MOST SHOCKING TAX RESULTS

MY CLIENTS’ TEN MOST SHOCKING TAXABLE EVENTSpig_taxes_trough

  1. Covered California Healthcare

The IRS reconciles your Health Insurance Premium based on Income measurements.  If your Income has increased, you may end up paying the Government back their subsidy.  Avoid this by using techniques to keep your income base at the initial reported range.

  1. California’s Water Rebate

Many people realized, as they received a Form 1099 for their low water lawn conversion, the rebate was taxable income on the Federal level.

  1. Change in Disposition of Client’s Portfolio

Selling stocks, bonds, or rental properties all produce Capital Gains. These transactions generally do not have taxes withheld on them ahead of time. Look to sell items that create capital losses to offset the gains.

  1. Social Security taxable up to 85% for Federal

Depending on your total income, you could end up paying tax on social security. Lowering taxable income may reduce how much of Social Security is taxable.

  1. Unemployment taxable for Federal

State Unemployment and Paid Family Leave Benefits are both fully taxable on the Federal Tax Return. Taxes can be withheld for this liability.

  1. A lawsuit settlement is taxable and in some circumstances you may deduct legal fees

Except for Personal Injury suits, like a car accident, most lawsuit settlement are taxable and have no taxes withheld. The legal fees are not always deductible.

  1. Filing status change from Head of Household, Married Filing Jointly, Single, etc.

Changing filing status may have income taxed on a more aggressive tax table with higher tax percentages. Accommodate by changing your W4 at work.

  1. Your dependents are no longer on your tax return

No Exemption, no education credit, no medical, etc. As children get older (past 18 yrs), or are staying with an ex-spouse, a variety of deductions and credits become no longer available; sometimes all at once.

  1. Business showing a profit for the first time

Business Income creates individual taxes, social security taxes, and Medicare taxes (self-employment tax due). This is the same for Sole Proprietorships, General Partnerships, and LLCs. Qualified Business expenses reduce all of these taxes.

10. IRA distribution having 10% penalty

Retirement Account withdrawals are 100% taxable unless they are rolled over to another qualified Retirement within the required 60 day time frame. There are a few instances when it is not penalized – Education, Medical, First Time Home Buyers.

 

 

In conjunction with Freeman & Associates, Steven Z. Freeman, CPA provides trustworthy and professional Tax Planning and Business Accounting and can assist you with these services. If you have any questions on this matter, or to schedule an initial consultation, Please contact us at (805) 495-4211   CPA@FreemanAssoc.net        

Speak Your Mind

*