Blog

Summertime is a time of year when people rent out their property. In addition to the standard clean up and maintenance, owners need to be aware of the tax implications of residential and vacation home rentals.

Receiving money for the use of a dwelling also used as a taxpayer’s personal residence generally requires reporting the rental income on a tax return. It also means certain expenses become deductible to reduce the total amount of rental income that’s subject to tax.

Dwelling Unit.  This may be a house, an apartment, condominium, mobile home, boat, vacation home or similar property. It’s possible to use more than one dwelling unit as a residence during the year.

Used as a Home.  The dwelling unit is considered to be used as a residence if the taxpayer uses it for personal purposes during the tax year for more than the greater of: 14 days   or 10% of the total days rented to others at a fair rental price. Rental expenses cannot be more than the rent received.

Personal Use.  Personal use means use by the owner, owner’s family, friends, other property owners and their families. Personal use includes anyone paying less than a fair rental price.

Divide Expenses. Special rules generally apply to the rental of a home, apartment or other dwelling unit that is used by the taxpayer as a residence during the taxable year. Usually, rental income must be reported in full, and any expenses need to be divided between personal and business purposes. Special deduction limits apply.

How to Report. Use Schedule E to report rental income and rental expenses on Supplemental Income and Loss. Rental income may also be subject to Net Investment Income Tax. Use Schedule A to report deductible expenses for personal use on Itemized Deductions. This includes such costs as mortgage interest, property taxes and casualty losses.

Special Rules.  If the dwelling unit is rented out fewer than 15 days during the year, none of the rental income is reportable and none of the rental expenses are deductible. Find out more about these rules; see Publication 527, Residential Rental Property (Including Rental of Vacation Homes).

Use IRS Free File.  Renting a vacation home can be complicated and IRS Free File can make filing a tax return easier. IRS Free File is available until Oct. 16. Taxpayers earning $64,000 or less can use brand-name tax software. Those earning more can use Free File Fillable Forms, an electronic version of IRS paper forms. Free File is available only through the IRS.gov website. You can get forms and publications on IRS.gov/forms at any time.

Avoid scams. The IRS will never initiate contact using social media or text message. First contact generally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

For help with your taxes, please 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

The IRS mails millions of letters every year to taxpayers for a variety of reasons. Keep the following suggestions in mind on how to best handle a letter or notice from the IRS:

1. Do not panic. Simply responding will take care of most IRS letters and notices.
2. Do not ignore the letter. Most IRS notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes specific instructions on what to do. Read the letter carefully; some notices or letters require a response by a specific date.
3. Respond timely. A notice may likely be about changes to a taxpayer’s account, taxes owed or a payment request. Sometimes a notice may ask for more information about a specific issue or item on a tax return. A timely response could minimize additional interest and penalty charges.
4. If a notice indicates a changed or corrected tax return, review the information and compare it with your original return. If the taxpayer agrees, they should note the corrections on their copy of the tax return for their records. There is usually no need to reply to a notice unless specifically instructed to do so, or to make a payment.
5. Taxpayers must respond to a notice they do not agree with. They should mail a letter explaining why they disagree to the address on the contact stub at the bottom of the notice. Include information and documents for the IRS to consider and allow at least 30 days for a response.
6. There is no need to call the IRS or make an appointment at a taxpayer assistance center for most notices. If a call seems necessary, use the phone number in the upper right-hand corner of the notice. Be sure to have a copy of the related tax return and notice when calling.
7. Always keep copies of any notices received with tax records.
8.  The IRS and its authorized private collection agency will send letters and notices by mail. The IRS will not demand payment a certain way, such as prepaid debit or credit card. Taxpayers have several payment options for taxes owed.

