Tax Savings & Planning

The One Big Beautiful Bill Act: What You Need to Know About the Latest Tax Law Changes OBBBA

July 16, 2025 by Maurie West Leave a Comment

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, bringing a wave of significant changes to federal tax legislation. This comprehensive package impacts individuals, businesses, and even international taxpayers.

We’re breaking down the key provisions to help you understand how these updates might affect your tax planning.

Key Individual Tax Provisions

Many of the Tax Cuts and Jobs Act (TCJA) rates and provisions are now permanent, offering more stability for taxpayers:

Permanent Lower Tax Rates and Brackets: The tax rates from 2017 are now permanent, with an inflation adjustment for certain brackets in 2025.
Permanent Standard Deduction: The nearly doubled standard deduction amounts are now set permanently. For 2025, these are:
- Single & MFS: $15,750
- Head of Household: $23,625
- Married Filing Jointly: $31,500
Increased Child Tax Credit: The nonrefundable Child Tax Credit rises to $2,200 per child starting in 2025 and will be indexed for inflation.
Boosted Estate and Gift Tax Exemption: This exemption is permanently increased to $15 million per individual ($30 million for married couples) in 2026, indexed for inflation.
SALT Deduction Cap Increase: The state and local tax (SALT) deduction cap goes up to $40,000 per household, with a phase-out for higher earners. This will revert to $10,000 in 2030.
New Charitable Deduction for Non-Itemizers: Starting in 2026, you can deduct charitable contributions above-the-line ($1,000 for single, $2,000 for joint filers).
Temporary Deductions: From 2025-2028, new deductions are available for qualified tips, overtime pay (with limitations), and an enhanced $6,000 deduction for seniors (age 65+ with income below certain thresholds). You can also deduct up to $10,000 in interest on loans for U.S.-assembled passenger vehicles.
Permanent Changes to Other Deductions: The moving expense deduction is largely terminated (except for Armed Forces). Limits on home mortgage interest and personal casualty loss deductions (now including state-declared disasters) are made permanent. Several other credits, like the adoption credit and employer-provided childcare credit, are also made permanent.

Important Business Tax Provisions

Businesses also see significant changes and permanency for key deductions:

Permanent QBI Deduction: The Qualified Business Income (QBI) deduction remains at 20% and is now permanent.
Restored Bonus Depreciation: 100% expensing for qualified property is back for property placed in service after January 19, 2025.
Increased Section 179 Expensing: The maximum expense for qualifying property rises to $2.5 million, with a phase-out threshold of $4 million (indexed after 2025).
Immediate R&E Expense Deduction: Domestic research and experimental expenses can be immediately deducted in 2025.
Permanent Excess Business Loss Limitation: This limitation is now permanent, with existing loss carryforward rules maintained.
Business Interest Deduction Calculation Change: The interest expense limitation will now be calculated using EBITDA (earnings before interest, taxes, depreciation, and amortization) instead of EBIT.
Changes to International Tax: Beginning in 2026, the deduction percentages for FDII (foreign-derived intangible income) and GILTI (global intangible low-taxed income) are reduced. The BEAT (base-erosion and anti-abuse tax) rate increases from 10% to 10.5%.
Higher Reporting Thresholds: The Form 1099-K reporting threshold reverts to $20,000 and 200 transactions. The Form 1099 reporting threshold for services increases to $2,000 in 2026.
Renewed Opportunity Zones: These provisions are made permanent with changes, including a narrower definition of “low-income community,” effective in 2027.
Clean Energy Credit Terminations: Several clean energy credits from the Inflation Reduction Act are terminated.

Have questions about how the OBBBA might impact your personal or business tax situation? Don’t hesitate to reach out for a consultation!

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1099 Workers in Focus: How to Protect Yourself from IRS Scrutiny

November 14, 2024 by Maurie West Leave a Comment

As a 1099 worker, navigating the complexities of freelance or contract work can be both rewarding and challenging. While the flexibility of self-employment is appealing, it also comes with unique tax responsibilities that can lead to potential scrutiny from the IRS.

If you’ve received a notice from the IRS claiming you owe $10,000 or more or you are concerned about your tax obligations, contact our firm immediately for a consultation 941-893-1791 or https://www.westaxinc.com/consultation

To help avoid potential IRS in the future, this article will explore your tax responsibilities as a 1099 worker and provide strategies to help you minimize the risk of audits.

