The questions and answers provided on this page are for informational purposes only and are not intended as and should not be considered tax advice. Each taxpayer's situation is different and the information provided here may not be relevant to or correct for your own specific situation. You should always contact your tax professional for advice regarding your specific situation.
Questions are organized by category: IRS Correspondence, Misc. Tax Return Questions, Deductions, Income, Credits, Estates, Rentals, and Business.
Questions are organized by category: IRS Correspondence, Misc. Tax Return Questions, Deductions, Income, Credits, Estates, Rentals, and Business.
Clean Energy Tax Credits
Q: I just received a phone call/email from the IRS, and they said they will arrest me if I do not take action. What should I do?
A: First of all, do not panic. The IRS does not initiate contact with taxpayers by email, text messaging, or social media platforms to request personal or financial information. The IRS also will not ask for PINs, passwords, or similar confidential access information for credit cards, bank accounts, or any other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the message to firstname.lastname@example.org.
Q: How do I know if it's really the IRS calling?
A: For detailed information on how the IRS contacts (and doesn't contact) taxpayers, please click here.
Q: What about a letter from the IRS?
A: Again, do not panic. Bring the letter to our office and we will assist you with it.
Misc. Tax Return Questions
Q: I got married/divorced this year. Do I file Single or Married?
A: The IRS considers your marriage status for the entire year to be what it is on the last day of the year. If you are Married on December 31st, you will file Married. If you are Single on December 31st, you will file Single or Head of Household depending on your situation.
Q: I inherited an IRA this year. What should I do?
A: Call us as soon as possible. This area is a minefield and can be costly if you take the wrong step.
Q: I received an inheritance this year. Do I have to pay tax on the money and property?
A: You do not have to pay Federal or State income tax on money or property that you inherit. You will most likely receive a 1041 K-1 from the Estate Personal Representative. The 1041 K-1 may include income earned on the estate assets between the date of death and when you received the inheritance. Even if there was not income, there may be deductions that could reduce your income in the final year of the estate. As mentioned above, if you inherit an IRA, contact our office immediately.
Q: I received a cash gift from my aunt this year. Do I have to pay tax on the cash I received?
A: No. The donor is responsible for filing a Gift Tax Return if the gift is over $15,000.
Q: I don't have the money to pay what I owe. What should I do?
A: There are options but each case is individual, so it is best that you contact our office. One of our tax professionals will assist you in figuring out the best approach to your situation. The IRS has detailed information regarding this situation here.
Q: Can I email scanned copies of my forms?
A: We prefer that you use our secure portal to send us electronic documents.
Please be aware that sending information via email is not secure, so if you do, make sure that your Social Security number is obscured.
Q: Do I need bring you the original forms or can I just fill in the amounts on my organizer?
A: We need to see all forms that are official tax forms, such as W-2, 1099-SSA, 1099-DIV, 1099-INT, 1099-G, etc.
Q: How long should I keep my tax documents?
A: Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
Q: I forgot to make my estimated tax payment, what should I do?
A: Go ahead and make it now. There may be a small penalty for not paying it on time, but by paying it now, you will stop any additional interest/penalty charges.
Q: I have saved all of my medical receipts. Do you need to see them?
A: We do not need to see your receipts. You can simply total up the amounts and list them in the proper place on your organizer. You will need to save your receipts with your completed tax return in case you are audited.
Q: What exactly can I deduct as a non-cash contribution?
A: How much is the bag of clothes that you dropped off at Goodwill worth? We all think that our treasures are worth more than they really are. We have found that, "It's deductible!" over-values most items. The IRS states that you can deduct "fair market value". Take a quick trip around Goodwill or other thrift shops and see what similar items are sold for. Taking pictures of your items is another step that you can take to show what you donated. We do not need to see the pictures. Keep them just in case the IRS wants proof of your donation.
Q: What can I deduct if I make a political contribution?
A: Political contributions are not deductible as a charitable contribution on Schedule A. However, if you file an Oregon tax return and make a contribution (up to $50 single, $100 joint return) to a political candidate, political party or a PAC certified in Oregon, you may receive a credit equal to your contribution. This credit is available for Single taxpayers with an AGI of less than $75,000 and MFJ filers with AGI of less than $150,000.
Q: I heard there was a Special Medical deduction for Oregon. Can you tell me about it?
A: Oregon has a Special Medical deduction for taxpayers 66 and over who have a Federal Adjusted Gross Income of less than $200,000 MFJ, ($100,000 Single). It is a deduction of up to $1,800 from your Oregon income. If you or your spouse is 66 or over, please list your out-of-pocket medical expenses for you and your spouse separately. We need to report them separately for each taxpayer.
