Category Archives: Tax Questions

indiana tax attorney

Tax Considerations for the Self-Employed

When you’re self-employed, all your income goes straight into your own bank account. It doesn’t mean you’re off the hook for paying taxes to the Internal Revenue Service (IRS). Taxes apply to you, just like any other member of the workforce – and if you don’t play by the tax rules, the IRS could assign stiff penalties that could destroy your business.

How Does the IRS Define Self-Employment?

Whether you define yourself as a freelancer, a sole proprietor, a one-person corporation owner or another kind of worker, you’re one of the 15 million Americans who is self-employed. Maybe you don’t have a brick-and-mortar storefront or business cards or even an official business name – but it doesn’t matter. If you are accepting payment for services rendered, it’s a business according to the IRS. Because no employer is withholding taxes on your behalf, you’ll owe taxes to the IRS and should file as self-employed.

What Taxes Do Self-Employed Workers Pay?

You’ll owe both income tax and self-employed, or SE, tax. The SE tax is essentially the same thing as the tax any other worker would pay for Social Security and Medicare.

How Do I Determine How Much I Owe?

Start by figuring your net profit/loss during the tax year, which is your business income minus business expenses. If it’s more than $400, you’ll owe money to the IRS – but even if it’s under $400 or a net loss, you may need to file because you meet other requirements set by the IRS.

How Do I Pay What I Owe?

Use IRS tax Form 1040 to report your earnings, with Schedule SE for the self-employed. Schedule C or Schedule C-EZ will help you figure what you owe for Medicare and Social Security. Pay the IRS the total due, and keep in mind that they require any business that estimates it will owe more than $1,000 annually to make estimated tax payments every quarter using Form 1040 ES each time.

What About Credits and Deductions?

There are many credits and deductions that apply to self-employed workers, just like any other business. Take advantage of credits like the health coverage credit and the earned-income credit. Many expenses of running a business can also be deducted, as long as the IRS defines them as “necessary and ordinary” costs, like office supplies and using your vehicle for business.

What if I’ve Fallen Behind on Taxes?
If you owe back taxes, penalties will accrue and be applied retroactively when they realize you have delinquent unpaid taxes. This means you should start paying taxes immediately, even if you have never done so before. Otherwise the penalties will grow steeper and steeper. Call us for help and we can assist in laying out your options and helping you set up a payment plan.

Dutton Legal Group – Indiana’s Tax Resolution Law Firm

The Dutton Legal Group helps the people and businesses of Indiana navigate ever-changing State and Federal tax codes. Our goal as experienced tax attorneys is to assist you in finding an immediate, cost-effective answer to your tax challenges. We provide a variety of tax services from balance resolution and return preparation to wage garnishment relief and audit assistance. Make Dutton Legal Group your next call at 1-800-334-0255 or send an email to request a free consultation. Trustworthy and affordable, for over 15 years.

indiana tax attorney

10 Proven Strategies to Lower S Corporation Taxes

indiana tax attorney

One of the biggest benefits of setting up an S corporation is avoiding double taxation by not paying corporate income tax. Shareholders absorb profits and losses, paying tax when they file their individual returns. Of course, this makes S corporation owners wonder whether there are additional ways to lower taxes even further. The good news: S corp taxes can be lowered using reliable methods of keeping your tax burden as small as possible.

How Can Limiting Owner Wages Lower S Corp Taxes?

An S corporation is taxed in part at the level of its owner’s wages. By reducing the owner’s salary, the corporation’s taxes can be cut by thousands of dollars. Additional payments can be made to the owner through distributions – a sort of periodic bonus plan – without adding to the corporation taxes. The only caveat with this approach is that the owner’s salary can’t be so small that it falls below the IRS “reasonable compensation” threshold.

Can I Employ My Adult Children to Lower S Corp Taxes?

Do you know each of your children can make up to $12,000 without paying any federal income taxes on what they earn? This comes as great news for family businesses operating as S corporations, when you employ a second generation of family workers. It means you can not only provide a job for your children but also decrease the family tax burden at the same time. Keep in mind that you’re still responsible for payroll taxes for every employee, including your children.

What Happens If I Rent a Home to the S Corporation?

For up to 14 days a year, an S corporation owner can rent their home to the company and receive a tax deduction. To pursue this option, draw up formal paperwork for the transaction and have the S corporation deduct the full amount of the rental fees at tax time. The net result is that the owner of the company receives tax-free income.

