worse. The U.S. and international stock markets drop more than 50%.

Hold on! No one told you about the risk? You thought this portfolio was the be all do all of investing. You feel cheated. Another partner from Dewey Cheatem and How calls you. He gets you fired up about the dereliction of duty of that untrained, opinionated, mouthy blogger who convinced you that portfolio was the best thing ever created. And now you've lost more than 50% of your money. Yes, you actually did lose that money because, in the heat of the crisis, you sold everything. YIKES! That's an attorney's dream scenario.

Far fetched? Maybe. Do you want to risk it? Probably not. There are ways to mitigate these risks.

Lowering Liability Risk

I'll give you three things to consider to help protect your side hustle income.

Pay attention to taxes – If you're a do it yourself tax person, be sure to dive into your software or the IRS website to understand how your side income will be taxed. It's best to do this BEFORE you start. Waiting until the year is over and taxes are due is not a good plan. You can manage taxes. But you have to understand how your income gets taxed to deal with it.

Choose the right business entity – Setting up your side business as a Limited Liability Corporation (LLC) can limit your personal liability. They're relatively inexpensive to start. An LLC shelters your personal assets from lawsuits. Though nothing is foolproof, this layer of protection makes it much harder. You can have a one-person LLC. No need to overcomplicate it.

Have adequate and the right kind of liability insurance  – Back to the rental property example, if someone gets hurt on one of your properties, having an umbrella liability policy provides an extra layer of financial protection. Umbrellas policies add additional insurance over and above the home owner's policy. They are usually relatively inexpensive and well worth the money. If you're a blogger, consider a business insurance policy that includes liability coverage. There is even coverage available specific to bloggers. Though relatively new, it speaks to the proliferation of bloggers and the potential liabilities they face.

Final thoughts

Does all of this talk about lawsuits, taxes, and liability make you want never to start a side hustle? It shouldn't. And I'll grant you that the examples I used would fall into the category of extreme. But isn't that always the case with lawsuits? Attorney's live for situations where they can set a precedent and get the big payout. 

The steps I've outlined here to protect yourself are pretty simple. An LLC is relatively inexpensive to start. Liability insurance is cheap too.

I'd say the biggest and most complicated issue to deal with for side hustles 2019 is taxes. It's essential to understand the type of income you will receive in your side business. Understanding and planning for that in advance will save you potentially big money and hassles in the future.

So, by all means, start your favorite side hustle. Find something you like and have at it. Throw caution to the wind to get it started. That is except when it comes to taxes. Protect yourself and your income from liability. Do the three things suggestion – pay attention to taxes, think about your business entity and get liability protection – and you'll be on your way.

Success is right around the corner.

The post 3 Things You Need to Do to Protect Your Side Hustles appeared first on Your Money Geek.

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[vegas-glitz]

Are You Blaming Your Tax Preparer For Your Screwed Up Tax Return?

http://topicsofnote.com/?p=6902&utm_source=SocialAutoPoster&utm_medium=Social&utm_campaign=Tumblr

How one taxpayer argued and lost at Tax Court. Moral: you really have to take some responsibility for your taxes. Have you ever wondered if you could blame your tax preparer in order to avoid an IRS penalty of 20%? Come up with a new version of "The Dog Ate My Homework", or "The Devil Made Me Do It"? If your tax return gets audited, and you "lose", the IRS is very quick to impose its negligence penalty on top of back taxes, plus interest. The additional tax you owe is called a "deficiency" and the penalty is the "accuracy related penalty", and is imposed at a flat 20% of the deficiency: if you owe $5,000 because you lost the audit, the penalty is $1,000.

"Hold on!" you may cry. "I gave all my stuff to the preparer. Just because he made errors should not be a reason to penalize me. I've got enough problems with coming up with the deficiency. I'm a victim here. Not fair. I'm going to Tax Court." Which is precisely what a California woman did when faced with a penalty of $1,059.20. Not wanting to pay the big bucks for a tax lawyer, she represented herself [Pro Se] before the Tax Court [T.C. Memo 2009-278]. And she lost.

What happened? She asked her long time tax preparer to prepare her 2005 Form 1040. She gave the preparer financial documents, including a 2005 Form SSA-1099 Social Security Benefit Statement, indicating that she and her late husband had received $21,445 of Social Security benefits in 2005. She did not, however, provide the Preparer a 2005 Form 1099-DIV, Dividends and Distributions,indicating that she had received $216 of dividend income, or a Form 1099-INT, Interest Income, indicating that she had also received $24 of interest income.

