Since 2001, we provide tax expertise & strategies for: Individuals, Corporations, LLCs & Trusts.
TaxBizPro, LLC Posted on: December 17, 2011 19:29
If you are ready to purchase your dream home, a careful tax analysis about different types of mortgages must be done. If you want to know about big tax write-off a mortgage can give you, you should learn how mortgages work and then sit down with a tax advisor or an accountant and determined whether a 30-year mortgage is better or worse for you than the 15-year mortgage. This task might be confusing and you need to make sure you have a clear picture and help from your tax accountant. You can use mortgage calculator to compute the monthly payments on a 30 years or 15 years mortgages. This tool will help you budget your personal expenses and you will see how much the monthly payment will be on your new mortgage. What if you take out a 30-year fixed rate mortgage? If you decided to take out a 30-year fixed rate mortgage, you will be able to borrow money for a longer term. Your interest rate will be fixed and not fluctuate according to the changing mortgage markets. The payments for a 30-year mortgage will be lower then for the 15-year mortgage because of extra 15 years ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: November 28, 2011 11:54
The interest that you pay on your home mortgage loans is a very important factor in your financial tax strategy. The good thing about mortgage loan is that mortgage interest may be tax deductible. This is one of the popular tax deductions that you, the taxpayers, look forward to. However, you must adhere to some rules so as to get the benefit of mortgage interest tax deduction. As the mortgage holder, you must fulfill requirements of filling out form 1040 with a schedule A. Schedule A allows you to itemize or in other words deduct your mortgage interest. The person, who is filing for the tax deduction, must be the owner of the property.  No you don’t need to be an owner of the mortgage; you need to be an owner of the property. (It is not required in every case for you to have a true debtor-creditor relationship with your lender to take the mortgage interest deduction. Title 26 Code of Federal Regulations section 1.163-1(b) provides, quote “interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: September 11, 2011 10:32
There are two types of interest in a partnership: Capital Interest and Profits Interest.  Both Capital Interest and Profit Interest are determined based on the contribution of property to the partnership and or services performed for the partnership.  The Tax Court has described a Capital Interest is any interest that would entitle the holder to receive a share of partnership assets upon liquidation of the partnership.  Profit Interest is any interest that would not entitle the holder to receive assets on an immediate liquidation but that does give the partner the right to share in future partnership profits or earnings (Mark IV Pictures Inc. v. Commissioner, T.C. Memo 1990-571), Reg. 1.721-1(b)(1) and Reg. 1.704-1(e)(1)(v) respectively. If a partner receives an interest in the partnership in exchange for services, the beginning basis in the partnership interest is the amount of income required to be reported for the services rendered. Under Reg. 1.721-1(b)(1), service provided is not a property that will satisfy the regulation for non taxable transaction.  Therefore, the LLC is deemed to have paid the individual partner for services in cash and the individual partner in return, contributed an equal amount of value ...

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Posted in:Business Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: August 29, 2011 11:19
Partnership or LLC Distributions may be taxable to the partners or LLC members. Distribution of partnership assets can be done as either current distribution or liquidating distribution. A current distribution is when a partnership makes a distribution to the partner(s). The receiving partner’s capital interest is retained fully or partially (IRC Sec. 761(d)). Even if the distribution reduces partner’s interest in the LLC from 80% to 2%, this distribution will be considered current.  A liquidating distribution is when partner’s entire interest in the partnership/LLC is completely liquidated. Distribution can consist of cash, property, or combination of both. If partnership makes a distribution in excess of partner’s basis in the partnership/LLC, a taxable event may take place. Example: David and Daniel are 50/50 partners in ABC LLC. David contributed $10,000 cash and Daniel contributed $5,000 cash to the LLC. At the end of the first tax year, the ABC LLC has generated $4,000 in profits. ABC LLC distributes $8,000 cash to each partner. David’s distribution is not taxable: $10,000 initial capital contribution add $2,000 (50% LLC profit) $12,000 basis (capital) Less $8,000 cash distribution David’s basis in partnership interest after the distribution is $4,000. Daniel’s distribution is taxable: $5,000 initial capital contribution add $2,000 (50% LLC profit) $7,000 basis (capital) Less $8,000 cash distribution Daniel’s basis ...

