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Our team of IRS Enrolled Agent/Financial Advisors/Tax Attorney are here to do whatever it takes to get you back on your feet and to start thriving not just surviving.
Frequently Asked Questions
General FAQs:
Why did I receive a notice from the IRS/FTB? How should I go about this situation?
The letter you received is a notification that you are being audited. Generally, you are being notified of an issue with your tax return because the IRS believes you owe additional tax, are due a larger refund, or there is a question about your tax return. At Tido Financial, our advisors can represent you and help resolve your issue with the IRS/FTB. Using the Power of Attorney, we will serve as your representative and assist you every step of the way to ensure an ending result you are satisfied with. If you have any questions or concerns, we are here to answer them.
http://www.irs.gov/individuals/article/0,,id=96199,00.html
https://www.ftb.ca.gov/forms/misc/1015B.pdf
Why did the FTB send me a notice regarding my Head of Household filing status? What is the purpose of Head of Household Audit Letter?
Franchise Tax Board reviews the tax returns of tax payers claiming head of household filing status. Because this filing status is often misunderstood, tax payers are asked to provide information to determine if they qualify for the Head of Household status. The Head of Household Audit letter is a questionnaire asking specific questions to determine whether you meet the qualifications to file status as the Head of Household. As your representative, we will take matters to at our hands. The advisors at Tido Financial will work thoroughly looking at your marital status, claims, and individual gross income to ensure that you are a qualifying person for the HOH filing status. If you have any doubts, we will be there to guide you through them.
https://www.ftb.ca.gov/individuals/hoh/audit_process.shtml
https://www.ftb.ca.gov/individuals/hoh/faq.shtml
What is Form 1099-K and why do I need to file it? How does it affect my business?
The Form 1099-K is called Merchant Card and Third Party Network Payments and is needed to report payments made with a credit cards or payment cards, including network transactions from third parties. The reason your business need to file a Form 1099-K is because your business either accepted payments through payment cards/merchant cards or payments through a third party network that exceeded $20,000 in gross total reportable transactions. As business owners, you must report your proceeds from merchant cards/third party networks under Internal Revenue Code. Report items includes your gross receipts and sales for the calendar year.
http://www.irs.gov/pub/irs-pdf/f1099k.pdf
http://www.irs.gov/newsroom/article/0,,id=253979,00.html
What are Unreimbursed Employee Expenses (Line 21)? Can they be deductible? How do I claim them on my taxes?
If you paid for expenses (uniforms, safety equipment, examinations, passports, etc.) related to your job during the tax year, you may be eligible for reimbursement on your tax return. These are called Unreimbursed Employee Expenses. As a tax payer, you are qualified to deduct unreimbursed expenses that are incurred during the tax year, for carrying on the business of being an employee, and ordinary and necessary.
http://www.irs.gov/publications/p529/ar02.html
What are points and closing cost deductible on my Real Estate Home Purchase?
As a home owner, you are allowed a lot of tax advantages. At the closing of your purchase, your loan is officially contracted for your mortgage. You can deduct points used on a mortgage when buying a home and property taxes. Basically, “points” is a term used as a percentage of your loan amount on your home mortgage. As a benefit to a home buyer, you can deduct your “points” which means you can deduct your percentage loan amount when the conditions of the mortgage are met. There are other Closing Costs that are deductible as well. There are certain restrictions to what expenses you cannot deduct such as homeowner’s insurance or depreciation. Your advisors at Tido Financial can make sure you are following the right guidelines in obtaining maximum deduction to your tax returns.
http://www.irs.gov/publications/p530/ar02.html
What is Employer Accountability Plan (Reimbursing employee expenses)?
When you receive a reimbursement for your expenses, how you report the amount depends if the reimbursement was paid under an accountable plan or nonaccountable plan. To be an accountable plan, your employer’s reimbursement or allowance arrangements must include all of the following rules:
Your expenses must have a business connection — that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer.
