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Tax

Got a Letter from the IRS? What You Need to Know

The Internal Revenue Service sends millions of letters and notices to taxpayers every year. If one shows up in your mailbox, please follow these steps.

  1. Call us immediately. We know how to deal with the IRS. It’s very important that you do not try to handle this yourself.
  2. Don’t panic. The IRS sends notices for a number of reasons. They may request payment of taxes, notify you of changes to your account, or request additional information.
  3. Fax us a copy of the letter. We’ll take a look at it and immediately give you a clearer picture of what the IRS wants.

Remember; let us handle this for you. Dealing with the IRS requires precise wording and a timely response. Please don’t delay, call us as soon as you get the letter.

Business Tax

Deducting Your Home Office

If you use a portion of your home for business purposes, you may be able to take a home office deduction whether you are self-employed or an employee. Expenses that you may be able to deduct include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, depreciation, painting, and repairs.

You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively

  • as your principal place of business for any trade or business, or
  • as a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business.

Generally, the amount you can deduct depends on the percentage of your home that you use for business. Your deduction will be limited if your gross income from your business is less than your total business expenses.

If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.

The rules vary depending on whether you’re self-employed, a qualified daycare provider, or storing business inventory or product samples. If you are an employee, you have additional requirements to meet. The regular and exclusive business use must be for the convenience of your employer.

Call us if you want to explore deducting for the business use of your home.

Asset Protection Estate Financial Planning Tax

Five Hidden Reasons You Need a Will

Most people don’t appreciate the full importance of a will, especially if they think their estate is too small to justify the time and expense of preparing one. And even people who recognize the need for a will often don’t have one, perhaps due to procrastination or a disinclination to broach this sensitive subject with loved ones.

The truth is, almost everyone should have a will. Here are the five basic reasons why:

Reason 1. To Choose Beneficiaries

The intestate succession laws of the state in which you live determine how your property will be distributed if you die without a valid will. For example, in most states the property of a married person with children who dies intestate (i.e., without a will) generally will be distributed one-third to the spouse and two-thirds to the children, while the property of an unmarried, childless person who dies intestate generally will be distributed to his or her parents (or siblings, if the parents are deceased).

These distributions may be contrary to what you want. In effect, by not having a will, you are allowing the state to choose your beneficiaries. Further, a will allows you to specify not only who will receive the property, but how much each beneficiary will receive.

Note: If you wish to leave property to a charity, a will may be needed to accomplish this goal.

Reason 2. To Minimize Taxes

Many people feel they do not need a will because their taxable estate does not exceed the amount allowed to pass free of federal estate tax. These assumptions, however, should be reviewed given the current state of change in the federal estate tax laws. It is important to review and update your will on a regular basis. Most wills were written with the existence of a federal estate tax at a certain level.

Further, your taxable estate may be larger than you think. For example, life insurance, qualified retirement plan benefits, and IRAs typically pass outside of a will or estate administration. But retirement plan benefits and IRAs (and sometimes life insurance) are still part of your federal estate and can cause your estate to go over the threshold amount. Also, in some states, the estate or inheritance tax differs from the federal laws. A properly prepared will is necessary to implement estate tax reduction strategies.

Tip: Changes in the estate tax laws and in the size of your estate may warrant a re-examination of your estate plan.

Reason 3. To Appoint a Guardian

If for no other reason, you should prepare a will to name a guardian for minor children in the event of your death without a surviving spouse. While naming a guardian does not bind either the named guardian or the court, it does indicate your wishes, which courts generally try to accommodate.

Reason 4. To Name an Executor

Without a will, you cannot appoint someone you trust to carry out the administration of your estate. If you do not specifically name an executor in a will, a court will appoint someone to handle your estate, perhaps someone you might not have chosen. Obviously, there is peace of mind in selecting an executor you trust.

Reason 5. To Help Establish Domicile

You may wish to firmly establish domicile (permanent legal residence) in a particular state, for tax or other reasons. If you move frequently or own homes in more than one state, each state in which you reside could try to impose death or inheritance taxes at the time of death, possibly subjecting your estate to multiple probate proceedings. To lessen the risk of this, you should execute a will that clearly indicates your intended state of domicile.

If you need guidance with your will, just give us a call.

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