Can Selling a Home to the S Corporation Also Lower Taxes?

This is a great option if you’re already considering turning a home into a rental property. Sell the house to the S corporation first and avoid taxes through something known as the home-sale profit exclusion. You can exclude a $250,000 gain from your income if filing individually and $500,000 if filing jointly. 

How Does Using Owner-Employee Health Care Reimbursement Help?

The 21st Century Cures Act removes penalties for owner-employees who have health insurance through the company. If the S corporation owner holds more than 2% of the company, establish a health insurance plan for them and the S corporation can reimburse them for the premiums.

How Can Business Deductions Lower S Corp Taxes?

  • Deduct home office expenses. The deduction of home office expenses must be well-documented for the IRS, but it’s worth doing. The owner is reimbursed for the expenses. It’s like tax-free income. Make sure you create expense reports and a clear paper trail, in case the IRS questions your purchases.
  • Deduct depreciation. Under IRS rules, depreciation is an allowable reimbursement – although some people may try to convince you otherwise. If you have depreciation related to a vehicle, building or other asset used for the business, you can take it as a deduction.
  • Deduct vehicle expenses. Does your company use vehicles for business? Take advantage of the tax break this offers. If a vehicle is used for business trips, deliveries or day-to-day business driving, it almost certainly qualifies – especially if it is a “heavy vehicle” used for commercial purposes. Plus, don’t forget the depreciation deduction related to these vehicles.
  • Deduct travel. Travel expenses are deductible. We must caution you that the IRS pays close attention to these kinds of deductions, so make sure you keep receipts, fill out detailed expense reports and submit them to your S corporation financial executives just as any employee should.
  • Deduct cell phone costs. Don’t forget about cell phones at tax time. S corporations that provide employees with smartphones and other communications equipment can reimburse the employees for the full cost of the phone – including non-work-related use – and deduct it from their corporate tax return. For the employee, this is like tax-free income and comes as a very welcome fringe benefit of working for your company.

Dutton Legal Group – Indiana’s Tax Resolution Law Firm

The Dutton Legal Group helps the people and businesses of Indiana navigate ever-changing State and Federal tax codes. Our goal as experienced tax attorneys is to assist you in finding an immediate, cost-effective answer to your tax challenges. We provide a variety of tax services from balance resolution and return preparation to wage garnishment relief and audit assistance. Make Dutton Legal Group your next call at 1-800-334-0255 or send an email to request a free consultation. Trustworthy and affordable, for over 15 years.

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Tax Implications for Small Businesses After a Natural Disaster

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After a natural disaster like a hurricane, flood or wildfire, small businesses struggle to cope with the fallout. Even if your company isn’t directly in the path of the destruction, your employees or customers could suffer losses that create major chaos for the company. But don’t let a natural disaster become an even bigger financial disaster. Here’s how to handle costly penalties from the IRS.

How Does a Natural Disaster Cause Concerns About Taxes?

In the wake of a catastrophe, businesses must focus on solving a wide range of urgent issues, like structural damage, data recovery, security risks, inventory loss and employee absences. Routine financial matters often take a back seat to these immediate challenges. Unfortunately, the IRS is not aware of any difficulties you’re facing because of a natural disaster. A missed tax filing deadline is still a serious matter.

Doesn’t the IRS Care That We are Dealing with the Aftermath of a Natural Disaster?

The IRS tries to show mercy and offers you an opportunity to claim reasonable cause for your failure to file on time. Official examples of reasonable causes include death or serious illness, fire, natural disasters and inability to obtain necessary documentation due to extreme situations. Consult with your tax attorney about how to describe your reasonable cause to the IRS, because word phrasing is important. The Supreme Court has ruled that certain rationales, such as “I didn’t know what was going on,” or “It was my tax preparer’s fault” aren’t viable, because the ultimate responsibility to file taxes on time is yours.

What if We Just Realized We Have a Tax Problem?

The first step is to get good advice from a tax attorney. Don’t ignore the problem or let it get worse; act as soon as you realize the missed deadline or other error. Every month brings additional costly penalties. Gather your documents, contact the IRS to confirm your options due to reasonable cause and work with your tax attorney to resolve the issue.

Is There Anything We Can Do About a Missed Deadline?

