Individual Strategies

Here are a few reminders on claiming losses from property transactions with a focus on an informal ruling the IRS issued in January 2023 to help explain losses from certain cryptocurrency transactions. This article focuses not only on what CCA 202302011 provides, but also what it doesn’t cover regarding possible losses from cryptocurrency and digital asset transactions. Click here to continue reading…

Beanie babies, Pokémon cards, POGs, and digital pictures of monkeys on the internet, one of these things is not like the others. All these are items that people may collect or at least have collected in the past. Maybe they were just collecting for fun, or perhaps they acquired in hopes of selling their items in the future for a profit. However, the IRS has highlighted only one of the items on this list as potentially being a collectible. A non-fungible token (NFT) “is a unique digital identifier that is recorded using distributed ledger technology and may be used to certify authenticity and ownership of an associated right or asset. Ownership of an NFT may provide the holder a right with respect to a digital file (such as a digital image).” NFTs run the gamut from bored apes (computer generated pictures of monkeys that sell for hundreds of thousands of dollars, not to be confused with board apes, which are monkey pictures on sandwich and surf boards and do not sell for hundreds of thousands of dollars) to Ruish Bronzelight (a DeFi Kingdoms online video game Warrior Wizard we met in “Tax Planning for DeFi Based Games”), and even event tickets (especially popular with crypto conferences). There is even at least one CPA who sells access to his tax practice via NFT. Click here to continue reading…

Every tax professional has at least one client that when asked about business mileage replies, “I don’t know; what did I have last year?” You may have read that last sentence and thought, “most of them.” Self-employed taxpayers generally know they must track their mileage, but it’s seldom done correctly, or at all. Vehicle deductions are an area frequently challenged by the IRS on examination as well as an area the taxpayer is unlikely to prevail without strong, contemporaneous documentation. That said, very few taxpayers keep perfect records, so what are the best practices for mileage deductions in the real world? Keep reading to find out!

“Timalyn, Alyssa and I filed for divorce, and we will finalize everything before Thanksgiving. Does this change things for our taxes?” “No! Can we wait until January 1?” were my initial thoughts. But then I realized that if this news blindsided me, the seemingly happy couple was probably also scrambling for answers. They were looking to me to be calm during an upcoming storm. To give you some context, I had helped this family lower their back taxes by $16,000 and get a payment plan that worked well with their cash flow. Then, by implementing a few strategies they had just saved an extra $20,000 on their last tax return. We were planning on saving them even more money in upcoming years. Then, that is when it happened. Divorce. I never saw this happening, so I never prepared for it. But if it happened to me, it will happen to you. Clients divorce. Some of the things we are going over today may seem obvious to you. But remember what is obvious to us as tax experts is not obvious to our clients, especially if they are going through a life-changing event such as divorce. Here are four things you need to inform your client about when it comes to their divorce and taxes...

Reilly’s Fourth Law of Tax: “Execution isn’t everything, but it’s a lot” might be amended when it comes to charitable deduction of property, because there you have an area where execution is almost everything. It is also an area that dramatically illustrates the Seventh Law: “Read the instructions.” In January, we received guidance from the IRS on the reporting requirements for charitable contributions of crypto currency . If you have followed IRS guidance on crypto and know something about charitable donation reporting requirements, the result shouldn’t surprise you , but maybe it will. The most disturbing part of the story is that the IRS may be asking for something we can’t provide...

Question: A spouse didn’t meet the residence test when the home sold because they weren’t legally married for two years on the date of the house sale. You indicated, however, the spouse is eligible for the home exclusion because by the end of the year they were married for two years Answer: If you want to understand how getting married impacts your ability to take tax-free profit, we must look at two issues and pass two tests. To take the full 121 exclusion deduction amount ($250,000/$500,000), first you have to determine filing status. If you were married or an RDP as of December 31, 2022, even if you did not live with your spouse/RDP at the end of 2022, your filing status is either Married Filing Joint or Married Filing Separate. Either way, the IRS considers you married for tax purposes. Now that you’ve determined that the client’s filing status is married, the potential gain exclusion is $500,000 under Section 121. But there are two important tests to apply to see whether you can exclude the maximum of $500,000 or whether it is going to be less. To learn about these tests, read on.

Taxpayers who seek tax planning strategies fall into two categories. We have taxpayers who plan well and want to keep their tax liability manageable and low as possible. Then, we have the taxpayers the IRS hits with a tax bill bigger than they were expecting. Both taxpayers are dealing with a case of forosophobia. When the latter happens the taxpayer often goes into a panic or at least a small sweat. Whether they have the money sitting in a bank account or not, they weren’t intending to spend it on taxes. So, it changes their financial planning. This is when the forosophobia really starts to set in. Forosophobia is the fear of the IRS and taxes. Have you experienced this with your clients? When tax season rolls around, they are anxious to see whether they owe taxes or not. Clients who haven’t made their estimated tax payments and don’t have anything to show for their income hold their breath. They wonder things such as: What happens if I can’t pay? Will I go to jail? The IRS is going to empty out my bank account. Once a taxpayer’s mind starts on this emotional rollercoaster it can be difficult to get them off. But as their trusted tax advisor you are in a very powerful position. Not only can you help them calm down and breathe again, but you can also get their lives back from this fear. As a licensed professional you can step in their shoes and handle their IRS problems for them. If you aren’t familiar with this process, don’t worry, I’ll give you a breakdown of a potential cure for their forosophobia. Let’s look at who can help the taxpayer and how.

Every Spring there is some point in the tax season that I have to remind myself why I chose to become a tax professional. I am often comforted to find out that I am not the only person questioning my career decision. Tax pros nationwide share on social media that they are thinking the same thing. So let me ask you. Why did you choose to do this to yourself again? You promised yourself to fire problem clients and improve systems. Yet we’re here in March, how did you do with keeping your promise to yourself? My first busy season Thomas Reuters released a video that I found funny, at one of their tax conferences. There are children that talk about why they want to be a tax accountant. A few reasons they give are: • To work 22-hour days; • To work with numbers that are changing all the time; • Having lots of turnover with burned out employees. My personal favorite is to have 3 people do the work of 8. In hindsight it almost sounds like they were describing the tax industry during 2020 and 2021. When I first watched the video, it was hilarious. But 12 years later I still smirk, but for different reasons. I can totally relate to the sarcasm. Nobody goes into this industry for those reasons yet here we are each Spring on the verge of burnout. Did you think of your why? I want you to write it really big and post it somewhere that you will see it every day when you are working at your desk. I want to share with you 10 things that you can implement to protect you and your why. I like to call them the Tax Professional Self-care 10 Commandments.