In late September, the IRS sent out some new details on student loan relief, which was announced earlier this year. It has also provided links for further information. Meanwhile opponents of loan relief are taking legal action to try to prevent it, although the administration continues to proceed.

Who’s eligible for Student Loan Relief

You are eligible if you have most federal loans (including Direct Loans and other loans held by the U.S. Department of Education) and your income for 2020 or 2021 is either:

Less than $125,000 for individuals

• Less than $250,000 for households

If you’re a dependent student, your eligibility is based on your parental income.

What you might be eligible for

• Up to $20,000 in debt relief if you received a Pell Grant in college
• Up to $10,000 in debt relief if you didn’t receive a Pell Grant

How it’ll work

• In October, the U.S. Department of Education will launch a short online application for student debt relief. You won’t need to upload any supporting documents or use your FSA ID to submit your application.
• Once you submit your application, the government will review it, determine your eligibility for debt relief, and work with your loan servicer(s) to process your relief. It will contact you if it needs any additional information from you.

What’s next

• Right now, you don’t need to do anything! The government will contact you when the sign-up period for student debt relief opens.
• The government will issue regular updates with more details over the coming days, as it nears the application period, which will begin in October 2022 and last through December 2023.
• In the meantime, visit the Frequently Asked Questions page to find out more information on the student debt relief program.

Beware of Scams

You might be contacted by a company saying they will help you get loan discharge, forgiveness, cancellation, or debt relief for a fee. You never have to pay for help with your federal student aid. Make sure you work only with the U.S. Department of Education and its loan servicers, and never reveal your personal information or account password to anyone.

Here at Layton Layton & Tobler we can help you with IRS Student Loan Relief. Contact us today to schedule a consultation. We can also help you with payroll preparation and auditing.

Let’s consider a married couple, whom we’ll refer to as John and Blanche. Both suffer from serious health problems, and they expect to incur sizable medical expenses this year and next. So says Julian Block, an attorney and former IRS special agent.

The couple’s main question is whether there’s anything they can do to take maximum advantage of their deductions for medical care. And the answer is yes! However, the specifics will depend on how much John and Blanche expect to declare as adjusted gross income on their Form 1040 and when they plan to send payments for medical care, among other details.

Know The Floor

Now, the law doesn’t allow them to deduct their entire payments for medical care, just the portion of payments that exceeds 7.5% of their AGI. In other words, they cannot claim any deductions for payments in any single year that fail to top that threshold, which is why John and Blanche should either accelerate their payments or postpone them, opting to claim all the deductions in the same year.

John and Blanche should be especially mindful of those guidelines when their payments for the current year are close to, or have already surpassed, the hurdle of 7.5% and they anticipate that they’ll incur charges during the following year. Since they’re able to schedule many services at their convenience, the possibilities include routine dental cleanings, physical checkups and eye examinations, as well as purchasing extra pairs of eyeglasses or contact lenses.

All said, there’s a straightforward and perfectly legal way for John and Blanche to avoid the possible loss of a 2023 deduction for those payments as well as to boost their 2022 deduction. They could have the services performed and then pay for them by Dec. 31, which is a strategy that’s even more advantageous when the couple anticipates an increase in AGI for 2023. Therefore, they will have a higher threshold than 7.5% as a result.

Now, suppose John and Blanche anticipate an AGI of $160,000 for 2022 and 2023, while also planning to use Form 1040’s Schedule A. This can be used to itemize their customary write-offs for outlays such as medical expenditures, contributions, interest payments on their home mortgage and taxes, including state, local income and property taxes.

The couple’s medical payments will amount to $12,000 for 2022. The same is true for 2023. Next year’s payments will include a check for $4,000 that they’ll send in January to take care of a bill for extensive dental work that they will have received before 2022 ends.

They consequently forfeit any write-offs for both years. The downside? Payments in both years fail to top $12,000, which is 7.5% of $160,000.

A Happier Scenario

The tax-savvy couple date the check no later than Dec. 31 and then drop it in a mailbox with enough time for the envelope to be postmarked by midnight on Dec. 31. That bit of forethought, which has the blessing of the IRS, will convert a nondeductible payment for 2023 into a $4,000 deduction for 2022. The IRS couldn’t care less that their dentist receives the check after 2022 closes.

Protect Yourself From IRS Audits

Suppose the agency’s computers bounce their return. Odds are that an examiner is going to look closely at large year-end checks dated Dec. 31 and made out to, say, charities, doctors and state tax collectors.

