24 Sep 2022
0

An “Innocent Spouse” May Be Able to Escape Tax Liability

Roger Rossmeisl, CPA
Individual Tax Briefs
An "Innocent Spouse" May Be Able to Escape Tax Liability

When a married couple files a joint tax return, each spouse is “jointly and severally” liable for the full amount of tax on the couple’s combined income. Therefore, the IRS can come after either spouse to collect the entire tax — not just the part that’s attributed to one spouse or the other. This includes any tax deficiency that the IRS assesses after an audit, as well as any penalties and interest. (However, the civil fraud penalty can be imposed only on spouses who’ve actually committed fraud.) Innocent spouse relief In some cases, spouses are eligible for “innocent spouse relief.” This generally involves individuals who were unaware of a tax understatement that was attributable to the other spouse. To qualify, you must show not only that you didn’t...

18 Sep 2022
0

Estimated Tax Payments: Who Owed Them and When is the Next One Due?

Roger Rossmeisl, CPA
Individual Tax Briefs
Estimated Tax Payments: Who Owes Them and When is the Next One Due?

If you don’t have enough federal tax withheld from your paychecks and other payments, you may have to make estimated tax payments. This is the case if you receive interest, dividends, self-employment income, capital gains or other income. Here are the applicable rules for paying estimated tax without triggering the penalty for underpayment. When are the payments due? Individuals must pay 25% of a “required annual payment” by April 15, June 15, September 15, and January 15 of the following year, to avoid an underpayment penalty. If one of those dates falls on a weekend or holiday, the payment is due on the next business day. So the fourth installment for 2022 is due on Monday, January 16, 2023. Payments are made using Form 1040-ES. How much should you...

18 Sep 2022
0

Inflation Reduction Act Provisions of Interest to Individuals

Roger Rossmeisl, CPA
Individual Tax Briefs
Inflation Reduction Act Provisions of Interest to Individuals

You may have heard that the Inflation Reduction Act (IRA) was signed into law recently. While experts have varying opinions about whether it will reduce inflation in the near future, it contains, extends and modifies many climate and energy-related tax credits that may be of interest to individuals. Non-business energy property Before the IRA was enacted, you were allowed a personal tax credit for certain non-business energy property expenses. The credit applied only to property placed in service before January 1, 2022. The credit is now extended for energy-efficient property placed in service before January 1, 2033. The new law also increases the credit for a tax year to an amount equal to 30% of: The amount paid or incurred by you for qualified energy efficiency improvements installed...

18 Sep 2022
0

Is Your Income Tax Withholding Adequate?

Roger Rossmeisl, CPA
Individual Tax Briefs
Is Your Income Tax Withholding Adequate?

When you filed your federal tax return this year, were you surprised to find you owed money? You might want to change your withholding so that this doesn’t happen again next year. You might even want to adjust your withholding if you got a big refund. Receiving a tax refund essentially means you’re giving the government an interest-free loan. Adjust if necessary Taxpayers should periodically review their tax situations and adjust withholding, if appropriate. The IRS has a withholding calculator to assist you in conducting a paycheck checkup. The calculator reflects tax law changes in areas such as available itemized deductions, the child credit, the dependent credit and the repeal of dependent exemptions. You can access the IRS calculator here: https://www.irs.gov/individuals/tax-withholding-estimator Life changes There are some situations when you should...

28 Aug 2022
0

IRS Provides Simplified Method for Extending Portability Election

Roger Rossmeisl, CPA
Individual Tax Briefs
IRS Provides Simplified Method for Extending Portability Election

The IRS has released a procedure (Rev Proc 2022-32) that provides a new, simplified method for obtaining an extension of time to make a "portability" election. A portability election allows a surviving spouse to apply a deceased spouse's unused exclusion (DSUE) amount to their own transfers during life or at death. New simplified method The new procedure allows certain estates to use to obtain an extension of time to elect portability of a DSUE amount. The procedure applies to estates that are not normally required to file an estate tax return because the value of the gross estate and adjusted taxable gifts is under the filing threshold and the decedent has a surviving spouse.  Under the new procedure, an extension request must be made on or before the...

