Learning Center for Tax and Financial Insights

Article Highlights:Late filing penaltiesInterestThree-year statute of limitationsForfeited refundsIf you have been procrastinating about filing your 2022 tax return or have not filed other prior year returns, you should consider the consequences, including the penalties, interest, and aggressive enforcement actions. Plus, if you have a refund coming for a prior year you may end up forfeiting it.If you haven’t filed your return and you owe taxes, you will be subject to both a late payment and a late filing penalty. You should file a return as soon as possible and pay as much as possible to reduce the penalties and interest.The failure-to-pay penalty is one-half of one percent for each month, or part of a month, up to a maximum of 25%, of the amount of tax that remains unpaid from the due date of the return until the tax is paid in full. Should you put off filing, and if the IRS issues a notice of intent to put a levy on your property and any amount billed is not paid within 10 days, the interest rate will be increased to a full one percent per month.There is also a penalty for not filing on time. The failure-to-file penalty is 4½% of the tax owed for each month or part of a month that your return is late. When combined with the failure to pay penalty the maximum will add up to 25% for the first five months, although the interest penalty will continue to accrue. If your return is over 60 days late, there's also a minimum penalty for late filing; for 2022 returns filed in 2023 it's the lesser of $450 or 100% of the tax owed on that late-filed return. The IRS periodically increases the amount so it may be different for other years.

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.What is Tax Fraud? Breaking Things DownAs the term implies, tax fraud is a deception that is "deliberately practiced" when filing your state or federal income taxes. In other words, making a mistake that ends up saving you money or putting you in an otherwise beneficial situation is one thing. Withholding information or filling out forms incorrectly and knowingly to get those same benefits are something else entirely.What happens if you commit tax fraud will vary depending on the severity of the situation. Generally, you could get assessed a penalty of up to 75% of the amount that you failed to pay due to the fraud in question. Likewise, you could get fined up to $100,000 and be subject to three years in federal prison.Improper Child Tax Credit ClaimsThe Child Tax Credit is a tax break that is meant to go with families with qualifying children. That money can be essential for food, clothes, housing, and other essential items. "Qualifying" is certainly the operative word in that sentence - if your family situation doesn't meet the criteria, you cannot claim the Child Tax Credit and if you have done so it is in error. End of story.Failing to Report All of Your IncomeThis is an issue that has become increasingly common over the last few years as the "gig economy" began to grow in popularity. Someone might fully report all the income they bring in from their traditional 9-to-5 job... but may not have been as forthcoming about all that money they were making ride-sharing on the weekends. Or, they might set up an eBay store that generates a substantial amount of income that they think they don't have to report because no formal 1099 had been issued in the past.

