taxes

Real Estate Agent Not Permitted to Deduct Rental Losses

For our clients out there who are real estate agents and property owners: The taxpayer was a licensed real estate agent who owned rental properties. For 2006 and 2007, she deducted a total of $78,543 in rental losses. Upon audit, the IRS disallowed these losses because the taxpayer failed to show she materially participated in the rental activity. The taxpayer argued that her status as a real estate professional automatically rendered the losses nonpassive, regardless of material participation. The Court of Appeals for the Ninth Circuit sided with the IRS, holding that although real estate professionals are not subject to the per se rule under IRC Sec. 469(c)(2) that rental losses are passive, they must still show material participation before deducting rental losses. Therefore, the taxpayer was not entitled to deduct the losses.

If you have any questions, please contact your Linkenheimer CPA.

 

By |August 19th, 2016|deduction, irs|0 Comments

March Madness News- How Do I Report Fantasy Sports Winnings?

It’s that time of year again- March Madness is upon us, as is the time to file your taxes. A pressing question on the minds of many Americans this time of year is how to report fantasy sports income on their tax returns. The answer is relatively simple.  Assuming your involvement in fantasy sports does not rise to the level of a trade or business, this income is reported as hobby income. You claim the winnings (net of any entry fees) as other income on line 21 of your Form 1040, and if you are able to take advantage of itemized deductions, you can write off related expenses (i.e. entry fees which did not result in any winnings) on Schedule A, subject to a few important limitations: First, your expenses are deductible only to the extent of the related income you report on line 21. Second, like investment adviser fees, any related expenses are reported as miscellaneous itemized deductions, and you only benefit to the extent your total miscellaneous itemized deductions exceed 2% of your adjusted gross income. Additionally, these deductions may be eliminated completely if you are subject to alternative minimum tax. Also […]

By |April 1st, 2016|income tax, report|0 Comments

1099 Requirements for 2015

The IRS requires that you file information returns (1099’s) for cash and check payments issued by your trade or business to individuals not treated as your employees as well as non-incorporated entities. The IRS strictly enforces the requirements and aggressively audits this area of the law; additionally, there are numerous penalties that may be assessed if you fail to comply. We recommend that PRIOR to making payments for services, you obtain taxpayer identification (ID) numbers from all of your service vendors. If they don’t provide you a SSN or IRS business ID number (EIN), you are required to withhold taxes on payments to that vendor. A 1099 form must be filled in if:

Amount Requiring Reporting

Contract Labor, Commissions, Director Fees and
Other Non-employee Compensation                                                      $600 or more

Dividends, Interest and Royalties                                                            $10 or more

Professional Fees               […]

By |March 11th, 2016|irs, Uncategorized|0 Comments

Changes to Small Business Health Care Tax Credit

Small employers should be aware of changes to the small business health care tax credit, a provision in the Affordable Care Act that gives a tax credit to eligible small employers who provide health care to their employees.

Beginning in 2014, there are changes to the tax credit that may affect your small business or tax-exempt organization:

  • Credit percentage increased from 35 percent to 50 percent of employer-paid premiums; for tax-exempt employers, the percentage increased from 25 percent to 35 percent.
  • Small employers may claim the credit for only two consecutive taxable years beginning in tax year 2014 and beyond.
  • For 2014, the credit is phased out beginning when average wages equal $25,400 and is fully phased out when average wages exceed $50,800. The average wage phase out is adjusted annually for inflation.
  • Generally, small employers are required to purchase a Qualified Health Plan from a Small Business Health Options Program Marketplace to be eligible to claim the credit.  Transition relief from this requirement is available to certain small employers.

Small employers may still be eligible to claim the tax credit for tax years 2010 through 2013.   Employers who were eligible to […]

By |February 26th, 2015|affordable care act|0 Comments