Now, the Preparer, in the language of the Tax Court, "failed to consider or include" these three taxable items when he prepared the 2005 Form 1040: Social Security income $21,445, Dividends $216 and Interest $24. He forgot to put down the $21,445, and of course couldn't put down the dividend and interest income, because he didn't know about them. The Preparer did, nonetheless, give the Taxpayer a summary of the items which would be included on the tax return, but no copy of the return was provided to the Taxpayer until the return had been electronically filed, and the filing had been acknowledged by the IRS. (This is not considered to be acceptable practice by any tax preparer.)

The Taxpayer was well aware of the receipt of taxable Social Security Benefits in the 2002, 2003 and 2004 tax years. Nonetheless, she did not detect any errors in the summary of income items considered by the Preparer both in preparing the return, nor in the return itself when delivered after receipt of electronic filing.

The IRS, using its document matching programs, noticed the under-reported income and generated a letter calculating the deficiency of $5,296, and imposing the accuracy related penalty of $1,059.20. A straight calculation of 20% multiplied by $5,296. [IRC Sec. 6662(a)].

The legal framework is as follows:

The Penalty The Internal Revenue Code, subsection (a) of section 6662 imposes an accuracy-related penalty of 20 percent of any underpayment that is attributable to causes specified in subsection (b).

Among the causes justifying the imposition of the penalty is

o any substantial understatement of income tax as defined in section 6662(d) o a substantial understatement occurs where the amount of the understatement exceeds the greater of

- [1] 10 percent of the tax required to be shown on the return for the taxable year, or - [2] $5,000. - In this case, the deficiency is $5,296 which is greater than $5,000 and fulfills the second condition.

Exceptions to the Penalty The section 6662(a) penalty is not imposed if a taxpayer can demonstrate

o (1) reasonable cause for the underpayment and o (2) that the taxpayer acted in good faith with respect to the underpayment. Sec. 6664(c)(1).

Subjective Considerations Regulations promulgated under section 6664(c) further provide that

o the determination of reasonable cause and good faith "is made on a case-by-case basis, taking into account all pertinent facts and circumstances." Sec. 1.6664-4(b)(1), Income Tax Regs. o Reliance on the advice of a tax professional may, but does...not necessarily, establish reasonable cause and good faith for the purpose of avoiding a section 6662(a) penalty.

Based upon the this, the Taxpayer, of course, tried to fit her case into the Exceptions noted above by pleading special facts and circumstances, as well as reliance on the advice of her tax professional. A Taxpayer can really not accomplish more than that.

The Tax Court has set forth the following three requirements in order for a taxpayer to use reliance on a tax professional to avoid liability for a section 6662(a) penalty:

o (1) the adviser was a competent professional who had sufficient expertise to justify reliance, o (2) the taxpayer provided necessary and accurate information to the adviser, and o (3) the taxpayer actually relied in good faith on the adviser's judgment." See Neonatology Associates, P.A. v. Commissioner, 115 T.C. 43, 99 (2000), affd. 299 F.3d 221 (3d Cir. 2002).

These requirements are also known as "prongs", a Three Prong Test. Unconditional reliance on a preparer or adviser does not always, by itself, constitute reasonable reliance. The Tax Court has set forth additional guidelines based upon facts and circumstances. [Such guidelines are called dicta]

o The taxpayer must also exercise "Diligence and prudence".Marine v. Commissioner, 92 T.C. 958, 992-993 (1989), affd. without published opinion 921 F.2d 280 (9th Cir. 1991). o "The general rule is that the duty of filing accurate returns cannot be avoided by placing responsibility on an agent." Pritchett v.Commissioner, 63 T.C. 149, 174 (1974). o Taxpayers have a duty to read their returns to ensure that all income items are included.

- Reliance on a preparer with complete information regarding a taxpayer's business activities does not constitute reasonable cause if the taxpayer's cursory review of the return would have revealed errors. Metra Chem Corp. v. Commissioner, 88 T.C. 654, 662-663 (1987).

o "Even if all data is furnished to the preparer, the taxpayer still has a duty to read the return and make sure all income items are included." Magill v.Commissioner, 70 T.C. 465, 479-480 (1978), affd. 651 F.2d 1233 (6th Cir. 1981).

