Category Archives: Blog

Tips for Filing Gambling Winnings and Losses

cat gamblingIf you enjoy the occasional visit to the casino or plan on going any time in the future, this article will help you in knowing how to manage your taxes after a visit. If you have been fortunate enough to win some money or if you are like most of us and have lost some money, we will lay out what steps you need to take to properly document that.

  1. Forms you should know:
    1. Form W-2G, typically given to you by the casino if you win a lot of money but you are responsible for getting one even if you are not provided with one. You can get one of these forms online by going to: https://www.irs.gov/pub/irs-pdf/iw2g.pdf
    2. Schedule A, a form for your tax deductions which in this case is your losses. You can get this form online by going to: https://www.irs.gov/pub/irs-pdf/f1040sa.pdf
  2. Tax Returns: You have to report any and all of your gambling winnings as income under “Other Income.”
  3. Loss Deductions: Depending on the gambling income reported on your W-2G will determine how much you can deduct, this is limited to amounts more than 2% of your adjusted gross income and cannot deduct more than the winnings claimed as income.
  4. Gambling on sweepstakes, wagering pools, certain pari-mutuel pools, jai alai, and lotteries with winnings of $5,000 or more has a backup withholding rate at 24% for the W-2G under “Specific Instructions” in the “Withholding, Regular Gambling Withholding for Certain Games, Noncash payments, and Backup Withholding” section.
  5. Gambling on horse racing, dog racing, jai alai, and other wagering has a withholding rate at 24% for the W-2G under “Specific Instructions” in the “Withholding, Regular Gambling Withholding for Certain Games and Backup Withholding” section.

Changes to know about for the net operating loss

Tax reform made a lot of good changes in the tax law for the small-business owner.

 

But the changes to the net operating loss (NOL) deduction rules are not in the good-changes category. They are designed to hurt you and put money in the IRS’s pocket.

 

Now, if you have a bad year in your business, the new NOL rules are designed to stop you from using your business loss to find some immediate cash. The new (let’s call them bad-for-you) rules certainly differ from the prior beneficial rules.

 

Old NOL Rules

 

You have an NOL when your business deductions exceed your business income in a taxable year.

 

Before tax reform, you could carry back the NOL to prior tax years and get refunds of taxes paid in those prior years.

 

Alternatively, you could have elected to waive the NOL carryback and instead carry forward the NOL to offset some or all of your taxable income in future tax years.

 

New NOL Rules

 

Tax reform made two key changes to the NOL rules:

 

  1. You can no longer carry back the NOL (except for certain qualified farming losses).

Your NOL carryforward can offset only up to 80 percent of your taxable income in a tax year.

 

The changes put more money in the IRS’s pocket by

 

  • eliminating your ability to get an immediate tax benefit from your NOL carryback, and
  • delaying your ability to get tax benefits from future NOL carryforwards.

Jesse Lothamer J.D., C.P.A., E.A.

Lothamer Tax Resolution

FAFSA Checklist – What you need to know about applying for FAFSA

The new 2018-19 FAFSA form has become available to apply on since Oct. 1st of this year. We have decided to make a checklist to help make sure you are on track to be eligible to apply for the new school year. Below is a checklist of things you need to have completed and ready in order to be able to apply for FAFSA for you or your kids who are ready to start college!

  • Create an account for your FSA ID on fafsa.gov (create this early to make sure you do not fall behind on the process even if you are not ready to complete the FAFSA form.
  • Meet the basic criteria:
    • Have a Social Security Number (or Alien Registration Number)
    • Have a driver’s license number ready (if you do not have a license then ignore this step)
    • Have a high school diploma or GED certificate
    • Register with Selective Service if you are a male 18-25 and not currently on active duty in the US Armed Forces
  • Be up to date with all your tax returns
    • FAFSA now requires you to report your income information from the earlier tax year
    • For the 2018-19 form you will need your 2017 tax information
      • Tax Return information ready
      • W-2 available for reference
      • Records of untaxed income (if applicable)
      • Records of assets (if applicable)
      • Bank statements/records of investments (if applicable)
    • IF you have a conviction for possession or sale of illegal drugs, you must complete the Student Aid Eligibility Worksheet to determine if you are eligible or partially eligible for aid.

Changes You Need To Know For Your 2018 Tax Year

1040A formsWith each new year comes new changes to the tax brackets due to inflation and new bills passed by Congress. We made a table for these changes and here are the most important revisions we think you need to know!