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Posted in:Business Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: June 28, 2011 16:29
Disclaimer: This article is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. Choosing the best and correct business structure is vital key component to starting a new business or office. This article will address some formation and legal issues that businesses encounter daily.  Hopefully it will be of help to new entrepreneurs and existing businesses that want to set up their companies correctly.  So there are several types of business entities: partnership, limited liability company, S or C corporation.  Each legal entity had different nature of relations with investors, lenders, partners, suppliers, and customers. The LLC is a relatively new type of hybrid business structure that is now permissible in New York and New Jersey. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration. It is highly recommended that an LLC with one or more partners contain an ...

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Posted in:Business Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: May 13, 2011 13:43
Having access to reliable NJ/NYC accounting CPA tax services is important for businesses of any size in the New York/New Jersey area.  But some businesses may not spend as much time as they should in choosing the accounting and tax services firm for their company. Often the business owners just select the “low cost provider” and move forward.  Using the low cost approach could be a mistake.  There are other important factors to consider when looking for a trustworthy accounting firm that can provide the CPA and tax services that your business needs. What Accounting services will you need for your business?  CPA/accounting & tax firms vary in their service offerings.  Some may only provide tax preparation or tax assistance, while others provide capital expenditure planning, audits, certified financial statements, payroll, accounting and general ledger management, and business growth or strategic planning. How many resources are needed?  If the CPA/accounting & tax firm is too small to handle various tax and accounting cases, important deadlines could slip.  Consider the business needs compared to the resources available at the CPA/accounting & tax firm, and how flexible your business is with meeting its deadlines. Is there industry expertise?  ...

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Posted in:Business Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: October 21, 2010 10:03
A taxpayer who trades securities, reports his/her trades on schedule D of form 1040.  He/she is subject to the $3,000 annual limitation that applies to net realized capital losses.  Also, securities are subject to the Wash Sales rules (in a nut-shell; loses will not be recognized for tax purposes if you sell a security at a loss and within 30 days you buy identical security).  However, if you devote a great deal of time (see later what this means) trading stock, bonds, options or any other security, you might be able to qualify as a Trader for tax purposes. This is accomplished by electing IRS Code Sec 475(f), also know as mark-to-market (M2M).  By doing so, the Trader elects to mark his/her stock holdings to market at the end of the year.  Under this method, all gains and losses are treated as ordinary income or loss.  All the securities held as of December 31st are deemed to be sold at the year-end market value.  If you were profitable, the realized capital gains from trades are not subject to Self-Employment tax, under IRC Sec 1402 (a)(3)(A).  So by making this IRC Sec 475(f) election, a Trader ...

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Posted in:Business Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: September 3, 2010 11:25
If you are thinking or already attending a college, university or a graduate school, then you should know about several educational tax credits that you can claim on your personal income tax return.  If you are a dependent, your parent(s) can claim those credits on their personal income tax return. This article addresses The American Opportunity Credit. • You can claim The American Opportunity Credit tax credit on form 8863* for tuition and certain school fees paid for higher education in 2009 and 2010. • This credit can be claimed for expenses paid for any of the first four years of post-secondary education. • In order to completely benefit from this tax credit, your income (modified adjusted gross income) must be $80,000 or less - for single filers and $160,000 or less - for joint filers.  If you make over these amounts, this tax credit will start to decrease accordingly. • You can claim up to $2,500 a year.  It’s based on a percentage of the cost of qualified tuition and related educational expenses paid during the taxable year for each eligible student. • Qualified tuition and related expenses also include, expenses paid for required course materials: books, supplies and equipment required for ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: July 7, 2010 15:35
If you send your kid(s) to a summer camp(s) or day care facility, you might be able to deduct those costs by claiming dependent care expense tax credit.  Because you and your spouse work or are looking for work, you must arrange to care for your child(ren) under 13 years of age during the school vacation.  So camp might be a good tax deduction for you.  You can claim the child and dependent care expense credit on your personal income tax return.  Here are few facts that you should know about this tax credit. • If you paid for an overnight camp, you cannot deduct it; those expenses do not qualify for this credit. • If you bring your child to a daycare facility outside your home you can deduct it and claim this tax credit. • Unfortunately, there is a limit of how much you can deduct.  Presently only $3,000 of the qualified child care expenses paid during the year for one qualifying individual or $6,000 for two or more qualifying individuals is allowed for this credit. • Depending on your income, you can deduct up to 35 percent of your qualifying child care expenses (see limits above) and the lowest deduction ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: June 2, 2010 10:32
