Many of you may be caught up in the swirl of the Republican primaries. And as with many other things that swirl, such as carnival rides, you may be feeling nauseated. One of the big headlines has centered on how much tax Mitt Romney is paying in Federal income tax. Why is Mitt Romney only paying around 15 percent? In order to understand this, you need to know the difference between ordinary income and capital gain income, because they are taxed differently.

First, ordinary income is income you receive from wages (your W-2), commissions, self-employment and bonuses. read more »

Don’t worry; the IRS isn’t going know about your Viagra purchases from Canada or your strange fascination with collecting Michael Jackson look-alike clothing. The IRS is concerned with any income you may be receiving as a business from a credit card sales. OK, now that we clarified that one, breathe easy and read on.

This next paragraph is more of a confession. Every time I go to the mailbox and see a piece of mail from a credit card company, only one thing comes to mind: Rip it up and feed it to the recycle bin. Perhaps it is instinct, perhaps I have been conditioned to this response, like Pavlov’s dogs, by years of disappointing unsolicited credit card offers. Who knows? Getting unsolicited offers from the credit cards happens (unfortunately for me) almost every day. read more »

Imagine to yourself the following situation: The real estate market is in the toilet and the stock market is performing poorly (that wasn’t hard to do was it?). So you think to yourself “when prices are low it is a great time to buy.” You begin dreaming late at night about buying real estate, being a landlord and then when this market turns around you will sell your dirt cheap properties for a hefty profit.

So you stay up late at night indulging in beverages that contain too much sleep inhibiting chemicals trying to hatch a plan to fund your new real estate empire. Banks are a hassle these days (again not hard to imagine). So it hits you like a ton of bricks: “I will use my IRA to buy the property!” read more »

Just like a scene from the Wizard of Oz, the last few years of turmoil in the real estate market seem more fictional than real. Many taxpayers have lost their homes or investment properties to foreclosure or short sales. As I meet with clients who have lost homes, I often get the BIG question: “Do I have to pay taxes on the money that was written off by the bank?”

In case you didn’t know, the IRS considers forgiveness of debt a taxable event and requires a lender to send a 1099-C to the taxpayer in affect giving them taxable income. read more »

It’s no secret that the IRS is always trying to increase tax compliance. However, this year (thankfully) it is not doing so by increasing the number of audits for ordinary taxpayers like you and me. This time the IRS is making an effort to clean up the vast pool of tax preparers. Over the next few years there will be clear limits on who can prepare a tax return for compensation (you can still do your own).

On Aug. 19, the IRS issued proposed regulations to register and regulate tax return preparers. The proposed regulations would implement a plan to register and assign a PTIN (Preparer Tax Identification Number) to all paid tax preparers who will file tax returns for the year 2011 and thereafter. read more »

As part of closing the state budget deficit, our legislature has decided to tax a food item that has long been exempt: candy. Additional taxes have also been applied to gum, soda pop, and bottled water, and taxes are being raised again on beer and cigarettes. The recent tax hike on candy may not be as simple as it may seem at first glance. If your business sells candy, you need to be aware of which items are classified as taxable “candy.” read more »