Taxing fantasy sports

As the internet has grown enormously in the past decade, so has participation in online fantasy sports leagues. Last year, approximately 33 million people in the United States participated in these leagues, which include fantasy football, baseball, hockey, and basketball. Participants create teams using real players, and the games are played using those players’ actual performance in games.

via Taxing fantasy sports.

Penalties for Filing and Paying Late

  • If you file late and owe federal taxes, two penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.
  • The failure-to-file penalty is usually much more than the failure-to-pay penalty. In most cases, it’s 10 times more, so if you can’t pay what you owe by the due date, you should still file your tax return on time and pay as much as you can.
  • The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.
  • If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.
  • The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.
  • If the 5 percent failure-to-file penalty and the 0.5 percent failure-to-pay penalty both apply in any month, the maximum penalty amount charged for that month is 5 percent.
  • If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15 due date.
  • You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time.

Options for Taxpayers Who Owe Taxes

If you owe taxes but can’t pay in full, you have a number of options. Make sure you file your tax return on time and pay as much as you can.

• Borrow the money.  You may want to get a loan from a bank or other source.

• Make an Online Payment Agreement.   If you owe $50,000 or less, you can apply for an installment agreement. You may choose to make payments for up to 72 months.   Online Payment Agreement tool.

• Use an Offer in Compromise as a last resort.  An Offer in Compromise is an agreement that allows you to settle your tax debt for less than the full amount.  Use the Offer in Compromise Pre-Qualifier tool.

 

Medical Expense Deductions in 2013

Prior to 2013, taxpayers could only deduct medical expenses to the extent that total medical expenses exceeded 7.5% of the adjusted gross income (AGI). This is the amount that it must exceed before a taxpayer can take a deduction. This concept is known as the “floor.”

The medical expense floor for most taxpayers (except for taxpayers age 65 or older) in 2013 is now 10%. This means a taxpayers total medical expenses must exceed 10% of the AGI before there is a deduction.

Taxpayers age 65 and older can continue to use the floor of 7.5% until 2016 when it will be 10%.