news archives: Tax & Business Updates
Feeley and Driscoll provides an archive to articles addressing current tax planning, tax services, tax news and business updates. Please contact a Feeley & Driscoll tax accountant by email or call 888-875-9770 with any further questions.
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2010
Haiti’s Earthquake Relief Deductible in 2009
On January 21, 2010 the Senate unanimously passed a bill that will allow taxpayers to deduct cash donations made to Haiti’s earthquake relief on their 2009 taxes.
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Clarification on Claiming the COBRA Subsidy Credit
The IRS has recently posted additional guidance to its website related to the COBRA premium subsidy credit. Most employers claim the credit on Form 941, Employer's Quarterly Federal Tax Return. Certain employers claim the credit on other employment tax returns (example: Form 943 or Form 944).
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The Embattled 401(k)
Today’s employees may be more concerned than ever about building up retirement savings, and they’ll be looking to their employers to help them meet this goal via a 401(k) plan. This article looks at a number of 401(k) options — the traditional, the Roth, the Safe Harbor and the SIMPLE — and how each may or not be suited for a particular type of business including the Solo 401(k) for self-employed business people.
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Charitable giving
Noncash donations can take many forms
Donating cash might be an easy way of supporting a charity, but it’s not necessarily the best. Rather than hurting personal cash flow by lowering the balance on one’s bank account, it might be better to look to other assets to serve as a valuable donation — with some helpful tax benefits. This article discusses donating a home, a vehicle, art or other collectibles, or appreciated stock, while a sidebar shows the different costs involved in donating cash, stock, real estate or collectibles.
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Fraud has struck! What now?
A contingency plan can help minimize fallout, expedite investigation
When fraud strikes, panic is a common but not very desirable response. Having a fraud contingency plan can help ensure that a business will know just what to do to minimize the fallout from a fraud incident and get the investigation underway immediately. It involves taking an honest look at the types of fraud most likely to be attempted, and how to respond if controls are breached. This includes having the right members for a fraud investigation team and communicating effectively with employees, the public and other stakeholders. A good fraud contingency plan should be integrated into a greater suite of risk management programs.
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Moneylines: News Briefs for Businesses
This issue’s topics: An anti-identity-theft rule that’s in effect for companies that offer any sort of credit arrangement; the lack of competition among health insurance providers; pay increases that are expected to be only minimal in 2010; and more large companies seeking bank loan covenant amendments.
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Practical Perspectives: Key financial issues for you and your family
Savvy planner readies for 2010 IRA rule changes
Gerald is a 63-year-old physician who rolled over his traditional 401(k) into a traditional IRA when he left his hospital position to start his own practice. The tax-deferred contributions seemed like a good idea at the time, but he has no intention of retiring within the next decade. Thus, he’s bothered by the account’s required minimum distributions (RMDs), which he’ll have to start taking after he turns age 70½. Converting to a Roth IRA would solve that problem, but his high income disqualifies him from doing so. But, as his advisor explains, that will change in 2010.
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2009
Mandatory Electronic Filing for 2009 Forms 5500
The Department of Labor (DOL) is requiring mandatory electronic filing for 2009 forms 5500. In addition, as of January 1, 2010, 2009 Short Year Returns and Delinquent Forms 5500 (prior to 2008)
will be required to be electronically filed.
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Index shows many businesses catching up on their debts
The National Association of Credit Management (NACM) keeps its Credit Managers’ Index to track the state of credit in the business sector. The results are based on a survey of about 1,000 trade credit managers contacted during the last 10 days of every month. In a report issued this past October, the index surpassed 50 for the first time since August 2008. That’s good news as, according to the NACM, it appears many companies are catching up on their debts. This could open up the credit markets a bit more in the coming months.
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Pay Raises Probably Won’t Go Much Higher In 2010
If you struggled to give employees raises over the past year, you’re not alone. Median 2009 pay raises had an estimated range of between 2% and 3%, according to a recent study by HR consultants Watson Wyatt Worldwide and Hay Group. The same survey forecasts raises to run around 3% nationwide next year. If your company faces pay raise problems, look into other ways to keep staff morale up, such as flexible work schedules and advanced training.
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Paying college expenses?
You may be eligible for a valuable credit or deduction
Are you currently paying higher education expenses? If so, you may be eligible for a valuable tax credit or deduction.
The credit can take the form of either the American Opportunity credit (a temporary expansion of the Hope credit) or the Lifetime Learning credit. The deduction, as of this writing, is available only for the 2009 tax year, though it may be extended. Let’s take a closer look at each.
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Cobra Benefits Extended
Under the American Recovery and Reinvestment Act of 2009 (ARRA) President Obama recently signed a measure to extend a federal subsidy to continue health insurance coverage for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA.
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Standard Mileage Rates Lower for 2010
The standard mileage rates for business, medical, and moving purposes are slightly lower than 2009 rates of operating an automobile. This article explains the revisions for 2010.
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Unemployment Benefits Act Also Helps Homebuyers & Businesses
The Worker, Homeownership and Business Assistance Act of 2009 (WHBAA) was signed into law Nov. 6. Not only does the act extend unemployment benefits for millions of Americans, but it also extends and enhances the homebuyers credit and the five-year net operating loss (NOL) carryback election for businesses.
Are you eligible?
The Internal Revenue Service announced on October 15, 2009, the cost-of-living adjustments applicable to dollar limitations for pension plans and other items for Tax Year 2010.
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Charitable giving
Noncash donations can take many forms
Donating cash might be an easy way of supporting a charity, but it’s not necessarily the best. Rather than hurting personal cash flow by lowering the balance on one’s bank account, it might be better to look to other assets to serve as a valuable donation — with some helpful tax benefits. This article discusses donating a home, a vehicle, art or other collectibles, or appreciated stock, while Feeley & Driscoll shows the different costs involved in donating cash, stock, real estate or collectibles.
Read the Full Article
A number of temporary tax provisions or extenders are due to expire on December 31, 2009 if Congress does not extend them before the year’s end. Feeley & Driscoll’s tax team intends to closely monitor Congressional reports and reviews on some of the following tax credits.
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Massive changes to the health insurance delivery system and employer provided healthcare coverage would be made through Bills from the Senate and the House. F&D lists some of the requirements and tax implications that could affect you and your business.
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3 Tax-Related Scams and Mistakes to Avoid
Earlier this year, the IRS issued its annual list of common tax scams, covering everything from identity theft traps to serious mistakes taxpayers can make.
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Paying Estimated Taxes - Special Rule for 2009
As 2009 winds down, many taxpayers and their accountants are attempting to project their 2009 tax liabilities and calculating whether sufficient amounts of tax has been paid to the IRS throughout the year.Here are the rules and their exceptions.
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Connecticut 4th Quarter Estimated Tax Requirements Revised
Taxpayers subject to the new 6.5% marginal tax rate applicable to the 2009 tax year who make quarterly estimated tax payments must adjust their January 15, 2010 payment to reflect the rate change in CT. Find out if you may be required to make estimated tax payments for the 2009.
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New York Metropolitan Commuter Transportation Mobility Tax
In 2009, New York established the metropolitan commuter transportation mobility tax (MCTMT). This tax will be administered by the New York State Tax Department, and the proceeds from this tax will be distributed to the Metropolitan Transportation Authority.
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Estate Tax Repeal on Hold
A move is underway in Congress to stave off the repeal of the estate tax in 2010 and prevent a wholesale revision of the transfer tax rules in 2011.
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Unemployment Insurance Extension Bill
The Senate Unemployment Insurance Extension Bill may carry NOL carryback relief, homebuyer credit extension and other tax changes. Other interesting changes are detailed in the full release.
