Do You Have Unreported Income?

The last thing you want is to get in trouble with the IRS—but many find themselves in the hot seat every year, having failed to accurately report all of their income. If the IRS finds a discrepancy between your records and the payment information on file, they will first send you a CP2000 Notice, giving you a chance to prove there has been a mistake and correct the situation. Penalties—from civil to criminal, depending on the situation—may await the taxpayer who fails to report his or her income accurately.

In addition, the IRS is getting much better at catching misreported returns, thanks to electronic means of tracking income and comparing forms 1099-K (Payment Card and Third Party Network Transactions) to business returns. The most likely taxpayers to underreport are high-income individuals and small businesses, so if you fall into either of those categories, you may also be more … Read More

Passing Down the Summer Cottage

A family’s summer cottage is a place for relaxation—a break from the stresses of work, city life, and winter’s grueling months. But this refuge can quickly turn into a source of stress itself when its owners try to pass the property along to their children. What was once a place of family union can turn into divisions between siblings, arguments over money, and a storm of emotions.

A number of baby boomers who grew up spending summers at the family cottage now face the responsibility of inheriting the property from their ageing parents. And the burden of making the transaction as smooth as possible often falls on the parents themselves. A recent article in the Wall Street Journal addresses the issue by presenting a number of possible solutions to make the transfer of property as easy as possible.

  1. Establish early on how the property is being funded in the long term.
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Minnesota’s New Gift Tax: What You Need to Know

Minnesota may hold a steady place near the top of Gallup’s annual Best Places to Live, but a recent Wall Street Journal article claimed the state is also edging out the competition on another list: Worst Places to Die.

Minnesota’s place on the list, which also recommends against passing away in Washington and Nebraska, was established by its high 16% estate tax (or “death tax”). But the state’s number shot up recently after the state passed an additional 10% gift tax—a fee for transferring property to another person during your lifetime.

Here’s the breakdown: 10% of gifts in excess of $14,000 are counted toward your lifetime credit of $100,000 (which comes to an exemption of about $1 million in gifts total). While legislators are quick to assure panicked residents that the majority of people in the state won’t ever see the tax, for many small-business or multiple-property owners, the … Read More