news archives: Tax & Business Updates
Welcome to Feeley & Driscoll's Business Updates Archive. We realize articles alone cannot answer all of the questions that concern you, so please feel free to contact us by email or by calling us at (888) 875-9770 and ask to speak with a Feeley & Driscoll construction advisor for additional information.
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2013
More and more businesses are using independent contractors to benefit from staffing flexibility and to achieve tax savings. But this latter item has increasingly attracted the attention of the IRS, which is wary of businesses misclassifying full-time employees as contractors, and is ready to serve up stiff penalties for doing so. But a voluntary self-reporting program can mitigate this. This article explains how the Voluntary Classification Settlement Program can benefit those businesses eligible to participate, while a sidebar discusses how to maintain the distinction between employees and contractors.
There are many ways to fund retirement. Among the most long-standing is the IRA, which can still prove useful — even for those having a 401(k) or other employer-provided plan. This article shows the similarities and differences between traditional and Roth IRAs, especially as they apply to taxes.
This issue’s “Moneylines” discusses the new IRS mileage rate in effect for calculating the deductible costs of operating a vehicle; how the national debt is affecting hiring practices; and how massive delays in state judicial decisions have adversely affected the economic production of many businesses.
In this issue, “Practical Perspectives” looks at the case of a couple who was unsure of the tax implications of renting out their vacation home. Their advisor explored three possible scenarios, depending on how long they decided to rent it out.
The recently enacted 2012 American Taxpayer Relief Act is a sweeping tax package that includes, among many other items, permanent extension of the Bush-era tax cuts for most taxpayers, revised tax rates on ordinary and capital gain income for high-income individuals, modification of the estate tax, permanent relief from the AMT for individual taxpayers, limits on the deductions and exemptions of high-income individuals, and a host of retroactively resuscitated and extended tax breaks for individuals and businesses. The following is a summary of the key elements of the package.
Property Tax Exemption Form 3-ABC are due by March 1, 2013 for all Massachusetts tax exempt organizations that hold real or personal property. Forms are to be filed with the assessor's office for the city or town in which the property is located. The form must be accompanied by the organization's most recently filed Attorney General Form PC (which also includes the IRS 990 and audited financial statements).
The recently enacted 2012 American Taxpayer Relief Act is a sweeping tax package that includes, among many other items, permanent extension of the Bush-era tax cuts for most taxpayers, revised tax rates on ordinary and capital gain income for high-income individuals, modification of the estate tax, permanent relief from the AMT for individual taxpayers, limits on the deductions and exemptions of high-income individuals, and a host of retroactively resuscitated and extended tax breaks for individuals and businesses. The following is a summary of the key elements of the package.
This article discusses some of the most important provisions of the American Taxpayer Relief Act of 2012 (ATRA), signed into law this past January. These provisions address ordinary-income tax rates and long-term capital gains rates; the alternative minimum tax; and several tax breaks for businesses. A sidebar explains how ATRA affects gift, estate and generation-skipping transfer taxes.
If top managers aren’t getting the most from their respective teams, the company is operating at a competitive disadvantage. This article describes some ways an organization can ensure it’s leveraging the true power of its management to get maximum results. These methods include reinforcing collaboration and nurturing knowledgeability among managers, along with assessing their performance and organizing a retreat.
This issue’s “Moneylines” takes a look at new standards handed down by the Institute of Internal Auditors that will result in more companies getting increased feedback from their auditors. Also discussed is the continuing need that employees have for help in retirement planning, along with an increasing trend among companies to hire a Chief Digital Officer.
In this issue, “Practical Perspectives” examines the case of “Rudy,” a prospective entrepreneur who wondered whether he should tap his 401(k) funds to finance his startup. His advisor agreed that this route offered some advantages — but that there could also be legal hurdles and tax risks.
2012
The tax experts at Feeley & Driscoll examine the question of whether additional shareholder payments be in the form of salary or equity distributions? They concluded that based on the current tax environment, especially for 2013, in many cases distributions are more tax efficient than salary.
IRC Section 179 has provided businesses with the ability to substantially accelerate depreciation on qualified purchases for the last decade. The limitation on the available deduction grew to $500,000 during 2010 and 2011 as Congress intended for the increased limits to assist businesses in light of the recession. For 2012, the available deduction has been decreased to $139,000. Without intervention by Congress, the deduction will decrease further for 2013 to $25,000.
Recent data indicates financing is there for the savvy business owner who knows where to find it. But the reason behind this availability isn’t necessarily because the economy is getting markedly better. Rather, competition is creating opportunities for business owners to get the capital they need. This article discusses crowdfunding, angel investors and other options to traditional loan offerings. A sidebar describes three tests to help a company decide if a loan is advisable.