2017 2018
Standard Deduction – Single $6,500 $12,000
Standard Deduction – Jointly Married $13,000 $24,000
Personal Exemption – Single/Joint $4,000/$8,000 ELIMINATED
Child Tax Credit (Under 17) $11,000 $12,000
Limits for Retirement Savings $18,000 $18,500
Savings in IRAs – Single $62K-$72K $63K-$73K
Savings in IRAs – Married (w/ employer plan) $99K-$119K $101K-$121K
Contribution to IRAs – Single $118K-$133K $120K-$135K
Contribution to IRAs – Married (jointly) $186K-$196K $189K-$199K
Top Rate – Individual 39.6% at $418.4K+ 39% at $500K+
Top Rate – Married (joint) 39.6% at $470.7K+ 39% at $600K+

 

August 2018 Newsletter  

Payroll Taxes

 

Delinquent Payroll Taxes Are Aggressively Pursued By The IRS & State Authorities and Put Many Companies Out of Business. Let Us Help Your Business.

 

The IRS and State agencies take payroll tax debt very seriously: delinquent Employment Payroll Taxes can result in the assessment of substantial penalties and interest along with the seizure of assets including liquidation of the business.

 

Payroll taxes in particular are the most aggressively collected and penalized of all tax types—Federal and State Payroll Tax laws give the government much greater power to try to recover what is owed. This authority includes the ability to collect the payroll liabilities from business owners, officers and even employees personally.

 

Contact us as soon as possible if your business is experiencing Payroll Tax Problems or a Payroll Tax Audit. Any discussion you have or information you provide to the IRS or State tax agency can be used in an attempt to collect the delinquent tax. For example, providing a list of accounts receivable gives the IRS or State a source to Levy.

 

Lothamer has successfully represented thousands of large and small businesses with payroll tax issues and other business tax problems. Our Enrolled Agents will fight for you to reduce the amount you owe and keep your business operating. Our accounting and legal backgrounds give us the knowledge to restructure your business in a way to allow for resolution.

 

Let us worry about the IRS so you can focus on growing your business. If you need assistance with payroll tax problems please contact us at (800) 619-8277 to schedule a initial consultation.

 

 

 

 

 

 

 Your IRS Questions Answered Here… 

 

Question: 

      I just heard about a Nanny Tax. What is it?

 

  Answer: 

When you hire someone to work in your home, the government considers you an employer. As an employer, you are responsible for paying employment taxes. These employment taxes are commonly known as “nanny taxes” although they don’t only apply to nannies – they apply to anyone working in your home. This includes anyone who works in and/or around your home such as babysitters, caretakers, house cleaning workers, domestic workers, drivers, health aides, housekeepers, maids, nannies, private nurses, and yard workers. According to the IRS, a person is an employee if you’re telling them what they will do and how they will do it, as opposed to an independent contractor that you tell only what results you’re looking for. Families that misclassify their household empl oyee as an independent contractor (by providing a Form 1099 for filing taxes) can be charged with tax evasion.

 

         We at Lothamer Tax Resolution are experts in IRS tax problem resolution and help taxpayers with their IRS Problems every day.  There is a solution to EVERY problem. Generally, you’ll never have to meet or speak with the IRS once you bring us into the picture. Call us today!

 

 

 

 

 

 

 

August Google Reviews

  1. H. of MasonMI– Throughout the process of dealing with my tax issues, Lothamer has maintained a highly detailed, organized, and informative plan of action. The expertise and execution of the many idividuals involved was exemplary. While my experience with Lothamer in this matter is still ongoing, I have ultimate confidence in them achieving the optimum outcome.

D.M. of Lowell, MI – After using TurboTax for years, we were audited. We had audit protection and was represented by a CPA during the audit and ended up with a tax bill of over $100,000. Brian and the Lothamer Tax Resolution team helped us eliminate that debt and continue to provide top notch tax representation! Thank you!!

  1. H. of Sturgis, MI– We were very grateful for Lothamer in assisting us with our tax situation…it went on a bit longer than expected and there were a few ” hiccups” along the way, but the end result was gratifying. Good luck to you..God bless!
  2. G. of Belleville, MI-They were able to resolve debt in a timely and efficient manner.
    Staff was professional at every level.
    Saved me thousands of dollars.

We appreciate all your kind words.

