Thomas A. Gorczynski, EA, USTCP is a nationally recognized speaker and educator on federal tax law matters. He is editor-in-chief of EA Journal. In addition, Tom is the co-author of the PassKey Learning Systems EA Review Series and co-owner of Compass Tax Educators.
He is an Enrolled Agent, a Certified Tax Planner, a National Tax Practice Institute TM Fellow, a Certified Tax Resolution Specialist, and admitted to the bar of the United States Tax Court as a non-attorney.
Tom earned a Master of Science in Taxation from Golden Gate University and a Certificate in Finance and Accounting from the Wharton School at the University of Pennsylvania. He received the 2019 Excellence in Education Award from the National Association of Enrolled Agents and the 2018 Member of the Year Award from the American Institute of Certified Tax Planners.
Tom’s tax practice in Phoenix, Arizona focuses on implementing advanced tax reduction strategies and representing taxpayers with complex tax problems before the IRS and in the United States Tax Court.
Learn more about Tom and his upcoming educational offerings at www.gorczynski.tax.
The Inflation Reduction Act of 2022 expanded existing energy credits and created brand new ones. There are now several new ways tax professionals can help taxpayers save thousands of dollars a year by planning for these tax credits. In this webinar, we will cover the credits likely to be used by individuals and small businesses. We will also discuss tax planning considerations and areas in need of additional guidance.
The Treasury Department offers two types of federal savings bonds, Series EE and Series I, for individuals and businesses to invest in cash savings.
Until 2021, federal savings bond rates were low; however, with the dramatic increase in inflation and interest rates, interest in federal savings bonds as a savings vehicle has skyrocketed. For example, in May 2023, TreasuryDirect issued $230 million in I bonds in that one month; in May 2020, only $13 million were issued.
Federal savings bonds have very favorable tax features. At the federal level, the interest earned is generally tax-deferable and sometimes entirely excluded from tax. At the state level, the interest is always entirely excluded from tax.
This article will review the differences between Series EE and Series I savings bonds and the tax savings opportunities available to owners of these bonds.
Your optimal choice of entity depends on many factors, including which tax breaks and loopholes are available for that entity type. The C corporation leaps to the top of entity choices if your C corporation stock will qualify as small business stock (QSBS).
The tax law gives two huge tax breaks to QSBS:
1. Up to $10 million of gain exclusion upon sale or the stock’s liquidation; or
2. Tax-deferred rollover of gains if the taxpayer purchases additional QSBS.
But beware: There are two issues that are ambiguous under the law that could cause you to not qualify for either of these tax benefits. Read on to learn more!
Thanks to the Inflation Reduction Act of 2022, the federal government is giving out tens of billions of dollars in tax credits to incentivize taxpayers to purchase electric vehicles. As with any government program, claiming the benefits can be complicated. Since Congress used tax credits to deliver the program, and the personal tax credits are income-limited, tax planning can help a taxpayer who would otherwise not qualify for these benefits. This article will briefly overview the two personal electric vehicle tax credits, followed by several tax planning strategies to unlock these credits for taxpayers who may not otherwise qualify.
Congress created one of the best tax savings vehicles in 2003. It wasn’t the individual retirement account (IRA). It wasn’t the Roth IRA.It was the health savings account (HSA). The HSA is the only tax-preferred savings vehicle in which a taxpayer potentially gets both an upfront tax deduction in addition to tax-free and penalty-free distributions.
The IRS wrote the HSA rules to give taxpayers maximum flexibility in how they use their HSAs for medical expenses. Strategic use of the HSA can lead to lifelong tax savings opportunities.
Let’s review the basic rules as to how an HSA operates, the little-known rules that create tax savings opportunities, and examples of how the HSA can be used to provide tax-free and penalty-free distributions when the taxpayer has a cash need.
Millions of taxpayers in the United States are using crowdfunding websites like GoFundMe and Kickstarter to raise money for important needs, such as paying medical bills, paying legal fees, or funding a new business venture.
Both the IRS and the courts have been surprisingly silent on the tax consequences of crowdfunding platforms.
The good news is that established tax law provides a clear road map for answering most tax questions created by raising money from a crowdfunding website.
By knowing these rules, taxpayers can use crowdfunding to raise cash and minimize their overall tax exposure.
When an individual sells a stock for a loss, it is a capital loss, and Congress makes it difficult for individuals to use their capital losses.
The tax law only allows capital losses to the extent of capital gains. If capital losses exceed capital gains, the individual can only use up to $3,000 per year against ordinary income ($1,500 if married filing separately).
