Tips for taxpayers who make money from a hobby

On July 2, 2019   /   Uncategorized  
Tips for taxpayers who make money from a hobby
Rate this post

Many people enjoy hobbies that are also a source of income. From painting and pottery to scrap booking and soap making, these activities can be sources of both fun and finances. Taxpayers who make money from a hobby must report that income on their tax return.

If someone has a business, they operate the business to make a profit. In contrast, people engage in a hobby for sport or recreation, not to make a profit. Taxpayers should consider nine factors when determining whether their activity is a business or a hobby. They should base their determination on all the facts and circumstances of their activity.

If a taxpayer receives income for an activity that they don’t carry out to make a profit, the expenses they pay for the activity are miscellaneous itemized deductions and can no longer be deducted. The taxpayer must still report the income they receive on Schedule 1, Form 1040, line 21.

Many people enjoy hobbies that are also a source of income. From painting and pottery to scrap booking and soap making, these activities can be sources of both fun and finances. Taxpayers who make money from a hobby must report that income on their tax return.

If someone has a business, they operate the business to make a profit. In contrast, people engage in a hobby for sport or recreation, not to make a profit. Taxpayers should consider nine factors when determining whether their activity is a business or a hobby. They should base their determination on all the facts and circumstances of their activity. If a taxpayer receives income for an activity that they don’t carry out to make a profit, the expenses they pay for the activity are miscellaneous itemized deductions and can no longer be deducted. The taxpayer must still report the income they receive on Schedule 1, Form 1040.

For any kind of tax help, contact one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Back to Top

Its time to do a Paycheck Checkup

On June 25, 2019   /   Uncategorized  
Its time to do a Paycheck Checkup
Rate this post

The IRS urges all employees, including those with other sources of income, to perform a Paycheck Checkup now. Doing a checkup will help employees make sure their employers are withholding the right amount of tax from their paychecks. Doing so now will help avoid an unexpected year-end tax bill and possibly a penalty.

The easiest way to a Paycheck Checkup is to use the Withholding Calculator on IRS.gov. Taxpayers can use the results from the Calculator to help fill out the Form W-4 and adjust their income tax withholding with their employer.  Taxpayers who receive pension income can use the results from the calculator to complete a Form W-4P and give it to their payer.

If you need help with a payroll checkup call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Back to Top

Taxpayers who still haven’t filed their 2018 tax return should do so ASAP

On June 21, 2019   /   Uncategorized  
Taxpayers who still haven’t filed their 2018 tax return should do so ASAP
Rate this post

While the federal income tax-filing deadline has passed for most people, some taxpayers did not file an extension and still have not filed their tax returns. These taxpayers should file ASAP. They should do so even if they can’t pay to avoid potential penalties and interest, which can continue to add up quickly.

Here are some things taxpayers in this situation should know:

  • Penalties and interest are only added on unfiled returns if the taxpayer did not pay taxes by the April deadline. Taxpayers who did not file and owe tax should file a tax return and pay as much as they are able to now. If they cannot pay the full amount, they should learn about payment options. These can reduce possible penalties and interest added to the amount the taxpayer owes.
  • IRS Free File is available on IRS.gov through October 15.
  • Some taxpayers may have extra time to file their tax returns and pay any taxes due. These include:
      o Some disaster victims
      o Military service members and eligible support
         personnel in combat zones
      o U.S. citizens and resident aliens who live and work
         outside the U.S. and Puerto Rico
  • If a return is filed more than 60 days after the April due date, the minimum penalty is either $210 or 100 percent of the unpaid tax, whichever is less. Therefore, if the tax due is $210 or less, the penalty is equal to the tax amount due. If the tax due is more than $210, the penalty is at least $210.
  • The IRS provided penalty relief for certain taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year.
  • Other taxpayers filing after the deadline may also qualify for penalty relief. Those who are charged a penalty may contact the IRS and explain why they were unable to file and pay by the due date.
  • Taxpayers who have a history of filing and paying on time often qualify for first-time penalty abatement.
  • There is no penalty for filing late if a refund is due.

