by Fresh Start Tax | Aug 10, 2020 | Tax Help
Here’s what taxpayers need to know about the home office deduction.
The home office deduction allows qualifying taxpayers to deduct certain home expenses on their tax return.
Here are some things to help taxpayers understand the home office deduction and whether they can claim it:
• Employees are not eligible to claim the home office deduction.
• The home office deduction Form 8829 is available to both homeowners and renters.
• There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
• Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.
• The term “home” for purposes of this deduction:
◦ Includes a house, apartment, condominium, mobile home, boat or similar property.
◦ Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.
◦ Doesn’t include any part of the taxpayer’s property used exclusively as a hotel, motel, inn or similar business.
• There are two basic requirements for the taxpayer’s home to qualify as a deduction:
◦ There must be exclusive use of a portion of the home for conducting business on a regular basis.
For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
◦ The home must be the taxpayer’s principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties.
Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.
• Expenses that relate to a separate structure not attached to the home will qualify for a home office deduction. It will qualify only if the structure is used exclusively and regularly for business.
• Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:
◦ The simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet.
The maximum deduction under this method is $1,500.
◦ When using the regular method, deductions for a home office are based on the percentage of the home devoted to business use.
Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.
by Fresh Start Tax | Aug 6, 2020 | Tax Help
Need To Write An IRS Appeals Letter, Former IRS Agent, Here is How You Do That
Thank God for the Appeals Function of the IRS, they can fix the wrongs of many bad decisions by IRS Agents.
The Agents that work in appeals are much more seasoned and as a whole has a great deal of common sense and I find them much more lenient that regular agents that may new newer or green and do not understand the flexibility that they have.
The real question, should you hire someone or do it yourself?
Answer: Depends on the size of the case and the issues at hand.
Its always best to speak to a professional but regardless,this is how you approach the appeals letter.
Michael Sullivan Fresh Start Tax Expert, Former IRS Agent
As a former IRS agent teaching instructor with the Internal Revenue Service and now being in private practice is necessary to understand how important the IRS appeals function is in dealing with your IRS problem.
In almost all facets in dealing with the IRS in both collections, audits and all other functions the appeals branch serves as an important instrument to help taxpayers mistakes, oversight and to let others see a new understanding regarding your case.
Therefore is critical to understand how important the appeals letter is in dealing with the issue.
Lets stat with the Office of Appeals’ mission statement:
“To resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayer in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service.”
IRS Appeals proudly boasts independence as a core value & they really are.
Appeals offers a fresh, objective and impartial perspective and provides taxpayers a fair hearing that would otherwise often inefficiently clog up a court’s and taxpayer’s time and resources.
To take a case to Appeals, the taxpayer must protest in writing the IRS’s proposed action.
The written protest MUST contain the elements below:
The following in a written protest:
1. Your name, address and a daytime telephone number,
2. A statement that you want to appeal the IRS findings to the Office of Appeals,
3. A copy of the letter you received that shows the proposed change(s),
4. The tax period(s) or year(s) involved,
5. A list of each proposed item with which you disagree,
6. The reason(s) you disagree with each item,
7. The facts that support your position on each item,
8. The law or authority, if any, that supports your position on each item.
You must Add: The penalties of perjury statement as follows:
“Under the penalties of perjury, I declare that the facts stated in this protest and any accompanying documents are true, correct and complete to the best of my knowledge and belief”
As well as your signature under the penalties of perjury statement
IRS practice tips to know and understand.
You should include as much information as you can in your appeals write up.
While most of you will not be a tax professionals in writing this, make sure it is concise, to the point so the appeals agent has a good understanding of why your appeal is being filed.
Let it contain as much factual information and documentation as possible.
Remember, documentation is king. You cannot over document.
Make sure your package is neat, orderly, and well put together.
If you can tab it and send it in a nice package all the better.
The appellate agent is going to stick to the facts of the case. You need to lay out every dispute possible and associated directly with what the IRS agent spelled out in your initial audit report.
The appellate hearing is a very informal hearing in which after that meeting you can still include more information.
Generally after speaking to the appellate officer agent he/she may give you some more time and information he/she may need to help your case and you can provide at the time requested.
If this is your first time doing this I would have third party look over it and review it.
To be perfectly honest with you, it’s best to have a tax professional put these this appeal together especially that it involves a large amount of money.
Call us today should you have any questions.
by Fresh Start Tax | Aug 5, 2020 | Tax Help
The Appeals Function of the IRS, they can fix the wrongs of many bad decisions by IRS Agents.
As a former IRS agent teaching instructor with the Internal Revenue Service and now being in private practice is necessary to understand how important the IRS appeals function is in dealing with your IRS problem.
In almost all facets in dealing with the IRS in both collections, audits and all other functions the appeals branch serves as an important instrument to help taxpayers mistakes, oversight and to let others see a new understanding regarding your case.
Therefore is critical to understand how important the appeals letter is in dealing with the issue.
It’s very simple, very compact and very easy to complete.
Here is the Office of Appeals’ mission statement:
To resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayer in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service.
IRS Appeals proudly boasts independence as a core value.
Appeals offers a fresh, objective and impartial perspective and provides taxpayers a fair hearing that would otherwise often inefficiently clog up a court’s and taxpayer’s time and resources.