 

Please Leave a Review

 

We would really appreciate it if you could take the time do write us a google review based upon your experience with our firm. We thank you kindly for choosing Lothamer for your tax resolution. It is important that you use a Gmail account when writing a Google review.

Copy the link for the location and paste it to your web browser, then click on google reviews and this will take you to Write a review.

 

Lansing –  https://goo.gl/gqugVw

Grand Rapids –  https://goo.gl/4Xk8Zk

Detroit –  https://goo.gl/73y6QJ

Flint –  https://goo.gl/Mhp4qW

Traverse City –  https://goo.gl/pYw58J

 

 

Lothamer Referral Program

Refer a friend, family, neighbor or coworker……
…..You will get a $100.00 AMAZON GIFT CARD!!

Jeff of Berkley, MI  got his $100.00 gift card this month!!

Way to go!! Keep the referrals coming in!

Phone # 1-800-619-8277      

Email –            

Text – 1-877-955-9020 

          

 

   If you get a questionable notice, phone call, have unfiled tax returns or unpaid taxes feel free to call or email Lothamer at 517-484-1040, or call toll free at 1-800-619-8277 or

                                            

         We here at Lothamer Tax Resolution will make sure all your rights are protected!                                                                     

 

 

 

                Recent Lothamer results of Offer in Compromise settlements:

 

Amount of Tax Owed      Settlement Amount     Total Amount Saved     Offer #

 

$70,769.05                          $500.00                           $70,269.05                    3471

$254,641.40                      $15,366.00                   $239,275.40                    3067

$135,165.47                          $7,500.00                         $127,665.47                    6726

$39,982.15                          $6,400.00                        $33,582.15                  10390

 

 

               Call us 8 am – 6pm            877-TAX-BILL             www.Lothamer.com  

 

 

         

                                     

 

Thank you!

Thanks to YOU, the word is spreading. Thanks to my clients and friends who graciously referred me to their friends, clients and relatives last month! I enjoy building my business based on the positive comments and referrals from people just like you. I just couldn’t do it without you!

 

 

I’d Like to Hear From You!

If you have an IRS issue, or just want to refer a friend, relative or client, we’d love to hear from you.

We at Lothamer Tax Resolution are experts in tax resolution and help taxpayers with their IRS

Problems every day.

 

Call us at 800-619-8277

Email us at

Tips For Deducting Travel Expenses

As you likely know by now, your travel meals continue under tax reform as tax-deductible meals subject to the 50 percent cut.

 

And tax reform did not change the rules that apply to your other travel expense deductions.

 

One beauty of being in business for yourself is the ability to pick your travel destinations and also deduct your travel expenses. For example, you can travel to exotic locations using the seven-day travel rule and/or attend conventions and seminars in boondoggle areas.

 

From these examples, you can understand why the IRS might want to see proof of your business purpose for any trips, should it examine them.

 

With deductions for lodging, a meal, or other travel expenses, the rules governing receipts, business reasons, and canceled checks are the same for corporations, proprietorships, individuals, and employees. The entity claiming the tax deduction must keep timely records that prove the four elements listed below:

 

  1. Amount. The amount of each expenditure for traveling away from home, such as the costs of transportation, lodging, and meals.
  2. Time. Your dates of departure and return, and the number of days on business.
  3. Place. Your travel destination described by city or town.
  4. Business purpose. Your business reason for the travel, or the nature of the business benefit derived or expected to be derived.

 

When in tax-deductible travel status, you need a receipt, a paid bill, or similar documentary evidence to prove

 

  • every expenditure for lodging, and
  • every other travel expenditure of $75 or more, except transportation, for which no receipt is required if one is not readily available.

 

The receipt you need is a document that establishes the amount, date, place, and essential character of the expenditure.

 

Hotel example. A hotel receipt is sufficient to support expenditures for business travel if the receipt contains

 

  • the name of the hotel,
  • the location of the hotel,
  • the date, and
  • separate amounts for charges such as lodging, meals, and telephone.

 

Restaurant example. A restaurant receipt is sufficient to support an expenditure for a business meal if it contains the

 

  • name and location of the restaurant,
  • date and amount of the expenditure, and
  • number of people served, plus an indication of any charges for an item other than meals and beverages, if such charges were made.

 

You can’t simply use your credit card statement as a receipt. Like a canceled check, it proves only that you paid the money, not what you purchased. To prove the travel expenditure, you need both the receipt (proof of purchase) and the canceled check or credit card statement (proof of payment).