Do you have an IRA or an employer sponsored retirement plan such as: 401-K, 403-B, 457, DB, Profit Sharing Plan, or other qualified retirement plans?  Did you purchase a non-qualified annuity to protect your retirement assets?  If the answer is yes, then you should know what would happen tax-wise, if you take the money out early (taking premature distribution)?  In most cases withdrawing funds early out of a retirement plan or an IRA before 59 ½, is called “an early distribution”. • Early distributions will be reported to the IRS on form 1099-R and subsequently you will also report it on your personal income tax return. • Early distributions are usually subject to ordinary income taxes on both Federal and State levels.  You will pay taxes based on your tax bracket.  Additionally, you also will be subject to the 10 percent tax penalty. • If you received an early distribution from a Roth IRA, the distribution attributable to your prior contributions (the amount that you contributed also referred to as basis) is not subject to income taxes or penalties.  Any amount over the basis will be subject to the above taxes and penalties. • There are several exceptions to ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: May 6, 2010 9:02
Capital Gains and Losses are recognized when you sell or dispose of an asset (property, stock, bonds, other securities, collectables, etc.)  Here are some facts you should know about capital gains and losses. • When you sell a capital asset, you should know the original price.  It also referred to as “basis”.  The difference between the amounts you sold it for and your basis is the capital gain or capital loss.  So let’s say you purchased a stock XYZ for $25 (basis) and sold it for $45, you now have $20 of capital gain ($45-$25) • If it’s an investment related asset (like a Real Estate that you rent out), you may only deduct capital losses on investment property.  So if you had investment capital loses, you will not be able to deduct it on property held for personal use. • Depending on how long you held the asset before the sale, you might have a short-term or a long-term capital gain or loss. If you hold the asset for more than one year, your capital gain or loss is a long-term and contrary, if you held it one year or less, your capital gain or loss ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: April 21, 2010 10:09
If you have already filed your individual or business income tax returns and discovered that you made a mistake, or you forgot to add a dependent, or your accountant or a tax advisor missed a tax deduction, or reported wrong taxable income, or you need to make any other adjustments to the taxes; you should file an amended tax return Form 1040X*.  Amending taxes is a complex issue and it’s recommended to seek professional tax help from an accountant, CPA or a tax advisor to help you with the tax changes or corrections.  Here are few important facts you should know about correcting your already filed personal taxes. If you need to amend your individual tax return for any tax year, use Form 1040X, Amended U.S. Individual Income Tax Return.  You can correct your filed personal tax forms 1040, 1040A or 1040EZ. You cannot e-file the amended tax return, so you will need to file it by paper. Generally, you do not need to file an amended return for math errors. The IRS will automatically make the correction. If you forgot to include a tax forms such as W-2, 1099, or any other tax schedules, ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: April 14, 2010 15:42
If you are living and working abroad you may be entitled to the Foreign Earned Income Exclusion.  The foreign earned income exclusion is adjusted annually for inflation.  For 2009, you can exclude from the U.S. taxes the maximum annual amount of up to $91,400 per qualifying person.  The foreign exclusion is not a simple tax matter and it’s recommended to seek professional help from an accountant, CPA or a tax adviser.  You must have documentation that you can produce to evidence your qualification for the foreign earned income exclusion.  Here are few important facts that you should know: • If you are a U.S. citizen or a resident alien who lives and works abroad (outside the United States), you may be able to exclude all or part of your foreign salary or wages from your income.  You may also qualify to exclude compensation for your personal services or certain foreign housing costs. • In order to qualify for the foreign earned income exclusion, a U.S. citizen or resident alien must have a tax home in a foreign country and earned income in that foreign country.  The taxpayer must also meet one of two tests: the bona fide residence ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: March 24, 2010 10:24
