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Wednesday, August 28, 2013

Forgiving deficiency?

Does anyone know if there are tax consequences with getting a loan modification?

My lender agreed to reduce the unpaid principal amount and forgiving the deficiency. I also had help from the Hardest hit program in MI
I was reading this:


The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

Is Cancellation of Debt income always taxable?


Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:


Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.
 

Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
 
In my case I did file bankruptcy and included my mortgage and it was discharged.

Being that I now agreed to a loan modification do you think it opens me up to having the pay taxes on the deficiency?

I am not exactly sure how that is going to work.

Answer :

No I don’t think so; you do not have to pay taxes on the forgiven loan balance if that mortgage loan was for your primary residence. The primary residence is a home where you live for the majority of the year. The only exception to this rule is if the total amount forgiven exceeds $2 million. Anything up to that point is tax-free. The rest is automatically taxable.
 
As you can see, a loan modification is the result of a negotiation between you, a borrower , and lender, typically over a large loan like a mortgage. Modifications help both sides compromise when the borrower cannot make the current monthly payments. This can save the borrower from foreclosure and credit damage, but the modification may also create tax complications; forgiven debt also affects taxes. Forgiven debt is the amount of money that the borrower would owe to the lender if the loan was unchanged. Sometimes loan modification results in debt settlement, in which the lender forgives a large amount of money. This money counts as income to the IRS and can create…Read more…

Redistributing stock within the existing S-Corp while avoiding additional tax liabilities

Hypothetically:

The company in question is an existing S-Corp. There are four shareholders:

1: 30%

2: 30%

3: 30%

4: 10%

Is there a way to redistribute the existing stock within the company so that all four partners own equal shares of the company (25%) without having any additional tax liabilities?

Answer :

I do not think so. Changes in the ownership of S Corps are governed by shareholder agreements. While all corporations with multiple shareholders should have shareholder agreements in place, often many corporations do not have one. Shareholder agreements spell out the terms and conditions under which shareholders may buy, sell, or transfer their shares in the corporation. Transferring the ownership in an S corp is accomplished…Read more…

W4 confusion

1 : Hello, I bought a house this year and just got married. My husband has an ITIN number and no social security number. We both work. We have no children. Our total income is about $90,000/yr. We will be filing our taxes as married/jointly. I need to change my w4 for work. I am confused if I should have "1" or "2" for total allowances claiming.
 
2 : It is also difficult for me to determine deductions as I don't know my home mortgage interest as this will be my first year owning a home. Basically I just don't want to end up paying a lot when we file our taxes! Please help. 


Answer :

1 : I assume that you are a US resident(a G/C holder) or a citizen, then as yur spouse also has income in US, you can file your return as MFJ;as you are married and one spouse , you, is a U.S. citizen or a resident alien and the other spouse is a nonresident alien, you can choose to treat the nonresident spouse as a U.S. resident. This includes situations in which one spouse is a nonresident alien at the beginning of the tax year, but a resident alien at the end of the year, and the other spouse is a nonresident alien at the end of the year. You need to calculate the total number of exemptions. Generally you can claim yourself, your spouse. The second page of the W-4 form contains a worksheet to help determine the number of allowable exemptions. However, if you are still unsure as to how many exemptions to claim, you need to visit the IRS website and access the IRS Withholding Calculator; please IRS website here and follow the instructions ; 2013 Withholding Calculator
 
Then, you need to submit the completed form to your employer. Be sure to keep a copy of your completed and signed W-4 for your files.

NOTE : The more allowances that you claim on your W-4 form, the less money will be withheld from your paycheck for federal income taxes. Examples of when you may be entitled to claim more allowances include getting married. Each allowance you claim reduces the amount of income subject to federal income tax withholding. For 2013, each allowance claimed reduce your annual income subject to withholding by $3,900.SO, Do not claim more allowances than you are entitled to claim. Improperly claiming allowances on your W-4 form can lead to both civil and criminal penalties. Contact your HR dept for more info . Legally you can declare 9 exemptions…Read more…

When will the IRS issue a Tax Lien and under what circumstances will they release the Tax Lien?


When will the IRS issue a Tax Lien?

Generally speaking, when a taxpayer owes the IRS back taxes, and the Taxpayer makes little or no attempt to settle or negotiate a payment plan, the IRS has the right to file a Federal Tax Lien (to protect its interest in the amount of the Tax Liability).

Why does the IRS issue a Federal Tax Lien?

A Federal Tax Lien gives the IRS a “priority on your real and personal property against all other creditors and furthermore, it provides them the right to seize the property subject to prior encumbrances.”

When will the IRS remove a Tax Lien?

The IRS will release a Federal Tax Lien when the tax liability related to the Tax Lien is fully satisfied. The IRS will release the tax lien within 30 days after full payment or immediately if paid in cash or the equivalent of cash. A Federal Tax Lien can also be released if any of the following circumstances applies:

1.The lien was filed not in accordance with IRS regulations.

2.The release of lien would speed up the actual collection process.

3.The IRS determines it is in their best interest and the taxpayers.

Source : 

http://www.asktaxguru.com/8255-when-will-irs-issue-tax-lien-under.html

Connecticut-source income

1 : I'm in the process of starting an Internet business, and am thinking about establishing the primary office for it in Connecticut. I am a New York resident. This would be an S-Corporation. Most likely I will incorporate in Delaware, but would file as a foreign corp in CT. I read the guidelines and examples in the instructions to Schedule CT-SI, but I am still unclear on the regulations regarding Connecticut-source income.

This company will be in the business of reselling tickets to entertainment and sporting events over the Internet. The web server that runs the website for the business will be located in the state of Kansas.
 
2 : My question is, what would qualify as Connecticut-source income that the business would have to pay CT income tax on? I assume that if a transaction is made on the website where a seller outside Connecticut sells a ticket for an event outside Connecticut to a buyer outside Connecticut, there would be no Connecticut-source income generated in that scenario. So if this represented 100% of the business in a year, there would be no CT source income, correct?

 
3 : What if there's a transaction where the seller is outside CT, but the buyer of the ticket is in CT? Is the profit the company earns on that considered CT-source income? And, vice-versa, if the seller is in CT but the buyer is outside CT, would the profit the company earns on that transaction be CT-source income?

 
4 : To the extent there is any CT-source income, can I deduct that amount from my NYS tax return so that I'm not paying double taxes on the same income?

Answer :

1 : Correct, the S corp conducting business in CT incorporated or chartered in DE is considered a foreign corporation. As your corp will conduct business in CT other than in which it is incorporated, DE, you'll need to determine what qualifications or registrations are required by CT state. You want to do business in CT, but are registered as a Domestic Corporation in DE. In order to legally conduct business in CT, you must register with the CT Secretary of State as a Foreign Corporation. The process of registering as a Foreign Corporation in Connecticut is called Connecticut Corporation Foreign Qualification.
 
2 : Your corp that is doing business in CT or has income from an CT source is required to file a return to CT. Doing business in CT means being engaged in any profit-seeking activity in CT. You are clearly doing business in CT since you have an office in CT. So, as a foreign Corp that either does business in CT or that derive income from sources within the CT , the corp is subject to CT tax laws. If you are engaged in intrastate business and derive income from other states besides Connecticut, you must allocate the amount of income derived from the state of Connecticut in order to determine your Connecticut state taxes. Please contact the dept. of rev. of CT for more info in detail; DRS: Contact DRS

 
3 : As mentioned above, doing business in CT means being engaged…Read more…
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