Individual Tax
Individual Taxation
After years of serving clients in some of the largest metropolitan areas, our practice has obtained the expertise to navigate your specific regulatory environment and achieve desired outcomes on your return with solid professional integrity.
Some common areas that we handle on a daily basis:
Self-employment/contractor/freelancer income
Rental property
Sale of Home
Equity Compensation. For example, RSU, ESPP, ISO, NSO, etc.
Multi-state allocation
Company IPO, merger & acquisition
Crypto currency
Foreign Income Exclusion & Foreign Tax Credit
Our individual tax services provide fast and accurate results.
For individuals with Equity Compensation, we can discuss when and how to exercise or sell your stocks/options to optimize your net after tax income based on your vesting schedule.
For individuals with a business, we can discuss quarterly taxes as well as methods to structure your company, such as possible s-Corp conversion or other types of credits & deductions.
Tax Planning
Over the years, clients have given us one important piece of feedback: they often do not want someone “just filing our taxes.” Long-term strategy and building a relationship are important considerations. Some frequent topics that we are hired to discuss include:
Equity compensation – timing & quantity of stock option sales/vests
New home purchase & related tax effects
Joint vs. separate tax returns
Tax benefits of dependents
Quarterly estimated taxes
Moving states
Feel free to contact us to discuss any of these (or any other) long-term tax planning topics.
Past-Due Tax Returns
We have been approached frequently with requests to reconcile past records and file past-due tax returns. Even if you have lost your records, our team will assist in obtaining information from the IRS and any relevant states.
We can help estimate, reduce, or eliminate taxes or interest through various abatement programs, payment plans, and debt settlements (tax reductions) that are available through the government.
Give us a call to learn more about our individual tax services today.
Multi State Tax Returns
How to avoid double-taxation on multi-state tax returns
There are four main methods to avoid double-taxation on the state-side of your return. I will give some general details for each:
Allocate between the states
If the situation is that you moved during the year, you can allocate income to each state that you moved. This gives a clean cutoff of where income should be allocated. This gets tricky, however, if your W2 (or 1099) only shows one of the states or worse, shows the wrong state(s) altogether.
If that is the case, we would need to use a combination of the other strategies below, namely, credit for taxed paid to other states or state wage allocation.
Credit for taxes paid to other states
If the income being reported on your W2 was already taxed by another state, causing a double-taxation scenario, most states will allow you to take a “credit for taxes paid to other states.” This is an option in most professional tax software, so reach out if you need us to complete this. However, the general idea is that if you earned income in SC (source state) but drove back to your home in NC (residence state), then you would be paying taxes on your W2 to your income source state of SC but then applying a credit on your NC return for the taxes you paid to SC. This avoids double taxation on the states.
There are states that do not allow this, however, if you have moved at any point in the year – in such cases, the residence state providing the credit forces you to file a full-year return if you will be taking a credit. This causes us to be creative on how the return is to be filed presentationally while also maintaining legal compliance with state statutes.
State reciprocity agreements
Certain states have reciprocity agreements, such as DC and VA, where you only have to file in the resident state. Other examples of states that have agreements with neighboring states include Arizona, Illinois, Indiana, and Maryland.
Reverse Credit States
A great example of this is CA – if you are living in CA but working in OR, rather than paying taxes to the income source state (as my example above with SC and NC), you would only pay tax in your residence state.
A note about city taxes
Cities such as Detroit, New York, and Philadelphia tax you based on your residence, regardless of where you earned your income, and credits for taxes paid to other states generally do not apply. These are unique situations & you can contact us if this applies to you to know more.
Taxation of Rental Properties
Tax optimization of rental properties
Whether you have rented out one unit on a whim or manage an empire of rentals, there are quite a few deductions to be aware of:
You can depreciate your residential property over 27.5 years if you rent it out. The depreciation can be a great deduction on your returns. Do not skip your depreciation – there may be long-term penalties for doing so.
Mortgage interest and real estate tax are deductible. However, any expenses you pay to get a mortgage are not deductible. Instead, these expenses will increase your basis in the property.
If you are a real estate agent or full-time real estate professional, you can use the loss from rental property to offset your ordinary income. This may not be the case if you have a full-time occupation unrelated to real estate. Contact us to learn more about how aggressively (or not) you can deduct.
You can deduct the cost of repairs in full if the amount is not large. You will need to capitalize the cost and depreciate it over the useful life if the amount is significant.
Setting up an LLC for the rental property can limit your personal liability and keep your business & personal expenses separate.
Income from rentals may be eligible for the 20% Qualified Business Income deductions.