In a word: Yes. The IRS does offer some options if you’ve already missed an all-important tax filing deadline due to a natural disaster. If it’s the first time it’s ever happened, they may give you a one-time forgiveness called an abate without penalty. For partnerships, you can also ask the IRS about something called partnership relief, which is another non-penalty route. But don’t count on these penalty-free options. The IRS may apply a late penalty at their discretion.

If We Have to Pay a Penalty, What Could It Cost?

In terms of a missed filing deadline, for an individual or C corporation return, you’ll pay a 5% penalty on tax owed per month the return is left unfiled, up to 25%. For a partnership or S corporation, the penalty is $2,000 per shareholder per month, with a maximum of 12 months. There could also be other penalties depending on your exact tax situation. Most post-disaster tax problems can be cleared up quickly, as long as you have access to your company data and documents.

Dutton Legal Group – Indiana’s Tax Resolution Law Firm

The Dutton Legal Group helps the people and businesses of Indiana navigate ever-changing State and Federal tax codes. Our goal as experienced tax attorneys is to assist you in finding an immediate, cost-effective answer to your tax challenges. We provide a variety of tax services from balance resolution and return preparation to wage garnishment relief and audit assistance. Make Dutton Legal Group your next call at 1-800-334-0255 or send an email to request a free consultation. Trustworthy and affordable, for over 15 years.

tax surprises

How Retirees Can Avoid a Surprise Tax Bill from the IRS

tax surprises

Are you in for a big surprise at tax time? If you’re about to retire or are newly-retired without a plan for IRS withholding, you could receive a shockingly high tax bill. Although retirement should be a peaceful and relaxing time in your life, a tax issue can really shake things up. Let’s take a look at the most common questions about retirement-related tax issues, so you can be prepared.

Why are Taxes an Issue at Retirement?

Tax issues come up at retirement because your household income is changing. You may have an abrupt decline in income or you may do other things that affect your tax burden, like cash out a 401K or change your investments. If you’re due to receive a pension or annuity check, the IRS will want to ensure that they’re receiving the proper amount in taxes. Many people don’t take the time to think through all these financial factors and calculate exactly how it will affect what they owe the IRS.

What Can I Do to Prevent a Problem?

The IRS doesn’t want to leave taxpayers high and dry on this issue. They want to make sure you pay your taxes. That’s why they offer tools like the IRS Withholding Calculator to assist you with the math it takes to make a correct payment. However, it’s not as simple as doing a single calculation. You may need to pay estimated tax earlier in the year than usual, and you may need to provide the IRS with documentation related to a pension or annuity, which is viewed as income.

Is There Still Time This Year to Avoid a Big Tax Bill?

Timing is everything with taxes. As a tax year comes to a close, you might not have time to withhold enough to prevent a large tax bill. But don’t throw up your hands and assume everything will work out next year. This could cause you to incur penalties that increase what you owe significantly. One option is to make an estimated payment to the IRS that helps protect you from a massive tax bill later. Making an estimated payment also shows the IRS that you are dutifully trying to manage your tax burden so you stay in their good graces.

What if I Receive Unexpected Income, Like Capital Gains?

Unexpected income can further complicate your tax picture. Around retirement, unexpected income usually arrives as cash retirement gifts, capital gains on stock, mutual fund dividends, or the sudden sale of a property. You may even have new income from the sharing economy, like opening your home to Airbnb travelers. You’ll owe taxes on all income, even if it’s unexpected. For a complex financial situation like this, you’ll need the advice of a tax attorney to ensure you’ve covered all your bases.

Dutton Legal Group – Indiana’s Tax Resolution Law Firm

The Dutton Legal Group helps the people and businesses of Indiana navigate ever-changing State and Federal tax codes. Our goal as experienced tax attorneys is to assist you in finding an immediate, cost-effective answer to your tax challenges. We provide a variety of tax services from balance resolution and return preparation to wage garnishment relief and audit assistance. Make Dutton Legal Group your next call at 1-800-334-0255 or send an email to request a free consultation. Trustworthy and affordable, for over 15 years.

employee payroll

How to Handle Small Business Payroll Tax Problems

employee payroll

Is your small business processing payroll taxes correctly? It’s important to be sure. Making a mistake can be costly and get you into hot water with the IRS. Payroll tax problems can trigger an audit and, in some cases, even cause your business to be shut down. There have been numerous cases where the IRS has launched a federal investigation, resulting in jail time for small business owners. Avoid these worst-case outcomes by informing yourself about payroll tax regulations.

