Refer to Pub 525 Taxable and Non-Taxable : Miscellaneous Repayments.
Full amount paid in the year is deductible on Sched A other deductions. If more than $3000 then you can either deduct or determine credit.
Unum
Friday, January 30, 2015
Medical Expense Deductions
Track anything you pay out-of-pocket that insurance won't. For 2014, if its above 10% of your AGI (Adjusted Gross Income) you can deduct these expenses.
Previous years the threshold was 7.5% not 10%.
Previous years the threshold was 7.5% not 10%.
Estate and Descendent Accounts Taxes
Here's a quick source of things to look at when dealing with a deceased person without a will (intestate).
*Executor of the estate has to file every year that wasn’t previously filed.
*If assets of the estate produce income more than $600 then you must file a 1041
*IRS can help by sending copies of w-2s and 1099s from taxable years. See link
who becomes executor of estate in Colorado when there is no will?
*In CO, we use the term ‘personal representative’ instead of executor
*If none of the heirs opens a probate within 45 days after the decedent died, any creditor of the decedent can open a probate proceeding and become appointed personal representative. - See more at: http://blog.bradfordpublishing.com/probate/probating-estate-colorado/#sthash.zU4IgVwp.dpuf
Should proceed to lawyer who specializes in probate law.
Colorado’s Interstate Succession Law
IRS calls Taxes owed before death ‘Descendent Accounts’
http://www.irs.gov/irm/part5/irm_05-005-001.html
Sale of Home in 2014 Exclusion
Exclusion of up to $250,000 for single or MFJ $500,000.
http://www.irs.gov/publications/p17/ch15.html
"You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true.
http://www.irs.gov/publications/p17/ch15.html
"You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true.
- You meet the ownership test.
- You meet the use test.
- During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home."
"Ownership and Use Tests
To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:
- Owned the home for at least 2 years (the ownership test), and
- Lived in the home as your main home for at least 2 years (the use test)"
Reduced Maximum Exclusion
If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. This applies to those who:
- Fail to meet the ownership and use tests, or
- Have used the exclusion within 2 years of selling their current home.
In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons.
- A change in place of employment.
- Health.
- Unforeseen circumstances."
Monday, January 19, 2015
Natural Resource Income Reporting (Oil, Natural Gas, etc)
REFERENCE SOURCE: http://www.irs.gov/uac/Newsroom/Tips-on-Reporting-Natural-Resource-Income
Tips on Reporting Natural Resource Income
FS-2013-6, April 2013
Taxpayers who own land that contains valuable natural resources should be aware that arranging for the development of the resources by means of a lease creates tax consequences.
Landowners may make complex financial agreements to receive royalty, bonus or other income in exchange for access to the resources on their land, such as natural gas and oil from shale deposits. Here are some important facts from the Internal Revenue Service about these transactions.
Lease Agreements
Natural resource extraction agreements involve payments for extracting resources such as oil and gas. Payments can include delay rental, royalty and lease bonus payments.
Taxpayers who receive these payments are royalty owners who do not have a working interest in extraction operations. Taxpayers should normally report these payments as income on Part I ofSchedule E (Form 1040), Supplemental Income and Loss. Income reported on Schedule E is usually not subject to self-employment tax.
Taxpayers who do have a working interest in the extraction operations are subject to self-employment tax, and must file Schedule C (Form 1040), Profit or Loss from Business.
Leases and Lease Bonuses
Taxpayers/lessors typically receive a lease bonus from a lessee — the party that extracts the natural resource — in consideration for granting the lease. A lease bonus may be paid in a lump-sum or multi-year payments. The lessee should provide the taxpayer with a Form 1099-MISC, Miscellaneous Income, listing the amount of bonus payments as “Rents” in Box 1. Taxpayers usually report their lease bonus income as rent on Schedule E.
Royalty Payments
Taxpayers/lessors may receive periodic payments for their share of the natural resource. These payments are commonly known as royalty payments. They must be based on natural resource production on a recurring or intermittent basis, per the terms of the lease.
The lessee should provide the taxpayer with a Form 1099-MISC reporting the payments as “Royalties” in Box 2. Most taxpayers report royalty payments received as royalty income on Schedule E.
Depletion Deduction
Depletion is the using up of natural resources by mining, drilling, quarrying stone, or cutting timber. The depletion deduction allows a taxpayer who owns an economic interest in a mineral deposit or standing timber to reduce their taxable income and account for the reduction of reserves.
There are two ways of figuring the depletion deduction: cost depletion and percentage depletion. A taxpayer who owns an interest in a mineral deposit must use the method that yields the greater deduction. The percentage depletion rate for federal tax purposes varies depending on the mineral being produced.
A taxpayer must be an independent producer or royalty owner to use percentage depletion for oil and gas. A taxpayer who owns an interest in standing timber can only use cost depletion.
Taxpayers claim depletion and other allowable deductions in the “Expenses” section in Part I of Schedule E. See IRS Publication 535, Business Expenses, for more information.
Additional Expenses
Taxpayers who own working interests may be able to deduct expenses to reduce their natural resource income. This applies to taxpayers who have working interests in extraction operations. Expenses may include overhead, dry holes, certain legal and administrative fees and county health department water testing fees. Severance tax and operation expenses should be detailed on an Authorization for Expenditures (AFE) statement provided by the exploration company.
Only taxpayers who have a working interest in the extraction operations may deduct business expenses such as depreciation, tangible or intangible costs, utilities, car and truck and travel from their natural resource extraction income.
Free Natural Gas
Taxpayers may receive natural gas from a lessee oil and gas company. The receipt of gas may be taxable income if the gas is not from the taxpayer/lessor’s retained ownership interest. In general, the ownership of raw gas extracted by a lessee is based on the lease terms and state law.
