Major Tax Savings

Heavy Vehicle + Deductible Home Office = Major Tax Savings

You can reap major tax savings with the heavy vehicle and home-office combo. The heavy vehicle produces quick deductions. The home office that qualifies as a principal office eliminates commuting miles, and such an elimination can dramatically increase your business-use percentage of vehicles.

For example, say you bought a $50,000 vehicle that you use 60 percent for business. Your depreciation and expensing elections apply to $30,000. But if you can increase your business percentage to 90 percent with a tax code–defined principal office in your home, your base for tax deductions increases to $45,000—that’s a $15,000 increase, and you did not spend a penny or drive a mile farther to capture it.

Give us a call at (610) 863-8347 today for a free consultation!

Stay tuned for more tax tips from Corvino and Verwys.

How to Protect Your Gambling Winnings from the IRS

Your gambling income is taxable. And—just as important—it’s reportable. The good news is that you can offset your gambling winnings with your gambling losses provided you keep good proof of those losses. The IRS and courts expect you to maintain a “contemporaneous gambling diary.”

You face specific rules for a gambling diary depending on the type of gambling. For example, with slot machines, the IRS advises that you record the machine number, date, and time played to support your winnings. Often, you can find the machine number clearly displayed on the machine. If not, simply ask the casino operator for the machine number.

If your gambling losses exceed your winnings, you get no deductions for your net loss. Further, the net loss does not carry forward. It simply disappears.

As you can see, you need to know how the rules work if you gamble. Don’t reach the end of the year with lots of income on Form W-2Gs and no appropriate tax records for your losses.

Have questions? Give us a call at (610) 863-8347 today for a free consultation!

Stay tuned for more tax tips from Corvino and Verwys

Selling to a Related Party?

Selling to a Related Party can Kill Your Tax Losses

If you sell property to a related party, you may not deduct your loss on the sale. And it gets worse; the loss you cannot deduct no longer belongs to you. It moves to the related party, and that can really complicate matters. This brings up two questions:

  1. Who are your related parties?
  2. What happens to the loss that the government took away from you?

Related Parties: The tax code says that your related parties include, among others, you and your spouse, brothers and sisters, parents, children, grandparents, or grandchildren. Additionally, it includes corporations and partnerships in which you own, directly or indirectly, more than 50 percent (e.g., stock, value, profits interest).

The constructive ownership rules expand your network of related parties because you are deemed to own what you and your family members own, and if you are a shareholder or partner, you own a proportionate share of the stock owned by the corporation or partnership.

Where the Loss Goes: Your tax-deductible loss is lost to you when you sell to a related party. But here’s a possible (although often unlikely) silver lining: the loss you lost travels to the buyer, and the buyer can use that loss to reduce any taxable gain on a later sale of the property.

For example, say you incur a loss when you sell your business vehicle to your brother. You can’t deduct the loss. If your brother later sells the vehicle for more than he paid you, then he can use your loss to offset his gain. If he sells it for less than he paid you, then he can’t deduct the loss.

You need to know that the related-party loss-disallowance rule exists, so you don’t mistakenly make your tax-loss deductions disappear. If possible, don’t sell to a related party. Instead, sell to a remotely related person, such as an in-law, aunt, niece, cousin, or employee of the business.

Thinking of selling to a Relative? Give us a call at (610)863-8347 for a free consultation. 

Stay tuned for more tax tips from Corvino and Verwys

Thinking of Sending Your Child to Summer Camp?

Claim a Tax Credit for Sending Your Children to 

Summer Camp

You may be able to claim the child and dependent care credit if you pay expenses for the care of your under-age-13 child or another qualifying person to enable you (and your spouse, if filing a joint return) to work or look for work.

The tax credit is a percentage of the expenses you paid during the year for the care of a qualifying person, such as your child under age 13. The cost of camps and before- and after-school programs qualifies for the credit if the camps are primarily for the protection and well-being of your child. On the other hand, the cost of overnight camps, summer schools, and tutoring programs does not qualify.