Have you spent money to care for your child(ren), or a dependent, or perhaps you are planning to do so this year?  If so, you should know that you might be able to qualify and receive a Child and Dependent Care Credit on your federal and state (not all states have this credit please check with your tax advisor/accountant) income tax returns.  Here are some important facts you need to know about the eligibility and requirements for this tax credit. 1.   The care must have been provided for qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided.  Also your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. 2.   The care must have been provided so you and your spouse if you are married filing jointly could work or look for work. 3.   You and your spouse if you are married filing jointly must have earned income from wages, salaries, tips, or net earnings from self-employment or be a full-time student. 4.   The payments for care can only be paid to individuals who are not your spouse or a dependent on your income tax return.  ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: March 19, 2010 9:04
If you would like to contribute to a qualified retirement plans such as 401-K, 403-B, 457, SEP, SIMPLE IRA, KEOGH, IRA, or other qualified retirement plans, you may be eligible for a tax credit known as Retirement Savings Contributions Credit. But not everybody will qualify for this credit. Here are some facts that you need to know: 1.   If you make over the income limits that are set by the IRS every year, the credit will be phased out or not allowed. Below are the 2009 limits. (These amounts are adjusted annually) Single, married filing separately, or qualifying widow(er), with  income up to $27,750 Head of Household, with income up to $41,625 Married Filing Jointly, with income up to $55,500 2.   To be eligible for this Savers Tax Credit you must have been born before January 2, 1992, you cannot be a full-time student during the calendar year, and you cannot be claimed as a dependent on someone else’s individual income tax return. 3.   If you make eligible contributions to a qualified retirement plan, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. 4.   When figuring this credit, you generally must subtract the amount of distributions (money ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: March 11, 2010 11:12
If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim a special tax relief and exclude the debt forgiven from your income.  Here are some facts on this.   ·       Generally, if debt is forgiven, it results in a taxable income to you. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of forgiven debt on your principal residence.  For married person filing a separate return, the limit is $1 million. ·       If your mortgage debt was forgiven or reduced due to the mortgage restructuring, foreclosure or short sale, you also may exclude it from your income. ·        To qualify, the forgiven debt must have been used to buy and/or refinanced in order to: build or substantially improve your principal residence and be secured by that residence. ·       Proceeds of refinanced debt used for other purposes such as to pay off credit cards, do not qualify for the exclusion. ·        If you qualify, claim the special exclusion by filing Form 982*, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven. ·        Debt forgiven on second ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: March 4, 2010 9:41
Many clients ask us what to do if their employer did not provide them with the form W-2?  Employers have until February 1st of each tax year to send you the W-2.  If you haven’t received your W-2, follow these four steps: 1. Contact your employer: If you haven’t received your W-2, by February 5th contact your employer to inquire if and when the W-2 was mailed to you.  Find out what mailing address was used on the W2.  It may have been returned to the employer because of an incorrect or incomplete address.  After you contacted your employer, allow a reasonable amount of time for them to resend or to issue your W-2. 2. Contact the IRS:  If you haven’t received your W-2 by February 16th, contact the IRS for assistance at 800-829-1040.  When you call, you must provide your name and address, Social Security number, phone number and have the following information: Employer’s name, address and the phone number Your dates of employment for which you haven’t received your W2 An estimate of the salary you earned and the federal income tax withheld from your paychecks.  You can get this information from your last December paystub or earning statement. 3. File ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: February 25, 2010 10:30
You recently bought a lottery ticket and have won, or your trip to Las Vegas was a success and you made some cash in the casinos!  Well, the gambling winnings are fully taxable and must be reported on your tax return. Here are some facts you should know on this. Gambling income includes but is not limited to: winnings from lotteries, raffles, horse and dog races and casinos, as well as the fair market value of prizes such as cars, houses, trips or other noncash prizes. Depending on the type and amount of your winnings, the payer might provide you with a Form W-2G and might need to withheld federal income taxes from the payment. The full amount of your gambling winnings must be reported on your individual income tax return form 1040 line 21.  You cannot use other forms to report the winnings, such as Form 1040A or 1040EZ. If you itemize deductions, you can deduct your gambling losses on line 28 of Schedule A, Form 1040, but the deduction is limited to the amount of your winnings. So you cannot deduct more that you won. It’s important to keep accurate records to evidence your gambling expenses. You can provide: ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: February 17, 2010 14:42