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Many companies are unaware of the Form 5500 filing requirements for their employee benefit plans. ERISA's rules require financial and other information to be reported to various federal agencies, including the Internal Revenue Service and the Department of Labor.
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Under Governor Deval Patrick’s recently signed Life Sciences Act (an Act Providing for the Investment in and Expansion of the Life Sciences Industry in the Commonwealth, St. 2008, c. 130), Massachusetts-based life sciences companies will be granted over $1 billion in benefits over the next 10 years on a competitive basis.
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Determining Travel and Entertainment expenses can be difficult at times for an employer. Many payments or reimbursements do not fall into a clearly defined category, resulting in confusion on what exactly qualifies as 50% deductible and 100% deductible for the employee. Read more for a detailed flowchart.
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Massachusetts DOR Directive No. 09-9 issued September 16th, 2009 explains a change in Department of Revenue policy concerning persons who file Form 1099-MISC or any other form in the 1099 series with the Department.
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By working with F&D to project income, deductions and tax liabilities for 2009 and 2010 it may be possible to shift income and deductions between tax years to minimize overall tax burden, or at least to defer taxes.
>Read Pros & Cons of Strategies
As business owners gather their tax-related information and documentation, one major issue they may want to review is whether their business structure still best suits their company’s needs and situation.
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This article looks at the case of owners of a popular restaurant. We examine four specific steps to manage and protect the assets they’ve worked so hard to build up over the years.
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- Tax breaks available only in 2009
- How companies with defined-benefit plans are suspending 401(k) matches
- The prevalence of intentional and unintentional software piracy
- Why it may be to check with bankers about the coming year’s credit market
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Although this year is only about half over, we’ve already had one new tax law (a really big one), and more might be on the way (maybe not so big). F&D presents some tax planning ideas to consider this summer that may apply to you, some to family members, and others to your business.
Section 409A covers inclusion in gross income of deferred compensation plans and a failure to comply can lead to some rather harsh consequences to the service provider (employee or independent contractor).
Last month, New Hampshire signed HB 02 into law. Among the legislative changes made as a result of the bill's passing was a modification to the Interest and Dividends Tax law.
Understand the requirements for an Accountable Plan -- what's excluded from the employee's gross income, reported on the employee's W-2, or subject to withholding or employment taxes.
Is your company doing business in California? For the 2009 tax year the state of California is offering a New Jobs Credit aimed at small businesses in California with 20 or fewer CA employees at the beginning of the tax year. California is setting aside $400 million with which to provide businesses a $3,000 non-refundable credit for every full-time employee hired in California.
Layoffs, mandatory furloughs, procedural streamlining.
These are all ways companies have tried to cope with the recent recession. Some business owners, however, are going a step further by eliminating their own salaries from the payroll.
The Internal Revenue Service recently announced that, under its National Research Program (NRP), it is developing a program that will conduct detailed employment tax examinations. The NRP was introduced in 2002. NRP audits are normally more complex and in depth than regular audits as the IRS attempts to extract information from its sample population to determine taxpayer trends.
In April Feeley & Driscoll reported that a majority in the Massachusetts House of Representatives and the Senate approved a proposed FY2010 budget. On June 29, 2009 Governor Patrick signed a $27.046 billion budget for next year cutting aid to cities and towns, reducing support for agendas throughout state government, and inflicting a sales tax hike and additional taxes on the residents, consumers, and visitors of Massachusetts. The sales and use tax will increase from 5% to 6.25% -- take advantage of the current sales tax before the increase goes into effect on August 1, 2009.
Do you or your company have a bank account in a foreign country? If so you may be required to file an information return with the IRS by June 30. Failure to do so could result in penalties ranging from $10,000 to $500,000 or even imprisonment. U.S. persons are required to file a Report of Foreign Bank and Financial Accounts (Form TD F 90-22.1) each year if they have a financial interest in any financial accounts read more for details.
In economic times like these, you may reach a point where you’re so overwhelmed by all the uncertainty surrounding your finances that you ask, “What now?” Well, perhaps the worst thing to do is to start panicking, and the best is to start planning. And even when times are better, reviewing your situation to make the most of any resurgence is a wise move.
If you’re a business owner, you’ve likely either been directly affected by the credit crunch or at least thought about how it could affect your company. Unfortunately, tight credit has left many businesses scrambling for ways to finance their operations in recent months.
Perhaps the simplest solution to this problem is one that often gets lost in the shuffle: cash. That’s right, cash. If your cash flow is strong, your need for financing may be much less — or at least less pressing. Let’s review some fundamental ways to keep those dollars flowing.
Massachusetts recently adopted federal "check the box" entity classification rules. Under the previous rules, business entities, including Massachusetts Business Trusts, sometimes had different classifications for federal and state purposes. The Act Relative to Tax Fairness and Business Competitiveness repeals the separate taxation provisions that formerly applied to Massachusetts Business Trusts.
If you are due a refund on your Federal Tax Return, you have several options for checking on the status of your refund.
The IRS' Where’s My Refund? an interactive tool on the IRS website. Taxpayers can check the status of their refund after they provide identifying information shown on their tax return. Once the information is processed, you could get several responses, including:
- Acknowledgement that your return was received and is in processing.
- The mailing date or direct deposit date of your refund.
- Notice that the IRS could not deliver your refund due to an incorrect address. To ensure delivery, you can change or correct your address online.
Due to the difficult economic times many corporations and individuals are being faced with the harsh reality that they will have net operating losses (NOLs) at the end of their 2008 tax year. Luckily, the American Recovery and Reinvestment Tax Act of 2009 has provided some help for many eligible small business that have occurred NOLs with tax years ending, or under a special election effective for NOLs in 2008.
The States of Connecticut and New Jersey will be offering tax amnesty programs as an opportunity for taxpayers to clear obligations for all taxes administered and collected by the States' Department of Revenue Services and Division of Taxation (respectively) without any civil or criminal penalties.
Publicity surrounding the Stimulus Act focuses on government spending initiatives to jumpstart the economy -- don't forget about one-third of it provides tax breaks for businesses and individuals. Details of the following are in the full article. Examples are not limited to but include:
- Credit for first-time home buyers.
- Increase in the Section 179 limit for initial year expensing.
- Advanced energy investment credit.
- Early AMT Relief.
- Sales tax deductions.
Although you might regard a long-term care (LTC) insurance policy as a nonessential expense at the moment, procuring such coverage may still be the right move. Deciding whether you fit the bill entails learning some of the ABCs of LTC: Adjust your expectations, Beware of limitations, and Consider the tax impact. This article discusses some of the details.
In this issue, we meet Debbie and Alex, who’d read about the vehicle-related provisions of the American Recovery and Reinvestment Act of 2009 (ARRA), and wanted to put one of its new tax deductions to good use. To discuss this and other vehicle-related tax breaks, they gave their financial advisor a call.
Massachusetts Sales & Use Tax to Increase?
Increases passes in the House
This week a majority in the Massachusetts House of Representatives approved an amended FY2010 budget bill that would increase the sales and use tax from 5% to 6.25% if signed by the Governor. The increase would be effective September 1, 2009 if passed in its current state by the Senate and Governor. There is much more information to come.
Some companies have been slow to try their hands at telecommuting arrangements for a variety of reasons. Perhaps they fear the technology challenges, a drop in productivity or the diminished face time with workers. But, as budgets continue to tighten and credit remains, in many cases, difficult to obtain, the cost benefits of telecommuting beckon reconsideration. This article tells why.
If you already filed your federal tax return and are due a refund, you have several options for checking on the status of your refund.
The IRS' Where’s My Refund? an interactive tool on the IRS website. Taxpayers can check the status of their refund after they provide identifying information shown on their tax return. Once the information is processed, you could get several responses, including:
- Acknowledgement that your return was received and is in processing.
- The mailing date or direct deposit date of your refund.