Recent data indicates financing is there for the savvy business owner who knows where to find it. But the reason behind this availability isn’t necessarily because the economy is getting markedly better. Rather, competition is creating opportunities for business owners to get the capital they need. This article discusses crowdfunding, angel investors and other options to traditional loan offerings. A sidebar describes three tests to help a company decide if a loan is advisable.
The traditional pension may seem like a thing of the past, but one survey indicates that more than half of workers are still counting on payouts from one of these “defined benefit” plans in retirement. But should one take a lump sum payout or an annuity? If the latter, should it be a single-life or joint-life annuity? This article describes these options and the factors to consider when choosing one.
This issue’s “Moneylines” takes a look at “activity-based billing,” which charges customers on the basis of how they use a product or service; a survey regarding the importance of company culture; and the risks involved with employees using personal computerized devices to perform job duties.
In this issue, “Practical Perspectives” discusses the case of Rita, who worried about possibly having to place her mother in a nursing home. With long-term care insurance not being an option, she visited her financial advisor, who discussed Medicaid planning — including the option of creating an irrevocable trust.
Did you hire any veterans after November 21, 2011? Are you considering hiring any veterans before January 1, 2013? If so, you may be eligible to receive a tax credit for each qualified veteran hired.
The Internal Revenue Service recently issued proposed regulations addressing deduction limitations for expenditures paid or incurred for entertainment, amusement, or recreation activities and for facilities used in connection with such activities. Specifically, the amount allowable as a deduction for any expense for food, beverages, entertainment activities, or entertainment facilities is limited to 50% of the amount otherwise allowable.
In June of 2012, the United States Supreme Court upheld the Affordable Care Act (ACA). As a result of this decision, the major provisions in the ACA will move forward in 2013 and 2014. Employers and individuals should be aware of the ACA’s provisions in 2013 and 2014. Key tax provisions included in the Act are discussed in this article.
The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to improve tax compliance involving foreign financial assets and offshore accounts.
The IRS issued a list of frequently asked questions and answers report ("Q&A") that provides specific examples concerning certain tax issues related to medical loss ratio rebates. The medical loss ratio ("MLR"), a product of The Affordable Care Act, requires insurers to spend a minimum percentage of premium dollars on medical claims, clinical services and activities designed to improve health care quality. Insurers in the large group market must achieve an MLR of 85% while insurers in the individual and small group markets must achieve an MLR of 80%. Insurers that fail to achieve these percentages must issue rebates to their policyholders.
IRC Section 179 has provided businesses with the ability to substantially accelerate depreciation on qualified purchases for the last decade. The limitation on the available deduction grew to $500,000 during 2010 and 2011 as Congress intended for the increased limits to assist businesses in light of the recession. For 2012, the available deduction has been decreased to $139,000. Without intervention by Congress, the deduction will decrease further for 2013 to $25,000.
There is considerable uncertainty in today's tax planning environment. This is especially true in the area of estate and gift tax planning. Thanks to legislation passed by Congress in 2010, the gift and estate tax exemption are both $5.12 million and both rates are currently 35%. In addition, the unused exemption of a deceased spouse may carry over and increase the surviving spouse's unused exemption resulting in a surviving spouse's estate tax exemption that can total up to $10 million. In other words, an estate up to $10 million may be passed to surviving beneficiaries (e.g., children) intact without any federal estate tax. However, without Congressional action, gift/estate tax rates and exemptions will revert to pre-2001 levels of 55% and $1 million, respectively, in 2013. This makes 2012 a critical year to consider planning techniques that also may not be around after 2012. The following is a brief discussion of a few of these techniques.
There may be some significant tax law changes in 2012 — or there may not. And the fact that it’s an election year only compounds the intrigue. This article looks at three particularly hot tax issues for business owners to keep an eye on as the year winds down: the Patient Protection and Affordable Care Act (PPACA); bonus depreciation and Section 179 expensing; and the Work Opportunity credit as it pertains to hiring veterans. A sidebar offers a reminder that failing to properly file a Form 1099-MISC could lead to costly penalties or an audit.
The decision to speed up mortgage payments isn’t a no-brainer. There are certainly advantages, but, as this article explains, these should be weighed against the benefits of using money in other ways. First, it’s important to have a quickly accessible nest egg set aside for emergencies. It’s also important to look at the return on investment of paying off early vs. such alternatives as deducting mortgage interest, refinancing, paying down credit card debt, maxing out contributions to an IRA or 401(k), or purchasing company stock at a discount.
In this issue, “Moneylines” looks at how accounting rules may soon get easier for privately held companies; a survey indicating the reluctance of many small businesses to expand this year; and a survey that shows that companies have mixed feelings about social media.
In this issue’s “Practical Perspectives,” we meet alarmed taxpayer Alan. After reading several articles about the challenges he and his fellow taxpayers may face when filing their 2012 returns, Alan noticed a particularly ominous take on the alternative minimum tax (AMT). Unless Congress passes another “patch” to raise the income level, more middle and upper-middle income earners will be subject to the AMT. Concerned, Alan visited his tax advisor to discuss the current law and defensive strategies.
