Blog

Using your 401(k) plan to save this year and next

Bruce Claassen

December 3, 2019

You can reduce taxes and save for retirement by contributing to a tax-advantaged retirement plan. If your employer offers a 401(k) or Roth 401(k) plan, contributing to it is a taxwise way to build a nest egg.

If you’re not already contributing the maximum allowed, consider increasing your contribution rate between now and year-end. Because of tax-deferred compounding (tax-free...

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Accelerate depreciation deductions with a cost segregation study

Bruce Claassen

November 26, 2019

Is your business depreciating over a 30-year period the entire cost of constructing the building that houses your operation? If so, you should consider a cost segregation study. It may allow you to accelerate depreciation deductions on certain items, thereby reducing taxes and boosting cash flow. And under current law, the potential benefits of a cost segregation study are now even greater...

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You may be ABLE to save for a disabled family member with a tax-advantaged account

Bruce Claassen

November 18, 2019

There’s a tax-advantaged way for people to save for the needs of family members with disabilities — without having them lose eligibility for government benefits to which they’re entitled. It can be done through an Achieving a Better Life Experience (ABLE) account, which is a tax-free account that can be used for disability-related...

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Setting up a Health Savings Account for your small business

Bruce Claassen

November 14, 2019

Given the escalating cost of employee health care benefits, your business may be interested in providing some of these benefits through an employer-sponsored Health Savings Account (HSA). For eligible individuals, HSAs offer a tax-advantaged way to set aside funds (or have their employers do so) to meet future medical needs. Here are the key tax benefits:

  • Contributions that...

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IRA charitable donations are an alternative to taxable required distributions

Bruce Claassen

November 11, 2019

Are you charitably minded and have a significant amount of money in an IRA? If you’re age 70½ or older, and don’t need the money from required minimum distributions, you may benefit by giving these amounts to charity.

 

IRA distribution basics

A popular way to transfer IRA assets to charity is through a tax provision that allows...

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Understanding and controlling the unemployment tax costs of your business

Bruce Claassen

November 8, 2019

As an employer, you must pay federal unemployment (FUTA) tax on amounts up to $7,000 paid to each employee as wages during the calendar year. The rate of tax imposed is 6% but can be reduced by a credit (described below). Most employers end up paying an effective FUTA tax rate of 0.6%. An employer taxed at a 6% rate would pay FUTA tax of $420 for each employee who earned at least $7,000 per...

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Selling securities by year end? Avoid the wash sale rule

Bruce Claassen

November 6, 2019

If you’re planning to sell assets at a loss to offset gains that have been realized during the year, it’s important to be aware of the “wash sale” rule.

 

How the rule works

Under this rule, if you sell stock or securities for a loss and buy substantially identical stock or securities back within the 30-day period before or...

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The chances of an IRS audit are low, but business owners should be prepared

Bruce Claassen

November 4, 2019

Many business owners ask: How can I avoid an IRS audit? The good news is that the odds against being audited are in your favor. In fiscal year 2018, the IRS audited approximately 0.6% of individuals. Businesses, large corporations and high-income individuals are more likely to be audited but, overall, audit rates are historically low.

There’s no 100% guarantee that you...

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Use a Coverdell ESA to help pay college, elementary and secondary school costs

Bruce Claassen

October 31, 2019

There are several ways to save for your child’s or grandchild’s education, including with a Coverdell Education Savings Account (ESA). Although for federal tax purposes there’s no upfront deduction for contributions made to an ESA, the earnings on the contributions grow tax-free. In addition, no tax is due when the funds in the account are distributed, to the extent the...

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How to treat your business website costs for tax purposes

Bruce Claassen

October 28, 2019

These days, most businesses need a website to remain competitive. It’s an easy decision to set one up and maintain it. But determining the proper tax treatment for the costs involved in developing a website isn’t so easy.

That’s because the IRS hasn’t released any official guidance on these costs yet. Consequently, you must apply existing guidance on other...