If you received or will be receiving Social Security benefits, you should know that some or most of the Social Security benefits may be subject to the income taxes.  Depending on your taxable income, up to 85% of your Social Security benefits may be taxable.  Here are some facts that will help you determine whether your Social Security benefits are taxable. Your total taxable income determines what portion of your Social Security benefits is taxable. So if your only income during the year was from Social Security benefits, your benefits are not taxable and you probably do not need to file a federal income tax return. If you received income from other sources: investment income, dividend or interest income, you withdrew money out of qualified retirement accounts such as an IRA or you had a part-time job, your Social Security benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status. The 2009 base amounts are: $32,000 for married couples filing jointly. $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: February 5, 2010 13:40
The Alternative Minimum Tax was designed to ensure that anyone who benefits from certain tax deductions pays at least a minimum amount of tax. Tax laws provide tax benefits for special tax deductions and tax credits for certain expenses. These benefits can drastically reduce taxpayers’ taxable income, thus fewer taxes will be paid. Congress created the Alternative Minimum Tax in 1969 and AMT became enforced in 1970; targeting taxpayers who could claim many tax deductions but owed little or no income tax. Currently the AMT is not indexed for inflation, thus a growing number of middle-income taxpayers are discovering they are subject to the AMT and owe more taxes that they were expecting.  If your taxable income and any tax adjustment are higher than the AMT exemption amount, you will most likely pay the AMT.  The AMT exemption amounts are set by law for each filing status. Alternative Minimum Tax Rate and Exemption Amounts 1986–1990 1991–1992 1993–2000 2001–2002 2003–2005 2006 2007 2008 2009 2010 2011 2012 Individual Tax rate 21% 24% 26/28% 26/28% 26/28% 26/28% 26/28% 26/28% 26/28% 26/28% 26/28% 26/28% Married Filing Jointly 40,000 40,000 45,000 49,000 58,000 62,550 66,250 69,950 70,950 72,450 74,450 TBD Single or Head of Household 30,000 30,000 33,750 35,750 40,250 42,500 44,350 46,200 46,700 47,450 48,450 TBD Taxpayers can find more information about the Alternative Minimum Tax and how it impacts them by accessing IRS Form 6251, Alternative Minimum Tax —Individuals, and its instructions below. Click on the link below: AMT Assistant IRS Form 6251, Alternative ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: January 26, 2010 11:40
Do you need to obtain a copy of filed federal tax return from the IRS?  Here are some important facts you should know. 1. There are two easy and convenient options for obtaining free copies of your federal tax return information — tax return transcripts and tax account transcripts. 2. The IRS does not charge a fee for transcripts, which are available for the current year as well as the past three years. 3. A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules.  It does not reflect any changes you, your representative or the IRS made after the return was filed. In many cases, a return transcript will meet the requirements of lending institutions, such as those offering mortgages and student loans. 4. A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data – including marital status, type of return filed, adjusted gross income and taxable income. 5. To request either transcript by phone, call 800-829-1040 and follow the prompts in the recorded message. 6. To request a tax return transcript through the mail*, individual taxpayers should ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: January 15, 2010 12:24
If you have children, consider these important tax benefits available to you. In most cases your child can be claimed as a dependent in the year they were born. So if your child was born on December 31st, you can claim that child as a dependant on your personal income tax return for that tax year. Here is the list of several tax credits that you can claim on your personal income tax return, only if you have and can claim your kids as dependant children. Child Tax Credit (1). This tax credit applies to your dependant children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible to claim Additional Child Tax Credit on your personal income tax return. This Additional Child Tax Credit is a refundable credit and may give you a refund even if you do not owe any tax. Child and Dependent Care Credit(2).  This tax credit applies to your if you need to pay someone to care for your child under age 13 so that you can work, look for work, or go to school as a student. If you filing jointly both parents need to ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: January 1, 2010 12:15
If you have a small business like a sole proprietorship or an independent contractor, or you operate as Single Member LLC, you generally would consider yourself to be a self-employed.  For tax purposes, you must file IRS Schedule C, Profit or Loss From Business or Schedule C-EZ, Net Profit From Business with your individual income tax return Form 1040.  Here are some important facts for you to know: If you are self-employed, your net earnings (after business deductions) are subject to Self-employment Tax. This tax consist of Social Security tax and Medicare tax.  Currently, for 2010, you would pay 15.3% of SE tax (subject to Social Security maximum cap). Half of the SE Tax can be deducted above the line, meaning, this deduction reduces your AGI (Adjusted Gross Income) Because you are a self-employed, you generally have to make estimated quarterly tax payments on the 4th, 6th, 9th, and 12th month of the calendar year to the IRS and your State government (if applicable).  If you don’t make quarterly payments as required, you may be subject to tax penalties. You are allowed to deduct ordinary and necessary business expenses.  This is the costs of operating ...

