W. Edward Newton Jr., CPA, CFP (R) | 13850 Ballantyne Corporate Place, Suite 500 | Charlotte, NC 28277 | 704-552-8689

 

10 Ways Selling Your Home Can Impact Your Taxes + 9 Ways Identity Theft Can Affect Your Taxes + 4 Tax Tips about Hobbies that Earn Income



10 Ways Selling Your Home Can Impact Your Taxes
 

Usually, profits you earn are taxable. However, if you sell your home, you may not have to pay taxes on the money you gain. Here are ten tips to keep in mind if you sell your home this year.

 

1. Exclusion of Gain. You may be able to exclude part or all of the gain from the sale of your home. This rule may apply if you meet the eligibility test. Parts of the test involve your ownership and use of the home. You must have owned and used it as your main home for at least two out of the five years before the date of sale.

2. Exceptions May Apply. There are exceptions to the ownership, use and other rules. One exception applies to persons with a disability. Another applies to certain members of the military. That rule includes certain government and Peace Corps workers. For more information on exceptions, please call or email our office.

3. Exclusion Limit. The most gain you can exclude from tax is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.

4. May Not Need to Report Sale. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.

5. When You Must Report the Sale. You must report the sale on your tax return if you can't exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That's also true if you get Form 1099-S, Proceeds From Real Estate Transactions. For more information on reporting the sale, please call or email our office.

6. Exclusion Frequency Limit. Generally, you may exclude the gain from the sale of your main home only once every two years. Some exceptions may apply to this rule.

7. Only a Main Home Qualifies. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.

8. First-time Homebuyer Credit. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules, please call or email our office.

9. Home Sold at a Loss. If you sell your main home at a loss, you can't deduct the loss on your tax return.

10. Report Your Address Change. After you sell your home and move, please call or email our office to update your address.
 



9 Ways Identity Theft Can Affect Your Taxes

Tax-related identity theft normally occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund. Many people first find out about it when they do their taxes.

 

The IRS is working hard to stop identity theft with a strategy of prevention, detection and victim assistance. Here are nine key points:

 

1. Taxes. Security. Together. The IRS, the states and the tax industry need your help. We can't fight identity theft alone. The Taxes. Security. Together. awareness campaign is an effort to better inform you about the need to protect your personal, tax and financial data online and at home.

2. Protect your Records. Keep your Social Security card at home and not in your wallet or purse. Only provide your Social Security number if it's absolutely necessary. Protect your personal information at home and protect your computers with anti-spam and anti-virus software. Routinely change passwords for internet accounts.

3. Don't Fall for Scams. Criminals often try to impersonate your bank, your credit card company, even the IRS in order to steal your personal data. Learn to recognize and avoid those fake emails and texts. Also, the IRS will not call you threatening a lawsuit, arrest or to demand an immediate tax payment. Normal correspondence is a letter in the mail. Beware of threatening phone calls from someone claiming to be from the IRS.

4. Report Tax-Related ID Theft to the IRS. If you cannot e-file your return because a tax return already was filed using your SSN, our office will assist you to complete the following steps: File your taxes by paper and pay any taxes owed. File an IRS Form 14039 Identity Theft Affidavit. File a report with the Federal Trade Commission using the FTC Complaint Assistant. Contact one of the three credit bureaus so they can place a fraud alert or credit freeze on your account.

5. IRS Letters. If the IRS identifies a suspicious tax return with your SSN, it may send you a letter asking you to verify your identity by calling a special number or visiting a Taxpayer Assistance Center. This is to protect you from tax-related identity theft.

6. IP PIN. If you are a confirmed ID theft victim, the IRS may issue an IP PIN. The IP PIN is a unique six-digit number that you will use to e-file your tax return. Each year, you will receive an IRS letter with a new IP PIN.

7. Report Suspicious Activity. If you suspect or know of an individual or business that is committing tax fraud, you can visit IRS.gov and follow the chart on How to Report Suspected Tax Fraud Activity.

8. Combating ID Theft. In 2015, the IRS stopped 1.4 million confirmed ID theft returns and protected $8.7 billion. In the past couple of years, more than 2,000 people have been convicted of filing fraudulent ID theft returns.

9. Service Options. Information about tax-related identity theft is available online. There is a special section on IRS.gov devoted to identity theft and a phone number available for victims to obtain assistance.

 



   4 Tax Tips about Hobbies that Earn Income

Millions of people enjoy hobbies. Hobbies can also be a source of income. Some of these types of hobbies include stamp or coin collecting, craft making and horse breeding. You must report any income you get from a hobby on your tax return.

How you report the income from hobbies is different from how you report income from a business. There are special rules and limits for deductions you can claim for a hobby. Here are four basic tax tips you should know if you get income from your hobby:

1. Business versus Hobby. There are nine factors to consider to determine if you are conducting business or participating in a hobby. Please call or email our office for more information on making this determination.

2. Allowable Hobby Deductions. You may be able to deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is helpful or appropriate.

3. Limits on Expenses. As a general rule, you can only deduct your hobby expenses up to the amount of your hobby income. If your expenses are more than your income, you have a loss from the activity. You can't deduct that loss from your other income.

4. How to Deduct Expenses. You must itemize deductions on your tax return in order to deduct hobby expenses. Your costs may fall into three types of expenses. Special rules apply to each type. Please call or email our office for more information on itemizing these deductions.

Don't hesitate to call us if you need help or want to get started on tax planning for 2016! If you have comments or questions on the information in these articles, as usual feel free to call our offices.


 

 

 


 

"Like" us on our Facebook FAN Page

 

Hi everyone!!  We've just created a business/fan page for our business.

 

If you want updates on tax or related subjects, click on this link and LIKE our page.
 

We'll post new relevant information on tax reduction, accounting & finance that you can read and comment on.

 

Thank you in advance for "Liking" us!

 



Would You Do Me A Quick Favor And Give Me An Online REVIEW on Google+ Local?

If you are a local business like I am, more and more people FIND you by going online and searching.  To help me be found the same way by good customers like you would you take 2 minutes and give me a Review on my Google+ Local listing?

 

Just click here and it will take you to my listing.  From there just click on the Write a Review button.  Thank you in advance for your help! 

If you have any questions about giving us a Review or have an accounting or investments question about yourself or your business, please give me a call at 704-552-8689.  I can help guide you in the right direction.

 

To read other articles like this online, click here or go to www.EdNewtonCPA.com and click on the Articles link.

 


 

As always you can call our offices if you have any questions about these or any other accounting, tax, financial planning or Quickbooks related issues, at 704-552-8689. 

 

Regards, W. Edward Newton Jr., CPA

Certified Public Accountant

 

 

 

 

W. Edward Newton Jr., CPA | Certified Public Accountant

13850 Ballantyne Corporate Place, Suite 500 Charlotte, North Carolina 28277
Phone: (704) 552-8689  |  Email: ed@newtonassociatescpa.com