28 Aug 2022
0

How to Avoid the Early Withdrawal Tax Penalty on IRA Distributions

Roger Rossmeisl, CPA
Individual Tax Briefs
How to Avoid the Early Withdrawal Tax Penalty on IRA Distributions

When you take withdrawals from your traditional IRA, you probably know that they’re taxable. But there may be a penalty tax on early withdrawals depending on how old you are when you take them and what you do with the money. Important: Once you reach a certain age, you must start taking required minimum distributions from your traditional IRAs to avoid a different tax penalty. Previously, the required beginning date (RBD) was April 1 of the year after the year in which you turn 70½. However, a 2019 law changed the RBD to 72 for individuals who reach age 70½ after 2019. But what if you want to take an “early” withdrawal, defined as one taken before age 59½? You’ll be hit with a 10% penalty tax unless...

23 Aug 2022
0

IRS/Energy Dept Issue Guidance, List of Cars Eligible for Revised EV Credit

Roger Rossmeisl, CPA
Automotive, Individual Tax Briefs, Small Business Tax Briefs
IRS/Energy Dept Issue Guidance, List of Cars Eligible for Revised EV Credit

On its website, the IRS has issued guidance  on accessing the Inflation Reduction Act of 2022's tax credits for electric vehicles ("Plug-in Electric Drive Vehicle Credit at a Glance"), while the Energy Department listed credit-eligible cars, trucks, and SUVs ("List of Vehicles with Final Assembly in North America") on 8/16/22, just hours after President  Biden signed the law. Credit Amounts The Act introduces a $4,000 tax credit for the purchase of used electric vehicles (EVs), and updates the $7,500 credit for new EVs . . . Vehicle Price Caps A major change however is the introduction of caps on the price of new vehicles, based on the buyer's income, that qualify for that credit. The caps imposed are: $55,000 for electric cars, and $80,000 for SUVs and pickup trucks. Final Assembly...

23 Aug 2022
0

Does the Kiddie Tax Affect Your Family?

Roger Rossmeisl, CPA
Individual Tax Briefs
Does the Kiddie Tax Affect Your Family?

Many people wonder how they can save taxes by transferring assets into their children’s names. This tax strategy is called income shifting. It seeks to take income out of your higher tax bracket and place it in the lower tax brackets of your children. While some tax savings are available through this approach, the “kiddie tax” rules impose substantial limitations if: The child hasn’t reached age 18 before the close of the tax year, or The child’s earned income doesn’t exceed half of his or her support and the child is age 18 or is a full-time student age 19 to 23.   The kiddie tax rules apply to your children who are under the cutoff age(s) described above, and who have more than a certain amount of...

17 Aug 2022
0

President Biden Signs the Inflation Reduction Act of 2022

Roger Rossmeisl, CPA
Current Events, Individual Tax Briefs, Small Business Tax Briefs
President Biden Signs the Inflation Reduction Act of 2022

On 8/16/22, President Biden signed into law the so-called Inflation Reduction Act of 2022 (H.R. 5376).  In a statement earlier, the White House said, "President Biden and Congressional Democrats have worked together to deliver a historic legislative achievement that defeats special interests, delivers for American families, and grows the economy from the bottom up and middle out". The White House is also planning an event on 9/6/22 to celebrate the enactment of the bill. The $740 billion Act is projected to raise revenue via a new 15% minimum tax on large, profitable corporations and a 1% excise tax on stock buybacks, to achieve the Democrats goal of using the budget reconciliation measure to reduce the U.S. annual deficit (i.e. not the National Debt) by approximately $300...

17 Jul 2022
0

How Disability Income Benefits are Taxed

Roger Rossmeisl, CPA
Individual Tax Briefs
How Disability Income Benefits are Taxed

If you’ve recently begun receiving disability income, you may wonder how it’s taxed. The answer is: It depends. The key issue is: Who paid for the benefit? If the income is paid directly to you by your employer, it’s taxable to you just as your ordinary salary would be. (Taxable benefits are also subject to federal income tax withholding. However, depending on the employer’s disability plan, in some cases they aren’t subject to Social Security tax.) Frequently, the payments aren’t made by an employer but by an insurance company under a policy providing disability coverage. In other cases, they’re made under an arrangement having the effect of accident or health insurance. In these cases, the tax treatment depends on who paid for the insurance coverage. If your...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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