Although the credit is not large, it’s free money. You would, and likely did, spend this money without regard to the credit. This means you have likely done all you need to do to claim the credit when it comes time for us to prepare your tax return.

Have questions? Give us a call at (610) 863-8347 today for a free consultation!

Stay tuned for more tax tips from Corvino and Verwys.

Hire Your Child and Get Paid

You can pay your child to work in your business and get paid yourself for this arrangement. Sound too good to be true? The basic mechanics of this are (a) you deduct the wages and (b) your child pays zero or very little in income taxes.

The three points below elaborate on this:

1. The child pays zero taxes on earnings up to the $6,350 standard deduction amount. Say you pay tax-deductible wages of $6,350. This reduces your taxes or gives you tax refunds, and the child pays no taxes.

2. The child can use the traditional IRA to avoid taxes on $5,500, for a total of $11,850 on which he or she can avoid taxes. You can pay this amount and reduce your taxes.

3. The child can use the 10 percent tax bracket, the standard deduction, and the traditional IRA so as to pay low taxes on earnings up to $21,175, while you reap the tax benefits of paying your child this much larger amount.

To get this right, you need to file a W-2 for the child, have him or her keep a time sheet, and create proof of a reasonable wage. And you will be happy to know that the IRS has approved employing children as young as seven years old.

Here’s another benefit: If the child working for a parent is under age 18, both the child and the parent or parents are exempt from payroll taxes. In these cases, the parent operates a Schedule C business or both parents are the sole owners of a partnership.

Corporations are not parents. They do not qualify for this exemption from payroll taxes. Even so, corporate hires of the owner’s children usually produce good tax benefits.

In summary, all business owners can achieve tax benefits by hiring their children, regardless of the type of business entity.

Thinking about hiring your child? Give us a call at (610) 863-8347 today for a free consultation!

Stay tuned for more tax tips from Corvino and Verwys

Big Deductions for Temporary Work Assignments

You may already know you can deduct your away-from-home overnight travel expenses. However, what tax rules do you need to know if you want to travel, or need to travel, to an out-of-town business location for an extended period?

First, your travel to and expenses of living in this out-of-town location are deductible only if this is a temporary work location, which the IRS defines as a location where you expect to spend less than one year.

Second, you have to travel away from your tax home. Your tax home is not your personal home. Your tax home is the location of your principal place of business.

You can run into these rules when you create a second business location in a second state.

For example, a business owner who has an operation in Wisconsin creates a second business location in Florida. One of the two locations is going to be the principal place of business. Traveling to and living in the second location is going to create tax deductions for travel.

If you meet the requirements listed above, you can deduct all of your out-of-town travel expenses to the extent they were not reimbursed by your employer.

Have questions? Give us a call at (610) 863-8347 today for a free consultation!

Stay tuned for more tax tips from Corvino and Verwys.

IRS Audits and Your Plan of Attack

As you grow your business and make more money, your chances of an IRS audit increase. For example, on an individual tax return, here are your chances of audit:

  • One in 38 with $200,000 or more in income
  • One in 10 with over $1 million in income
  • One in three with over $10 million in income

So, what do you do if the IRS sends you an audit notice? First, you call us.

What will we do? This depends on whom you will face in the audit: a tax auditor or a revenue agent.

If the IRS wants you to come to its office, you likely will meet with a tax auditor. If you spend just a little time with us, you may be able to handle this by yourself, because tax auditors are not tax experts. Or if you simply don’t want to talk to the IRS, we can represent you with or without your presence.

On the other hand, if the IRS wants to come to your office, expect a revenue agent. In this type of examination, you generally want us with you. We speak the same technical language as the revenue agent and this helps ensure that you don’t lose your rightful deductions.

Have questions? Give us a call at (610) 863-8347 today for a free consultation!

Stay tuned for more tax tips from Corvino and Verwys

Buy Your Employees Flowers

Buy Your Employees (and Yourself) Flowers and Fruit, and Deduct the Cost

Under the de minimis fringe benefit rules, your business deducts the cost of giving you or your employees flowers, fruit, books, and similar property under special circumstances. The recipients—you or your employees—receive these fringe benefits tax-free.