The Court started off with a consideration of the Third Prong, the reliance in good faith on the Preparers judgment. In a display of common sense which is rarely seen in any federal court, the Tax Court delivered its opinion that

o "We conclude that petitioners did not rely in good faith on [the Preparer] to accurately prepare their return. We conclude that petitioners did not rely in good faith on [Preparer's] advice because they did not examine their return before it was submitted to the IRS. [Emphasis added]

- There you have it! If you don't read the return, you are not really relying upon someone, are you? - "Thus, petitioners' unconditional reliance on [The Preparer] does not, on these facts, constitute reasonable reliance and does not excuse their failure to closely examine their return."

What about the Second Prong? That the Taxpayer must provide necessary and accurate information to the Preparer.

o The Tax Court noted that the "reliance defense is also undercut by the fact that [Taxpayer] did not provide [Tax Preparer] with necessary Form 1099 documentation regarding their dividend and interest income in 2005.

- Sure, the amounts are insignificant, $216 in dividend income, and $24 interest income. But the failure to hand these over shows sloppiness, and causes the taxpayer to not meet the Second Prong.

After considering the Second and Third Prongs, the Tax Court did not even bother with the First Prong, whether the tax adviser was a competent professional. It concluded that the Taxpayer had "not demonstrated good faith and reasonable cause for their underpayments for 2005. Accordingly, the Court sustains [the IRS] determination that petitioners are liable for the section 6662(a) accuracy-related penalty for substantial understatements of income tax for the 2005 tax year."

That's it. The 20% penalty is kept. Obviously, the Taxpayer was protesting the principle of the penalty, as $1,059.20 is not a lot of money, and not worth the work of filing a Petition to hear the case in Tax Court. We have discussed this particular case because it illustrates rather clearly the principles involved in protesting the penalty, as well as the burden of proof required by the taxpayer.

Source by Bruce Kowal

[anna-2807]

Imagine if, sadly, Dad dies or becomes incapacitated. You’re in charge of handling all his financial affairs, from managing his investments to putting income sources in place for Mom.

There’s just one problem: He was an old-school guy who never consolidated his assets or set up online accounts. Also, it appears he worked with different brokers and you don’t even know who they are.

What now?

Go talk to your neighbor next door, or the harried woman at work or even your millennial dog walker. Why? Because this is a common problem, and more people are working through it than you might think.

But more importantly, share your challenge with your own financial advisor. No one has a more vested interest in helping you manage assets to your best advantage. You may also learn various ways to track down and help manage your parents’ assets, and, the best part is, you don’t have to go it alone. Give us a call — we can help.

You know your dad as well as anyone. Hopefully, he kept organized financial records that are easy to find. However, because prior generations didn’t have easy access to today’s financial software and cool apps, he may not have a conveniently centralized record of his accounts, policies and important legal documents.

Naturally, you’ll want to start with his desk or a file cabinet. From there, consider these tips:

Review all the mail for statements and bills.

Look for any record of a safe deposit box — such as a bill for the rental or a key — as many people retain a safe deposit box at their local bank.

Contact your dad’s past employers to find out if they know of any pensions or retirement plans your dad held, or employer-purchased life insurance.

Check unclaimed property lists in every state where your father lived; states collect and hold unclaimed deposits and accounts.

Look for bank accounts, bonds, stocks, mutual funds, certificates of deposit, dividend or payroll checks, life insurance policies, retirement accounts, safe deposit box contents, and securities and utility deposits held by financial institutions or holding companies.

Assets are considered dormant or abandoned if there’s no activity in the account for a year or more. Bear in mind that if you miss out on claiming well-hidden assets, those assets may eventually become property of the state where those accounts are domiciled in a process known as escheat.

For state searches, start at www.unclaimed.org, sponsored by the National Association of Unclaimed Property Administrators. It’s a free website that allows you to search for unclaimed property held by each state.3 You also might want to check out www.MissingMoney.com to conduct a national search.

If you need additional help, you may consider hiring a forensic accountant. Television shows often depict forensic accountants as people who uncover offshore accounts, shell companies and other shady financial accounting practices. They are, but they also can use those clever skills to find, for example, whatever mining oil stock Dad invested in 20 years ago and conveniently forgot to tell Mom.

