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TaxMama s TaxQuips Net Operating Losses

2015-07-24 by Eva Rosenberg

LossesToday TaxMama® hears from Jean in the TaxQuips Forum, with this problem. “I have a client that hasn’t filed his personal tax returns for 8 years. He is currently under audit, and I am preparing the returns. Can I carryback net operating losses (NOLs) from 2012 to 2010, and forward from 2009 to 2010? Since these tax returns have never been filed to begin with, does that allow me to go that far back?”

Hi Jean

You don’t have any choice, actually.

To waive the carryback period, the taxpayer would have had to have filed a TIMELY return and they must have included the election to waive the carryback.
http://www.irs.gov/publications/p536/ar02.html#en_US_2014_publink1000177379
To make this choice, attach a statement to your original return filed by the due date (including extensions) for the NOL year. This statement must show that you are choosing to waive the carryback period under section 172(b)(3).
The bad news is – even if you use the carryback (and you must), he won’t get any refunds from those closed years. The good news is – the NOLs can potentially eliminate all the taxes due.

But this is interesting…what can he possibly be audited for if he hasn’t filed a tax return for 8 years?

And remember, you can find answers to all kinds of questions about net operating losses and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

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IRS Notices

2015-07-07 by Eva Rosenberg

IRS Notices - CP 2000 notices

Today TaxMama® hears from Paul in the TaxQuips Forum, with this common issue. “I just received a CP2000 Notice from the IRS informing me of $1,900 in proposed taxes due from 2013. (On our joint return, I forgot to include my wife’s 1099 earnings in the amount of $5,100.) This amount due seems high, given that we are in a 15% tax bracket (not a nearly 40% bracket).”

 


Dear TaxMama Family,

My answer to Paul is posted in the TaxQuips Forum. But I want to talk to you about these IRS notices in general.

Interesting, I’ve had a couple of questions this week about CP-2000 notices issued on the 2013 tax returns. They are late. Usually, they are issued by about September of the filing year (i.e. 2014).

Don’t be afraid. This isn’t an audit. These CP-2000 notices are computer-generated and based on a cross-reference of W-2s, 1099s, etc that the IRS received, that should be on your tax return. Quite often, you have reported the income – only not where the computer expected to find it. You can clear up that problem easily by making a phone call or writing a letter to the IRS to explain where you reported the income.

If the notice IS correct, just pay the balance due. Generally, these CP-2000 notices will only propose a tax due, but no penalties will be assessed if you pay the balance due. You will, however, owe interest.

What’s if you cannot pay the balance due? Don’t worry. The IRS has made it easy for most people to set up your own installment plan. You can do it online if you owe less than $50,000 including penalties and interest. You don’t need to pay anyone a thousand dollars or more to do it for you. But you will pay the IRS an administrative fee – $52 or $120. And you will need to be in compliance (current on withholding and/or estimated tax payments) to get your agreement accepted automatically.

And remember, you can find answers to all kinds of questions about IRS notices and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

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Reasonable Care and RMD

2015-06-15 by Eva Rosenberg

Image from page 190 of "Bell telephone magazine" (1922)Today TaxMama® hears from Sonia in the TaxQuips Forum, who has this quickie question. “I contacted the custodian of my IRA AT 3 PM on 12/31 to request a required minimum distribution (RMD). The transaction ended up being dated 1/1. Will the 50% penalty apply? If so, how can I apply for relief?”

Dear Sonia,

There IS a way to get penalty relief on RMDs, IF reasonable steps were taken to take the required minimum distribution.

Calling the custodian at 3 pm on New Year’s Eve, when most people have already left for the holiday, and expecting the transaction to be done that day is, well…not exactly reasonable.

But you can certainly request penalty relief. And if this is the first error or the first RMD, you are apt to get the penalty waived. Mike Reed, EA confirms that he gets these penalties waived regularly.

Please follow this procedure, which is explained on the IRS RMD FAQs. The worst they can do is to say, “No.” Be sure to explain why the request was made at the last minute.

Did you not know about this responsibility until then? And how did you suddenly find out? Why will this never happen again?

And folks, any time you have deadline-based transactions, perform them at least a week early. Not at the last minute. Especially if you must rely on someone else to process the transaction for you. Otherwise, not only will there be penalties; but missing the deadline may make it impossible for you to get the relief or results you wanted to achieve.
And remember, you can find answers to all kinds of questions about IRS penalties and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

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Vacation Home Mortgage

2015-04-27 by Eva Rosenberg

Reverse MortgageToday TaxMama® hears from LFloom in the TaxQuips Forum with a very good question.

We want to buy a vacation home that will eventually be a retirement home. It is difficult and more expensive to get a loan on this place. So, I want to get a mortgage on my primary home to buy the second home. Will the interest be tax deductible?

Dear LFloom,

That is an excellent question. And I am so glad that you asked this before going forward.

You would think this would be straightforward. The loan is really meant for the new residence, so why should you have any problem with the deduction?

Unfortunately, the way the current tax laws are written, your mortgage interest deduction, essentially works like this:

You get to deduct all the interest on the mortgage to buy or to improve/repair your personal residence or one second residence (acquisition debt). The limit on the amount of the loan is $1 million.

Plus you get to deduct the interest on another $100,000 worth of debt secured by one of your homes.

Since the loan you will taking out will be on your personal residence, and it will not be secured by the vacation home, you are limited to deducting the interest on only $100,000 of debt.

To get some ideas on how to make this work, please log into the TaxQuips Forum .

And remember, you can find answers to all kinds of questions about mortgage interest and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

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Tax Season Blues

2015-04-15 by Eva Rosenberg

http://www.taxmama.com/art/main/busy.gifToday TaxMama® just wants to bring up a little lightness of being. Today is the day to pay last year’s taxes with the extension; estimated taxes for this year, and the final IRA contribution to reduce last year’s taxes a bit. So…it’s time to sing the blues.

 

 

 

The Post-Tax Filing Blues


I finally filed my tax return.

Through sleepless nights, how my eyes burn.

I dug and searched before I filed.

But let me tell you, I am riled.

I work too hard and pay a ton.

But, hey,…for now, my tax return’s done.

…. is yours?


 

© Eva Rosenberg 2004
And remember, you can find answers to all kinds of questions about paying taxes and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

Download the MP3 (0:00min, 1MB) or listen now...

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