The Internal Revenue Service (IRS) draws a clear distinction between hobbies and businesses for tax purposes. This distinction is crucial because it determines whether an individual’s activities are considered a profit-generating enterprise or a recreational pursuit. Understanding the IRS’s criteria for classifying an activity as a hobby or a business is essential for accurate tax … Read more
The mere mention of an IRS audit can send shivers down the spines of taxpayers. However, the reality is that the chances of facing an audit are surprisingly low for most individuals. This article delves into the statistics, misconceptions, and factors that determine the likelihood of an IRS audit, providing valuable insights for taxpayers seeking … Read more
An IRS audit is a review or examination of an individual’s or organization’s financial information and accounts to ensure that the reported tax amount is accurate and that the information is reported correctly according to tax laws. Reasons for Selection The selection for an audit does not necessarily indicate a problem. The IRS employs various … Read more
As a self-employed individual, you are responsible for paying both self-employment (SE) tax and income tax. Self-employment tax covers Social Security (12.4%) and Medicare (2.9%) taxes, while income tax is the tax you pay on your business profits. If you fail to pay your self-employment taxes on time, you may face penalties and interest charges. … Read more
Navigating the complexities of tax returns can be a daunting task, especially when you receive an IRS notice regarding an adjusted refund amount. This guide delves into the intricacies of adjusted refund amounts, empowering you with the knowledge to decipher these notices and take appropriate action. What is an Adjusted Refund Amount? An adjusted refund … Read more
Purchasing a home is a significant financial milestone, and many individuals consider utilizing funds from their Individual Retirement Arrangement (IRA) to facilitate this endeavor. While this strategy can provide access to substantial capital, it’s crucial to understand the tax implications and reporting requirements associated with IRA withdrawals. This guide will delve into the intricacies of … Read more
Navigating the complexities of tax audits and investigations can be daunting, especially when it involves the Internal Revenue Service (IRS) scrutinizing your financial accounts. Understanding the IRS’s authority, limitations, and the legal framework governing their access to bank records is crucial for protecting your financial privacy and ensuring compliance with tax regulations. This comprehensive guide … Read more
Understanding the Legalities and Exceptions In general, employers are legally obligated to provide employees with access to their 401(k) retirement accounts, regardless of their employment status. However, there are certain circumstances where an employer may be justified in denying access to 401(k) funds. Vesting Restrictions One of the most common reasons for an employer to … Read more
Navigating tax obligations can be a daunting task, especially when faced with financial constraints. The Internal Revenue Service (IRS) recognizes these challenges and offers various payment plan options to assist taxpayers in fulfilling their tax responsibilities. Among these options, the Long-Term Payment Plan, also known as an installment agreement, stands out as a viable solution … Read more
Understanding Estimated Tax Payments Self-employed individuals and freelancers are responsible for paying estimated taxes quarterly to the Internal Revenue Service (IRS). These payments cover income taxes and self-employment taxes, ensuring that taxes are paid throughout the year rather than in one lump sum at tax time. Consequences of Skipping Estimated Tax Payments Failure to make … Read more