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Watch out for tax-related scams

Bruce Claassen

October 25, 2019

“Thousands of people have lost millions of dollars and their personal information to tax scams,” according to the IRS. Criminals can contact victims through regular mail, telephone calls, and email messages. Here are just two of the scams the tax agency has seen in recent months.

 

  1. Fake property liens. A tax bill is sent from a...

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5 ways to withdraw cash from your corporation while avoiding dividend treatment

Bruce Claassen

October 22, 2019

Do you want to withdraw cash from your closely held corporation at a low tax cost? The easiest way is to distribute cash as a dividend. However, a dividend distribution isn’t tax-efficient, since it’s taxable to you to the extent of your corporation’s “earnings and profits.” But it’s not deductible by the...

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Take advantage of the gift tax exclusion rules

Bruce Claassen

October 17, 2019

As we head toward the gift-giving season, you may be considering giving gifts of cash or securities to your loved ones. Taxpayers can transfer substantial amounts free of gift taxes to their children and others each year through the use of the annual federal gift tax exclusion. The amount is adjusted for inflation annually. For 2019, the exclusion is $15,000.

The exclusion covers...

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2019 Q4 tax calendar: Key deadlines for businesses and other employers

Bruce Claassen

October 11, 2019

Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2019. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

 

October...

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When is tax due on Series EE savings bonds?

Bruce Claassen

October 7, 2019

You may have Series EE savings bonds that were bought many years ago. Perhaps you store them in a file cabinet or safe deposit box and rarely think about them. You may wonder how the interest you earn on EE bonds is taxed. And if they reach final maturity, you may need to take action to ensure there’s no loss of interest or unanticipated tax...

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The key to retirement security is picking the right plan for your business

Bruce Claassen

October 4, 2019

If you’re a small business owner or you’re involved in a start-up, you may want to set up a tax-favored retirement plan for yourself and any employees. Several types of plans are eligible for tax advantages.

 

401(k) plan

One of the best-known retirement plan options is the 401(k) plan. It provides for employer contributions made at...

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Getting a divorce? There are tax issues you need to understand

Bruce Claassen

September 30, 2019

In addition to the difficult personal issues that divorce entails, several tax concerns need to be addressed to ensure that taxes are kept to a minimum and that important tax-related decisions are properly made. Here are four issues to understand if you are in the process of getting a divorce. 

  1. Alimony or support payments. For alimony under divorce or...

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The tax implications of a company car

Bruce Claassen

September 26, 2019

The use of a company vehicle is a valuable fringe benefit for owners and employees of small businesses. This benefit results in tax deductions for the employer as well as tax breaks for the owners and employees using the cars. (And of course, they get the nontax benefits of driving the cars!) Even better, recent tax law changes and IRS rules make the perk more valuable than...

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Uncle Sam may provide relief from college costs on your tax return

Bruce Claassen

September 24, 2019

We all know the cost of college is expensive. The latest figures from the College Board show that the average annual cost of tuition and fees was $10,230 for in-state students at public four-year universities — and $35,830 for students at private not-for-profit four-year institutions. These amounts don’t include room and board, books, supplies, transportation and other expenses...

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Should you elect S corporation status?

Bruce Claassen

September 20, 2019

Operating a business as an S corporation may provide many advantages, including limited liability for owners and no double taxation (at least at the federal level). Self-employed people may also be able to lower their exposure to Social Security and Medicare taxes if they structure their businesses as S corps for federal tax purposes. But not all businesses are eligible — and with...

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Taking distributions from your traditional IRA

Bruce Claassen

September 17, 2019

If you’re like many people, you’ve worked hard to accumulate a large nest egg in your traditional IRA (including a SEP-IRA). It’s even more critical to carefully plan for withdrawals from these retirement-savings vehicles.

Knowing the fine points of the IRA distribution rules can make a significant difference in how much you and your family will get to keep after...

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What to do if your business receives a “no-match” letter

Bruce Claassen

September 13, 2019

In the past few months, many businesses and employers nationwide have received “no-match” letters from the Social Security Administration (SSA). The purpose of these letters is to alert employers if there’s a discrepancy between the agency’s files and data reported on W-2 forms, which are given to employees and filed with the IRS. Specifically, they point out that an...