You can’t do this too often or spend too much money, but it’s easy to see that this is a great benefit, especially when you give to yourself.

For your business to make this fringe benefit tax-free, it must meet two requirements—value and frequency. Unfortunately, the IRS has not been very helpful in defining either criterion. With some research, we arrived at $70 as the maximum value for the flowers, fruit, books, and similar property.

How often is too often? The IRS doesn’t say, but it adds some common sense to the regulation with this guidance as to when this fringe benefit is appropriate: “Examples of de minimis fringe benefits are … flowers, fruit, books, or similar property provided to employees under special circumstances (e.g., on account of illness, outstanding performance, or family crisis).”

Just don’t use gift cards or certificates. The IRS considers the coupon or gift card taxable to the recipient no matter how small the amount, even if that small amount is used solely to buy the flowers or fruit.

How much is too much? Give us a call at (610)863-8347  for a free consultation. 

Stay tuned for more tax tips from Corvino and Verwys

Be Sure It's Really the IRS

Constantly changing scams require your attention 

Believe it or not, pretending to be an IRS agent is common among scam artists, according to the Better Business Bureau. Scam artists impersonate the IRS to either intimidate people into making payments over the phone, or in phishing attempts to trick people into sharing personal information via email.

You can defend yourself against these scammers by knowing these simple rules:

Rule 1: Expect a letter first

In almost every case, the IRS will send you a letter via standard mail if they need to get in touch with you. This will alert you to expect future communication from the agency and instruct you on the best ways to get in touch with them.

Rule 2: Never over email

The IRS will never initiate contact with you using email. A common scammer trick is to send emails to taxpayers using accounts and graphics that imitate the agency's. They may threaten imprisonment or fines if you don't pay up, or promise an extra refund if you send money to "prepay" your taxes. Often the emails contain links to an official-looking but fake website to collect payments. Clicking on them may also trigger the installation of viruses on your computer.

What to do: Don't respond to any email communications that look like they’re from the IRS. Don't click on any links. Delete the email or forward it to phishing@irs.gov to help catch the scammers.


Rule 3: Proper phone call etiquette

After notification via the USPS, the real IRS may call you to discuss options to handle delinquent taxes or an audit. A real IRS agent or a debt collector won't demand immediate payment without giving you an opportunity to question or appeal the bill, nor will they threaten lawsuits, arrest or deportation. Their tone should not be hostile or insulting. Finally, if they ask for payment, they should be asking you to make it out only to the United States Treasury.

What to do: If you get a call from the IRS or an IRS debt collector, politely ask for the employee's name, badge number and phone number. They shouldn't hesitate to provide this information. You should then end the call and dial the IRS at 1-800-366-4484 to confirm the person's identity.

Rule 4: Check in-person visits

Ask the person for their credentials. Every IRS agent should be able to produce two forms of credentials: a pocket commission card and a personal identity verification card issued by the Department of Homeland Security, also called an HSPD-12.

What to do: Never provide sensitive information nor confirm information they may have without first independently verifying they are legitimate representatives of the IRS. If you have concerns you can call the IRS at 1-800-366-4484 to confirm the person's identity.

You do not need to navigate this problem on your own. Call immediately for assistance. It is good to have a knowledgeable expert on your side.

To be sure it's really the IRS, give us a call at (610)863-8347  for a free consultation.

Stay tuned for more tax tips from Corvino and Verwys.

Unreimbursed Employee Business Expenses

Taxpayers that pay business expenses out of their pocket, but don't get reimbursed by their employer, may be eligible to deduct the expenses on their tax return.

1. Ordinary and Necessary: The IRS requires that the expenses be ordinary (common and acceptable in the industry) and necessary (appropriate and helpful to a business).

2. Examples of Expenses: Below is a list of potentially deductible expenses:

• Required work clothes or uniform not appropriate for everyday use
• Supplies and tools for use on the job
• Business use of a car
• Business meals and entertainment
• Business travel away from home
• Business use of your home
• Work-related education or certificates

          (The above list is not all-inclusive.)

