Loading...
Menu

Rashad's Quick Course On Taxes

p<>{color:#000;}.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This publication is designed to provide competent and reliable information regarding the subject manner covered. This publication is provided (with or without consideration) with the understanding that the author and publisher are not engaged in rendering legal, financial, or other professional advice. If legal and professional assistance is required, the services of a professional should be sought. The author and publisher specifically disclaim any liability that is incurred from the use or application of the contents of this book.

 

Copyright © 2016 by Rashad Phillips

 

Published by: New Growth Media

 

Cover Design and Graphic Design by: Angette Williams

 

Reproduction in part or in whole without the express written consent of author is prohibited.

 

Shakespir Edition: September 2016

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

SECTION TOPIC

 

 

#
p<>{color:#8B010F;}. ABOUT THE AUTHOR

 

#
p<>{color:#8B010F;}. INTRODUCTION

 

#
p<>{color:#000;}. PERSONAL TAXES QUESTIONS

 

 

#
p<>{color:#000;}. BUSINESS TAX QUESTIONS

 

#
p<>{color:#000;}. INVESTMENT TAX QUESTIONS

 

#
p<>{color:#000;}. EDUCATION TAX QUESTIONS

 

#
p<>{color:#000;}. NONPROFIT TAX QUESTIONS

 

 

#
p<>{color:#8B010F;}. THANK YOU

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

ABOUT THE AUTHOR

 

 

 

Rashad Phillips is a tax accountant, small business advisor, real estate educator, and an Award Winning Journalist who is passionate about sharing his expertise with individuals, small business owners, non-profit organizations, and students. Phillips expressed an early interest in the business field. He enrolled in Garinger High School’s Academy of

 

Finance, a magnet program which offered real estate pre-license courses to high school students. After completing high school, he earned his real estate license and then entered Johnson C Smith University’s business program as a Duke Endowment Scholar. As a college student, he put his classroom knowledge to work in the real world, working as a part-time tax professional. As a business student, he gained valuable real world business experience to compliment his classroom knowledge. After graduating from JCSU, he continued his post-graduate business studies at Pfeiffer University. Phillips considers education a life-long pursuit and is an avid reader of Business, Economics,

 

Marketing, Self-Help, and Historical Books.

 

Phillips’s passion for writing and communications earned him several Charlotte Area Black Journalists Association

 

Excellence In News Awards (2013, 2014, 2015). During the past two years, you may have seen Phillips sharing his tax expertise on WBTV News, WSOC News, and in a nationwide Time Warner Cable commercial.

 

Check out the following links to learn more about Phillips:

 

www.rashadphillips.com

 

https://youtu.be/jw_78rHSQNI

 

https://youtu.be/IG3HBuRwZoo

 

CONTACT RASHAD:

 

[+ [email protected]+]

 

https://www.linkedin.com/in/rashadphillips

 

https://about.me/rashadphillips

 

https://www.facebook.com/rashadquickcourse/

 

Text Rashad @ 313131 for a FREE TAX REPORT

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

 

 

INTRODUCTION

 

 

Rashad’s Quick Course on Taxes is the result of thousands of conversations, emails, meetings, and tax appointments. For the past 15 years, when I thought I was off work, I was approached by clients who had small business or tax questions. I remember my ex-girlfriend complaining that I was giving her quality time away to my clients during my off time. Even if I was tired or needed a break, I couldn’t say no to my clients. At one point, we began to go shopping, dining, and hanging out in neighboring cities so that I would encounter fewer tax questions during my off time.

