Taxes Attorneys

Tax attorneys may be well-versed on tax law, and here is an opportunity for you to know more about capital gains taxes.  Not that this information will make you feel any better about paying them (!), but knowledge is power and it is key to know what you are paying in taxes and why.

The History Of Capital Gains Taxes In The United States

What are Capital Gains Taxes:

The money you made from the time of acquisition or purchase to the time of sale of a valuable asset is known as your capital gains. This profit has a tax levied on it, which is called a capital gain tax. Some common examples of capital include large investments such as real estate, stocks, bonds, or mutual funds. The capital gains tax rates strongly affect the economy. Any increase could negatively affect millions, including middle class families with some stock or entrepreneurs trying to open their own small business.

The Beginning:

Capital gains always remained below 7% from 1913 to 1921. It was not until the Revenue Act of 1921 when the tax made its first upward climb to 12.5%. The tax then waxed and waned, hiking up with the 1969 and 1976 tax reform acts, only to be reduced in 1978 by congress. More recently, the Taxpayer Relief Act of 1997 again, lowered the capital gains rate. Currently, the rate for most taxpayers is 15% on long-term capital gains (i.e. property held for longer than 12 months) and ranging from 10% to 35% on short-term capital gains (i.e. property held for less than 12 months). Individuals in the 10% and 15% tax brackets pay 0% on long-term capital gains.

 The Rise and Fall:

The opposition to cutting capital gains taxes is usually rooted in the belief that the tax cuts benefit only the wealthy. However, this is only partly true. While most wealthy people own stocks and other capital, there are plenty of struggling businesses and middle class families depending on capital just as much. In reality, the cutting of capital gains taxes has proven to benefit the economy when tried in the past on multiple occasions. Historically, when capital gains taxes were raised it tended to harm the US economy more than help it.

Election ‘08 and Capital Gain Taxes:

Controversy looms over the 2008 Presidential election with capital gains taxes in the spotlight. Sen. Barack Obama revealed his plan to raise capital gains taxes in order to make the distribution of wealth fairer. He cited 50 individuals benefiting from the tax sharing a $29 billion income between them. However, many experts strongly oppose Obama’s plan saying an increase will hurt the economy possibly knocking off almost 2% of Gross Domestic Product.

Unfair Tax:

When it comes to the legitimacy of capital gains taxes and increases, there are solid arguments from both sides. Those who support low capital gains tax rates claim that any increase would discourage investing and hurt the economy. However, groups that support an increase are quick to deem low rates as unfair. They claim that by taxing capital gains at a lower rate then income taxes is essential a tax benefit for just the wealthy. ‘Some people who are richer than Croesus are paying 15 cents in federal income taxes on the marginal dollar, while you may be paying 25 or 35 cents,’ claims economist Alan Blinder says on his blog, EconomistsView.

By: roni deutch

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Tax attorneys can tell you that all too many otherwise honest tax payers underreport income as they are simply not sure what may or may not qualify as “income”.  If you profit from selling on Ebay, or other sites such as Etsy, you do indeed need to report that income to the IRS.  Ask a tax attorney for more information, and eliminate the risk of a costly IRS tax audit.

Income Tax On Ebay Profits

Several folks argued that just because their little eBay hobby generated a little cash, that didn’t make it a full blown business. It seems they consider the income from their little hobby to be financial manna from Heaven and thereby not taxable by earthly tax collectors. I’ve always been amused by folks who try to impress me with talk about their ‘little side business’ but when the subject turns to taxes they suddenly refer to it as ‘my little hobby.’

All arguments aside, the conclusion that I came to after reading each of the emails was always the same: while you may think selling on eBay is just a fun pastime and the money you’re making is not reportable as income, depending on the circumstances, the IRS would probably disagree with you.

 It seems that everyone likes making money, but hates carving off a piece for good old Uncle Sam. Welcome to free enterprise, folks. If you’re going to come to the dance you have to pay the fiddler.

The IRS rules are clear: you must pay taxes on all personal and business income and that includes money you make selling on Ebay.

In its most basic sense, the IRS rules can be interpreted to mean that if you buy an old vase at a garage sale for $10 and sell it on eBay (or elsewhere) for $20 you made a $10 profit and therefore must report it as income and pay Uncle Sam his fair share.

In reality, if you are a casual seller who only sells a few items on eBay every now and then it’s doubtful the IRS is going to let loose an army of agents to collect taxes on the few bucks you make. However, if you consistently sell on eBay the IRS may deem your activities to be business oriented and you will be required to file a Schedule C and claim the income.