If you haven’t filed your 2018 tax return, contact one of our offices for assistance.

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Back to Top

Here’s what taxpayers should know if they get a notice from the IRS

On June 18, 2019   /   Uncategorized  
Here’s what taxpayers should know if they get a notice from the IRS
Rate this post

Certain taxpayers might get a letter from the IRS this year. It’s called an IRS Notice CP 2000. It gives detailed information about issues the IRS identified. The IRS sends this notice when information from a third party doesn’t match the information the taxpayer reported on their tax return. The notice also provides steps taxpayers should take to resolve those issues.

Here is some information about these notices to help taxpayers understand why they got one and what to do when it arrives:

  • The IRS sends a notice to the taxpayer when a tax return’s information doesn’t match data reported to the IRS by banks and other third parties.
  • This notice isn’t a formal audit notification. It is simply a notice to see if the taxpayer agrees or disagrees with the proposed tax changes.
  • Taxpayers should respond to the Notice CP2000. The taxpayer usually has 30 days from the date printed on the notice to respond.
  • The IRS provides a phone number on each notice. IRS telephone assistors can explain the notice and what taxpayers need to do to resolve any issues.
  • The IRS will send another notice to the taxpayer if the taxpayer doesn’t respond to the initial Notice CP2000, or if the agency can’t accept the additional information provided. It is called an IRS Notice CP3219A, Statutory Notice of Deficiency.
  • The Notice CP3219A gives detailed information about why the IRS proposes a tax change and how the agency determined the change. The notice tells taxpayers about their right to challenge the decision in Tax Court if they choose to do so. Even if they decide not to go to Tax Court, the IRS will continue to work with the taxpayer to help resolve the issue.

If you get a notice from the IRS, contact one of our offices for assistance.

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Back to Top

Got tip income? Here are some tips about tips from the IRS

On June 17, 2019   /   Uncategorized  
Got tip income? Here are some tips about tips from the IRS
Rate this post

Aside from regular wages, many taxpayers have jobs where they get tips from their clients or customers.  Generally, income received as a tip is taxable. Here’s some information to help taxpayers correctly report the income they receive as a tip:

Use the Interactive Tax Assistant.
This tool on IRS.gov asks taxpayers a series of questions. After the taxpayer answers the questions, the tool gives responses based on the answers. Taxpayers can use the Interactive Tax Assistant to find out if their tip income is taxable.

Show all tips on a tax return.
Taxpayers use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to report the amount of any unreported tip income. This form allows the taxpayer to include it as additional wages. This includes the value of non-cash things someone receives as a tip, such as tickets or passes to an event.

Report all types of tips.
Taxpayers must pay tax on all tips received during the year, including those:

  • Directly from customers.
  • Added to credit cards.
  • From a tip-splitting agreement with other employees.

Report tips to an employer.
Employees who receive $20 or more in tips in any month must report their tips for that month to their employer. They must do so by the 10th day of the next month. When reporting tips, the employee should include cash, check and credit card tips they received. The employer must withhold federal income, Social Security and Medicare taxes on these reported tips.

Keep a daily log of tips.
Taxpayers use Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record tips. This will help report the correct amount of tips on their tax return.

For help planning for your 2019 taxes call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Back to Top

It’s time to check your withholding for 2019 taxes.

On June 13, 2019   /   IRS  
It’s time to check your withholding for 2019 taxes.
Rate this post

Taxpayers who haven’t done a Paycheck Checkup to check their withholding in 2019 should do one as soon as possible. The best and easiest way to do a checkup is to use the Withholding Calculator on IRS.gov. However, some taxpayers may need to use Publication 505 to check their withholding.