Forensic accountants have the experience and knowledge necessary for conducting a thorough investigation to find accounts no one in the family knows about — not because Dad intentionally hid assets but because he was a private guy. For instance, a forensic accountant might pull an IRS transcript that shows 1099-DIVs and 1099-INTs issued to your dad at some point. These are forms that banks issue for account activity involving amounts of $10 or more. The point is, forensic accountants know all sorts of methods that you may not have considered.

Standard Disclaimer.

Advisory services offered through Lake Point Wealth Management, LLC, an SEC Registered Investment Adviser. Insurance products and services offered through Lake Point Advisory Group, LLC. It is important that you do not use e-mail to request, authorize or effect the purchase or sale of any security or to effect any other transactions. The information transmitted herein and any attachments or files transmitted herewith may contain proprietary, confidential and/or protected, non-public information, are covered by applicable state and federal laws and are intended solely for the use of the individual or entity named above as the intended recipient. If the reader of this message is not the above-named intended recipient, or his/her/its agent, be advised that any review, disclosure, dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please immediately notify the sender by telephone or e-mail and destroy the material forwarded in error. Nothing in this communication shall constitute an offer to sell or solicit any offer to buy a security or any insurance product. Recipients should be aware that all emails exchanged with the sender may be archived and may be accessed at any time by duly authorized persons and may be produced to other parties, including public authorities, in compliance with applicable laws.

Learn more — https://lakepointadvisorygroup.com/

[goldstonefinancialgroupil]

Where is Dad’s Money?

Where is Dad’s Money? is courtesy of: www.goldstonefinancialgroup.com Goldstone Financial Group

Imagine if, sadly, Dad dies or becomes incapacitated. You’re in charge of handling all his financial affairs, from managing his investments to putting income sources in place for Mom.

There’s just one problem: He was an old-school guy who never consolidated his assets or set up online accounts. Also, it appears he worked with different brokers and you don’t even know who they are.

What now?

Go talk to your neighbor next door, or the harried woman at work or even your millennial dog walker. Why? Because this is a common problem, and more people are working through it than you might think.

But more importantly, share your challenge with your own financial advisor. No one has a more vested interest in helping you manage assets to your best advantage. You may also learn various ways to track down and help manage your parents’ assets, and, the best part is, you don’t have to go it alone. Give us a call — we can help.

You know your dad as well as anyone. Hopefully, he kept organized financial records that are easy to find. However, because prior generations didn’t have easy access to today’s financial software and cool apps, he may not have a conveniently centralized record of his accounts, policies and important legal documents.

Naturally, you’ll want to start with his desk or a file cabinet. From there, consider these tips:

Review all the mail for statements and bills.

Look for any record of a safe deposit box — such as a bill for the rental or a key — as many people retain a safe deposit box at their local bank.

Contact your dad’s past employers to find out if they know of any pensions or retirement plans your dad held, or employer-purchased life insurance.

Check unclaimed property lists in every state where your father lived; states collect and hold unclaimed deposits and accounts.

Look for bank accounts, bonds, stocks, mutual funds, certificates of deposit, dividend or payroll checks, life insurance policies, retirement accounts, safe deposit box contents, and securities and utility deposits held by financial institutions or holding companies. 1

Assets are considered dormant or abandoned if there’s no activity in the account for a year or more. Bear in mind that if you miss out on claiming well-hidden assets, those assets may eventually become property of the state where those accounts are domiciled in a process known as escheat.2

For state searches, start at www.unclaimed.org, sponsored by the National Association of Unclaimed Property Administrators. It’s a free website that allows you to search for unclaimed property held by each state.3 You also might want to check out www.MissingMoney.com to conduct a national search.4

If you need additional help, you may consider hiring a forensic accountant. Television shows often depict forensic accountants as people who uncover offshore accounts, shell companies and other shady financial accounting practices. They are, but they also can use those clever skills to find, for example, whatever mining oil stock Dad invested in 20 years ago and conveniently forgot to tell Mom.5

Forensic accountants have the experience and knowledge necessary for conducting a thorough investigation to find accounts no one in the family knows about — not because Dad intentionally hid assets but because he was a private guy. For instance, a forensic accountant might pull an IRS transcript that shows 1099-DIVs and 1099-INTs issued to your dad at some point. These are forms that banks issue for account activity involving amounts of $10 or more. The point is, forensic accountants know all sorts of methods that you may not have considered.6

Content prepared by Kara Stefan Communications.

1 Roberta Codemo. Legal Zoom. “How to Recover Unclaimed Inheritance Money.” https://www.legalzoom.com/articles/how-to-recover-unclaimed-inheritance-money. Accessed June 24, 2019.

