Individual Strategies Archives - Page 10 of 14 - Think Outside the Tax Box

Individual Strategies

By Jeff Stimpson

Should You File Your Client’s Taxes Early?

Common sense says that filing taxes as early as possible in the year gets an onerous chore off your plate and, chances are, gets your clients’ tax refund into their pockets quicker. Common sense can also be wrong if you need, as most taxpayers do, various tax-reporting forms that can arrive in early spring, if not later. There are also many other reasons you may, or may not want, to file your client’s taxes as early as possible.

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Office in the Home – Partnerships

The COVID-19 pandemic has altered many aspects of our society, perhaps permanently. One of these is the need to physically go to the office to get work done. Like all businesses, partnerships are no exception. While the Tax Cuts and Jobs Act of 2017 (TCJA) suspended this deduction for employees of the partnership until 2025 . However, partners may still take advantage of this often-overlooked tax benefit. The key is in how to report it. Read on to learn how!

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Office in the Home

2020 saw a huge increase in taxpayers working from home. A good internet connection can allow taxpayers in many industries to work almost anywhere. Whether it is because the typical workspace has closed or there’s a need to be home to care for a family member, the shift to working from home can come with substantial tax savings. Claiming the home office deduction allows the taxpayer to take a typically non-deductible expense and make it deductible, reducing the amount of income subject to tax. The most important item to note is the Tax Cuts and Jobs Act of 2017 (TCJA) suspended this deduction for employees until 2025. However, this deduction is still available to taxpayers who are self-employed or independent contractors. (Some states may still allow a deduction for an employee). While it’s not as easy as claiming the expenses and calling it a day, home office deductions provide fantastic ways to get a tax deduction for amounts you ordinarily would spend but are not eligible as write-offs. Keep reading to learn the details and how to deduct things like your homeowner’s association dues, security systems, and other home improvements.

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End of Summer Tax Savings: Summer Home Rentals and Summer Jobs for the Kids

Considering hiring your kids to work in your business or renting property you own to your business to save money on taxes? Both of these strategies can work (and work well), but often those promoting them (the mainstream media, social media, etc.) hold forth heavily on the benefits of the strategies without considering the nuances and fine print that can end up costing money rather than saving it if you end up on the bad side of an audit. Keep reading for how to maximize tax savings on summer homes and summer jobs without getting burned.

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Don’t Overpay on the Crypto 1099-K

As cryptocurrency grows in popularity, so do the complications of tax reporting. At present, there is no consistent 1099 reporting for crypto transactions. This is primarily because no 1099 form currently exists to adequately report cryptocurrency. The IRS has yet to issue third party reporting requirements to exchanges, so companies must determine on their own what information to report to the IRS and how they will report it. Some exchanges will attempt to report transactions on a traditional 1099-B, but the easily accessible transferability of crypto makes it nearly impossible for an exchange to correctly report basis information. Incorrect reporting can result in the IRS sending an unnecessary CP2000 notice, which can be both expensive and time-consuming for the taxpayer to resolve. Other exchanges issue a 1099-Misc for certain transactions, but again this doesn’t reflect the full picture. Some exchanges choose to issue a 1099-K to customers, showing only the gross proceeds of crypto transactions and also doesn’t show the full picture. Here’s what to do to avoid getting a dreaded notice from the IRS.

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Cryptocurrency Staking and the U.S. Tax Code

Cryptocurrency is currently one of the hottest topics in taxation. The use cases of crypto are continually evolving, and official IRS guidance is perpetually several years behind the types of transactions investors engage in. We are left trying to force a crypto transaction to fit into the existing code that was not written with crypto in mind. Additionally, with the lack of official guidance, we are forced to attempt to anticipate how the IRS will interpret novel transactions or worry about potential penalties and interest down the road. Staking is a transaction that has become extremely common among crypto users, yet the IRS is silent on how to report and tax it. Read on to learn more about cryptocurrency “mining”, staking, and how the current IRS interpretations of the tax code (or lack thereof) may affect your income reporting.

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Airline Miles, Other Reward Programs, and Taxes – What You Need to Know

Frequent flyer miles and similar programs for other forms of consumption like grocery shopping raise a host of tax issues. There are the concerns of the recipients of the “rewards” and also of the issuers of the various sorts of points. A recent Tax Court decision brought the taxability of rewards into focus again and the opinion encourages the IRS to provide more guidance. Here is where we seem to be now. This is the first of two articles discussing the tax strategies available to boat owners. Part 1 focuses on using a boat as a residence, but if that doesn’t meet your needs, stay tuned because Part 2 will cover boats for business use (including as a home office). Why not consider both options and see how your tax savings can help fund your floating condo? Keep reading to learn more.

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What Is the Best Way Tax Advisors Can Charge for ERC Claims?

Question: How are you pricing Employee Retention Credit claims? Answer: The Employee Retention Credit (ERC) has seemed more confusing than some of the other tax credits simply because it was mostly ignored by the tax community early in the pandemic. While small businesses happily pocketed PPP funds rather than claim the credit, the choice between the two benefits was clear. As we now know, business owners can have both PPP loan forgiveness as well as access to the ERC tax credits. But many smaller firms and payroll processors felt overwhelmed by the demand, and with refunds taking months to process, some businesses are often looking for help on their own. So many new players have entered the game selling access to these credits, up to $33,000 in cash per employee. Firms selling R&D studies and cost segregation are advertising – hard. Most are charging a percentage of the total credit amount. You don’t want to miss out on this valuable service for your client to capture this free cash, yet many advisors are passing on this work due to the time, research, and education requirements for something that has such a short shelf life. Is it worth losing income to meet everyone’s needs? Continue reading to check out the results of a short survey asking tax pros how they are charging for this type of work.

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Any Port in The Storm – Tax Strategies for Boat Owners (Part 2 of 2)

Ever thought of using a recreational vehicle like a boat to lower your taxes? Yes, it’s possible using the right strategies, and there’s no time like the present to make that happen. Even more than pre-pandemic taxpayers may be considering buying their own island. Those for whom buying an actual island is beyond the budget may be considering buying a boat or an RV for use as a residence, an office, or both. Whatever the type of use, there are tax strategies available for boat owners if they meet the requirements. As with any tax strategy it is important to have a full understanding of the requirements to ensure the deduction is legal and to ensure the taxpayer can substantiate the deduction should the tax authorities examine the return. This is the first of two articles discussing the tax strategies available to boat owners. Part 1 focuses on using a boat as a residence, but if that doesn’t meet your needs, stay tuned because Part 2 will cover boats for business use (including as a home office). Why not consider both options and see how your tax savings can help fund your floating condo? Keep reading to learn more.

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