 

 

Throughout the past 10 years, I constantly heard the voice of my best friend, Melvin

 

Graham, saying “You need to write a book.” The thought of writing a book took a back seat to the sounds of Afro-Latin music, beautiful Salseras, and road trips to dance the days and nights away. In 2008, I began taking Salsa dance lessons and after 6 months of tripping over my feet, I was transformed from Rashad Phillips into Dr. Dip, a nickname that I earned for my mastery of the dance move known as the dip. I thought that Salsa dancing was my

 

table<>. <>. |<>.
p<>{color:#000;}.  

|<>. p<>{color:#000;}.   | <>. |<>. p(((<>{color:#000;}. “THERE’S JUST ONE THING I CAN’T FIGURE OUT. |<>. p)))>{color:#000;}. ITHE HARDEST THING TO UNDERSTAND IN THE | <>. |<>. p(((<>{color:#000;}. *M*Y INCOME TAX!” |<>. p)))>{color:#000;}. WORLD IS THE INCOME TAX.” | <>. |<>. p(((<>{color:#000;}. -N*AT* KING COLE |<>. p)))>{color:#000;}. -A*LBERT* EINSTEIN | <>. |<>. p<>{color:#000;}.   |<>. p<>{color:#000;}.   | <>. |<>. p<>{color:#000;}.   |<>. p<>{color:#000;}.   |

 

escape from thinking about taxes, but as soon as my Salsa family learned that I was a tax accountant, I began receiving questions on the dancefloor. It wasn’t unusual for me to answer tax questions at our pre-dancing dinners or after we finished dancing.

 

 

I hope that Rashad’s Quick Course on Taxes provides answers to common tax questions and allows me to enjoy a little more of my off time. When I am dining out, shopping, enjoying a movie, or dancing Salsa, I can direct people to download a free copy of Rashad’s Quick

 

Course on Taxes. I wrote this book so that the reader doesn’t have to read the entire book in one sitting. The reader can select questions from five categories (personal, business, investments, education, and nonprofit questions) and find practical responses to their tax concerns. I am confident that Rashad’s Quick Course on Taxes will provide readers with clarity on a variety of tax topics.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABEL OF*] ONTENTS

 

PERSONAL TAX QUESTIONS

 

 

 

 

1. ARE INCOME TAXES CONSTITUTIONAL?

 

Yes, income taxes are constitutional. Many individuals and organizations that oppose the income tax state that income taxes weren’t included among the original articles of the United States Constitution when it was adopted in 1787. Income taxes became law when Congress passed

 

Amendment 16 to The United States Constitution on

 

July 2, 1909. On February 3, 1913, Amendment 16 was ratified by the US Congress. The 16th Amendment changed a portion of Article I, Section 9: “The Congress shall have

 

power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States,

 

and without regard to any census or enumeration.” Additionally, many states have passed laws that allow state and local governments the

 

authority to collect income, sales, and property taxes.

 

 

 

Does my 17-year-old son need to file an income tax return for his part-

TIME SUMMER JOB? 2

 

If your son makes less than $10,300 (Tax Year 2016) then he is not required

 

to file an income tax return. Consider looking at box 2 and 16 on your son’s Form W-2 to see if federal (box 2) or state (box 16) taxes were withheld. Your son may not be required to file but he may want to file to get a refund based on federal and state taxes withheld from his check. Also, if your son plans to attend a community college or university, he will be required to file a tax return in order to qualify for financial aid.

 

 

 

 

THREE LAST NOVEMBER, I GOT MARRIED. SINCE, I WAS SINGLE FOR MOST OF THE year, can I file single on my tax return?

 

Let’s assume that you were married on

 

11/30/15. Even if you were married for only one day in 2015, in the eyes of the Internal

 

Revenue Service, you were married for the whole year. If someone were to get married on 12/31/15, the IRS would consider the couple married for all of 2015. When you file your tax returns, you have two filing options: married filing joint or married filing separate.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

 

 

4I want more money in my paycheck. Can I file exempt for six months and then switch back

 

TO NORMAL TAX WITHHOLDINGS AFTERWARDS?

 

This strategy will work if you are single and earn less than $28,000 (with 2 dependents under the age of 16) or married filing joint (with 2 dependents under age 16) and earn less than

 

$38,000. The previously mentioned taxpayers can change their withholding throughout the year because their tax will probably be very low and they are entitled to the following tax credits: the child tax credit, the earned income credit, and the additional child tax credit. If you don’t fit the description of the two types of taxpayers that I described then I strongly recommend that you do not switch your exemptions during the year because typically you will end up with a large tax bill on April 15th.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5If I pay $5,000 in mortgage interest does that mean I will get a $5,000 deduction from

MY TAX BILL?