Q: I just bought a bunch of stuff at the school auction. What can I deduct?
A: If you received a benefit as a result of purchasing items at a charity's auction, you can deduct only the amount of your purchase price that is more than the value of the item or service you receive. For example, if you pay $100 to go to the auction dinner and the dinner is worth $25 then you can deduct the amount over the cost of the dinner, or $75. The same goes for items that you purchase at an auction. If you pay $30 for a gift certificate worth $50 then you can not deduct anything. If you paid $100 for the $50 gift certificate then you can deduct $50.
Q: I received a lot of statements from my brokerage firm this year. Which ones do you need to see?
A: Brokerages firms send a lot of statements. There are monthly, quarterly, and yearly statements. We do not need to see those. The one that we need to see will say something like "Year-End Consolidated 1099 Forms." We need to see this in its entirety. Often there is important information hiding on a page that we need, but you may not think is important.
Q: I have a rental property that is managed by a rental management company. What do you need?
A: The rental management company should give you a year end statement that lists your income and expenses. You can use this information to fill out your tax organizer. You may also have expenses that you paid out of pocket that didn't go through the management company. You need to also list these expenses but be careful to not accidentally list the same expenses twice.
Q: I cashed out an annuity this year, do I have to pay tax on the amount I received?
A: Most likely a portion of the amount you received is taxable income. The insurance agent or investment broker should be able to tell you what portion of the annuity is taxable.
Q: What if I inherited the annuity?
A: You pay tax on the inherited annuity just like you would if it was your own annuity. This means a portion of what you receive when you cash out the annuity is taxable on your individual return in the year you receive the payout. Call us before you cash out the inherited annuity, and we will help you determine what Federal and State taxes should be withheld.
Q: I love the idea of giving my Minimum Required Distribution (MRD) to a charity. How do I go about doing this?
A: Call your IRA custodian and they can help you facilitate the transfer to the charity. Make sure you let us know you have done this so we can treat the distribution correctly on your tax return. Unfortunately, there is no indication on the 1099-R to tell us whether you took the distribution yourself or you gave it to charity.
Q: I received a 1099-NEC, 1099-MISC, or 1099-K for some work I did this year. What is this form and why did I get it?
A: One of the most common reasons you will receive tax form 1099 is if you are self-employed or did work as an independent contractor during the previous year. The IRS refers to this as “non-employee compensation.” Please include this form with your tax information.
If you sold any goods or services through a third-party, you may receive a 1099-K.
Q: I cashed in some US Treasury Bonds this year. What do you need from me?
A: The bank where you cashed in the Bonds should issue a 1099-INT. If they didn't, you should contact them. If you did not report the increase in the redemption value of the bonds as interest annually, you must report all interest in the year the bonds are redeemed or fully matured (whichever is earlier).
Q: I sold my personal car this year. Do I have to report the sale?
A: It depends. Basically, the IRS views all personal vehicles as capital assets. If you sell it for less than the original purchase price, it’s considered a capital loss that is a non-deductible personal loss. This means you do not have to report it on your tax return. However, if you sell it for a profit (higher than the original purchase price), this would be a gain to you and would result in you having to report this windfall on your income tax return and pay taxes on it. EV credits can complicate this calculation.
Q: Can you tell me about the Oregon Cultural Trust tax credit?
A: If you donate to one of Oregon's heritage and humanities non profits, and then make a matching donation to Oregon's Cultural Trust, not only will you receive a Federal charitable contribution for those donations, but you will also receive an Oregon Tax Credit for the donation to the Oregon Cultural Trust. For example, if you make a $100 donation to the Corvallis Public Schools Foundation and $100 to the Oregon Cultural Trust, Oregon will give you a credit of $100. That's a pretty good deal for a donation! See their website for limits and additional information.
Q: I sold my personal residence this year. Do I have to pay tax on the gain?
A: You may be able to exclude gain up to $250,000 ($500,000 for joint filers) from your income. You must have owned and used the home as your personal residence for 2 out of the last 5 years.
Q: I am thinking about buying an electric vehicle. Are there tax credits available?
A: There is still a Federal tax credit available for purchasing some electric vehicles. The credit is as much as $7,500 for participating vehicles. If your EV qualifies, please include your purchase agreement from the car dealership. Click for more on electric vehicle tax credits.
Q: Is there a credit for saving money for college?
A: There is a credit against Oregon taxes. If you put money away in the Oregon College Savings Plan you may be able to claim a credit of up to $300. Click here for more information.
