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can you deduct your home office from your taxes if you work from home

The IRS may choose to audit a taxpayer’s accounts for a number of reasons. In general, the IRS has up to three years after the tax filing deadline to open up an audit. However, individuals who didn’t report 25% or more of their income can be audited up to six years after filing their taxes. Dealing with an audit can be stressful, and it’s usually best to have a tax professional on your side to ensure you gather all the necessary documentation. Here’s a couple of reasons why the IRS may open an audit on one of your tax returns.


You Omitted Part of Your Income


One of the most common reasons the IRS will open an audit is if they suspect a taxpayer did not report all of their income. Your employer doesn’t just send your W-2 to you. The IRS gets a copy of any filed tax documents, meaning if the income you report doesn’t match your copy, there’s a good chance they’ll open an audit. As you’re getting ready to file taxes, it’s important to ensure you’re not missing any tax forms. For example, if you’re on a W-2 from your employer but do some freelancing on the side, be sure to include the income on any 1099s in your income.


You Claimed the Home Office Deduction but Aren’t Eligible


The home office deduction might provide a valuable tax break to some individuals who work from home. If you work from home, you can write off costs like Wi-Fi, office materials, and even a portion of your mortgage or rent. However, in order to claim the home office deduction, there are eligibility requirements that apply. To qualify, you must “regularly and exclusively” use your home office for business. This means you must designate some area of your house for business use and nothing else. To avoid troubles with the IRS, it’s best to keep records of all the expenses you plan on claiming.


You’ve Reported Excessive Business Losses


Business owners may be eligible for several deductions. However, if year after year, your business has been reporting a loss, it becomes questionable to the IRS. It’s normal for most businesses to report losses in their early stages. However, it becomes suspicious if your company never reports a profit. If your business is really struggling, you’ll likely need to prove to the IRS that you have a business plan with a profit motive. In the case the IRS audits you, it’s important to have detailed records of not only your expenses but also your business plans.


You Failed to Pay Taxes on Stock Trades


Stock trading is gaining in popularity. However, unless your stocks are in a tax-deferred retirement account—like a 401(k)— they are subject to taxes. If you sell any shares, both you and the IRS will receive a copy of Form 1099-B from your brokerage. Once you receive this form, you will need to report your capital gains (or losses) on Schedule D as part of your income tax return. If you fail or forget to report your stock trades, you could get contacted by the IRS for an audit.


Choose Morgan Sebastian for Help With Your Taxes


At Morgan Sebastian Law, Attorney Becky Sebastian is eager to help you navigate the complexities of filing your taxes. As a trusted tax resolution lawyer, Attorney Becky Sebastian has years of experience representing business owners and individuals who are experiencing tax audits, wage garnishment, and other tax-related issues. She can provide you with the professionalism and peace of mind you deserve when dealing with the IRS.


To schedule a consultation with an experienced tax resolution lawyer, call (877) 223-6605 or fill out our online contact form.










can you deduct your home office from your taxes if you work from home

Cryptocurrencies are taxable. The IRS classifies cryptocurrency holdings as property for tax purposes, meaning it is taxed similarly to other assets, like stocks. If you own cryptocurrency, ensuring you are properly tracking your gains and losses is essential to avoiding an audit from the IRS. However, The complex and ever-evolving nature of digital currencies can make proper reporting complicated. Here are some important things to know about reporting cryptocurrency to the IRS and how to plan ahead for your taxes.


Do I Owe Taxes on Cryptocurrency I Purchased?


The simple act of buying cryptocurrency and keeping it within the platform where you purchased it or transferring it to your personal wallet is not taxable, meaning you won’t owe taxes on them at the end of the year.


Are Cryptocurrency Exchanges and Sales Taxable?


When you start to exchange your digital currencies or use them as a payment method, they become taxable. Actions like selling your crypto for U.S dollars, exchanging one digital currency for another, or buying one cryptocurrency currency with another are all examples of taxable transactions. Essentially, whenever you sell or exchange your crypto for another “investment”, it becomes a taxable transaction. This means people who do a lot of trading must be extra diligent about tracking their transactions, as every time you place a trade, it’s a taxable event.


Is Paying for Something at a Retailer That Accepts Digital Currencies Taxable?


The IRS views spending your digital currencies in the same way as selling them. For instance, let’s say you bought Bitcoin for $1,000 and the value increased to $20,000. If you use your Bitcoin to buy a new car, you’ll have to pay capital gains tax on that transaction. The IRS will look at the value of the coin on the day you bought the car and compare that to the value on the date on which it was acquired. If you make less than $40,000 a year, you’ll have to pay taxes on any item purchased with a digital currency that increased in value.


Reporting and Paying Taxes on Cryptocurrency


Since the IRS classified digital currencies as property, their taxable value is subject to capital gains or losses. This means the taxes you pay on virtual currencies will depend on how much value they gained or lost in the fiscal year. The difference between how much you bought and sold the crypto for and the amount you earn from its sale (the capital gain or loss) is what you’ll report on your tax return. For example, if you bought $300 worth of Ethereum and sold it for $1,000, you’d report and pay taxes on a gain of $700.


