For income tax purposes, there are three levels of income: gross income, adjusted gross income, and taxable income. Gross Income. Gross income includes income from all sources whatsoever unless specifically excluded by tax law. Gifts and inheritances, for example, are specifically excluded from income. Adjusted Gross Income. To arrive at adjusted gross income (AGI), you are allowed […]
Why do I need a tax professional when I can buy tax preparation software? Tax software producers claim their products can prepare complex returns, but you may want to think twice before relying on software for all your tax and financial guidance. Although software may help you make choices on your tax return that results […]
A capital gain is what results when you sell certain property at a profit. In general, everything you own for personal or investment purposes is a capital asset, including your home, stocks, bonds, and collectibles. Capital assets do not include business property, such as inventories, notes, and accounts receivable. Short-term capital gains occur when you sell […]
In a recent keynote address to over 1,000 tax professionals in Chicago, John Koskinen, the Commissioner of the IRS, asked the audience to raise their hands if they had personally been contacted by someone pretending to be from the IRS. He reiterated that he was not talking about clients, but those sitting in the audience. […]
If you don’t receive a W-2 or 1099, is this a defense to protect yourself from not reporting the income during an audit? In short, the answer is no. You are required to report your income whether your employer or customer filed the correct form or not. So what can you do to ensure you […]
Remember you have until you file your tax return (excluding extensions) to make a contribution to a Traditional IRA or Roth IRA. This is typically April 15th following the end of the plan contribution year. The annual contribution amount is $5,500 ($6,000 in 2019) or $6,500 if you are age 50 or over ($7,000 in […]
When I sell my home, do I have to replace it with a more expensive home to postpone taxes on the sale? No. In fact, you don’t have to reinvest in another house at all. If you meet certain qualifications, you can use your sale proceeds for whatever purpose you choose – without having to […]
Gift taxes are due on certain transfers of wealth. If and when gift taxes are due, the donor is liable for them. The recipient of the gift is not taxed. (Note that gifts to charity are not subject to gift taxes.)The combined estate and gift exclusion for 2021 is $11.7million. In addition, from 2018-2021, you’re […]
Suppose you’re switching jobs if you were furloughed because of the pandemic or you’re simply searching for greener pastures. If you have a 401(k) from your soon-to-be former employer, you must decide what to do with your retirement account when you leave. Here are your four options: Leave the money in your previous employer’s pension […]
Selling a stock is an important decision – almost as important as the decision to buy. Unfortunately, while the world is full of buy recommendations, there is very little advice on when to sell. Many investors make the mistake of holding onto losing stocks for too long. Sometimes they compound this error by selling their […]