You may be responsible for state & local tangible property taxes, in some jurisdictions. Contact us to learn more.
For further information on tax strategy for landlords, please feel free to reach out to us at hello@dimovtax.com. We specialize in rental properties. Our experience with rentals is personal as well as professional, as both our clients as well as ourselves own rental income properties.
Capital Gains Taxation
Capital gains provide an excellent opportunity for proactive tax planning due to a variety of minimization/tax elimination strategies available in the tax code. In cases where you must simply pay tax, it also makes sense to hire a CPA/accounting professional to help you compute and plan for the tax bill.
Capital gains are a common situation for our client base & may result from:
Equity compensation, vested shares, RSUs, etc.
Sale of a primary residence or rental property
Liquidation of stock portfolio or inherited assets
Sale of business interest or sale of entire company
For these types of situations, we are frequently approached with the following questions:
How much tax should I set aside for this proposed situation (planning)?
Are there any tax-saving strategies for me available for me to limit my capital gains?
Can I use tax-loss harvesting techniques to optimize my tax obligation?
Can you assist with filing my annual tax return?
Should I make estimated tax payments, and if so, how much?
How are state taxes computed?
Are there better tax outcomes if I wait?
If I am selling a rental property, how is depreciation recapture accounted for?
If I am selling inherited assets, what is my “cost basis?”
Can I construct a plan for more than one year of equity vesting, exercises, and sales?
These (and more) are all common scenarios that we compute for our clients.
Equity Tax Strategy
We specialize in taxation of equity income, which includes RSU, ESPP, ISO, NSO, 83(b), and other equity-related items. For assistance filing a tax return, please contact us below and we will reach out in a matter of a few hours.
Happy to cover any equity-related items, such as carryover of AMT credits, AMT tax, capital gains tax, sell-to-cover RSUs, and any other equity-related concerns. Just contact us below.
Planning strategies for those receiving equity
Due to our large technology client base, we are frequently approached with the following questions:
How many RSUs should I sell? How much tax should I set aside based on this sale? If I have a certain cash target, what is the total amount of RSUs I should sell?
My company has granted me stock options. How many should I exercise before I hit AMT?
If I only have a given amount of cash to pay tax, what is the most I can exercise?
Are there any tax-saving strategies for me available in these situations?
Should I then sell the underlying equity? How many share should I sell?
How will this be affected by share price?
Should I make estimated tax payments, and if so, how much?
Can I construct a plan for more than one year of equity vesting, exercises, and sales?
I am leaving my company & must make an ISO vs. NSO decision
These (and more) are all common scenarios that we compute for the clients.
Forensic Accounting
Making sense of your data
Tasks in this category include everything from investigating spending during a marriage to reallocating a partner’s capital accounts and ownership share during the inclusion of a new business partner. Dissolution of partnership, data mining, fraud investigation, back taxes, reconciliation of past financial activity, organization and clean-up of historical accounting records, etc.
Letter from IRS or State
Reasons for receiving a letter from the IRS or the state include:
Mistakes on the return
Missing RSU/Stock options income: many taxpayers file their return without properly accounting for their RSU or stock option income, which causes them to receive a CP2000 or other similar notice. The CP2000 is the most common notice & is received for any of the situations below.
Missing 1099-K or 1099-MISC: many taxpayers run an online business or make a few sales on Ebay, Etsy, or similar platform & then do not report the income on their return under the false assumption that if the activity was not profitable, then there is no income to report. The IRS and state(s) do not know your business was not profitable – you have to tell them by filing a schedule C along with your schedule of expenses. If this was not done, you will receive a letter & must amend the return.
Rollover or withdrawal from a 401k or IRA: these 1099-Rs are frequently missed, as are K-1s, 1099-DIVs, and other forms
Failure to file a return
The IRS and the states send letters when they believe you should have filed a return. This happens also for businesses owners. We receive surprised calls from business owners that did not know that you had to file a return if your business had no activity. That’s right – the IRS and most states require most business structures to file even if your company had no activity and will assess a penalty for late filing of these zero-activity returns. Contact us on how to resolve this matter.
Audit/request for more information
The IRS occasionally audits taxpayers, especially ones with aggressive deductions, schedule C businesses (freelancers, sole proprietors, single-member LLCs, etc.). They normally ask for receipts or other backup to substantiate the expenses.
If you have issues with any of the above, please scan ALL PAGES of the letter received & send (or share securely) with hello@dimovtax.com and we will take a look right away. We are available assist remotely with clients in all 50 US states and dozens of nations globally.