tax return - Linkenheimer LLP CPAs & Advisors

Help Safeguard Your Personal Information By Filing Your 2021 Tax Return Early

The IRS announced it is opening the 2021 individual income tax return filing season on January 24. (Business returns are already being accepted.) Even if you typically don’t file until much closer to the April deadline (or you file for an extension until October), consider filing earlier this year. Why? You can potentially protect yourself from tax identity theft — and there may be other benefits, too.

How tax identity theft occurs

In a tax identity theft scheme, a thief uses another individual’s personal information to file a bogus tax return early in the filing season and claim a fraudulent refund.

The actual taxpayer discovers the fraud when he or she files a return and is told by the IRS that it is being rejected because one with the same Social Security number has already been filed for the tax year. While the taxpayer should ultimately be able to prove that his or her return is the legitimate one, tax identity theft can […]

By Linkenheimer LLP|2022-01-18T23:03:26+00:00January 18th, 2022|irs, tax deadlines|0 Comments

Scholarships are Usually Tax Free But They May Result in Taxable Income

If your child is fortunate enough to be awarded a scholarship, you may wonder about the tax implications. Fortunately, scholarships (and fellowships) are generally tax free for students at elementary, middle and high schools, as well as those attending college, graduate school or accredited vocational schools. It doesn’t matter if the scholarship makes a direct payment to the individual or reduces tuition.

Requirements for tax-free treatment

However, scholarships are not always tax free. Certain conditions must be satisfied. A scholarship is tax free only to the extent it’s used to pay for:

Tuition and fees required to attend the school and
Fees, books, supplies and equipment required of all students in a particular course.

For example, expenses that don’t qualify include the cost of room and board, travel, research and clerical help.

To the extent a scholarship award isn’t used for qualifying items, it’s taxable. The recipient is responsible for establishing how much of an award is used to pay for tuition and eligible expenses. Maintain records (such as copies of bills, receipts and cancelled checks) that reflect the use of the scholarship money.

Payment for services doesn’t qualify

Subject to limited exceptions, a scholarship isn’t tax free […]

By Linkenheimer LLP|2021-08-16T19:19:22+00:00August 16th, 2021|child, scholarship, tax implications, tax planning|0 Comments

Tax Responsibilities If Your Business Is Closing Amid The Pandemic

Unfortunately, the COVID-19 pandemic has forced many businesses to shut down. If this is your situation, we’re here to assist you in any way we can, including taking care of the various tax obligations that must be met.

Of course, a business must file a final income tax return and some other related forms for the year it closes. The type of return to be filed depends on the type of business you have. Here’s a rundown of the basic requirements.

Sole Proprietorships. You’ll need to file the usual Schedule C, “Profit or Loss from Business,” with your individual return for the year you close the business. You may also need to report self-employment tax.

Partnerships. A partnership must file Form 1065, “U.S. Return of Partnership Income,” for the year it closes. You also must report capital gains and losses on Schedule D. Indicate that this is the final return and […]

By Linkenheimer LLP|2020-11-05T17:49:44+00:00November 5th, 2020|business, disaster, employer, New Tax Laws, small business|0 Comments

Here’s What Taxpayers Need To Know About The Home Office Deduction

The home office deduction allows qualifying taxpayers to deduct certain home expenses on their tax return. With more people working from home than ever before, some taxpayers may be wondering if they can claim a home office deduction when they file their 2020 tax return next year.

Here are some things to help taxpayers understand the home office deduction and whether they can claim it:

Employees are not eligible to claim the home office deduction.
The home office deduction Form 8829 is available to both homeowners and renters.
There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.
The term “home” for purposes of this deduction:
- Includes a house, apartment, condominium, mobile home, boat or similar property.
- Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.
- Doesn’t include any part of the taxpayer’s property used exclusively […]

By Linkenheimer LLP|2020-09-03T20:02:08+00:00August 6th, 2020|business, deduction, deductions, Uncategorized|0 Comments

After You File Your Tax Return: 3 Issues To Consider

The tax filing deadline for 2019 tax returns has been extended until July 15 this year, due to the COVID-19 pandemic. After your 2019 tax return has been successfully filed with the IRS, there may still be some issues to bear in mind. Here are three considerations.

1. Some tax records can now be thrown away

You should keep tax records related to your return for as long as the IRS can audit your return or assess additional taxes. In general, the statute of limitations is three years after you file your return. So you can generally get rid of most records related to tax returns for 2016 and earlier years. (If you filed an extension for your 2016 return, hold on to your records until at least three years from when you filed the extended return.)

However, the statute of limitations extends to six years for taxpayers who understate their gross income by more than 25%.

By Linkenheimer LLP|2020-09-03T20:02:19+00:00July 7th, 2020|irs, tax, tax deadlines|0 Comments