Understanding Your Tax Responsibilities

As a 1099 worker, you are classified as self-employed, which means you have specific tax obligations that differ from traditional employees. Here are the key responsibilities you need to be aware of:

Accurate Reporting of Income: All income earned as a 1099 worker must be reported on your tax return, regardless of how small the amount was or whether you received a 1099 form from your client. The IRS requires comprehensive reporting of all earnings, and not submitting everything can result in significant penalties that could otherwise be avoided.
Quarterly Estimated Tax Payments: Unlike employees, taxes are not withheld from your payments as a 1099 worker. You are responsible for making estimated tax payments quarterly. Staying on top of these payments is crucial to avoid underpayment penalties and interest. This often gets overlooked, but coming up with your own system to make these payments will save you a major headache when it comes to filing your tax return.
Detailed Record-Keeping: Maintaining meticulous records is essential for accurately reporting your income and expenses. This includes tracking your invoices, saving any and all receipts, and documenting your business-related costs. Good record-keeping not only simplifies your tax filing but also provides the supporting documentation in case of an audit.
Deductions and Business Expenses: As a self-employed individual, you get the opportunity to deduct legitimate business expenses that can lower your taxable income. However, these deductions have to be extremely well-documented and should directly relate to your business operations. The IRS is known to closely scrutinize excessive or questionable deductions, so it’s important to stay within the bounds of what is legal.

Strategies to Minimize IRS Scrutiny

Now that you understand your tax responsibilities, here are some effective strategies to help you minimize the risk of IRS scrutiny:

File Your Taxes Accurately and Timely: Tax day is not something most people look forward to, and many people put it off as long as they can. As a 1099 worker, it’s even more important to make sure that your tax return is accurate and submitted by the deadline. Take the time to double-check your figures to avoid any errors that could potentially lead to an audit.
Track Your Earnings: One of the biggest red flags for IRS auditors is unreported or misreported income. Utilize accounting tools or payment platforms that help you track your earnings effectively. This practice not only aids in accurate reporting but also ensures that you have the necessary documentation readily available.
Request 1099 Forms from Clients: If you work with multiple clients, request 1099 forms from each one. This helps you know that all your income is accounted for and provides a clear record of what you’ve earned.
Make Timely Estimated Payments: Keep track of your quarterly estimated tax payments and ensure that they are made on time. Set reminders for yourself and put money aside periodically to help prevent any missed payments, which could lead to penalties.
Be Aware of Common Audit Triggers: Get familiar with factors that might trigger an audit, such as large deductions relative to your income or discrepancies between what you report as income and what your clients report to the IRS. Understanding these triggers can help you avoid the common pitfalls.
Communicate Promptly with the IRS: If you receive any notices or inquiries from the IRS, respond promptly and professionally. Ignoring their communications can lead to further complications. If you’re uncertain about how to respond, contact our office 941-893-1791, and we can help you.

Moving Forward with Confidence

As a 1099 worker, it is so important to understand your tax responsibilities and take proactive measures to avoid the IRS’s scrutiny. By staying organized, filing your taxes accurately, and being aware of common mistakes that many freelance workers make, you can reduce your risk of audits and penalties.

If you find yourself struggling with tax issues or facing IRS scrutiny, remember that you don’t have to face it alone. Tax resolution professionals like the ones at WesTax, Inc are here to help you navigate all the complexities of tax regulations and work toward a favorable resolution. Don’t hesitate to reach out to us at 941-893-1791 for support—your peace of mind is worth it.

#taxes #taxproblems #irs #irsproblems #offerincompromise #lt11 #paymentplan

Tax Relief for Florida Residents Affected by Hurricanes Helene & Milton

October 16, 2024 by Maurie West Leave a Comment

Due to the devastation to our area recently from the hurricanes, The IRS is trying to help Florida residents recover by offering tax relief options. Here’s a summary of what’s available:

More Time to File and Pay:

No need to request an additional extension, The IRS automatically extends deadlines for those in disaster areas.
Current deadline: May 1, 2025 (includes 2023 and 2024 tax returns & payments for most Florida residents).
Check IRS.gov for the latest list of disaster areas to see what your county specifically qualifies for.

Financial Assistance May Be Tax-Free:

Qualified disaster relief payments (e.g., for repairs or living expenses) from government agencies are generally excluded from your taxable income.

Disaster Loss Deduction:

Deduct uninsured or unreimbursed damage to your property (home, belongings, etc.) on your tax return.
You can claim this deduction on your 2024 return (filed next year) or your 2023 return (filed this year). The deadline for choosing is October 15, 2025.