 

In a nutshell, a travel expense is an expense of getting to and from the business destination and an expense of sustaining life while at the business destination. Here are some examples from the IRS:

 

  • Costs of traveling by airplane, train, bus, or car between your home and your overnight business destination
  • Costs of traveling by ship (subject to the luxury water travel rules and cruise ship rules)
  • Costs of renting a car or taking a taxi, commuter bus, or airport limo from the airport to the hotel and to work destinations, including restaurants for meals
  • Costs for baggage and shipping of business items needed at your travel destination
  • Costs for lodging and meals (meal costs include tips to waiters and waitresses)
  • Costs for dry cleaning and laundry
  • Costs for telephone, computer, Internet, fax, and other communication devices needed for business
  • Tips to bellmen, maids, skycaps, and others

 

The travel deduction rules are the same whether you operate your business as a corporation or a proprietorship, with one important exception. When you operate as a corporation during the tax years 2018 through 2025, you must either

 

  • have the corporation reimburse you for the expenses, or
  • have the corporation pay the expenses.

 

There are many intricacies to travel deduction rules. To ensure you are deducting business travel properly let Lothamer Tax Resolution help guide you.

 

 

Jesse Lothamer J.D., C.P.A., E.A.

Lothamer Tax Resolution

 

 

Avoid becoming an IRS target if your business produced loses this past year

If you operate what you think is a business, but that business loses money, it may not be a business at all under the tax code.

 

Such a money-losing activity can look like a tax shelter to the IRS, and that substantially increases your chances of an IRS audit.

 

The tax code contains a business loss safe harbor that’s known as a presumption of profit. You meet this safe harbor when your activity produces a profit in three of five years (two of seven for breeding, training, showing, or racing horses).

 

When you meet the safe harbor, you are presumed a business unless the IRS establishes to the contrary.

 

We know this for-profit tax code section as the hobby loss section. But you can see that this tax code section creates trouble for much more than what you would consider a simple hobby.

 

Here’s an example of how badly the recent tax reform under the Tax Cuts and Jobs Act can treat a business that loses money.

 

Example. Henry has an activity that fails the business test and loses money. Last year, he had $70,000 of income and $100,000 of expenses. Under pre-tax-reform law, Henry could claim the hobby-related business deductions up to the amount of his income. So Henry deducted $70,000 (subject to some minor adjustments) and reported close to zero taxable income.

 

Not this year. Tax reform is going to make Henry suffer. With the same facts, Henry’s business deductions are zero. His taxable income is $70,000.

 

Think about that. Henry lost $30,000 ($70,000 – $100,000) in real money. He now pays taxes on $70,000 of phantom income.

 

What can Henry do to make this problem go away? He has two choices.

  • First, he could create a “for profit” business defense in the hope that he would defeat the IRS in an audit.
  • Alternatively, he could stop the taxation on his phantom income by operating his activity as a C corporation.

 

If you would like to discuss either or both of these possibilities, please allow Lothamer to guide you through avoiding a tax problem with the IRS.

Jesse Lothamer J.D., C.P.A., E.A.

Lothamer Tax Resolution

5 Tax Home Tips

The fact that your personal home is not your tax home is one income tax issue.

 

Here’s another: business travel is different from business transportation.

 

Your tax deductions, tax strategies, and tax records hinge on the following federal income tax–defined terms:

 

  1. Personal home
  2. Tax home
  3. Business travel
  4. Business transportation

 

I know you don’t have an issue with your work deductions at the moment, but I want to make sure you are aware of what could happen if you moved your business location or personal home.

 

Meanings

Personal home This is where you live.
Tax home This is where you maintain your principal place of work.
Business travel You are in tax-deductible travel status when you travel away from your tax home overnight or long enough to require sleep.
Business transportation You deduct business transportation as a cost of going to and from tax-deductible business destinations, whether in town or out of town, on overnight business travel.

Five Good Things to Know

 

  1. Have your personal home within 50 miles of your tax home.
  2. When you have your personal home within 50 miles of your tax home, claim the home-office deduction under the administrative office rules so you can eliminate commuting to your outside-the-home office.
  3. Deduct overnight business travel when you travel on business outside the area of your tax home.
  4. If you have more than one business, the business on which you spend the most time and make the most money is the principal business. It’s the location of your tax home. Overnight travel outside the tax-home area of the principal business to a secondary business is deductible. For example, if you have your principal office in Worcester, Massachusetts, you can deduct your overnight travel to your second business in New York City.
  5. If you have one business with multiple offices in different cities, the office where you spend the most time, do the most important things, and make the most money is your tax home. When you travel away from this office overnight to a secondary office, you are in business travel status.

