Many taxpayers know they can deduct charitable contributions if they itemize deductions. Far fewer understand that a legitimate charitable donation can still be denied if the taxpayer cannot properly substantiate it. The Internal Revenue Code allows charitable contribution deductions, but Treasury Regulations impose detailed documentation requirements. If those requirements are not met, the deduction may [...]
Business owners often assume that every piece of equipment they purchase must be depreciated over several years. That is not always true. The Internal Revenue Code and Treasury Regulations contain a separate set of rules governing materials and supplies, allowing many inexpensive or short-lived items to be deducted immediately as ordinary business expenses. Understanding these [...]
IRS Interest Is Not a Penalty Many taxpayers receive an IRS notice showing both penalties and interest and assume they are the same thing. They are not. An IRS penalty is generally intended to encourage compliance with the tax laws. Interest, however, is designed to compensate for the time value of money. If taxes are [...]
When most people inherit property, they assume the only question is whether to accept it. Surprisingly, federal tax law sometimes rewards doing exactly the opposite. Under Internal Revenue Code § 2518, a beneficiary may legally refuse an inheritance through what is known as a qualified disclaimer. If all of the statutory requirements are satisfied, the [...]
Many taxpayers lend money to friends or family members believing that, if the borrower never repays the loan, they will at least receive a tax deduction. Unfortunately, federal tax law is much stricter than most people realize. In many situations, a personal loan that goes unpaid does not produce an ordinary tax deduction. Instead, the [...]
Healthcare costs continue to rise, causing many employers to look for flexible ways to help employees pay medical expenses. One increasingly common option is a Health Reimbursement Arrangement (HRA). Unlike a Health Savings Account (HSA), an HRA is funded solely by the employer. Employees generally cannot contribute their own money, and when properly structured, reimbursements [...]
One of the most common misconceptions taxpayers have is that if they accidentally overpay their taxes, they can simply request the money whenever they discover the mistake. Unfortunately, federal tax law is much stricter. The Internal Revenue Code imposes firm deadlines for claiming refunds. Miss those deadlines, and even an obviously valid refund may be [...]
Can Your Employer Provide You a Home Tax-Free? Most people assume that if an employer gives an employee a place to live, the value of that lodging is automatically taxable compensation. Surprisingly, that is not always true. Under certain circumstances, the Internal Revenue Code allows employees to exclude the value of employer-provided lodging from gross [...]
Many taxpayers are surprised to learn that paying all of their taxes by the April filing deadline does not necessarily prevent an IRS penalty. If you earn income without sufficient withholding—such as self-employment income, investment income, rental income, or retirement distributions—you may be required to make quarterly estimated tax payments throughout the year. Fortunately, Congress [...]
If you received a state income tax refund this year, you may be wondering whether the IRS expects you to report it as taxable income. The answer is one of the most misunderstood in federal tax law: Sometimes yes. Sometimes no. Whether a state tax refund is taxable depends largely on whether you received a [...]
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