Send such checks by certified mail and request certified mail receipts. Staple the receipts to the canceled checks. The receipts will back up your 2022 deductions for payments made with checks that may not clear the bank until well beyond the close of the year.

Credit cards

There’s also room to maneuver when the couple uses credit cards to pay for their deductibles. Credit card payments qualify for 2022 deductions as soon as they authorize charges, even if the credit card companies don’t bill them until 2023. Here at Layton Layton & Tobler we can help you navigate. Contact us today to schedule a consultation. We can also help you with payroll preparation and auditing.

Do you collect stamps? Write stories? Craft macrame holders for hanging plants? Do you consider what you do a hobby or a business? The IRS has weighed in on this: “A hobby is any activity that a person pursues because they enjoy it and with no intention of making a profit. People operate a business with the intention of making a profit.” Of course, acknowledges the agency, you may engage in hobby activities that turn into a source of income.

However, determining whether that hobby has grown into a business can be confusing. To help simplify things, the IRS has established factors taxpayers must consider when determining whether their activity is a business or a hobby.

Factors the IRS Uses to Determine Whether You Have a Hobby or a Business

These factors are whether:

• The taxpayer carries out activity in a businesslike manner and maintains complete and accurate books and records.
• The taxpayer puts time and effort into the activity to show they intend to make it profitable.
• The taxpayer depends on income from the activity for their livelihood.
• The taxpayer has personal motives for carrying out the activity such as general enjoyment or relaxation.
• The taxpayer has enough income from other sources to fund the activity.
• Losses are due to circumstances beyond the taxpayer’s control or are normal for the startup phase of their type of business.
• There is a change to methods of operation to improve profitability.
• The taxpayer and his or her adviser have the knowledge needed to carry out the activity as a successful business.
• The taxpayer was successful in making a profit in similar activities in the past.
• The activity makes a profit in some years, and how much profit it makes.
• The taxpayer can expect to make a future profit from the appreciation of the assets used in the activity.

All factors, facts and circumstances with respect to the activity must be considered. No one factor is more important than another.

Safe Harbor

In most situations, the IRS will grant a “safe harbor” and approve an activity as a business if it has turned a profit in at least three of five consecutive years.

What if a taxpayer gets lucky and starts making a profit from an activity that was never intended to do so? The IRS has that covered too: If a taxpayer receives income from an activity that is carried on with no intention of making a profit, the taxpayer must report the income he or she receives.

Not Sure Whether You Have a Hobby or Business?

If you’re not sure about your situation, consult with a qualified tax professional. Here at Layton Layton & Tobler we can help you decide. Contact us today to schedule a consultation. We can also help you with payroll preparation and auditing.

We’ll Help You Determine Whether You Can Claim What You Do as a Business in Summerlin

Serving Las Vegas, Summerlin & Henderson

Posted on July 30, 2022 | Published by Ignite Local | Related Local Business

Despite its reputation, the Internal Revenue Service can be flexible in situations where you owe more in taxes than you can feasibly pay. The IRS will consider your unique set of circumstances and your ability to pay in terms of your income, expenses, and asset equity. From there, the IRS generally approves an offer in compromise submission when the amount of money being offered represents the greatest amount of money that the IRS can expect to collect in a reasonable period.

How to file an offer in compromise form

The trick is knowing how the system works. First, you have to file an OIC application. Before the IRS accepts the application, the IRS will check to see that you’ve filed all of the required returns and made your estimated payments on time. It’s also important to know that you can’t apply for an OIC if you’re involved in open bankruptcy proceedings.

If you meet those conditions, you can submit your application alongside the $205 application fee. You will also need to make an initial payment, the value of which will depend on your offer and the payment option you choose.

The two payment options when submitting an OIC form 

Here are your options:

• Lump sum cash—Submit an initial payment of 20% of the total offer amount with your application. If your offer is accepted, you’ll receive written confirmation from the IRS. The remaining balance that is due on the offer will be paid in five payments or less.
• Periodic payment—Submit your initial payment with your application. Continue paying the remaining balance in monthly installments while the IRS considers your offer. If it is accepted, continue to pay your amount due until the balance is paid in full.

If you meet the low-income certification guidelines, you won’t have to pay an application fee or an initial payment, nor will you need to make monthly installments while the IRS is evaluating your offer.

