The W-2 mortgage loan officer in this tax case beat the alternative minimum tax (AMT) by winning his claim that, in spite of his W-2, he was an independent contractor who should report his business expenses as a proprietorship on Schedule C of his Form 1040.

The IRS does not like offshore and foreign bank accounts that are not reported on the FBAR, IRS Form 8938, and Schedule B of IRS Form 1040. Millions of U.S. taxpayers have perfectly legal and properly reported offshore and foreign bank accounts. But legal or illegal, they must be reported on the two income tax forms and the FBAR.

Is your worker an independent contractor or an employee? You want to get this right at the beginning. But if you improperly classified an employee as an independent contractor, the IRS has a tax penalty relief program for you. Should the IRS plan not have the best relief for you, consider the Section 530 employer protection plan.

Learn what is 1099 income and why that often causes an incorrect 1099, which in turn can lead to an IRS audit. Often, correcting an incorrect 1099 on Schedule C compounds the problem. In this article, you learn how to 1099 correctly and what is 1099 income. The definition of “what is 1099 income” may surprise you.

Learn how to avoid payroll tax problems when you hire a nanny or other household worker. Your best bet is likely a payroll service that specializes in “nanny tax” compliance.

If you are thinking about a new business, you need to know the rules on how to deduct start-up costs right now. Why? Your deductible costs could start accumulating simultaneously with your thinking about this new business.

You trigger business deductions once you start your business. Thus the question: Which triggers do you need to pull for the business to start?

The single-member LLC is a disregarded entity for federal income tax purposes, but a corporation for employment tax purposes.

When the bank forecloses on a home, tax law comes into play in some surprising and often beneficial ways, especially this year. Tax law treats recourse and nonrecourse mortgages in completely different ways, but with a personal residence, the end result can be pretty much the same.

If you are personally liable for a debt and that debt is canceled or forgiven, you include the canceled debt as taxable income on your income tax return. Your situation dictates whether you will pay taxes on this taxable income. You might qualify to exclude the canceled-debt income from taxation altogether or to pay little or no taxes on it this year and then pay taxes in later years.

Even if you are not required to file a tax return, you need to file a return within the statute of limitations if you are due a refund and you want the cash. If you fail to file a return within the statute of limitations, you forfeit your refund and make a contribution of that refund to the government.

The U.S. tax system is kind to proprietors and corporations that lose money in their businesses. The losses can be carried back and forward, but you must pay strict attention to the elections and due dates to ensure your benefits.

Do you own a business that withholds taxes from employees? If so, you need 100 percent certainty that the withheld payroll tax monies are going to the IRS. You can achieve 100 percent certainty with the IRS EFTPS registration..

The U.S. government taxes your profits and subsidizes your losses. That’s nice. Not all governments share in the losses.

If you are the victim of a Ponzi scheme, you absolutely, positively must read this article to learn how the law gives you favored victim status. This includes a safe harbor election, possible carryback of the losses to one of five years, net operating loss treatment, and more.

Make sure you know all of the ramifications of a premature IRA withdrawal before you make the withdrawal for medical expenses.

If you are looking for tax deduction trouble from the IRS, do this: Don’t file your tax return or at the very least, file it well after the filing deadline.

Your home equity loan can give you a full, partial, or no deduction for your interest. If you will get zero or a reduced benefit, make the necessary changes to protect your tax benefits.

This court case shows how an office in the home may have than one room that qualifies for deduction.

You may not claim a home office deduction when you rent your home office to your S corporation employer. Therefore, redo this arrangement by taking advantage of your employee status.

Section 179 expensing is available against business income. For this purpose, business income is defined to include, among others, W-2 income.

You may deduct education that improves or maintains the skills you need in your current business, if this education does not qualify, or lead to qualifying, you for a new or different business.

With net business income less than $115,647, the sole proprietor with two qualifying children and a stay-at-home spouse can hire the spouse and pay a wage of $6,000 to create a $1,200 child care credit with no change in their joint income taxes—other than realization of the $1,200 credit.

In an ISP, the IRS asserted that the Section 105 medical reimbursement plan may not reimburse the employee-spouse for the cost of health insurance purchased in the employee-owner’s name. This court case held that this IRS position is wrong and that the owner may deduct the cost of medical insurance purchased in his name when that insurance is covered by the Section 105 medical reimbursement plan.

When you use an intermediary to complete a Section 1031 exchange, you sell one property and place the cash on deposit with the intermediary. If the intermediary goes bankrupt causing your exchange to fail the time test, you are on the hook for the taxes.

New tax rules have pretty much killed the once-common tool and car allowances as expense reimbursement methods.

Your son may not deduct the interest on the mortgage payments he makes on your behalf. You need to reconsider and restructure this arrangement.

The husband and wife who work together must consider the joint venture election if they want the business treated by the IRS the way they think it should be treated.

This proprietor paid his employee-wife $12,000 in wages. Now, she wants to contribute the entire $12,000 as an elective deferral to her 401(k) account but she no longer has $12,000 because of payroll taxes. With some mechanical adjustments, the employee-wife may contribute the full $12,000.

The IRS ruled that this real estate broker who gives commission rebates and commission reductions at closing does not have to give Form 1099s to his customers who receive the rebates and reductions.

Terry Gerber was sentenced to two years and six months in federal prison for tax evasion.

Under the “objective test,” entertainment does not mean only the entertainment of others. The objective test sanctions Dutch-treat entertainment.

The IRS applies a recapture tax, even when no depreciation is claimed.