Article Highlights:Divorce or Separation Agreements Can Specify Who Claims a Child.If You Pay Child Support, You Claim the Child as a Dependent.Avoiding Payroll Taxes by Treating an Employee’s Compensation as a Gift.Only Medical Expenses for Taxpayer, Spouse, and Dependents Are Deductible.Donation of the Use of a Time-Share Week Is a Charitable Deduction.Pay Household Help in Cash and Avoid Paying Payroll Taxes.Health Savings Account Funds Are Only for Medical Expenses.Only Must Report and Pay Tax on Income Over $600.You Don’t Have to Report Interest Income if You Haven’t Received a Form 1099-INT.You Can Help Friends and Family with Interest Free Loans. Older People Should Change the Title on Their Home to Their Child.Cost of Attending a Medical Conference Is Deductible.Claim a Medical Deduction for Repainting Home If Lead-Based Paint Is Discovered.You Can Sell Your Used Electric Vehicle to an Individual and Get a Tax Credit.Investments In Foreign Countries Are Not Subject to U.S. Taxes.·Only Homeowners Can Claim the Solar Credit.A U.S. Citizen Married to A Non-Resident Alien Cannot File a Joint Return.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. If your divorce or separation agreement says so, you can claim your child as your dependent.Not true! The IRS will not accept a state court’s allocation of dependents because IRC Sections 151 and 152, not state law or a judge’s ruling, determine who may claim a child as a dependent for federal income tax purposes.If you pay child support you are entitled to claim the child as a dependent.Untrue! A child is the dependent of the custodial parent unless the custodial parent releases the dependency to the non-custodial parent.The IRS defines “custodial parent” to be the parent with whom the child resides for the greater number of nights during the year.An employer can avoid payroll taxes by treating an employee’s compensation as a gift.Not true! Although gifts are generally excluded from the recipient's gross income, transfer by or for an employer to or for the benefit of an employee can't be excluded as a gift (Code Sec. 102(c)(1)).However, de minimis fringe benefits are not treated as a gift and are excluded from the recipient's gross income (Code Sec. 132(a)(4)). A de minimis fringe is any property or service whose value is so small that accounting for it is unreasonable or administratively impracticable. You can only deduct medical expenses for the taxpayer, spouse, and dependents.That is generally true, but for purposes of deducting medical expenses for a dependent relative, the individual does not need to meet the gross income test (IRC Sec 152(d)(1)(B)) to be a medical dependent. In addition, for qualifying children of divorced or separated parents, each parent can deduct the expenses they pay, as long the child is a dependent of one of them.You get a charitable contribution if you donate the use of your time-share week to a charity auction.Not true! Unfortunately although that might seem to be good advice, the “use” of an item does not constitute a gift of property. It is merely the granting of a privilege for which no charge is made and therefore does not constitute a deductible charitable contribution. Rev Ruling 70-477, I.R.B. 1970-37.If you pay your household help in cash you can avoid paying FICA.Not true! The IRS consider household help to be employees and employees are subject to Social Security and Medicare taxes (FICA) once a specified threshold is exceeded. Household employees do not include repairmen, plumbers, contractors, and other business people who provide their services as independent contractors. IRS Publication 926. Health savings account (HSA) funds can only be used for medical expenses.Not true! Generally HSAs can only be established by eligible individuals who are only covered by high-deductible health plans. Eligible individuals may, subject to inflation adjusted limits, make contributions to HSAs. Even though the intent of HSAs is to provide a means for taxpayers with high deductible insurance to pay medical expenses, there is no requirement that HSA distributions must be used to pay medical expenses. However, such distributions are subject to income tax and a 20% penalty tax., except that an individual aged 65 or older can withdraw the funds penalty free but still must pay tax on the nonqualified distribution.

The IRS is warning employers to be wary of third parties who are advising them to claim the credit when they may not even qualify.

Article Highlights:Health InsuranceRetirement PlansSpecial Rule for Military SpousesQualified Transportation Fringe BenefitsFlexible Spending Accounts (FSAs)Group Term Life InsuranceQualified Employee DiscountsEmployer-Provided Education AssistanceAdoption ExpensesChild and Dependent Care BenefitsHealth Savings AccountsSpecial Rule for Military SpousesTax law includes several tax- and financially favored benefits that employers can offer or provide to their employees. This article is intended to make you aware of these perks, with the caveat that all employers, especially small businesses, may not provide all, or perhaps any, of these covered perks. But whichever of these benefits your employer offers, you should seriously consider taking advantage of them, if you haven’t already.Health Insurance – For a company that has 50 or more employees, the Affordable Care Act requires the business to offer at least 95% of its full-time employees and their dependents (but not spouse) with affordable minimum essential health care coverage or be subject to a penalty. If you work for one of these larger employers and the company picks up the entire health insurance premium cost, consider yourself lucky, as the costs of health insurance coverage have risen dramatically over the last few years. More likely, you may have to pay part of the premium costs, and the plan may have a high deductible and/or co-pays. Even so, the tax-free benefit of what the employer covers is valuable. While not required to, businesses with fewer than 50 employees may offer health care coverage, often for competitive purposes in retaining employees. The health insurance premiums paid on your behalf by your employer are tax-free to you. If you aren’t aware of the value of this nontaxable employee benefit, you can look at your Form W-2, box 12a, code DD, which shows your share of the cost of employer-sponsored health coverage. You can claim the part of the coverage that you pay for with post-tax dollars as a medical expense, if you itemize your deductions.Retirement Plans – Although some larger employers may provide a company-funded retirement plan that will pay you a monthly benefit when you retire, most generally offer 401(k) plans with which an employee can save for retirement by making pre-tax contributions up to $22,500 for 2023, and if the employee is age 50 or over, they can qualify to make a catch-up contribution of up to $7,500, bringing the total to $30,000. Some employers also match their employees’ contributions up to a certain amount, which means an employee should endeavor to contribute at least the amount that the employer will match.Special Rule for Military Spouses – Starting in 2023, small employers (no more than 100 employees earning more than $5,000 per year) that have defined contribution plans may be eligible for new a tax creditthat can be up to $500 per eligible employee. The credit applies for their employees who are military spouses where the plan enables the military spouse to become eligible to participate in the plan within 2 months of being hired and meet other conditions. If you are a military spouse who hasn’t been able to contribute to an employer’s plan or receive matching contributions from the employer, you may be able to be covered by the employer’s plan much sooner than in the past.Qualified Transportation Fringe Benefits – Certain transportation-related fringe benefits that an employer may provide to employees are tax free to the employee. Prior to the passage of the tax reform in late 2017, employers were able to provide employees with tax-free reimbursement for parking, transit passes, commuter transportation, and bicycle commuting, subject to certain limits, and the employer could deduct the cost. The tax reform had a significant impact on these benefits. It eliminated the $20-per-month bicycle benefit and no longer allows the employer to deduct reimbursements made to employees for other transportation benefits, making some employers less likely to offer any transportation fringe benefits. However, they remain tax-free to the employee; for 2023, the limit on tax-free employer reimbursements is $300 per month each for qualified parking, transit passes, and commuter transportation.Flexible Spending Account (FSA) – This is a special account established by an employer that allows employees to contributeto the account throughsalary-reduction contributions. The benefit is that the contributions are pre-tax, meaning the employee doesn’t pay taxes on the money contributed to the account. This allows employees to payfor certain out-of-pocket health care costs with pre-tax dollars. The health careexpenses can be used forhealth plan deductibles, co-payments, and even some over-the-counter-medications. The annual limit on contributions is inflation adjusted and is $3,050 for 2023.However, if you don’t use the money in your FSA, you’ll lose it.