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Posted in:Business Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: December 30, 2009 12:52
If you are filing an income tax return, you must know which filing status applies to you. The tax filing status is very important! It determines your personal deduction, the amount of tax you would need to pay or if you will receive a tax refund. Here are some facts about the individual tax filing status that you would claim on form 1040, 1040A or 1040EZ, as well as on the State tax returns. Your marital status on the last day of the year determines your marital status for the entire year. So if you married on December 31st of 2009, you tax filing status would be married filing jointly or separately. If more than one filing status applies to you, should choose the one that gives you the lowest tax obligation. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law. If your spouse died during the year and you did not remarry during that tax year, you may still file a joint return with that spouse for the year of death, provided the joint return election is not revoked by a personal representative for the deceased ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: December 15, 2009 12:08
There are three individual tax return forms you can use to file your Federal Income Taxes. Its form: 1040, 1040A and 1040EZ. You can mail your individual tax return by mail or you can e-file it.  Whether you use e-file or file by mail, using the simplest tax return form will help avoid costly errors or processing delays. Remember, if you file electronically, it speeds up the processing of your individual income tax return and if you are entitled to a refund, you will get it faster. Here are some rules about using forms 1040, 1040A or 1040EZ when filing your income tax return. Use the 1040EZ if: Your taxable income is below $100,000 Your filing status is Single or Married Filing Jointly You and your spouse – if married -- are under age 65 and not blind You are not claiming any dependents Your annual interest income is $1,500 or less You are not claiming the additional standard deduction for real estate taxes, taxes on the purchase of a new motor vehicle, or disaster losses Use the 1040A if: Your taxable income is below $100,000 You have capital gain distributions (from stocks, bonds, and other investments) You claim certain tax credits You claim ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: November 4, 2009 16:11
The following are the amounts that are exempt from Federal Estate Tax. In 2005: First $1,500,000 in assets In 2006-2008: First $2,000,000 in assets In 2009: First $3,500,000 in assets In 2010: First 1,000,000 in assets In 2011-2012: First 5,000,000 in assets If your assets (Real Estate, IRAs, Life Insurance, Savings Accounts, CD, Stocks, Bonds, Life Insurnace and any other Investments or Properties) exceed the exemption amounts above, then for every dollar more than the exemption, the Uncle Sam will take following persentages: Federal Estate Tax Rates 2005: 47 % 2006: 46 % 2007- 2009: 45 % 2010: No Estate Tax 2011-2012: 35% Besides Federal Estate Taxes, there is also the State Inheritance/Estate Tax. The exemption amount and estate/inheritance tax rates are varied from State to State. Below you can find States that have either Estate Tax or Inheritance Tax. Some State have both taxes - the Estate Tax and the Inheritance Tax. See MD and NJ States below. The New Jersey estate-inheritance tax varies from 11% to 16%* based on who will be getting the assets for the deceased. There are different groups or classes of beneficiaries and each class has its own exemption and tax rate. For example; the immediate family members to the decedent ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: October 12, 2009 13:43
Many business owners are curious and interested to know about different ways to save money on taxes.  This article will introduce you to a legal way of reducing businesses or corporate taxable income by paying your minor children. The payments to minor children have to be reasonable. The minor child needs to be compensated for the services actually performed as a bona fide employee of your business or a corporation.  This tax deduction might be appropriate for some business owners.   Minor child is referred to a child between 7 to 18 years of age.  Each state has different guidance and laws about the definition of minor, so please consult your legal advisor. Paying minor children has many tax benefits.  For instance, payments to minor children by the parents’ business are not subject to either FICA (Social Security & Medicare Taxes) or FUTA taxation, IRC §3121(b)(3)(A) and 3306(c)(5).  This works great for businesses that are operating as sole-proprietorships or Single Member LLC.  But what about a corporation; can a corporation employ a child of a shareholder?  Based on Rev Rul 72-23 this would be allowed.  However, publication 15 page 10, states that a corporation wholly owned ...

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Posted in:Business Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: September 30, 2009 10:32
The corporation does not recognize gain when it distributes cash to its shareholders.  Also when a shareholder in exchange for cash, redeems a corporation stock, the corporation recognizes no gain. (Sec. 311(a)).  On the other hand, if a corporation distributes property in connection to stock redemption, this may result in corporate-level capital gain and/or ordinary income. Generally a corporation will recognize capital gains when it distributes capital assets or Sec 1231 assets.  So what happens if a corporation (C Corp or S Corp) distributes property or stock other than cash to a departing shareholder?  The corporation will recognized gain (not loss) if the fair market value (FMV) of the property exceeds its adjusted cost basis (Sec. 311(b)(1)).  The depreciation recapture of certain capital assets will trigger ordinary income and/or special unrecaptured sec. 1250 gain that is subject to 25% capital gain tax.  Basically the non-cash distribution is treated as if the corporation (C Corp or S Corp) had sold that property to the exiting shareholder.  This taxable transaction is reported on Form 1099-DIV and Form 5452. Unfortunately, a corporation (C Corp or S Corp) cannot recognize any losses on a distribution of appreciated property (i.e., where the property's FMV is less than the ...