For others, while you await a decision regarding your offer, your nonrefundable payments and fees will be applied to the tax liability. You can designate payments to a specific tax year and tax debt. Meanwhile, keep the following implications of your filing in mind:

• A Notice of Federal Tax Lien may be filed.
• Other collection activities might be suspended.
• The legal assessment and collection period is extended.
• You must continue to make all required payments associated with your offer.
• You don’t have to make payments on an existing installment agreement.
• Your offer is automatically accepted if the IRS doesn’t let you know its decision within two years of the IRS receipt date.

What to expect if your OIC form is accepted 

If your offer is accepted, these could be the terms of your situation:

• You must meet all of the offer terms listed in your form, including filing all required tax returns and making all payments on time.
• Any refunds due in the calendar year your offer is accepted will be applied to your tax debt.
• Federal tax liens aren’t released until your offer terms are satisfied.
• Certain offer information is available for public review by requesting a copy of a public inspection file.

What to do if your OIC form is rejected 

However, if your offer is rejected, keep these details in mind:

• You have the option to appeal the rejection in 30 days.
• The IRS Independent Office of Appeals provides additional assistance to people who would like to appeal a rejected offer.

At the end of the day, it’s all a matter of government discretion. The IRS provides fair consideration to each properly submitted OIC application. In recent years, about 40% of OIC submissions have been accepted. So, what can you do to improve the odds that your application will be approved? Work closely with a financial professional by contacting us today.

Let Us Help You With Your IRS Offer in Compromise Application in Las Vegas

Serving Las Vegas, Summerlin & Henderson

Posted on June 8, 2022 | Published by Ignite Local | Related Local Business

While you cannot fully control whether the IRS audits you come tax season, there are measures you can take in an effort to lower your chances of being audited. It all starts with hiring a reputable tax accountant. If you prefer to file your own taxes, make sure you are diligent and extra careful. But what does this mean? Basically, you should avoid making the following common mistakes that tend to result in an audit from the IRS.

Making data entry errors

When you transfer any amount of data from one location to another, you run the risk of improperly copying numbers, inaccurately inputting data points, and making mistakes regarding your calculations. It is important to be as specific as possible when adding, subtracting, multiplying or dividing digits as you perform data entry. Instead of rounding numbers, be as exact and as precise as possible.

Failing to report all of your income

The IRS receives its own copies of every income reporting form that you fill out, including W-2 forms and Form 1099, as well as alimony-related forms and your K-1 income, which entails any losses or dividends that you accrue as a result of your business or your financial partners. Information pertaining to foreign bank accounts is also accounted for by the IRS.

If you fail to report any of your income sources, you run the risk of being audited by the IRS, even if the omission happened by total accident. Whether it’s income from a full-time job or a part-time side hustle, all of the money you earn must be reported.

The IRS often looks at your income from one year to the next, so any discrepancies that are spotted will pique the interest of the IRS, which may lead to an audit.

Misrepresenting your deductions 

Overestimating how much money you can deduct from what you owe is a dangerous game to play. From charitable deductions and business expenses to home office deductions and other potential tax breaks, claiming too many deductions can ultimately look like a cause for concern in the eyes of the IRS.

This is usually especially true if your deductions are far greater this year than they were in years prior. Be honest about how much money you’ve donated to charity, the size of your home office, and other specifics pertaining to any and all tax deductions that you claim. When possible, obtain and hold on to receipts that you can provide to the IRS in the event that you are audited as a result of the deductions you are claiming.

If you claim a lot of various deductions when filing your taxes, you are typically automatically at risk of being audited because deductions often draw attention to you. Just make sure that any deductions you claim can be proved with documentation in the event that you are selected for an audit.

Choosing the wrong filing status

It is imperative that you select the proper filing status for yourself and your circumstances. With the help of a reputable tax professional, you can ensure that you are making the right selection. If you change your filing status in a way that is drastically different from your prior filing status, then you might cause heads to turn at the IRS.

For instance, if you recently divorced your spouse but you try to claim head of household or single for the year you were still married, the IRS will likely investigate. There are different filing status options for a reason, so make sure you select the status that is accurate for you.

Falsely claiming dependents 

It might seem easy to claim dependents, but there are various checklists that must apply before you can do so. Claiming children that you don’t actually have or saying you have dependents when you only have pets will be viewed as pure deceit. Instead of getting into trouble with the IRS, be honest about your dependents. While honest mistakes can happen, especially in the event of confusion caused by child custody, the IRS is not always forgiving of accidents, so the fewer you make and the more you can avoid, the better.

Wrongfully claiming the Earned Income Tax Credit

The Earned Income Tax Credit was put in place with the intention of assisting households that have low income levels. The IRS is adamant about making sure only the households that legitimately qualify are able to take advantage of this credit opportunity, so before you claim the Earned Income Tax Credit, double-check your eligibility with an experienced tax adviser.

