235 results for author: Daniel Morris

Is “Don’t Die with Capital Loss Carryovers” a Good Rule to Live By?

Question In 2023 "Last-Minute Year-End Tax Strategies for Your Stock Portfolio", you state in Strategy 4, “Don’t die with Loss carryovers.” I ask, “Why not?” Let’s say I have $400,000 in capital loss carryovers, and a stock portfolio worth $2 million with a basis of $1 million. I sell $800,000 worth of stock to generate a $400,000 gain, use my $400,000 carryover loss to avoid taxes, and spend $800,000 to buy back that stock the next day. (The wash sale rule does not apply to gains, so the buyback causes no tax problems.) After this transaction, the loss is gone and I have the following: Result 1. Say I die a day ...

Don’t Let Your Weekend Gambling Create a Tax Nightmare

If you gamble, you must pay attention to your taxes. Imagine this. You gamble during the year, lose money, and pay $13,898 in taxes on your gambling activity. This, or worse, could happen to you as a casual gambler. You will see, later in this article, how it happened in real life. But first, here’s a quick look at the federal income tax rules for the non-professional gambler: Your winnings are “above-the-line” taxable. Your losses are “below-the-line” itemized deductions and thus deductible, but (a) only to the extent of your winnings and (b) only if you itemize. Casinos and other payors of your winnings may have to report ...

Tax Implications of Dual Citizenship: What You Need to Know

Are you a citizen of both the U.S. and another country? Or perhaps you are considering becoming a dual citizen of the U.S. and another country. Dual citizenship has become more common in an increasingly interconnected world. It comes with a number of advantages, such as expanded travel opportunities and access to social benefits like health care and education. And unfortunately, it also comes with very real responsibilities, particularly in the realm of taxation. If you fail to comply with your tax obligations, you could find yourself knee-deep in trouble, both legally and financially. In this article, you learn the ins and ...

2023 Last-Minute Year-End General Business Income Tax Deductions

The purpose of this article is to get the IRS to owe you money. Of course, the IRS will not likely cut you a check for this money—although in the right circumstances, that will happen. But in most cases, you’ll probably realize the cash when you pay less in taxes. This article gives you six powerful business tax deduction strategies you can easily understand and implement before the end of 2023. 1. Prepay Expenses Using the IRS Safe Harbor You have to thank the IRS for its tax-deduction safe harbors. IRS regulations contain a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 ...

2023 Last-Minute Vehicle Purchases to Save on Taxes

Questions: Do you need a replacement business car, SUV, van, or pickup truck? Do you need tax deductions this year? Do you need a tax credit to offset what you owe to the IRS? If you answered yes to any of these questions, you need to examine this article and get ready to smile. Thanks to the Tax Cuts and Jobs Act (TCJA), you can write off the full business cost of certain vehicles, 89 percent of other vehicles, and up $20,200 for other vehicles. If you plan on purchasing an electric vehicle or a plug-in hybrid electric vehicle, you may qualify for a tax credit of up to $7,500. Get the Timing Right Don’t procrastinate. If you ...

Beware: New 2024 Businesses and Rentals Trigger Financial Crimes Enforcement Network (FinCEN) Filings

If, in 2024 (right around the corner), you start a small business or buy a rental property using a new limited liability company (LLC), you can trigger the need to file new federal reports and keep them up to date. Take This Seriously The penalties for non-compliance with the requirements to file the newly required reports can be severe. First, there are civil penalties of up to $500 for each day that a violation continues, capped at $10,000. Second, there are also potential criminal penalties—imprisonment for up to two years for any person who willfully: Provides, or attempts to provide, false or fraudulent beneficial ...

Should You Convert Your Personal Vehicle to Business Use?

Remember Mel Practess, the attorney you met last month who came out ahead by using his wife’s car for business? Once Mel and Sharpe, his wife, started using both cars, they had 73.7 percent business use of each car. Before their agreement to switch cars every week, Mel drove one car and achieved 93.3 percent business use. If you are single and have two or more vehicles, you likely come out ahead by using all vehicles for business. Why? Let’s look at an example. Jim has three cars with the following basis for depreciation: $50,000 for vehicle 1 $33,000 for vehicle 2 $27,000 for vehicle 3 If Jim drives only vehicle 1 for business, ...

Tax-Free Income from 14-Day Augusta Rule for S Corporation Owners

IRC Section 280A(g), also known as the Augusta rule, states:1 “Notwithstanding any other provision of this section or section 183, if a dwelling unit is used during the taxable year by the taxpayer as a residence and such dwelling unit is actually rented for less than 15 days during the taxable year, then— No deduction otherwise allowable under this chapter because of the rental use of such dwelling unit shall be allowed, and The income derived from such use for the taxable year shall not be included in the gross income of such taxpayer under section 61.” Example: Fred rents his home at $3,000 a day for 14 days. Under the Augusta ...

IRS Makes a Mess of the ERC—What to Do Now?

In its e-News for Tax Professionals dated September 15, 2023, the IRS published these articles on the Employee Retention Credit: IRS orders immediate stop to new ERC processing amid surge of questionable claims, concerns from tax pros Client not convinced they’re ineligible for Employee Retention Credit? New IRS Q&A document may help Beware of warning signs of aggressive promotions that can mislead businesses into improper ERC claims IRS looks to hire 3,700 employees nationwide to help expand compliance for large corporations, complex partnerships Key Point: The IRS barrage of negative information and intimidation scares many tax ...

Understanding Tax Deductions for Charitable Clothing Donations: The Case of Duncan Bass

Tax-related issues can be complex and challenging, especially when it comes to charitable donations. In this article I explore the tax-related problems faced by Duncan Bass, an individual with multiple jobs and businesses, who made substantial donations of clothing to Goodwill and the Salvation Army. By taking a look at Mr. Bass's predicament, our objective lies in delineating the core tenets and fundamental facets of tax deductions for charitable clothing donations, highlighting the importance of adhering to IRS rules and regulations. Duncan Bass's Diverse Work and Philanthropic Endeavors Duncan Bass exemplified a diligent work ethic, balancing ...