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Posted in:Business Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: September 14, 2009 8:47
Many taxpayers are confused about different tax professionals that prepare tax returns.  Even though the current law allows anybody to prepare and file your taxes, it’s strongly recommended to use a tax professional that has one of the nationally recognized tax designations.  The IRS is currently working on legislation that will regulate all tax preparers.  Until that happens you should try to use a reputable and experienced tax pro.  This article will help you understand the basics about different tax professionals and their designations. ATP - Accredited Tax Preparer.  This designation is administered by Accreditation Counsel of Accountancy and Taxation.  In order to qualify for ATP designation a tax professional needs to meet educational requirements and pass 3.5 hour exam consisting of 100 questions relating to preparation of individual, corporate, and partnership taxes.  The exam is administered in May and December of each year.  In addition, the candidate must have 3 years of tax preparation experience before he/she can receive ATP designation.  In order to keep current with tax laws and regulations, the ATP holder needs to meet CPE (continuing professional education) requirements of 72 hours per three-year cycle of which 4 ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: September 6, 2009 9:34
If you were thinking of getting additional office help and wanted to hire someone on a part-time of full-time basis you need to understand the difference between employees and independent contractors. There is a major difference between employees and independent contractors when it comes to how much tax you as an employer has to pay and withhold from their paychecks. Additionally, it will affect how much additional cost your business must bear, what documents and information they must provide to you, and what tax documents you must give to them. Behavioral Control, Financial Control, and the Type of Relationship, are main factors that will play a key roll in making the correct determination between employees and independent contractors. Behavioral Control-shows whether the employer directs or controls how the work is done through instructions, training, supervision or other means. Financial Control-shows whether the employer directs or controls the financial and business aspects of the worker's job. The Type of Relationship-factor relates to how the workers and the business owner perceive their relationship. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are ...

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Posted in:Business Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: August 24, 2009 14:05
Here are some important facts you need to know before deducting charitable donations/contributions. Note that in order to deduct charitable contribution you need to itemized your deductions on Schedule A of form 1040 Charitable contributions must be made to a qualified charitable organization.  Qualified means that the charity is registered with the IRS and has received a status of qualified organization.  The most common qualified organizations are: non-profits also knows as 501 (c) (3) organization, public charities, religious organizations, (churches, synagogues, etc), schools and etc. You can deduct up to 50% of your AGI (Adjusted Gross Income) and if your charitable donations are in excess of 50%, you may carry it forward to the next year. You generally can deduct your cash contributions and the fair market value of the property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats. If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet, raffle tickets or other event, you can deduct only the amount that exceeds the fair market value of the benefit received. Be sure to keep good records of any charitable contribution you make, ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: August 20, 2009 16:35
Religious organization can provide to clergy ministers non-taxable benefits referred to as parsonage allowance. It’s done as part of total compensation paid to the minister. How does this work? Religious organization can provide to a minister with rent-free furnished apartment or housing that is owned by the religious organization. Religious organization also can pay the fair market value of furnished apartment or house directly to the landlord or reimburse the minister. Religious organization pays directly or reimburses the minister for the mortgage and escrow payments of purchased apartment or a house. Based on the above, cash for housing allowance can be provided to the minister to rent or purchase a home. An allowance continues to be income tax free even during minister’s retirement, but it will be stopped once minister will depart this life. How to qualify for a Parsonage Allowance. Under Sec. 1.107-1(a), the parsonage allowance is tax free if provided as remuneration for services that are ordinarily the duties of an ordained minister. What qualifies someone to be an ordained minister? Under Sec. 1.1402(c)-5(a)(2), an ordained minister is one who is “duly ordained, commissioned, or licensed” as a minister and it’s ...

