Is It a Hobby or a Business?

hobby or business las vegas

Is your hobby a business? It matters to the IRS. The agency says your hobby is a business if it operates to make a profit. But it’s not a simple determination. To start with, intent matters.

Factors The IRS Uses to Ascertain Whether Your Hobby is a Business

  • You carry out your activity in a businesslike manner and maintain complete and accurate books and records.
  • The time and effort you put into the activity shows you intend to make it profitable.
  • You depend on income from your activity for your livelihood.
  • Your losses are indicative of a business. This is complicated: Losses are normal in a business’s startup phase. Still, this may not necessarily indicate that the activity is not engaged in for profit. If the losses continue beyond a period in which it’s customary to bring an operation to profit, then this may indicate the activity is not being engaged in for profit.
  • You change methods of operation to improve profitability.
  • You and your advisers have the knowledge needed to carry out the activity as a successful business.
  • You were successful in making a profit in similar activities in the past.
  • You can expect to make a future profit from the appreciation of assets used in the activity. The IRS will take into consideration whether you make a profit in some years and, if so, how much.

When are Deductions Allowable?

If the activity you’re engaged in turns a profit, deductions are allowable for money spent for the production or collection of income or for the management, conservation or maintenance of property that brings you income. Deductions aren’t allowable if your activities aren’t turning a profit, including sports or things you do for recreation.

The IRS Considers Intent

The IRS uses no one factor to make the determination. A lot of the decision hinges on intent to derive profit. But here, too, it’s fuzzy because greater weight is given to objective facts than to your statement of intent, according to the IRS. Here are some scenarios to consider:

  • If you attempt to develop new or superior techniques that may result in profit, then we’re talking business.
  • How much time you devote to the activity that doesn’t have substantial personal or recreational aspects may indicate your intention to make a profit.
  • If you stopped your usual occupation and devote most of your time and energy to another activity, it looks like a business to the IRS.
  • If you are employing qualified people to help, even though you are not spending significant time yourself — that looks like a business.
  • Assets used in your activity appreciate — even the land used in the activity. Though you point out that there’s no intent to make a profit, if the value of land used increases, exceeding your expenses of operation, then you’ve made a profit.
  • Suppose in the past you’ve done a similar activity and took it from an unprofitable to a profitable undertaking. This may indicate that your present activity is for profit, even though it’s presently unprofitable.
  • The amount of profit in relation to losses incurred in relation to your investment is important. An occasional small profit coming from an activity that generates large losses or from an activity you’ve made a large investment in wouldn’t generally be an indication that you’re engaged in your activity for profit. However, substantial profit, even occasionally, makes it look like you’re in it for profit. If you don’t seem to have substantial income or capital aside from your activity, that looks like you’re expecting a profit from your so-called hobby.
  • If the losses from your activity generate substantial tax benefits, it may show that you’re not so much interested in profit as in using losses on your tax return.

While intent is important in determining whether you’re running a business or enjoying a hobby, the IRS looks at the income derived from the activity. Your lack of a profit objective may seem to indicate you’re engaged in a hobby, but as you can see, many factors are considered in making this determination. The important takeaway here is to work closely with a tax professional.

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.

Helping You Figure Out Whether You Can Claim What You Do as a Business in Las Vegas

Serving Las Vegas, Summerlin & Henderson


Posted on January 12, 2023 | Published by Ignite Local | Related Local Business

It’s Almost Tax Time: Review Your Situation

tax timeTax law is never simple. But you can prepare for your April 15 reckoning by reviewing the past year and seeing what’s coming. And the first thing to know is that April 15 is actually not April 15 in 2023. Because of the weekend and a holiday, you have until April 18 in 2023. Still, the IRS and tax professionals urge early filing.

Here are some other key items.

Social Security

According to the Social Security Administration, approximately 70 million Americans will see an 8.7% increase in their Social Security benefits and Supplemental Security Income payments in 2023. On average, according to the SSA, Social Security benefits will increase by more than $140 per month starting in January. The SSA will send notices throughout the month of December to retirement, survivors and disability beneficiaries; SSI recipients; and representative payees. Those who want to find out their new benefit sooner can do so through their personal SSA account. If you don’t have one already, you can sign up online.