However, there is a way around this rule: Losses on Section 1244 stock are ordinary losses, and claiming this valuable tax benefit allows an individual to save thousands of dollars in tax in the year of sale compared to the standard capital loss treatment.
Let’s review what qualifies as Section 1244 stock, what benefits a taxpayer can get from Section 1244 stock, and how to claim those benefits on a tax return.
The IRS loves to issue penalties to taxpayers. In fiscal year 2019, the IRS imposed a whopping $40.5 billion in civil penalties.1
If a taxpayer wants to contest an IRS penalty, it usually takes a really good explanation plus a lot of time and effort.
However, there is a little-known IRS policy that allows a taxpayer to get penalty relief with no explanations required.
Taxpayers who file returns late can quickly rack up huge penalty bills.
The tax law disadvantages gamblers with its treatment of gambling gains and losses. Add that to the fact that gamblers often aren’t the best recordkeepers, and you have a recipe for years of overpaying taxes.
How most tax professionals attempt to reconcile gambling reporting on the tax return can cost gamblers thousands of dollars a year in increased taxes and Medicare premiums (if over age 65).
We’ll discuss how to calculate gambling gains on the tax return, which in many cases reduces or eliminates the excess taxes many gamblers could pay.
Federal, state, and local governments, as well as private organizations, have collectively given trillions of dollars in financial support to individuals and businesses during the pandemic through a maze of government and private programs.
These benefits will help taxpayers to a greater extent if they are tax-free, but are they? In some cases, we have a definite answer. For many, it is the classic tax law answer: “It depends.”
We’ll review the general tax law rules applicable to deciding, then show three ways you can use the tax law to exclude these benefits from a taxpayer’s income.
Many taxpayers use S corporations (governed by Subchapter S of the Internal Revenue Code) or C corporations (governed by Subchapter C of the Internal Revenue Code) to legally reduce income taxes, payroll taxes, and self-employment taxes for their business.
However, without careful planning, a taxpayer may have a surprise tax bill from using a corporation for federal tax purposes.
This article will tell you when these unexpected tax hits can happen and how the taxpayer can avoid them with proper planning.
Tax season is prosperous, summer is dry until extension season. Do you find yourself in that cycle? Clients are “easy” to get during tax season when taxes are top of mind. Then the direct deposits go dry by June, and you are looking for what’s next. Stop the search, you don’t have to add another service. You need better marketing to highlight the service that you offer and specialize in. This will allow you to have a predictable client pipeline. You can do tax preparation, planning, and or representation all year long.
This article focuses on the OBBB from the House offering a variety of observations to help understand the range of changes, relevance to compliance and planning, process considerations and some unexpected provisions. While the final OBBB will not include all of the House provisions or will modify some of them, there are lessons to learn to understand the tax legislation process and results now and in the future.
In the competitive accounting world, where trust and reliability are paramount, client retention is not just a success metric—it’s a vital strategy for sustainable growth. For Certified Public Accountants (CPAs), accountants, and bookkeepers, maintaining a solid relationship with existing clients can unlock new business opportunities, turning satisfied clients into powerful referral sources.
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Tax season is prosperous, summer is dry until extension season. Do you find yourself in that cycle? Clients are “easy” to get during tax season when taxes are top of mind. Then the direct deposits go dry by June, and you are looking for what’s next. Stop the search, you don’t have to add another service. You need better marketing to highlight the service that you offer and specialize in. This will allow you to have a predictable client pipeline. You can do tax preparation, planning, and or representation all year long.
This article focuses on the OBBB from the House offering a variety of observations to help understand the range of changes, relevance to compliance and planning, process considerations and some unexpected provisions. While the final OBBB will not include all of the House provisions or will modify some of them, there are lessons to learn to understand the tax legislation process and results now and in the future.
In the competitive accounting world, where trust and reliability are paramount, client retention is not just a success metric—it’s a vital strategy for sustainable growth. For Certified Public Accountants (CPAs), accountants, and bookkeepers, maintaining a solid relationship with existing clients can unlock new business opportunities, turning satisfied clients into powerful referral sources.