At what point is a home destroyed so that it is eligible for the “involuntary conversion rules and the $250,000 ($500,000) exclusion of capital gains rules? In this chief counsel advice, the IRS gives some clarity.

As a person who buys and sells stocks, you will see a huge difference in how the law treats you if you’re a dealer, trader, or investor.

Dealer versus investor tax status is a heavily litigated issue. Choosing between dealer or investor status is often a tough call, as is in the case of this taxpayer. There can be a huge tax difference between classification as a dealer or classification as an investor.

Anthony Lee was sentenced to seven months in prison and three months of home detention for failure to file his tax returns. He owed $76,853 in taxes and an extra fine of $10,000. Know the law!

Even if you do not owe any money, you move right to the front of the line for an IRS audit if you do not file your taxes on time. Always file a tax return, even if you cannot pay the tax.

Answer this question: Could you prove that you filed last year’s tax return? Is your proof credible enough that it will stand the scrutiny of the IRS?

Getting the IRS to give you an advance ruling on a transaction or deduction can be very worthwhile. It now costs money, but it might be worth getting the opinion you seek. If your ruling does not fit into the three major categories they list, your fees may vary. The highest fee is $50,000 for a pre-filing agreement.

Schedule E allows wages, but it does not have a separate line item for them. So, when you are hiring your spouse to work on your rental properties, file the work as “ordinary and necessary expenses to save money on taxes.

It matters not that you used a paid tax preparer to help you, you commit tax fraud and face jail time when you take illegal tax protestor positions on your tax returns.

You may amend your tax return for missed Section 179 expensing on a unibody SUV. The truck chassis is not required for an SUV to qualify as a truck for purposes of the SUV deduction.

Winning a court case for physical or nonphysical injuries triggers tax laws that can dramatically impact the after-tax value of any cash you receive for injuries or damages.

Lawmakers enacted a special two-year sales tax deduction to benefit taxpayers who live in states with no income tax. According to the Treasury Inspector General, over 700,000 taxpayers failed to claim the deduction.

You do not want a hobby for tax purposes. The fact that hobby losses are not deductible is minor compared to the other problems caused by the hobby. For example, you report hobby income above-the-line and hobby expenses below-the-line as miscellaneous itemized deductions where they suffer the 2 percent of adjusted gross income floor, or, worse yet, the AMT.

Hobby gambling can trigger taxes when you have a zero income because the law makes your winnings reportable above-the-line and losses deductible below-the-line.

Tax law calls the wreckage and totaling of your vehicle both an involuntary conversion and a casualty. Special rules allow you to treat the involuntary conversion as either a sale or a trade-in. Thus, your first step in this process is to find your gain or loss and then decide how you want to claim your tax benefits.

Today’s computer and Internet technology give you a variety of new safeguards that you can use to protect your tax records. When thinking about your records, keep this one overriding rule in mind: no records, no deductions.

It is highly unusual for the IRS to revoke a private letter ruling. You can protect yourself from a revocation by making a proposed transaction the subject matter for the ruling.

Bad records can cost you just about every tax deduction. You can testify as to your deductions, but without the records that turns out worthless. When it comes to your taxes, paper talks.

If you don’t have the tax records or if you are just not cooperative, you could enable the IRS to use the bank deposits method to determine your taxable income. This is a bad thing. When the IRS uses the bank deposits method to determine your tax liability, you generally pay a whole lot more tax.

The AMT can trigger additional taxes on your capital gains despite the fact that the capital gains tax rate for both regular and AMT purposes is identical. Your status as single or married and the amount and nature of your income determine the extra AMT hit. In general, the middle income can suffer the worst AMT impact.

Not filing your tax returns on time because you lost or misplaced your tax records is going to make your tax life miserable. The trouble is so bad that you need to consider an “offer in compromise.”

The IRS fulfilled its promise and audited twice as many Form 1040-Schedule C taxpayers and S corporation returns. Your odds of audit vary by both choice of entity and gross receipts in that entity.

When you operate your business as a corporation, you claim the office-in-the-home deduction as an employee. The law requires that this employee use be for the convenience of the employer. Generally, you want the convenience of the employer reason in writing.

When you have your corporation reimburse your home office as an employee business expense, you treat the home as if you had claimed the office-in-the-home deduction personally.

The corporate reimbursement of the owner-employee for office-in-the-home expenses includes condo fees and mortgage payments.

The corporate reimbursement to you, the employee, for the business use of your home office requires that you recognize the depreciation component of the reimbursement as if you had claimed the office in the home on your personal tax return.

When you take early retirement and your income is greater than the thresholds, your Social Security benefits are subject to (1) recapture by the Social Security Administration and (2) taxation by the IRS. Tax planning to avoid both benefit recapture and taxation of benefits involves the possible use of an S or C corporation.

The couple in this court case did not keep the right records to prove the improvements they made to their home. This failure to keep the records probably saved them some personal time, but it cost them taxes on $101,907 of capital gains. What do you suppose the hourly cost of this failure—considering that the time spent to keep these records has to be very few hours? You really do need the right tax records and it takes very little time when you know what to keep.

This taxpayer embezzled money from his employer, got caught, and died in jail. Before he died, the embezzler sent the embezzled money to the IRS as an estimated tax payment.

The IRS told lawmakers that a number of people were cheating on vehicle donations and that some changes in the rules could put a quick stop to that. This court case explains why lawmakers went along with the IRS and enacted the changes that are in effect today.