401(k) and IRA Limits Rise for 2023

The IRS has announced that the amount individuals can contribute to their 401(k) plans in 2023 has increased to $22,500, up from $20,500 for 2022. This also applies to 403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan. Also increasing is the catch-up contribution limit for employees aged 50 and over who participate in the above plans. This limit has increased to $7,500, up from $6,500. Therefore, participants in 401(k), 403(b), and most 457 plans or the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $30,000 starting in 2023. The amount individuals can contribute to their SIMPLE retirement accounts is increased to $15,500, up from $14,000. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans is increased to $3,500, up from $3,000.

IRAs are also going up. The limit on annual contributions to an IRA increased to $6,500, up from $6,000. The IRA catch‑up contribution limit for individuals aged 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.

HSA Limits

The HSA contribution limit for self-only for 2023 is up slightly to $3,850; for family, it is also up slightly to $7,750. The catch-up contribution for age 55 and older remains at $1,000.

Tax Year 2023 Annual Inflation Adjustments

The standard deduction for married couples filing jointly for tax year 2023 rises to $27,700, which is up $1,800 from the previous year. For single taxpayers and married individuals filing separately, the standard deduction rises to $13,850 for 2023, up $900, and for heads of household, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022. For tax year 2023, the top tax rate remains 37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly). Other rates have also changed; work with a tax professional to see where you are so you can make any necessary withholding adjustments.

The Affordable Care Act

The IRS is reminding both individuals and businesses that this is very much in force and there have been recent adjustments. In mid-2022, the IRS announced annual adjustments to the ACA. According to the Society for Human Resource Management, the “2023 health plan affordability threshold — used to determine if an employer’s lowest-premium health plan meets the Affordable Care Act’s (ACA’s) affordability requirement — will be 9.12 percent of an employee’s ‘household income,’ down from the 2022 limit of 9.61 percent.”

The Tax Cuts and Jobs Act

This, too, is very much in force. The IRS has helpfully updated guidance with a useful list. New businesses especially that may not be familiar with the act’s details should consult it.

Inflation Reduction Act of 2022

This contains a powerful set of provisions. It imposes a 15% minimum tax on corporations with over $1 billion in revenue and a 1% excise tax on corporate share buybacks. This may level the playing field for small businesses. The act also provides an Affordable Care Act subsidy extension through 2025, permission for Medicare to negotiate drug prices, a cap on Medicare recipients’ drug expenditures at $2,000 per year, and an electric vehicle tax break for individual and commercial vehicles.

Mileage Change

Driving for business? The IRS increased the optional standard mileage rates for the final six months of 2022. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes. Check your driving logs for dates to take advantage of the full amount.

Whether you’re an employee, self-employed or a business owner, work with your tax adviser to keep on top of your due dates and responsibilities. For now, gradually gather the information you will need at tax time. Forbes and Nerdwallet have both provided helpful lists. (Laws may change every year, but the list of what the IRS needs, based on your sitaution, stays pretty much the same.)

Need More Information on Tax Law Changes in 2023?

Here at Layton Layton & Tobler we can answer your tax questions. Contact us today to schedule a consultation. We can also help you with payroll preparation and auditing.

Let Us Answer Your Questions About Tax Law Changes in 2023 in Las Vegas 

Serving Las Vegas, Summerlin & Henderson


Posted on December 27, 2022 | Published by Ignite Local | Related Local Business

Key Social Security Changes for the New Year in Summerlin

social security changes laytonAccording to the Social Security Administration, approximately 70 million Americans will see an 8.7% increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2023. On average, according to the SSA, Social Security benefits will increase by more than $140 per month starting in January.

Why the Big Increase?

Why the big bump? As the SSA explains, federal benefit rates increase when the cost-of-living rises, as measured by the Consumer Price Index (CPI-W). The SSA will send notices throughout the month of December to retirement, survivors, and disability beneficiaries, SSI recipients, and representative payees.

Those who want to know their new benefit sooner can do so through their personal SSA account. If you don’t have one already, you can sign up online. You can access this information in early December, prior to receiving the mailed notice. Benefit amounts will not be available before December.

On the other hand…

It is possible to reach a maximum income, beyond which there are no more Social Security taxes. As the SSA explains, Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. The same annual limit also applies when those earnings are used in a benefit computation. This limit changes each year with changes in the national average wage index.