- Notice that the IRS could not deliver your refund due to an incorrect address. To ensure delivery, you can change or correct your address online.
One often overlooked aspect of retirement planning is having a strategy for giving away one’s nest egg should one not be around to enjoy it. More simply put, everyone needs to choose his or her retirement plan beneficiaries. This article offers three key questions to ask when making this important choice.
In this issue’s “Practical Perspectives,” we meet Tanya, a recent divorcee who’s looking for ways to renew her life. One of her goals is to give more back to her local community. When she mentioned her desire to somehow give to a local charity in a manner more substantial than a simple cash donation, her financial advisor mentioned life insurance.
This section offers four news briefs about:
1) the adjusted 2009 IRS mileage rates,
2) a recent survey indicating that what homeowners don’t know about their mortgages could leave them vulnerable to fraud,
3) one venerable tech research firm’s tips on cutting IT costs, and
4) the results of a recent study indicating that most Americans are dependent on employer-provided health insurance.
On Feb. 17, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA). While approximately two-thirds of the nearly $800 billion stimulus act is focused on government spending initiatives intended to create jobs and jumpstart the economy, about one-third provides tax breaks for businesses and individuals.
In an effort to collect up to $20 million in back taxes, Massachusetts has established a tax amnesty period between March 1, 2009 and April 30, 2009. 159,000 individuals previously contacted by the Department of Revenue for unpaid taxes will qualify -- applying only to 2007 tax returns and earlier. Find out more about Tax Amnesty Notices, qualifications, and program specifics.
If you already filed your federal tax return and are due a refund, you have several options for checking on the status of your refund.
The IRS' Where’s My Refund? an interactive tool on the IRS website. Taxpayers can check the status of their refund after they provide identifying information shown on their tax return. Once the information is processed, you could get several responses, including:
- Acknowledgement that your return was received and is in processing.
- The mailing date or direct deposit date of your refund.
- Notice that the IRS could not deliver your refund due to an incorrect address. To ensure delivery, you can change or correct your address online.
In 1995 the State of Maine successfully created the Business Equipment Tax Reimbursement (BETR) Program. BETR refunds local property taxes on eligible business equipment and property to qualified Maine businesses. Find out what is eligible equipment, what is qualified property, and your timeframe for reimbursement.
As April 15 gets a little closer, bear in mind the changes that have taken place. The Emergency Economic Stabilization Act of 2008 (EESA), signed into law last fall, extended a variety of tax breaks for businesses and individuals.
In this issue’s “Practical Perspectives,” we meet Frank and Alice, a married couple who are a year or two away from retirement. One of the many goals they’d like to accomplish during their golden years is helping to fund their grandchild’s college education. In the last year or two, they’d read a couple of articles about 529 plans but weren’t sure whether these arrangements were still worthwhile. Read the full article for more information.
At one time or another, just about every business owner considers either buying another company or selling his or her own. Maybe you’ve sat down with your accountant and discussed it, or maybe you’ve simply pondered the idea over a cup of coffee. Whatever the case may be, if you ever find yourself heading toward a business sale, it will be critical to do M&A the right way.
The Massachusetts Health Care Reform Act of 2006 requires a broadening of dependent coverage offered by health insurance carriers. In so doing, the Act also created a potential imputed income tax liability for employees who benefit from employer provided health insurance. Those at risk of the imputed income trap are employees who maintain family health insurance coverage through an employer provided fringe benefit, and included in the employee’s family is an individual who does not meet the definition of a “qualifying child” or “qualifying relative” under federal income tax rules.
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2008
New Economic Relief Act Benefits Seniors and Employers - December 2008
The economic downturn and mounting stock market losses are shrinking retirement accounts and impeding employers’ ability to meet pension funding requirements. The Worker, Retiree and Employer Recovery Act of 2008 (WRERA) is designed to help seniors recover some of the value their retirement accounts have lost this year and ease employer pension funding requirements that could have forced businesses to make large pension fund contributions at a time when cash is in short supply. In addition, the act “corrects” several technical provisions of the Pension Protection Act of 2006 (PPA).
Home Sales: Housing Assistance Tax Act of 2008 - December 2008
Under prior law, it was possible to avoid a taxable gain of up to $500,000 on the sale of a vacation home by moving into it and using it as a principal residence for at least 2 years of a 5 year period ending on the date of sale. However, as a result of a change in the law under the recently enacted Housing Assistance Tax Act of 2008, this planning idea may not work as well as it once did.
IRS Turns Wary on S Corporations' Compensation - December 2008
Another compensation issue making the rounds of late is increased IRS attention to precisely how S corporations are paying their shareholder-employees. The IRS is attacking shareholder compensation that could be too low. Unreasonably low compensation avoids social security tax. If your company is structured as an S corporation and you haven’t considered this issue, the time to do so is now.
Employer-Owned Life Insurance - November 2008
Although life insurance death benefit proceeds are generally excluded from taxable income, such death benefits from employer-owned life insurance contracts are taxable to the employer unless certain notice and consent requirements are met. The IRS has recently issued final regulations requiring employers who own such policies to provide information related to compliance or non compliance, as the case may be, with these notice and consent requirements. This information must be provided for tax years ending after November 6, 2008, by attaching Form 8925, Report of Employer-Owned Life Insurance Contracts, to the policyholder's (i.e., the employer's) income tax return by the due date of that return.
Harvesting Mutual Fund Unrealized Losses to Offset Realized Capital Gains- November 2008
As the holidays approach, so too is the annual ritual of that necessary task of year-end tax planning. This has become especially acute in today's investment market when so many portfolios have been ravaged by the fiscal upheaval of the times. This brings us to the year-end ritual of loss harvesting where we look to those securities whose values have declined below tax basis resulting in the all-too common unrealized losses.
529 Plan Liquidations - November 2008
As a result of today's market environment, the value of many 529 plans have declined below the taxpayer's original cost basis resulting in unrealized losses. In some cases, taxpayers will simply roll over the 529 plan into another account. However, for these taxpayers, a potential tax planning alternative is to liquidate the plan. The IRS has stated that a loss from the liquidation will result in a miscellaneous itemized deduction, presumably to the taxpayer who funded the 529 plan.
Annual Gift Exclusion Increase- November 2008
The Federal annual gift exclusion is the amount a person is allowed to give to another person without incurring the Federal gift tax. The 2009 annual gift exclusion for "present interest gifts" has increased to $13,000 from $12,000. Annual gift exclusions are a great way of removing assets from your estate annually tax-free.
Tighten Internal Controls with a Year End Fraud Review - October 2008
Strategically speaking, year end is typically a busy time for business owners. Among the many things on your mind may be (or, at least, should be) tax planning. After all, you don’t want to give Uncle Sam any more than you absolutely need to.
Don't Let Your 401k Get Lost in the Shuffle: Pay Heed to Your Retirement Plan Following a Job Change - October 2008
Even under the best of circumstances, changing employers involves a lot of details and stress. Amongst all the challenges, one of the things that can get lost in the shuffle is your 401(k) plan account.
Moneylines: News Briefs for Businesses and Individuals - October 2008
This article discusses year end tax issues; employer health care costs, treatment of dependents, electronic payments, and yearly raises.
Pass-Through Withholding - October 2008: Recent Massachusetts Regulation 830 CMR 62B.2
A recent Massachusetts regulation 830 CMR 62B.2 requires that certain pass-through entities that maintain offices or do business within the state of Massachusetts generally must withhold on behalf of its members' distributive share amounts allocated on or after January 1, 2009 that are attributed to a tax year beginning January 1, 2009. Entities potentially subject to the new regulations include general and limited partnerships, LLCs treated as partnerships under Massachusetts tax law, S corporations, and trusts and estates not taxed at the entity level (including grantor trusts). However, the new regulations exempt certain entities from the withholding requirements. Read the full article for exempt entities.