2 Ibid.

3 National Association of Unclaimed Property Administrators. “Start your free search for money that might be due you.” https://www.unclaimed.org. Accessed June 24, 2019.

4  MissingMoney.com. “What to expect.” http://www.MissingMoney.com. Accessed June 24, 2019.

5  Investopedia. April 25, 2019. “Forensic Accounting.” https://www.investopedia.com/terms/f/forensicaccounting.asp. Accessed June 24, 2019.

6  The Wealthy Accountant. Aug. 16, 2017. “Forensic Accounting: The High-Paying Part-Time Business.” https://wealthyaccountant.com/2017/08/16/forensic-accounting-the-high-paying-part-time-business/. Accessed June 24, 2019.

Neither our firm nor its agents or representatives may give tax or legal advice. Be sure to speak with qualified professionals about your unique situation.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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[managermint]

Investopedia: Taxation Rules for Bond Investors

Investopedia: Taxation Rules for Bond Investors

What Are the Taxation Rules for Bond Investors?

Every year, bondholders ritually fill out IRS tax form 1099-INT, to report their annual taxable interest income. While at first glance, this document offers straightforward guidelines for declaring tax on income generated from the stated rates of interest, there are often complex factors fixed incomeinvestors must heed. This article explores…

[mikebrackett]

What Freelancers Need to Know About Filing 2018 Tax Returns

Unless you harbor a fascination for numerical tedium or entertain odd hobbies, chances are filing taxes doesn’t top your list of thrilling things to do. But when you’re a self-employed freelancer, the onus of paying Uncle Sam looms over you year-round.

Filing your taxes doesn’t have to be headache-inducing. Getting a jump now on filing your tax return for 2018 will make for a smoother process.

Here are some ways freelancers can best prepare to file their tax return this year.

Tax Prep Is a Yearlong Endeavor

When you’re self-employed, taxes aren’t seasonal. Freelancers are in a unique financial position, explains Katherine Pomerantz, founder of The Bookkeeping Artist.

“They’re individual taxpayers, but they’re also small businesses,” says Pomerantz. “Whereas individuals only think about taxes once a year, for businesses, it’s tax time year-round.”

Reality check: Employers handle a lot of tax reporting on behalf of their worker bees, says Pomerantz. “With every paycheck, a business collects, files and pays taxes on your behalf. A company must also file sales tax every month, and sometimes even pay income tax on behalf of the organization several times a year.”

Stay on Top of Your Bookkeeping

So even though, as the owner of a freelancing business, you aren’t required to pay quarterly income tax or monthly sales tax, you should still be in a year-round tax mindset. You should have daily, weekly and monthly bookkeeping checklists to follow so you’re on top of your recordkeeping. As a freelancer, I transfer funds to my business bank account every Friday, work my voodoo magic in my accounting software weekly and send invoices at the end of the month.

Don’t neglect to squirrel away a portion of each paycheck as if you were paying taxes. How much should you tuck away? There’s no universal percentage — the amount you need to save for taxes depends on variables such as how your business is set up, your tax deductions, marital status, income and where you live. Pomerantz recommends socking away 15% to 30% of your income each month for taxes. “It’s money you will owe eventually, and it’s much better to plan ahead and pay on time, rather than accidently spend that money and owe late fees and interest,” says Pomerantz.

Gather Those Documents

When filing taxes, you might be just fine referring to your credit card and bank statements. While the chances of getting audited are slim, you should still gather your receipts and keep them stowed away in a fireproof box. As for your income forms, your clients have until January 31 to send you copies of any 1099 and W-2 forms. However, if a client neglects to send these forms by then, you’re still on the hook for paying taxes.

“Every penny of income is reportable, even if you didn’t receive a 1099-MISC — or other 1099 form, such as INT,” says Eric J. Nisall, founder of AccountLancer. “That rule is meant to reduce paperwork, not to allow you not to report income.”

You can order what’s called a Wage and Income Transcript from the IRS, which has info from your 1099s and W-2 forms that was reported to Uncle Sam. Just be prepared to jump through a few hoops to verify your identity. If you purchased health insurance through the marketplace, you’ll need a copy of your 1095-A. If you earned money on interest or dividends, you’ll need a 1099-INT or a 1099-DIV.

