Genesis Tax Resolution

Understand digital asset reporting and tax requirements

The IRS reminds taxpayers that there’s a question at the top of Forms 1040 and 1040-SR that asks about digital asset transactions. All taxpayers filing these forms must check the box indicating either “yes” or “no.”

If an individual disposed of any digital asset that was held as a capital asset through a sale, exchange or transfer, they should check “Yes” and use Form 8949, Sales and other Dispositions of Capital Assets, to figure their capital gain or loss and report it on Schedule D (Form 1040), Capital Gains and Losses, or Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, in the case of a gift.

Examples of transactions involving digital assets include:

A sale of digital assets.
The receipt of digital assets as payment for goods or services provided.
The receipt or transfer of digital assets for free (without providing any consideration) that does not qualify as a bona fide gift.
The receipt of new digital assets as a result of mining and staking activities.
The receipt of new digital assets as a result of a hard fork.
An exchange of digital assets for property, goods or services.
An exchange/trade of digital assets for another digital asset(s).
Any other disposition of a financial interest in digital assets.
If individuals received any digital assets as compensation for services or disposed of any digital assets they held for sale to customers in a trade or business, they must report the income as they would report other income of the same type (for example, W-2 wages on Form 1040 or 1040-SR, line 1a, or inventory or services on Schedule C).

Know what’s deductible after buying that first home, sweet home

Making the dream of owning a home a reality is a big step for many people. Whether a fixer-upper or dream home, home ownership is a milestone that can come with a learning curve. First-time homeowners should make themselves familiar with authorized deductions, programs that can assist with home ownership and the use of housing allowances that can be beneficial.

When it comes to home ownership, the IRS considers a home to be a house, condominium, cooperative apartment, mobile home, houseboat or house trailer that contains a sleeping space, toilet and cooking facilities.

Most home buyers take out a mortgage loan to buy their home and then make monthly payments to the mortgage holder. This payment may include several costs of owning a home. The only costs the homeowner can deduct are:

state and local real estate taxes, subject to the $10,000 limit
home mortgage interest, within the allowed limits
mortgage insurance premiums
Taxpayers must file Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Income Tax Return for Seniors, and itemize their deductions to deduct home ownership expenses. However, taxpayers can’t take the standard deduction if they itemize.

Non-deductible payments and expenses
Homeowners can’t deduct any of the following items.

Insurance, other than mortgage insurance, including fire and comprehensive coverage, and title insurance
The amount applied to reduce the principal of the mortgage
Wages you pay for domestic help
Depreciation
The cost of utilities, such as gas, electricity, or water
Most settlement or closing costs
Forfeited deposits, down payments, or earnest money
Internet or Wi-Fi system or service
Homeowners’ association fees, condominium association fees, or common charges
Home repairs
Mortgage interest credit
The mortgage interest credit is meant to help individuals with lower income afford home ownership. Those who qualify can claim the credit each year for part of the home mortgage interest paid.

A homeowner may be eligible for the credit if they were issued a qualified Mortgage Credit Certificate from their state or local government. An MCC is issued only for a new mortgage for the purchase of a main home. The MCC will show the certificate credit rate the homeowner will use to figure their credit. It will also show the certified indebtedness amount and only the interest on that amount qualifies for the credit.

Homeowners Assistance Fund
The Homeowners Assistance Fund program provides financial assistance to eligible homeowners for paying certain expenses related to their principal residence to prevent mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services, and also displacements of homeowners experiencing financial hardship after January 21, 2020.

Minister's or military housing allowance
Ministers and members of the uniformed services who receive a nontaxable housing allowance can still deduct their real estate taxes and home mortgage interest. They don’t have to reduce their deductions based on the allowance.

More information:
Publication 530, Tax Information for Homeowners
Publication 936, Home Mortgage Interest Deduction

Amen!
5x over!

Daily Inspiration

Taxpayers beware: Tax season is prime time for phone scams

With the new tax season starting this week, the IRS reminds taxpayers to be aware that criminals continue to make aggressive calls posing as IRS agents in hopes of stealing taxpayer money or personal information.

Here are some telltale signs of a tax scam along with actions taxpayers can take if they receive a scam call.

The IRS will never:

Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
Threaten to immediately bring in local police or other law enforcement groups to have the taxpayer arrested for not paying.
Demand that taxes be paid without giving taxpayers the opportunity to question or appeal the amount owed.
Call unexpectedly about a tax refund.
Taxpayers who receive these phone calls should:

Record the number and then hang up the phone immediately.
Report the call to TIGTA using their IRS Impersonation Scam Reporting form or by calling 800-366-4484.
Report the number to [email protected] and be sure to put “IRS Phone Scam” in the subject line.

If you need income tax help call Genesis Tax Resolution to discuss your specific tax needs. 205-547-0919 or email at [email protected]