Unless Congress acts before year end, significant changes will take place on Jan. 1, 2013: The current $5.12 million gift and estate tax exemption will drop to $1 million, and the top rate of 35% will increase to 55%. These uncertainties call for estate plan flexibility. This article illustrates a variety of ways to do so, including making large gifts, having beneficiaries use qualified disclaimers, or setting up a credit shelter trust. A sidebar discusses two other trusts: a grantor retained annuity trust (GRAT) and the charitable lead annuity trust (CLAT).
Companies offering employees a 401(k) plan need to check on a number of items well before year end. And this holds true whether they self-administer their plan or use a third-party administrator. This article lists some of the questions to ask and describes tests to perform. It also notes the importance of reviewing enrollment materials and considering specific changes to make to a plan before January.
In this issue, “Moneylines” describes how internal auditors are shifting their main focus away from Sarbanes-Oxley act compliance; an increasing tendency by small to midsize businesses to loosen their purse strings; and the efforts of a substantial number of companies to operate more sustainably.
This issue’s “Practical Perspectives” discusses the case of Jeffrey and Samantha, who are sending their daughter off to college this fall and are looking for some tax relief for the costs they’ll incur. Their financial advisor mentions two specific credits — the American Opportunity credit and the Lifetime Learning credit — and discusses which one might be best for their specific circumstances.
With the advent of e-commerce and a vast array of national distribution networks available, taking wares across state lines has never been easier. But if its business activities in another state reach the point of nexus, a company could face interstate tax issues for which it’s not completely prepared. “Nexus” is the term states use to indicate that a company’s business presence in their territory is substantial enough to subject it to their tax rules and obligations. This article explains what creates nexus and the kinds of taxes that may result. But it also shows where a company can find information about its actual or potential nexus obligations and how those might work to a company’s advantage. A sidebar discusses Internet sales tax obligations.
To thrive at having an effective savings plan, one must be disciplined. To that end, this article offers five ways to increase the odds of successfully building savings, including “paying yourself first,” taking advantage of compounding, and signing up for a 401(k) plan.
In this issue, “Moneylines” notes increased optimism among small-business owners about their projected revenue heading into the year; the risk of “overadvertising”; and increased expectations regarding the number of businesses moving to cloud computing.
This issue’s “Practical Perspectives” discusses the case of Bradley and Melissa, who recently bought a house. With the closing behind them, the couple sat down with their financial advisor to discuss the tax impact of their mortgage. Their advisor began by noting that they had picked a good time to buy a house — at least from one tax perspective. The advisor explained the distinction between asset debt and equity debt, and pointed out that the IRS has come to be more lenient regarding the deductibility of the latter. This could be helpful if Bradley and Melissa decided to refinance in the future.
There is considerable uncertainty in today's tax planning environment. This is especially true in the area of estate and gift tax planning. Thanks to legislation passed by Congress in 2010, the gift and estate tax exemption are both $5.12 million and both rates are currently 35%. In addition, the unused exemption of a deceased spouse may carry over and increase the surviving spouse's unused exemption resulting in a surviving spouse's estate tax exemption that can total up to $10 million. In other words, an estate up to $10 million may be passed to surviving beneficiaries (e.g., children) in tact without any federal estate tax. However, without Congressional action, gift/estate tax rates and exemptions will revert to pre-2001 levels of 55% and $1 million, respectively, in 2013. This makes 2012 a critical year to consider planning techniques that also may not be around after 2012. The following is a brief discussion of a few of these techniques.
April 24, 2012- The program offers financial assistance to eligible Massachusetts small businesses seeking new and increased export sales of their goods and services
SBA defines a small business concern as one that is independently owned and operated, is organized for profit, and is not dominant in its field. Examples of SBA general size standards included.
February 8, 2012- Massachusetts information security regulations (“Standards for the Protection of Personal Information of Residents of the Commonwealth”) took effect on March 1, 2010. On March 1, 2012, covered companies face a compliance deadline relating to their third party service provider contracts.
This article outlines five basic tips on how to avoid IRS penalties when paying independent contractors, as outlined by The American Payroll Association (APA).
In order to facilitate systems and programming changes, the IRS issued Notice 2012-4 to notify tax-exempt organizations that use of the IRS Modernized e-file (MEF) system will be suspended from January 1, 2012 through February 29, 2012 for electronic filing of Forms 990, 990-EZ, 990-PF and 1120-POL information returns.
Without a robust flow of dollars, even profitability itself may not keep a company in good standing. But many factors play into this essential goal, and one of them is working capital management. This article explains what it is and describes its components. It then looks at three common areas that most affect working capital — receivables, inventory and payables — and explains why working capital management should be part of a business’s overall strategic planning. A sidebar shows why having a surplus of cash is not effective working capital management, but actually a sign of operational inefficiency.
