Tax planning is something that savvy Georgia residents are aware of year-round, but it becomes especially relevant at the end of the calendar year. For individuals thinking about these issues when the end of the current year approaches, there are a number of things that might be done to minimize tax liability or to take advantage of available incentives and tax breaks.
The end of the calendar year is generally a time of celebration and cheer for Georgia residents. However, the end of the holiday season usually means the beginning of the tax season. While this may be a busy time for accountants and taxpayers, the IRS has tried to make the season easier to manage. For starters, the agency recommends that individual and business taxpayers gather relevant documents as soon as possible.
Some workers receive severance pay from their employer. It may be as the result of being terminated, being laid off or leaving a position. Regardless of why a person received such pay, the IRS views it as wage income subject to tax. Therefore, that payment may be subject to employment taxes and deductions that may apply even if it is received in a settlement years after leaving the company.
When individuals in Georgia buy and sell real estate or business assets, capital gains taxes could be a costly concern. Solutions could emerge with planning and patience because an Internal Revenue Code Section 1031 exchange or irrevocable trust provides the legal instrument for navigating around taxes under the right circumstances.
Many Georgians own vacation homes and might wonder if they might face tax consequences if they choose to rent them out when they are not using them. It can be smart to recoup some of the expenses that people incur with the maintenance costs, mortgages and property taxes of vacation homes through renting them when they are not in use. However, the owners should be aware of the ways that the IRS treats rental income that is derived from such rentals.
The gains generated by the sale of a primary residence can be significant, but this income is not subject to federal income tax in many situations. Georgia residents may qualify for this exclusion by establishing ownership and use. This is done by establishing that they have owned the property in question and used it as their primary residence for at least two of the five years preceding the sale.
Georgia residents sometimes enter into tax-sharing agreements through which two parties agree to be responsible for paying a certain percentage of the tax liabilities owed. These types of agreements or orders are common in divorce cases. As a 2017 case demonstrates, the agreements are not binding on the Internal Revenue Service.
Georgia residents who need more time to file their taxes may ask for an extension. This means that those who ask for an extension on their 2017 personal tax returns won't have to file until Oct. 16. One of the best reasons to ask for an extension is to cut down on potential late fees. The IRS charges a 5 percent late filing fee for each month that a return is late on top of any taxes owed.
Georgia residents may have heard about income tax identity theft. The act involves a criminal stealing a person's social security number and using it to file a fraudulent return. The criminal's goal is to trick the IRS into sending a refund based on that fraudulent return. In an effort to combat this problem, the IRS, state tax agencies and private companies have joined forces.
Georgia residents who have had all or part of their debt canceled by a lender normally have to report the amount as taxable income. However, for mortgage debt that has been canceled, homeowners may be able to take advantage of a tax exclusion.