K. Y. Tapya CPA

K. Y. Tapya CPA Certified Public Accountant and QuickBooks ProAdvisor Full service tax preparation, accounting and relating technology consulting company.

What is a digital asset?A digital asset is a digital representation of value which is recorded on a cryptographically se...
01/29/2023

What is a digital asset?

A digital asset is a digital representation of value which is recorded on a cryptographically secured, distributed ledger.

Common digital assets include:

Convertible virtual currency and cryptocurrency
Stablecoins
Non-fungible tokens (NFTs)

How to report digital asset income:

Besides checking the “Yes” box, taxpayers must report all income related to their digital asset transactions. For example, an investor who held a digital asset as a capital asset and sold, exchanged or transferred it during 2022 must use Form 8949, Sales and other Dispositions of Capital Assets, to figure their capital gain or loss on the transaction and then report it on Schedule D (Form 1040), Capital Gains and Losses, or Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, in the case of gift.

If an employee was paid with digital assets, they must report the value of assets received as wages. Similarly, if they worked as an independent contractor and were paid with digital assets, they must report that income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). Schedule C is also used by anyone who sold, exchanged or transferred digital assets to customers in connection with a trade or business.

Some things to know about crowdfunding and taxesCrowdfunding is a popular way to raise money online. People often use cr...
08/23/2022

Some things to know about crowdfunding and taxes

Crowdfunding is a popular way to raise money online. People often use crowdfunding to fundraise for a business, for charity, or for gifts. It’s important to know that money raised through crowdfunding may be taxable.

Some money raised through crowdfunding may be considered a gift.
Under federal tax law, gross income includes all income from any source, unless it’s excluded from gross income by law. In most cases, gifts aren’t included in the gross income of the person receiving the gift. Here’s what people involved in crowdfunding should know:

If a crowdfunding organizer is raising money on behalf of others, the money may not be included in the organizer's gross income, as long as the organizer gives the money to the person for whom they organized the crowdfunding campaign.

If people donate to a crowdfunding campaign out of generosity and without expecting anything in return, the donations are gifts. Therefore, they will not be included in the gross income of the person for whom the campaign was organized.

However, not all contributions to crowdfunding campaigns are gifts and may be taxable.

When employers give to crowdfunding campaigns for an employee, those contributions are generally included in the employee's gross income.

Taxpayers may want to consult a trusted tax pro for information and advice regarding how to treat amounts received from crowdfunding campaigns.

People may receive Form 1099-K for money raised through crowdfunding.

The crowdfunding website or its payment processor must file Form 1099-K, Payment Card and Third Party

07/07/2022

An Offer in Compromise is an agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed. The offer program gives eligible taxpayers a path toward paying off their debt when they otherwise couldn’t or would face financial hardship.

Year-round tax planning: All taxpayers should understand eligibility for credits and deductionsTax credits and deduction...
06/24/2022

Year-round tax planning: All taxpayers should understand eligibility for credits and deductions

Tax credits and deductions can help lower the amount of tax owed. All taxpayers should begin planning now to take advantage of the credits and deductions they are eligible for when they file their 2022 federal income tax return next year.

Here are a few facts that can help taxpayers with their year-round tax planning:

Adjusted Gross Income, or AGI, is a taxpayer’s total gross income minus specific deductions that can reduce the taxpayer’s income before calculating tax owed. AGI is the starting point for calculating taxes and determining a taxpayer’s eligibility for certain tax credits and deductions that can help lower their tax bill.

Taxable income is a taxpayer’s AGI minus the standard deduction or itemized deductions, whichever is greater.

The standard deduction is a set dollar amount that reduces taxable income. Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions and using the option that lowers their tax the most.

Properly claiming tax credits can reduce taxes owed or boost refunds.

Some tax credits, like the earned income tax credit, are refundable, which means an eligible taxpayer can get money refunded to them even if they don't owe any taxes.

To claim a deduction or credit, taxpayers should keep records that show their eligibility for it.

03/21/2022

Taxpayers should make sure they have all their documents before filing a tax return.