Emergency Economic Stabilization Act of 2008 (EESA) - October 2008
The Emergency Economic Stabilization Act of 2008 (EESA) is designed to address the current U.S. credit crisis. But this "rescue" act also extends and expands a multitude of tax breaks for individuals and businesses that had already expired or were set to expire after this year, including many energy-related incentives. In addition, it provides relief for natural disaster victims in the Midwest, Louisiana and Texas.
Mid-Year Tax Planning - September 2008
Although this year is only about half over, we’ve already had three new tax laws with several more almost certainly on the way. Despite added confusion created by these repetitive changes, the current federal income tax environment is still quite favorable. Now is the time to take advantage of the tax breaks that Congress has provided before they are taken away. This article presents some tax planning ideas to consider this summer while you have time to think. Some of the ideas may apply to you, some to family members, and others to your business.
Retirement Plan Deadlines - September 2008
Thomson Reuters/PPC released the IRS reminder that small business owners thinking about setting up a retirement plan may have upcoming deadlines.
2009 Indexed Amounts for Health Savings Accounts (HSAs)Released- September 2008
Do you participate in an HSA, either through your employer or on your own? If so, please note that, earlier this year, the IRS released the indexed 2009 amounts for HSA contribution limits. The maximum annual contribution for family coverage will be $5,950 ($3,000 for self-only coverage), and the additional catch-up contribution limit for qualifying individuals age 55 and over will increase to $1,000.
How Can Your Business Fight Identity Theft? Start with Social Security Numbers - September 2008
Identity theft is one of the fastest growing crimes in America. Your social security number is perhaps the most important piece of information about you; making it the most vulnerable to identity theft. Find out how your company can help fight identity theft. Companies can help individuals fight identity theft by starting with the following two steps...
New Housing Act Provides Tax Relief for Individuals and Businesses- August 2008
The Housing and Economic Recovery Act of 2008 is designed primarily to help troubled borrowers and their lenders, including Fannie Mae and Freddie Mac. But it also provides incentives and tax breaks for certain home buyers, homeowners, businesses and real estate investors, as well as for GO Zone residents and investors.
Return of Organization Exempt from Income Tax Form 990 – Form and Instructions Revisions - August 2008
By the end of August 2008, the IRS expects to post revisions to the 2008 Form 990 instructions for tax year 2008 (to be filed in 2009 and later). At the end of 2007, the IRS redesigned the Return of Organization Exempt from Income Tax Form 990 (for the tax return that charities and tax-exempt organizations file). The redesign of both the form and the form's instructions were based on the public's comments and suggestions. Read more for details.
MA Life Sciences Legislation - August 2008
This new act that provides for the investment and expansion of the Life Sciences Industry is intended to position MA as a global leader thanks to a 10 year $1B investment. The implementation of these incentives will be controlled by an 18 member advisory board. For key highlights of the program refer to the full article.
Small Business Energy Exemption - August 2008
All businesses with a gross income totaling less than $1,000,000 annually and employing less than five people are exempt from paying sales tax on their gas, steam, electricity, and heating fuel bills. Read more for details.
Governor Signs Sales Tax Holiday Bill - August 16th & 17th - August 2008
Massachusetts joins more than a dozen states in granting a sales tax holiday in 2008. Shoppers can look forward to a tax-free weekend for the fifth year in a row as Governor Deval Patrick signed legislation to grant an exemption from the 5 percent Massachusetts sales tax. The sales tax holiday is effective August 16th and 17th, 2008 and applies to items costing $2,500 or less.
Partnership, Trust and Estate Tax Returns Can Be Extended For Only Five Months Rather than Six Months- July 2008
In order to help individuals better meet their filing obligations, the IRS has announced that it has issued Regulations that will change the extended due dates for certain businesses to file their returns before January 1, 2009.
Summary of the New Massachusetts Corporate Tax Law - July 2008
On July 3, 2008 Massachusetts Governor Deval Patrick signed into law An Act Improving Tax Fairness and Business Competitiveness, effective for tax years beginning after January 1, 2009. The intention is to bring tax fairness, modernization and improved competitiveness to the MA state tax system while gradually reducing corporate rates from 9.5% to 8%, starting in the year 2010. However, during the next five years tax revenues will still increase by more than $1 billion.
Use Your Estate to Motivate With an Incentive Trust - July 2008
Many people think of their estate plan as, ultimately, a passive concept. That is, it can transfer your wealth to beneficiaries, but it can’t really give them your wisdom or help them make sound life choices. One way to shift this paradigm, so to speak, is to create an incentive trust. It uses the “carrot and stick” concept to help shape your loved ones’ lives rather than only contribute to their finances.
The Net Operating Loss Deduction: A Tax Break for Tough Times - June 2008
For much of the year, fears of an economic downturn — voiced in everything from gloomy whispers to screams of outright panic — have permeated the news. Whether or not tough times lead to your company losing money, one way to mitigate any shortfall may be to claim a tax deduction for a net operating loss (NOL). This article looks at the rules governing the NOL deduction as well as changes to another deduction (Section 179) brought about by the Economic Stimulus Act of 2008.
The Most Important Thing: Smart Hiring Now Saves Time and Money Later - June 2008
No matter how sound the business plan or how brilliant the strategies for executing it, without the right people on staff, a company isn’t likely to get very far. And that’s why every business always needs to be on the lookout for smart approaches to hiring. This article offers a few to consider.
4 Tech Tools to Help You With Your Personal Finances June 2008
By now, most people use technology, in one form or another, to manage their personal finances. There may, however, be a few technological options out there that some individuals have either never heard of or never fully considered. This article gives four examples.
Moneylines: News Briefs for Businesses and Individuals - June 2008
This section offers four news briefs about: 1) How the subprime mortgage crisis has made it harder for many small businesses to obtain financing, 2) A recent survey indicating that a slowing economy may not necessarily mean that college graduates will have a hard time finding jobs, 3) How the IRS has boosted a valuable tax break for commuters, and 4) The perhaps disturbing results of a recent study indicating that many Americans are unclear on some fundamental concepts that apply to their personal finances.
Practical Perspectives: Key Financial Issues For You And Your Family - June 2008: Cleaning Up Tax Records Can Help Fend Off an IRS Audit
In this issue’s “Practical Perspectives,” we meet Mike and Beverly, a married couple with two young daughters, who recently decided to finally get their house in order — literally. Beverly’s job was to organize the family’s financial records and, when she went to do so, she began to get frustrated about what tax-related documents she needed to keep and for how long. Wisely, she called her financial advisor, who had some answers.
How Do You Spell “SUCCESS”? 3 Hallmarks of A Profitable Business - March 2008
Every business owner wants his or her company to succeed. Whether one leads a startup or a generations-old enterprise, it’s an easy (and obvious) thing to wish for. But what are the hallmarks of a successful company? This article names three: strong revenues, low production costs and minimal operating expenses.
Risk Management: Buy-Sell Agreements Protect Companies From Themselves - March 2008
When business owners speculate about threats to their companies, they often overlook the human beings sitting next to them in the boardroom. An unanticipated ownership change can cripple a company’s ability to make executive decisions. One wise risk management move is creating and maintaining a buy-sell agreement. This article explains why.
Reverse Mortgages Grow in Popularity & Availability - March 2008
In the past year or so, the word “mortgage” has usually raised negative connotations. Put the word “reverse” in front of it, however, and suddenly you’re referring to one of the more positive personal financing developments in recent memory. The cause of this surge is twofold: Reverse mortgages are more popular, no longer appealing only to those desperate to cover medical expenses, and they’re more available, as more lenders leap headlong into the market.