Here are some things taxpayers should know about these two methods for checking withholding:

Withholding Calculator

  • The Withholding Calculator works for most employees by helping them determine whether they need to give their employer a new Form W-4.
  • Taxpayers can use their results from the calculator to help fill out the form and adjust their income tax withholding.
  • If a taxpayer receives pension income, they can use the results from the calculator to complete a Form W-4P, Withholding Certificate for Pension and Annuity Payments, and give it to their payer.
  • Taxpayers who don’t pay taxes through withholding, or don’t pay enough tax that way, may still use the Withholding Calculator to determine if they have to pay estimated tax quarterly during the year to the IRS. Those who are self-employed generally pay tax this way.

Instructions in Publication 505, Tax Withholding and Estimated Tax

  • Taxpayers with more complex situations may need to use the instructions in Publication 505, Tax Withholding and Estimated Tax instead of the Withholding Calculator.
  • This includes employees who owe self-employment tax, the alternative minimum tax, or tax on unearned income by dependents.
    • Publication 505 can also help those who receive non-wage income such as dividends, capital gains, rents and royalties.
    • The publication includes worksheets and examples to guide taxpayers through these special situations.

For help planning for your 2019 taxes call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Back to Top

All taxpayers should plan ahead for natural disasters

On June 11, 2019   /   Uncategorized  
Rate this post

Floods, wildfires, hurricanes, tornados and other natural disasters happen quickly and often with little warning. No one can prevent these disasters from happening, but people can prepare for them. Here are some things taxpayers can do to help protect their financial safety should a disaster occur. Taxpayers should: Update emergency plans. A disaster can strike any time. Personal and business situations are constantly evolving, so taxpayers should review their emergency plans annually. Create electronic copies of documents. Taxpayers should keep documents in a safe place. This includes bank statements, tax returns and insurance policies. This is especially easy now since many financial institutions provide statements and documents electronically. If original documents are available only on paper, taxpayers should scan them. They should save them on a DVD or CD, or store them in the cloud. Document valuables. It’s a good idea to photograph or videotape the contents of any home. This is especially true when it comes to items of value. Documenting these items ahead of time makes it easier to claim insurance and tax benefits if a disaster strikes. The IRS has a disaster loss workbook. Using this can help taxpayers compile a room-by-room list of belongings. Remember the IRS is ready to help. In the case of a federally declared disaster, affected taxpayers can call the IRS at 866-562-5227. The taxpayer can speak with an IRS specialist trained to handle disaster-related issues. Taxpayers can request copies of previously filed tax returns and attachments by filing Form 4506. They can also order transcripts showing most line items through Get Transcript on IRS.gov. They can also call 800-908-9946 for transcripts. Know what tax relief is available in disaster situations Taxpayers should be aware that the Tax Cuts and Jobs Acts modified the itemized deduction for casualty and theft losses. After Dec. 31, 2017, net personal casualty and theft losses are deductible only to the extent they’re attributable to a federally declared disaster. Claims must include the FEMA code assigned to the disaster.

For questions regarding your income tax call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Back to Top

Taxpayers should include tax plans in their wedding plans

On May 31, 2019   /   Uncategorized  
Rate this post

IRS Tax Tip 2019-68, May 30, 2019

Couples getting married this year know there are a lot of details in planning a wedding. Along with the cake and gift registry, their first tax return as a married couple should be on their checklist. The IRS has tips and tools to help newlyweds consider how marriage may affect their taxes.

Here are five simple steps that can make filing their first tax return as newlyweds less stressful.

Step 1: Taxpayers should check their withholding at the beginning of each year, or when their personal circumstances change — like after getting married. Using the IRS Withholding Calculator is a good way for taxpayers to check their withholding. Taxpayers who need to change their withholding should complete and submit a new Form W-4, Employee’s Withholding Allowance Certificate to their employer.

Step 2: Marriage may mean a change in name. If either – or both – of the newlyweds legally change their name, it’s important to report that change to the Social Security Administration. The names on the taxpayers’ tax return must match the names on file at the SSA. If it doesn’t, it could delay any refund.