The IRS uses a number of factors to determine if an eBay hobby that generates sales revenue is actually a business. These factors include:

Do you carry on the hobby in a business-like manner?

Do you spend considerable time working on the hobby?

Do you depend on income from your hobby for your livelihood?

If the answer to any or all of these question is yes, you’re running a business, not carrying on a hobby, and you are responsible for paying taxes on your income.

What’s eBay’s take on all this? Naturally eBay is vehemently opposed to anything that might rock the eBay boat. eBay does not issue 1099 tax forms to sellers, nor does it report seller’s sales figures to the IRS.

Ebay considers itself merely to be a facilitator, meaning that they provide a marketplace in which buyers and sellers come together to do business.

Furthermore, under its current system it would be impossible for eBay to issue accurate 1099s to sellers. eBay does not track if a seller actually gets paid by the buyer, so eBay has no idea how much money - if any - actually changes hands at the end of each transaction.

On the bright side, if you do sell on eBay as a business you can deduct a number of business expenses, including the cost of inventory, listing fees, shipping, envelopes, packing materials, etc.

You might also be able to deduct things like the purchase of a computer for business use, office space (even if it’s a home office), office supplies, and more.

Talk to your accountant if there’s any doubt as to whether you should or should not be paying taxes on your eBay earnings.

By: mannchauhan

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If you have overlooked any of these sources of taxable income, you may want to consult with a tax attorney to resolve your tax situation.  In overlooking these sources, and not reporting them,or underreporting them, you do run the risk of a costly IRS tax audit.  Work with a tax attorney to understand your income, ALL sources, to make sure that you are not underreporting and risking longterm issues with the IRS.

7 Most Commonly Overlooked Sources Of Taxable Income

1. Social Security Income

Social Security benefits may be non-taxable, or partially taxable. It depends on your total income from other sources. If your sole source of income during the tax year was Social Security, your benefits are probably not taxable. But, if you have other forms of income, including tax-exempt income, it could make your Social Security benefits taxable. If you add half the amount of your Social Security Benefits to all other forms of income, and the total exceeds a ‘base’ amount, then a portion of your benefits will be taxable. In 2008, the base amount is $25,000 if single, married filing single, or head of household, and $32,000 if married filing jointly.

2. Unemployment Compensation

People are always surprised that unemployment compensation is taxable income. This includes any amounts you received under federal or state unemployment compensation laws, state unemployment insurance paid by a state (or District of Columbia) from the Federal Unemployment Trust Fund. If you received unemployment compensation during the year, you should receive IRS Form 1099-G, showing the amount you were paid, and if any taxes were already withheld. If your unemployment benefit payments were made from a private, non-union fund to which you voluntarily contribute are only taxable if you received more money than you put into the fund.

 Please note that as a result of passing the American Recovery and Reinvestment Act (ARRA), starting in 2009, the first $2,400 earned in unemployment compensation is excludable as taxable income.

3. Gambling Winnings

Gambling winnings are fully taxable and must be reported on your tax return. Gambling winnings include any winnings from lotteries, raffles, horse races, or casinos. Both cash winnings and the fair market value of prizes such as cars and trips are counted as taxable income. If you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must also include it in your income. A payer (such as the casino or track, etc.) is required to issue you an IRS Form W-2G if you receive certain gambling winnings or if your gambling winnings are subject to Federal income tax withholding. All gambling winnings must be reported no matter if any portion is subject to withholding or not.

Please note that you may deduct gambling losses only if you itemize deductions. You may claim your gambling losses as a miscellaneous deduction, however, the amount of losses you deduct may not be more than the amount of gambling income you have reported on your return.

4. Bonuses

Bonuses or awards from your employer based on work performance are included as taxable income. Money, gift cards, property, or prizes such as a vacation trip all count as ‘bonuses’. If the award you receive is a good or service, then you need to include the fair market value in your income. Even holiday bonuses count if your employer gives you cash, a gift certificate, or a similar item that you easily can exchange for cash.

Please note that if you receive personal property (e.g. something other than cash, gift card, or its equivalent) as an award for length of service exceeding five years, the fair market value of the award is less than $1,600, and the award is presented as part of a meaningful presentation, it can generally be excluded as income.

5. Punitive Damages

If you were awarded damages for actual monetary losses (due to property damage or medical care for injuries) the funds are generally not taxable. However, if any damages were awarded beyond compensating you for monetary losses, like punitive damages, (usually to punish or make an example of a defendant based on outrageous conduct), interest, emotional distress, injury to reputation etc these are all taxable income.