Keep Your Clients Looped In With Changes

If you moved or made changes to your business, such as forming an LLC or doing business under a new name, let your clients know as soon as possible. Otherwise, the income forms you receive from them might not be accurate and could create a snag.

Last year, I did both: moved to another city and formed an LLC. Along with all the challenges I had to deal with in setting up my LLC, I made sure to email the accounting departments of my clients. That way, come tax time, my 1099 forms will be up to date.

Consult With An Accountant

Even if you’re used to doing your taxes yourself, it’s a good idea to meet with an accountant to file your 2018 taxes, Pomerantz says. That’s because the Tax Cuts and Jobs Act 2017 changed what is deductible and how taxable income is calculated. “Most freelancers will not have time to read the entire new tax law, so it’s a good idea to have someone double-check your work this year,” Pomerantz explains.

Because your tax situation isn’t easy, it’s generally a good idea for freelancers to use an accountant every year, says Pomerantz. “With multiple income streams, self-employment taxes and extra reporting requirements for business income, a freelancer’s financial life is anything but simple,” says Pomerantz. “Consulting with an expert will help you plan ahead for the best tax savings and ensure you don’t make mistakes.”

The post What Freelancers Need to Know About Filing 2018 Tax Returns appeared first on ZING Blog by Quicken Loans.

from Updates About Loans https://www.quickenloans.com/blog/freelancers-need-know-filing-2018-tax-returns

[christophergill8]

Documents you need to file your 2018 tax return, including a look at the new Schedule A for itemizers

Even if you've been filling out Form 1040 and any other associated forms and schedules for years, things will be different this filing season.

This is the first year we taxpayers (and tax pros) will be filing under the extensive new Tax Cuts and Jobs Act (TCJA) changes.

In addition to new tax rates and deduction amounts, there are a variety of other tax law tweaks that could affect what goes on — or now doesn't — your Form 1040, which itself is new.

So before you start working with your tax preparer or open up your tax software, either the package you bought or downloaded or are using via Free File (yes, it's already open), here are some things to think about and documents that you might need to do the job.

Start with last year: Tax laws have changed, but your 2017 filing is still the best place to start. This includes not only your federal forms, but also your prior year's state tax filing if you live in a state that collects an income tax.

If your personal and financial life didn't change much in 2017, your previous return will give you a good idea of what to expect this time round even if the way the new tax laws treat your situation is a bit different.

Plus, these documents will have some data, such as Social Security numbers and bank account info if you're have your refund directly deposited, that you'll need again this year.

Perennial filing documents: The world, including the Internal Revenue Service, largely has gone digital. That should help you in the gathering of the tax and financial documents that you'll need to fill out your taxes.

Most third-party tax reporters — these are the folks that let you and the IRS know how much money you made at your job, either full-time or as a freelancer, and how much unearned income you got from investments — must get you this relevant income info by Jan. 31.

Some documents, however, come sooner, especially if you've opted to receive this data electronically. Check your email inbox and accounts for this data, then download it a special tax filing folder.

Among the documents you of particular tax-filing note are:

W-2 forms reporting your wages and W-2G for gambling winnings if you had a really good time in Las Vegas,

Various 1099s with sundry income amounts, including 1099-R for retirement; 1099-INT for interest earned; 1099-DIV for investment dividends; 1099-B for brokerage sales; 1099-G for unemployment benefits, state tax refunds or other government payments; and 1099-MISC for independent contractor and other types of, as the extension indicates, miscellaneous income, and

Some 1098s, such as 1098-T that students will need to calculate education tax credit eligibility; 1098-E with potentially deductible student loan interest payment amounts; or the plain old Form 1098 for homeowners with mortgage interest, loan points and, in some cases, payments made toward private mortgage insurance real estate taxes.

More specialized filing material: Every filer's tax situation is unique. That's why you could need additional information that applies to your financial circumstances and tax-filing needs.

Considerations here include:

Records of estimated tax payments you made for both your federal and state taxes.

Do you get tips or other gratuities as part of your job? Have your records of those payments handy.

Were you unemployed for a bit? The W-2G you  got is income that has to be included on your 1040, just like with the gambling and prize winnings mentioned earlier.

For the 2018 tax year, if you got alimony, that's taxable income. If, however, you paid alimony, it's an adjustment to your income, aka an above-the-line deduction. In these cases, the income and deductibilty considerations are grandfathered in despite the changes to these divorce matters under the TCJA.

