Harvey & Horowitz, P.C.'s Blog

August 20, 2015 Taxes

Avoiding IRS Underpayment Penalties

Category: Tax Central Tags: Taxes Article Highlights: Pay-as-you-go System Safe Harbor Payments Situations Triggering Underpayments True Safe Harbors Congress considers our tax system as a “pay-as-you-go” system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the “pay-as-you-go” requirement. These include: Payroll withholding for employers; Pension withholding for retirees; and Estimated tax payments for self-employed individuals and those with other sources of income not covered by withholding. When a taxpayer fails to prepay a safe harbor (minimum) amount, he or she can be subject to the underpayment penalty. This nondeductible interest penalty is higher than what might be earned from a bank and is

August 11, 2015 Advisory & Consulting, Taxes

Only One IRA Rollover Every 12 Months – Period!

Category: Looking to Invest Tags: IRA Article Highlights: One rollover per 12-month period Tax consequences Difference between a rollover and a transfer Relief Although this subject has been brought up before-and, yes, we are harping on the subject because of the profound tax consequences-this is a reminder that, beginning this year, individuals are only allowed one IRA rollover in any 12-month period (this includes SEP and Simple accounts, traditional and Roth IRAs). That is, 12 months must have elapsed from the date a rollover iscompleted before another rollover can be made. Failure to abide by this rule can be expensive. And the rule applies no matter how many IRAs an

July 24, 2015 Advisory & Consulting, Taxes

Bunching Your Deductions Can Provide Big Tax Benefits

Category: Health Care Issues, Tax Central Tags: Charity, Medical, Taxes Article Highlights: Itemized Versus Standard Deductions Medical Expenses Taxes Charitable Contributions If your tax deductions normally fall short of itemizing your deductions or even if you are able to itemize, but only marginally, you may benefit from using the “bunching” strategy. The tax code allows most taxpayers to utilize the standard deduction or itemize their deductions if that provides a greater benefit. As a rule, most taxpayers just wait until tax time to add everything up and then use the higher of the standard deduction or their itemized deductions. If you want to be more proactive, you can time the

June 9, 2015 Compliance, Taxes

Have a Financial Interest in or Signature Authority over a Foreign Financial Account? Better Read This!

Category: Friendly Reminders, Tax Central Tags: Taxes, Compliance Article Highlights: Reporting Threshold FBAR Filing Due Date Penalties Overlooked Accounts Each U.S. person who has a financial interest in or signature or other authority over any foreign financial accounts (including bank, securities, or other types of financial accounts in a foreign country) must report that relationship to the U.S. government each calendar year if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year. The government uses this reporting mechanism as a means of uncovering hidden foreign accounts and ensuring that investment income earned in foreign countries by U.S. taxpayers is included on their U.S. tax

May 6, 2015 Taxes

How Long Are You on the Hook for a Tax Assessment?

Category: Tax Central Tags: Tax Planning Article Highlights: Statute of Limitations Filing Before April Due Date Filing After April Due Date Extension Amended Returns Three-year Statute Understatement Exceeds 25% Ten-year Collection Period Tax Records A frequent question from taxpayers is: how long does the IRS have to question and assess additional tax on my tax returns? For most taxpayers who reported all their income, the IRS has three years from the date of filing the returns to examine them. This period is termed the statute of limitations. But wait – as in all things taxes, it is not that clean cut. Here are some complications: You file before the April

April 13, 2015 Taxes

Do I Have to File a Tax Return?

Category: Tax Central Tags: Tax Planning Article Highlights: When You Are Required to File Self-Employed Taxpayers Filing Thresholds Benefits of Filing Even When Not Required to File Refundable Tax Credits This is a question many taxpayers ask during this time of year, and the question is far more complicated than people believe. To fully understand, we need to consider that there are times when individuals are REQUIRED to file a tax return, and then there are times when it is to individuals’ BENEFIT to file a return even if they are not required to file. When individuals are required to file: Generally, individuals are required to file a return if

March 18, 2015 Advisory & Consulting, Taxes

Family Home Loan Interest May Not Be Deductible

Category: Tax Central Tags: Buying a Home, Home and Mortgage Article Highlights: Qualified residence interest is deductible interest that is paid or accrued during the tax year on acquisition indebtedness or home equity indebtedness with respect to any qualified residence of the taxpayer. Acquisition indebtedness means that any indebtedness that is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer is secured by such residence. Interest on unsecured home debt is generally not deductible. It is not uncommon for individuals to loan money to relatives to help them buy a home. In those situations, it is also not uncommon for a loan to be undocumented or

February 25, 2015 Advisory & Consulting, Taxes

Will the Interest on Your Vehicle Loan be Deductible?

Category: Tax Central Tags: Automotives, Tax Deduction Article Highlights: Vehicle loan interest Consumer loans secured by the vehicle Using home equity loans to create deductibility Exercising restraint when using home equity Whether or not the interest you pay on a loan to acquire a vehicle is deductible for tax purposes depends how the vehicle is being used (for business or personal purposes), the tax form on which the expenses are being deducted, and the type of loan. If the loan were a consumer loan secured by the vehicle, then the following rules would apply: If the vehicle is being used partially for business and the expenses are being deducted on

February 21, 2015 Taxes

Don’t Overlook the Spousal IRA

Category: Retirement Planning Tags: IRA, Marriage Article Highlights: Spousal IRA Compensation requirements Maximum Contribution Traditional or Roth IRA One frequently overlooked tax benefit is the “spousal IRA.” Generally, IRA contributions are only allowed for taxpayers who have compensation (the term “compensation” includes: wages, tips, bonuses, professional fees, commissions, alimony received, and net income from self-employment). Spousal IRAs are the exception to that rule and allow a non-working or low-earning spouse to contribute to his or her own IRA, otherwise known as a spousal IRA, as long as the spouse has adequate compensation. The maximum amount that a non-working or low-earning spouse can contribute is the same as the limit for

February 16, 2015 Taxes

The Affordable Care Act Can Bring Surprises at Tax Time

Category: Health Care Reform Tags: Insurance, Medical Article Highlights: New Tax Return Complications Shared Responsibility Payment Premium Tax Credit The Affordable Care Act, the federal health care law, will bring some surprises at tax time for many. This year there are two new issues that can complicate the preparation of almost anyone’s tax return. First, there is the shared responsibility payment, a nice name the government gave to the penalty for not being insured. So everyone who is uninsured is subject to a monthly penalty, assessed on the individual 1040 tax return, unless they meet one or more of the many exceptions to the penalty. Many of the exceptions are