 

Mortgage interest is an itemized deduction. Taxpayers select the standard deduction ($6,100

 

Single or 12,100 Married Filing Joint for Tax Year 2016) or they select the total of their mortgage interest, real estate taxes paid, personal property taxes paid, medical expenses paid, state income or sales taxes paid, charitable donations, and unreimbursed employee expenses. The standard deduction or itemized deduction reduces your adjusted gross income. In short, if selecting itemized deductions is in your best interest, usually you realize between 20% and 30% of the mortgage interest that you paid in the form of a tax refund.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WHAT TAX BREAKS ARE AVAILABLE FOR HOME OWNERS?

SIX Homeowners are able to receive tax breaks for mortgage interest, loan discount points, mortgage insurance premiums, and real estate taxes. Homeowners aren’t

able to deduct the following items: homeowners insurance, homeowner association dues, home repairs, or home renovation.

 

What are the tax consequences of a short sale on my primary residence?

A short sale occurs when homeowners sells their home for less than their home SEVEN loan. [Example: Owen Owner sells his home for $185,000 and his loan balance

 

is $300,000]. Owen would only be able to sell his home with the permission of his lender due to the Due-on-sale clause (alienation clause) in his promissory note. After the sale, Owen’s lender could sue Owen for the shortfall ($115,000) or cancel Owen’s debt. If the lender cancels the debt, then Owen will receive a 1099-C, and $115,000 would become taxable income on Owen’s federal and State taxes.

 

8Do I have to pay taxes on death benefits

 

MONEY THAT I RECEIVED FROM LIFE INSURANCE?

 

Life insurance death benefits are not taxable. If you borrow against your life insurance policy and decide not to repay your loan, then you will receive a Form 1099. The unpaid loan will become taxable income. Some people use life insurance in their tax planning strategy to reduce the tax burden on their family after their death.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

~9~I LIVE IN NC BUT I WORK IN SC. AM I DOUBLE TAXED BECAUSE I WORK IN A DIFFERENT STATE?

If you live in one state and work in another state, you will pay taxes in both states. You are entitled to a tax credit for the taxes paid in the state of your employment. Often times, people who work in another state receive a refund in the state where they work and owe taxes in the state where they live. This is because

 

state taxes are withheld in the state of their employment as opposed to the state of their residence.

10My husband and I are separated but still

 

LEGALLY MARRIED. ARE WE STILL REQUIRED TO file taxes together?

 

When you are legally married, you have two filing options: married filing joint or married filing separate. My recommendation is to request that your tax professional conduct a married filing joint versus married filing separate analysis to determine which filing status is in your best interest. If you have been legally separated for six months or more with a qualified dependent then you may select the Head of Household filing status.

 

11My husband and I file joint returns. We owe $87,550 in federal and state taxes. I only work part-time and he makes the majority of the

 

MONEY WITH HIS FULL TIME JOB. IF WE GET DIVORCED, AM I still responsible for his federal and state tax bills?

 

Since you and your husband file joint returns, in the eyes of the Internal Revenue Service, both of you owe $87,579 together. If you get divorced, both of you still owe IRS and your state department of revenue $87,579. The only way that you could force your husband to pay his portion of the tax bill is through a court order during the divorce legal proceedings.

 

 

 

 

12. My wife owes $125,000 in student loans and she is currently behind on her monthly payments. If we

 

file joint tax return, what will happen to our refund? Also, do you think it’s better for me to file a separate return?

 

The Department of Education or the student loan financing company will take part or all of your federal refund for your wife’s unpaid student loans. If you and your wife decide to file a joint return, you can file an injured spouse claim which will protect your portion of any possible federal refund from garnishment by The Department of Education or

student loan financing company.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

 

 

 

table<>. <>. |<>.
p<>{color:#000;}.  