Did you move for a job last year? Sorry, you probably aren't going to be able to count on Uncle Sam to help cover your relocation costs. This above-the-line deduction and the associated income exclusion for workers whose new employers pay relocation costs, now is available only to members of the Armed Forces.

Distributions from retirement accounts, depending on the type of plan you have, could be taxable. Double check income statements for your workplace retirement and/or IRA withdrawals, as well as your Social Security benefits if you're now getting those payments.

If you're still contributing to your retirement plan, is any of it deductible? Have your statement of these amounts to help you decide.

A few more questions: In addition to collecting all your filing material, take the time to answer a few questions that could have tax implications. They include:

Do you have any unresolved state or IRS tax issues?

Did you get married or divorced last year? This will affect, among other things, your filing status.

Are you supporting anyone not living with you?

Did you have a child last year? Was that new family addition adopted or the adoption process begun last year?

Did you pay for a dependent child's (or another dependent's) care so you could go to work?

Did you receive any assistance from your employer to pay for education expenses, child care costs or adoption expenses?

Did you or any member of your household pay any college costs?

Did you hire household help?

Did you make any major improvements to your home?

Did you sell, refinance or face any foreclosure transactions on your personal residence?

Do you own a second residence or any other real estate? If so, did you rent it out last year?

Were you a resident of, or did you have income in, more than one state during the year?

Did you have money in a foreign account?

Did you make any large purchases, such as a vehicle?

Did you have any nonresidential debt that was canceled?

Did you serve in the military? If so, did you receive combat pay?

Did you have health care coverage? Did you buy your medical insurance through the market place?

Which deduction method do you plan to use, claiming the standard amount for your filing status or itemizing?

Affordable Care Act still applies: Maybe all the talk by the White House and Republicans on Capitol Hill has you wondering about that health care question in the above list.

The short answer is that for your 2018 tax return, tax requirements involving Obamacare as it's popularly known are still in effect and the IRS will continue to enforce the tax components.

So for this filing season, unless you qualify for an exemption, you must continue to report your health care coverage or pay the individual shared responsibility payment for tax year 2018.

For planning purposes, the individual mandate is repealed effective this year, meaning you won't have to pay the added tax if you choose to go without health insurance this and future years.

But back to the here-and now. For your 2018 return, you should be on the lookout for Obamacare-related tax forms:

Form 1095-A is officially titled the Health Insurance Marketplace Statement. As the name indicates, it is sent by the exchanges through which individuals purchased their medical coverage.

Form 1095-B is issued by health care insurance issuers or some smaller companies that provide coverage for employees, confirms that you had at your workplace acceptable minimal health insurance coverage. It also shows how long you were covered and which family members also were on your policy.

Form 1095-C is the same as the 1095-B, but it is issued by large employers.

The B and C 1095s generally will mean you just have to check a box on Form 1040 to let the IRS know that you had health care coverage and therefore don't owe a tax penalty.

The A version of 1095 is key if you're eligible for the premium tax credit, also known as the federal subsidy, to help you pay for your ACA-mandated coverage that you got through the marketplace.

Schedule A specific information: Now for folks who answered "itemizing" to the deduction method question. This choice could have a major impact on the filing documents you need.

The TCJA almost doubled the standard deduction amounts, so more taxpayers are expected to use this easier-to-claim deduction method this (and future) filing seasons.

But if you do find that itemizing still works better for you (and some of us still do), take note of the new law's Schedule A changes and what you now need (or won't need) to complete it.

Here's a breakdown, using the new Schedule A as a guide, of what's still deductible and what you need to claim the expenses.

Medical These expenses survived the first major tax reform in more than 30 years. In fact, for the 2018 tax year, they were enhanced. You still can claim allowable doctor, dentist and a URL variety of health care related costs and this filing season they only have to exceed 7.5 percent of your adjusted gross income (AGI). For the 2019 tax year, though, you'll have to meet 10 percent of AGI when you file those returns in 2020.

Regardless of the tax year, if you claim medical costs you'll need records of your expenditures, not to submit but in case the IRS questions the claims. This includes prescriptions, doctor office visit payments, dental care costs, hospital bills, medical insurance premiums as long as they aren't paid at work via pretax dollars, long-term care insurance premiums and the mileage to and from physicians' offices.

