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Justin Dain Hein
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Justin Hein’s Answers

48 total

  • Cost basis

    I bought some stock a long time ago, and cannot figure out what I paid for it. The records were in my basement, which was flooded by Katrina. If I sell it, how can I figure out my cost basis so that I can report the gain?

    Justin’s Answer

    The cost basis is simply the money you paid when you bought the security, including any commissions that you paid to acquire that security. If you accumulated stock over the course of many purchases, the total cost basis is still just the cost of all the purchases including commissions.

    But be mindful of reinvested dividends. If a stock paid dividends and the dividends were reinvested, computation of the cost basis will require some work. All reinvested dividends need to be added to the cost basis, otherwise the cost basis will be much too low and you will pay too much tax. If the dividend payment and reinvestment records are not available, you need to reconstruct them. Find out from old Wall Street Journals or New York Times financial sections how much the dividend was each year since the stock was acquired or inherited, and use the number of shares and price per share on the dividend pay date.

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  • Tax returns

    How long am i required to keep old tax returnes.

    Justin’s Answer

    You must keep your records for as long as they are important for the federal tax law.

    Keep all records that support an item of income or a deduction appearing on a return until the statute of limitations for the return runs out. For assessment of tax you owe, this generally is 3 years from the date you filed the return. For filing a claim for credit or refund, this generally is 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. Returns filed before the due date are treated as filed on the due date.

    If you did not report income that you should have reported on your return, and it is more than 25% of the income shown on the return, the statute of limitations does not run out until 6 years after you filed the return. If a return is false or fraudulent with intent to evade tax, or if no return is filed, an action can generally be brought at any time.

    Keep in mind that you may need to keep records relating to the basis of property longer than the statute of limitations. Keep those records as long as they are important in figuring the basis of the original or replacement property.

    For more information, please review IRS Publication 17.

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  • Tax lien

    The IRS is taking 15% of my Social Security check for back taxes. Now they have garnished my bank account where the balance of my Social Security check is automatically deposited. Can the IRS take my entire Social Security check?

    Justin’s Answer

    Through the Federal Payment Levy Program (FPLP), Social Security benefit payments are subject to a 15% levy, to pay a delinquent tax debt. In addition, the IRS can levy your bank account. This levy is separate from the FPLP. It is a one-time event to take all of the funds within the account subject to the levy. No matter how the funds were placed into the account - deposit, transfer, interest, etc. - the bank levy attaches to all of the funds. The bank must hold all funds you have on deposit - up to the amount you owe - for 21 days. This holding period allows the IRS time to resolve any issues about account ownership. After 21 days, the bank must send the money plus interest, if it applies, to the IRS.

    In your case, it appears that this occurred. And it is within the IRS's legal authority. The IRS took 15% of your Social Security through the FPLP. Then, the IRS levied your bank account, where the remaining 85% was deposited. This resulted in your entire Social Security being taken.

    Although the above is within the IRS's legal authority, you can contact the IRS to seek the release of both levies. This can be done through resolving your back tax liability. You can also get levies released by negotiating with the IRS to have your collection account placed into a Currently Not Collectible status. This means that your monthly income is exceeded by your allowable monthly expenses. You can prove this by demonstrating to the IRS that you need all of the income to pay for expenses tied to your and/or your family's health, welfare, or for the production of income.

    If you need further assistance, you can contact the IRS Taxpayer Advocate or a professional tax debt resolution company.

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  • Underpaid taxes

    If the IRS comes after me, claiming I underpaid my taxes, can they take my house away? Can I stop them?

    Justin’s Answer

    I applaud my above colleagues answer.

    To reiterate, yes, the IRS can technically take your house away. However, the IRS only engages in such ridiculous behavior when the tax liability is similarly ridiculous in size. Typically, they will file a federal tax lien against you home, which acts as a second mortgage, preventing you from realizing the gain on the sale of the property without the IRS first receiving their take. The lien will stay in place until the liability is paid in full or it expires. Yes, that is right, IRS tax liabilities expire 10 years after they are assessed. However, the IRS can engage in other collection activity to make sure that the liability does get paid (i.e. levying your bank accounts, wages, etc.).

    To also reiterate, yes, you can stop them. You can do this by negotiating a resolution to your tax liability. My colleague hits on a couple - Offer in Compromise (i.e. settlement) and Installment Agreement (i.e. monthly payment plan based upon income > expenses). However, there are additional forms of resolution given your financial situation (i.e. Currently Not Collectible status), liability amount/age (i.e. Streamlined Installment Agreement), and/or how the liability came about (i.e. Innocent/Injured Spouse). Once the resolution is negotiated, the IRS will stop engaging in collection practices - however, the federal tax lien may stay in place, depending upon the form of resolution. You should consult with an experienced Tax Attorney about finding the right resolution type for your situation.