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The next estimated tax deadline is September 16: Do you have to make a payment?

Bruce Claassen

September 11, 2019

If you’re self-employed and don’t have withholding from paychecks, you probably have to make estimated tax payments. These payments must be sent to the IRS on a quarterly basis. The third 2019 estimated tax payment deadline for individuals is Monday, September 16. Even if you do have some withholding from paychecks or payments you receive, you may still have to make estimated...

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The IRS is targeting business transactions in bitcoin and other virtual currencies

Bruce Claassen

September 6, 2019

Bitcoin and other forms of virtual currency are gaining popularity. But many businesses, consumers, employees and investors are still confused about how they work and how to report transactions on their federal tax returns. And the IRS just announced that it is targeting virtual currency users in a new “educational letter” campaign.

The nuts and...

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Expenses that teachers can and can’t deduct on their tax returns

Bruce Claassen

September 3, 2019

As teachers head back for a new school year, they often pay for various expenses for which they don’t receive reimbursement. Fortunately, they may be able to deduct them on their tax returns. However, there are limits on this special deduction, and some expenses can’t be written off.

For 2019, qualifying educators can deduct some of their unreimbursed out-of-pocket...

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Take a closer look at home office deductions

Bruce Claassen

August 28, 2019

Working from home has its perks. Not only can you skip the commute, but you also might be eligible to deduct home office expenses on your tax return. Deductions for these expenses can save you a bundle, if you meet the tax law qualifications.

Under the Tax Cuts and Jobs Act, employees can no longer claim the home office deduction. If, however, you run a business from your...

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The tax implications of being a winner

Bruce Claassen

August 22, 2019

If you’re lucky enough to be a winner at gambling or the lottery, congratulations! After you celebrate, be ready to deal with the tax consequences of your good fortune.

Winning at gambling

Whether you win at the casino, a bingo hall, or elsewhere, you must report 100% of your winnings as taxable income. They’re reported on the “Other...

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Businesses can utilize the same information IRS auditors use to examine tax returns

Bruce Claassen

August 19, 2019

The IRS uses Audit Techniques Guides (ATGs) to help IRS examiners get ready for audits. Your business can use the same guides to gain insight into what the IRS is looking for in terms of compliance with tax laws and regulations.

Many ATGs target specific industries or businesses, such as construction, aerospace, art galleries, child care providers and veterinary medicine. Others...

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The “kiddie tax” hurts families more than ever

Bruce Claassen

August 16, 2019

Years ago, Congress enacted the “kiddie tax” rules to prevent parents and grandparents in high tax brackets from shifting income (especially from investments) to children in lower tax brackets. And while the tax caused some families pain in the past, it has gotten worse today. That’s because the Tax Cuts and Jobs Act (TCJA) made changes to the kiddie tax by revising the tax...

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It’s a good time to buy business equipment and other depreciable property

Bruce Claassen

August 12, 2019

There’s good news about the Section 179 depreciation deduction for business property. The election has long provided a tax windfall to businesses, enabling them to claim immediate deductions for qualified assets, instead of taking depreciation deductions over time. And it was increased and expanded by the Tax Cuts and Jobs Act (TCJA).

Even better, the Sec. 179 deduction...

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The “nanny tax” must be paid for more than just nannies

Bruce Claassen

August 8, 2019

You may have heard of the “nanny tax.” But even if you don’t employ a nanny, it may apply to you. Hiring a housekeeper, gardener or other household employee (who isn’t an independent contractor) may make you liable for federal income and other taxes. You may also have state tax obligations.

If you employ a household worker, you aren’t required...

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M&A transactions: Avoid surprises from the IRS

Bruce Claassen

August 1, 2019

If you’re considering buying or selling a business — or you’re in the process of a merger or acquisition — it’s important that both parties report the transaction to the IRS in the same way. Otherwise, you may increase your chances of being audited.

If a sale involves business assets (as opposed to stock or ownership interests), the buyer and the seller...