The bumpy economy and volatile markets haven’t made saving for retirement any easier. But, it’s still important to keep saving for one’s golden years. And when doing so, everyone needs to abide by certain fundamentals. This article explains the importance of contributing to a retirement plan and having a cash reserve in order to avoid the drawbacks of withdrawing cash too early. It also notes that it’s important to monitor the plan to see that its allocation percentages remain in harmony with one’s current risk tolerance and financial objectives.
In this issue, “Moneylines” explains why, ironically, an excess of cash is considered a major business threat in 2012. It also notes that the IRS has reported that a remarkably low number of companies have claimed the Small Business Health Care Tax Credit, and that, for businesses, tablets are making noticeable inroads into the PC market.
This issue’s “Practical Perspectives” discusses the case of Terry and Marissa, who were thinking about how they’d cope financially if one of them were disabled for a long period. Their advisor agreed with them that it’s a good idea for anyone whose biggest asset is their ability to earn income to consider long-term disability coverage, but noted that the biggest hurdle for Terry and Marissa would be cost. He suggested how they might lessen the cost and explained what to look for in a policy.
When it comes to taxes, 2012 will likely bring great uncertainty. So to prepare an effective tax plan this year, it’s necessary to look ahead at the many issues in flux. While the presently low income and capital gains rates don’t expire until 2013, taxpayers should immediately consider a wide variety of tax planning strategies — including possibly selling appreciating assets and accelerating income into 2012. This article includes a chart showing the scheduled tax rate changes, while a sidebar notes that the Patient Protection and Affordable Care Act of 2010 will make higher-income taxpayers subject to two new Medicare taxes.
The owners of many companies launch their enterprises with a business plan — a written document outlining the company’s strategic objectives and practical means of accomplishing them. Likewise, many owners leave their businesses via a succession plan, a written document outlining how the company’s ownership should transition. Often, however, these two documents never cross paths, much less join toward a common goal. This article shows how effective mentoring can unite a succession plan with a business plan to great effect.
This issue’s “Moneylines” cites several recent surveys. One measures the confidence of small to midsize business owners regarding their business prospects in the upcoming six months; another shows that many companies are rushing into cloud computing unprepared; and yet another reveals that small to midsize businesses are vulnerable to corruption.
This issue’s “Practical Perspectives” looks at the case of Roxanne, who discovered that her ex-husband had failed to report thousands of dollars in income and the two owed the federal government a substantial sum in back taxes, interest and penalties. But her advisor explains that she could find recourse under Section 6015 of the IRS Restructuring and Reform Act of 1998, better known as the “innocent spouse rules” — though it wouldn’t be easy.
2011
As part of the Hiring Incentives to Restore Employment Act (HIRE Act), employers have been granted a credit of up to $1,000 for each qualified employee hired after February 3, 2010 and before January 1, 2011.
The MA DOR released a warning about several unscrupulous tax preparers who coaxed elderly public housing residents to fraudulently apply for the Senior Circuit Breaker Tax Credit last year.
The Tax Relief Act of 2010 extended some tax breaks and expanded others. However, some generous tax breaks are set to expire at the end of 2011 and others at the end of 2012. As the end of the year approaches, all taxpayers should consider every possible tax planning strategy that is currently available both on the business and personal level to minimize taxes now with the uncertainty of what the upcoming years have in store.
This article addresses some of the easier parts to a succession plan, describing tools and techniques frequently used in executing a succession plan for a closely held business that, properly structured, will result in tax efficiency. However, it is important that tax-planning techniques do not take on a life of their own, resulting in a tax-efficient plan that doesn't accomplish the underlying family goals.
The IRS recently became aware of a fraudulent scheme targeting EFTPS users, the scheme uses an e-mail that claims your tax payment was rejected and directs you to a website for additional information. The website contains malware that will attempt to infect your computer.
Outsourcing payroll duties to third-party service providers can streamline business operations, but the IRS reminds employers that they are ultimately responsible for paying federal tax liabilities. The IRS has outlined three tips that employers should keeep in mind when outsourcing their payroll.
Wheter their company is struggling or leading, it behooves every savvy business owner to stay up on the fundamentals of mergers and acquisitions. This article discusses some of the questions that a prospective buyer or seller should ask before deciding to proceed. It looks at the timing of a transaction, along with strategic considerations, due diligence, taxes and sale structure. A sidebar stresses the importance of having an integration plan already in place when the sale occurs.
With one year ending and another beginning, many are considering donating to qualified charities. But there are tax ramifications involved. This article examines the “when” and “what” of charitable giving. It discusses the timing of gifts and the use of charitable remainder trusts, along with the kinds of gifts that might be the most tax advantageous.