Exhibiting strange behavior when self-employed 

The IRS keeps a watchful eye on the self-employed because self-employment taxes can be quite complex. If you are self-employed and you either fail to acknowledge that you’ve made a profit or claim that you are not profiting from your self-employment services, then the IRS will be skeptical of the legitimacy of your self-employment.

Reporting drastically different information than your employer

If you happen to be a shareholder in a corporation of any kind, be mindful of the fact that the IRS will likely compare your tax return to the information reported by the corporation. If your information does not line up with theirs, the IRS might investigate to figure out why there are discrepancies between you and the other party.

Keeping inaccurate records

Make sure you maintain accurate records that you can then reference when it comes time to file your taxes each year.

The odds of getting an IRS Audit in Summerlin are slim

When you are intentional and honest about your taxes, there is nothing to worry about. The odds of you being audited will be slim, but even if you are selected for an audit, the IRS will likely see upon further investigation that there is no reason to be concerned. As always, there is no way to be sure that you’re safe from an audit, but if you are audited by the IRS, try not to panic. Instead, contact us at Layton, Layton & Tobler. Established in 1971, we are a trusted CPA firm providing highly experienced accounting, auditing and tax services for business and individuals in the greater Las Vegas area.

We Help You Avoid an IRS Audit in Summerlin

Serving Las Vegas, Summerlin & Henderson

Posted on May 11, 2022 | Published by Ignite Local | Related Local Business

Nobody likes dealing with the IRS, but if you have to do it, it’s nice to have an expert in your corner. That’s why you have the right to retain an authorized representative of your choice to represent you in your dealings with the IRS. It’s one of the fundamental rights of all taxpayers as outlined in the Taxpayer Bill of Rights. If you cannot afford representation, you have the right to seek assistance from a Low Income Tax Payer Clinic. You don’t have to attend with the representative when you retain representation unless the IRS formally summons you to appear. In most cases, the IRS suspends an interview if you request consultation with a representative, who may be an attorney, a certified public accountant, an enrolled agent or an enrolled actuary. Any such representative may submit a written power of attorney to represent you before the IRS.

The Power of Representation with the IRS

Indeed, although the IRS may seem all-powerful, you have a lot of leverage. Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.

Taxpayers are also entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Offi­ce of Appeals’ decision. Taxpayers generally have the right to take their cases to court.

Special Help for Low-Income Taxpayers

If you decide to seek assistance from the low-income taxpayer clinic, check out the Low Income Taxpayer Clinics page on IRS.gov or call the IRS toll-free at 800-829-3676. LITCs are independent of the IRS and of the Taxpayer Advocate Service. They charge a small fee to represent you in audits, appeals and tax collection disputes before the IRS and in court. If you speak English as a second language, there are people at the clinics who can provide information about your rights and responsibilities in many different languages.

For more information about your rights as a taxpayer, see Publication 1, Your Rights as a Taxpayer. For a list of LITCs, go to the Low Income Taxpayer Clinic List. More about the Taxpayer Advocate Service is available on its website.

Your Best Bet For a Good Outcome With the IRS

Your best bet for a good outcome with the IRS is to work closely with a qualified tax professional. Contact us at Layton, Layton & Tobler. Established in 1971, we are a trusted CPA firm providing highly experienced accounting, auditing and tax services for business and individuals in the greater Las Vegas area.

Getting Representation: Help With the IRS From Qualified Tax Professionals in Las Vegas

Serving Las Vegas, Summerlin & Henderson

Posted on April 22, 2022 | Published by Ignite Local | Related Local Business

Property taxes can be confusing, as there doesn’t appear to be an obvious, consistent rate. Still, there is a method to the apparent madness.

How Property Taxes are Calculated

First, understand that property taxes are calculated using the tax rate and the current market value of your property. Tax rates are based on state law and set based on what municipalities feel they need to pay for important services. An assessor hired by your local government estimates the market value of your property, including the land and structure.

The assessed value is a percentage of the home’s market value or the market value itself, depending on the jurisdiction, and your tax bill is based on this assessment. Your tax office multiplies the tax rate by the assessed value to come up with your bill.

Take Charge of Your Situation

Request a copy of your property tax card from the assessor’s office. It will give you information your town has gathered about your property, such as the size of the lot, the precise dimensions of the rooms, and the number and type of fixtures located within the home. It may include a section about improvements made to the existing structure.

