6 Audit Red Flags the IRS Uses to Choose Which Returns to Audit

red_flag

When it comes to your taxes, there are few things scarier than the prospect of a tax audit.

The good news is that most people aren’t audited.

Further, most audits are actually taken care of through the mail.  Many audits are routine, and require only that you send in a piece of missing documentation.

However, most people still prefer not to be audited at all.

As you prepare your tax return, consider the following 6 audit red flags that could lead to an increased chance of audit:

Continue Reading

Withdrawing Money From a Roth IRA: How Does It Work and When Can I Do It?

Roth_IRA_Nest_Egg

Withdrawing money from your retirement account is something you only really want to do in retirement.

That’s obvious.

What is also obvious is there are definitely times in life when you find yourself with a significant cash crunch and that nest egg looks ripe for the harvest.

Unfortunately for a majority of your retirement account options any early withdrawals are disastrous.

You get hit with fees and taxes; your overall withdrawal can easily be reduced by 25-40%… which means you just have to withdraw even more money to get to the amount that you actually need to use.

It’s a lose-lose situation: you’re paying a lot in fees and taxes while also losing out on potential growth of the account in the future.

unless you’re using a Roth IRA.

Withdrawing Money from a Roth IRA

Continue Reading

Did You Get a 1099-K Tax Form This Year?

One of the newest tax forms to be released is the 1099-K.

This new 1099 tax form is designed by the IRS to help catch those who under-report their income from online business transactions.

Concerns that sellers on eBay are not reporting their income, as well as other third-party transactions handled by banks and processors like PayPal, are being overlooked as income, the IRS is hoping that the 1099-K tax form can help them recapture lost revenue.

Who Issues the 1099-K?

Continue Reading

What Business Expenses are Tax Deductible?

When it comes to reducing business income for tax purposes, the tax deduction is one of the most popular methods.

You can deduct some of the money you spend on business and lower your taxable income.

However, it’s important that you understand what makes an expense tax deductible for business purposes.  Otherwise, you could find yourself red-flagged by the IRS.

But What Business Expenses are Tax Deductible?

Ordinary and Necessary Expenses

Continue Reading

Obama Proposed Corporate Tax Reform – Cut Tax Rate But Seal Up Loopholes

It’s yet another example of something that most lawmakers agree on yet it most likely will not get done.  Washington gridlock is alive and well even when there is no disagreement on the core issue.

That is the main problem with the corporate tax.

Currently, American corporations pay a 35% tax rate, higher than any other advanced country and most lawmakers, tax experts and, of course, corporate CEOs believe that this is too high.

Because of that, President Obama proposed lowering the tax rate to 28% in an attempt to make America a more corporate friendly place to do business.

The chances of this issue gaining enough traction to get through Congress is essentially none.

Here’s why. Continue Reading

How to Deduct Your Moving Expenses

Moving_Truck_smaller

According to the U.S. Census bureau, up to 40 million people move from their current residence each year.

That represents just over 14% of the population and as everybody knows, moving is expensive, stressful, and back breaking.

For those who are moving because of a new job, the IRS softens the blow by allowing a portion of those moving expenses to be deducted on your tax filing– but be careful.

In order to deduct your moving expenses, you have to pass two important IRS tests.
Continue Reading

Cost Basis Reporting – How it Affects Your Taxes

When you sell an investment, your gains or losses depends on your cost basis.

If you sell for more than your cost, you end up owning capital gains taxes on the increase.  If you sell at a loss, you don’t have to pay taxes on the difference; instead, you might be able to claim a tax deduction for your investment loss.

What is Cost Basis?

Continue Reading