3. Keep Good Records: The better your records, the easier it is to support your expenses in the event of an audit. Record keeping can include, but is not limited to, logs for mileage and meals, receipts, invoices, statements, etc.

To find out if you can deduct your unreimbursed employee business expenses, give us a call at (610)863-8347  for a free consultation.

Did you get married this year?

If so, here are a few ways how getting married affects your taxes:  

1. Name Change: If you are changing your name, you will need to notify the Social Security Administration. Your name on your tax return must match what is on file at the Social Security Administration.

2. Address Change: If you have moved, you will need to notify the IRS of your address change.

3. Filing Status Change: You have the option to file married filing jointly or married filing separately. In most cases, married filing jointly is more advantageous, but both statuses are something to consider before filing.

4. Withholding Change: You may want to change your tax withholding at work to take into consideration the new filing status and possibly additional deductions.

5. Tax Form Change: Now that you are married, you may be able to take itemized deductions, which requires additional forms and a longer tax return.

We are here to help determine the most advantageous filing status and get all of the proper forms filed after you get married. Give us a call at (610) 863-8347 for a free consultation!

Beat the Recapture Tax on Your Home Office

The depreciation you claim with your home-office deduction is subject to a recapture tax when you sell your home.

But you may be able to avoid the recapture tax by following one easy step when it comes time to sell your current home and buy a replacement. And you not only avoid the recapture tax, but you also increase your tax basis in your replacement home. This gives you a double dip in tax benefits.

You make this work by following IRS Revenue Procedure 2005-14, which shows you how to combine the tax-favored Section 1031 tax-deferred exchange and the Section 121 home-sale exclusion rules so that you can sell your home and

1. avoid some or all the taxes on the sale of the personal part of your home,
2. avoid and/or defer some or all the taxes on the sale of the office part of your home,
3. avoid and/or defer some or all the taxes on the sale of the rental part of your home, and
4. defer all the taxes on the depreciation recapture caused by the office or rental part of your home.

Before you take any steps to sell your home, contact us at (610) 863-8347 so we can help you make this tax-saving strategy work for you.

Due Diligence is Critical to Buying a Business

You have much to consider when you buy an existing business. If you are purchasing an existing business, due diligence is critical to making an informed decision. Here are just a few examples of how due diligence works in your favor:


• If you are buying the assets of the target business, make the target comply with the applicable bulk sales law so that creditors cannot “follow the assets” to the new owner (you) and make claims against you.
• To avoid being surprised by security interests and liens perfected under the Uniform Commercial Code (UCC), conduct a UCC filing search.
• Inspect local court records to identify undisclosed liens or judgments against the target business or the existence of current or past litigation against the business, its owner(s), or its officers.
• Review the target business entity’s income, payroll, property, sales, use, and excise tax returns for several years to identify exposure to underpaid taxes.


We have a wealth of experience in this area and can help you in any way you need. Please don’t hesitate to give us a call at (610) 863-8347.

Did you misclassify W-2 Workers as 1099 Contractors?

One potential business tax reduction strategy is to hire independent contractors instead of employees. If a worker’s classification fits within the tax law, it’s a legitimate strategy that can save you thousands of dollars. But sometimes the classification isn’t clear-cut. You may think you have the independent contractor classification correct, but when the IRS does the audit, you could learn the IRS considers those contractors W-2 employees. This can cost you a huge sum of money in back payroll taxes.

The law requires that you withhold taxes on the wages you pay to your employees. If you don’t, you are liable for the withholding and FICA (i.e., Social Security and Medicare) taxes that you neglected to remit to the IRS. Thus, if the IRS reclassifies your independent contractors as W-2 employees, you are on the hook for the taxes you should have taken from the paychecks.

But you have a way out of a big chunk of this potential tax bill: If you can show the worker paid the taxes, then you aren’t liable for them. This rule prevents the taxes from being paid twice.

