5 Common IRS Questions and Their Answers

5 Common IRS Questions and Their Answers
Navigating the maze of tax rules, and filing regulations can be confusing, especially if you are new to filing for yourself, filing in a different bracket, or filing as a business for the first time. Here are a few of the most common tax-related questions, and their answers.

1. When are Tax Returns Due this year?

This year’s tax filing deadline is April 15, 2019. This news isn’t particularly surprising since April 15 has long been the day on which taxes are due. For the past two years, however, the tax filing deadline has been pushed back several days because April 15 fell out over a weekend and the following weekday conflicted with Emancipation Day, a federal holiday. As such, there could be lingering confusion over when taxes are due this year. Mark your calendar. April 15th

2. Which Tax Form Should I File?

There are three main tax forms for standard tax situations: 1040, 1040A, and 1040EZ. Form 1040EZ is the simplest but comes with the most restrictions, allowing only certain types and amounts of income, deductions, and credits. These forms are suitable for independent contractors and people with simple tax situations.   A Limited Liability Company (LLC) will file one of the following depending on its situation.  
  • Form 1040 (Schedule C, E, or F) (appropriate for single-member LLCs)
  • Form 1065 (Partnership) (appropriate for multiple member LLCs)
  • Form 1120S (S Corporation)
  • Form 1120 (Corporation)

3. What’s the Difference Between an Exemption, Credit, and Deduction?

Exemptions and deductions work the same way. They reduce your taxable income, which lowers your tax bill. For example, if you take a $1,000 deduction, and you’re in the 20% tax bracket, you could save $200 on your taxes. Or if you get a $3,800 exemption, that’s about $760 less in taxes.  

4. What filing status should I use?

Your tax filing status is determined by what your marital status was as of Dec. 31 of the tax year in question. So if you got married on Dec. 30, then you’ll need to file using one of the two married filing statuses. If you got divorced on Dec. 30, then you’ll need to file as a single person. If the change happened right after the beginning of 2018, then you’ll file under your old status in 2017 and then adopt the new status when you file next year.

5. I’m Being Audited! What Questions will I be Asked?

If you find yourself in the scope of an IRS audit, There is a long list of IRS audit questions you will be asked, and you will be responsible for providing valid answers and providing the proper financial documentation required. Among the most commonly asked questions in an audit are  
  • How do you (and your spouse) earn a living?
  • Has all income and or deductions been reported on the tax return?
  • Are you aware of any changes that should be made to you return?
  • Do you have any hobbies?
  • Do they generate income?
  • If so, was such income reported on the tax return?
  • Do you engage in any bartering activities? If so, what type?
  • Did you have $10,000 or more cash transactions for this tax year?
  • Who did you bank with during the tax year?
  • Type of financial accounts:
  • Do you have any foreign bank accounts?
  • If so please, describe and identify foreign bank accounts.
  • Do you have a safe deposit box?
  • If so, describe the contents
  • Do you keep cash and/or securities in another location besides a bank, financial institution or a safe deposit box?
  • If so please describe?
  • Do you keep money in a hidden location, such as buried in the back yard, in a safe, in the freezer, mattress, wall, floor, etc?
  • If so, describe approx. amount kept
  • Did you have any non-taxable sources of income during the tax year?
These are just a few of the commonly asked tax and audit questions. If you find yourself in the scope of an IRS audit, secure the services of a licensed tax attorney in your area.

Tips and Tricks on how to Effectively trade Penny Stocks

Tips and Tricks on how to Effectively trade Penny Stocks
When trading penny stocks, traders should remember that penny stocks are companies whose shares trade for under $1. They are known to be often risky investments, and are usually trading for such little money because the company is in a state of financial disaster, with an uncertain future that could go either way.   When searching for good sites  to purchase penny stocks, traders be on the lookout for brokers that do not charge additional fees on top of original stock prices. This is a major  factor that the investor can control and should not be overlooked.   When looking for a good site, make sure there are: No additional charges for low-prices stocks: Some sites will advertise their supposedly good transaction fees as part of their effort, but avoid telling traders that there are a number of added costs. Some brokers charge a percentage of the total trade value, whilst others might a fee per share purchased. Either way, the trader will be getting charged more than they would for a normal blue-chip stock trade, and most certainly if the broker charges a fee per share as penny stocks are often traded in vast quantities.   No unreasonable volume restrictions: Timothy Sykes saysIf a trader were to find a stock that they would like to purchase for 1 cent, and are planning to invest $1000 – this would mean that they would be buying 100,000 shares. Any broker that charges either for large trades, or requires that the trader splits up  their order into multiple smaller orders is not sensible to use for investing in penny stocks. A reasonable number to look for would be 1 million shares, that is, sites that allow investors to purchase up to 1 million shares (or invest $10,000 in stocks at 1 cent for the case of this example) and still avoid being charged extra.”   No Costly Add-Ons: due to the harsh nature of penny stock investment, some sites could require that you upgrade to products like premium accounts – these tend to be filled with additional usage fees and upped minimum balances. Some also may require that you place orders via telephone to a person, meaning high unforeseen service charges. Remember: if you are looking to enter penny stock trading, you should ensure that you are whilst minimising any possible additional costs and difficulties.   A Low Minimum Account Balance: Often, people that are trying to invest in penny stocks do not have a large amount of capital that they are happy to or able to risk. This means in response, that it is important for a good penny stock site to have a low/non-existent account minimum balance. Because of the unpredictable nature of investing in penny stocks, it is not common for penny stock traders to see their original investment reduce at a fast rate, because of which a low minimum balance requirement should be constant and not merely a sign-up perk. This will cover the trader should an investment go badly wrong.   Finding a good investment: A lot of the companies that trade with share prices of less than a dollar have small market shares. When looking to invest in penny stocks, it is important for the trader to take note of the strength of the company’s fundamentals – if or not the company is profitable, and if or not if it will be able to enter profit with its current business structure, and whether the company is reliant on issuance of new shares to generate capital. If a trader learns about an organisation, potential it may have, and its current place, there are countless investment opportunities to be had.