You must adequately account to your employer for these expenses within a reasonable period of time.
You must adequately account to your employer for these expenses within a reasonable period of time.
What types of Insurance Settlements are there? Are Insurance Settlements taxable?
There are a variety of Insurance Settlements ranging from Repairs (agreement for cost of repairs), Total Value (agreement for total value of property), Lump Sum (agreement on a sum of the repairs), Structured Settlements (settlements paid over time), and Limits (share of policy limits). Repair Settlements cover cost of repairs and sometimes extra expenses such as rental car, towing, motel room, or loss of business revenue. In general, most insurance settlement proceeds are not taxable income. Property settlements, life insurance proceeds and medical bill payments are not subject to taxation because they are intended to compensate for a loss by the policy holder, and not to cause a profit or gain of any kind. However, there are some exceptions to this. If the settlement is a profit, the excess amount of the proceeds may be subject to tax. An example is a car receiving a settlement higher than its depreciated value. The excess amount can become taxable income to the business. Settlements for “pain and suffering” are often taxable as well. To exempt from taxation, there must be concrete physical loss from which the financial loss occurred. Non-tangible losses such as slander or harassment suits can be taxed. Life insurance designed to replace income of a deceased person are not taxable most of the time.
http://www.ehow.com/about_6550227_taxation-insurance-settlements.html
How are Individual Retirement Arrangements (IRAs) taxed? What are the exclusions and exemptions?
For Roth IRAs, contributions are not deductible; however, for Traditional IRAs are deductible. If you or your spouse are covered by a retirement plan at work and your income exceeds a certain amount, your deduction may be limited; whereas, you are entitled to full deduction if you or your spouse have no retirement plan at work.
http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-IRAs
Early Distributions from Retirement plans other than IRAs:
http://www.irs.gov/taxtopics/tc558.html
What is the Mortgage Forgiveness Debt Relief Act?
When you owe a debt to someone and it is canceled or forgiven, the canceled amount may be taxable. The Mortgage Debt Relief Act of 2007 allows taxpayers to exclude income realized as a result of adjustment of the terms of the mortgage, or foreclosure of your residence. Up to $2million of forgiven debt is eligible for this exclusion. This applies to forgiven debt in calendar years 2007 through 2012. The exclusion does not apply if the discharge reason is not directly related to a decline in the home’s value or the taxpayer’s financial condition.
http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation-
What is a 1031 exchange? What are the qualifications and how does it benefit investors?
The Internal Revenue Code Section 1031 permits no gain or loss to be recognized in the exchange of property used for productive used in a trade or business, or for investment. This is a postponement of paying tax on the gain of an investment if you replace it and reinvest in a similar property as part of the qualifications of the like-kind exchange. The like-kind exchange under Section 1031 is not tax free but tax-deferred. When the replacement property is sold, the original deferred gain plus any realized gain since the purchase of the replacement property, is taxable. To qualify for a Sectional 1031 deferral, you have to be an owner of investment and business property. There must be an exchange of properties, such as a swap of one property for another. To qualify, the taxpayer must distinguish a deferred exchange, using proceeds to purchase another property. Under a like-kind exchange, properties cannot be used for personal used, like a second home or vacation home. The property must be used as a trade, business or investment.
http://www.irs.gov/uac/Like-Kind-Exchanges-Under-IRC-Code-Section-1031
What is the American Recovery Tax Credit? Who qualifies? What education expenses can be used?
Under the American Recovery and Reinvestment Act (ARRA), parents and students qualify for a tax credit called the American Recovery Tax Credit also known as the American Opportunity Tax Credit, to pay for college expenses. Many who are eligible qualify for a maximum credit of $2,500 per a student annually. To qualify for the full credit, individuals need to have an adjusted gross income of $80,000 or less, or $160,000 or less for married couples filing jointly.
http://www.irs.gov/uac/American-Opportunity-Tax-Credit
What qualifies as charitable contributions?