Read it carefully, and note any discrepancies. If the information on the card is wrong, inform the assessor, who will either make the correction or conduct a reevaluation. Next, research other assessments on comparable homes. If a similar house has a lower assessment, bring it to the assessor’s attention.

You don’t have to give the assessor permission to access your home, but you should. If you refuse, it’s in the town’s interest to assume that you’re hiding some pricy improvements. Some towns have a policy to let the assessor automatically assign the highest value if not granted access to the property.

Look for exemptions

Your tax burden could be lowered:

• If you are a senior.
• If you are a veteran.
• If you have certain disabilities.
• Following the death of a homeowning spouse. This is called the homestead exemption; it can also release the surviving spouse from certain debts.

What to Do if You Believe You’re Being Overcharged

You may, after your research, believe you’re being overcharged. In that case, appeal your tax bill. You may have a small filing fee; and you’ll probably need a lawyer, who may take a portion of the savings on your tax bill if your appeal is approved. You may get a reduction, but there’s no guarantee. Sometimes, you even see a raise! So be prudent, and don’t file an appeal with nothing more than hope.

Finally, keep in mind that each state and each locale has its own rules and procedures. Work with local property and legal professionals to make sure your appeal has merit.

Property Taxes: The Bottom Line

The bottom line: Don’t assume your tax bill is set in stone. With research and due diligence, you may be able to reduce your burden. Contact us at Layton, Layton & Tobler. Established in 1971, we are a trusted CPA firm providing highly experienced accounting, auditing and tax services for business and individuals in the greater Las Vegas area.

Property Taxes for 2022 from Las Vegas CPA

Serving Las Vegas, Summerlin & Henderson

Posted on March 9, 2022 | Published by Ignite Local | Related Local Business

The IRS is encouraging taxpayers to make sure they’re well-informed about their tax situation as the filing deadline approaches. The key topics include special steps related to charitable contributions, economic impact payments and advance child tax credit payments. Here are some key IRS filing tips for taxpayers to know before they file next year.

Changes to the charitable contribution deduction

Taxpayers who don’t itemize deductions may qualify to take a deduction of up to $600 for married taxpayers filing joint returns and up to $300 for all other filers for cash contributions made in 2021 to qualifying organizations.

Check on advance child tax credit payments

Families that received advance payments will need to compare the advance child tax credit payments that they received in 2021 with the amount of the child tax credit they can properly claim on their 2021 tax return:

• Taxpayers who received less than the amount for which they’re eligible will claim a credit for the remaining amount of child tax credit on their 2021 tax return.
• Eligible families that did not get monthly advance payments in 2021 can still get a lump-sum payment by claiming the child tax credit when they file a 2021 federal income tax return next year. This includes families that don’t normally need to file a return.

In January 2022, the IRS will send Letter 6419 showing the total amount of advance child tax credit payments taxpayers received in 2021. People should keep this and any other IRS letters about advance child tax credit payments with their tax records to share with their preparers. Individuals can also create or log in to an IRS.gov online account to securely access their child tax credit payment amounts.

Economic impact payments and claiming the recovery rebate credit

Individuals who didn’t qualify for the third economic impact payment or did not receive the full amount may be eligible for the recovery rebate credit based on their 2021 tax information. They’ll need to file a 2021 tax return, even if they don’t usually file, to claim the credit.

Individuals will need the amount of their third economic impact payment and any plus-up payments received to calculate their correct 2021 recovery rebate credit amount when they file their tax return.

In early 2022, the IRS will send Letter 6475, which contains the total amount of the third economic impact payment and any plus-up payments received. People should keep this and any other IRS letters about their stimulus payments with other tax records. Individuals can also create or log in to an IRS.gov online account to securely access their economic impact payment amounts.

As for refunds, the IRS is saying that it anticipates that most taxpayers will receive their refund within 21 days of when they file electronically, barring any issues with processing their tax return. However, there are other reports that there will be delays this year because of special challenges.

Need Help Filing 2022 Taxes in Las Vegas? Contact Us for IRS Filing Tips

There’s a good chance you have other issues you should address to minimize any problems or hassle as the filing date approaches. Reach out to a qualified tax preparer to keep yourself on track. Contact us at Layton, Layton & Tobler. Established in 1971, we are a trusted CPA firm providing highly experienced accounting, auditing and tax services for business and individuals in the greater Las Vegas area.

IRS Filing Tips for 2022 from Trusted Las Vegas CPA

Serving Las Vegas, Summerlin & Henderson

Posted on February 15, 2022 | Published by Ignite Local | Related Local Business