What’s Defined as Payroll Taxes?

The IRS defines payroll taxes as the duo of Social Security and Medicare taxes, also known as FICA taxes, which are withheld from employee paychecks. People sometimes confuse payroll taxes with employment taxes, which are technically something different, and include federal taxes, unemployment tax and self-employment tax. Generally, when someone refers to payroll taxes, they mean FICA taxes.

What’s the Biggest Risk to My Business?

Paying late – or not at all – is a big problem. Past due payroll taxes are a major enforcement issue for the IRS, which actively targets small businesses for compliance. If there’s one thing you shouldn’t do, it would be to ignore payroll taxes or flagrantly pay them late. More than 40% of small businesses are fined an average of $850 per year for payroll tax issues, primarily for late payment.

What Power Does the IRS Really Have?

Make no mistake – the IRS has wide authority to track down and penalize payroll tax evaders. Not paying your payroll taxes is a federal crime. If you don’t pay, the IRS can:

  • conduct an audit
  • assign financial penalties
  • confront you at your business
  • padlock your front doors
  • seize machinery and equipment
  • contact your customers
  • prevent your business from operating
  • notify the Department of Justice
  • work with authorities to secure jail time for the business owner

What if We Already Have Past Due Payroll Taxes?

Act fast to resolve it. Just 16 days past the due date, the IRS can assign a penalty of a whopping 33%. Also, don’t waste time trying to explain it away with excuses; the IRS isn’t very flexible on this issue. Some small businesses try to justify nonpayment by saying they used payroll tax money to cover their operating expenses. This is against the law, because that money is owed to the federal government. Instead, work proactively with a tax attorney to sort things out with the IRS as quickly as possible.

Dutton Legal Group – Indiana’s Tax Resolution Law Firm

The Dutton Legal Group helps the people and businesses of Indiana navigate ever-changing State and Federal tax codes. Our goal as experienced tax attorneys is to assist you in finding an immediate, cost-effective answer to your tax challenges. We provide a variety of tax services from balance resolution and return preparation to wage garnishment relief and audit assistance. Make Dutton Legal Group your next call at 1-800-334-0255 or send an email to request a free consultation. Trustworthy and affordable, for over 15 years.

tax finances

7 Ways Technology Can Help with Business Finances

tax finances

What if a simple tech tool could make running your business easier? New types of financial technology can save time, boost your efficiency and ensure you always stay well within the law. At Dutton Legal, we assist people with tax resolution and financial management. We are familiar with tech solutions that could make the finance departments of Indiana’s small businesses run more smoothly. Here’s a look at seven ways technology could help your company’s finances.

How Do Tech Apps Standardize Invoicing, Collections and Payments?

1- Invoicing. By automating your invoicing, you can get paid more quickly by your customers and keep a firm grip on your cash flow. Electronic invoicing can also offer the benefit of handling worldwide payments, including cryptocurrency and international currency, so your business can expand around the globe.

2- Collections. Collecting on overdue bills usually sucks up manpower. With electronic collections, you can send automated messages that encourage faster payment and shorter collection cycles.

3- Payments. Your company can also make payments with electronic invoicing. Whether it’s a one-off payment, monthly billing or complex contract, a finance program can handle the details and ensure everything keeps flowing. It limits the possibility of human error, which can cause delays and costly late payments.

Can Technology Help with Funding and Investing?

4- Funding. When you need to obtain loans, funding is made easier through the use of technology. The system can be set up to fund certain amounts to certain accounts, so funds are available almost instantaneously from your financial institution.

5- Investing. Most financial systems include some type of investment tool or calculator, which makes investing much easier. An earnings calendar, for example, provides a small business with a clearer look at its overall investment picture.

How Can My Company Benefit from a Cybersecurity Program?

6- Cybersecurity. Data leaks are always a risk. A staggering 60% of small businesses close permanently within six months of a cyber-attack due to the toll it takes on the business. Another way technology can strongly benefit a company’s business finances is security. By protecting your company’s assets, you’re also protecting your customers’ valuable financial information. Use your monitoring system to identify risks and minimize cyber-opportunities for data breaches. If a breach occurs, technicians can use your financial technology to troubleshoot the issue and plug the gaps.

What if the Company Owns Real Estate?