6. Reimbursed Business Expenses

Reimbursed business expenses may be considered taxable income, depending upon whether your employer meets the requirements for an Accountable Plan. To be considered an Accountable Plan, your employer’s reimbursement or allowance arrangement must meet all of the following rules:

Employee paid or incurred expenses that are deductible while performing services as an employee.

Employee adequately accounts for these expenses to employer within a reasonable time period.

Employee returns any excess reimbursement or allowance within a reasonable time period.

If your employer’s reimbursement arrangement does not meet all three requirements, the reimbursements you receive for business expenses should be shown on your W-2, and the payments should be reported as income. You can get this income back by itemizing your deductions and completing IRS Form 2106 with your return.

7. Severance Pay

Any type of severance pay or payment on the cancellation of your employment contract is taxable income. This includes a lump-sum payment for accrued vacation or leave time, or back pay awards as the result of a judgment or settlement. If you choose a reduced severance payment in exchanged for your former employer paying for an outplacement service or employment agency, you must include the unreduced severance pay as income.

By: roni deutch

Article Directory: http://www.articledashboard.com

A tax attorney can assist you in dealing with an IRS bank levy.  Contact a tax debt attorney before it gets too late, you should not take on the IRS alone.

Tax Debt Help Needed - How Can I Stop An IRS Bank Levy?

The IRS does give you ample warning that they intend to levy your bank account. You undoubtedly received the notice and demand for payment from the IRS which included the amount you owed in back taxes. You probably did not contact the IRS at that time, and that was very important. The next communication you received was called the ‘Final Notice’ which did express their Intent to Levy and also included a notice of your right to a hearing after the levy has been placed. That final notice arrives 30 days before the IRS actually talks with your bank and proceeds with freezing your accounts. It comes in the form of a certified letter directly from the IRS. If you are now facing the impending crisis of the IRS bank levy, then you have obviously procrastinated the handling of your IRS past due tax problem (probably because you did not have the money to pay the back taxes). All is not lost and it is still possible to stop the IRS levy. However, the time to act is right now. You need fast, professional tax debt help and you have just 21 days to get this handled, and the clock is counting down each day!

An IRS levy is clearly one of the most powerful collection tools in the IRS arsenal and the IRS bank levy can be incredibly frightening when the freeze is actually implemented. Once the IRS freezes your bank account, you have no access to your funds. They are waiting for the ‘21 days to expire’ before they withdraw these funds to pay your delinquent tax debt bill. Any personal bills that you have that need to be paid in this timeframe will not get paid. In fact, you will probably be hit with insufficient funds fees and the refusal of any preset automated debits you have set up on your account to pay for goods/services. Even the newly deposited funds that come in as paycheck direct deposits will be frozen once they are received by your bank! The IRS intends to be paid the back tax money that you owe, one way or the other. Keep in mind that your bank is required by law to comply with the IRS bank levy and hold all funds that have been deposited into your bank accounts. They will not be able to provide you with any tax debt help in this matter.

During the 21 day period, it is now prudent to seek expert IRS tax debt help so that a tax attorney or tax specialist is able to negotiate with the IRS to release the funds. Unless an IRS bank levy release is obtained, once the 21 day period has expired, the bank sends the money to the IRS and you will never get it back. You may also consider contacting the Taxpayers Advocate in your area. This would require you to complete paperwork to prove economic hardship in hopes of having the IRS bank levy ‘lifted’ or released. Time is of the essence and your financial future does hang in the balance.

Other Important Things You Need to Know About an IRS Levy:

How does the IRS know where I bank? The IRS knows your banks accounts from the 1099’s that are filed every year with your tax returns. Even if your tax returns are unfiled, they have still received those 1099’s from the financial institutions themselves.

What other accounts might be affected? Certificates of Deposit and any account where you have your name and social security number listed. Keep in mind that if you have joint accounts for whatever reason, with family members or even friends, those will be subject to the IRS bank levy also.

What types of accounts are excluded from an IRS Levy? Life Insurance, Worker’s Compensation, Benefits received from the Department of Veteran’s Affairs, and Scholarships or Grants.

Will the IRS levy both my bank account and my wages too? The IRS does not typically levy both your bank accounts and your wages. They intend to be paid for your delinquent taxes, but they must leave you just enough to live on, and while they ‘can’ enforce an IRS levy on your wages and your bank accounts, they don’t tend to collect past due taxes in this manner.

By: mansi gupta

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