Georgia Interest Rate on Past Due taxes

Georgia just changed its long standing ridiculous annual 12% interest rate on past due taxes to 6.5% beginning July 1, 2016. In the future the rate will be based on the Federal Reserve prime rate plus 3 percent and may be updated in January of each year. The current IRS rate on past due federal taxes is 4 percent so it is still better to pay off GA first.

Real Estate Professionals

If you qualify as a real estate professional you get to deduct rental real estate losses as nonpassive losses so you don't get ensnared by the restrictive passive loss rules. If your rental activities produce income, you don't want to be a real estate professional as the income can offset passive losses from other passive activity losses. To qualify you have to satisfy two conditions: 1. You have to work over 750 hours in real estate trades or businesses, and 2. More than 50% of your personal services are performed in real estate trades or businesses. Real estate trades and businesses are businesses where you materially participate and involve real property development, construction, acquisition, rental, operation, management, or brokerage. Mortgage brokers do not qualify. If you are a full time employee in a non real estate activity and have a lot of rental real estate, you have the burden of proof to keep records showing that your time spent in real estate activities exceeds the 750 hours and 50% test in a given year.

Failure to File Partnership and Sub S Tax Returns

These tax returns for 2015 are due 9/15/2016. If you miss the due date, then there is a $195 penalty per partner or shareholder per month or part of a month for up to 12 months. The IRS really wants you to file these returns on time since individual returns are affected by these pass through entities. If you have a reasonable cause for late filing, you can get out of the penalty.

Work Clothes

Can you deduct work clothes on your tax return? Well it all depends. Professional athletes, firefighters, police, nurses, and some rock stars can deduct their clothing and uniforms. Also safety items such as safety glasses, hard hats, special heavy boots, and gloves can qualify for a deduction. If the clothing is suitable or adaptable for everyday wear, then you can't deduct it. The clothing must also be required as a condition of employment. You take the deduction as an itemized deduction subject to the 2% of adjusted gross income floor.