Tag: Chicago tax accountant

Illinois State Income Tax

Illinois State Income Tax

The Illinois state income tax is back up, it’s just a matter of when and how much it will rise.  Will Illinois implement a progressive state income tax like California?  Maybe so if Illinois House Speaker Michael Madigan has his way.  According to Crain’s Chicago Business, House Speaker Madigan plans to introduce legislation calling for a vote in November on a constitutional amendment to allow a progressive state income tax in Illinois.  Specifically, Madigan proposed a 3 percent surcharge on individual income above $1 million.  On the other hand, Senate President John Cullerton may be seeking a progressive state income tax on a lower income threshhold:

http://www.chicagobusiness.com/article/20140320/BLOGS02/140329980/madigan-moves-for-millionaire-surcharge?r=6778C2146356E5Z

 

Severance Pay Held Taxable

Severance Pay

The U.S. Supreme Court ruled severance pay is taxable income.  Lower courts issued divided rulings on the issue.  However, it should not come as a surprise that the Supreme Court recently ruled that severance payments to laid off workers are subject to Social Security, Medicare and federal income tax.  Therefore, recipients of severance pay should retain a CPA to understand the tax implications of severance pay.  Also, get full details of the ruling in U.S. v. Quality Stores:

http://www.accountingtoday.com/news/supreme-court-rules-severance-pay-taxable-income

Mortgage Forgiveness Debt Relief Act

Mortgage Forgiveness Debt Relief Act

The Mortgage Forgiveness Debt Relief Act recently extended to cover tax years 2015 and 2016.  https://www.nar.realtor/news-releases/2015/12/national-association-of-realtors-applaud-passage-of-tax-extenders-package

Does the cancellation of a debt result in taxable income?  Yes, if you owe a debt  to someone and they cancel or forgive that debt, the canceled amount may be taxable income to you.   Some exceptions to this general rule were set forth in my earlier blog post on this subject. The taxpayer should receive a 1099-C Cancellation of Debt.  This cancellation of debt is also reported to the IRS.

However, there is some good news for homeowners who have gone through a mortgage foreclosure or short sale.  In December 2007, Congress enacted the The Mortgage  Forgiveness Debt Relief Act of 2007.   Generally, the Act allows taxpayers to exclude income from the discharge of debt on their principal residence as the result of a mortgage modification, mortgage foreclosure or short sale. The Act applies to  up to $2 million of mortgage debt ($1 million if married filing separately) forgiven in calendar years 2007 through 2013. Subsequently, Congress extended the Act to mortgage debt forgiven in tax year 2014.

Contact Chicago CPA and attorney Brian J. Thompson for legal advice re the Mortgage Forgiveness Debt Relief Act.

Private Mortage Insurance Deduction and Mortgage Loan Relief Expiring

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:

http://www.mainstreet.com/article/moneyinvesting/taxes/homeowner-tax-breaks-expire?page=1

 

2013 Marginal Income Tax Rates and Standard Deduction Amounts

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:

http://www.forbes.com/sites/kellyphillipserb/2013/01/15/irs-announces-2013-tax-rates-standard-deduction-amounts-and-more/

How to Reduce Income Taxes on Mutual Funds

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:

http://www.usatoday.com/story/money/columnist/waggoner/2013/10/31/the-horror-of-mutual-fund-taxes/3327981/

Common Tax Filing Mistakes to Avoid

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.):

http://finance.yahoo.com/news/avoid-10-common-tax-filing-100000908.html

How do I resovle IRS Tax Problems?

If you are a taxpayer who owes income tax debts to the Internal Revenue Service, you may be asking yourself: “How to defend against an IRS tax or federal tax levy?” or “How can I resolve my federal income tax problems?” or “What should I do about my unfiled federal income tax returns and unpaid IRS tax debts/federal income tax debts, penalties and interest?” Chicago tax attorney and CPA Brian J. Thompson can assist you in resolving your unpaid federal income taxes and federal income tax problems with the IRS.

What should you do if the IRS sends you a Notice of Tax Due and Demand for Payment, a Notice of Federal Tax Lien, or a Final Notice of Intent to Levy and Notice of Your Right to a Hearing?

Do not ignore collection actions by the IRS which may include seizure and sale of property
held by you or levy of property that is yours but held by someone else (such as your wages,
retirement accounts, bank accounts, rental income, accounts receivable). The first step is to determine your true tax liability to the IRS, including any failure-to-file penalties, failure-to-pay penalties, and interest.  This first step may include filing any unfiled tax returns or correcting prior tax returns.  The next step in resolving your IRS tax debts involves paying the IRS what you owe. If you don’t have the money to pay your unpaid back taxes and federal tax debts now, an installment agreement or offer in compromise might be right for you.