This issue’s “Moneylines” takes a look at recent Americans with Disabilities Act (ADA) regulation changes that heighten employers’ risk; a survey showing that many CFOs aren’t confident in the work of their employees and others who provide IT support; and a survey showing a recent drop in the numbers of employees experiencing financial stress.
In this issue, “Practical Perspectives” looks at the case of Gail and Allen, who visit their financial advisor to discuss the notion of buying a smaller home soon after they retire in the near future. Their advisor points out some of the factors they should consider, such as whether they have enough cash for a down payment, whether they can afford home ownership during retirement when their income is lower, and the potential difficulty of getting a mortgage for the smaller home.
A company calling itself Compliance Services recently mailed solicitations entitled Annual Minutes Requirement Statement Directors and Shareholders to numerous Massachusetts corporations. The solicitation offers to complete corporate meeting minutes for a fee. Secretary Galvin stated this is a scam and Massachusetts corporations are not required by law to file corporate minutes with the State.
From a tax return to a specific management report, businesses must collect, review, and analyze facts and figures to support reports and conclusions. The Record Retention Guide provides a suggested time-frame of how long you must retain those records.
The Workforce Training Fund is a state fund enacted into law in July 1998 and financed entirely by Massachusetts employers. Its purpose is to provide resources to Massachusetts businesses and workers to train current and newly hired employees. This article explains the different categories of grants available in this program.
The Business Equipment Tax Reimbursement Program (BETR) is designed to encourage new capital investment in Maine. The program reimburses local property taxes paid on most qualified business property. To qualify, qualified business property must have been first placed in service in Maine after April 1, 1995.
This project focuses on higher education organizations sponsoring Internal Revenue Code section 403(b) plans and their satisfaction of Universal Availability non-discrimination rules and new plan document requirements. The project builds upon a similarly focused 403(b) pilot project involving K-12 public schools. For purposes of this project, higher education organizations refers to academies, universities, colleges, seminaries, institutes of technology, and other collegiate level organizations, such as vocational and trade schools that award academic degrees or professional certifications.
Although the variances among most of the major business entity types aren’t drastic, they can be notable enough to make it worthwhile to review the state of one’s business structure. This article takes a look at the fundamental tax impact of each of the major entity types in use today: S and C corporations, general and limited partnerships, and limited liability companies. A sidebar explains that businesses of any entity type can benefit from two depreciation tax breaks this year.
Anyone interested in smartly managing his or her wealth needs a gifting strategy — both for estate planning purposes and for minimizing the taxes they and their loved ones could face in the here and now. This article shows the benefits of creating a family limited partnership (FLP) or a family limited liability company (FLLC) to transfer interests in a family business, and the tax advantages of establishing certain trusts — such as grantor retained annuity trusts and charitable lead annuity trusts.
This issue’s “Moneylines” takes a look at the latest IRS mileage rates; why the indirect costs of a fraud can be higher than the theft cost; and the top four concerns of retailers, according to a recent survey.
In this issue, “Practical Perspectives” discusses the case of Emily, who paid a visit to her financial advisor to talk about the latest capital gains rules. He explained that, if she were to buy qualified small business (QSB) stock by Dec. 31, 2011, and hold it for more than five years (and meet other requirements), she would garner a full 100% gain exclusion when she sold the stock.
A credit shelter trust (or “bypass” trust) preserves one’s estate tax exemption for eventual tax-free disposition of assets to children while first benefiting one’s spouse for the remainder of his or her life. However, some may feel that this trust is obsolete, due to the recent increase in the estate tax exemption and the availability of exemption “portability.” But, as this article explains, the benefits of this trust should be valuable for years to come. A sidebar explains why those who currently have a credit shelter trust should review the documentary language to make the most of the estate tax exemption, regardless of the amount it may be in the years ahead.
The Roth IRA has become a well-known type of retirement plan, but the Roth 401(k) is also a benefits option worth considering. This article explains the Roth 401(k) in relation to Roth IRAs and traditional 401(k)s — particularly in terms of distributions and taxation.
This issue’s “Moneylines” takes a look at a survey finding a decline in the collective health of U.S. workers with employer-sponsored health care insurance; increased IRS scrutiny of the wealthy; and growing optimism among owners of midsize companies regarding hiring and revenue and profit growth.
In this issue, “Practical Perspectives” takes a look at Donald, a retiree who was piqued by a newspaper article’s report of an arbitration panel requiring an insurance company to pay millions for its involvement with life settlements. Donald was curious because he had a $3 million permanent life insurance policy he might be willing to part with if he could get something for his years of investment. This article describes his financial advisor’s advice.
In April of 2006, the Massachusetts health insurance legislation required employers with eleven or more full-time employees to file a Fair Share Contribution Report (FSC). Employers who do not make a reasonable contribution to their employees’ health insurance are required to pay per employee FSC to the Commonwealth Care Fund.
Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provide a two percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. This reduction applies only to the employee withholding amount. This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits.
Final regulations issued by the IRS in December require that all business tax deposits be made through the Electronic Federal Tax Deposit System (EFTPS). This requirement began on January 1, 2011 and includes payroll, withholding, income and corporate estimated taxes. The IRS will no longer maintain its paper deposit coupon system. To enroll, please visit www.eftps.gov.
Although there’s no sure-fire cure for every financial disaster, a personal financial crisis management plan can help to mitigate and resolve the mess. This article explains why there’s more to an effective plan than just having insurance. It involves a variety of issues, ranging from short-term cash needs to long-term estate planning. A sidebar offers four warning signs of an impending financial disaster.
One way companies that produce, buy or sell merchandise can potentially reduce their taxable income is by switching from the first-in, first-out (FIFO) inventory method to the last-in, first-out (LIFO) approach. But an accounting method switch could affect something beside their tax bill — namely, their financial statements. So it’s not an endeavor to take lightly. Nonetheless, this article shows why comparing FIFO to LIFO every so often is worthwhile.
This issue’s “Moneylines” examines how workers feel about whether they’re prepared for their retirement; a greater scope of responsibilities being placed on CFOs; and a revised Google algorithm that may have altered where companies show up on a results page.
In this issue, “Practical Perspectives” visits Matt and Sylvia, who consult their financial advisor regarding their summer rehab plans. Their advisor explains how energy-efficient home upgrades — for both their home and car — would be good not only for the planet, but potentially also for their tax bill.
The many provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, passed in December, map out the tax planning terrain for the near future. This article shows the new law’s effect on income and Social Security taxes and the AMT; long-term capital gains and qualified dividends; tax breaks for parents; and the ability to take an itemized deduction for state and local sales taxes in lieu of state and local income taxes. A sidebar discusses how the law affects gift, estate and generation-skipping transfer (GST) rates and exemptions.
The conflict between the IRS and businesses regarding who is an independent contractor and who is an actual employee is nothing new and will probably always be an issue. To keep your company as far from trouble as possible, get and keep yourself up to speed on the IRS rules regarding the use and classification of independent contractors.
This issue’s “Moneylines” discusses 2011 IRS mileage rates for the business use of a vehicle; Inc. Magazine’s predicted top-performing industries for 2011, and what business owners can learn from them; and one survey’s indication of increased hiring this year.
“Practical Perspectives” in this issue takes a look at Brent and Angela, a newlywed couple who wisely decide to plan for the future. They’ve heard the words “term” and “whole life” (or “permanent”) used in relation to life insurance. But the particulars escaped them. Their financial advisor explains the differences in policies and what the couple should consider in making their choice.
The source of every company’s cash flow is its customers — and it’s with them that owners can pinpoint ways to keep their business liquid. Improving accounts receivable collections is generally the most immediate way to improve cash flow, but this article also shows how to strengthen relationships and improve marketing efforts. A sidebar discusses sound cash flow management.
During unsettling economic times, debt can pile up fast. Just a few late payments can significantly hurt a credit score, and simply having more account numbers in circulation can increase vulnerability to credit card fraud and identity theft. This article discusses steps to take that can reduce both these threats.
This issue, “Moneylines” takes a look at help for small-business owners looking to implement and maintain retirement plans; why subcontracting can be a worthwhile means of attracting federal contracts; and how smart phones may soon surpass laptops for business users.
This issue’s “Practical Perspectives” features Bob and Marjene, who opened up a 529 college savings plan for their son — only to watch the recession decrease the value of their account so that they were now $10,000 underwater. But their advisor urged them not to give up on their 529 without considering all the good it could still do.
2010
Risk management is nothing new in the business world. But, just as risks continually evolve, so do efforts to manage it. This article examines one of the most popular approaches: enterprise risk management (ERM), which manages risk on an integrated, companywide level.
In this issue’s “Moneylines,” we tip readers off to the SBA’s disaster preparedness program, cite the results of a recent study indicating 401(k) loans and hardship withdrawals have been on the upswing, and reveal data from another report that may indicate more companies are moving into overseas markets.
In this issue’s “Practical Perspectives,” we meet Peter and Claire — a married, dual-income couple who abruptly realized that retirement wasn’t far off. What’s more, though they’d kept an eye on their retirement plan and investment portfolios, the couple hadn’t made many changes recently. So they sat down with their financial advisor to discuss the matter.
The end of the year usually has business owners thinking about taxes. But, while year end tax planning is certainly important, conducting a year end budget review is also critical. This article covers the basics to performing a year end review that helps companies determine whether they’ve kept all (or most) of their important financial numbers in line or whether they’re headed for trouble. A sidebar looks at cost control management —a formalized, systematic review of operations and resources with the stated goal of reducing or at least controlling costs at every level.
