Today's Tax Talk Archives - Chicago IRS Tax Attorney

Sole Proprietorship, LLC, or Corporation: Making the Right Choice

September 20, 2023 by admin

Wednesday, September 20, 2023 – Listen up, taxpayers—I’m here to tell you that your business structure isn’t just a bunch of paperwork; it’s a game-changing strategy. Get this wrong, and you’ll pay for it, literally—in taxes, and maybe even in lawsuits. But get it right, and you’re one step closer to financial freedom.

You’ve got options. Let’s start simple: Sole Proprietorship. It’s the easiest to set up but don’t get too excited. This structure ties your personal finances to your business, meaning if your business goes belly-up, your personal assets are on the line. And here’s another kicker: all your business profits are taxed as personal income. You think that’s smart money? Think again.

Now, let’s talk about the Limited Liability Company, or LLC. It’s the darling of the small business world for good reason. With an LLC, your personal assets get a layer of protection, and you can decide how you want the IRS to tax you. But remember, flexibility means more decisions; more decisions mean more room for mistakes. Get educated.

Then we have corporations—S-Corps and C-Corps. S-Corps are similar to LLCs but come with their own maze of rules. As for C-Corps, they’re their own beasts entirely. The corporate tax rate may be lower but beware of the double taxation trap. Profits can get taxed twice—first at the company level, then again when they reach your pocket as dividends.

Look, taxpayers, don’t play guessing games with your financial future. It’s critical to talk to a tax attorney and get the best advice for your specific situation. Remember, it’s not just about making money; it’s about keeping it, and making it work for you.

Steven A. Leahy is a tax attorney in Illinois. He was the host of the long-running popular Radio Show “The IRS Radio Hour” heard every Sunday evening on AM 560 The Answer. Attorney Leahy is also the author of the book “Deal With Your IRS Problems Today!” You can get a FREE copy of this important book at FreeIRSBook.com. Or Call 24/7 (312)664-6649

Beware Crypto-Traders: 1099 Forms May Bury You

September 20, 2023 by admin

Crypto-Tuesday, September 19, 2022 – Hey taxpayers, If you’re messing around with this Bitcoin and other digital money, you better brace yourselves. The government wants their cut too, and they’re real serious about it.

So here’s the thing: end of the year comes, and WHAM! You get hit with a ton of these 1099-B tax papers (soon to be 1099-DAs) What’s a 1099-B? Well, it’s a paper that says how much you made or lost trading stuff. And guess what? Every place you traded crypto is gonna send you one. So if you’re trading a lot, or using different apps to do it, you’re gonna have a mountain of papers to deal with. I have clients who received 100’s of 1099-B forms in one year!

Don’t think you can get just any brainiac with a calculator to figure this out. This crypto tax stuff is like the Wild West, and you need someone who knows the ropes. So get someone who really gets how digital money taxes work.

And here’s the kicker: some of these trading places don’t even send out 1099-Bs. So you gotta be real careful, or you’re looking for trouble with the IRS. My old man used to say, “Time is money.” So use your time wisely and get to know how taxes work with this crypto stuff.

Hey, I know it sounds like a headache, but life ain’t always easy, right? This is part of the game if you wanna get rich and keep your money safe. Just remember, the taxman always wants his share, so you better be ready. It’s not just about making a quick buck; you gotta be smart about keeping it too.

4.7 Billion 1099 Forms: More Coming!

September 19, 2023 by admin

Monday, September 18, 2023 – Listen up, taxpayers. You think you know, but you have no idea. The game’s changing, especially when it comes to taxes and the IRS. I’ve been teaching high-level classes on this stuff for years, and let me tell you, the best way to master something is to teach it. Currently, I’m working on my third class with Lorman Education Services, and we’re diving deep into the world of IRS Form 1099.

Now, I bet most of you have heard of a 1099 form. You’ve probably even received one. But do you actually know the true power behind this simple piece of paper? It falls under what they call “Information Returns,” and these are the IRS’s watchdogs, making sure you, me, and everyone else are paying our fair share.

Last year, get this, there were nearly 5.5 billion of these third-party information returns filed—5.5 billion! And a whopping 86% of those were 1099 forms. But it doesn’t stop there. There are 21 different flavors of this form, and the IRS just introduced a new one, Form 1099-DA, for digital assets. That’s right, they’re keeping an eye on your crypto.