7- Real estate/rental management. If your company owns real estate or rents property, technology can streamline all routine paperwork and even create a paperless work environment. Leases and rent notices and payments can be handled right from a smartphone. This makes it much easier to manage properties without being physically present at every location. Plus, at tax time, all the necessary information can be pulled from your tech app and shared with your tax attorney.

Dutton Legal Group – Indiana’s Tax Resolution Law Firm

The Dutton Legal Group helps the people and businesses of Indiana navigate ever-changing State and Federal tax codes. Our goal as experienced tax attorneys is to assist you in finding an immediate, cost-effective answer to your tax challenges. We provide a variety of tax services from balance resolution and return preparation to wage garnishment relief and audit assistance. Make Dutton Legal Group your next call at 1-800-334-0255 or send an email to request a free consultation. Trustworthy and affordable, for over 15 years.

Indiana tax attorney

Get 2018 Tax Documents Ready for Filing Season Now

Indiana tax attorney

As tax season approaches, now is the perfect time to get your tax documents in order and make sure you have everything you need. One missing document could create confusion at the last minute, or even cause you to file your taxes past the deadline and pay penalties. We strongly advise our clients to get their tax documents together by December of the current year, so everything will be ready to go well before the filing deadline, usually in April of the next year for most people.

What Documents Do I Need to File My Taxes?

To file your taxes, the three most essential things you’ll need are your social security number, your tax documentation from the recent tax year and your W-2 forms from all employers you worked for this year. If filing jointly, you need all the same documentation for your spouse. Beyond that, you’ll also need the following documents, depending on your exact situation: 1099 forms for any contract work beyond $600, statements of income from any investments like stocks, bonds, dividends and interest, accounting records if you run a business or rent property, social security benefits forms and proof of any other benefits from unemployment, jury duty, gambling, prizes and medical savings accounts.

What if a Document is Missing?

If you lost last year’s return, request a free tax transcript from the IRS through the online portal and receive it in five to 10 days. By mail, it takes 30 to 75 days, depending on the level of detail you requested. If you need info as far back as six years, you may owe a $50 fee to the IRS per return requested. For other types of missing forms, it will depend on the organization involved. For a missing W-2 or 1099, contact your employer. It often takes them several weeks to generate and mail a new copy, so be prepared to wait. For proof of your investment income, contact the company that manages your investments. Prove social security benefits by contacting the Social Security Administration. For gambling and prizes, contact the company that administers the payout. If you run a business or rent property, you will be expected to provide records and may need the help of a tax attorney to sort out missing documents.

Why Does the IRS Need So Many Documents?

Tax-related documentation is used to prove your identity, prevent people from impersonating you and provide details the IRS needs to verify your tax burden. In a world that is increasingly paperless, you might find it frustrating that you’ll still need to deal with so much paperwork at tax time. However, many organizations now provide the information you need electronically, which makes things a little easier. For example, your employer may use an online vendor that can show you a picture of your W-2, even if you haven’t received it by mail. The online W-2 usually provides enough information to fill out your tax forms and proceed with filing. Also, keep in mind that the IRS recommends keeping all tax documents – whether printed or online – for seven years, and to dispose of old documents carefully by shredding.

What if Missing Documents Cause Me to Miss the Filing Deadline?

Don’t miss filing your taxes simply because you’re missing a document. If you pass the filing deadline, you could be assigned penalties and interest by the IRS. You could owe an additional 5% to 25% of your total tax due, a fee of $210 and additional escalating penalties depending on how late you file and the amount you owe. A business owner can rack up $100,000 in penalties for failure to pay on time. Instead, take the honest approach and notify the IRS about what’s going on. If you know in advance that you won’t be able to meet the deadline, file for an extension using IRS Form 4868. Or, if you later receive missing documents or realize something was omitted, file an amended tax return to keep yourself in good standing with the IRS. When in doubt, consult a tax attorney who can help you sort through your paperwork and keep things on track.

Dutton Legal Group – Indiana’s Tax Resolution Law Firm

The Dutton Legal Group helps the people and businesses of Indiana navigate ever-changing State and Federal tax codes. Our goal as experienced tax attorneys is to assist you in finding an immediate, cost-effective answer to your tax challenges. We provide a variety of tax services from balance resolution and return preparation to wage garnishment relief and audit assistance. Make Dutton Legal Group your next call at 1-800-334-0255 or send an email to request a free consultation. Trustworthy and affordable, for over 15 years.

business entertainment budget

The Business Lunch Set to Make a Comeback

business entertainment budget

When tax cuts are announced for 2018, the loss of entertainment deductions for businesses seems harmless. What would it matter if companies can no longer treat potential clients to a night on the town for a five-star meal … and deduct it? The truth is more businesses reach out to new clients by taking them to sporting events, concerts or the theater. These types of outings are better for building strong relationships than an expensive meal. Companies large and small purchase suites, box seats or season tickets for entertaining clients and promoting their business. What does losing these deductions mean for you?

