I can recall looking for a part time job in local newspapers when I was in high school. Sometimes a friend and I would ride around with our $2.29 per gallon gas looking for places that were hiring. Facebook was gaining popularity but not for job posting. So, searching for jobs on my phone via an app was unimaginable.
Advances in technology have changed the way that we do things in the world. Everything an individual needs to find a job is right at their fingertips. There are more opportunities to find gigs and be your own boss if that’s what one desires.
There’s no question that the way people find ways to earn income has changed. What has not changed is the fact that the IRS wants their share of the income earned. But how do we apply the tax code to these new ways that taxpayers are earning money?
We are going to break that down in this three-part series. Whether your client is doing odd jobs on an app like TaskRabbit, driving for Lyft, renting out their home or car, you will know how to guide them. This is what we are going to cover today with a focus on rideshare, delivery, and other service gigs.
As many of us become more accustomed to working from home, it is easy to forget that some industries were regularly working remotely prior to the COVID-19 pandemic. It might be easy to forget altogether that real estate businesses also qualify for the same deductions as other businesses. Yet, it is often easy to overlook something like a home office for a real estate rental operation, but the home office typically functions as the glue holding these businesses together. To learn more about the how and the where to grab this deduction, keep reading.
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If someone approaches your client offering four to one deductions on conservation easements (probably somewhere in the Southeast), you need to do your best to talk them out of it. And if you cannot, it may be best to let some other practitioner have the honor of preparing their return. On the other hand, if your client has land or a building they would like to preserve forever, a conservation easement may be just the thing. Assuming the desire to have the property preserved anyway, it is about as close to a free lunch as you can get. Good execution is the key to making it work. Read on to learn how!
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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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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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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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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 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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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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Creativity on a tax return is a natural tendency. Many strategies and behaviors we know are wrong, e.g. not reporting all income. However, is it ever okay to disregard some deductions and pay more tax? At first glance, it would seem that the IRS should like the idea of more reported income and a higher tax liability attached to the additional income. The IRS does not.
The gig economy involves more than one-off and part-time jobs. It also includes when you share your property in exchange for money. This can be a residential property, a vacation home, or even a vehicle. The gig economy has connected those who need rides and places to stay with owners via online platforms. We refer to this part of the gig economy as the share economy.
Accessing these accommodations is easy with the online platforms. But how the people participating should report their income isn’t quite as straightforward. Last time we looked at how your clients should report gig income, just like any other income made as a sole proprietor.
But making money from renting your property out is different, right? If you have clients with rental properties, you report their income on Schedule E (1040), Supplemental Income and Loss. We know from last time that we report gig economy income on Schedule C (1040), Profit or Loss from Business. So, how does rental income derived from the share economy get reported on a tax return? Every taxpayer’s favorite answer, it depends.
A 2023 Tax Court decision upheld what many small business owners and tax practitioners have wondered about for some time. The court found that shareholders of an S corporation could exclude rental income paid to them by their S corporation for holding planning meetings in their homes. While the IRS and court found that the amounts charged by the shareholders were excessive, the court found the arrangement itself within the bounds of the law.
This article examines this case and underlying law and when and how this is a planning idea worth pursuing, the limitations and unknowns involved, and the policy implications of this long standing exclusion. The case is Sinopoli, TC Memo 2023-105 involving the exclusion at IRC Section 280A(g).
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