Moneylines: News Briefs for Businesses and Individuals - March 2008
This section offers four news briefs about: 1) A recent survey indicating that many businesses lack formal tax risk management strategies, 2) The traits and methods of identity thieves, according to a recent study based on Secret Service data, 3) How e-mail volume for corporate users is expected to rise to flood-like proportions in the near future, and 4) The results of a recent study indicating that baby boomers may not be as ill-prepared for retirement as previously thought.
Practical Perspectives: Key Financial Issues for You and Your Family - March 2008
In this month’s Practical Perspectives, we meet newlyweds Nathan and Penelope, who recently decided they needed a financial advisor. With successful careers and a beautiful home, they had a lot to lose: If one of them died prematurely, the survivor might not be able to pay the mortgage. Among the first topics they discussed with their CPA were the two fundamental types of life insurance: term and permanent.
Looking For a Successor? For Best Results, Keep an Open Mind -- February 2008
For many business owners, among the hardest aspects of retiring (or otherwise moving on) is choosing a successor. Many, if not most, have a few viable candidates to consider — often too few. This article recommends that, when looking for a successor, business owners keep an open mind and take a close look at all options, including family members, nonfamily employees and external candidates.
Qualified Plan Loans: What You Don't Know Can Hurt You -- February 2008
Among the risks of offering workers a “qualified” retirement plan (one that follows certain rules to qualify for beneficial tax treatment), such as a 401(k), is that the arrangement may allow participants to take loans from their accounts. Although employees often appreciate this feature, taking out a qualified plan loan can get workers into trouble — and hurt their companies as a whole. This article gives an overview of how qualified plan loans work for employers who may not be fully aware of all the risks involved.
5 Easy Steps to Creating a Financial Disaster recovery Plan -- February 2008
Whether a massive flood that affects thousands or a sudden illness that affects only one person, should disaster strike, an individual’s financial solvency could very well depend on whether he or she has a clear strategy in place for paying the bills. This article offers five easy steps to creating a financial disaster recovery plan.
Moneylines: News Briefs for Businesses and Individuals -- February 2008
This section offers four news briefs about: 1) A recent survey indicating that many companies are still ill-prepared for a technological disaster, 2) How the IRS has recently adjusted the allowable living expense standards that help determine how much delinquent taxpayers must pay, 3) The results of a recent survey revealing that many workers intend to delay their retirements, and 4) Why the beginning of the year is a great time to contribute to a traditional or Roth IRA.
Comparing Coverdell ESAs with 529 Plans Practical Perspectives: Key Financial Issues for You and Your Family February 2008
In this month’s Practical Perspectives, we meet Floyd, an investment analyst, and Marietta, an educational researcher — a married couple with a five-year-old son and a newborn daughter. Like many parents, they’d heard and read plenty about 529 plans, but they wanted to know whether there were any other college funding alternatives worth considering. They visited their financial advisor, who explained one potential option: the Coverdell Education Savings Account.
New Housing Act Provides Tax Relief for Individuals and Businesses - August 2008
The Housing and Economic Recovery Act of 2008 is designed primarily to help troubled borrowers and their lenders, including Fannie Mae and Freddie Mac. But it also provides incentives and tax breaks for certain home buyers, homeowners, businesses and real estate investors, as well as for GO Zone residents and investors.
Return of Organization Exempt from Income Tax Form 990 – Form and Instructions Revisions - August 2008
By the end of August 2008, the IRS expects to post revisions to the 2008 Form 990 instructions for tax year 2008 (to be filed in 2009 and later). At the end of 2007, the IRS redesigned the Return of Organization Exempt from Income Tax Form 990 (for the tax return that charities and tax-exempt organizations file). The redesign of both the form and the form's instructions were based on the public's comments and suggestions. Read more for details.
MA Life Sciences Legislation - August 2008
This new act that provides for the investment and expansion of the Life Sciences Industry is intended to position MA as a global leader thanks to a 10 year $1B investment. The implementation of these incentives will be controlled by an 18 member advisory board. For key highlights of the program refer to the full article.
Small Business Energy Exemption - August 2008
All businesses with a gross income totaling less than $1,000,000 annually and employing less than five people are exempt from paying sales tax on their gas, steam, electricity, and heating fuel bills. Read more for details.
Governor Signs Sales Tax Holiday Bill - August 16th & 17th
Massachusetts joins more than a dozen states in granting a sales tax holiday in 2008. Shoppers can look forward to a tax-free weekend for the fifth year in a row as Governor Deval Patrick signed legislation to grant an exemption from the 5 percent Massachusetts sales tax. The sales tax holiday is effective August 16th and 17th, 2008 and applies to items costing $2,500 or less.
Partnership, Trust and Estate Tax Returns Can Be Extended For Only Five Months Rather than Six Months -- July 2008
In order to help individuals better meet their filing obligations, the IRS has announced that it has issued Regulations that will change the extended due dates for certain businesses to file their returns before January 1, 2009.
Summary of the New Massachusetts Corporate Tax Law -- July 2008
On July 3, 2008 Massachusetts Governor Deval Patrick signed into law An Act Improving Tax Fairness and Business Competitiveness, effective for tax years beginning after January 1, 2009. The intention is to bring tax fairness, modernization and improved competitiveness to the MA state tax system while gradually reducing corporate rates from 9.5% to 8%, starting in the year 2010. However, during the next five years tax revenues will still increase by more than $1 billion.
Use Your Estate to Motivate With an Incentive Trust -- July 2008
Many people think of their estate plan as, ultimately, a passive concept. That is, it can transfer your wealth to beneficiaries, but it can’t really give them your wisdom or help them make sound life choices. One way to shift this paradigm, so to speak, is to create an incentive trust. It uses the “carrot and stick” concept to help shape your loved ones’ lives rather than only contribute to their finances.
Services for Charitable Causes: Deductions Uncovered -- July 2008
While no specific deduction is allowable for the contribution of services, including valuing your time, un reimbursed expenditures incurred in connection with the service may be deductible. Read the full article for examples of allowable deductible expenses.
Massachusetts Treatment of Self-Employed Individuals 401(k) Contributions -- July 2008
The Massachusetts Department of Revenue has issued Directive 08-3, which denies a state tax deduction for partners and other self-employed individuals, for contributions (including matching contributions) to 401(k) plans beginning in 2008.
IRS Changes the Law for Tax Exiles -- June 2008
Under the Internal Revenue Code, the income of a U.S. citizen is taxable without regard to the citizen's place of residence, and, significantly, without regard to where the income is earned or produced. Every year, hundreds of US citizens will denounce their citizenship and move abroad in order to eliminate that tax liability and protect their wealth. Previously, tax exiles were required to file a U.S. Tax Return for the 10 years following renouncement. This system also encouraged people to hold onto their U.S. assets until after the 10-year period expired to avoid a high gift tax. Recently, a new law approved by Congress under the Heroes Earnings Assistance and Relief Tax Act of 2008 is determined to close the loopholes that allowed Americans to reduce their tax bills through expatriation.
Compensation Issues for Self-Employed S. Corporations -- June 2008
In the Tax Advisor’s May 2008 issue there is an interesting analysis of the economic benefits of maximizing an S corporation’s shareholder’s compensation. This is contrary to the intuitive view that such compensation should be minimized in order to minimize employment taxes. The article discusses a website that provides a downloadable and interactive spreadsheet to determine the effects of different wages.
2008 Standard Mileage Rates and Employee Reimbursement Rules Change -- June 2008
The IRS has announced a raise in the optional standard mileage rates that may be used by employees, self-employed individuals, and other taxpayers when computing the deductible costs of operating a passenger car for business, medical, moving or charitable purposes to 58.5 cents from 50.5 cents. Please also note the MA Sales Tax Holiday update.
