Edition 55

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.

A 113-page set of instructions accompanies the 2022 Form 1040, U.S. Individual Income Tax Return. Commonly used Form 1040 Schedules A, B, C, D, and E comprise an aggregate of 69 pages of instructions. Instructions are non-binding information but certainly necessary for getting tax information correctly placed on the tax return. With hundreds of Internal Revenue Code (IRC) sections, thousands of pages of regulations, thousands of IRS rulings and judicial opinions, on top of more than 200 pages of instructions relevant to many complex Forms 1040, some tax pros might easily overlook these items. This article travels top to bottom through the two-page 2022 Form 1040, highlighting a few items not to overlook. No promises that the list hits all items, but what follows might bring to mind a few more items you can add to the list.

Question: What kind of trusts help a taxpayer pay less or no federal tax? Answer: If you have trusts and want to minimize state taxes, there are options available. In the United States, there are two types of trusts for federal income tax purposes: grantor and non-grantor trusts. A grantor trust is one the creator or their spouse retains enough control over that they are still the assets’ owner. Therefore, they must pay taxes on any income or gains it generates. On the other hand, a non-grantor trust is its own entity and is responsible for paying its own taxes. However, state tax laws also have an impact on the taxes trusts must pay. By choosing the right trustees or assets for your non-grantor trust, it’s possible to minimize or even eliminate state income taxes. Don’t miss out on this opportunity. Learn more about your options and take steps to reduce your trust taxes today. Click here to continue reading.