As phenomenons like Airbnb and Uber become more prevalent in our economy, the IRS and other taxation Agencies have increased their vigilance to make sure taxes are paid on this income. Some of those changes include…
Ridesharing, Airbnb, Renting Parking Spaces, Event Ticket Resellers, and Online Selling
All of this is subject to income and or payroll tax. It needs to be reported, no matter how small the income from such activities. Most of this is automatically reported to the IRS, generally on 1099’s. If not included on your return, it will probably result in either a change letter or an audit.
Some of this is also subject to payroll taxes. If you rent out your home as an Airbnb and include additional services such as offering food and drink like a hotel, then the IRS no longer considers it solely a real estate rental.
Since you’re then acting like a hotel it becomes active trade or business income which is subject to income and payroll tax.
1099-K Limit Updates
These forms are sent to taxpayers to report sales transactions from credit card transactions for a company. Prior to 2024, you had to process $20K in credit cards to receive a 1099-K.
The limit for 2024 is now only $5,000. This will probably result in more people reporting the income from their side gigs.
Please keep track of your deductible expenses. Without proof of these deductions, we may be unable to reduce your taxes.
Enhanced Due Diligence Requirements for Child Tax Credits, Advanced Child Tax Credits, and The American Opportunity Tax Credit
The increased due diligence requirements are still in effect this year for the Earned Income Tax Credit, CTC, ACTC, and AOTC. Again, this is primarily a response to the identity theft threat, because these are so easy to use to increase a refund.
Additional questions need to be answered and additional forms must be filed in order to claim these credits. It also takes much longer to complete these returns.
Expiration of the Discharge of Indebtedness on Principal Residence Exclusion
As of 12/31/2016, if you have a loan tied to your personal residence which was forgiven, it’s no longer automatic that you’ll not pay tax on this taxable gain.
Remember that the process of no longer being forced to pay a bill is an economic benefit. The fact that you no longer have a debt normally creates a taxable situation.
There are exclusions which may apply to stop you from paying tax on this type of event. Please make sure to provide the necessary 1099 C’s or other appropriate forms, when we’re completing your return.
Private Debt Collectors for Tax Liabilities
The use of private debt collection agencies for the collection of back taxes, interest, and penalties has been approved at the Federal and State levels. Affected Taxpayers and their representatives are notified via US mail that their account is being transferred to a private collection agency.
The collection agency will then send a second, separate letter to the taxpayer and their representative confirming the transfer. The arm-twisting will then begin.
Let’s make sure that your taxes are filed and paid timely so that you don’t have to deal with these animals.
Let me leave you with this…
November is almost at an end. Turkey Day is later this week. Where does the time go?
This is the fifteenth column in my series trying to get my clients ready for tax season. We’ll begin our tax planning sessions in December when we have a solid set of November Financials in place.
If we don’t have everything that we need, please get it to us today. I don’t want any of my clients to pay one more dime in income tax than is absolutely necessary.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.SalarySolutions.net
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.