We can help you determine if you have misclassified your workers as contractors. Give us a call at (610) 863-8347 today for a free consultation!

Private Debt Collectors are Coming to a Doorstep Near You

A large chunk of overdue tax bills has sat idly uncollected due to the IRS’s lack of resources. But that’s about to change, thanks to some debt collectors that the IRS hired.

As part of the Fixing America’s Surface Transportation (FAST) Act, lawmakers wrote a provision that requires the IRS to outsource inactive tax receivables to private collection agencies. About nine months ago, the IRS announced it had contracted with four private collection agencies to operate the program.

And then, a little over two months ago, the IRS released new Internal Revenue Manual sections putting in place the procedures for this new program. This means that delinquent taxpayers could now receive a Notice CP40 telling them that the IRS assigned their case to a private collection agency.

Don't talk to the IRS! We have a wealth of experience in this area and can help you navigate through the IRS collection process. Please don’t hesitate to give us a call at (610) 863-8347.

Buy Your Employees (and Yourself) Flowers and Fruit, and Deduct the Cost

Under the de minimis fringe benefit rules, your business deducts the cost of giving you or your employees flowers, fruit, books, and similar property under special circumstances. The recipients—you or your employees—receive these fringe benefits tax-free.

You can’t do this too often or spend too much money. But it’s easy to see that this is a great benefit, especially when you give to yourself.

For your business to make this fringe benefit tax-free, it must meet two requirements—value and frequency. The IRS has not been very helpful in defining either criterion. With some research, we arrived at $70 as the maximum value for the flowers, fruit, books, and similar property.

How often is too often? The IRS doesn’t say, but it adds some common sense to the regulation with this guidance as to when this fringe benefit is appropriate: “Examples of de minimis fringe benefits are … flowers, fruit, books, or similar property provided to employees under special circumstances (e.g., on account of illness, outstanding performance, or family crisis).”

Just don’t use gift cards or certificates. The IRS considers the coupon or gift card taxable to the recipient no matter how small the amount, even if that small amount is used solely to buy the flowers or fruit.

Business vs Hobby

A major feature of a business is that you engage in it to make a profit. In most cases, you would engage in a hobby for sport or recreation, not to make a profit.

In determining whether you have business or hobby activity, you should take into account all facts and circumstances with respect to the activity. No one factor alone is decisive. Consider the following factors in determining if you are operating a business:

• Whether you carry on the activity in a businesslike manner.
• Whether the time and effort you put into the activity indicate you intend to make it profitable.
• Whether you depend on income from the activity for your livelihood.
• Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
• Whether you change your methods of operation in an attempt to improve profitability.
• Whether you or your advisers have the knowledge needed to carry on the activity as a successful business.
• Whether you were successful in making a profit in similar activities in the past.
• Whether the activity makes a profit in some years and how much profit it makes.
• Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

We can help you determine if you have a business or hobby! 

Call Corvino & Verwys your Certified Tax Resolution Specialists today at (610) 863-8347.

PA Tax Amnesty Happening RIGHT NOW!

Do you owe any type of Pennsylvania taxes? 

We can save you penalty and interest!

This is time sensitive! June 19th is the last day for amnesty!

Give us a call if ...

1. You have filed all of your personal tax returns through December 31, 2014 OR all of your business returns due before December 31, 2015, but have not paid all of your taxes.
2. You have not filed tax returns for the years ending December 31, 2015, and before.

We highly recommend filing delinquent tax returns, as soon as possible, if you would like to participate in this program.

We can help you prepare and get current with your tax returns and estimate what your payment would be to settle with Pennsylvania. Give us a call or stop by our Wind Gap office!

Is the IRS on Your Trail?

There is no better debt collector in the country than the IRS. It has tools and techniques in its arsenal that many private collection agencies would drool at the thought of using.

But here's the good news: unlike some fly-by-night debt collectors, the IRS must stay within the bounds of the law.

Even though it may seem like it, the IRS's primary interest is NOT making your life miserable, but, instead, is collecting your debt. Therefore, if you follow the procedures and relief formulas the IRS allows you to use, you can pay off your debt and get the IRS off your back.

