Tax Archives

Can Sweat Equity Partner Deduct Partnership Losses?

One person has the money. The other has the know-how or desire to work. They go into business together. The money partner puts up all the capital and the other partner does the work. It is one of the most common deals in small business, real estate, and investing. Now add a twist. To keep…

Can Divorce Decree Exempt Ex’s Half House Proceeds from IRS Collections?

A couple owns a house together. They also owe the IRS. The marriage ends, and the divorce decree says the wife gets all of the money when the house sells. The husband agrees to pay the IRS debt and keep her out of it. That seems like a clean split. Then the house sells. The…

Replacement Receipts to Prove a Hurricane Casualty Loss?

For those who have suffered damage in a natural disaster, this type of article has real meaning. The consequences of the event are one thing. The aftermath and clean up another. The incurance fights another. And then in the end, the fight with the IRS. Since we are in Houston, we experienced and saw a…

Does a Promise to Repay Made Later Turn the Money Into a Loan?

Money hits the business bank account. There is no contract, no promissory note, no invoice. Everyone involved knows what the money is for, and everyone assumes the paperwork will get sorted out later. This happens all the time in deal-driven businesses. Two people who have worked together for years agree to fund a purchase. One…

Did the IRS Really Mail That Notice by Certified Mail?

You file a Form 8857 asking the IRS for innocent spouse relief. Then you wait. Months go by. Nothing shows up in your mailbox. So you eventually file a petition with the U.S. Tax Court to get someone to look at your case. Then the IRS tells you that you are too late. It says…

For the COVID Sick Leave Credit, What is a Real Business?

The COVID pandemic impacted just about every business in the U.S. Right or wrong, Congress acted to prevent the financial fallout. This was accomplished in large part by making refundable tax credits available to businesses and business owners. Small business owners spent 2020 and 2021 and the years that follow trying to claim the tax…

The Attorney Took Their Cut. Why Do You Owe Tax on It?

Imagine you sue a company over a mistake on your credit report. You win a settlement. Your lawyer takes their cut off the top, and you walk away with a small check for what feels like a big fight. Then a Form 1099 shows up, and it reports the entire settlement as your income—including the…

A Customer Paid to Expand Your Factory. Is That Income?

Your business has a big customer. The customer wants more product than your business can make. So the customer offers to pay for a building expansion on your property to allow you to make their product. Your business does not take a dime of that building money. The cash goes straight to the contractor from…

IRS Levy for a Debt It Already Agreed to Payment Over Time?

Most people think a tax debt is a tax debt. You owe the money, the IRS collects it, and that is the end of the story. But there is often more than one legal mechanism the government can use to collect the same dollars. Sometimes those mechanisms overlap. That overlap can create problems. Suppose the…

Married Filing Separate, Community Property Reduction

Most small business owners think of their income as their own. You do the work. You bill the client. The money lands in your account. So when the IRS audits you and says you left income off your return, it feels like a problem that belongs to you alone. But that is not always how…