|<>\2. p))))))))>{color:#000;}. How long should I keep my tax records? | <>. |<>. p<>{color:#000;}.   |<>\2. p)>{color:#000;}. 13I recommend that you keep your tax records for seven years. | <>. |<>. p<>{color:#000;}.   |<>\2. p>{color:#000;}. Please keep the following records along with your tax returns: Form W-2, | <>. |<>. p<>{color:#000;}.   |<>\2. p>{color:#000;}. Form 1099, mortgage interest statements, charitable contribution statements | <>. |<>. p<>{color:#000;}.   |<>\2. p))>{color:#000;}. (along with cancelled checks for each contribution), Form 1098, real estate | <>. |<>. p<>{color:#000;}.   |<>\2. p)>{color:#000;}. tax records/payments, property tax records/payments, medical expenses payments, | <>. |<>. p<>{color:#000;}.   |<>\2. p)>{color:#000;}. unreimbursed employee expenses, traditional IRA contributions, alimony payments | <>. |<>\3. p((<>{color:#000;}. records, rental property expenses, brokerage account statements, interest and dividend income | <>. |<>\2. p((<>{color:#000;}. statements, and business expenses. |<>. p<>{color:#000;}.   | <>. |<>\2. p<>{color:#000;}. 14. What is the difference between an exemption, tax credit, and |<>. p<>{color:#000;}.   | <>. |<>. p<>{color:#000;}. TAX DEDUCTION? |<>. p<>{color:#000;}.   |<>/2. p>{color:#05466E;}. CUTCUTCUTCUTCUT | <>. |<>\2/2. p<>{color:#000;}. A personal exemption is based on the number of taxpayers and | <>. |<>. p<>{color:#000;}.   | <>. |<>\2. p<>{color:#000;}. dependents listed on a tax return. You multiply the number of people |<>. p<>{color:#000;}.   |

listed on the return by the personal exemption amount provided by IRS [Note: The personal exemption amount changes every year.

 

In 2015 the personal exemption was $3300. If you have a family of 4, then you multiply $3300 by 4. Your personal exemption will equal $12,000.] The personal exemption reduces your taxable income.

 

After your taxable income has been calculated, tax credits are subtracted from your taxable income. Tax credits lower your tax bill (if you owe) or increase your tax refund (if you are due a refund). The following are examples of tax credits: Child Tax Credit, Daycare Credit, American Opportunity Credit, Lifetime Learning Credit, Retirement Savings Credit, Earned Income Credit, and Additional Child Tax Credit.

 

A tax deduction reduces your adjusted gross income. The adjusted gross income is used to determine your income for bank loans, financial aid, and credit cards. The following are examples of deductions: student loan interest, alimony payments, educator expenses, moving and expenses.

 

15When do I need to hire an accountant to help me

 

WITH MY TAXES?

 

If you have a simple return (Form W-2, interest income, and student loan interest) you are probably capable of filing a return without a tax professional. I recommend the following individuals consider hiring a tax professionals: homeowners with itemized deductions (mortgage interest, charitable donations, unreimbursed employee expenses, property taxes paid), real estate investors, business owners, stock market investors, independent contractors, barbers, hair stylists, nail technicians, massage therapists, makeup

 

artists, performing artists, musical artists, and photographers. Due to the complex nature of the previously mentioned tax returns, it is prudent to hire a tax professional to file your return. Additionally, an experienced tax professional can keep you informed about tax law changes that may affect your industry.

W-2 &1099 RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS
p<>{color:#000;}.  

 

 

I don’t have enough money to pay my income tax bill, what are my 16 options?

If you are unable to pay your taxes you can request an installment agreement with the Internal Revenue Service to pay your federal tax bill over a period

 

of 72 months. Depending on your state of residence, you may be required to file an installment agreement along with your tax return or you may be required to directly contact your state department of revenue via telephone to request an installment agreement.

 

17After I filed my tax return, I received an additional W-2 and 1099-R. Can I just

 

INCLUDE THESE TWO ITEMS WITH MY NEXT

 

TAX RETURN?

 

Sometimes people are in a hurry to file their tax returns so they file their returns before they receive all of their tax documents. If income wasn’t included on your tax return,

 

you must amend your federal and state tax returns to include the missing income. You must include the income based on the year that the income was received. Often times, people think that they can wait to include the missing income in the following year but that isn’t possible. The year listed on the income document must match the year listed on the tax return. [2015 Form W-2 must be reported with 2015 federal and state returns.]