And you know what else is hitting the headlines? The rules for the 1099-K cash apps. They were supposed to kick in, but Uncle Sam pushed it back a year. So, in 2023, the game changes. The threshold for getting hit with a 1099-K just plunged from $20,000 and 200 transactions to a mere $600. You think this won’t affect you? Think again.

Erin Collins, the Taxpayer Advocate, is speculating that this change might double the number of 1099s next year. If that happens, well, brace yourself for the IRS to be slower than molasses, trying to sort it all out.

So, if you’re in business, or thinking of getting into business, you better get your ducks in a row. These 1099 rules aren’t just random guidelines; they’re how the IRS keeps tabs on us. So educate yourself. It’s not just about making money; it’s about understanding the rules of the game so you can play it better than anyone else.

Surprise: $400,000 IRS Audit Pledge Broken

September 15, 2023 by admin

Thursday, September 14, 2023 – It’s clear as day: Biden’s promise to refrain from auditing households and small businesses making less than $400,000 a year was never believable from the get-go. The Treasury Inspector General for Tax Administration (TIGTA) just dropped a bombshell report saying as much. They reveal that the IRS is hopelessly out-of-date, using income thresholds from 1976! That’s right—while your cost-of-living skyrockets, the IRS is stuck in a time warp, holding onto an archaic definition of “high income” set at $200,000. This bureaucratic inflexibility isn’t just a quirky footnote; it’s leading to more audits for the little guy.

What’s even more shocking is that when TIGTA recommended that the IRS update this decades-old standard to align with Biden’s supposed $400,000 pledge, the IRS flat-out refused. They claim they need “agility” to go after anyone they please. This isn’t agility; it’s a power grab. The IRS wants an unchecked ability to audit whomever they wish, flying in the face of the President’s alleged intentions.

TIGTA didn’t mince words either. They slammed the IRS for having “no common understanding” of what high-income even means. And let’s not forget the report’s title: “The IRS Needs to Leverage the Most Effective Training for Revenue Agents Examining High-Income Taxpayers.” Translation? The IRS is not just outdated but woefully unprepared to enact even their own directives.

So here it is, plain and simple: the IRS isn’t about to rein itself in, and the Biden administration’s pledges are looking emptier by the day. It’s another glaring example of why expansive government power should be viewed with the utmost skepticism.

https://www.tigta.gov/reports/audit/irs-needs-leverage-most-effective-training-revenue-agents-examining-high-income

The IRS’s AI Overreach: What Does It Mean To You?

September 13, 2023 by admin

Monday, September 13, 2023 – The IRS was granted $80 billion in the Inflation Reduction Act, a development that has many concerned about an uptick in audits. I’ve long warned that the real issue to watch out for is the increased scrutiny enabled by information technology and artificial intelligence (AI). Now, my concerns are coming to fruition.

Armed with this windfall, the IRS has declared its intent to use AI to audit wealthy individuals and large financial partnerships, specifically those with an average of $10 billion in assets. While the agency’s initial focus appears to be on high earners and the ultra-rich, the fundamental issue is the Pandora’s Box that opens when the IRS begins to integrate AI into its audit procedures. Once the technology for “pattern recognition” and trend identification is unleashed, what safeguards are in place to prevent its application on middle-income Americans?

Today, the IRS says it will go after those who earn more than $1 million and have more than $250,000 in recognized tax debt. Seems fair, right? But don’t be fooled. The IRS has also signaled its intention to cast its AI net over digital assets—a rapidly expanding field that many average earners are entering – and all 1099 information return earners.

So, why does this matter? Because today’s focus on high-income earners is just a precursor to extending this technology to average Americans. While some may celebrate these developments as efforts to make the wealthy pay their ‘fair share,’ we must question what this means for the freedoms and privacy rights of all taxpayers. With the IRS’s enhanced capabilities courtesy of the Inflation Reduction Act, it’s more critical than ever to remain vigilant against potential overreach and abuse.

Sole Proprietorship, LLC, or Corporation: Making the Right Choice

Beware Crypto-Traders: 1099 Forms May Bury You

4.7 Billion 1099 Forms: More Coming!

Surprise: $400,000 IRS Audit Pledge Broken

The IRS’s AI Overreach: What Does It Mean To You?

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