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The Internal Revenue Service, probably the most-hated government agency in America, just became more powerful, and probably more ominous. As everyone knows, IRS is the only agency that can, without going to Court, seize your asses and empty your bank accounts – one of the reasons they earned the title of being the most feared agency. Now, the IRS has been empowered to seize American passports of delinquent taxpayers, maybe even preventing those taxpayers from domestic flights.
In June of 2013, the U.S. Supreme Court held in U.S. v. Windsor that provisions of the Defense of Marriage Act (DOMA) were unconstitutional. Prior to this ruling, Section 3 of DOMA required that, for purposes of federal enactments, marriage be defined as the union of one man and one woman and the word spouse be defined as someone of the opposite-sex who is a husband or wife.
You’ve just received an award as the prevailing party in a lawsuit and it’s just a few weeks before the April 15th tax deadline. As you organize your documentation for the preparation of your taxes, you suddenly wonder if you have to pay taxes on the legal proceeds that you received a few weeks earlier. Are they indeed taxable? Whether you must include the amount of the proceeds in your income depends on all the facts and circumstances of each individual case. It also depends upon the type of injury incurred.
A profitable way to convert your home into a means of producing income is the rental of it completely, or just in part (a room), even for a short period of time. Taxpayers may avail themselves of rental services like Airbnb, HomeAway, or VRBO to accomplish this. Of course all income is “all income from whatever source derived” under the Internal Revenue Code. Income earned through the rental of your home, or a room in your home, is taxable “income” and must be reported to the IRS on your tax return.
IS IT BETTER TO FILE SEPARATELY OR JOINTLY WHEN MARRIED?
Under the tax laws, if you are legally married, when filing your tax returns, you have a choice of filing jointly with your spouse, or filing separately. The tax laws generally expect married couples to file jointly though they may legally elect to file separately.
Most times, it is more to the advantage of the filing couple to file jointly. Where married taxpayers file separately, most deductions and exemptions are generally halved for each tax return. In rare cases, married taxpayers may be able to file separately and claim higher deductions and get bigger refunds on their returns.
Is Your Income Taxable?
Generally, under IRS rules, all incomes are taxable, except if they are specifically excluded from income. Taxable income includes money earned, like wages and tips. It also includes bartering, an exchange of property or services
Certain incomes are usually excluded from income, such as
• Gifts and inheritances
• Child support payments
• Welfare benefits
• Damage awards for physical injury or sickness
• Cash rebates from a dealer or manufacturer for an item you buy
• Reimbursements for qualified adoption expenses
Under certain conditions, the following income may not be taxable::
• Life insurance. Proceeds paid to you because of the death of the insured person are usually not taxable. However, if you redeem a life insurance policy for cash, any amount that you get that is more than the cost of the policy is taxable.
• Qualified scholarship. In most cases, income from this type of scholarship is not taxable. This means that amounts you use for certain costs, such as tuition and required books, are not taxable. On the other hand, amounts you use for room and board are taxable.
• State income tax refund. If you got a state or local income tax refund, the amount may be taxable. You should have received a 2014 Form 1099-G from the agency that made the payment to you. If you didn’t get it by mail, the agency may have provided the form electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.
Other than receiving a refund check, correspondence with the IRS is usually a stressful experience to say the least. However, as understandable as it is to ignore the notice for as long as possible, the truth is that you will need to open it immediately to see the request that the IRS is making. So, do not ignore an IRS request as it will lead to even more expenses or worse depending on the nature of the request.
What is a Tax Summons?
One would not normally think that the US could impose taxes on a home that was sold in London, especially when the home was sold by the Mayor of London. However, this is exactly what happened late last year.
Originally, London Mayer Boris Johnson said that he would not be paying the tax lien that was placed on him by the United States, but earlier this year changed his mind. Now, reports say that he plans to pay the fee just before he takes a planned trip to the Boston area.
There are few things as disconcerting as receiving the notice that the IRS will be conducting a tax audit on your return. Such a notice can be very upsetting and understandably so when it is totally unexpected. However, instead of panicking or believing the worst, it is important to remember that the IRS will often conduct random audits every year which mean that your filing may actually be fine.
Typically, when you are receiving anything from the IRS, the experience is very stressful. Of course, there is the positive experience of receiving a refund check, but when people receive anything other than this, great stress is typically involved. Many people even take steps to avoid opening the document altogether.
However, avoiding the situation can be very dangerous and will only work to escalate the situation even further. Most of the time, the IRS will request information through a particular form called an Information Document Request, Form 4564. Surprisingly, you actually have no legal obligation to respond to this form, but by avoiding it, you may find yourself in an even more stressful situation.