This FAQ is added to once a week, please check back for updates.
Can my tax attorney be forced to testify against me in court?
No, your tax attorney cannot be forced to testify against you. The confidential communications shared with your attorney are within the attorney-client privilege. Those privileged communications remain in confidence, even if the IRS charges you with a federal tax crime. Other tax professionals, namely certified public accountants and enrolled agent s, can be forced to testify against their clients about what was discussed during the tax representation.
If I take a Roth IRA withdrawal early to pay for education expenses, will I be subject to a retirement-plan early-distribution penalty?
The 10% additional tax for your Roth IRA will be waived IF: your withdrawal is less than your higher-education expenses AND the funds are withdrawn from your original contributions. You also have to make sure that the expenses are “qualified”, which means the money was spent on tuition, school fees, books, supplies, and equipment during the period of enrollment.
Can I deduct child support from my taxes or claim the child as an exemption?
No, you can’t deduct child support payments from your taxes nor are they taxable income to the payee. You may be able to claim them as a dependent though. The custodial parent is typically the one who claims the exemption for the child, however, the noncustodial parent may be treated as the parent who provided more than half of the support in some situations.
When do I pay estimated taxes?
Typically you will pay your estimated taxes four times per year. Starting April 15th, and the first business day after June 15th, September 15th, and January 15th.
I don’t have an employer who is withholding my income tax. How do I pay my income taxes?
First, if you are in this situation, you must determine why your employer is not withholding income taxes. Many people have no idea that their employer is really paying them as an Independent Contractor (1099 employee), until it is too late. Second, you need to save a good portion of every paycheck (roughly 20-30%). Refer to Form 1040-ES (Estimated Tax for Individuals) and its instructions for estimating payments. That form has as worksheet that can help. You may be liable for penalties if you don’t estimate correctly, so we strongly advise seeking the counsel of a tax attorney or other tax professional.
What is a split refund?
Very simply put, a split refund lets you divide up your refund and direct deposit the funds in up to three separate accounts within the U.S. In order to do so, you must fill out a Form 8888, Allocation of Refund.
Are unemployment benefits taxable?
Unemployment income is taxable income, however, you may qualify for credits and deductions available to lower-income tax payers if your income has decreased. Also, moving expenses and job search expenses may be tax deductable as well. These include things such as fees for printing, employment agencies, career seminars, and business-related travel.
I didn’t have health insurance for most of or all of 2016. Do I have to pay a tax penalty for not having health insurance?
Yes, the Affordable Care Act (ACA) requires most people have health insurance or face a tax penalty. The amount of the tax penalty is different each year, but what many people don’t realize is that there are a number of exemptions such as:
– You’re uninsured for less than 3 consecutive months of the year
– You can’t find “affordable” coverage, meaning the cost of your premium would be more than 8% of household income
– Your household income is low enough that you’re not required to file a federal tax return
These are just some of the exemptions. For a full list you can click here for a complete list.
Can losses from a passive income source such as rental properties be used to lower active income (full-time job) tax liabilities?
This is a tricky question. Generally, rental activities are passive UNLESS you happened to be categorized as a real estate professional. This is not so cut and dry with the IRS, so it’s certainly a question you want to ask your tax attorney before filing.