by Jim Magary | May 28, 2015 | Tax Help
Tips for Deducting Losses from a Disaster
If you suffer damage to your home or personal property, you may be able to deduct the losses you incur on your federal income tax return. Here are 10 tips you should know about deducting casualty losses:
1. Casualty loss. You may be able to deduct losses based on the damage done to your property during a disaster. A casualty is a sudden, unexpected or unusual event. This may include natural disasters like hurricanes, tornadoes, floods and earthquakes. It can also include losses from fires, accidents, thefts or vandalism.
2. Normal wear and tear. A casualty loss does not include losses from normal wear and tear. It does not include progressive deterioration from age or termite damage.
3. Covered by insurance. If you insured your property, you must file a timely claim for reimbursement of your loss. If you don’t, you cannot deduct the loss as a casualty or theft. You must reduce your loss by the amount of the reimbursement you received or expect to receive.
4. When to deduct. As a general rule, you must deduct a casualty loss in the year it occurred. However, if you have a loss from a federally declared disaster area, you may have a choice of when to deduct the loss. You can choose to deduct the loss on your return for the year the loss occurred or on an amended return for the immediately preceding tax year.
Claiming a disaster loss on the prior year’s return may result in a lower tax for that year, often producing a refund.
5. Amount of loss. You figure the amount of your loss using the following steps:
• Determine your adjusted basis in the property before the casualty.
For property you buy, your basis is usually its cost to you. For property you acquire in some other way, such as inheriting it or getting it as a gift, you must figure your basis in another way. For more see Publication 551, Basis of Assets.
• Determine the decrease in fair market value, or FMV, of the property as a result of the casualty. FMV is the price for which you could sell your property to a willing buyer. The decrease in FMV is the difference between the property’s FMV immediately before and immediately after the casualty.
• Subtract any insurance or other reimbursement you received or expect to receive from the smaller of those two amounts.
6. $100 rule. After you have figured your casualty loss on personal-use property, you must reduce that loss by $100. This reduction applies to each casualty loss event during the year. It does not matter how many pieces of property are involved in an event.
7. 10 percent rule. You must reduce the total of all your casualty or theft losses on personal-use property for the year by 10 percent of your adjusted gross income.
8. Future income. Do not consider the loss of future profits or income due to the casualty as you figure your loss.
9. Form 4684. Complete Form 4684, Casualties and Thefts, to report your casualty loss on your federal tax return. You claim the deductible amount on Schedule A, Itemized Deductions.
10. Business or income property. Some of the casualty loss rules for business or income property are different from the rules for property held for personal use.
You can call the IRS disaster hotline at 866-562-5227 for special help with disaster-related tax issues.
For more on this topic and the special rules for federally declared disaster area losses see Publication 547, Casualties, Disasters, and Thefts.
You can get it and IRS tax forms on IRS.gov/forms at any time.
by Jim Magary | May 28, 2015 | Tax Help
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IRS Tax facts
The Internal Revenue Service receives approximately 80,000 offers in compromise every year and accepts approximately 38% of them. The average settlement is $6500 per case.
The IRS Settlement Program
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. If the liabilities can be fully paid through an installment agreement or other means, the taxpayer will in most cases not be eligible for a OIC.
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by Jim Magary | May 28, 2015 | Tax Help
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by Jim Magary | May 27, 2015 | Tax Help
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IRS Tax Problems + Removal of IRS Tax Levies + IRS Wage Garnishments
The Internal Revenue Service levies approximately 1.8 million taxpayers each and every year and this figure includes wage garnishments. If you have been levied you are not alone.
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by Jim Magary | May 27, 2015 | Tax Help
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by Jim Magary | May 27, 2015 | Tax Help
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Bank levy or an IRS wage garnishment levy.
Both IRS tax levies are different. It is also important to understand an IRS tax levy is not a tax lien.
It is important for you to understand the difference.
An IRS Bank Levy puts a freeze on your money for 21 days where an IRS wage garnishment levy is an immediate seizure of your paycheck. The bank will send your frozen funds to IRS on the 22nd day.
The IRS will give you 21 days to work out a settlement before they receive the funds. your employer is mandated by law to send your next paycheck to the Internal Revenue Service if they have received a wage garnishment notice.
Certain exemptions apply but approximately 80% of your check will go to the Internal Revenue Service because of the IRS tax levy garnishment.
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Owe Back Taxes = IRS Tax Levy Garnishments, Tax Audit, Tax Settlement, IRS Payment, Installment Plans, Affordable – Former IRS – Orem, Sandy, Ogden , Saint George, Layton