 

18. In 2013, I purchased a home for $210,000.

 

NOW MY HOME IS UNDER CONTRACT AND WE ARE

 

SCHEDULED TO CLOSE NEXT YEAR. THE VALUE OF MY house has increased to $325,000. Do I need to set aside money to pay taxes on the sale of my

 

HOME?

 

If the home in question was your primary residence and you lived there for two of the previous five years, then you are not required to pay taxes

 

(capital gains taxes) on the sale of your residence.

 

If you are filing a joint return or married filing separately, you aren’t required to pay taxes on the sale of your home.

19. I am withdrawing $25,000 from my 401(k) plan. How much tax do I need to

 

table<>. <>. |<>.
p)>{color:#000;}. WITHHOLD? |<>.
p<>{color:#000;}.  

| <>. |<>. p)))>{color:#000;}. The amount of the tax that you should withhold is based on your tax bracket |<>. p<>{color:#000;}.   | <>. |<>. p))))>{color:#000;}. and your age. If you are under age 59 ½, you are required to pay a 10 |<>. p<>{color:#000;}.   | <>. |<>. p))))>{color:#000;}. percent early withdrawal penalty. Find your tax rate from your previous |<>. p<>{color:#000;}.   | <>. |<>. p))))>{color:#000;}. tax return (add 10% if you are under age 59 ½) and this will give you |<>. p<>{color:#000;}.  
<>.
<>.

need to have state taxes withheld based on your state income tax rate. Most states do not have an early withdrawal penalty.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

 

20. Next year, I plan to retire from Durham

COUNTY SCHOOL DISTRICT. I WILL RECEIVE a pension from NC and Social Security

 

INCOME. DO I INCLUDE MY SOCIAL SECURITY

 

INCOME ON MY TAX RETURN?

 

If your retirement income exceeds $25,000

 

(single or married filing separate) or $50,000 (married filing joint), then some or all of your social security benefits will be taxable. Some seniors believe that Social Security benefits aren’t taxable but this isn’t the case. Whether the benefits are or aren’t taxable is based on income and filing status.

21RECENTLY, I WAS LAID OFF FROM MY JOB

AND I WAS UNABLE TO MAKE MY CAR payments. My car was repossessed. Yesterday, I received a 1099-C from the bank. Please explain how this

 

AFFECTS MY TAXES?

 

The Form 1099-C is a cancellation of debt which means you no longer owe the bank or auto finance company money. Your auto loan was charged off by your former lender. When debt is cancelled by a lender, the Internal Revenue Service consider the

 

cancelled debt as income. So the amount of cancelled

 

debt listed on your Form 1099-C will be taxable income on your federal and state return in the year listed on the form. [Note: Your car could have been repossessed in 2013 but the auto finance company waited until

 

2015 to cancel the debt. The 1099-C is based on the year the auto finance company cancelled the debt.]

 

 

 

 

 

22. I won a $5,000 prize from a radio contest. Do I have to pay taxes on this money?

 

Yes, your prize money is taxable income. The radio station will issue you a 1099-Misc and you will be required to report the $5,000 as income on your federal and state return. If you didn’t have taxes withheld from your prize, be prepared to pay income taxes or have a smaller refund.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

23WE ARE MOVING FROM

 

GREENSBORO, NC TO DURHAM,

 

NC. We hired professional

 

MOVERS. CAN I DEDUCT MY MOVING expenses from my tax return?

 

I regret to inform you that your moving expenses will not be tax deductible. IRS requires your move to be work-related and pass a distance test of 60 miles or greater.

 

The distance between Greensboro, NC and

 

Durham, NC is less than 60 miles so your move doesn’t meet IRS requirements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24. My tax preparer included a small business, education expenses, and a home office to get me a

 

LARGER REFUND. THEN I RECEIVED AN IRS LETTER SAYING THAT MY RETURNS WERE AUDITED BY IRS. NOW I OWE

 

IRS and NCDOR $14,875 for tax years 2012 and 2013. What can I do to make my former tax guy pay my interest and penalties?

