Renting out your property as an Airbnb can be a good way to secure residual income. While Airbnb may send you a tax form at the end of the year. It’s important to understand your tax responsibilities to check for errors and in the event you aren’t issued a form.
Reporting Airbnb or Vacation Rental Income
The IRS requires that all payment processing companies report gross earnings for all users within the US. Companies like this include Venmo, PayPal, Airbnb, Etsy, and others. Airbnb will issue Form 1099-K if you meet certain income thresholds. Non-US citizens will be provided Form W-8. However, you still must report the income if you do not receive this form.
Withholding taxes from Airbnb payouts
You do have the option to withhold taxes from your Airbnb earnings. This is particularly recommended to avoid a large tax bill at the end of the year. You can also use a tax calculator to get an estimate of your earnings to save money for taxes.
Vacation Home, Rental, or Personal Use
You’ll need to determine whether your Airbnb property falls under the category of a vacation home, rental property, or personal use. This depends on several factors. One is how you use the property. Another is how often you rent it out. Finally, your intentions with the property are also considered.
Vacation Home
If you primarily use the property for personal vacations and occasionally rent it out to cover expenses or generate additional income, it might be considered a vacation home. Typically, vacation homes are used by the owner for personal enjoyment and rented out to others on a short-term basis.
Rental Property
What if your primary purpose for owning the property is to generate rental income? If you rent it out consistently throughout the year, it’s likely considered a rental property. In short, rental properties are typically managed as investment properties with the primary goal of generating rental income.
Personal Use
If you use the property exclusively for personal purposes and do not rent it out to others, it would be considered for personal use only. This could also include using the property as a second home for personal vacations. However, there is something called the Augusta Rule, also known as the “14-day rule.” This is a provision that allows homeowners to rent out their primary residence for up to 14 days each year without having to report the rental income on their tax return. The IRS requires you to pay taxes rental income for 15 days or more out of the year.
Tax Relief and Filing Assistance for Airbnb Hosts
As a host, you may qualify for tax relief. Our tax professionals will review your case to determine the best course of action for your compliance. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers.
CEO David King and Lead Tax Attorney Phil Hwang discuss these circumstances and what you should do if you’re thinking your refund could be at risk for IRS seizure.
While stocks may seem like an effortless path toward financial stability, they do affect your taxes. Understanding what’s expected when you file can keep you out of trouble with the IRS.
While taxes are inevitable, you want to make sure that you’re not paying more than you have to. You can legally reduce your taxes by using strategies that you may not be aware of.
The responsibility of payroll taxes falls on the shoulders of employers, although they come from employee paychecks. The federal government, Social Security and Medicare heavily rely on taxes from employee wages.
IRS revenue officers are now tracking how unpaid payroll taxes were spent during their “trust fund investigation.”
Payroll Taxes Used for the Employer’s Benefit
Employers will now face more penalties for payroll fraud. This can include wrongfully spending payroll taxes or pocketing it for themselves. Maintaining a luxury lifestyle while owing payroll taxes can now lead to prosecution.
Revenue officers are being instructed to pull employer 1040 tax returns to learn whether the money that benefited them was reported as income. If the money was not reported as income, the RO will submit the returns and investigation records to the civil audit division. Another option is that the RO will refer the case to the IRS Criminal Investigation Division to review for criminal prosecution. The course of action made by the RO depends on the severity of the case.
What This Means for Business Owners
Business owners should utilize their tax professionals and seek advise to avoid any possible criminal activity. It’s important to review and track where the payroll money goes for the year. If you know that some of your payroll tax money went to yourself as an employer, you should prepare to amend your income tax returns before the IRS catches up to you.
Avoiding handling this matter could put you in a worse financial situation, or even lead to prosecution.
Payroll Tax Debt
If you are currently in unaffordable tax debt, Optima’s team of tax professionals may be able to aid your case. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.
With the rise of gas prices and the decline of the housing market, it’s no secret that the United States is experiencing inflation. Inflation doesn’t stop at gas and housing, though, as the state of the economy also impacts your taxes. The IRS updates certain tax provisions annually to account for inflation, so your tax and investment plans should change accordingly.
Inflation and Standard Deductions
Standard deductions rise during inflated tax years. For 2022, the deduction for joint filers is expected to rise to $25,900; an $800 difference. Single filers and married taxpayers filing separately now have a standard deduction of $12,950. This is a $400 difference from last year. Heads of households now have a standard deduction of $19,400 for 2022, which is a $600 difference. The 401(k) limit has been increased as well, making it $20,500.
