Podcast 7: Reducing Your IRS Tax Debt: A Quick List of Assets that Must Be Reported

small business tax debt

Taxpayers should err on the side of caution and report any and all assets held in their ownership, whether these assets are foreign or domestic.

 

Editor's note: This is the seventh podcast in a series of seven by tax attorney Senen Garcia...find part 7 podcast at the bottom of this page

This week, we are continuing our discussion about the process to reduce your IRS tax debt, and the information that must be reported to the Internal Revenue Service (“IRS”). In addition to income and expenditures that must be reported, the IRS also requires that taxpayers wishing to reduce their debt report certain assets that they own.

Taxpayers should err on the side of caution and report any and all assets held in their ownership, whether these assets are foreign or domestic.

Here is a quick list of assets that must be reported.  Like with our previous discussion, we will split our discussion between personal and business assets.

Cash

Taxpayers wishing to reduce their IRS debt must report any cash they own.

This includes any amount held in a bank account, whether that account is a checking account, savings account, money market account or an online-only account. Of course, cash held in outside of an account or secured places like a safe or safety deposit box must also be reported.

Stocks and bonds

Typically, when one is reporting income tax to the IRS, stocks and bonds must only be reported once that taxpayer has made a sale (known as realized gains). However, for purposes of tax reduction, stocks and bonds not yet sold must be reported (known as unrealized gains).

A taxpayer wishing to reduce their IRS debt must report the fair market value of stocks and bonds they own.

Retirement accounts

As is the case with stocks and bonds, the fair market value or retirement accounts must be reported (these include 401k and IRA accounts) even though payout of these accounts has yet to occur.

The value must be reported, even if the account is still growing.  Simply report the current value, though. Do not include expected gains or growth.

Vehicles

The value of any car that the taxpayer currently owns or any lease must be reported. If the taxpayer is reporting a lease, the current value less any loan amount is reported.

Life insurance policy

If the taxpayer owns a traditional life insurance policy, they must report the current cash value of that policy.

If the cash value of the property has yet to accrue, then none needs to be reported.  Also, if the taxpayer has borrowed against the cash value, then they can offset the cash value by the borrowed amount.

Keep in mind, term life insurance policies do not have a cash value, so taxpayers need not worry about reporting the value of a term policy as there is none.

Real estate

When reporting any real estate the taxpayer owns, certain information must be included.  

Among this is the county and country where the property is located, whom the title is in, whether the property is a primary residence of the taxpayer, and, if held with a mortgage, the current value less any loan balance.  The fair market value of the properties would be listed and reduced by any mortgages or other similar encumbrances on the property.

Miscellaneous

Any miscellaneous assets must also be reported.

This includes collectibles (e.g., automobiles, sports cards, coin, etc.), artwork, and jewelry. The taxpayer must report the fair market value of these items.

Business assets

Regarding business assets, many of personal asset discussion would apply such as cash that is held by a business must be reported.

However, it is important to note assets akin to business that must also be included. Among these are the equipment owned by the business used for producing goods or office equipment such as industrial copy machines.

Another asset is any amounts of accounts receivable. Finally, any notes receivable issued by the business.  This could be loans issued owners of the business.

Find Small Business Tax podcast 7 below...

As with all of our blogs, if you have any questions regarding the information we have provided, please contact our office.  We would be happy to help answer any questions you may have.

his article/podcast is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the subject of this document, we encourage you to contact the author or an independent tax advisor to discuss the potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this article may be considered to contain written tax advice, any written advice contained in, forwarded with, or attached to this article is not intended to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal

Related articles:

Podcast 6: Reporting Expenses: A Breakdown of Items You Didn’t Know had to be Reported

Podcast 5: Reducing Tax Debt with the IRS: Income You need to Report to Reduce or Eliminate Tax Debt

Podcast 4: Things You Might Not Know, But Should: Select Provision of the Tax Cuts and Jobs Act

Podcast 3: Tax Cuts and Jobs Act: What Actions Reduce Your Tax Liability?

Podcast 2: Three Ways Tax Cuts and Jobs Acts Impact Small Business Profits

Tax Podcast 1: Deductions Under the New Tax Cuts and Jobs Act. Which is better: Standard or Itemized?

Business Owners Need Tax Professionals, but Here's Why You Need a Tax Guide

10 Tips to Help You Choose a Tax Preparer 

Will the Changes in the Tax Code Impact Your Business?

About the author

Senen Garcia

Senen Garcia operates SG Law Group LLP a thriving law practice in multiple states assisting clients with their corporate, real estate, estate planning, and property insurance claim needs.  Additionally, Mr. Garcia has accounting practice assisting small businesses with tax and accounting needs.  Along with his work with SCORE, Mr. Garcia has also provided assistance with the local Small Claims Clinic that provides assistance to individuals filing small claims cases. Mr. Garcia has spoken on a variety of topics such as:  How to start a business, Communication within your organization, Importance of Capital Accounts, What’s in Business Name Anyway?, and Stock Purchase Agreements vs. Asset Purchase Agreements.

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