Sam Altman: In the BeginningBorn in Chicago, Sam Altman was originally raised in St. Louis, Missouri. He had always shown an aptitude for technology, even from an early age. He received his first computer at the age of eight, for example, and learned to code quickly thereafter.By 2005, he was already setting his sights on the various ways in which he could apply his passion toward something greater. He spent time at the prestigious Stanford University, where he studied computer science.At the age of just 19 years old, Sam Altman founded a company called Loopt. It was a mobile application that offered location-based social networking - something that has since become a nearly ubiquitous part of our lives, but in 2005 was certainly seen as a novelty. During his tenure as the company's CEO, he was able to raise more than $30 million from venture capitalists - that's how promising they thought this idea was.Over the next several years, Sam Altman's career took many turns. After Loopt was acquired by the Green Dot Corporation, he moved on and became a partner at Y Combinator. It's a startup accelerator that has been used to help financially support more than 4,000 companies, including some of the most prominent in the digital space today. This includes but is certainly not limited to ones like Airbnb, Twitch, DoorDash, Dropbox, Reddit, and others.During his time with the company, Sam Altman indicated that the total valuation of Y Combinator organizations had grown to a colossal $65 billion.The Ascent of OpenAIOver the next few years, Sam Altman became closely entwined with an organization called OpenAI. It's a research lab focused on not just artificial intelligence as a concept, but the potential implications thereof. Although Sam Altman wasn't a founder, he (along with other notable names like Elon Musk) were initial board members.Things were looking so promising that Altman transitioned to be Chairman of the Board for Y Combinator in 2019 so that he could focus more of his attention on OpenAI, before leaving entirely in 2020.It was during this period that Sam Altman helped OpenAI transition from its non-profit model to a for-profit one. What made it unique was that OpenAI was capped, meaning that any profit was capped at 100 times any investment that was being made. This not only helped Sam Altman raise money by getting the attention of various investment funds, but it also allowed employees to get a stake in the company as well. OpenAI also partnered with Microsoft, which invested nearly $1 billion into the organization.Advancements started coming quickly from that point forward. In 2020, for example, OpenAI announced what was dubbed GPT-3. This was a language model that was trained on large Internet-based data sets that used natural language to answer questions. It can also translate from one language to another, can improvise text based on user inputs, and more.The next year, the company introduced DALL-E. This was a deep learning model that could take the descriptions users would provide and use them to generate digital images.But it was in December 2022 that OpenAI received its highest volume of attention. It was then that Sam Altman and the rest of his cohorts launched a free preview of ChatGPT. It was a chatbot that was built on GPT version 3.5.