The IRS gives you avenues of relief when your tax debt is too big for you to pay.

• Offer in Compromise -  If you cannot pay your full tax liability, or if doing so would create a hardship, you may qualify to reduce your tax bill through an offer in compromise. Under this process, you determine an amount that you can pay using an IRS formula that considers your income and assets. You then submit this offer to the IRS and, pending IRS approval, you have up to 24 months to pay off the reduced amount, satisfying your debt in full.
• Installment Agreement - An installment agreement or payment plan gives you time to pay your tax debt. If you owe, you can provide IRS financial reporting documentation on your situation and negotiate the lowest possible payment plan.  Some payment plans are referred to as partial payment plans. This is where the amount you negotiate will not cover your IRS debt within the statutory time (10 years) the IRS has to collect by law. There are instances where this is better than an Offer in Compromise. 
• Abatement of Penalties -  You can use this strategy to eliminate the penalties the IRS dumped on you in addition to the taxes you owe. There are a number of grounds you can use to make this claim, such as undue economic hardship, the loss of property in a natural disaster, a recent death, divorce, various life events, alcoholism, depression, drug abuse and various other reasonable causes.
• Innocent Spouse Relief -  Normally, both spouses are equally responsible for the payment of taxes on a joint return. The innocent spouse relief will remove much or all of your liability and pin it slowly on your spouse (or ex-spouse). This might apply, for example, if your spouse operates a business that you do not participate in and owes taxes as a result of that business. We usually recommend, in these cases, to file separate tax returns and avoid the innocent spouse relief negotiation.
• Bankruptcy -  Bankruptcy is not a simple process and has many lingering effects, such as a potentially decade-long hit on your credit. However, bankruptcy can be a perfect tool in the right direction, and it can permanently eliminate some or all of your income tax liabilities, including interest and penalties.  

Is the IRS on your trail? Call us at (610) 863-8347 for an appointment today!

Last Chance to Claim your 2013 Refund

On March 1, 2017, the IRS announced that there is more than $1 billion of unclaimed Federal Tax Refunds for an estimating 1 million taxpayers that did not file their 2013 tax return.

In order to collect your 2013 tax refund, you must file your tax return by this year's tax deadline of April 18, 2017. After that date, if your 2013 return results in a refund, you will not receive the refund, but are still required to file your tax return.

Remember, there is no late filing penalty for filing a late return if you are due a refund.

Please note that if you haven't filed your 2014 and 2015 returns, the IRS may hold your 2013 refund until those returns are filed. In addition, the IRS may use the refund to offset prior Federal tax liabilities, outstanding child support, and state tax liabilities.

Don't be like many of our clients who have lost out on tax refunds!

Do you have secret cash in your vehicle?

If you have been taking the IRS standard mileage rate there is a component, let's say $0.25 a mile, for depreciation.  The $0.25 for depreciation just might hold the key to finding secret cash. Most people who use the IRS standard mileage rate assume that once they use the IRS rate, they are done, and they have nothing else to consider on that vehicle. That is incorrect. Most accountants do not take the time to find their clients' Secret Cash.

For example, if you have used your vehicle for business purposes - perhaps 90% or 100% of the time. Whatever the percentage, you or your tax preparer should know or calculate your basis in the vehicle. Your basis is the vehicle's cost minus the depreciation amount the IRS states in your mileage rate.

If you acquire a vehicle for $35,000. Then, you decide to sell your vehicle and, at that time, you have taken $7,500 of depreciation. Based on the mileage depreciation number, your car is now worth (in your hands) $27,500 ($35,000 - $7,500 = $27,500). If you sell this car for $15,000, you actually have a $12,500 loss ($27,500 remaining cost basis less $15,000 selling price). Now you have created a tax return loss in the amount of $12,500.

Beware, if you trade-in the car and buy a replacement, this will not work.  When you trade in a car, you are taking the basis of the old car and adding it to the new car cost, which most likely will never be fully depreciated.