Archive for March, 2013

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The IRS’s “Dirty Dozen” Tax Scams

Thursday, March 28th, 2013

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

Each year, based on information derived from their data base, the Internal Revenue Service publishes a list of the top twelve tax return scams that have been observed, and in many case, prosecuted by the Federal government.  The IRS is continuously leveraging the many benefits and advantages which are being provided by and  associated with information technology.  While you may have been able to participate and gain from one or more of these scams in the past by being “under the radar”, that situation is rapidly changing.  If you are considering any of these activities, or if you are planning to participate in a tax scam, you would be wise to reconsider the risks and adverse outcomes from your plans.

You may also look at this list and determine whether or not your current or past activities have placed you at risk for becoming a victim of one or more of these tax scams.  If there are risks, then perhaps you should make several important changes in your plans and activities to either reduce or eliminate these risks.   

If you have already filed either a fraudulent, incorrect, or erroneous tax return, you should contact either a Certified Public Accountant or tax attorney immediately. (more…)

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Is Your Mortgage Debt Forgiveness Taxable Income To You?

Wednesday, March 13th, 2013

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

Important Facts about Mortgage Debt Forgiveness

 

If your lender cancelled or forgave your mortgage debt, you generally have to pay tax on that amount. But there are exceptions to this rule for some homeowners who had mortgage debt forgiven in 2012.

Here are 10 key facts from the IRS about mortgage debt forgiveness:

1.   Cancelled debt normally results in taxable income. However, you may be able to exclude the cancelled debt from your income if the debt was a mortgage on your main home.

2.   To qualify, you must have used the debt to buy, build or substantially improve your principal residence. The residence must also secure the mortgage.

3.   The maximum qualified debt that you can exclude under this exception is $2 million. The limit is $1 million for a married person who files a separate tax return.

4.   You may be able to exclude from income the amount of mortgage debt reduced through mortgage restructuring. You may also be able to exclude mortgage debt cancelled in a foreclosure.

5.   You may also qualify for the exclusion on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home. The exclusion is limited to the amount of the old mortgage principal just before the refinancing.

6.   Proceeds of refinanced mortgage debt used for other purposes do not qualify for the exclusion. For example, debt used to pay off credit card debt does not qualify. 

7.   If you qualify, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Submit the completed form with your federal income tax return.

8.   Other types of cancelled debt do not qualify for this special exclusion. This includes debt cancelled on second homes, rental and business property, credit cards or car loans. In some cases, other tax relief provisions may apply, such as debts discharged in certain bankruptcy proceedings. Form 982 provides more details about these provisions.

9.   If your lender reduced or cancelled at least $600 of your mortgage debt, they normally send you a statement in January of the next year. Form 1099-C, Cancellation of Debt, shows the amount of cancelled debt and the fair market value of any foreclosed property.

10. Check your Form 1099-C for the cancelled debt amount shown in Box 2, and the value of your home shown in Box 7. Notify the lender immediately of any incorrect information so they can correct the form.

Use the Interactive Tax Assistant tool on IRS.gov to check if your cancelled debt is taxable. Also, see Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. IRS forms and publications are available online at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

IRS YouTube Videos:

 

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Are Unemployment Benefits Taxable?

Tuesday, March 5th, 2013

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

Four Tax Tips about Your Unemployment Benefits

 

If you received unemployment benefits this year, you must report the payments on your federal income tax return.

Here are four tips from the IRS about unemployment benefits.

1.   You must include all unemployment compensation you received in your total income for the year. You should receive a Form 1099-G, Certain Government Payments. It will show the amount you were paid and the amount of any federal income taxes withheld from your payments.

2.   Types of unemployment benefits include:

  • Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
  • Railroad unemployment compensation benefits
  • Disability payments from a government program paid as a substitute for unemployment compensation
  • Trade readjustment allowances under the Trade Act of 1974
  • Unemployment assistance under the Disaster Relief and Emergency Assistance Act

3.   You must include benefits from regular union dues paid to you as an unemployed member of a union in your income. However, other rules apply if you contribute to a special union fund and your contributions are not deductible. If this applies to you, only include in income the amount you received from the fund that is more than your contributions.

4.   You can choose to have federal income tax withheld from your unemployment benefits. You make this choice using Form W-4V, Voluntary Withholding Request. If you complete the form and give it to the paying office, they will withhold tax at 10 percent of your payments. If you choose not to have tax withheld, you may have to make estimated tax payments throughout the year.

For more information on unemployment benefits see IRS Publications 17, Your Federal Income Tax, or IRS Publication 525, Taxable and Nontaxable Income. You can download these free booklets and Form W-4V from the IRS.gov website. You may also order them by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

 

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