Why Did the Government Cut These Deductions?

The 2018 Tax Cuts and Job Act (TCJA) lowers the corporate tax rate from 35% to 21%. With such a large cut, Washington decides entertainment deductions are not needed. In the past, a business could deduct 50% of the cost of a ticket and the meal. Now, they can only deduct part of the price of a prospective client’s hot dog and beer.

Is Losing this Deduction a Big Deal?

It is not a big deal for companies that buy random event tickets. These companies do not rely on these types of deductions to lower taxes. Businesses using these perks as a marketing tool are going to have to change their way of doing business. Instead of attending an event like a baseball game, the company should consider sponsoring a booth at a trade show. These types of business deductions are still valid and can put salespeople in contact with the right decision-makers. However, with fewer tickets sold to businesses fewer fans may be cheering in the stands. Vendors and small companies that count on event revenue may suffer losses.

What Happens If a Business Is Locked into an Entertainment Agreement?

If an organization wants to take clients to watch the Indianapolis Colts from a corporate suite at Lucas Oil Stadium, they will often commit to multi-year deals to get the best price. A company with this kind of commitment will no longer be able to deduct this expense, which can add up to between $50,000 and $100,000. Unfortunately, backing out of a contract may cost more than continuing without the benefit of deductions. Corporations need to look for tax credits in other areas of their business.

Can’t Companies with Long-Term Leases Resell Tickets?

It depends on the contract they sign. For instance, a lease for a suite at AT&T Stadium, where the Dallas Cowboys play, does not allow suite owners to resell season tickets or individual game seats. Some venues do allow businesses to list open event tickets for sale.

How Are Small Businesses Affected?

A small business is likely to buy season tickets to sports team games, musical concerts or theater performances. The loss of entertainment deductions -key to lowering taxes for some businesses- may mean these company perks are likely to get eliminated. Small companies and freelancers often use events to solidify relationships with clients. Some marketing executives fear losing their entertainment deductions means losing a vital opportunity to connect with and nurture potential clients. They need to review their marketing plans and find other ways to meet-n-greet new clients. Since meals are still deductible, the two-hour lunch meeting is sure to make a comeback (call for reservations now).

Dutton Legal Group – Indiana’s Tax Resolution Law Firm

Dutton Legal Group helps the people and businesses of Indiana navigate ever-changing State and Federal tax codes. Our goal as experienced tax attorneys is to assist you in finding an immediate, cost-effective answer to your tax challenges. We provide a variety of tax services from balance resolution and return preparation to wage garnishment relief and audit assistance. Make Dutton Legal Group your next call at 1-800-334-0255 or send an email to request a free consultation. Trustworthy and affordable, for over 15 years.

state tax code changes

2018 Tax Reform Brings Changes to State Tax Codes

state tax code changes

Since the end of 2017, everyone is scrambling to figure out how the Tax Cuts and Job Act (TCJA) affects them. Individual taxpayers, businesses and state governments (like Indiana) are determining how this new legislation affects them on a state and local level. An unexpected consequence is some states can expect to collect additional tax revenue without raising rates. Of the 41 states that impose an income tax, only five (Alabama, Arkansas, Mississippi, New Jersey and Pennsylvania) do not have laws tied to sections of the federal code. The remaining states must decide whether to change their plan to match the new TCJA, reform individual state code to be different from the federal one or continue to follow 2017 filing guidelines until they decide what to do. Preliminary estimates show states that do nothing are going to increase their tax revenue. Many legislators are already planning how to spend the windfall.

Why Would States Gain More Revenue?

With the increase in federal standard deductions, more individuals and businesses will skip itemizing starting in 2018. Some of the exemptions eliminated in the TCJA still exist on the state level. Unfortunately, you won’t get to use them since you must file your state return the same way as your federal. Those unused exemptions mean individuals pay more in state tax than the year before. States currently reforming their tax codes look to balance the tax obligations for their citizens.

Is Indiana Reforming Its Tax Code?

