Month: March 2021

Avoiding an IRS Tax Audit

Just 0.45 percent of taxpayers were audited in the fiscal year 2019. Still, with taxes becoming more complicated every year, there is an even greater possibility of confusion turning into a tax mistake and an IRS audit. Avoiding “red flags” like the ones listed below could help.

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Tax Credits for Electric Vehicles and Plug-in Hybrids

Tax credits are still available for Qualified Plug-in Electric Drive Motor Vehicles, including passenger vehicles and light trucks. The credit applies to vehicles acquired after 12/31/2009 and is limited to $7,500. State and/or local incentives may also apply.

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Renting Out a Second Home

In general, income from renting a vacation home for 15 days or longer must be reported on your tax return on Schedule E, Supplemental Income, and Loss. You should also keep in mind that the definition of a “vacation home” is not limited to a house. Apartments, condominiums, mobile homes, and boats are also considered vacation homes in the eyes of the IRS. Tax rules on rental income from second homes can be confusing, especially if you rent the home out for several months of the year and use the home yourself.

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Claiming the Credit for Other Dependents

Taxpayers with dependents who don’t qualify for the child tax credit may be able to claim the credit for other dependents. The maximum credit amount is $500. To take the credit, your dependent must meet certain conditions.

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Small Business Tax Roundup

Due to recent legislation such as the Tax Cuts and Jobs Act and the CARES Act, tax changes affect both individual taxpayers and small businesses. In 2020, the IRS issued several guidance documents and final rules and regulations that clarified several tax provisions affecting businesses. Here are five of them:

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Unemployment Benefits Identity Theft Scam Alert

During 2020, millions of taxpayers were impacted by the COVID-19 pandemic through job loss or reduced work hours. Some taxpayers who faced unemployment or reduced work hours applied for and received unemployment compensation from their state. As a reminder, unemployment benefits are taxable income and must be reported on tax returns.

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Capital Gains Tax on Sale of Stocks

Apps like Robinhood make it easy for everyone to play the stock market. If you’re a retail investor who made money last year buying and selling stocks, you may owe capital gains tax when you file your tax return this year. If you lost money, you may be able to deduct that loss and reduce your income.

Here’s what you need to know about capital gains tax:

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There’s Still Time To Make an IRA Contribution for 2020

If you haven’t contributed funds to an Individual Retirement Account (IRA) for tax year 2020, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 15, 2021, due date, not including extensions.

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