For help with your taxes, please 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

Day camps are common during the summer months. Many parents enroll their children in a day camp or pay for day care so they can work or look for work. If this applies to you, your costs may qualify for a federal tax credit. Here are 10 things to know about the Child and Dependent Care Credit:

1. Care for Qualifying Persons.  Your expenses must be for the care of one or more qualifying persons. Your dependent child or children under age 13 generally qualify.
2. Work-related Expenses. Your expenses for care must be work-related. In other words, you must pay for the care so you can work or look for work. This rule also applies to your spouse if you file a joint return. Your spouse meets this rule during any month they are a full-time student. They also meet it if they are physically or mentally incapable of self-care.
3. Earned Income Required. You must have earned income. Earned income includes wages, salaries and tips. It also includes net earnings from self-employment. Your spouse must also have earned income if you file jointly. Your spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care.
4. Joint Return if Married. Generally, married couples must file a joint return. You can still take the credit, however, if you are legally separated or living apart from your spouse.
5. Type of Care. You may qualify for the credit whether you pay for care at home, at a daycare facility or at a day camp.
6. Credit Amount. The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on your income.
7. Expense Limits. The total expense that you can use in a year is limited. The limit is $3,000 for one qualifying person or $6,000 for two or more.
8. Certain Care Does Not Qualify. You may not include the cost of certain types of care for the tax credit, including:

• Overnight camps or summer school tutoring costs.
• Care provided by your spouse or your child who is under age 19 at the end of the year.
• Care given by a person you can claim as your dependent.

9. Keep Records and Receipts. Keep all your receipts and records for when you file taxes next year. You will need the name, address and taxpayer identification number of the care provider. You must report this information when you claim the credit on Form 2441, Child and Dependent Care Expenses.
10. Dependent Care Benefits. Special rules apply if you get dependent care benefits from your employer.

Keep in mind this credit is not just a summer tax benefit. You may be able to claim it at any time during the year for qualifying care. IRS Publication 503, Child and Dependent Care Expenses, provides complete details on all the rules. Get it anytime on IRS.gov.

For help with your taxes, please 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

This Fourth of July all across the country, people will show their love for America by displaying flags along streets, hanging them from porches, and proudly carrying them in parades and festivals. Old Glory will be everywhere. But did you know there are official rules on properly displaying the U.S. flag? This infographic from USAGov, based on the Federal Flag Code, can help you show respect for the flag as you celebrate America’s 241st birthday:

• When: You can display the flag outside from sunrise to sunset. If you want to fly it after dark, it will need to be lit. Don’t fly the flag during inclement weather, unless it’s an all-weather flag.
• On the porch: The union of the flag–the blue section with white stars–should be placed at the peak of the staff unless the flag is at half-staff. When the flag is suspended from a rope on a pole extending from a house, the flag should be hoisted out, union first, from the building.
• On the wall or the window: When the flag is displayed on a flat surface like a wall, the union should be at the top left.
• On the street: The flag should be suspended vertically with the union to the north in an east and west street or to the east in a north and south street. The flag should never touch anything beneath it, so make sure it’s hoisted at the proper height.
• At the office: Suspend the flag vertically with the union to the observer’s left upon entering. If the building has more than one main entrance, the flag should be suspended vertically near the center of the corridor or lobby with the union to the north when entrances are to the east and west, or to the east when entrances are to the north and south. If there are entrances in more than two directions, the union should be to the east.
• On a vehicle: The staff should be fixed firmly on the right side of the vehicle. Do not drape the flag over the hood, top, sides, or back of a vehicle or a boat.
• Half-staff: During periods of mourning, it’s common to see the flag flying at half-staff. Only presidents can proclaim such periods for a national remembrance (PDF, Download Adobe Reader). Governors can also declare mourning periods at a local level. In some cases, heads of federal agencies can order the flag flown at half-staff on grounds under their supervision. Traditionally, states and local governments follow the president’s proclamation during a period of national mourning.

Take care of your flag. Many dry cleaners will clean U.S. flags for free during the months of June and July. Store your flag in a well-ventilated area. If it gets wet, make sure it’s completely dry before storing it. If the flag is damaged or worn out, it should be burned and disposed of with dignity. Learn more about the flag, its history, protocol, and ways to pay your respects, including the proper way to fold it.

Have a happy and safe Forth of July from all 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

You get a call from someone who says he’s from the IRS and tells you that you owe back taxes. These call usually involve threats for immediate payment. The caller may know part of your Social Security number. And your caller ID might show a Washington, DC area code. But is it really the IRS calling?