To take a case to Appeals, the taxpayer must protest in writing the IRS’s proposed action. The written protest must contain the element below:
The following in a written protest:
1. Your name, address and a daytime telephone number,
2. A statement that you want to appeal the IRS findings to the Office of Appeals,
3. A copy of the letter you received that shows the proposed change(s),
4. The tax period(s) or year(s) involved,
5. A list of each proposed item with which you disagree,
6. The reason(s) you disagree with each item,
7. The facts that support your position on each item,
8. The law or authority, if any, that supports your position on each item.
You must Add: The penalties of perjury statement as follows:
“Under the penalties of perjury, I declare that the facts stated in this protest and any accompanying documents are true, correct and complete to the best of my knowledge and belief”
ALSO:
Your signature under the penalties of perjury statement
IRS practice tips.
You should include as much information as you can in your appeals write up.
While most of you will not be a tax professionals in writing this, make sure it is concise, to the point so the appeals agent has a good understanding of why your appeal is being filed.
Let it contain as much factual information and documentation as possible.
Remember, documentation is king.
Make sure your package is neat, orderly, and well put together.
If you can tab it and send it in a nice package all the better.
The appellate agent is going to stick to the facts of the case. You need to lay out every dispute possible and associated directly with what the IRS agent spelled out in your initial audit report.
The appellate hearing is a very informal hearing in which after that meeting you can still include more information.
Generally after speaking to the appellate officer agent he/she may give you some more time and information he/she may need to help your case and you can provide at the time requested.
If this is your first time doing this I would have third party look over it and review it.
To be perfectly honest with you, it’s best to have a tax professional put these this appeal together especially that it involves a large amount of money.
by Fresh Start Tax | Aug 5, 2020 | Tax Help
IRS Help For IRS Tax Notices + Did you receive an IRS tax audit notice for supporting documentation for an earned income credit or another tax issue?
Call us today for a free initial tax consultation.
IRS has programmed their computers to generate IRS notice CP 75, RCP 75 a asking for supporting documentation for the earned income credit.
If you have received this IRS notice or letter please be advised of the following.
Here is the information you need to know:
a. At the top of the notice on the right side, we list the tax year that we’re auditing.
b. Any documents you send in need to cover the year we’re auditing.
c. Don’t send original documents. Only Send us copies.
The IRS Earned Income Credit Audit
The first item listed is the earned income credit.
Your package includes a Form 886-H-EIC that lists all the different documents you can send to prove you may claim the EIC with one or more qualifying children.
You can send any combination of these documents to provide the information the IRS needs.
Look at the Schedule EIC you filed with your tax return and complete the following steps for each qualifying child listed:
1. you must prove you lived with your child in the U.S. for more than half the tax year:
a. If your child lived with you at the address shown on your notice, you need to send a document showing your child lived at that same address for more than half the tax year.
b. If you moved and you and your child lived at another address, you must send documents showing the same address for both of you for more than half the tax year.
c. If your child didn’t go to school, you can send in copies of medical records or a statement from a daycare provider.
d. If you need to get a statement from your child’s school, daycare or medical care provider, you can find templates here. Your school or provider can copy and paste the template to their letterhead to make sure all the required information is provided.
e. Don’t forget to check the Form 886-H-EIC for more examples of documents you can send.
f. If you can’t prove your child lived with you for more than half the tax year, you cannot get the EIC.
You also must verify how you’re related to the child.
The child must be related to you in one of the ways listed on the Form 886-H-EIC.
The form gives examples of what to send to prove how you’re related.
If your child is age 19 years old or over, you must verify either that:
a. Your child was under age 24 and a full-time student for at least five months of the tax year (you can do this by sending copies of official school records), or
b.Your child is permanently and totally disabled (you can do this by sending a copy of one of the official documents shown on Form 886-H-EIC).
You must verify you, your spouse (if filing a joint return) and your child have a valid SSN:
a. To claim the EIC, you (and your spouse, if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA) by the due date of your 2019 return (including extensions).
b.Any qualifying child listed on Schedule EIC also must have a valid SSN by the due date of your 2019 return (including extensions).
You can only claim the EIC if your child lived with you for more than half the tax year in the United States. Your child must also be related to you in one of the ways listed on the Form 886-H-EIC, and be an eligible age.
Your child must meet all three of these requirements to qualify you for the EIC.
If you can’t show that your child meets all the requirements, you may still be eligible for the EIC without a qualifying child.
If you need any help during an IRS tax audit, former IRS agents who know the system.
by Fresh Start Tax | Aug 5, 2020 | Tax Help
Being a former revenue officer I can tell you there are generally two types of ways that revenue officers work “Trust Fund” cases.
At IRS you have a mixed bag of tricks of Revenue Officers who work for on cases.
I have pretty much categorize them into two different areas.
First, those who do their due diligence and come up with the correct assertion of who is truly responsible for the trust fund penalty,
Second, those who generally just throw a cast net and drag everyone in that they possibly can.
Looking at those who do their due diligence, these revenue officers look at the 4180s, look at the corporate resolutions, look at bank signature cards, look at who signed tax returns and try to narrow down the field to find out who was truly responsible for the trust fund tax.
They make sure those who are on the fringes do not have to go through the appellate process or possibly the assessment process of having to pay the trust fund tax liabilities.
The second area of those who just throw a cast net around every body. They review who signed bank signature cards, who signed tax returns, those who knew anything about the business and they will set up everyone who they possible can and try to shake down everyone and let the appeals division sorted it all out.
These are generally what I call the lazier revenue officers who shrug their responsibility.
They do not do their proper due diligence and do not take a true look at the situation and realize how much damage and money it cost for people to make a tax defense against the trust fund.
Tax Tip :If you run into type II those who throw a cast net around everyone, make sure you speak to the group manager and state your case to help alleviate the trust fund penalties around your clients addiction situation exist.