 

Based on the information that you provided, it appears as though your tax professional prepared a fraudulent return to provide you with a larger refund. When a tax a professional lists unusual business expenses, education expenses, home office expenses, and charitable donations, this usually triggers an audit. If your tax professional prepares a high percentage of fraudulent returns, he or she is probably being investigated by the IRS and is facing civil and criminal charges. It’s highly unlikely that you are able to force your tax professional to pay your interest and penalties. If you would like to pursue legal action against your tax professional, you may want to seek legal counsel.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

 

 

BUSINESS TAX QUESTIONS

1What are the requirements for me to claim the office in home

DEDUCTION?

 

The space in your home must be used exclusively for conducting business on a regular basis. It must be the principal place of your business or

 

you must use your home substantially to conduct regular business.

 

IRS regulations refer to the place that clients or customers come in the normal course of business.

 

The home office deduction is an item that the IRS is carefully watching.

 

In my professional opinion, claiming this deduction can invite an audit. Based on my professional experience, the home office deduction rarely exceeds $1,000 in tax savings.

 

 

2. CAN I DEDUCT THE MILES THAT I DRIVE FROM HOME TO MY BUSINESS?

 

No, you aren’t able to deduct the miles that you drive from home to your business. After you arrive at your business, then you are able to deduct the miles that you drive from your business to other business locations, meetings, or business related events.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3IF MY BUSINESS MAKES NO MONEY, AM I STILL required to file a tax return?

Yes, you are required to file a tax return for your business (sole proprietor, C-Corp, S-Corp, partnership, or LLC) even if your business doesn’t make a profit. Also, if your business has no activity, you are still required to file a return. Failure to file a tax return could result in criminal prosecution by the IRS for tax evasion.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

 

 

What business records do you recommend that I keep?

FOUR I recommend that you keep your tax records for seven years.

Please keep the following records along with your tax returns: bank statements, Form W-2s &W-3s, Forms 1099s (that you received and issued), cancelled checks, business credit card statements, payroll tax records, state income tax withholding, sales tax records,

 

PayPal statements, Square statements, and merchant account records.

 

5. I am a freelance photographer. No

 

TAXES ARE WITHHELD FROM MY CHECKS.

 

WHAT SHOULD I DO ABOUT MY TAXES?

 

If you are a freelance photographer who is unincorporated (meaning that you have not created a corporation or LLC business entity) then you are classified as a sole proprietorship. You

 

are responsible for reporting all of your income and expenses to the Internal Revenue Service. In the past, many of my clients showed up to my office with a box of receipts. The challenge with receipts is that the ink fades over time. In the event that you are audited by IRS, you will be

 

asked to produce evidence of your expenses. Due to faded receipts, your evidence of expenses may disappear. To resolve these issues, I recommend that you open a business checking account. If you write checks or use your debit card for your business expenses, then your bank statements are proof of your business expenses. I suggest that you only use your business checking account for business expenses. When you include personal expenses on your business account, it increases the time for record keeping. If your business revenues grow to $70,000 or beyond, you should consider creating a

 

C-Corporation, S-Corporation, or Limited Liability Corporation to reduce your income taxes.

 

 

6. I have a business credit card in my company name. Last year my business closed and I don’t have money to repay my credit card. What are the tax implications if I don’t repay my credit card?

 

If you close your business, please make sure that you let IRS know that your business is closed. Regarding your credit card, I suggest that you review your cardholder agreement.

 

Often times, business credit cards have a personal guarantee (meaning in the event of default, the business owner is personally responsible for the credit card debt). In the event the credit card debt is cancelled, the debt would become taxable income. [See Personal #21 for additional details.]

 

 

 

 

8. TWO YEARS AGO, I STARTED A LAWN

 

CARE AND TREE SERVICE BUSINESS.

 

NOW, I HAVE TWO GUYS WORKING WITH me. I report all of my income on my personal return. I file my own taxes. I want to purchase a home and finance new equipment for my business. How do I pay myself?

 

HOW DO I SAVE FOR RETIREMENT?