No. The real IRS doesn’t call and if they do contact you about unpaid taxes, they do it by mail, not by phone.

Here’s what you can do:

1. Stop. Don’t wire money or pay with a prepaid debit card. Once you send it, the money is gone. If you have tax questions, go to irs.gov or call the IRS at 800-829-1040.
2. Pass this information on to a friend. You may not have gotten one of these calls, but the chances are you know someone who has.

Please Report Scams

If you believe you’ve been the victim of an IRS scam, please report it to the Treasury Inspector General for Tax Administration.

For help with your taxes, please 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

You should always keep a copy of your tax return for your records. You may need copies of your filed tax returns for many reasons. For example, they can help you prepare future tax returns. You’ll need them if you have to amend a prior year’s tax return. You often need them when you apply for a loan to buy a home or to start a business. Or, you may need them to apply for student financial aid. If you can’t find your copies, the IRS can give you a transcript of the information you need, or a copy of your tax return. Here’s how to get your federal tax return information from the IRS:

• Transcripts are free. You can get them for the current year and the past three years. In most cases, a transcript includes the tax information you need.
• A tax return transcript is a summary of the tax return that you filed. It also includes items from any accompanying forms and schedules that you filed. It doesn’t reflect any changes you or the IRS made after you filed your original return.
• A tax account transcript includes your marital status, the type of return you filed, your adjusted gross income and taxable income. It also includes any changes that you or the IRS made to your tax return after you filed it.
• The quickest way to get a copy of your tax transcript is to use the Get Transcript application. Once you verify your identity, you will be able to view and print your transcript immediately online. This Fact Sheet provides details on how to complete this step.
• If you’re unable or prefer not to use Get Transcript Online, you may order a tax return transcript and/or a tax account transcript using the online tool Get Transcript by Mail or by calling 800-908-9946. Transcripts arrive at the address we have on file for you in five to 10 calendar days from the time IRS receives your request.

For help with your taxes, please 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

Usually, profits you earn are taxable. However, if you sell your home, you may not have to pay taxes on the money you gain. Here are ten tips to keep in mind if you sell your home this year.

1. Exclusion of Gain.  You may be able to exclude part or all of the gain from the sale of your home. This rule may apply if you meet the eligibility test. Parts of the test involve your ownership and use of the home. You must have owned and used it as your main home for at least two out of the five years before the date of sale.
2. Exceptions May Apply.  There are exceptions to the ownership, use and other rules. One exception applies to persons with a disability. Another applies to certain members of the military. That rule includes certain government and Peace Corps workers. For more on this topic, see Publication 523, Selling Your Home.
3. Exclusion Limit.  The most gain you can exclude from tax is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.
4. May Not Need to Report Sale.  If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.
5. When You Must Report the Sale.  You must report the sale on your tax return if you can’t exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale, you should review the Questions and Answers on the Net Investment Income Tax on IRS.gov.
6. Exclusion Frequency Limit.  Generally, you may exclude the gain from the sale of your main home only once every two years. Some exceptions may apply to this rule.
7. Only a Main Home Qualifies.  If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.
8. First-time Homebuyer Credit.  If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules, see Publication 523.
9. Home Sold at a Loss.  If you sell your main home at a loss, you can’t deduct the loss on your tax return.
10. Report Your Address Change.  After you sell your home and move, update your address with the IRS. To do this, file Form 8822, Change of Address. Mail it to the address listed on the form’s instructions. If you purchase health insurance through the Health Insurance Marketplace, you should also notify the Marketplace when you move out of the area covered by your current Marketplace plan.

For help with your taxes, please 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

The IRS encourages all businesses and business owners to know the rules when it comes to classifying a worker as an employee or an independent contractor.

An employer must withhold income taxes and pay Social Security, Medicare taxes and unemployment tax on wages paid to an employee. Employers normally do not have to withhold or pay any taxes on payments to independent contractors.

Here are two key points for small business owners to keep in mind when it comes to classifying workers:

1. Control. The relationship between a worker and a business is important. If the business controls what work is accomplished and directs how it is done, it exerts behavioral control. If the business directs or controls financial and certain relevant aspects of a worker’s job, it exercises financial control. This includes:

• The extent of the worker’s investment in the facilities or tools used in performing services
• The extent to which the worker makes his or her services available to the relevant market
• How the business pays the worker, and
• The extent to which the worker can realize a profit or incur a loss

2) Relationship. How the employer and worker perceive their relationship is also important for determining worker status. Key topics to think about include:

• Written contracts describing the relationship the parties intended to create
• Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation or sick pay
• The permanency of the relationship, and
• The extent to which services performed by the worker are a key aspect of the regular business of the company
• The extent to which the worker has unreimbursed business expenses

The IRS can help employers determine the status of their workers by using form Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. IRS Publication 15-A, Employer’s Supplemental Tax Guide, is also an excellent resource.

For help with your tax return or with any questions, please call our office:

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

With hurricane season underway, the IRS offers advice to those impacted by storms and other natural disasters. Here are some tips to help you prepare for such events:

• Use Electronic Records. You may have access to bank and other financial statements online. If so, your statements are already securely stored there. You can also keep an additional set of records electronically. One way is to scan tax records and insurance policies onto an electronic format. You may want to download important records to an external hard drive, USB flash drive or burn them onto CD or DVD. Be sure you keep duplicates of your records in a safe place. For example, store them in a waterproof container away from the originals. If a disaster strikes your home, it may also affect a wide area. If that happens, you may not be able to retrieve the records that are stored in that area.
• Document Valuables. Take photos or videos of the contents of your home or business. These visual records can help you prove the value of your lost items. They may help with insurance claims or casualty loss deductions on your tax return. You should also store these in a safe place. For example, you might store them with a friend or relative who lives out of the area.
• Count on the IRS for Help. If you fall victim to a disaster, know that the IRS stands ready to help. You can call the IRS disaster hotline at 866-562-5227 for special help with disaster-related tax issues.
• Get Copies of Prior Year Tax Records. If you need a copy of your tax return, you should file Form 4506, Request for Copy of Tax Return. The usual fee per copy is $50. However, the IRS will waive this fee if you are a victim of a federally declared disaster. If you just need information that shows most line items from your tax return, you can request a free transcript. The quickest way to get a copy of your tax transcript is to use the Get Transcript application. You can also get it if you call 1-800-908-9946. Two other options are to file Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript, or Form 4506-T, Request for Transcript of Tax Return.

For help with your taxes, please 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

Tax Tips for Students Working this Summer

Many students get summer jobs. It’s a great way to earn extra spending money or to save for later. Here are some tips for students with summer jobs:

1. Withholding and Estimated Tax. If you are an employee, your employer normally withholds tax from your paychecks. If you are self-employed, you may be responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments on set dates during the year. This is essentially how our pay-as-you-go tax system works.
2. New Employees. When you get a new job, you need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from your pay. The IRS Withholding Calculator tool on IRS.gov can help you fill out the form.
3. Self-Employment. Money you earn working for others is taxable. Some work you do may count as self-employment. These can be jobs like baby-sitting or lawn care. Keep good records of your income and expenses related to your work. You may be able to deduct those costs. A tax deduction generally reduces the taxes you pay.
4. Tip Income. All tip income is taxable. Keep a daily log to report your tips. You must report $20 or more in cash tips received in any single month to your employer. And you must report all of your yearly tips on your tax return.
5. Payroll Taxes. You may earn too little from your summer job to owe income tax. But your employer usually must withhold social security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count for your coverage under the Social Security system.
6. Newspaper Carriers. Special rules apply to a newspaper carrier or distributor. If you meet certain conditions, you are self-employed. If you do not meet those conditions, and are under age 18, you may be exempt from Social Security and Medicare taxes.
7. ROTC Pay. If you’re in ROTC, active duty pay, such as pay you get for summer advanced camp, is taxable. Other allowances you may receive may not be taxable, see Publication 3 for details.

For help with your tax return or with any questions, please call our office:

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