Free Tax Transcripts & Copies:

Get free transcripts or a copy of your tax return if yours were lost or destroyed.
Transcripts are available online at IRS.gov or by calling 800-908-9946.
Free copies are available by filing Form 4506, noting it’s disaster-related and listing the affected state.

Address Change & Disaster Hotline:

Update your address with the IRS using Form 8822 if you relocated.
Call the IRS disaster hotline at 866-562-5227 with any tax questions related to the hurricanes. This includes those outside the disaster area who may be affected (e.g., lost records).

Stay Informed:

Visit IRS.gov for more details on these and other tax relief options available to disaster victims.

Remember, this information is a summary of the general help available, feel free to reach out to verify anything specifically.

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Converting a Rental or Vacation Home into a Primary Residence: Tax Implications

September 24, 2024 by Maurie West Leave a Comment

Introduction

If you’re considering making a significant life change by converting your rental or vacation home into your primary residence, it’s important to understand the tax implications. This decision can have a substantial impact on your tax liability, especially when it comes to selling the property in the future.

Exclusion of Gain on the Sale of a Primary Residence

One of the primary benefits of owning a primary residence is the potential for excluding gain on the sale of the property. Under certain conditions, you may be able to exclude up to $250,000 ($500,000 for married couples filing jointly) of capital gains from your taxable income.

Limitations for Vacation Homes Converted to Primary Residences

However, there are limitations that apply to vacation homes that are converted to primary residences. To qualify for the exclusion, you must have used the property as your primary residence for at least two out of the five years preceding the sale. Additionally, you must have lived in the property for a continuous period of at least 12 months during that five-year period.

Recapture of Depreciation Deductions

If you’ve been deducting depreciation expenses on your rental property, you may be subject to recapture of those deductions when you sell the property. This means that a portion of the gain from the sale will be treated as ordinary income, subject to your regular income tax rate.

Shift in Deductible Expenses

When you convert a rental or vacation home into a primary residence, the deductible expenses associated with the property will shift. For example, you may no longer be able to deduct mortgage interest or property taxes. However, you may be able to deduct certain expenses related to home improvements.

Potential Pitfalls

It’s important to be aware of the potential pitfalls associated with converting a rental or vacation home into a primary residence. These include:

Failing to meet the occupancy requirements: If you don’t live in the property for the required period, you may not qualify for the exclusion.
Recapture of depreciation: If you’ve deducted depreciation on the property, you may be subject to recapture of those deductions.
Passive loss limitations: If you have passive losses from other rental properties, these losses may be limited in the year of the conversion.

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What You Need to Know About Tax Penalties and Interest

September 12, 2024 by Maurie West Leave a Comment

Preparing, filing, or even thinking about taxes can be overwhelming for many individuals, especially when faced with financial difficulties that prevent them from being able to pay their taxes in full.

However, it is vital to stay aware of the financial consequences that are associated with not paying your taxes on time and in full, because the penalties and interest can add up quickly and become a significant financial burden.

Knowing the types of penalties and interest you might encounter and how they are calculated can help you take proactive steps to address them.

In this article, we’ll review the various types of penalties that the IRS may impose if you fail to meet your tax obligations, and we’ll break down how the interest accrues. Once you have a better understanding of how these penalties and interest can affect you, you’ll have a clearer picture of the total impact they have on the amount owed.

Types of Tax Penalties

1. Failure-to-File Penalty

One of the most common penalties is the failure-to-file penalty. This is imposed when you do not file your tax return by the due date, including any extensions. This penalty is calculated based on the amount of tax you owe and it increases over time.

Generally, the rule is that the penalty is 5% of your unpaid taxes for each month or part of a month your return is late, up to a maximum of 25%.

For example, if you owe $1,000 in taxes and are one month late, the penalty would be $50 (5% of $1,000). If you’re six months late, the maximum penalty could reach $250 (25% of $1,000).

2. Failure-to-Pay Penalty

If you file your tax return on time but don’t pay the amount that is due, a failure-to-pay penalty is incurred. This penalty is usually 0.5% of your unpaid taxes for each month or part of a month that the taxes are unpaid, up to a maximum of 25%.

For example, if you owe $1,000 in taxes and are one month late in payment, the penalty would be $5 (0.5% of $1,000). If you are six months late, the penalty could be $30 (6 x 0.5% of $1,000).

3. Accuracy-Related Penalty

The accuracy-related penalty applies if you under report your income or claim incorrect deductions. This penalty is 20% of the underpaid tax amount. Common causes of this penalty can include mathematical errors, incorrect deductions, and failure to report all of your income.