 

Based on your question, you appear to be operating your business

 

as a sole proprietor with several independent contractors working with you. The sole proprietor is the simplest form of business because it’s the easiest to create. The IRS doesn’t see any distinction between you and

 

your business. So you can take profits from your business at any time. I suggest that you consider creating a separate business account to make record keeping easier.

 

You have several retirement saving options. You can open an SEP, Roth IRA, or Traditional IRA. All three retirement accounts have tax advantages. I recommend that you examine the pros and cons of each retirement account with your tax professional and an investment advisor.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

9. I OWN ONE RETAIL STORE IN NORTH

 

CAROLINA AND I AM CONSIDERING ACQUIRING

 

ANOTHER STORE IN SOUTH CAROLINA. HOW do I report my business taxes in two

 

DIFFERENT STATES?

 

If you have a business that operates in two states, you will file one federal return and two state returns. You will pay taxes in both states. In your home state, you will receive a tax credit for state income taxes paid in the second state.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10I am a traveling medical salesperson. I drive my personal vehicle for work purposes. My company provides me with $750 per month for auto expenses. Can I still deduct my auto expenses on my personal return?

 

Yes, you can deduct your business miles as an unreimbursed employee expense. Please keep an annual mileage log with the total business miles. Each year, the IRS

 

changes the standard miles deduction, which is currently $.565. Multiply your total business miles by the standard mileage deduction ($.565), then subtract the total mileage payments that you received from the company ($750 per month) from the result.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

 

INVESTMENTS TAX QUESTIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. How do rich people pay little or no income tax?

 

Rich people pay less in taxes because the majority of their income isn’t subject to payroll taxes. Often times,

 

rich people receive interest income, dividend income, or capital gains, which are taxed at a lower rate than a W-2 employee or a 1099 independent contractor. [Note: For a more detailed explanation, visit rashadphillips.com to purchase the audio version of Rashad’s Quick Course on Taxes for $5.]

 

 

2. NEXT YEAR, I AM CONSIDERING SELLING MY DAYCARE. WHAT TAX WILL I be required to pay?

 

When you sell your daycare, you may be subject to capital gains tax. If you or your corporation own real property (a commercial building), then you will pay capital gains tax on the sale of the building. Also, you will pay capital gains tax on the transfer of your equity in the daycare.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

3. WHAT TAX BREAKS ARE AVAILABLE

TO INVESTORS WHO LOSE MONEY ON AN

INVESTMENT?

Let’s assume that you invest $50,000 in an unimproved lot of real property.

Three years later, you sell the lot for $30,000. You suffer a $20,000 loss

. IRS will not allow you to write off the full $20,000 loss in one year. You will be able to deduct $3,000 per tax year over a period of about 7 years.

4I invested $15,000 into my brother’s start-up business. His business closed and he has no money to repay me. Can I write off my $15,000 investment on my personal return?

If you purchased stock in your brother’s company in exchange for $15,000, then that transaction is a stock sale. After the business closes, you will be able to write off your $15,000 as a capital loss. [Note: Your brother’s business would need to

be structured as a legal corporation.] If you invested $15,000 as a partner in your brother’s business, then your brother must file a partnership return and you will receive a Form K-,1 which you will use to complete your personal return. [Note: You will receive Form K-1 if the business is structured as a partnership or LLC].

 

 

 

 

 

5. MY GRANDMOTHER left me $10,000 worth of Ford Motor Company

 

STOCK. IF I SELL THE

 

STOCK, WILL I HAVE TO report $10,000 on my personal return?

 

Selling your Ford stock will result in a capital gain or capital loss. If you sell the stock for more than the cost basis

 

(purchase price) then it’s a capital gain. If you

 

sell the stock for less than the cost basis then it’s a capital loss. Since you inherited the stock, your cost basis will be the value of the stock on the day that you received the stock. [Example: If you inherited 500 shares of Ford at $20 per share and later sold the 500 shares for $25 per share; your capital gain would be $5 per share multiplied by 500 shares or $2,500.]