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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Question: Can my business still take a deduction for my car if the title is in my name? Answer: If you want to get all the business deductions you are entitled to for your car, it’s better to have the vehicle titled in your business’s name. Most taxpayers continue to use their vehicles for both personal use and business purposes, as a result, most car titles show just the individual’s name as the owner. This can present a big problem and potential lost deductions, especially due to the Tax Cuts and Jobs Act (TCJA). It is important to review the rules since they have changed recently. You may have deducted expenses on past tax returns as an unreimbursed employee vehicle expense. But under tax reform, the miscellaneous itemized deductions were repealed until 2026, and this is an important rule change. Read on to learn how to still benefit after tax reform and why it can help you go the extra tax mile to title the car in your business’s name.
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Looking to escape high state taxes? Perhaps the taxpayer wants to leave the gridlock, housing congestion, and cement jungles behind for the likes of slower, less expensive living? COVID-19’s long-term impact on urbanization may be uncertain, but we have already seen people moving to low-tax states because these states offer more land and outdoor space. Along with the people, many businesses are also looking to relocate to low tax jurisdictions. But before packing up that U-haul, consider how to lock in your tax savings; otherwise, there may be a nasty bill waiting for you in that new mailbox.
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Practically overnight, cryptocurrency has gone mainstream, with more and more investors funneling money into Bitcoin, Dogecoin, and other cryptocurrencies. The IRS has responded with increased interest and scrutiny, demonstrated by the addition of the cryptocurrency question on the front page of 1040. Whether you have invested in cryptocurrency or not, you are required to answer this tax return question. Many investors choose to take the most conservative position to avoid future correspondence from the IRS but trying to avoid a letter is no reason to pay more tax than necessary! After all, the Supreme Court has long held that a taxpayer has the right to do everything possible under the law to reduce tax.
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On Wednesday, March 11, President Biden signed into law the American Rescue Plan Act (ARPA) of 2021, a $1.9 trillion COVID stimulus package. The ARPA contains a mix of retroactive and prospective tax breaks in the form of credits, exclusions from income, and even new tax-free grant programs. Let’s take a look at the most tax significant items in the bill.
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Looking for lucrative deductions to reduce your taxable income? Many people are turning to Conservation Land Easements (CE), and the tax authorities are doing their best to deny these deductions. When a property meets the IRS criteria for a conservation easement, the owner may qualify to deduct thousands of dollars simply by acquiring the right kind of land an LLC holds. Often, these deductions are worth much more than the actual cost of getting the LLC interest. Sounds appealing doesn’t it? Under a conservation easement, a property’s owner gives up the right to make certain changes to that property to preserve it for future generations. Such an easement usually limits the usefulness of the property and lowers its value. But the tax deduction is not based just on the property’s reduction in value. The magnitude of the deduction comes into play when the deduction’s value is calculated by taking the difference between the appraised “highest and best use” of the property and its new reduced value. These best use appraisals often make assumptions about the property’s potential creating massive tax deductions, which, of course, leave taxpayers lining up to claim. But be careful! The IRS is cracking down on what it calls an “abusive tax deduction”; even going so far as to list the strategy on its Dirty Dozen list of tax scams. Yet even after spending billions of dollars, the service is not having much success. In fact, it’s losing key arguments on the strategy. Continue reading to learn how to participate safely.
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Starting a business is hard. Running a business is hard. And often, it isn’t profitable either – at least not right away. As if losing your money isn’t enough torture, it can get worse. If your business is not profitable and remains that way for a while the IRS can reclassify it as a hobby. This is really bad because while you still have to pay tax on your hobby income, you can’t deduct any of the expenses. Ouch! One strategy around this is to reorganize as a C corporation (since code section 183 doesn’t apply to them). However, if you’re thinking about using this to deduct expenses from your hobby, be careful! A taxpayer, a courtroom, and a whole lotta cats (explanation later) might change your mind. Click here to continue reading.
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Question: Can I save S/E tax and create passive income by having my spouse own my entity? Answer: Potentially, but it depends on a number of factors. If you’re a sole proprietor or single member LLC, you’ve probably felt the sting of self-employment taxes (S/E tax). If you and your spouse work together and you’re not incorporated, the IRS generally considers you a 50/50 partnership and both spouses’ earnings are subject to S/E tax. This is true even if your spouse minimally participates in the activity. That’s right, even without a partnership agreement, if you and your spouse both share in the profits and losses of an unincorporated business, the IRS considers that you have a partnership owned equally. The IRS calculates self-employment taxes by apportioning 50 percent of the earnings to each spouse. It’s possible to pay way more than you need to if your profits are more than the threshold for Social Security. One way around this is to make your non-participating (or passively involved) spouse your business partner. But if you live in a community property state, be sure to follow these guidelines to secure your savings.
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