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Summer: A good time to review your investments

Bruce Claassen

July 30, 2019

You may have heard about a proposal in Washington to cut the taxes paid on investments by indexing capital gains to inflation. Under the proposal, the purchase price of assets would be adjusted so that no tax is paid on the appreciation due to inflation.

While the fate of such a proposal is unknown, the long-term capital gains tax rate is still historically low on appreciated...

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Bartering: A taxable transaction even if your business exchanges no cash

Bruce Claassen

July 26, 2019

Small businesses may find it beneficial to barter for goods and services instead of paying cash for them. If your business engages in bartering, be aware that the fair market value of goods that you receive in bartering is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties.

Income is also realized if services...

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Volunteering for charity: Do you get a tax break?

BRUCE CLAASSEN

July 22, 2019

If you’re a volunteer who works for charity, you may be entitled to some tax breaks if you itemize deductions on your tax return. Unfortunately, they may not amount to as much as you think your generosity is worth.

Because donations to charity of cash or property generally are tax deductible for itemizers, it may seem like donations of something more valuable for many people...

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Which entity is most suitable for your new or existing business?

Bruce Claassen

July 18, 2019

The Tax Cuts and Jobs Act (TCJA) has changed the landscape for business taxpayers. That’s because the law introduced a flat 21% federal income tax rate for C corporations. Under prior law, profitable C corporations paid up to 35%.

The TCJA also cut individual income tax rates, which apply to sole proprietorships and pass-through entities, including partnerships, S corporations,...

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You may have to pay tax on Social Security benefits

Bruce Claassen

July 15, 2019

During your working days, you pay Social Security tax in the form of withholding from your salary or self-employment tax. And when you start receiving Social Security benefits, you may be surprised to learn that some of the payments may be taxed.

If you’re getting close to retirement age, you may be wondering if your benefits are going to be taxed. And if so, how much will you...

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2019 Q3 tax calendar: Key deadlines for businesses and other employers

Bruce Claassen

July 12, 2019

Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2019. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

July...

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If your kids are off to day camp, you may be eligible for a tax break

Bruce Claassen

July 12, 2019

With schools out for the summer, you might be sending your children to day camp. It’s often a significant expense. The good news: You might be eligible for a tax break for the cost.

The value of a credit

Day camp is a qualified expense under the child and dependent care credit, which is worth 20% to 35% of qualifying expenses, subject to a cap....

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Hiring this summer? You may qualify for a valuable tax credit

Bruce Claassen

July 5, 2019

Is your business hiring this summer? If the employees come from certain “targeted groups,” you may be eligible for the Work Opportunity Tax Credit (WOTC). This includes youth whom you bring in this summer for two or three months. The maximum credit employers can claim is $2,400 to $9,600 for each eligible employee.

10 targeted groups

An employer is...

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Is an HSA right for you?

Bruce Claassen

July 3, 2019

To help defray health care costs, many people now contribute to, or are thinking about setting up, Health Savings Accounts (HSAs). With these accounts, individuals can pay for certain medical expenses on a tax advantaged basis.

The basics

With HSAs, you take more responsibility for your health care costs. If you’re covered by a qualified high-deductible...

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Employers: Be aware (or beware) of a harsh payroll tax penalty

Bruce Claassen

July 1, 2019

If federal income tax and employment taxes (including Social Security) are withheld from employees’ paychecks and not handed over to the IRS, a harsh penalty can be imposed. To make matters worse, the penalty can be assessed personally against a “responsible individual.”

If a business makes payroll tax payments late, there are escalating penalties. And if...

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Donating your vehicle to charity may not be a taxwise decision

Bruce Claassen

June 27, 2019

You’ve probably seen or heard ads urging you to donate your car to charity. “Make a difference and receive tax savings,” one organization states. But donating a vehicle may not result in a big tax deduction — or any deduction at all.

Trade in, sell or donate?

Let’s say you’re buying a new car and want to get rid of your old...