Year-end tax planning is an important annual exercise for many taxpayers. A certain amount of educated guesswork is involved in projecting what the current and subsequent year's tax profile will look like. Will taxable income be higher, lower or about the same? Year-end tax planning is made more complex this year because of uncertainty whether the individual tax rates will revert to the pre-Bush tax cuts.
The Small Business Jobs Act of 2010 (SBJA) has just been passed by Congress, and it benefits more than just small businesses. It also provides tax-saving opportunities for larger businesses and individuals — including small-business investors, the self-employed and employees saving for retirement.
October 15th, 2010 is the deadline for filing a new tax form (990N) with the Internal Revenue Service. Small charitable or not-for-profit organizations with annual gross receipts under $25,000 that have not filed Form 990-EZ for the last three years must file Form 990N or risk using their tax exempt status.
A corporation’s ability to utilize net operating loss carry forwards in Massachusetts changed, effective August 1. Read the Full Article below for details on the losses incurred in tax years beginning prior to January 1, 2010 that may be carried forward.
Read about the newly created Job Creation and Tax Cuts Act of 2010, a legislation to “create jobs” and extend critical tax provisions for individuals, families and employers.
The Small Business Jobs Act of 2010 (SBJA) has just been passed by Congress, and it benefits more than just small businesses. It also provides tax-saving opportunities for larger businesses and individuals — including small-business investors, the self-employed and employees saving for retirement.
A corporation’s ability to utilize net operating loss carry forwards in Massachusetts changed, effective August 1, 2010.
October 15th, 2010 is the deadline for filing a new tax form (990N) with the Internal Revenue Service. Small charitable or not-for-profit organizations with annual gross receipts under $25,000 that have not filed Form 990-EZ for the last three years must file Form 990N or risk using their tax exempt status.
Late on Sept. 16, Senate Finance Committee Chair Max Baucus introduced the Job Creation and Tax Cuts Act of 2010, legislation to “create jobs” and extend critical tax provisions for individuals, families and employers.
It’s an odd year for estate planning, with estate tax legislation up in the air as of midyear. Although this has given rise to much estate planning uncertainty, making lifetime gifts is still an effective strategy. Lower asset values can make this a good time to transfer assets and remove future appreciation from one’s taxable estate. It’s also important to consider income taxes, as well as gift and estate taxes, and to ask whether gifting through a grantor retained annuity trust (GRAT) or charitable lead annuity trust (CLAT) might be beneficial.
This issue’s “Moneylines” takes a look at increased IRS scrutiny of small businesses and individuals who misclassify employees as independent contractors. It discusses who has been lending to small businesses since passage of the Troubled Asset Relief Program (TARP), and who hasn’t. And it mentions a survey that shows increasing optimism among small-business executives.
Pedro and Angelina had owned their home for several years and wished to make some environmentally friendly upgrades. But they also wanted to reap any available tax benefits, so they visited their tax advisor. She explained that, yes, there were a number of ways that Pedro and Angelina could make improvements that would do less damage to the environment, lower their energy bills and save them some tax dollars.
Does your charitable organization hold a raffle, bazaar or a casino night? If so Massachusetts General Law, Chapter 271, 7A applies to your organization's fundraising events.
The recent recession has caused many companies to have lower profits, which in turn means lower values on company shares. But this has made employee stock ownership plans (ESOPs) more affordable and more popular. This article takes a look at what’s entailed in these retirement plans: the difference between leveraged and unleveraged ESOPs, the different tax treatments for S and C corporations, and distribution rules.
Since the Sarbanes-Oxley Act (SOX) was passed in 2002, one element of the law that hasn’t sat well with many businesses is the Public Company Accounting Oversight Board (PCAOB). In fact, its red-tape-strewn rules prompted the case of Free Enterprise Fund v. Public Company Accounting Oversight Board. Read more about this landmark decision.
Governor Deval Patrick recently signed legislation providing for a two-day sales tax holiday for items purchased on August 14 and 15. The sales tax exemption is limited to non-business purchases at retail of single items of tangible personal property costing $2,500 or less.
Although this year is half over, we’ve already seen legislation with major tax changes, and more are almost certainly on the way. Despite confusion created by the never-ending changes, the 2010 federal income tax environment is still quite favorable. However, we may not be able to say that for 2011 and beyond. Therefore, tax planning actions taken between now and year-end may be more important than ever.
It’s an odd year for estate planning. As of this writing, the 2010 estate and generation-skipping transfer (GST) tax repeal still stands. And both taxes are scheduled to return in 2011 — at their pre–tax cut top rate of 55% and with exemptions significantly smaller than in 2009. Meanwhile, Congress might take action — or it might not. Although this has given rise to much estate planning uncertainty, making lifetime gifts is still an effective strategy.
