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Deduction of Hospital Care Expenses – Paul Gaulkin CPA

hospital sign

The cost of inpatient hospital care which requires an overnight stay, including the cost of meals and lodging, is deductible as an itemized deduction. The extent to which expenses for care in an institution other than a hospital(nursing home, home for the aged, ect.) qualify as a deduction for medical care depends on the situation, condition of the individual and the nature of the services received. Specific Situations If the availability of medical care in an institution is the principal … Read more

Health Reimbursement Arrangement Guide – Paul Gaulkin CPA

looking at medical papers

A health reimbursement arrangement is an employer established benefit plan for employees, which is different from an MSA or HSA. Under the plan, an employer reimburses a participating employees qualified medical expenses up to a maximum dollar amount specified in the HRA plan agreement for the coverage period. Unlike an MSA or HSA which require contributions and distributions to be reported on employee’s federal tax returns, there is no tax reporting requirements for an HRA. Health Reimbursement Arrangement Benefits HRAs … Read more

Health Savings Account Rules & Benefits – Paul Gaulkin CPA

couple looking at healthcare plans

The health savings account was created in 2003 and shares many characteristics of the Archer MSA program. Like MSAs, HSAs are trusts created solely to pay the qualified medical expenses of an account beneficiary and call for an individual to: 1. Buy a high deductible health insurance policy, and 2. Make tax deductible contributions to the trust Contributions made to the trust and any earnings are tax deferred for as long as they remain in the trust. HSA account holders … Read more

Hobby Deduction Code Section 183 – Paul Gaulkin CPA

someone doing a hobby

Deductions for hobby activities are claimed as itemized deductions on Schedule A, Form 1040. These deductions must be taken in the following order and only to the extent stated in each of the following three level categories. Level 1 Deductions Deductions that a taxpayer may claim for personal expenses, such as home mortgage interest, taxes, casualty and theft losses, bad debts, worthless securities, tax related expenses, qualified residence interest, medical expenses, charitable contributions, etc. may be taken in full. However, … Read more

Dependent Care Credit Rules & Guidelines – Paul Gaulkin CPA

picture of coins and cash

A tax credit is available for taxpayers who have incurred employment related expenses for the care of a qualifying individual. The amount of credit available is equal to an applicable percentage of the expenses paid by the taxpayer during the taxable year. Credit Filing Requirements In order to qualify for the dependent care credit, a taxpayer must have incurred employment related expenses for the care of a qualifying individual who resides in the taxpayer’s household for more than one half … Read more

Statutory Requirements Regarding Alimony – Paul Gaulkin CPA

alimony judgment money

There are basically five statutory requirements for a taxpayer to claim money transferred to them as alimony payments. If divorce or separate instrument characterizes a payment as “alimony” but fails to satisfy the five requirements under Code Section 71, the payment will not be treated as alimony for federal income tax purposes, regardless of what it is considered under state law. These fix requirements include: 1. Payment must be made in cash 2. Paid to or on behalf of spouse … Read more

Separately Reportable Items on Partnership Return – Paul Gaulkin CPA

two people shaking hands

Any item that may have to be treated differently by each partner must be separately stated. For example, some partners may be able to deduct charitable contributions that flow through from the partnership, but those that have already met the 50 percent AGI limit for contributions will have to carry over those contributions. Each partner’s share of these items is identified on the partner’s separate Schedule K-1 tax return. The following items should be separately stated: 1. Short term capital … Read more

Qualified Employee Discount Exclusion – Paul Gaulkin CPA

50 percent discount picture

Certain employee discounts provided to employees on the selling price of qualified property or services of the employer are excludable from gross income. The main rule in this provision is that in order for the discount to be excludable, it must be available to employees on a non-discriminating basis. Discount Ceiling The employee discount may not exceed the gross profit percentage normally offered by the employer to customers. In the case of qualified services, the excludable amount cannot exceed 20 … Read more

Assignment of Income Doctrine Definition & Guide – Paul Gaulkin CPA

Income drawn on chalkboard

The assignment of income doctrine basically is defined as income that is taxed to the individual who earned it, even if the right to the income has been transferred to another individual prior to recognition. This means that compensation, interest, rents, dividends, and other forms of income usually must be included in the gross income of the recipient even if the income was transferred to another individual. Assignment of Income Doctrine A tax problem arises when an individual attempts to … Read more

Tax Free State & Municipal Bonds – Paul Gaulkin CPA

chart of bond rates up and down

Interest received on state and local government bonds is generally excludable from gross income. A state or local bond is basically an obligation of a state or political subdivision, and the term state includes the District of Columbia and any possession of the United States. Tax exempt bonds are an attractive investment for many investors because the after tax return on such bonds is considerably higher than taxable bonds. Interest received on state or local bonds is excludable from gross … Read more