The SSA calls this annual limit the contribution and benefit base, and it’s also known as the taxable maximum. For earnings in 2023, this base is $160,200. Employers need to take note of this when calculating deductions

No matter your situation, these are changes that may lead to questions. Consult qualified advisors.

Need More Information on Social Security Changes in 2023?

Here at Layton Layton & Tobler we can answer your Social Security questions. Contact us today to schedule a consultation. We can also help you with taxes, payroll preparation and auditing.

We’ll Answer Your Questions About Social Security Changes for the New Year in Summerlin

Serving Las Vegas, Summerlin & Henderson


Posted on November 12, 2022 | Published by Ignite Local | Related Local Business

IRS Update on Student Loan Relief

student loan relief hendersonIn 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 Us Help You Navigate IRS Student Loan Relief in Henderson

Serving Las Vegas, Summerlin & Henderson


Posted on October 13, 2022 | Published by Ignite Local | Related Local Business

 

Tax and Timing for Medical Expenses

medical-expensesLet’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.

Let Us Help You Navigate Taxes and Medical Expenses in Las Vegas

Serving Las Vegas, Summerlin & Henderson


Posted on September 14, 2022 | Published by Ignite Local | Related Local Business

Capital Gains in Las Vegas: Know the Basics

capital gains las vegasCapital gains are profits made when you as an individual or business sell a capital asset — investments or real estate, for instance — for a higher cost than its purchase price. A capital loss is incurred when there’s a decrease in the capital asset value compared with its purchase price. Almost everything you own and use for personal or investment purposes is a capital asset: a home, personal-use items like furnishings, and collectibles.

How Are Capital Gains Claimed on Personal Taxes?

A capital gain may be short term (one year or less) or long term (more than a year). The capital gain must be claimed on income taxes. While capital gains are generally associated with stocks and mutual funds due to their volatility, a capital gain can occur on any security sold for a higher price than the price that was paid for it. Unrealized gains and losses, sometimes referred to as paper gains and losses, reflect an increase or decrease in an investment’s value that haven’t yet triggered a taxable event.

The profit you realize when you sell a capital asset at a profit is your gain over basis paid. Basis is often defined as the original price plus any related transaction costs; basis also may refer to capital improvements and cost of sale. Capital losses are used to offset capital gains of the same type: short-term losses are deducted against short-term gains, for example.

How About Businesses?

What are capital gains and losses for a business? A business may gain or lose money in two ways: It can make a profit on its sales activities or lose money by spending more than it brings in from sales. And, of course, it can gain or lose money based on its investments or sales of assets — items of value that the business owns.

Each type is taxed differently. Profits are taxed as ordinary income and at regular business or personal tax rates. Gains or losses on investments or the sale of assets are taxed as capital gains or losses, but it can depend on the type of business. When expensive equipment is involved, businesses have to consider depreciation, which takes into account the equipment’s declining value over its useful lifetime.

Capital gains and losses can come into play when a business writes off an asset, taking it off its balance sheet. That might also be the case with accounts receivable when a debt is owed to the business but is unlikely ever to be paid. In contrast to the write-off of a business asset however, accounts receivable get written off against ordinary income.

Selling Capital Shares or Owner’s Equity

Individual shareholders or business owners who sell their capital shares or owner’s equity in a business also incur capital gains or losses from those sales. Note the following distinction: Operating profits and losses result from the ongoing operations of the business; sometimes called net operating losses for tax purposes, they result from day-to-day operations.

Need More Information on Capital Gains in Las Vegas?

This is just an introduction to a complex topic, and there are many other provisions. Whether you’re buying or selling as an individual or as a business, be sure to keep track of your sales and discuss them with a qualified financial professional. 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.

We’ll Help You Navigate the Complexities of Capital Gains in Las Vegas

Serving Las Vegas, Summerlin & Henderson


Posted on August 23, 2022 | Published by Ignite Local | Related Local Business

Do You Have a Hobby or a Business in Summerlin?

hobby or business summerlin

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

Can an IRS Offer in Compromise Help You?

Offer in Compromise

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

9 Ways To Avoid an IRS Audit in Summerlin

IRS audit summerlin

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

Getting Representation Before the IRS in the Las Vegas Area

representation IRSNobody 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