Atlanta Tax Law Blog

Tax deductions individuals can take in 2019

On behalf of Cal Bomar of Bomar Law Firm, LLC posted in Income Taxes on Monday, January 14, 2019.

While the tax law has changed in recent years, there are still many deductions that Georgia residents may be entitled to in addition to the standard deduction. For example, it may be possible to take a deduction for student loan interest up to $2,500. This is true for single filers who have a modified adjusted gross income of $80,000 or less. The amount increases to $165,000 for married couples filing jointly.

Those who have an health savings account and who fund them directly could be in line for a tax deduction. Contribution limits for individuals funding their own accounts was $3,450 in 2018 and $3,500 in 2019. Those who are funding accounts for their families could contribute $6,900 in 2018 and $7,000 in 2019. Individuals who are self-employed can take a variety of deductions. These deductions could be for health insurance premiums paid or for self-employment taxes paid during the year.

Keeping tax records forever isn't a bad idea

On behalf of Cal Bomar of Bomar Law Firm, LLC posted in Audits on Thursday, January 10, 2019.

Georgia residents and others are advised to keep a physical and digital copy of a tax return for as long as they live. This can be helpful in the event that the IRS claims a person hasn't filed a return in a given year or filed a fraudulent return. Furthermore, the government generally has no deadline to come after a taxpayer who understates his or her income on a tax return.

This is true even if an investigation is launched in error. This means that a person still needs to prove that a return was filed or filed accurately even its because of inaccurate IRS records. As long as a taxpayer files a return in good faith, the IRS generally has three years to audit that return. A taxpayer has three years to amend a return if a mistake was discovered that may entitle that individual to a refund.

New tax form available to the public

On behalf of Cal Bomar of Bomar Law Firm, LLC posted in Income Taxes on Monday, December 31, 2018.

Georgia residents may have heard that the new Form 1040 is going to be shorter than previous versions. This was one of the benefits touted by those who supported the Tax Cuts and Jobs Act (TCJA). However, taxpayers should be aware that there are six schedules that could need to be attached to the new form. Individuals who owe self-employment taxes or tax deductions or who need to pay the alternative minimum tax (AMT) will have to go through this process.

Self-employment tax deductions are reported on Schedule 1 while AMT payments are reported on Schedule 2. Capital gains and unemployment benefits that are subject to taxation are also reported on Schedule 1. Those who owe self-employment taxes will report them on Schedule 4 along with anyone who owes household taxes. If an individual requests an extension to file their taxes, any payment made at that time will be submitted on Schedule 5.

Facing an IRS audit

On behalf of Cal Bomar of Bomar Law Firm, LLC posted in Audits on Friday, December 28, 2018.

Most people living in Georgia take care to submit accurate tax returns. However, some tax documents end up being flagged by the IRS's algorithms, subjecting filers to an audit. Interestingly, there is some evidence that it is not the wealthy who are the most likely to be audited, but those who claim lower incomes and might be eligible for the earned income tax credit.

Low-income individuals and families can be eligible for EITC, which is intended to provide additional income for struggling households and to incentivize work. In some cases, the credit could make up the bulk of an income tax refund. Since calculating the EITC can be a complicated process, claimants often make mistakes. Many filers either fail to claim the credit or miscalculate the amount that they are eligible for.

Distributions may be required by the IRS

On behalf of Cal Bomar of Bomar Law Firm, LLC posted in Income Taxes on Friday, December 28, 2018.

At some point, Georgia retirees must start taking distributions from their retirement savings accounts. The IRS mandates that individuals must start taking these distributions starting in April of the year after turning age 70 1/2. Furthermore, they must calculate and abide by their required minimum distribution. This amount is based on how long a person is expected to live as well as their account balance at the end of the previous year.

There are some exceptions to this rule. For instance, no distributions need to be made from a Roth IRA before the original owner passes away. Additionally, those who are 70 1/2 or older may receive an exception if they are still working and have an employer-based retirement plan. When making a distribution from an IRA, the amount is based on the balance of each one that a person has. However, the distribution itself can come from any one account or combination of accounts.