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  • Tax Law

    Tax collector want to close my business down. I was a corporation, which is the entity that owes the IRS money for one year taxes about 30K. I closed that business. With a BK Attorney I filed CH 13, which does not protect the corporation but su...

    Justin’s Answer

    As mentioned by my colleague, most taxes are not covered by bankruptcy. Especially when the bankruptcy is filed for an individual and the taxes are owed by a defunct corporation. Undoubtedly, the IRS Revenue Officer is looking to assess a Trust Fund Recovery Penalty (TFRP) against you personally for your corporation's failure to make payroll deposits. The Revenue Officer has to go through an extensive investigation to determine who is liable for the failure to make payroll deposits. Once identified, the Revenue Officer assesses a penalty against that individual, which is usually a large fraction of the total liability owed by the corporation. At that point, the IRS will be looking to collect against you personally. And, by that point if not sooner, you should be working with an experienced Tax Attorney who understands how to resolve IRS back taxes.

    Given your lack of assets and assuming that you are personally "in the red" (income

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  • Insurance proceeds

    Someone stole my hi def TV and home entertainment system. I made a claim on my home owners insurance. I got a check for approximately $35,000. Is this the kind of thing I need to pay taxes on?

    Justin’s Answer

    The main factor is whether or not you received more or less than what the stolen property was worth. If you received more, you have a gain. This may be taxable or it can be passed on into future years. If you received less, you have a loss. This may be deductible, assuming if it was insured, you made a timely claim for all of the insurance.

    You will need to complete an IRS Form 4684 (attached below) in order to make that determination. In addition, please read the instructions for the form (also attached below).

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  • Claiming tips

    I live in washington state. What is the state & federal law on what percentage of tips you have to claim?

    Justin’s Answer

    All tips you receive are income and are subject to federal income tax. You must include in gross income all tips you receive directly, charged tips paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement. The value of noncash tips, such as tickets, passes, or other items of value are also income and subject to tax.

    Reporting your tip income correctly is not difficult. Just remember three things:

    1) Keep a daily tip record
    2) Report tips to your employer
    3) Report all your tips on your income tax return

    For more information, review IRS Publication 531.

    IRS Publication 531

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  • WA State and IRS tax problems due to being put out of business by competitors hiring illegal workers.

    I had a business in the wood pallet industry for seven years(ending in 1996). I had the business doing two million dollars a year in revenues. I hired only legal American workers and paid them well. But I could not compete with everyone else in ...

    Justin’s Answer

    Well, working under the table is just going to exacerbate your current problem with both Washington and the IRS. It is going to result in you owing taxes every year moving forward.

    As mentioned above by my colleagues, you really need to speak with a Tax Attorney whose focus is Tax Debt Resolution. They can review your financial situation to see what type of debt resolution programs you qualify for. For the IRS, the might be an Offer in Compromise (i.e. settlement), Installment Agreement (i.e. monthly payment plan based upon income>expenses), Streamlined Installment Agreement (i.e. monthly payment plan based upon how much you owe), or Currently Not Collectible status (i.e income

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  • Tips

    do you have to claim your tips

    Justin’s Answer

    All tips you receive are income and are subject to federal income tax. You must include in gross income all tips you receive directly, charged tips paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement. The value of noncash tips, such as tickets, passes, or other items of value are also income and subject to tax.

    Reporting your tip income correctly is not difficult. Just remember three things:

    1) Keep a daily tip record
    2) Report tips to your employer
    3) Report all your tips on your income tax return

    For more information, review IRS Publication 531.

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  • Unmarried couple filing joint taxes

    My fiance and I are 'common law' married according to Colorado law and were thinking about filing our taxes together this year. I will be moving to Maryland soon and he may not be able to come with me. Will this be a problem if we ant to file sepa...

    Justin’s Answer

    I might be mistaken, but your real question might be can you filed married-jointly? If that is your question, you should be able to file married-filing-joint as well as married-filing-separate. If you and your husband are "married" according to your "marriage" state of residence (in your example, it would be Colorado), you and your husband can file jointly for your federal return. You would then have to file a separate state tax return in Maryland, and he the same in Colorado. Just because you are living abroad for a year, doesn't mean that you and your husband are no longer married. Thus, you are not precluded from filing married-filing-joint or married-filing-separate.

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