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Impact CPA, LLC
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It’s National Small Business Week and the IRS is hosting daily webcasts to help small business owners and self-employed individuals navigate common tax situations. Each daily webcast covers a different topic, and the same topic will be covered in two 30-minute sessions each day. Session 1 starts at 11 a.m. EDT and Session 2 starts at 1 p.m. EDT. Closed Captioning is available during Session 2. Topics include “Pay Now? Pay Later? Can’t Pay (Payment Options)” “Small Business Resources” and “Paycheck Checkup.” Find links to register here: https://bit.ly/2rb51KJ
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When someone provides the IRS with information that leads to collection of unpaid taxes, the tipster could receive money from the IRS Whistleblower Office. In one case, the whistleblower was a former attorney for the taxpayer and reported that the individual engaged in tax evasion using offshore entities. But the IRS found the information provided was subject to attorney/client privilege, and wasn’t usable, so no action was initiated against the individual. Plus, no proceeds were collected. Therefore, the U.S. Tax Court affirmed the IRS decision. (TC Memo 2018-34)
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What are your chances of being audited by the IRS? Not very high, according to the recently issued IRS Data Book. The annual publication contains statistical tables, IRS organizational information, and the rate at which the IRS audits tax returns. In 2017, the audit rate dropped to 0.6%, the lowest rate since 2002. In addition, the business taxes collected were $338.5 billion, down from $345.6 billion in fiscal year 2016. However, there were increases in the individual income, estate and employment taxes collected. Read the Data Book here: https://bit.ly/2uCTN5U
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The U.S. Tax Court defines a convicted tax evader’s taxable income. The court ruled that the individual had constructive dividend income from his solely owned construction business. There were checks made payable to the company but the taxpayer either cashed or deposited them into his own account or an account he and his wife opened in the name of another entity, which appeared to be a conduit for transferring money. The court also ruled that payments from the company the defendant claimed were nontaxable loan repayments were also taxable wages. (TC Memo 2018-31)
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Want a closer look at the U.S. federal budget? The Congressional Budget Office recently published a series of infographics related to the 2017 budget. The details show that the federal government collected $3.3 trillion in revenues in 2017. Receipts from individual income taxes, the largest source of revenues, totaled $1.587 trillion. Payroll tax receipts amounted to $1.162 trillion. Revenues composed 17.3% of gross domestic product in 2017 (up from 17.2% average in 1997-2016). Infographics depicting trends in revenue can be viewed here: https://bit.ly/2D767dy
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You can roll over funds from one IRA to another tax-free if you complete the rollover within 60 days. What if you miss the deadline? You may owe tax and, if you’re under age 59½, an early withdrawal penalty. The IRS may waive the penalty if circumstances are extenuating. One taxpayer missed the deadline when her financial advisor failed to invest a stated amount into an IRA. In addition, her medical condition impaired her cognitive ability to understand financial statements. She was granted a 60-day extension to complete the rollover. (IRS PLR 201807010)
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New rules now apply when it comes to the tax treatment of vehicles, thanks to the Tax Cuts and Jobs Act. The new law alters the tax rules for many taxpayers and transactions, including the rules governing depreciation or lease deductions for business autos, trade-ins of autos, write-offs for heavy SUVs and deductions for employee-provided autos. For example, for passenger autos placed in service after Dec. 31, 2017, the maximum amount of regular allowable depreciation is increased substantially. To learn how the new law will affect your situation, contact us.
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A coalition of states is challenging the Affordable Care Act (ACA). Twenty states have brought a new challenge to the ACA in a federal court in Texas. Now that the individual mandate penalty has been repealed by the Tax Cuts and Jobs Act (effective in 2019), the states argue that the ACA isn’t constitutional. The penalty is paid by individuals who don’t have mandatory health coverage or qualify for an exemption. The coalition of Attorneys General note the U.S. Supreme Court already upheld the individual mandate and the penalty in a 2012 case.
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The IRS has released an online updated withholding calculator, as well as a new version of Form W-4, to help taxpayers check their 2018 withholding in light of changes made by the Tax Cuts and Jobs Act. The IRS encourages employees to use the tools to perform a quick “paycheck checkup.” It can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time in 2019. The IRS has also issued a series of frequently asked questions (FAQs) on the withholding calculator. Read them here: http://bit.ly/2FdYQh2
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No alimony deduction for marital home expenses paid by husband. The U.S. Court Appeals for the 7th Circuit, affirming a decision by the U.S. Tax Court, has rejected a husband’s argument that half of the amounts that he paid to keep up the marital residence, between the time the couple signed a marriage dissolution agreement and the time the house was sold, were deductible as alimony. The court agreed with the IRS that the amount in question wasn’t alimony because it failed the “must end at the death of the payee spouse” test. (Hexum, CA 7 2/22/2018)
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