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

 

 

 

 

 

SMART INVESTORS HIRE TAX PROFESSIONALS TO HELP THEM MAKE

 

WISE DECISIONS REGARDING PURCHASING, SELLING, RENTING, AND

 

RENOVATING INVESTMENT PROPERTIES.”

 

-R*ASHAD* PHILLIPS

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

 

EDUCATION TAX QUESTIONS

1Can I deduct my child’s private school

EDUCATION?

 

No, private school tuition for grades K-12 is not deductible. If your child attends a private school for afterschool care, then the afterschool care may be deductible.

 

table<>. <>. |<>/2.
p>{color:#000;}. What tax breaks are available to public school teachers? |<>.
p<>{color:#000;}.  

| <>. |<>/3. p<>{color:#FFF;}. TWO | <>. |<>. p>{color:#000;}. School teachers are able to deduct $250 for the purchases of school supplies for their | <>. |<>. p>{color:#000;}. classroom. [Note: For a more detailed explanation, visit rashadphillips.com to | <>. |<>. p>{color:#FF5000;}. purchase the audio version of Rashad’s Quick Course on Taxes for $5.] |<>. p<>{color:#000;}.   |

3Since my son was unable to find a summer job, he started a small business. How will his small business affect his tax returns and financial aid?

 

Your son will have to file a tax return that includes a Schedule C and SE. If your son’s business has a profit or a loss, this will affect his financial aid. If his business profits, your son’s AGI (adjusted gross income) will increase, which may decrease his financial aid package (Pell Grants and need based scholarships). If his business loses money, then his financial aid package may increase.

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

 

 

 

 

TRUCKER

 

 

 

 

 

6. For the last two years, I’ve been out of work. I borrowed money from my sister to pay for truck

 

DRIVING SCHOOL. CAN I WRITE OFF MY TUITION?

 

If you borrowed money from your sister to pay truck driving school, then you are eligible for Tuition

 

Deduction or Lifetime Learning Tax Credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7. MY TWIN DAUGHTERS WANT TO TRAVEL ABROAD TO STUDY FOR THE SUMMER. CAN WE DEDUCT THEIR TRAVEL AS an education expense?

 

Travel expenses are not considered education expenses under the American Opportunity or Lifetime Learning credits. If the travel is a part of the student’s tuition expense, then the travel will be considered an education expense.

~8~I am taking a real estate course at a private school. Can I deduct tuition on my taxes?

 

You have two options. You can deduct your real estate course under The Lifetime Learning Tax Credit or you can deduct your real estate course as a business expense on Schedule C. [Note: You will need to successfully complete your real estate course and earn your license to deduct your real estate course on Schedule C.]

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

NONPROFIT TAX QUESTIONS

RASHAD’S QUICK COURSE ON TAXES |*] [+T+]ABLE OF*] ONTENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THANK YOU

 

Thank you for taking time out of your busy schedule to download and read my first book! The answers found in Rashad’s Quick Course

 

On Taxes are buried in thousands of pages of IRS tax code. Trust me, you wouldn’t have enjoyed searching the tax code for those answers. Hopefully, my book saved you some time and answered some of your tax questions.

 

I am considering writing another Quick Course on personal finances, real estate, mortgages, or starting a small business but I am basing my decision on the feedback from this book. So, if you enjoyed this book, please let me know. Send an email to [email protected], send me a message on LinkedIn, or leave a book review. Text me at 313131 to recieve a Free Overlooked Deductions Tax Report.

 

P.S. Please help me by sharing my book with your family, friends, and co-workers.

 

Sincerely,

Rashad I. Phillips


Rashad's Quick Course On Taxes

Rashad’s Quick Course on Taxes has answers to 55 common questions asked by personal taxpayers, business owners, investors, and nonprofit organizations. Rashad’s Quick Course on Taxes provides clear and concise answers to your tax questions written in language that the average person can understand. When you have a question about personal taxes, business taxes, investments, education, or nonprofit organization, open up Rashad’s Quick Course on Taxes.

  • ISBN: 9781370785896
  • Author: RashadPhillips
  • Published: 2016-10-23 19:20:55
  • Words: 6425
Rashad's Quick Course On Taxes Rashad's Quick Course On Taxes