Q: I received a scholarship. Is it taxable?
A: Generally, scholarships are tax free if they are used for qualified expenses (tuition and fees), and you are a degree candidate for a degree at an eligible educational institution. Scholarships used for Room & Board are usually taxable. Contact our office with your specific situation.
Q: I have a child in college, what kind of tax breaks are available?
A: The American Opportunity Tax credit is a credit of up to $2,500 and is available for 4 years of undergraduate studies. This credit is available for taxpayers with Adjusted Gross Income of less than $160,000 for MFJ and $80,000 for all others. The maximum tuition per person that you can use for the credit is $4,000. This $4,000 must be paid with non-529 college fund money. Please give us a call if you have specific questions on your situation.
Q: Can you expand on the Education credits?
A: Let's assume that you paid $10,000 for your child's tuition. The first $4,000 is used for the credit. You get a 100% credit from the first $2,000 paid for tuition and then 25% of the next $2,000. This $4,000 cannot be from 529 college saving money, but it can be loan money. If you are also using 529 for your child, you could use it for the remaining $6,000 of tuition, room and board, and books.
Q: My buddy at the gym told me that the government is going to tax my estate when I die, what?
A: Yes, there may be a Federal and Oregon tax on assets that a decedent owned or had an interest in as of the date of death. For Oregon that limit is a low $1,000,000. For Federal, the 2022 limit is $12.06 million. An Oregon return is required to be filed if gross assets are over $1,000,000. Deductions for liabilities and expense are allowed in determining what portion of the estate that the tax is applicable to. However, you are required to file an Oregon Form 706 if the gross estate (before deductions) is over $1,000,000.
Q: How can I avoid or limit this tax?
A: Good estate planning can reduce, eliminate or at least defer the Oregon Estate Transfer Tax and Federal Estate and Gift Tax. We recommend you see an attorney that has experience with Estates and Trusts. Fortunately, there are several great attorneys in Corvallis and Albany.
Q: You are kidding me right? What do I need to include in determining whether or not I am over the $1,000,000?
A: No, sadly we are not kidding you. The answer to your question, like most tax questions, is not completely straightforward. However the common assets that are included in determining the $1,000,000 threshold are life insurance, real estate, personal property, bank accounts, investment accounts and retirement accounts. Oregon will expect a tax return if your gross assets are above $1,000,000. So even if your taxable estate is below $1 million, you will be required to file the Oregon Transfer Tax return (OR 706).
Q: I rent out a room in my house to a student. Do I need to report the rent that I receive?
A: Yes, the rent that you receive is considered income and should be reported on your tax return.
Q: I have a rental and I am wondering what is deductible. Where can I find help?
A: Follow this link to the IRS publication on Residential Rentals.
Q: Is rental income considered investment income for the purposes of the net investment income tax?
A: Unless you are an active real estate professional, the net rental income is considered net investment income and is subject to this tax. Ouch!
Q: I have a home in Sunriver that I use personally as well as a rental. Can I deduct my expenses of owning the Sunriver rental?
A: Well, you have stepped into the quagmire of IRC Sec. 280A... This is a complicated area of the tax law and is best handled by your tax professional. The general answer is, depending on how many days you use the rental, you can deduct some of your expenses to offset income and you may or may not be able to take a deduction for the excess expenses. It all depends... Aren't you glad you asked???
Q: What expenses are deductible against my business income?
A: Any ordinary and necessary business expenses are allowed as a deduction against your business income. Here is an IRS link to Schedule C instructions.
Q: What is the mileage rate for 2021 and 2022?
A: The mileage rate for the 2022 tax year is $0.585 per mile for business from January-June and $0.625 from July-December. In addition to the calculated mileage deduction you may also take a portion of your automobile interest as a business deduction. For medical purposes, you may deduct 18 cents per mile driven and 14 cents per mile driven in service of charitable organizations.
Q: I opened a taco shack and I am the only owner. How do I report that activity on my personal tax return?
A: The taco shack will be considered a sole proprietorship and is reported on Schedule C of your 1040. This remains the case even if you register an LLC.
Q: My friend Joe and I opened a juice bar this year. How do we report our business on our tax returns?
A: Well, my friend, you have just created a Partnership. Whenever two or more people enter into a business for profit they have just created a partnership for tax purposes and you are required to file an informational return that will report the partnership income and expenses. This return will generate a form K-1 that will tell each partner how much of the total profit or loss should be reported on their 1040. This activity will be reported on Schedule E.