Most people assume that if someone owes them money and never pays, the IRS will allow a tax deduction. Unfortunately, federal tax law is considerably more restrictive. Whether you are a business owner, lender, landlord, or investor, the deductibility of bad debts depends upon how the debt arose, whether it became genuinely worthless, and whether [...]
Many Americans assume that every payment they receive must be reported as taxable income. Fortunately, Congress has created several important exceptions to that rule. One of the least understood is the exclusion for qualified foster care payments under Internal Revenue Code § 131. If you serve as a foster parent—or are considering becoming one—it is [...]
Tax identity theft continues to affect thousands of Americans each year. A fraudulent tax return filed under your Social Security number can delay legitimate refunds for months while the Internal Revenue Service investigates the matter. Fortunately, the IRS offers a simple but powerful security tool known as the Identity Protection Personal Identification Number (IP PIN). [...]
What Is an Involuntary Conversion? Most taxpayers know that selling appreciated property can trigger capital gains tax. However, not every disposition of property is voluntary. Sometimes property is: Destroyed in a fire or hurricane; Stolen; Condemned through eminent domain; Taken by a governmental authority; or Converted into insurance proceeds after a casualty. When this happens, [...]
When homeowners receive money from a government agency to elevate a home, install wildfire protection, improve drainage, or otherwise reduce the risk of future natural disasters, one of the first questions is: "Do I have to pay taxes on this?" The answer is often no, but for a different reason than many taxpayers assume. Congress [...]
Many employers reward employees with discounts on merchandise or services. Retail stores offer clothing discounts, restaurants provide discounted meals, airlines offer reduced airfare, and hotels often let employees stay at reduced rates. The good news is that many employee discounts are completely tax-free under the Internal Revenue Code. However, there are important limitations. Once an [...]
One of the most common tax myths is that if you lose your receipts, you automatically lose your tax deduction. That is not always true. Federal tax law recognizes that taxpayers sometimes incur legitimate business expenses without preserving perfect documentation. Under a famous court decision known as the Cohan Rule, courts may estimate deductible expenses [...]
Employee recognition is good for morale, but it can also have tax consequences. Many employers assume that giving an employee a watch, plaque, or other award is automatically tax-free. Unfortunately, that is not always true. The Internal Revenue Code contains a narrow exception that allows certain employee achievement awards to be excluded from taxable income. [...]
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