Alternative Fuel Excise Tax Credit -- June 2008
If you used an alternative fuel or an alternative fuel mixture for sale or use in your trade or business, you may be eligible for a credit or refund until September 30, 2009. For purposes of the alternative fuel credit or alternative fuel mixture credit find out what the alternative fuel exactly means and what the tax credit claim entails for the claimant.
Before Expanding Globally, Consider the Tax Consequences -- June 2008
Never before has the phrase “If it seems too good to be true…” carried more meaning than when business owners look to expand internationally. For all the positives associated with opening up a European office or acquiring a competitor in East Asia, navigating the murky waters of international tax laws can be an incredibly complex process.
Looking for Your Refund? Distributed by the IRS Tax Tips -- April 2008
If you already filed your federal tax return and are due a refund, you have several options for checking on the status of your refund.One way is to use “Where’s My Refund?” an interactive tool on the IRS Web site. Simple online instructions guide taxpayers through a process that checks the status of their refund after they provide identifying information shown on their tax return. Once the information is processed, you could get several responses, including:
- Acknowledgement that your return was received and is in processing.
- The mailing date or direct deposit date of your refund.
- Notice that the IRS could not deliver your refund due to an incorrect address. To ensure delivery, you can change or correct your address online.
"Where’s My Refund?" is a very flexible tool, read the full article to find out more...
How Do You Spell “Success”? -- March 2008
3 hallmarks of a profitable business
Every business owner wants his or her company to succeed. Whether one leads a startup or a generations-old enterprise, it’s an easy (and obvious) thing to wish for. But what are the hallmarks of a successful company? This article names three: strong revenues, low production costs and minimal operating expenses.
Risk Management -- March 2008
Buy-sell agreements protect companies from themselves
When business owners speculate about threats to their companies, they often overlook the human beings sitting next to them in the boardroom. An unanticipated ownership change can cripple a company’s ability to make executive decisions. One wise risk management move is creating and maintaining a buy-sell agreement. This article explains why.
Practical Perspectives: Key Financial Issues for You and Your Family -- March 2008
Getting back to basics with life insurance
In this month’s Practical Perspectives, we meet newlyweds Nathan and Penelope, who recently decided they needed a financial advisor. With successful careers and a beautiful home, they had a lot to lose: If one of them died prematurely, the survivor might not be able to pay the mortgage. Among the first topics they discussed with their CPA were the two fundamental types of life insurance: term and permanent.
Economic Stimulus Act of 2008 -- February 2008
Both the Senate and House of Representatives passed the “Economic Stimulus Act of 2008” on February 7 clearing it for the President’s signature. As expected, the bill contains benefits for both individuals and business.
Looking for a Successor? For Best Results, Keep an Open Mind -- February 2008
For many business owners, among the hardest aspects of retiring (or otherwise moving on) is choosing a successor. Many, if not most, have a few viable candidates to consider — often too few. This article recommends that, when looking for a successor, business owners keep an open mind and take a close look at all options, including family members, nonfamily employees and external candidates.
Moneylines: News Briefs for Businesses and Individuals
This section offers four news briefs about: 1) A recent survey indicating that many companies are still ill-prepared for a technological disaster, 2) How the IRS has recently adjusted the allowable living expense standards that help determine how much delinquent taxpayers must pay, 3) The results of a recent survey revealing that many workers intend to delay their retirements, and 4) Why the beginning of the year is a great time to contribute to a traditional or Roth IRA.
Qualified Plan Loans: What You Don’t Know Can Hurt You -- February 2008
Among the risks of offering workers a “qualified” retirement plan (one that follows certain rules to qualify for beneficial tax treatment), such as a 401(k), is that the arrangement may allow participants to take loans from their accounts. Although employees often appreciate this feature, taking out a qualified plan loan can get workers into trouble — and hurt their companies as a whole. This article gives an overview of how qualified plan loans work for employers who may not be fully aware of all the risks involved.
5 Easy Steps to Creating a Financial Disaster Recovery Plan -- February 2008
Whether a massive flood that affects thousands or a sudden illness that affects only one person, should disaster strike, an individual’s financial solvency could very well depend on whether he or she has a clear strategy in place for paying the bills. This article offers five easy steps to creating a financial disaster recovery plan.
AMT Patch Update-- January 2008
The alternative minimum tax (AMT) continues to be a bugaboo for Congress. They understand the need to overhaul the system, but can’t seem to find the key to simplifying it. With time running out, Congress finally approved a “patch” that includes 2007 AMT exemption amounts that are significantly higher than they would have been without the act but only slightly higher than the 2006 amounts.
Energy Issues -- January 2008
On Dec. 19, 2007, the president signed into law a new energy bill. The Energy Independence and Security Act of 2007 raises fuel economy standards for automobiles and sets standards for improving the efficiency of home appliances.
Mortgage Relief -- January 2008
Congress spent much of 2007 trying to hammer out legislation that would offer help to homeowners caught in the subprime mortgage crisis. The Mortgage Forgiveness Debt Relief Act of 2007, signed into law by President Bush on Dec. 20, 2007, creates a three-year exception (from Jan. 1, 2007, through Dec. 31, 2009) to current law so that affected homeowners won’t have to pay federal income taxes for debt forgiveness on their troubled loans.
Opening a Whole New World of Making Your Federal and Massachusetts Tax Payment Electronically… -- January 2008
It is easy, secure, fast, easy to use, convenient, timesaving and accurate! EFTPS is a system provided free by the U.S. Department of the Treasury to enable individual taxpayers to make all their federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone.
General Exception for Certain Business Use of Home -- January 2008
Taxpayers may deduct home business expenses, which may include such items as a portion of utility bills, mortgage interest, repairs, and depreciation, subject to the gross income limitation, in which the taxpayer uses both exclusively and regularly.
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2007
AMT Patch-Good News For Many! -- December 2007
Congress finally passed an Alternative Minimum Tax (AMT) relief Bill in The Tax Increase Prevention Act Of 2007, which should allow over 20 million taxpayers to either reduce or avoid the 2007 AMT thereby saving an estimated $2,000 in tax per taxpayer who would otherwise be subject to the AMT. President Bush is expected to sign this Bill immediately. Read the full article for specifics...
2008 Tax Calendar -- December 2007
To help make sure you don't miss any important 2008 deadlines, we've provided this summary of when various tax-related forms, payments and other actions are due. This is not an all inclusive list, but rather more for the common filings. Please read the full article for your review...
Mortgage Forgiveness Debt Relief Act of 2007 -- December 2007
President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007 last week. This law change excludes from taxation discharges of up to $2 million of indebtedness that is secured by a principal residence and is incurred in the acquisition, construction, or substantial improvement of the principal residence. It will be available for three years from January 1, 2007 through December 31, 2009. This act also includes an expanded time-period for a surviving spouse to use the higher home sale exclusion, and a three-year extension of the mortgage insurance premium deduction.
IRS Announces 2008 Standard Mileage Rates -- December 2007
2008 mileage rates per mile will be: 50.5 cents for business miles driven; 19 cents for medical or moving purposes; and 14 cents in service of charitable organizations.
409A Regulations: A Pleasant Alternative to Root Canal? -- November 2007
Congress enacted Internal Revenue Code section 409A in 2004 to address perceived abusive arrangements involving nonqualified deferred compensation plans. Employees and independent contractors are exposed to severe tax consequences if the plan fails to comply with 409A. For the three basic requirements under 409A, please refer to the full article.
Tax Savings: Heavy SUV and Hybrid Vehicle Purchases -- November 2007
Thinking of buying a heavy SUV between 6,000 and 14,000 pounds for your business? You may well be better off buying the vehicle in 2007 rather than waiting until 2008. And while on the topic of motor vehicles, don’t forget the tax credit for certification of certain hybrid vehicles. Read the full article for specifics.