Reporting Rental and Royalty Income
Rental and royalty income or loss is calculated on Schedule E. That amount is then transferred to Line 17 on Form 1040 to be combined with income received from other sources such as wages, dividends and interest to determine total income. Net income from royalty and lease payments is not considered passive income.
Estimated Tax
Since federal income tax is not typically withheld from these payments, taxpayers may want to consider making estimated tax payments on their natural resource income. See Publication 505, Tax Withholding and Estimated Tax, for more information.
Income from leasing mineral property and royalty payments for the extraction of natural resources can be significant. Taxpayers who receive this type of income should familiarize themselves with the tax rules to avoid an unexpected bill at tax time. More information is available in Publication 525, Taxable and Nontaxable Income, and the Instructions for Form 1040, Schedule E and Form 1040, Schedule C.
Page Last Reviewed or Updated: 18-Mar-2014
Thursday, January 15, 2015
Reporting Indian Tribal Distributions
*For tax year 2014
Income Tax - Native American Tax Subtraction
Is a Native American Indian subject to Colorado income tax on their income?
Income earned by a Native American Indian is usually subject to Colorado taxes just as it would be
for any other taxpayer. However, there is an exception for income if it is earned:
• on the Indian Reservation, and
• by a reservation tribal member (enrolled member) while domiciled on the reservation. This
income can be subtracted from taxable income on the “Other Subtractions” line of Form 104
as qualified reservation income. This would include casino winnings if won in a casino
located on the reservation on which the tribal member resides when the income is received.
Other income earned off the reservation by the taxpayer will still be subject to Colorado tax.
Income earned by a Native American Indian or on a Native American Reservation that is
subject to Colorado tax includes:
• income earned on a reservation by anyone not living on that reservation,
• income earned by a reservation member while working off the reservation,
• income earned by a tribal member on a reservation other than the reservation to which they
belong and reside,
• income earned by a taxpayer who is not a Native American Indian even if they live and/or work
on a reservation.
When claiming the qualified reservation income you must submit the following supporting
documentation to the department:
a copy of the tribal card
proof of residency on the reservation
proof of employment on the reservation.
FOR COLORADO STATE TAXES
Line 1: Taxable Income: after deductions, after exemptions, before amt
Line 4: Same as Line 1
Line 12: ALL INCOME made
Reporting Tribal (per capita) distributions on your 2014 tax return
Note to Tribes: ITG encourages you to include this article when sending Tribal members their Form 1099-MISC.
If you are a member of a federally recognized tribe, you may receive taxable distributions from your tribe. The tribe must report these distributions to the IRS and to you on Form 1099-MISC.
If you are expecting a refund, correctly preparing your 2014 federal tax return may help avoid refund delays. Please make sure that you include information from your Form 1099-MISC when you file.
Follow these instructions when filing your 2014 federal income tax return:
- Use Form 1040; not Form 1040A or Form 1040EZ
- On Form 1040, line 21, enter the amount of tribal distributions from Form 1099-MISC, Box 3
- On Form 1040, line 21, include a description of the income in the space provided on Line 21
- To avoid processing delays, enter one of the following descriptions on Line 21:
- INDIAN GAMING PROCEEDS
- INDIAN TRIBAL DISTRIB
- NATIVE AMERICAN DISTRIB
- Spell the descriptions exactly as listed above. These descriptions facilitate the processing of your tax return. For example, if you spell out DISTRIUBTION rather than using DISTRIB, the IRS may reject your return and delay your refund.
If you receive a letter requiring a response from you, respond to the letter in a timely manner. Do not ignore it. While the correct descriptions shown above are important, it is crucial you respond timely to any letter requesting your response.
Some letters do not require a response. These are called notices. Notices are sent by the Internal Revenue Service to inform you of the length of time your refund is expected to be delayed.
The IRS’s hard work to protect taxpayers from fraud and identity theft may delay refunds for Tribal members. All tax returns are subject to the refund fraud and identity theft filters. There are NO exceptions.
Although this diligence has affected everyone, ITG has gotten involved and the IRS has made strides in streamlining refunds. With automated processes and your following the guidelines in this article, the number and length of delays should be reduced.
FOR STATE FILINGS IN COLORADO
https://www.colorado.gov/pacific/sites/default/files/NativeAmericansReservationIncome.pdfIncome Tax - Native American Tax Subtraction
Is a Native American Indian subject to Colorado income tax on their income?
Income earned by a Native American Indian is usually subject to Colorado taxes just as it would be
for any other taxpayer. However, there is an exception for income if it is earned:
• on the Indian Reservation, and
• by a reservation tribal member (enrolled member) while domiciled on the reservation. This
income can be subtracted from taxable income on the “Other Subtractions” line of Form 104
as qualified reservation income. This would include casino winnings if won in a casino
located on the reservation on which the tribal member resides when the income is received.
Other income earned off the reservation by the taxpayer will still be subject to Colorado tax.
Income earned by a Native American Indian or on a Native American Reservation that is
subject to Colorado tax includes:
• income earned on a reservation by anyone not living on that reservation,
• income earned by a reservation member while working off the reservation,
• income earned by a tribal member on a reservation other than the reservation to which they
belong and reside,
• income earned by a taxpayer who is not a Native American Indian even if they live and/or work
on a reservation.
When claiming the qualified reservation income you must submit the following supporting
documentation to the department:
a copy of the tribal card
proof of residency on the reservation
proof of employment on the reservation.
FOR COLORADO STATE TAXES
Line 1: Taxable Income: after deductions, after exemptions, before amt
Line 4: Same as Line 1
Line 12: ALL INCOME made
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