When an individual receives a set sum of money or personal property under a will, known as a pecuniary legacy, it may be subject to inheritance tax. The value of the legacy will be included in the recipient’s taxable estate, potentially increasing the overall tax liability. In some cases, the deceased individual’s estate may be … Read more
Accrued expenses, also called unpaid expenses, are business expenses incurred but not yet paid. For tax purposes, the timing of expense recognition and deduction depends on the type of accounting method used, either cash basis or accrual basis. Under the accrual basis, accrued expenses are deductible in the period they are incurred, regardless of when … Read more
The likelihood of an amended tax return being audited depends on several factors. Generally, amended returns are audited more frequently than original returns, as the IRS scrutinizes changes made to previously filed information. The significance of the changes, such as the amount of additional tax owed or the nature of the adjustments, can also influence … Read more
Deciding whether to claim medical expenses on your taxes requires careful consideration. The threshold for deducting these expenses is 7.5% of your adjusted gross income (AGI). If your total medical costs exceed this amount, it may be beneficial to itemize your deductions and include them. However, if your AGI is relatively high, the savings from … Read more
With 401(k) loans, it’s important to understand the tax implications. When you take out a loan from your 401(k), you’re essentially borrowing money from yourself. The amount borrowed is not taxed, so you don’t pay taxes on it now. However, when you repay the loan, you’re using after-tax dollars. This means that you’re paying taxes … Read more
Trustee fees are payments made to individuals or organizations for managing and overseeing trusts. Generally, these fees are treated as taxable income for the trustee. They are subject to federal income tax and may also be subject to state and local income taxes. However, there are some exceptions to this rule. For instance, if the … Read more
The likelihood of an individual tax preparer being audited by the Internal Revenue Service (IRS) is relatively low. However, certain factors can increase the risk of an audit. These include preparing returns that contain errors or omissions, representing clients who are involved in questionable tax practices, and having a history of preparing returns that have … Read more
An ad valorem tax is a levy imposed on the value of something. It is commonly encountered in the context of real estate property taxes, where the taxable value is determined by an appraisal. The tax rate is then applied to this value to calculate the amount of tax owed. Ad valorem taxes are also … Read more
Temporary differences between financial accounting and tax reporting can cause a deferred tax asset. This happens when expenses are recorded earlier for tax purposes than for financial reporting purposes, or when revenues are recognized later for tax purposes than for financial reporting purposes. As a result, a temporary difference arises between the book value and … Read more
When your tax return is filed with one bar, it simply means that the IRS has received your return and is processing it. There are a number of reasons why your return may be taking longer to process, including errors or missing information. If you have filed your return electronically, you can check the IRS … Read more