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Tax-smart domestic travel: Combining business with pleasure

Bruce Claassen

June 20, 2019

Summer is just around the corner, so you might be thinking about getting some vacation time. If you’re self-employed or a business owner, you have a golden opportunity to combine a business trip with a few extra days of vacation and offset some of the cost with a tax deduction. But be careful, or you might not qualify for the write-offs you’re expecting.

Basic...

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The chances of IRS audit are down but you should still be prepared

Bruce Claassen

June 14, 2019

The IRS just released its audit statistics for the 2018 fiscal year, and fewer taxpayers had their returns examined as compared with prior years. However, even though a small percentage of tax returns are being chosen for audit these days, that will be little consolation if yours is one of them.

Latest statistics

Overall, just 0.59% of individual tax returns...

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Hire your children this summer: Everyone wins

Bruce Claassen

June 11, 2019

If you’re a business owner and you hire your children (or grandchildren) this summer, you can obtain tax breaks and other nontax benefits. The kids can gain on-the-job experience, save for college and learn how to manage money. And you may be able to:

Shift your high-taxed income into tax-free or low-taxed income,
Realize payroll tax savings (depending on the child’s...

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Selling your home? Consider these tax implications

Bruce Claassen

June 7, 2019

Spring and summer are the optimum seasons for selling a home. And interest rates are currently attractive, so buyers may be out in full force in your area. Freddie Mac reports that the average 30-year fixed mortgage rate was 4.14% during the week of May 2, 2019, while the 15-year mortgage rate was 3.6%. This is down 0.41 and 0.43%, respectively, from a year earlier.

But before you...

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What type of expenses can’t be written off by your business?

Bruce Claassen

June 3, 2019

If you read the Internal Revenue Code (and you probably don’t want to!), you may be surprised to find that most business deductions aren’t specifically listed. It doesn’t explicitly state that you can deduct office supplies and certain other expenses.

Some expenses are detailed in the tax code, but the general rule is contained in the first sentence of Section 162,...

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It’s a good time to check your withholding and make changes, if necessary

Bruce Claassen

May 31, 2019

Due to the massive changes in the Tax Cuts and Jobs Act (TCJA), the 2019 filing season resulted in surprises. Some filers who have gotten a refund in past years wound up owing money. The IRS reports that the number of refunds paid this year is down from last year — and the average refund is lower. As of May 10, 2019, the IRS paid out 101,590,000 refunds averaging $2,868. This compares...

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Employee vs. independent contractor: How should you handle worker classification?

Bruce Claassen

May 20, 2019

Many employers prefer to classify workers as independent contractors to lower costs, even if it means having less control over a worker’s day-to-day activities. But the government is on the lookout for businesses that classify workers as independent contractors simply to reduce taxes or avoid their employee benefit obligations.

Why it matters

When your...

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Check on your refund — and find out why the IRS might not send it

Bruce Claassen

May 14, 2019

It’s that time of year when many people who filed their tax returns in April are checking their mail or bank accounts to see if their refunds have landed. According to the IRS, most refunds are issued in less than 21 calendar days. However, it may take longer — and in rare cases, refunds might not come at all.

Your refund status

If you’re...

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Deducting business meal expenses under today’s tax rules

Bruce Claassen

May 7, 2019

In the course of operating your business, you probably spend time and money “wining and dining” current or potential customers, vendors and employees. What can you deduct on your tax return for these expenses? The rules changed under the Tax Cuts and Jobs Act (TCJA), but you can still claim some valuable write-offs.

No more entertainment...

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Plug in tax savings for electric vehicles

Bruce Claassen

May 2, 2019

While the number of plug-in electric vehicles (EVs) is still small compared with other cars on the road, it’s growing — especially in certain parts of the country. If you’re interested in purchasing an electric or hybrid vehicle, you may be eligible for a federal income tax credit of up to $7,500. (Depending on where you live, there may also be state tax breaks and other...

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Three questions you may have after you file your return

Bruce Claassen

April 26, 2019

Once your 2018 tax return has been successfully filed with the IRS, you may still have some questions. Here are brief answers to three questions that we’re frequently asked at this time of year.

Question #1: What tax records can I throw away now?

At a minimum, keep tax records related to your return for as long as the IRS can audit your return or assess...