No Sure Thing: Donation Do's and Don’ts -- November 2007
If you donate money, goods or services to charity, you may be able to augment the personal satisfaction you get from the good deed with a tax deduction. But a tax break is no sure thing; you’ve got to follow the rules. Here are some donation dos and don’ts to keep in mind.
Lending Money to Family Members Can Be Risky -- October 2007
In this month’s “Practical Perspectives,” we meet Sarah and her sister Sylvia, who were always of a different ilk. Sarah settled down quickly after college to start a family and a career. Sylvia spent years traveling the world. For various reasons, Sylvia recently decided it was time to cease her travels and put down roots. The problem: She was deeply in debt. Sarah wanted to help her but was concerned about the tax implications of a loan. She visited her financial advisor for help.
Working the Fringes: 3 Hot Non-Taxable Benefits to Consider -- October 2007
A respectable benefits package is pretty much a must-have for any size company these days. One good way to differentiate a company’s benefits from its competitors is to “work the fringes” — that is, provide additional fringe benefits. This article suggests three hot — and nontaxable — ones to consider.
Client Relate Bulletin- Tax Consequences of Home Mortgage Foreclosure -- October 2007
The following is a discussion regarding the tax consequences to the homeowner as a result of a foreclosure. The CCH has produced an explanation of the interaction between the COD provisions and exceptions under 61(a)(12) and 108 as well as the gain exclusions for principal residence under 121.
Pension Plan Limits 2008 -- October 2007
The federal government has recently announced cost of living adjustments applicable to dollar limitations for pension plans and other items for 2008. The increase in the cost-of-living index met the statutory thresholds which triggered the increase in the indexed amounts. However, some amounts will remain unchanged for 2008. For instance, the amount of employee elective deferrals under a 401k plan remains at $15,500 and catch-up contributions for those aged 50 and over remains at $5,000 for 2008.
Congress Not Kidding Around: “Kiddie” Tax Gets Tougher -- September 2007
Legislators designed the kiddie tax to prevent taxpayers from shifting an inordinate amount of income-producing assets to their children to save on taxes. With the tightened restrictions, find out why 2007 may be the perfect year to shift highly appreciated assets to children 18 to 23 who will be subject to the kiddie tax next year.
Recent Changes Open the Door for Businesses; Section 179 Extension Deduction, Hiring Credit, and R&D Credit -- September 2007
They say when one door closes, another opens. So it often goes with tax law changes: When one savings opportunity disappears, such as the “bonus” depreciation offered in previous years, another (or several others) takes its place. As of this writing, the President has signed off on two new tax laws in as many years — the Tax Relief and Health Care Act of 2006 (TRHCA) and the Small Business and Work Opportunity Tax Act of 2007 (SBWOTA) — that could provide several means for you to lower your company’s tax bill.
Are Vacation Homes Really Considered Investment Property? -- September 2007
Based on the Barry E. Moore and Deborah E. Moore v. Commissioner case that discussed the § 1031 exchange and focused on why a vacation home was not considered an investment property -- the following guidelines serve as potential evidence that the court will consider in support of an investment motive.
Laptop Stolen Containing Information of over 100,000 Taxpayers -- September 2007
Connecticut state officials have confirmed that a computer laptop with the names and Social Security numbers of more than 106,000 Connecticut individual taxpayers has been stolen. The computer was taken from a state employee's car on August 17th. It is said to be password protected, therefore it is highly unlikely that the information could be accessed without specific knowledge.
The Best Defense is a Good Offense -- August 2007
Because of the prevalence of litigation, asset protection - the process of arranging affairs to shield assets from potential creditors, litigation and other legal hazards - has steadily risen to prominence during the past decade. More people are realizing that, to protect their assets, the best defense is a good offense. This article suggests a variety of ways to accomplish this.
You Can't Stop the ESOP ... But is One Right for your Company? -- August 2007
The employee stock ownership plan (ESOP) has been a virtually unstoppable force on the employee benefits scene for some time now. But whether an ESOP is right for any company depends on a variety of factors. This article answers some common questions about these arrangements, which hold advantages beyond just serving as an employee benefit.
Unpacking Tax Savings with the Home-sale Exclusion -- August 2007
In this month's "Practical Perspectives," we meet Lou, a retired sound engineer. During a recent visit to his financial advisor, Lou wished aloud that there was a simple form he could fill out to complete his estate plan. Hesitantly, Lou's advisor mentioned that, in truth, there is - specifically, a Transfer on Death (TOD) account.
2007 Sales Tax Holiday Weekend Announced -- August 2007
Massachusetts shoppers will enjoy sales-tax-free shopping on August 11-12, 2007. The bill exempts shoppers from the state’s 5 percent sales tax on purchases up to $2,500. The following do not qualify for the sales tax holiday exemption and remain subject to tax: all motor vehicles, motorboats, meals, telecommunications services, gas, steam, electricity, tobacco products and any single item whose price exceeds $2,500. Governor Deval Patrick signed a tax-holiday bill on August 2, 2007, allowing for a sales tax holiday for the fourth year in a row. By doing so, the state hopes to encourage sales at a traditionally slow time of year.
401(k) Heirs: Act Fast -- July 2007
Recently, Congress implemented a new law that allows anyone who inherits a 401(k) to receive the same favorable tax treatment that had previously been reserved for spouses. It gives the taxpayer the option of withdrawing the inherited money over their expected lifetime in order to minimize the up-front tax due. Until this time, spouses have been free to transfer inherited 401(k)s to individual retirement accounts enabling them to spread out the withdrawals without penalty, while non spouse beneficiaries typically have been required to withdraw all funds from the account and pay taxes within a matter of months. Such an inheritance has also forced some survivors into a higher tax bracket, further increasing their tax burden.
409A : Get Informed Now to Avoid Penalties -- July 2007
Payments under a non-qualified deferred compensation plan that is not in compliance with IRC section 409A can result in a penalty of 20% of the compensation plus an acceleration of the tax and interest. This provision of the Internal Revenue Code is very broad and complex. Read more to learn how to avoid it...
IRS to Conduct Random Audits -- July 2007
The Internal Revenue Service has announced plans to launch a new National Research Program (NRP) reporting compliance study for individual taxpayers that will provide updated and more accurate audit selection tools to reduce the nation's tax gap. The study will begin in October of 2007 and examine approximately 13,000 randomly selected tax year 2006 individual returns from various income categories. Similar sample sizes will be used in subsequent tax years.
IRS Calculator Can Prevent Tax Overpayments -- June 2007
No one can deny the allure of a sizable income tax refund. But, generally, getting back any more than $50 indicates that you essentially gave the federal government an interest-free loan.
IRS Releases Discussion Draft of Redesigned Form 990 for Tax-Exempt Organizations -- June 20007
The Internal Revenue Service released for comment and discussion a draft Form 990 and 15 associated schedules filed by tax-exempt organizations. The revised Form 990 will be completed by all tax-exempt organizations, hospitals and medical care providers also must complete Schedule H, and many hospitals must complete schedules concerning executive compensation, related organizations, asset transfer / termination of exempt entity, governance, and tax-exempt bonds. The IRS hopes to have the form ready for use for the 2008 filing year (returns filed in 2009).
Kiddie Tax: It's All About the Age -- June 2007
Congress recently passed a new law that will expand the reach of the "kiddie tax" and prevent many wealthy parents from taking advantage of a popular tax-saving strategy. The tax-saving strategy involves parents or grandparents transferring or gifting appreciated shares of stocks and mutual funds to children or grandchildren in lower tax brackets. In doing so, parents in higher tax brackets avoid paying tax at the maximum long-term capital gain tax rate (15%) upon sale. Instead, the children in the 10% or 15% tax brackets sell the investments and pay tax at their lower long-term capital gain rate, currently set at 5%. This strategy had been gaining considerable attention recently because of the fact that the current 5% tax rate on long-term capital gains is scheduled to be reduced to 0% in 2008. Conversely, the 15% long-term capital gain tax rate that higher income tax payers are subject to will remain unchanged.