State and local taxes (SALT) This component of the "Taxes You Paid" section of Schedule A didn't fare as well under TCJA. You still can claim the taxes you paid to your state and local tax collectors, including income or sales taxes — remember, can't deduct both; you must choose sales or income taxes to claim — along with real estate and personal property taxes, but there's now a limit. Only $10,000 can be counted here. For most folks not living in high-tax states or expensive neighborhoods, this shouldn't be a problem. And if you're not near the 10 grand cap and are claiming sales taxes, don't forget about adding in sales tax that was tacked on to a major purchase, such as a car, boat or airplane.

Your state and local officials should provide you with receipts or similar documents detailing the taxes you can claim. If you want to add up your sales taxes yourself rather than use the optional state sales tax table amounts the IRS provides in the Schedule A instructions, you'll need all those receipts, too.

Interest This mainly applies to homeowners, who still can claim the deductible interest on their mortgage. This will be reported on the previously mentioned Form 1098 or an IRS acceptable substitute document.

Note, however, that the limit on the amount of home loan on which you can claim this deduction was reduced under the new tax law. Instead of interest on home indebtedness up to $1 million, you now can deduct only the interest on home loan amounts up to $750,000. Don't panic, though, if you have an older, larger home mortgage. If you got the loan on or before Dec. 15, 2017, your itemized mortgage interest claim is grandfathered in at the prior $1 million level.

One area, however, where more folks might take a deduction hit is with interest on home equity loans or home equity lines of credit (HELOC). These used to be fully deductible. Under TCJA, however, no matter when you got such a home-secured debt, the interest cannot be claimed if the proceeds were used for something else, say to pay your children's college tuition. This loan interest now is deductible only when the loan or HELOC proceeds are used to buy, build or improve the property used to secure the loan.

And because of Congressional inaction, not TCJA revisions, the option to claim any private mortgage interest (PMI) premiums is gone. It's possible that the House and Senate could get to this and other so-called extenders, but not probable that it will do so soon. Lawmakers belatedly renewed this and a couple of other expired laws for the 2017 tax year in February 2018. If PMI makes a difference in your decision to itemize, you might want to consider delaying your filing to see if this becomes available later in the filing season.  

Charitable gifts This itemized deduction is still on Schedule A and you can even give more that before if you're able because the deduction limit for gifts to public charities is increased from 50 percent to 60 percent of AGI. But you still need to follow the other rules, like getting contemporaneous substantiation — a receipt — for any contribution of $250 or more. In fact, get receipts from all the nonprofits to which you give regardless of how large or small your donation.

And since donation deductions still must be claimed as an itemized expenses, many folks are looking at other tax-related philanthropic strategies.

Casualty and theft losses This section is still on Schedule A, but now also is more restricted. You can only claim losses related to a federally declared disaster. In addition to the documentation of the losses and expenses not paid by insurance toward recovery, you'll also have to include the Federal Emergency Management Agency (FEMA) number and the location of property against which the tax claim is being made.

Other itemized deductions This section for reporting specific itemized deductions gets a lot of attention because it's where you enter your gambling losses. This includes, among other things, the cost of losing bingo, lottery and raffle tickets, horse and dog racing slips and the money you dropped at the poker table or roulette wheel at your favorite casino. Obviously, you'll need to keep good track of these expenditures. Remember, though, that your losses can only offset the amount of winnings you got during the tax year, some of which were on the W-2G form mentioned earlier. You can't claim losses to produce a loss on your taxes.

Miscellaneous no more: Thanks to some key TCJA changes, the records you need to file have been reduced. Of course, that means your chance to use these areas to trim your tax bill also is gone.

Long-time itemizers probably noticed in the above discussion of Schedule A that somethings missing. I'm talking about miscellaneous itemized deductions section

This means you no longer have to keep track of documentation for such previously deductible (as long as the total exceeded 2 percent of your AGI) expenses as miscellaneous deductions. This section was eliminated by the TCJA. That means no more bothering with receipts for unreimbursed job expenses, expenditures on searching for a new job, hobby costs, various investment expenses and tax preparation fees.

Whew! That's a lot of stuff to consider regardless of whether you use Schedule A or take the easier standard deduction route.

And it's a lot of material for you to get together, either to file your taxes yourself or deliver to your tax preparer.

With the official start of tax filing season 2019 just days away (official opening is Jan. 28), it's time to get started tracking down these documents so you can be done with your taxes as soon as possible. 

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from Tax News By Christopher https://www.dontmesswithtaxes.com/2019/01/tax-return-checklist-to-file-2018-returns-schedule-a-changes.html