Have you ever dreamed of winning the Powerball jackpot? The allure of sudden wealth and financial freedom is undeniable, but there’s one thing that many winners overlook until it’s tax season – the substantial tax bill that comes with their lucky break. Winning the Powerball lottery isn’t just about celebrating. It’s about understanding the tax implications that could significantly impact one’s newfound fortune.
If you are the recent beneficiary of an inheritance, you may be wondering if you will need to pay tax on the cash, stocks or real property that you received. Generally, the answer is no, and you don’t even need to report the receipt of the inheritance on your income tax return. But there is an exception: if you receive untaxed income that a decedent had earned or had a right to receive during their lifetime, you’ll be taxed on it just as the decedent would have been. Examples of this type of income are payments of compensation, wages, bonuses, commissions, vacation and sick pay that the decedent had earned but hadn’t received before they died; uncollected rent; installment payments from property sold before the decedent’s death; and most frequently, traditional IRA distributions.
Back in August of 2022, President Biden issued an executive order that would forgive federal student loan debt for lower income individuals. The program would have provided up to $20,000 in loan relief to borrowers with loans held by the Department of Education (DOE) whose individual income is less than $125,000 ($250,000 for married couples) and who received a Pell Grant. Borrowers who meet those income standards but did not receive a Pell Grant in college would have received up to $10,000 in loan relief.
When you are starting a business there are several possible business entity types that need be considered to make sure you get started off on the right foot and avoid costly mistakes that must be corrected later or those that must be changed later to maximize tax benefits. One also needs to be concerned about potential personal liability. Each business entity choice has its own pros and cons – the following is an overview of each possible business structure.
Parents – especially new ones – are always looking for new ways to improve the lives of their children. Surprisingly, one of the most effective opportunities that people also often overlook has to do with starting a savings account for that child as early as they’re capable of doing so.
Parents – especially new ones – are always looking for new ways to improve the lives of their children. Surprisingly, one of the most effective opportunities that people also often overlook has to do with starting a savings account for that child as early as they’re capable of doing so.
Unpleasant Surprises May Await You at Tax Time
Taxpayers are frequently blindsided when their filing status changes because of a life event such as marriage, divorce, separation or the death of a spouse. These occasions can be stressful or ecstatic times, and the last thing most people will be thinking about are the tax ramifications. But the ramifications are real and need to be considered to avoid unpleasant surprises. The following are some of the major tax complications for each situation.
On July 14, 2023, the IRS issued Notice 2023-54 announcing that traditional IRA owners who will attain age 72 in 2023 (that is, individuals born in 1951) will have to take their first required minimum distribution (RMD) by April 1, 2025, rather than April 1, 2024.
You’d be hard-pressed to find someone out there willing to argue against the idea that taxes are complicated. There’s a reason why most people dread it on some level every time April rolls around. Making mistakes is commonplace, yes – but it’s also critical to understand that not all issues are created equally.
In fact, some common tax mistakes are more than just a “small problem.” They could actually land you in trouble with the IRS if you’re not careful, which is why they should be avoided at all costs.
The U.S. Tax Code is used for more than just collecting taxes. It is used by the Government as a means of providing lower-income individuals with social benefits such as the earned income tax credit, child tax credit and health care subsidies. It also is used to promote government-sponsored programs such as combatting climate change through tax credits for electric vehicles, home solar installations, and home energy-saving improvements. As a result, the tax code has become quite complex and changes frequently. That is why getting tax advice from friends and relatives or off the internet can be risky and lead to misinformation and trouble with the IRS, or missing out on tax benefits. Here are examples of bad tax advice.
