May 17, 2012

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The Gift Tax and Who is Responsible for the IRS Payment

March 1, 2011 By

What is a Gift Tax? A Gift Tax is any real estate property or other valued “property” items such as jewelry or stocks. When these properties are given to someone other than a spouse, they are considered a gift when the “giver” is not expecting full money value or no money return. The gift can be given to any such person, family, friend or business partner as long as it is not the spouse.

However, the “giver” is responsible for the IRS payment towards the gift that he or she gave to another other than a spouse. This can get confusing and makes the Gift Tax one of the most misunderstood taxes in the IRS Tax Law…

To file the Gift Tax, use IRS Form 709-United States Gift (and Generation Skipping-Transfer) Tax Return. The gift return or any gift tax is due the following year that the gift was given. For example, if a person decided to give the “gift” of a house to his/her son as a wedding present in 2010, then the tax amount owed from the gifted house is due by no later than April 15th in 2011. If you gave a gift of real estate, jewelry, stocks, bonds, put a person on their checking or savings bank investment account that had a fair amount of money, or any other type of property in the year of 2010, then you are responsible for filing and reporting that gift and paying taxes on them by this April.

The recipient of the gift will not incur responsibility of paying taxes on the gift received immediately because it is not included in the recipient’s taxable income (yet). However if the gift is sold, then that recipient will be responsible for paying the capital gains tax incurred for selling the gift. In the end, a gift may end up costing you some significant amount in taxes and some gifts may not “keep on giving” but actually, take!

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Oprah’s IRS Tax Woes

February 4, 2011 By

Many famous celebrities deal with IRS Tax issues just as the rest of the taxpayer population. For most, there is dislike towards the IRS knowing that a large portion or large percentage of their money goes to the IRS to pay taxes. All celebrities have to pay taxes, as no one is exempt from the IRS. In Oprah Winfrey’s case she really dislikes having to write those IRS checks!

In fact, it has become something of a tradition of having wine and nowadays, tequila to settle her nerves when she writes those IRS tax checks because they are indeed, large sums written and signed by Oprah herself. “The most pain I feel — and my accountants will tell you this — is every time I write a check to the IRS, it’s a ceremony,” says Oprah, “For years they came in with wine. Now they come in with tequila. It’s a tequila-signing ceremony.”

Every taxpayer that has to deal with tax issues and dreads owing the IRS. It is definitely not the “bright” side, not knowing where that hard-earned money goes. If everyone understood where the IRS tax goes, then maybe people would understand better why there is the law of taxable income. All of the money that is paid into the IRS goes back into America and the people, one way or another: to assist in the government and programs like Welfare (Department of Social Services – for minorities, low income families and senior citizens and the homeless).

Oprah Winfrey may not like the IRS and owing them each year, but she is still a very generous soul, having donated to charities and helped financially world-wide in the amount of $300 million dollars. Giving to charities and other foundations are also IRS tax deductible and lowers any taxpayer’s owed IRS tax amounts.

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Estimated Taxes for the Self-Employed and Small Business Owner

January 7, 2010 By

Small business owners and self-employed individuals often find themselves struggling with the notion of paying estimated taxes. There are essentially two ways to go about paying your taxes when you are self employed or a small business owner. The first method is to put off paying taxes until the end of each payment period and find yourself burdened with a huge tax bill; or pay taxes along the way every time you make money. The first option is great for people who don’t want to think too much about their taxes and are good at saving money, while the second method is ideal for just about everyone else.

Paying estimated taxes can be a little bit confusing however it’s well worth the effort of understanding. Here is where paying estimated taxes applies for most people: income from freelance work, alimony, rent payments, profit from the sale of assets, lottery winnings and prizes. In all of these cases if you expect to owe more than $1000 in taxes at the end of the year you should be making estimated tax payments.

To figure out your estimated taxes use the worksheet on form 1040 -ES, available from the IRS. It is important to recalculate your estimated payment for every payment quarter to make sure that your information stays relevant and accurate. Should you miss a quarterly payment or submit false or inaccurate information you could be subject to fines from the IRS.

The easiest way to pay your estimated tax is to use the Electronic Federal Tax Payment System available through the IRS. Using this system you are able to pay your estimated tax on a weekly, bi weekly, monthly or quarterly basis. The system also keeps track of your payment history which can be helpful when planning your next estimated tax payment.

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