The Indiana legislature has actively worked to revise our tax code since 2011. By passing numerous bills over several years, the state’s reform package is less obvious but no less sweeping. Indiana has lowered individual and corporate rates, broadened tax bases, simplified tax structures and improved competitiveness for Hoosier businesses. We rank ninth on the State Business Tax Climate Index.

Will My State Taxes Go Up?

Indiana does follow the federal tax code in some areas. Any changes to our state laws pass through the legislature before being implemented. Because of the tax reforms our state government is already doing, any rate increase is expected to be offset by the cuts on federal returns.

If Indiana Has an Increase in Tax Revenue, Will I Get a Refund?

In 2011, Indiana passed a successful taxpayer rebate program. The regulation states if our state’s rainy-day fund grows over 12.5% of its budget spending, we get money back. All excess cash splits between the teacher’s pension program and taxpayers. In 2012, lots of happy Hoosiers received a $111 refund. With this law in place, any extra revenue from the new federal tax reform means refund checks for Indiana citizens.

Dutton Legal Group – Indiana’s Tax Resolution Law Firm

Dutton Legal Group helps the people and businesses of Indiana navigate ever-changing State and Federal tax codes. Our goal as experienced tax attorneys is to assist you in finding an immediate, cost-effective answer to your tax challenges. We provide a variety of tax services from balance resolution and return preparation to wage garnishment relief and audit assistance. Make Dutton Legal Group your next call at 1-800-334-0255 or send an email to request a free consultation. Trustworthy and affordable, for over 15 years.

bitcoin tax laws

Digital Coin Integration – A Marriage of Old and New Monies

bitcoin tax laws

With digital coin prices linked to the fluctuating value of companies like Bitcoin, the future of cryptocurrency is often in doubt. Recently, Coinbase, the largest platform for Western purchases of fiat digital currencies, announced they are beginning token integration. Digital coins, like Ethereum, are being paired with U.S. dollars and other fiat currencies for sale. It gives cryptocurrencies an increased level of stability because it is no longer tied to one company’s profitability. Digital currency can now gain better global acceptance in the marketplace. Average investors feel more confident buying crypto coins that are the equivalent of USD.

How Are Cryptocurrencies Taxed?

In the beginning, some investors hoped digital currencies would be a way to avoid taxes. The IRS has been watching the development of this new monetary platform since its conception. In April 2014, the IRS released limited guidelines for the taxation of digital currencies. From their point of view, the purchase of crypto coins lies somewhere between currency and investments and is treated as property.

How Are Taxes Calculated for Digital Currency?

Crypto coins are considered assets. Any gain or loss from the sale or exchange of digital currency is taxable. The length of time you own the coins determines whether you will pay short-term (one year or less) or long-term (over a year) capital gains taxes. The First In, First Out rule is used to calculate the period of ownership for an investor who purchases coins multiple times.

What Do I Need to Document for Taxes on Digital Coins?

Before buying any cryptocurrency, consult with a tax professional who understands the regulations, which continue to be defined for this new platform. You should keep track of three things for all digital coin investments:

  • Purchase Price – The original cost of the coins is called your basis. It is needed to calculate your earnings.
  • Sale Price – The amount you are selling or exchanging your coins.
  • Earnings – The basis amount minus your sales price.

Did the 2018 Tax Law Affect Digital Currencies?

In the past, investors could avoid taxes by exchanging crypto coins for an equal valued commodity. It is called a like-kind exchange. The new 2018 tax law has eliminated this opportunity. These exchanges are now limited to real estate only. If you sell your crypto coins for cash or use it to purchase anything other than another cryptocurrency, it is seen as income and capital gains taxes apply.

Is Cryptocurrency Still a Questionable Investment?

Digital currency appears to be the wave of the future, although it is still experiencing growing pains. Understand the tax implications this new monetary format brings before investing. Consult a tax professional and do your research.

Dutton Legal Group – Indiana’s Tax Resolution Law Firm

Dutton Legal Group helps the people and businesses of Indiana navigate ever-changing State and Federal tax codes. Our goal as experienced tax attorneys is to assist you in finding an immediate, cost-effective answer to your tax challenges. We provide a variety of tax services from balance resolution and return preparation to wage garnishment relief and audit assistance. Make Dutton Legal Group your next call at 1-800-334-0255 or send an email to request a free consultation. Trustworthy and affordable, for over 15 years.