“Summer is a season when people have fun, yet get things done,” the IRS said in a recent “Tax Tip.” Now that the standard deduction is so high, fewer taxpayers itemize deductions. But if you do, here’s a brief look at topics to keep in mind when planning this summer. State and local taxes are still deductible, but limited. Buying or refinancing a home may have tax implications you need to be aware of. Donating to qualified charities is still tax deductible for itemizers, but proof of donations is required, and miles driven for charity must also be tracked. If you won money gambling, the IRS has tax advice for you. For more details on each topic: https://bit.ly/2T5QOeD
Who can deduct car expenses on a tax return? Business owners and self-employed persons who use their cars for business may be able to deduct car expenses, the IRS reminds us. But if a car is used both for business and personal purposes, the expenses must be split based on mileage. There are two methods for figuring car expenses: actual expenses and the standard mileage rate (for 2019, 58 cents per mile). Both require careful recordkeeping. Prior to 2018, some employees who used their cars for work could deduct expenses, but that’s no longer true even if costs aren’t reimbursed. Certain exceptions exist. For details, including a list of “actual expenses,” click here: https://bit.ly/2Y8oAFQ
Unusual changes to reported income may draw unwanted IRS attention. In one case, a psychic counselor reported substantial wage income over several years. Then without explanation, his reported wage income dropped sharply. Upon review of his records, the IRS found unreported bank deposits exceeding $1.5 million. The taxpayer claimed the deposits were repayments of loans he’d made to his late mother or money she’d given him to buy property for her. However, he was unable to produce credible evidence that formal loans had been made or that property had been purchased for his mother. Therefore, he was issued a notice of deficiency and assessed accuracy-related penalties.