The capital tax gains rate you’ll be subject to will depend on your earnings from the sale along with how long you held the currency before selling. For example, if you held your digital currencies for multiple years before selling, they’d be subject to a long-term capital gains tax rate. To outline your cryptocurrency earnings or losses, you can use Form 8949 and then report them on Form 1040 using Schedule D.


Consult a Skilled Tax Resolution Attorney


If you own, sell, or exchange virtual currency, the best way to avoid getting audited or other issues with the IRS is to consult with an experienced tax attorney. At Morgan Sebastian Law, attorney Becky Sebastian is eager to help you navigate the complexities of your tax situation. She understands that accurately reporting capital gains tax on your digital currencies can be a challenge, and can help you properly report gains (or losses) to avoid an audit.


To schedule a consultation with an experienced tax resolution lawyer, call (877) 223-6605 or fill out our online contact form.









can you deduct your home office from your taxes if you work from home

Many people are wondering if the stimulus payments provided during the pandemic will affect their tax refund. However, since stimulus payments are not considered taxable income, they won’t be considered as additional income by the IRS when calculating your return. The only way stimulus payments could affect your taxes is if you were eligible to receive them but didn’t get them. In this scenario, claiming the Recovery Rebate Tax Credit on your taxes could increase your refund.


If you are concerned about filing your taxes incorrectly or aren’t sure how to claim the Recovery Rebate Tax Credit, a skilled tax resolution lawyer can be a great resource. Here is some helpful information to know about the Recovery Rebate Tax Credit and how to claim it when you file your taxes.


What Is a Tax Credit?


Tax credits decrease the amount of state and federal income tax you owe during tax season. Unlike deductions, which reduce your taxable income, tax credits reduce the amount of tax you owe dollar for dollar. Tax credits are used to promote certain behaviors or help disadvantaged taxpayers and are considered more favorable than deductions. There are two kinds of tax credits: nonrefundable and refundable.


Refundable tax credits not only reduce the amount of tax you owe, but could also result in a refund if the credit is more than you owe in taxes. For example, if you are eligible for a $1,000 refundable tax credit but only owed $300 in taxes, the leftover amount from the credit ($700) would be provided to you as a refund. Examples of refundable tax credits include:


  • American Opportunity Tax Credit.

  • Earned Income Tax Credit.

  • Child Tax Credit.


Nonrefundable tax credits provide taxpayers with a refund of the amount they owe and nothing more. For example, if you are eligible for a nonrefundable tax credit totaling $1,000 but all you owe is $300, you would not receive the remaining $700 as a refund. Instead, you would use the tax credit to reduce your taxes by the amount you owe, or $300. Examples of nonrefundable tax credits include:


  • Adoption Tax Credit.

  • Foreign Tax Credit.

  • Mortgage Interest Tax Credit.

  • Residential Energy Property Credit.


The Recovery Rebate Tax Credit


The Recovery Rebate Tax Credit was developed to help Americans struggling in the pandemic. However, unlike other tax credits that are usually provided during tax season as a direct reduction of an individual’s taxes, the Recovery Rebate Tax Credit was provided in advanced stimulus payments. Both the first and second stimulus payments of $1,200 and $600 respectively were essentially advanced payments of the credit. Most people who were eligible for the credit already received their payments; yet, if the combined total of your stimulus checks were less than the Recovery Rebate Credit amount, you may be able to get the difference back when you file your taxes.


Claiming the Recovery Rebate Credit on Your Taxes


While most eligible taxpayers received their stimulus payments in advance and won’t receive additional money from claiming the Recovery Rebate Tax Credit, some taxpayers could benefit from claiming the credit on their taxes. Specifically, if you believe you were underpaid in stimulus payments based on your eligibility, claiming the tax credit when you file will allow you to see if you qualify for more.


The stimulus payments were meant to reflect your 2020 tax situation. However, since they were provided in advance of 2020 returns, the IRS used your most recent tax return—most likely from 2019 or 2018—to determine your eligibility. This means that individuals who had a drastic change in income between 2019 and 2020 may not have received the payments they were eligible for since they had not yet filed their 2020 return. Working with a skilled tax professional is the best way to determine if you may be eligible for more funds through the Recovery Rebate Tax Credit.


Choose Morgan Sebastian for Help With Your Taxes


At Morgan Sebastian Law, Attorney Becky Sebastian is eager to help you navigate the complexities of your filing your taxes. As a trusted tax resolution lawyer, Attorney Becky Sebastian has years of experience representing business owners and individuals who are experiencing tax audits, wage garnishment, and other tax-related issues. She can provide you with the professionalism and peace of mind you deserve when dealing with the IRS.


To schedule a consultation with an experienced tax resolution lawyer, call (877) 223-6605 or fill out our online contact form.








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