2022 Marginal Rates During Inflation
The marginal rates (based on income level) are as follows:
Incomes greater than $539,900 ($647,850 for joint filing) have a rate of 37%
Incomes greater than $215,950 ($431,900 for joint filing) have a rate of 35%
Incomes greater than $170,050 ($340,100 for joint filing) have a rate of 32%
Incomes greater than $89,075 ($178,150 for joint filing) have a rate of 24%
Incomes greater than $41,775 ($83,550 for joint filing) have a rate of 22%
Incomes greater than $10,275 ($20,550 for joint filing) have a rate of 12%
Incomes of $10,275 or less ($20,550 or less if filing jointly) have a rate of 10%
Alternative Minimum Tax During Inflation
The AMT tax exemption for the 2022 tax year has also increased due to the economy. It is now $75,900 and begins to phase out when your income reaches $539,900. Married couples filing jointly have a minimum of $118,100 and begins to phase out at $1,079,800.
What You Can Expect
Although the IRS has made some inflation adjustments, several provisions of the tax code have yet to be amended. This means that taxpayers will pay more for the 2022 tax year.
You should review your spending and update your financial plans and investment accounts to avoid problems with the IRS in the future. Not all taxpayers may be affected by the inflation, but some state and federal provisions have not been updated to reflect the times. A tax professional can help you plan according to your state provisions and your current income level.
For Assistance with Tax Debt During Inflation
Our tax professionals will review your case and inform you on how to move forward in your tax relief journey. Optima Tax Relief has a team of dedicated and experienced tax professionals with proven track records of success.
There is no shame in needing professional help during tax season. In fact, if you’re able to afford tax assistance or find community resources, you’ll have a better likelihood of accurate returns. Getting your return completed correctly the first time means fewer delays and getting your refund faster. Choosing the wrong tax professional, however, could hurt you in the long run. The IRS has shared several tips for choosing a tax professional.
Certified public accountants are licensed by state boards of accountancy in the District of Columbia and U.S. territories. They must pass the Uniform CPA Examination and have completed a study in accounting at a college level. To maintain an active CPA license, it is required that a CPA completes specified levels of continued education.
Tax attorneys are licensed by state courts, the District of Columbia, or designees such as the state bar. If you’re considering hiring an attorney specializing in tax prep, they should still have a degree in law and passed a bar exam.
Tax Professional History
Conducting your own research is crucial to choosing a tax professional. Sources such as the Better Business Bureau can give you some history on the professional that you’re considering. Notable things in their background would be disciplinary actions and the status of their license. The State Board of Accountancy is used for CPAs, the State Bar Association for attorneys, and the IRS verifies enrolled agent status here.
Service Fees for Tax Professionals
The goal of the tax preparer should not be larger refunds than their competitors. Tax preparers that charge by taking a percentage of your refund may not have your best interest in mind. More money sounds great at first, but compliance with the IRS is the ultimate goal. You want to be sure that the tax pro is not using deductions you don’t qualify for, or other means to increase your refund and make more money.
There is never a reason to show your personal documents or Social Security number to a tax preparer when you’re asking about a quote.
Book a Tax Professional Early
You don’t want to wait until the last minute to find a tax professional. As soon as the tax season ends, it’s a good idea to contact a tax preparer for next year. Fly-by-night preparers are high risk investments.
Providing Documentation
Keep records and receipts handy for filing season. This will make the tax preparer’s job a lot easier, and increase the likelihood of accuracy for your return. A good tax preparer should ask questions to figure out your total income and tax deductions, or credits.
Blank Tax Returns, Signing, and Filing
You should never sign a blank tax form, even if the preparer sent it to you. Always review your return thoroughly and ask questions if you’re confused. This is important, you want to make sure the refund is going directly to you, and not through the preparer. They should also provide you with a copy of the completed return.
You also want to make sure that your tax professional e-files your return. Filing electronically and choosing direct deposit is the quickest way for you to get your refund.
Preparer Tax Identification Number
All paid tax preparers must sign returns and include their PTIN, or Preparer Tax Identification Number by law. If your preparer does not have a PTIN, do not move forward with their paid services.
Optima’s Tax Services
Now that you know these tips for choosing a tax professional, you can get help. Optima Tax Relief has a team of dedicated and experienced tax professionals with proven track records of success.
