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10 Reasons Your Clients Should Get a Tax Divorce

As a married individual, you can select a tax filing status as either married filing jointly or married filing separately, and in some cases neither of these statuses achieve what is possible for two single taxpayers each filing their own tax return. In many cases it can seem you are getting penalized for being married in the U.S. You may get frustrated that you seem to keep getting hit with “wealth taxes or penalties.” Of course, you may not refer to it that way. But when you see things like the Alternative Minimum Tax, The Net Investment Income Tax, the Additional Medicare Tax, and a whole variety of other taxes that are higher for married filers than they are for two single people…you may be tempted to think about a divorce. And “live in sin”? No matter your personal beliefs there are at least 10 tax attributes that cost married filers more than two single people. In some instances, children are in the mix, as they relate to specific credits. Some of these situations only apply to wealthy couples. Some only apply to those earning $50,000 or less or seniors. These attributes, commonly known as the so-called “marriage penalty” refer to situations where it may pay to file as two single individuals rather than as a married couple. However to qualify, you cannot legally be married as of December 31. To learn more about these penalties and find out how to work around them, continue reading.

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2022 Summer Education Series Event Calendar

TOTTB proudly introduces our 2022 SUMMER EDUCATION SERIES! That’s right! Every month through August we will be bringing you a FREE, live webinar event to help educate and inspire you on all things tax! As a monthly or annual subscriber, these webinars are 100% exclusive, and free to you! Guest speakers include regular columnist, Peter Reilly, Boston Tax Institute Founder, Lucien Gauthier, the Tax Mama, Eva Rosenberg, and more! Every webinar comes with free continuing education credits for those who qualify! Keep reading for more details...

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Do Your Clients Know Their Own Business Entity?

Have you been working with a partnership client or Schedule C client for a couple of years, only to find out: “Oh, by the way, we incorporated two years ago?” Or the taxpayer brings you a notice for non-filing penalties on the partnership or S corporation you didn’t know existed? When you are working with existing business clients for several years, you are not concerned about their prevailing business structure. After all, if you have been filing the wrong entity’s tax return, you would have been alerted by now. Right? As it turns out, not always. When you find out about the error, your gut reaction is that it’s your fault. Is your errors and omissions insurance (or malpractice insurance) up to date? Take a deep breath; it’s not your fault. Probably. Let's keep reading and find out.

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No One Wants to Pay SE Taxes on Royalties

Most of the Tax Code is “gray.” No, I don’t mean the color font it is written in. Unlike a lot of rules, the Tax Code is difficult to judge what is right and wrong. Perhaps it has to be written this way because to try and define every possible money situation is unfeasible. Perhaps, the writers like it this way because as we’ve said here many times at Think Outside the Tax Box, the gray area provides opportunity for tax savings. Take for example the official Tax Code definition of taxable income. Rather than affirmatively define it, the authors chose to negatively define it. Generally, an amount is part of taxable income unless the law specifically exempts it. Certain types of income get taxed twice. If, for example, you are subject to net investment income tax, you’ll not only pay income or capital gains tax, but an additional tax, as well. The same is true for royalty income. In some instances, it is necessary to pay income tax and self-employment tax on royalty checks you receive. To take advantage of breaks we must examine what loopholes or gray areas exist for royalties, and more importantly, how can you shield it from as much tax as possible. Continue reading to learn how.

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‘Tis Still the Season to Be Giving

It is the best of times, it is the worst of times – and charity cannot only help those in need; it can provide some hefty tax deductions to the donor, as well.

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Is Your Spouse Innocent or Injured? Part 2: The Innocent Spouse

Jack Sprat did pay no tax. His wife paid all of hers. But when they filed a joint return, She learned she owed all of his! This is the heart of the innocent spouse! The innocent spouse filed a joint return with a balance due – but didn’t really create the tax obligation. S/he did everything right, paid all the proper withholding or estimated tax payments. Yet, s/he suddenly finds out that the spouse has a balance due and doesn’t have the money to pay it all.

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Is Your Spouse Innocent or Injured? Part One: The Injured Spouse

Jack and Jill went up the hill to have a lovely wedding Jack fell down and broke his crown When Jill learned all his tax debts That pretty much describes the origin of the taxes faced by an injured spouse: The taxpayer was not married to that spouse at the time he or she incurred the tax obligation or it was assessed or did not sign the tax return where the balance due originated. In other words, it was never the injured spouse’s debt or obligation in the first place. What kinds of debts or taxes might the IRS collect (or “offset”) that would affect the injured spouse’s refund?

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Quick Guide to Claiming Work-From-Home COVID-19 Expenses to Reduce Your Tax Bill

This information is particularly important if you are the owner/shareholder of your own corporation – C or S corp. You can set up payroll and designate tax-free reimbursements for you to be working at home – as well other tax-free money for you and for your employees. (We will discuss employees momentarily. Yes, it’s essential.) If being an employee is your main source of income – watch out! The short answer to employees claiming an office in home deduction this year is... There is no deduction!

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