Is your business facing an IRS audit?

On behalf of Cal Bomar of Bomar Law Firm, LLC on Wednesday, December 26, 2018.

For small business owners, finally getting their taxes filed may be the beginning rather than the end. The Internal Revenue Service can review your taxes and decide it wants a closer look. Thus, you may learn your business faces an audit.

You can get audited even if you did everything correctly. The IRS sometimes chooses to audit businesses and individuals based on a computer algorithm. In other cases, tax returns can raise red flags that draw auditors' attention.

What Michael Cohen teaches us about tax law

On behalf of Cal Bomar of Bomar Law Firm, LLC posted in IRS on Friday, December 14, 2018.

Those watching television or reading the news in Georgia have probably heard about Michael Cohen. They may also know that he pleaded guilty to tax evasion and was sentenced to prison time. Those who would like to avoid a similar fate can take some steps to do so. For instance, taxpayers should be sure to report all of their income each year when filing a tax return.

Income is generally subject to taxation regardless of where it was earned. In the event that a person does receive an audit from the IRS, it is not a good idea to obstruct the investigation. An attempt to lie or game the system could turn a civil matter into a criminal one. Those who don't agree with what the IRS claims in an audit have the right to dispute those claims, but it needs to be done in accordance with established procedure.

IRS compromises on Gilti tax rules

On behalf of Cal Bomar of Bomar Law Firm, LLC posted in IRS on Wednesday, December 5, 2018.

If a company based in Georgia or anywhere else has a foreign tax bill of less than 13.125 percent, it will owe a 10.5 global intangible low-tax income tax. This tax is otherwise known as Gilti, and businesses had lobbied the IRS to make changes to how it is assessed. For instance, they wanted to avoid allocating domestic expenses to foreign subsidiaries, but the IRS ruled that half of such expenses must be allocated to foreign subsidiaries.

Previously, the IRS intended for all domestic expenses related to interest payments, administration and research to be allocated here. However, business interests claimed that it would make foreign tax credits less valuable. According to the U.S. Chamber of Commerce, the rule as it has been amended would still create an issue of double taxation. Technology companies and banks are most likely to be impacted by the Gilti tax as they tend to have equipment that can be used to lower their bill.

Reducing the tax burden on a divorced individual

On behalf of Cal Bomar of Bomar Law Firm, LLC posted in Income Taxes on Friday, November 30, 2018.

Obtaining head of household status can be a boon for divorced parents who meet the criteria for it. Among the benefits is a standard deduction of $18,000 as opposed to $12,200 for those who file single. Furthermore, individuals who have the head of household status can claim a $2,000 child tax credit. Unlike a deduction that reduces a person's taxable income, a credit actually reduces what a person owes by the amount of the credit.

Head of household status also offers wider tax brackets, which could cut down on taxes owed in a given year. While there are many benefits to having this status, it can be hard to qualify for. First, a parent must have a child living in his or her home for more than half of the year. In addition, a parent must also pay more than 50 percent of the household expenses. Expenses include paying a mortgage, buying food or any other cost related to keeping the home in order.

IRS announces new tax rules for 2019

On behalf of Cal Bomar of Bomar Law Firm, LLC posted in Income Taxes on Wednesday, November 28, 2018.

Taxpayers throughout Georgia and the rest of the country now know what the tax brackets will be for the 2019 tax year. Individuals who make up to $9,700 will be in the 10 percent tax bracket, which is the lowest of the seven income tax tiers. Individuals who have a taxable income of $510,301 or more will pay at the highest 37 percent rate. Those who are married filing jointly will be in the 37 percent bracket if they make $612,351 and up.

Individuals will see their standard deduction increase to $12,200 up from $12,000 while married couples will get a standard deduction of $24,400. There is no personal exemption as they were eliminated through 2025.