Congress, aware that related parties could create fictitious tax losses lacking economic substance based upon the related parties continued enjoyment of the property subject to the loss, enacted § 267 of the Internal Revenue Code to disallow certain losses and deductions on transactions between related taxpayers.
Frivolous Tax Arguments And Their Perils
“Like moths to a flame, some people find themselves irresistibly drawn to the tax protester movement’s illusory claim that there is no legal requirement to pay federal income tax. And, like moths, these people sometimes get burned.” United States v. Sloan, 939 F.2d 499, 499-500 (7th Cir. 1991).
As long as the federal income tax has been with us, taxpayers have tried to argue that income taxes don’t legally apply to them. The reasons and bases for these arguments usually include the voluntary nature of the federal income tax system, the meaning of income, and the meaning of certain terms contained in the Interenal Revenue Code. Taxpayers hanging their hats on frivolous positions risk a variety of civil and criminal penalties for tax evasion and tax fraud . And taxpayers that adopt these frivolous positions may face more severe consequences than those who only promote them.
Tax on Capital Gains and Losses, Explained
A capital gain occurs when you transfer or sell a piece of property for more than its acquisition cost. To be more succinct, it’s the profit realized on the sale of a non-inventory asset. Capital gains are realized from the sale of all types of property, both real and personal such as investments and other traditional non-investment types of personal property. In the United States, with certain exceptions, individuals and corporations pay income tax on the net total of all their capital gains.
What You Need to Know About Deducting State and Local Taxes
Taxpayers that itemize deductions on Schedule A, (and file Form 1040) can deduct the cost of state income taxes on their federal tax return. The ability to deduct the full cost of these taxes has its obvious advantages. Taxpayers may either claim such a deduction from state and local income taxes or state and local sales taxes, but not both. Basically, to be deductible, the tax must be imposed on a taxpayer and must have been paid during the particular tax year. Taxpayers that elect to deduct state and local general sales taxes, may use either their actual expenses or the optional sales tax tables.
Who Claims The Kids On Their Taxes, And Other Ways Divorce May Affect Your Taxes
Divorcing couples often wonder who claims the children on their taxes, and in what other ways divorce will affect their taxes. Questions may include which filing status to use after the divorce, and how payments for spousal maintenance and child support to an ex-spouse are treated for tax purposes. Also, inquiries about what happens to assets like the family residence are obviously frequently common.
Filing Status
To Be or Not To Be? Married Filing Jointly or Married Filing Separately?
Married couples have the option to file jointly or separately on their federal income tax returns. Undoubtedly, married couples during tax season have asked each other if they are filing advantageously, whether currently filing jointly or separately. The IRS strongly encourages most couples to file joint tax returns by extending several tax breaks to those who file together. In the vast majority of cases, it’s best for married couples to file jointly, but there may be a few instances when it’s better to submit separate returns.
The Alternative Minimum Tax, Explained
Under the Internal Revenue Code and the vast body of rules and regulations related thereto, certain tax benefits can significantly reduce the amount of taxes that a taxpayer may owe. The alternative minimum tax (AMT) applies to those taxpayers with high levels of income by limiting these benefits and ensuring that these taxpayers pay at least a minimum amount of tax. If the AMT applies to you, you may lose many credits or deductions you would normally receive if you didn’t have to pay the AMT.
IRS Audits – What Are My Chances?
It’s considered by many taxpayers to be one of the most frightening events that could happen related to their everyday business affairs. What is this frightening event? An IRS audit, of course. But is a tax audit really that scary in real life? The numbers reveal that only 1% of all taxpayers experience an audit, and of this one percent, about one in five result in a meeting with the IRS.
Presently, the IRS audits half as many taxpayers as it did five years ago. However, the amount of tax recovered per audit has increased. The IRS uses an elaborate computer selection process, auditing only those returns which will almost certainly yield some adjustment.
You’ve filed your tax return, how long does the IRS have to audit you?
You’ve filed all of your tax returns, and because of your level of income you find yourself in the class of taxpayers whose return is more likely to trigger an IRS audit. So you wonder, how long does the IRS now have to audit you?
Due to disclosure requirements, the IRS makes contact with a taxpayer selected for an audit by telephone or mail only. When returns are filed, they are compared against norms for similar returns. These norms are developed from audits of a statistically valid random sample of returns, selected as part of the National Research Program conducted by the IRS to update return selection information.
Uber drivers – employees or independent contractors? (What’s the significance anyway?)
By now everyone is familiar with Uber. And in case you’re not, Uber is an online taxi dispatch company that uses its own mobile app that allows its customers to submit a trip request on their smartphones for drivers who then pick up riders using driver-owned vehicles.
Uber’s business is built on an independent contractor (IC) model, which in Uber’s case means that ideally, Uber drivers receive no benefits, use their own vehicles, and pay all expenses for gas, maintenance, and insurance. Twenty to twenty-five (20 to 25) percent of driver earnings are paid to Uber as a fee to use its service. Some estimate that this contractor model can save businesses up to 30% on labor costs.