Patrick A Falcon PC
Question: Is bond interest taxable? Answer: That depends on the type of bond. For example: Corporate bond interest is taxable. Municipal bond interest is generally not subject to federal income tax. Treasury bond interest is free from state and local income taxes. Savings bond interest may or may not be taxable depending on the issue…
read moreQuestion: Does bartering for goods or services create income? Answer: Yes. Bartering for goods or services creates income to the extent of the fair value of the item received. For example, let’s say an auto mechanic exchanges some auto repair work for free rent of an apartment. If the apartment rental value was $800, that…
read moreQuestion: I made a loan to a relative that will never be repaid. Can I take a deduction for this bad debt on my tax return? Answer: Your loss might qualify as a nonbusiness (personal) bad debt deduction. You can take a tax deduction for a nonbusiness bad debt only in the year it becomes…
read moreQuestion: How do I keep track of the business use of my vehicle? Answer: You can use either of two methods to account for your deductible business use of a vehicle. The first and most cumbersome is to keep track of all your expenses, such as gas and oil, license, insurance, and repair bills. You…
read moreQuestion: What determines whether my return will be audited? Answer: The IRS uses various programs and techniques to determine which returns are audited, including: Matching programs. Information returns (such as Forms W-2 and 1099) are matched to your tax returns, using your social security and other identifying numbers. Discrepancies usually generate an IRS notice requesting…
read moreQuestion: What is the alternative minimum tax or AMT? Answer: The alternative minimum tax (or AMT) was created many years ago to insure that higher-income taxpayers with lots of deductions and credits pay at least a minimum amount of tax. The AMT is a separate tax calculation that disallows many of the deductions and credits…
read moreQuestion: After I filed my tax return, I discovered an error. How do I fix it? Answer: Oversights and errors are not uncommon, so the IRS provides a way for you to correct them. You can correct your return for up to three years after you file your original return by filing an “amended” return…
read moreQuestion: I pay alimony. Is it deductible? Answer: Yes, alimony is deductible by the one paying it and taxable income to the one receiving it. In fact, for the payer, it is an “above-the-line” deduction which means it can be deducted to arrive at adjusted gross income (AGI) even if you take the standard deduction…
read moreQuestion: What is adjusted gross income? Answer: Your adjusted gross income (AGI) is your gross income reduced by deductions other than itemized deductions, the standard deduction, and personal exemptions. Examples of deductions used to arrive at your AGI include business expenses, IRA contributions, student loan interest expense, alimony paid, and job-related moving expenses. Your AGI…
read moreQuestion: What is the difference between the cash method and the accrual method of accounting for my business? Answer: Under the cash method, you report income on your tax return in the year you receive payment from customers. You deduct business expenses in the year you pay them. Under the accrual method, you report income…
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