IRS Form 1099-C
Did you receive a Form 1099-C this year? Chicago CPA and business lawyer Brian J. Thompson wants you to know that Form 1099-C is used to report Income from Cancellation of Debt.
The general rule is if you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable income.
There are some exceptions to the general rule. The most common circumstances when cancellation of debt income is not taxable involve:
- Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007; it applies to most homeowners.
- Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
- Insolvency: If you are insolvent (i.e., your total debts are more than the fair market value of your total assets) when the debt is canceled, some or all of the canceled debt may not be taxable income to you.
- Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. In other words, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.
- Certain farm debts.
States Without Income Tax
States without income tax? Florida, Nevada, Texas, South Dakota, Washington, Wyoming and Alaska don’t impose income taxes, while New Hampshire and Tennessee only tax interest and dividend income.
If you are considering moving to a state without income tax, carefully plan your move and return visits to your former state. Otherwise, you can greatly complicate your tax life and cost yourself tons in back taxes and penalties.
One factor to consider is the amount of time you spend in your former state. If you are still planning to spend significant time in your former state, limit it to less than 183 days. This article from CNNMoney sets forth other factors to consider:
Small business owners who’ve recently launched a new business venture or are looking to raise their profile and find new customers often turn to social media, but which social network is best for your business? Chicago small business lawyer and CPA Brian J. Thompson wants to direct your attention to this helpful article courtesy of CNNMoney:
Itching for your federal income tax refund? You’ll have to wait an extra 10 days to file your 2013 tax reutrn this year. The IRS says that the 16-day government shutdown in October has delayed the start of tax filing from Jan. 21 to Jan. 31:
Chicago business lawyer and CPA Brian J. Thompson wants you to know that several homeowner tax breaks including the private mortgage insurance deduction and mortgage debt relief expired on December 31, 2013:
If you are getting ready to file your 2013 federal income taxes, you may be wondering about your 2013 marginal income tax rates and standard deduction amounts. Here’s some of the info you’ll need courtesy of the IRS and Forbes:
Qualify Foreign Corporation in Illinois
Qualify foreign corporation or LLC. A corporation or LLC formed under the laws of another state or country is a foreign business entity. A foreign corporation or LLC may do business in Illinois. However, such foreign corporations or LLCs must first qualify or register to do business in Illinois.
Contact Chicago business lawyer and CPA Brian J. Thompson to qualify your corporation or LLC to transact business in Illinois.
In order to reduce federal income taxes on your mutual funds, avoid buying mutual funds near the distribution date, buy index funds which typically have little to no capital gains or dividend distributions, buy a tax-managed mutual funds, or harvest other capital losses to offset your capital gains (If you have more capital losses than gains, you can deduct up to $3,000 of those capital losses from your earned income. And if you still have losses left over, you can carry those over into the next tax year). The full range of strategies to minimize your taxes on investment gains is explained in this article:
From filing status errors to incomplete info on charitable deductions, don’t delay receipt of your refund with any of these common tax filing mistakes (courtesy of Yahoo! Finance and Bankrate, Inc.):
Starting your own Limited Liability Company or corporation? Chicago business lawyer Brian J. Thompson wants you to know that officers, directors and controlling shareholders who leave one corporation to start a competing enterprise need to beware of the corporate opportunity doctrine. A corporate opportunity refers to any business opportunity that becomes known to an officer or director of a corporation due his position within the company. The corporate opportunity doctrine holds that the directors, officers and controlling shareholders have a duty of loyalty to the corporation and cannot to take such opportunities for themselves without first disclosing the opportunity to the board of directors of the corporation and getting permission from the board of directors. Failure to follow this procedure can be a violation of the duty of loyalty. As a result, the corporation may be entitled to a constructive trust of all profits obtained from the violation of the corporate opportunity doctrine. Contact Chicago business lawyer and CPA Brian J. Thompson for to form your Illniois LLC or Illinois S-Corporation.