Like most business owners, you probably followed the health care reform debate closely, waiting for some kind of resolution. Well, as you undoubtedly know, on March 23 that resolution arrived (in a manner of speaking) as the president signed into law the Patient Protection and Affordable Care Act (PPACA).
Just before an important deadline was set to expire, the House and Senate extended the homebuyer tax credit for certain taxpayers. Previously, the credit was available to qualified taxpayers for purchases made before May 1, 2010 — or July 1 if a binding contract was in place before May 1. Congress has extended the July 1 deadline to Oct. 1, 2010.
The Wells Fargo/Gallup Small Business Index surveys small-business owners on their perceptions of the current and future financial situation.
One of the stated purposes of the Troubled Asset Relief Program (TARP) was to help small businesses gain freer access to credit. Despite the federal government’s infusion of cash to big banks, those lenders didn’t loosen lending requirements for smaller companies.
If your company uses independent contractors to handle short-term projects, be sure you’re carefully documenting how you compensate them and following all of the prescribed IRS rules.
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, 2010. Failure to do so could result in penalties ranging from $10,000 to $500,000 or even imprisonment.
Although no one should depend solely on Social Security for retirement, many people are taking a second look at it. Unfortunately, rumors persist that the venerable government program is on its last legs. This article looks at how Social Security is funded, and what changes might be made to keep it solvent. In the meantime, savers will need to determine how large a Social Security presence they’re comfortable factoring into their retirement strategy. Then they’ll need to accumulate enough assets to provide themselves a comfortable retirement income when combined with the monthly government checks they expect.
Traditional banks have taken a substantial amount of heat over the last year and a half, and many continue to be hesitant about extending financing to even the most stable of businesses. There are, however, other options for borrowers to consider. These include “angel” investors, venture capital firms, and Small Business Administration loans. As a sidebar explains, banks are skittish partly due to the increased number of small business bankruptcies in 2009. However, for those who still want to approach a traditional bank, another sidebar offers some pointers.
This issue’s “Moneylines” discusses new reduced IRS mileage rates; the introduction of Generally Accepted Privacy Principles (GAPP) to help business management combat identity theft; and businesses that are physically relocating nearer to their competitors to form “business clusters.”
After a difficult period of unemployment, Sylvia scored a great job as an executive of a nonprofit. Her benefits package was decent except for one thing: Her group plan disability insurance fell short of her needs. As someone who had once been disabled following an auto accident, Sylvia couldn’t live without a good disability income insurance policy — especially in a slow-recovering economy. She visited her financial advisor to talk about what she should look for in a policy. The advisor offered several tips.
The recently enacted healthcare legislation includes many tax changes including the new health insurance tax credit for eligible small businesses. This particular credit is one of the more significant changes that takes effect this year and could benefit some small businesses.
Representing a sweeping overhaul of the U.S. health care system, the Patient Protection and Affordable Care Act and its companion reconciliation act were signed into law in March. Here’s a brief summary of the main tax provisions affecting individuals and businesses.
The Hiring Incentives to Restore Employment (HIRE) Act, signed into law March 18, provides tax incentives for hiring and retaining workers and purchasing equipment and many other business assets.
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, checking the status of their refund.
Medicaid and the Children’s Health Insurance Program A recent notice was issued by the U.S. Department of Labor U.S. Department of Health and Human Services regarding the offer of free or low-cost health coverage to children and families. If you are eligible for health coverage from your employer, but are unable to afford the premiums, some states have premium assistance programs that can help pay for coverage.
Homeowners, renters and businesses of all sizes affected by the recent storms and flooding may apply online or in person for assistance from Federal Emergency Management Agency (FEMA). Over $25 million in federal and state disaster assistance has been designated for area residents affected by the record-setting rainfall this past March.
A recent decision by the District Court provides an opportunity for a FICA refund in connection with severance payments related to a reduction in workforce.
Massachusetts has established a tax amnesty period between April 1, 2010 and June 1, 2010 applicable for tax periods ending on or before December 31, 2009 that is limited to sales-use taxes, withholding taxes, and certain business tax liabilities.
Charitable giving provides you with an opportunity to make a donation to benefit the mission of organizations that are important to you. Although charitable giving is not a tax-motivated transaction, it is important to understand the tax implications associated with your charitable giving. Depending on your goals, F&D provides resources and brief explanations of for different strategies.
> Read Full Article
Nonprofit organizations must follow certain MA General Laws when sponsoring a raffle or bazaar. Qualifying organizations must apply with their respective town before an event and subsequently file a report on all events. Read the full article for information on definitions, qualifications, the application process, and related taxes of proceeds.
> Read Full Article
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.
> For more info
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).
> Read Full Article
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.
> Read Full Article
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.
>Read Full Article
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.
>Read Full Article
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.
>Read Full Article
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.
>Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
Read the Full Article
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.
Read the Full Article
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.
Read the Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
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.
> Read Full Article
- 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
> Read Full Article
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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