Curtail Estate Planning Disasters: Special-use Valuations Help -- May 2007
If a business owner dies suddenly, his or her family may learn — too late — of a rather chilling secret: He or she had little to no working estate plan. As a result, they may find themselves on the hook for an estate tax bill so big that it leaves them no option but to sell the company. What many families don’t know is that, when a situation like this arises, all hope isn’t necessarily lost. If a significant portion of a business owner’s estate consists of real property used in a family business or farm, the owner’s family may be able to reduce estate taxes with a special-use valuation.
3 Hot Education-Funding Tips for 2007 -- May 2007
Jeffrey and Marcene like to stay informed. Yet when endeavoring to learn about how to fund their young daughter’s college education, they were quickly overwhelmed by their options. Wisely, they sat down with their financial advisor for help narrowing down some of the hot education-funding tips of 2007. Their advisor nodded knowingly when Jeffrey and Marcene mentioned how much information they had to wade through when contemplating education funding. Fortunately, she was able to fill the couple in on three important education-funding changes that have made news in the past year or so.
Small Business and Work Opportunity Tax Act of 2007 (SBWOTA) -- May 2007
On May 25, the President signed the Small Business and Work Opportunity Tax Act of 2007 (SBWOTA). Passed in conjunction with legislation to continue funding the war in Iraq and to raise the minimum hourly wage, the tax-related provisions are designed in part to provide benefits to small businesses likely to be hit hard by the minimum wage increase. Following are highlights of key provisions affecting businesses and individuals, as well as GO Zone incentives and other areas of tax law.
IRS Issues Final Regulations on Tough Restrictions for Non-Qualified Deferred Compensation Arrangements -- April 2007
Failure to comply with these rules can result in some very harsh consequences such as a 20% penalty on the amount of the deferred compensation. These penalties are applied at the employee/independent contractor recipient level. For example, something as simple and straight forward as a $100,000 deferred bonus could result in a $20,000 penalty if not structured properly.
Looking for Your Refund? -- March 2007
If you already filed your federal tax return and are due a refund, you have several options for checking on the status of your refund. “Where’s My Refund?” is an interactive tool on the IRS Web site guiding taxpayers through a process that checks the status of their refund.
IRS Changes Tax Filing Deadline to April 17th -- March 2007
The IRS has extended this year’s Tax Filing Date thanks to a quintessential observance: Patriot’s Day. Also known as Emancipation Day, residents of six eastern states and the District of Columbia will have until April 17, 2007, to file their 2006 returns and pay any taxes due.
Senate Approves Fiscal Year 2008 Budget -- March 2007
On March 23rd the Senate approved a $2.9-trillion fiscal year (FY) 2008 budget proposal that would provide two years of additional relief from the alternative minimum tax (AMT) and the application of a projected $132-billion surplus in 2012 toward the permanent extension of some expiring tax credits. The resolution provides a reserve fund allowing for new tax relief and the extension of expiring provisions, but only if the cost of those measures is offset.
Recent Tax Highlights That May Affect You...-- February 2007
See our full article for expansions on recent updates, announcements, and guidance from the IRS and Treasury Department:
- Backdated and Mispriced Stock Options
- Estimated Tax Penalty for Persons Working Abroad
- Rescinding Reportable Transaction Penalty
- Rollovers to Health Savings Accounts
- Treasury Explains Administration’s 2008 Revenue Proposals
- Day Trading Losses Are Capital Losses
- Deducting Payroll Taxes on Deferred Compensation:
- Like-kind Exchange Followed by Sale
- Patent Cross-licensing Arrangements
- Tax-exempt Organizations—Tax Shelter Transaction
New Year Brings New Rollover Option for Nonspouse Qualified Plan Distributions -- February 2007
Nonspousal IRA beneficiaries can’t treat an inherited IRA as their own. However, the IRS has long agreed that they can make trustee-to-trustee transfers to another IRA if the new IRA is in the name of the decedent for the benefit of the beneficiary (see, for example, Rev. Rule. 78-406 and PLR 9737030). This gives beneficiaries the option of stretching out the IRA distributions over their lifetime if they want to maximize the tax deferral and minimize the tax impact in any one year.
10 Million Taxpayers Miss Out on Telephone Tax Refunds; IRS Urges People to Check before Filing -- February 2007
The Internal Revenue Service is urging taxpayers to check to see if they qualify for the telephone excise tax refund after more than 10 million early filers did not request the one-time refund. In the first release of this year’s weekly filing season statistics, about 30 percent of all taxpayers did not request the telephone tax refund.
New Massachusetts W-2 Filing Requirements -- February 2007
Massachusetts Directive 07-2: Requirements for Employers Filing 2006 and Subsequent Year-end Withholding Information
This Directive describes the proper formats for employers to use in filing their year-end W-2 and income tax withholding reconciliation schedules with the Department of Revenue (Department). This Directive re-establishes a requirement, suspended by Directive 97-1, that employers not filing in a machine-readable form must file the W-2 and annual reconciliation information on paper. It also changes the threshold above which employers must file in a machine-readable form.
Waiver of the 60-Day Rollover Period -- January 2007
Before 2002, taxpayers who missed the 60-day deadline for rollovers from a qualified plan or Individual Retirement Account(IRA) were out of luck. The law with respect to the 60 day rule was very rigid and the IRS didn’t have the authority to consider equities. Effective for distributions after December 31, 2001, the IRS has discretion to waive the 60 day rule under certain circumstances. Please go to www.irs.gov/ep, select “PlanParticipant/Employee,” select “Resources for Retirement Plan Participant/Employee” and see the “IRA Online Resource Guide” to find information on obtaining a waiver of the 60 day rollover requirements.
Alternative Minimum Tax 101 -- January 2007
The AMT system comes with a completely different set of rates and deduction rules. People pay it only if their AMT tax amount is higher than their traditional taxes. Translation: if you're paying the AMT, you are by definition paying higher taxes. The system created to make sure the uber-rich didn't dodge the tax bullet is under fire because it's now affecting middle-class Americans. And reforming it could mean increased tax payments for everyone.
You think you’ve moved. Watch out. Your old state may still try to tax you as a resident. -- January 2007
If you're planning to move or if you have homes in more than one state, watch out. States are getting ever more creative about collecting income tax from people who have any ties to their territory. Even states without income taxes are getting into the act, with sales- and use-tax audits. Upping the stakes in the residency wars: Many states' estate taxes, invisible and painless until a 2001 change in federal law, have since become real burdens because the federal estate tax credit that used to be available to offset them is now gone.
AMT Will Ensnare One-Third of Individuals by 2010, National Taxpayer Advocate Warns -- January 2007
In less than three years, one-third of individual taxpayers could be paying AMT, National Taxpayer Advocate Nina Olson predicted in her recently released annual report to Congress. AMT reforms was just one of many recommendations in her report, including closing the tax gap and terminating private debt collection.
Simple Steps Can Prevent Tax Scams as Private Debt Collection Begins -- January 2007
As the Internal Revenue Service begins its private debt collection initiative, there are several simple steps that can provide protection against scam artists.
Scamsters try a variety of tricks to impersonate the IRS in hopes of tricking taxpayers into divulging personal or financial information or even conning people out of cash. Scam artists try to impersonate the IRS in person, by phone, by e-mail and over the Internet.
Find out how our expertise in tax and business consulting can add value to your business. Email us or call us at 1 (888) 875-9770.
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