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Posted in:Business Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: August 18, 2009 10:53
With today’s technology many people can run and operate a business out of their homes. Many clients may be able to take a home office tax deduction when filing their tax returns. What do you need to know about claiming the home office tax deduction? Generally, in order to claim a business tax deduction for your home, you must use part of your home exclusively and regularly: As your principal place of business, or As a place to meet or deal with patients, clients or customers in the normal course of your business, or In the case of a separate structure which is not attached to your home, it must be used in connection with your trade or business If you have inventory and need storage, or have a daycare/playgroup in your home, you are required to use the property regularly but not exclusively. Generally, the amount that is tax deductible depends on the percentage of your home that you use for business.  So let’s say that the total square footage of your home is 1,000 sq. feet and the area that you will be qualified to deduct as home office is 250 sq. feet, so your deduction will be 25%. You can allocate this percentage to your ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: August 17, 2009 17:00
Generally, you cannot deduct amounts that you approximate or estimate. You should keep proper records to prove your expenses or have sufficient evidence that will support your own statement. You must generally prepare a written record for it to be considered Proper. This is because written evidence is more reliable than oral evidence alone. However, if you prepare a record on a computer, it is considered a proper record. What Are Proper Records?  You should keep the proof you need in a log, account book, diary, statement of expense, or similar record. You should also keep documentary evidence that, together with your record, will support each element of an expense.You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses.          Exception.   Documentary evidence is not needed if any of the following conditions apply. ·     You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging. (Accountable plans and per diem allowances) ·     Your expense, other than lodging, is less than $75. ·     You have a transportation expense for which a receipt is ...

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Posted in:Business Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: August 12, 2009 9:44
This material was written and prepared by TaxBizPro, LLC © 2009 You have a great idea, you are excited and now you want to start your business.  So you are asking yourself, where do I begin?  First you need to understand that in any business you need to have a plan and a good tax advisor or accountant.  We will provide you with the basic and general information that should help you understand the business formation process and hopefully you will find this article useful. Different states have different rules and regulation when it comes to business formation. There are five types of business entities that you can adapt for your business. Those are: Sole-Proprietor, INC, LLC, LLP, and PC Sole-Proprietor-this is the most basic form of business formation. In most states you are required just to go to the county clerk, pay some fees, fill out an application and your business is registered.  You then can obtain an EIN (Employer Identification Number).  EIN commonly referred to as “Tax ID”.  You can obtain your Tax ID by calling the IRS or filing an application on their website. The county clerk will provide you with business registration certificate and you ...

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Posted in:Business Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: June 15, 2009 11:02
Many clients ask me what they can deduct and what they can’t deduct? So I am providing the following lists of NON deductible expenses: Expenses You Cannot Deduct Expenses that were reimbursed by your employer. Apartment Rent, unless qualified to claim away from home expenses for a business trip expected to last one year or less, or if a portion is used as a home office (special rules apply to both cases). Apartment Rent, may be deductible if maintained for the sole purpose of going to school if your education expenses qualify for the business deduction. Clothing that is adaptable to everyday wear (this includes suits, evening wear, etc.). Commuting costs (subways and rail fares, and vehicle use including tolls, gasoline, and parking).  Exception if qualified as being away from home or on business. Dues to country clubs, golf and athletic clubs, and airline and hotel clubs. Home phone line Job hunting expenses if you’re looking for your first job, or changing professions. Dry cleaning and laundry (unless you’re on a business trip) Legal fees and closing costs involved in purchasing a property Fees for taking an exam to qualify you in a profession (e.g., Bar Exam, GRE, etc.) Immigration visa expenses, such as for obtaining a ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
TaxBizPro, LLC Posted on: June 15, 2009 10:45
Many clients ask me what they can deduct and what they can’t deduct? So I am providing lists of possible deductions. The lists are only meant to give you an ideas.  These tax deductions are not all-inclusive and not all items are deductible all the time.  Many are subject to limitations, may only apply in certain situations.  Please keep careful records and save your receipts for 3 years in case of audit. Employee/Self-Employed Business Expenses Note that most of the Employees expenses are claimed in Schedule A and are called itemized deductions: Includes expenses for your job for which you weren’t reimbursed, but you only get the amount in excess of 2% of your AGI (adjusted gross income), and only if you can itemize.  For instance, if your AGI is $50,000, you must have at least $1,000 in employee business expenses before you will begin to benefit from the deduction. Self-Employed: You are allowed to deduct most business expenses in full. Advertising and Promotion Expenses (Self-employed) Books and Publications Books, trade journals, newspapers and publications for your trade or profession Dues and Fees: Dues to a professional organization for people in your profession Union dues, initiation fees, and assessments for benefit payments to unemployed union members. Regulatory ...

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Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.
Important Tax Disclosure
IRS Circular 230 Legend: Any advice contained herein was not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax payments or penalties. Unless otherwise specifically indicated, you should assume that any statement in this website or articles that relating to any U.S. federal, state, or local tax matter was written in connection with the promotion or marketing. Disclaimer: Any articles herein is designed for general information only. The information presented at this site should not be construed to be formal legal or tax advice. Each taxpayer should seek advice based on the taxpayer's particular circumstances.

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