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Tax Articles

Tax tips for taxpayers to consider when selling their home

The IRS has some good news for taxpayers who are selling their home. When filing their taxes, they may qualify to exclude all or part of any gain from the sale from their income. Here are some things that homeowners should think about when selling a home:

Ownership and use To claim the exclusion, the taxpayer must meet ownership and use tests. During a five-year period ending on the date of the sale, the homeowner must have owned the home and lived in it as their main home for at least two years.

Gains Taxpayers who sell their main home and have a gain from the sale may be able to exclude up to $250,000 of that gain from their income. Taxpayers who file a joint return with their spouse may be able to exclude up to $500,000.  Homeowners excluding all the gain do not need to report the sale on their tax return.

Losses Some taxpayers experience a loss when their main home sells for less than what they paid for it. This loss is not deductible.

Multiple homes Taxpayers who own more than one home can only exclude the gain on the sale of their main home. They must pay taxes on the gain from selling any other home.

Reported sale Taxpayers who don’t qualify to exclude all of the taxable gain from their income must report the gain from the sale of their home when they file their tax return. Anyone who chooses not to claim the exclusion must report the taxable gain on their tax return.  Taxpayers who receive Form 1099-S must report the sale on their tax return even if they have no taxable gain.

Mortgage debt Generally, taxpayers must report forgiven or canceled debt as income on their tax return. This includes people who had a mortgage workout, foreclosure, or other canceled mortgage debt on their home. Taxpayers who had debt discharged after Dec. 31, 2017, can’t exclude it from income as qualified principal residence indebtedness unless a written agreement for the debt forgiveness was in place before January 1, 2018.

Possible exceptions There are exceptions to these rules for some individuals, including persons with a disability, certain members of the military, intelligence community and Peace Corps workers.

Worksheets Worksheets included in Publication 523 can help taxpayers figure the adjusted basis of the home sold, the gain or loss on the sale, and the excluded gain on the sale.

This information is not intended to be a substitute for specific, individualized tax advice as individual situations will vary. Royal Alliance Associates, Inc., Georgetown Capital and its advisors are not engaged in rendering tax advice.

Prepared by the IRS. For more information go to www.irs.gov.

Taxpayers can minimize the effects of data theft with these steps

Every day, the theft of personal and financial information puts people at risk of additional problems. Thieves often use the stolen data as quickly as possible to:

  • Sell the information to other criminals.
  • Withdraw money from a bank account.
  • Make credit card purchases.
  • File a fraudulent tax return for a refund using a victim’s name.

Victims of a data loss should follow these steps to minimize the effect of the theft:

  • Determine what information the thieves compromised. This may include emails and passwords or more sensitive data, such as name and Social Security number.
  • Take advantage of credit monitoring services. When an organization or company is affected by a data theft, they will often offer these services.
  • Place a freeze on credit accounts. This will prevent the thieves getting access to a victim’s credit records. There may be a fee to place a freeze on an account, and it varies by state. At a minimum, victims should place a fraud alert on their credit accounts by contacting one of the three major credit bureaus. A fraud alert isn’t as secure as a freeze, but it’s free.
  • Reset passwords on online accounts. This includes financial sites, email accounts and social media accounts. People should use different passwords for each account. If possible, users should create passwords that are at least 10-digit passwords. People should mix letters, numbers and special characters when possible. Victims should consider using a password manager or app.
  • Use multi-factor authentication if available. Some financial institutions, email providers and social media sites allow users to set their accounts for multi-factor authentication. This requires a security code, usually sent as a text to their mobile phone, in addition to a username and password.

 This information is not intended to be a substitute for specific, individualized tax advice as individual situations will vary. Royal Alliance Associates, Inc., Georgetown Capital and its advisors are not engaged in rendering tax advice.

Prepared by the IRS. For more information go to www.irs.gov.

Online tool lets taxpayers check the status of their refund

Taxpayers filing their tax returns to meet the upcoming tax filing deadline should know that the easiest way to check on their tax refund is to use Where’s My Refund?. This tool is available on IRS.gov and through the IRS2Go app. The fastest way to get that tax refund is to use IRS e-File and direct deposit.

Taxpayers can use Where’s My Refund? to start checking on the status of their tax return within 24 hours after the IRS receives an e-filed return. For a paper return, it’s four weeks after the taxpayer mailed it.

The tool has a tracker that displays progress through three phases: (1) Return Received (2) Refund Approved (3) Refund Sent

All a taxpayer needs to use “Where’s My Refund?” is their Social Security number, tax filing status and the exact amount of the refund claimed on their tax return.

“Where’s My Refund?” is updated no more than once every 24 hours, usually overnight, so there’s no need to check the status more often.

Taxpayers should only call the IRS tax help hotline on the status of their tax refund if:

  • It has been 21 days or more since the tax return was e-filed
  • It has been six weeks or more since the return was mailed
  • When “Where’s My Refund?” tells the taxpayer to contact the IRS

Taxpayers who owe should pay as much as possible to minimize interest and penalty charges. The taxpayers should visit IRS.gov/payments to explore their payment options.

This information is not intended to be a substitute for specific, individualized tax advice as individual situations will vary. Royal Alliance Associates, Inc., Georgetown Capital and its advisors are not engaged in rendering tax advice.

Prepared by the IRS. For more information go to www.irs.gov.

Here’s how taxpayers can pay their taxes

The IRS offers several payment options where taxpayers can pay immediately or arrange to pay in installments. Taxpayers can pay online, by phone, or with their mobile device and the IRS2Go app. Taxpayers should pay in full whenever possible to avoid interest and penalty charges.   

Here are some electronic payment options for taxpayers:

  • Electronic Funds Withdrawal. Taxpayers can pay using their bank account when they e-file their tax return. EFW is free and only available through e-File.
  • Direct Pay. Taxpayers can pay directly from a checking or savings account for free with IRS Direct Pay. Taxpayers receive instant confirmation after they submit a payment. With Direct Pay, taxpayers can schedule payments up to 30 days in advance. They can change or cancel their payment two business days before the scheduled payment date. Taxpayers can choose to receive email notifications each time they make a payment.
  • Credit or debit cards. Taxpayers can also pay their taxes by debit or credit card online, by phone, or with a mobile device. Card payment processing fees vary by service provider and no part of the service fee goes to the IRS. Telephone numbers for service providers are at IRS.gov/payments.
  • Pay with cash. Taxpayers can make a cash payment at a participating retail partner. Taxpayers can do this at more than 7,000 locations nationwide. Taxpayers can visit IRS.gov/paywithcash for instructions on how to pay with cash.
  • Installment agreement. Taxpayers who are unable to pay their tax debt immediately may be able to make monthly payments. Before applying for any payment agreement, taxpayers must file all required tax returns. They can apply for an installment agreement with the Online Payment Agreement tool, which also has more information about who’s eligible to apply for a monthly installment agreement.

Anyone wishing to use a mobile device should remember they can access the IRS2Go app to pay with either Direct Pay or by debit or credit card. IRS2Go is the official mobile app of the IRS and is available for download from Google Play, the Apple App Store or the Amazon App Store.

Taxpayers can also visit IRS.gov/account and log in to their account. From here, they can view their taxes owed, payment history, federal tax records, and key information from their most recent tax return as originally filed.

This information is not intended to be a substitute for specific, individualized tax advice as individual situations will vary. Royal Alliance Associates, Inc., Georgetown Capital and its advisors are not engaged in rendering tax advice.

Prepared by the IRS. For more information go to www.irs.gov.