For instance, if you incorrectly report $10,000 less income than you actually earned throughout the year, and this results in $2,000 of underpaid taxes, you could owe a penalty of $400 (20% of $2,000).

4. Fraud Penalty

If the IRS determines that you’ve committed tax fraud, the penalty can be severe. This penalty is typically a whopping 75% of the underpaid tax amount. Tax fraud involves intentional acts to evade taxes, such as falsifying income or hiding assets, and it can have serious consequences.

5. Estimated Tax Penalty

If you’re self-employed or otherwise required to pay estimated taxes throughout the year, failing to make these payments can result in an estimated tax penalty. This penalty is calculated based on the amount you owe and the time it remains unpaid.

How Interest is Calculated

In addition to penalties, interest accrues on unpaid taxes, as well. The interest rate is determined quarterly and is based on whatever the federal short-term rate is plus 3%. The interest compounds daily, meaning that interest is charged on both the original amount owed and any accrued interest.

For example, if you owe $1,000 in taxes and the interest rate is 5%, the interest charges for one year would be approximately $50. And since interest compounds daily, the total amount owed could be higher the longer the taxes remain unpaid.

Addressing Penalties and Interest

1. File Your Returns On Time

Even if you can’t pay the full amount, it’s crucial to file your tax returns on time to avoid the failure-to-file penalty. If you need more time, there’s always an option to file for an extension. However, it’s important to know that the extension to file is not an extension to pay, so you’ll still accrue interest on any unpaid taxes.

2. Set Up a Payment Plan

If you can’t pay your taxes in full, setting up a payment plan with the IRS can help. This will allow you to pay off your debt in installments, which may be easier for you over time. This won’t eliminate the penalties and interest, but it can greatly reduce them and make your payments much more manageable.

3. Request Penalty Abatement

If you have a valid reason for missing your tax obligations, such as a serious illness or natural disaster, you might have the option to qualify for penalty abatement. This means that the IRS could reduce or eliminate the penalties you owe. It’s essential to provide documentation and a detailed explanation for your situation, so make sure to prepare as much information as you possibly can.

4. Seek Professional Help from A Tax Relief Professional

Even with the information provided in this article, trying to figure out the potential tax penalties and interest can be complex. Luckily, there are professionals like the ones at WesTax, Inc. that are skilled at handling these situations and can help make a significant difference.

Tax relief professionals can assist in negotiating with the IRS, setting up payment plans, and requesting penalty abatements. They can also help you understand all of your options and help you make informed decisions about how to handle your tax debt.

5. Consider an Offer in Compromise

In some cases, if you can’t pay your full tax liability and your financial situation qualifies, you might be able to settle your debt for less than the full amount owed through an offer in compromise. Be aware that this route requires an extensive evaluation of your finances and typically involves submitting a detailed application.

Moving Forward

Understanding the penalties and interest associated with unpaid taxes is essential for managing your tax obligations effectively. By filing on time, setting up payment plans, and seeking professional assistance, you can address your tax debt and reduce the financial burden of penalties and interest.

If you’re struggling with unpaid taxes and need help navigating the complexities of penalties and interest, WesTax, Inc. is here to assist you. Contact us today at 941-893-1791 to explore your options and find a solution that works for you.

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When Does Married Filing Separately Make Sense?

August 5, 2024 by Maurie West Leave a Comment

I often get asked by clients if they should file separately from their spouse due to a variety of reasons. Most often the answer is no, but not always.

While most married couples opt to file their taxes jointly, there are situations where filing separately (MFS) might be beneficial. This option can offer financial protection and autonomy for each spouse, especially in cases of separation or divorce. Additionally, MFS might provide opportunities for certain deductions, such as medical expenses, that are based on individual income. However, it’s essential to weigh these advantages against the potential drawbacks.

Filing separately often results in higher taxes due to less favorable tax brackets and reduced standard deductions. Moreover, couples may miss out on valuable tax credits and deductions available to joint filers. The complexity increases in community property states, where income might still be split evenly regardless of filing status.

Changing Your Filing Status

Couples who previously filed separately can choose to file a joint return within three years, provided certain conditions are met. This option allows for potential tax benefits but should be evaluated based on individual circumstances.

Making the Right Choice

Ultimately, the decision to file jointly or separately depends on your unique financial situation. Carefully consider factors such as income, deductions, credits, and potential liabilities. Consulting with a tax professional can provide valuable guidance in making an informed decision. Remember, understanding your options is crucial for maximizing your tax refund or minimizing your tax burden.

By carefully weighing the pros and cons of each filing status, you can choose the option that best suits your financial goals and protects your interests.

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