To deduct charitable contributions, the organizations must be a qualified applicant to the IRS. The following types of organizations can be qualified organizations: community chest, corporation, trust, fund, or a foundation with the following purposes: Religious, Charitable, Educational, Scientific, Literary, or prevention of cruelty to children or animals. To be certain if organizations qualify, check:
http://www.irs.gov/publications/p526/ar02.html.
How much can be contribute? How do I appraise the value of items contributed?
The general rule regarding the amount charitable deduction to be claimed is to use the fair market value of the gift. Special rules apply to vehicle donations. To deduct contributions of cash or property $250 or more, you must have a bank record, or written acknowledgement from the organization contributed to. For deductions over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return. Taxpayers donating items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.
http://www.irs.gov/uac/Eight-Tips-for-Deducting-Charitable-Contributions
What is a Form 1099-MISC, Miscellaneous Income? Who needs to file one? How do you file it?
You will need to report all your income earned as an independent contractor. A Form 1099-MISC is used to report miscellaneous income to each person you paid during the year. These could be payments you made in a trade or business to a person who is not an employee or unincorporated business. It is required when payments of $10 or more in royalties or broker interest payments is made; or $600 or more in rents, services, medical health payments, or compensation is made for business. Exceptions maybe general payments, merchandise, wages, and other items reported on Form W-2.
At Tido Financial, we will walk you through every step of your concerns. There are a lot of expenses that you could deduct associated with your business and you will only be taxed on the net profits. We can help you file your Form 1099-MISC for your tax return and answer any questions you have. If you already filed your taxes, you will need to file an amended tax return. Tido Financial can help you correct your tax return , preparing an amendment making sure you get the most out of your deductions.
http://www.irs.gov/instructions/i1099msc/ar02.html
What is Earned Income Credit (EIC)?
Earned Income Credit (EIC) or Earned Income Tax Credit (EITC), is a benefit for people who work and have lower wages. Tax credit gives you more money and it reduces the amount of tax you owe and may give you a refund.
Who qualifies for Earned Income Credit (EIC)?
To claim EIC on your tax return you need to meet the following rules:
You, your spouse (if you file a joint return), and all other listed on Schedule EIC, must have a valid Social Security Number.
You must have earned income from working for someone else or running or operating a farm or business;
Your filing status cannot be married filing separately.
You must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return.
You cannot be a qualifying child of another person.
You cannot file Form 2555 or Form 2555 EZ.
You must meet these EITC Income limits
And have a qualifying child, or if you do not have a qualifying child, you must:
be age 25 but under 65 at the end of the year,
live in the United States for more than half the year, and
not qualify as a dependent of another person.
Are there yearly limits or IRS restrictions?
Earned Income and adjusted gross income (AGI) must each be less than:
$43,998 ($49,078 married filing jointly) with three or more qualifying children
$40,964 ($46,044 married filing jointly) with two qualifying children
$36,052 ($41,132 married filing jointly) with one qualifying child
$13,660 ($18,740 married filing jointly) with no qualifying children
Tax Year 2011 maximum credit:
$5,751 with three or more qualifying children
$5,112 with two qualifying children
$3,094 with one qualifying child
$464 with no qualifying children
Investment income must be $3,150 or less for the year.
http://www.irs.gov/Individuals/EITC,-Earned-Income-Tax-Credit,-Questions-and-Answers
Is Inheritance taxable? What is estate tax?
Estate tax is tax on the total of your possessions and debts left behind after your death. Estate tax is taxed on the estate amount before distributions are made. The fair market values of these items are used. Property included in your estate may consist of cash and securities, real estate, insurance, trusts, annuities, business interest, and other assets.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Estate-Taxes
What is gift tax?
Gift tax is a tax on the transfer of property (including money) to one individual by another while receiving nothing in return, making it a gift. The donor is responsible to federal gift tax unless under special arrangements.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes