Tax, Accounting and Business Consulting

Find a good CPA or a Tax Expert  It is always worth having a good CPA on your side whether you are handling business or personal finances. Most of the start-ups do not consider hiring a CPA or consultant until they truly feel they must have one and sometime it may be very late. However, if it is not financially feasible to hire one, you can wait. Hiring doesn’t mean you have to pay a bunch of money and keep them with you all the time. You can buy couple of hours a month or a quarter on a retainer or on hourly basis for consulting when needed. Having an expert on your side will give you confidence and at the same time it keeps you updated on changes in tax laws and other business opportunities you can tap on. You may have a question “how can I know who do I trust?” You might say “I hired a professional CPA who had a very professional website, pretty good blog posts, decent YouTube videos and even a very good presence on the Internet. I saw them ranked very high in the Google search ...

  How is Tax Calculated on Installment Sale An installment sale is a sale of property where you receive at least one payment after the tax year in which the sale occurs. When you receive payment in installment for sale of asset, you're required to report gain on an installment sale under the installment method unless you elect out from it on filing the return or before the due date for filing your tax return (including extensions) for the year of the sale. You can recognize full gain in the year of sale even if it is an installment sale on Form 4797, Sales of Business Property, or on Schedule D (Form 1040), Capital Gains and Losses and Form 8949, Sales and Other Dispositions of Capital Assets. It is worthwhile to remember that installment sale method is not available for property sold on loss. Likewise, you cannot use the installment method to report gain from the sale of inventory or stocks and securities traded on an established securities market . Even it is installment sa...

Injured and Innocent Spouse Relief   Injured Spouse Injured spouse is one whose share of federal tax refund was reduced to pay his/her spouse’s debt. Refund may be applied to the following overdue debts like; ü   Past-due child support ü   Debts to federal agencies ü   Federal or State income tax obligations ü   State unemployment compensation debts ü   Student Loan If you are not legally responsible for these debts, you may get the part of your refund by filing Form 8379. Most of the debts should be taken before the marriage. You have to file form 8379 within 3 years of the original tax return filed or within 2 years of taxes paid whichever is later. If you have not filed the taxes, then you must file within 2 years from the date taxes were paid. If IRS reduces your refund they will send you a notice of offset from them showing the following: ü   The original refund amount ü   The amount applied to your spouse's debt ü...

Seven Days and Thirty Days Rental Rules  Seven days rental rule allows real estate owners to claim the loss from the rental activates to offset the loss against other earned income. In simply put, If a property is rented for an average of 7 days or less then owners will be eligible for tax-deductible losses.  For example if the property was rented for 132 days during the year and it was rented for 22 times. The average rental period will be 6 days. You are eligible to deduct the rental loss from your income. (Treas. Reg. Sec. 1.469-1T(e)(3)(ii)(A)). Likewise if it is rented for average period of 30 days or less and services are provided to the renters, rental income is active income. The rule says if it is rented for 7 days or less and in case of 30 days or less with substantial service, the activity is not a rental activity.  It is worthwhile take note that it is a favorable provision of tax law for owner of vacation rentals. Generally the owner does not participat...

  Residential Real Estate Tax Planning Real estate investment is a very good investment and produce regular stream of income if managed properly as well creates equity for the future. If it is planned properly real estate investment can save a big deal of taxes if planned properly. Other investment has very little options when it comes to saving taxes, but real estate provides great deal of opportunities. In most cases real estate rentals are passive income. However, there are certain tricks and tools that can help you save taxes not only for current year but also for future years.  How is rental income taxed   Rental income is a passive income in most cases, and it is taxes at the ordinary income tax rate. If there is loss, the loss can only be off set against passive income. If there is no passive income or passive income is not enough to offset rental income, the loss will be carried forward to future years until you have passive income. The passive income need...

 Capital Gain on Sale of Primary Residence What is a primary residence? Primary residence is your home you bought at least two years ago and lived /used it for at least for 2 years out of preceding five years. Sale of primary resident is taxable however, Section 121 allow you to exclude certain portion of your gain if you meet both ownership and use test. That mean you are taxed to certain gain but not all, if you fulfill the requirement under the section. Let me simply it. In case of filing married joint you can you can exclude gain up to $500,000 and $250,000 in case of other filing status. Ownership test: To take the exclusion you must have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. Use test: You must have used you home as primary resident for 24 months out of last 5 years. However, the ownership and the use can be different time period with in the last 5 years. It is w...

  Qualified Opportunity Zone (QOZ)   ü   Established by The Tax Cuts and Jobs Act 20174 to provide a tax incentive for private, long-term investment in economically distressed communities ü   Capital Gain Tax deferral or reduction: Investors in these programs have opportunities to defer and potentially reduce tax on recognized capital gains. ü   Tax savings: Tax payer can avail saving in taxes when they retain the investment in the Qualified Opportunity Fund for the time frame stipulated. Meaning, if you are hot by a huge tax bill due to capital gains, investing in a Qualified Opportunity Fund may worth considering, provided you invest within a prescribed time frame. What is Qualified Opportunity Zone? IRS says: A QOZ is an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as QOZs if they were nominated for that designation by a state, the District of ...