If you have questions regarding your tax home verse your personal home, let Lothamer Tax Resolution help you.

 

Jesse Lothamer J.D., C.P.A., E.A.

Lothamer Tax Resolution

 

Planning Your Tax Deductible Business Life

You can plan your tax-deductible business life to avoid cold winters and hot summers.

 

Spend a moment examining the following four short paragraphs that contain the basic facts from the Andrews case.

 

For six months of the year, from May through October, Edward Andrews lived in Lynnfield, Massachusetts, where he owned and operated Andrews Gunite Co., Inc., a successful pool construction business.

 

During the other six months, Mr. Andrews lived in Lighthouse Point, Florida, where he owned and operated a sole proprietorship engaged in successful horse racing and breeding operations. In addition, he, his brother, and his son owned a successful Florida-based pool construction corporation from which Mr. Andrews took no salary, but where he did assist in its operations.

 

Instead of renting hotel rooms while in Florida, Mr. Andrews purchased a home, claimed 100 percent business use of the Florida home, and depreciated the house and furniture as business expenses on his Schedule C for his horse racing and breeding business.

 

Mr. Andrews then allocated his other travel expenses and costs of owning and operating this house in Florida on his individual in-come tax return as:

 

  • personal deductions on his Schedule A for a portion of the mortgage interest and taxes,
  • business deductions on his Schedule C for the horse racing and breeding business, and employee business expenses on IRS Form 2106 for the pool construction business.

 

(Tax reform under the Tax Cuts and Jobs Act eliminates employee business expense deductions for tax years 2018 through 2025— so Mr. Andrews would change his strategy to obtaining expense reimbursements from the pool business.)

 

Just as Mr. Andrews did, you can tax plan your life to spend your winters in one state and your summers in a different state.

 

In this scenario, your tax-deductible home takes the place of your staying in hotels. The other home is likely your principal residence located near your tax home.

 

Your travel expenses between the homes are deductible because you do business in both places. You also deduct your meals and other living costs while at the deductible travel destination.

 

You can have separate businesses in each state or a branch business in the second state.

 

Jesse Lothamer J.D., C.P.A., E.A.

Lothamer Tax Resolution

Section 179 Deduction Rules of the Tax Cuts and Jobs Act

The recent tax reform, known as the Tax Cuts and Jobs Act (TCJA), added some good benefits to your real estate rentals. Both residential and commercial properties obtained a number of new tax breaks with respect to Section 179 deductions and bonus depreciation. The new breaks make it easier for you to plan your business income for the year.

Liberalized Section 179 Deduction Rules for Nonresidential Buildings and Property Used to Furnish Lodging

For qualifying property placed in service in tax years beginning in 2018, the TCJA increases the maximum Section 179 deduction to $1 million (up from $510,000 for tax years beginning in 2017).

 

As you probably know, the Section 179 deduction privilege allows you to deduct the entire cost of eligible property in Year 1.

 

For real estate owners, eligible Section 179 property includes any improvement to an interior portion of a nonresidential building if the improvement is placed in service after the date the building was placed in service.

 

The TCJA also expands the definition of eligible property to include expenditures for nonresidential building roofs, HVAC equipment, fire protection and alarm systems, and security systems.

 

Finally, the TCJA expands the definition of Section 179 eligible property to include depreciable tangible personal property used predominantly to furnish lodging. Examples of such property include beds and other furniture, appliances, and other equipment used in the living quarters of a lodging facility such as an apartment house, dormitory, or other facility where sleeping accommodations are provided and rented out.

 

Warning: Section 179 deductions cannot create or increase an overall tax loss from business activities. So you may need plenty of positive business taxable income to take full advantage of the Section 179 deduction privilege.

100 Percent First-Year Bonus Depreciation for Qualified Real Property Expenditures

For qualified property placed in service between September 28, 2017, and December 31, 2022, the TCJA increases the first-year bonus depreciation percentage to 100 percent (up from 50 percent).

 

Unlike the old 50 percent deduction, which was for new property only, the new 100 percent deduction is allowed for both new and used qualified property.

 

 

Jesse Lothamer J.D., C.P.A., E.A.

Lothamer Tax Resolution