Taxpayers who haven't received a W-2 or Form 1099 should contact the employer, payer or issuing agency and request the missing documents. This also applies for those who received an incorrect W-2 or Form 1099.

If they can't get the forms, they must still file their tax return on time or get an extension to file. To avoid filing an incomplete or amended return, they may need to use Form 4852, Substitute for Form W-2, Wage and Tax Statement or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc.

03/09/2022

Small business rent expenses may be tax deductible

Rent is any amount paid for the use of property that a small business doesn’t own. Typically, rent can be deducted as a business expense when the rent is for property the taxpayer uses for the business.

Here are some things small business owners should keep in mind when it comes to deducting rental expenses:

Lease or purchase

Sometimes a business must determine whether its payments are for rent or for the purchase of the property, because different tax rules may apply.
Businesses must first determine whether an agreement is a lease or a conditional sales contract.
Payments made under a conditional sales contract aren’t deductible as rent expense.
Unreasonable rent
Businesses can’t take a rental deduction for unreasonable rents paid. Rent is unreasonable for deduction when it is higher than market value or a professional appraisal.

Usually, unreasonable rent becomes a problem when business owners and the lessors are related.
Rent paid to a related person is reasonable if it’s the same amount a business owner would pay to a stranger for use of the same property.
Office in the home
A business owner’s workplace can be in their home if they have a home office that qualifies as their principal place of business.

Business owners who rent their home and have a home office as their principal place of business may also qualify for a deduction.
IRS Publication 587, Business Use of Your Home, Including Use by Daycare Providers, has more details about this deduction.
Rent paid in advance
Rent paid for a business is usually deductible in the year it is paid.

If a business pays rent in advance, it can deduct only the amount that applies to the use of the rented property during the tax year. The business can deduct the rest of the payment over the period to which it applies.
Business owners can review Publication 535, Business Expenses, for detailed examples on rent paid in advance.
Canceling a lease
A business can usually deduct the costs paid to cancel a business lease.

There's a different filing due date for Form 1099-MISC when reporting nonemployee compensation. When this form is used t...
03/01/2022

There's a different filing due date for Form 1099-MISC when reporting nonemployee compensation. When this form is used to report this in box 7 of the 1099-MISC, it's due to the IRS by January 31. This due date applies whether the payer is submitting the form on paper or electronically.

A Form 1099-MISC has two possible due dates when filed electronically:

January 31 to report nonemployee compensation payments
March 31 to report all other payments
The payer should separate the transmission of nonemployee compensation from other payments.

11/29/2021

Some important things all taxpayers should do before the tax year ends.

Donate to charity
Taxpayers may be able to deduct donations to tax-exempt organizations on their tax return. As people are deciding where to make their donations, the IRS has a tool that may help. Tax Exempt Organization Search on IRS.gov allows users to search for charities. It provides information about an organization’s federal tax status and filings.

The law now permits taxpayers to claim a limited deduction on their 2021 federal income tax returns for cash contributions they made to certain qualifying charitable organizations even if they don't itemize their deductions. Taxpayers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions to qualifying charities during 2021. The maximum deduction is $600 for married individuals filing joint returns.

Most cash donations made to charity qualify for the deduction. However, there are some exceptions. Cash contributions include those made by check, credit card or debit card as well as unreimbursed out-of-pocket expenses in connection with volunteer services to a qualifying charitable organization.

Find information about retirement plans:

Contribute salary deferral
Taxpayers can make a salary deferral to a retirement plan. This helps maximize the tax credit available for eligible contributions. Taxpayers should make sure their total salary deferral contributions do not exceed the $19,500 limit for 2021.

10/13/2021

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. Explore your rights and our obligations to protect them.

The Right to Be Informed
The Right to Quality Service
The Right to Pay No More than the Correct Amount of Tax
The Right to Challenge the IRS’s Position and Be Heard
The Right to Appeal an IRS Decision in an Independent Forum
The Right to Finality
The Right to Privacy
The Right to Confidentiality
The Right to Retain Representation
The Right to a Fair and Just Tax System

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