Step 3: If a marriage means a change in address, the IRS and the U.S. Postal Service need to know. Newlyweds can file Form 8822, Change of Address, to update their mailing address with the IRS. They should notify the postal service to forward their mail by going online at USPS.com or by visiting their local post office.

Step 4: Taxpayers who receive advance payments of the premium tax credit should report changes in circumstances to their Health Insurance Marketplace as they happen. Certain changes to household, income or family size may affect the amount of the premium tax credit. This can affect a tax refund or the amount of tax owed. Taxpayers should also notify the Marketplace when they move out of the area covered by their current Marketplace plan.

Step 5: Newlyweds should consider their filing status. A taxpayer’s marital status on December 31 determines whether they’re considered married for that full year. Generally, the tax law allows married couples to file their federal income tax return either jointly or separately in any given year. Taxpayers can use the Interactive Tax Assistant to determine which status is best for them.

For questions on your income tax call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Back to Top

New IRS publication helps taxpayers Get Ready for tax reform

On November 6, 2018   /   Uncategorized  
Rate this post
The IRS issued a new publication to help taxpayers learn about tax reform and how it affects their taxes. Taxpayers can access Publication 5307, Tax Reform Basics for Individuals and Families, on IRS.gov/getready.
While last year’s Tax Cuts and Jobs Act includes tax changes for both individuals and businesses, this publication is specifically geared to individual taxpayers. It breaks down the law in easy-to-understand language. The publication highlights the changes that taxpayers will see on their 2018 federal tax returns they file in 2019

This new publication provides important information about

• Increasing the standard deduction
• Suspending personal exemptions
• Increasing the child tax credit
• Adding a new credit for other dependents
• Limiting or discontinuing certain deductions

Taxpayers can also go to IRS.gov/getready to find other information about tax reform. This includes the steps taxpayers can take now to help make filing their taxes smoother next year. Following these steps will also help taxpayers avoid surprises when they file their returns.

For questions on your income tax call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Livonia 734-462-6161,
Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Back to Top

Tax reform brings changes to fringe benefits that can affect an employer’s bottom line

On October 29, 2018   /   Uncategorized  
Rate this post
The IRS reminds employers that several programs have been affected as a result of the Tax Cuts and Jobs Act passed last year. This includes changes to fringe benefits, which can affect an employer’s bottom line and its employees’ deductions

Here’s information about some of these changes that will affect employers:
Entertainment Expenses & Deduction for Meals
The new law generally eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.

However, under the new law, taxpayers can continue to deduct 50 percent of the cost of business meals if the taxpayer or an employee of the taxpayer is present, and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact. Food and beverages that are purchased or consumed during entertainment events will not be considered entertainment if either of these apply:

• they are purchased separately from the entertainment
• the cost is stated separately from the entertainment on one or more bills, invoices or receipts

Qualified Transportation
The new law also disallows deductions for expenses associated with qualified transportation fringe benefits or expenses incurred providing transportation for commuting. There is an exception when the transportation expenses are necessary for employee safety.

Bicycle Commuting Reimbursements
Under the new law, employers can deduct qualified bicycle commuting reimbursements as a business expense. The new tax law suspends the exclusion of qualified bicycle commuting reimbursements from an employee’s income. This means that employers must now include these reimbursements in the employee’s wages.

Qualified Moving Expenses Reimbursements
Employers must now include moving expense reimbursements in employees’ wages. The new tax law suspends the exclusion for qualified moving expense reimbursements.
There is one exception as members of the U.S. Armed Forces can still exclude qualified moving expense reimbursements from their income if they meet certain requirements.

Employee Achievement Award
Special rules allow an employee to exclude achievement awards from their wages if the awards are tangible personal property. An employer also may deduct awards that are tangible personal property, subject to certain deduction limits. The new law clarifies the definition of tangible personal property.

For questions on your income tax call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Livonia 734-462-6161,
Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Back to Top