Liz Smith, CPA, MSTFP

If you own a business, you may be able to take the meals and entertainment deduction to lower your tax liability. Generally, you can deduct the cost of business-related meals and meals consumed while traveling overnight. Entertainment costs aren’t deductible. The purpose and beneficiary of the meal are primary factors in determining which expenses you…

Section 1231 assets include real estate and depreciable assets used for trade or business and held for more than a year. They are named after section 1231 of the US tax code. Capital assets are defined more broadly as property used personally or held for investment. Knowing the difference in 1231 asset vs capital asset…

IRS Form 8832 is filed by limited liability companies (LLCs) planning to be taxed as C corporations (C-corps). The form must be filed between one year prior and 75 days after its effective date. With late relief, the effective date can be extended up to three years and 75 days from when relief was requested,…

Stock is ordinarily considered a capital asset, which would result in a capital loss if the stock was disposed of after a decline in value. Being able to take an ordinary loss on disposal of stock results in preferred tax treatment for 1244 stock. The ordinary loss would be claimed by filing Form 4797, and…

Commuting miles are the travel between the taxpayer’s home and primary work place, while business miles can be driven for various business reasons.  Business miles are a deductible business expense, but commuting miles are not. Note: The Tax Cuts and Jobs Act (TCJA) suspended the deduction for employee business expenses—including business mileage—for tax years through…

Listed property consists of items that can be used for business and personal purposes. They include the following categories: Passenger vehicles are defined as any four-wheeled vehicle intended for use on public streets and weighing no more than 6,000 pounds. Equipment designated for entertainment and recreational use, such as photography and audio/visual equipment. Other assets…

IRS Code 806 represents the tax withheld during the year on your behalf, generally on Form W-2 or 1099. Tax withholding is typically done by an employer or brokerage account administrator and acts as a prepayment of the tax that the IRS may assess when your tax return is filed. The Code 806 amount on…

While the naming convention implies that something is included in income, the auto lease inclusion is a calculated amount by which lease payment deductions are reduced. The reduction is triggered if the lease duration is 30 days or more and the fair market value (FMV) of the vehicle exceeds the threshold amount that the IRS…

Our guide will walk you through how to fill out Form 8824. These instructions detail the supporting documents needed to prepare the form and list line-by-line instructions. A completed form is also provided for further clarity on Form 8824 instructions. Step 1: Gather Supporting Information Here is a general summary of the information needed to…

Form 6252 is used to report income from the disposition of property sold under the installment method. In the course of a sale, when one or more payments are made after the close of the tax year, the installment method applies. What Sales Are Reported on Form 6252? Generally, when property is sold, a seller…

The steps shown here will walk you through how to complete Form 5884. These steps address how to obtain the form, complete calculations, report pass-through credit, and file the completed form. To further assist, we’ve provided an example of a filled-out form, prepared in accordance with the IRS’s Form 5884 instructions. Step 1: Obtain the…

Under cash-basis accounting, the taxpayer records income once payment is received and records expenses when payments are made. When noncash payments are received as income, the amount recorded is the fair market value (FMV) of the property received. Payments made with a bank credit card are deductible as cash payments, whereas payments made with a…