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Divorcing business owners need to pay attention to tax implications

Bruce Claassen

April 26, 2019

If you’re getting a divorce, you know it’s a highly stressful time. But if you’re a business owner, tax issues can complicate matters even more. Your business ownership interest is one of your biggest personal assets and your marital property will include all or part of it.

Transferring property tax-free

You can generally divide most assets,...

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My CPA says, 'extend.' What does that mean to me?

Bruce Claassen

April 12, 2019

The tax deadline is quickly approaching. For most people, your individual income tax returns will be due on Monday, April 15, 2019. This is extended to April 17 if you are a resident of Maine or Massachusetts. To some this means nothing, as they've already filed their income tax returns, and have received their refund, or paid their tax due. To others, this statement is enough to induce an...

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There’s still time for small business owners to set up a SEP retirement plan for last year

Bruce Claassen

March 29, 2019

If you own a business and don’t have a tax-advantaged retirement plan, it’s not too late to establish one and reduce your 2018 tax bill. A Simplified Employee Pension (SEP) can still be set up for 2018, and you can make contributions to it that you can deduct on your 2018 income tax return.

Contribution deadlines

A SEP can be set up as late as the due date...

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Vehicle-expense deduction ins and outs for individual taxpayers

Bruce Claassen

March 25, 2019

It’s not just businesses that can deduct vehicle-related expenses. Individuals also can deduct them in certain circumstances. Unfortunately, the Tax Cuts and Jobs Act (TCJA) might reduce your deduction compared to what you claimed on your 2017 return.

For 2017, miles driven for business, moving, medical and charitable purposes were potentially deductible. For 2018 through 2025,...

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Will leasing equipment or buying it be more tax efficient for your business?

Bruce Claassen

March 20, 2019

Recent changes to federal tax law and accounting rules could affect whether you decide to lease or buy equipment or other fixed assets. Although there’s no universal “right” choice, many businesses that formerly leased assets are now deciding to buy them.

Pros and cons of leasing

From a cash flow perspective, leasing can be more attractive than buying. And...

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Careful tax planning required for incentive stock options

Bruce Claassen

March 13, 2019

Incentive stock options (ISOs) are a popular form of compensation for executives and other employees of corporations. They allow you to buy company stock in the future at a fixed price equal to or greater than the stock’s fair market value on the ISO grant date. If the stock appreciates, you can buy shares at a price below what they’re then trading for. But careful tax planning is...

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Beware the Ides of March — if you own a pass-through entity

Bruce Claassen

March 6, 2019

Shakespeare’s words don’t apply just to Julius Caesar; they also apply to calendar-year partnerships, S corporations and limited liability companies (LLCs) treated as partnerships or S corporations for tax purposes. Why? The Ides of March, more commonly known as March 15, is the federal income tax filing deadline for these “pass-through”...

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Some of your deductions may be smaller (or nonexistent) when you file your 2018 tax return

Bruce Claassen

March 1, 2019

While the Tax Cuts and Jobs Act (TCJA) reduces most income tax rates and expands some tax breaks, it limits or eliminates several itemized deductions that have been valuable to many individual taxpayers. Here are five deductions you may see shrink or disappear when you file your 2018 income tax return:

1. State and local tax deduction. For 2018 through 2025, your total itemized...

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The home office deduction: Actual expenses vs. the simplified method

Bruce Claassen

February 26, 2019

If you run your business from your home or perform certain functions at home that are related to your business, you might be able to claim a home office deduction against your business income on your 2018 income tax return. Thanks to a tax law change back in 2013, there are now two methods for claiming this deduction: the actual expenses method and the simplified method.

Basics of the...

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3 big TCJA changes affecting 2018 individual tax returns and beyond

Bruce Claassen

February 21, 2019

When you file your 2018 income tax return, you’ll likely find that some big tax law changes affect you — besides the much-discussed tax rate cuts and reduced itemized deductions. For 2018 through 2025, the Tax Cuts and Jobs Act (TCJA) makes significant changes to personal exemptions, standard deductions and the child credit. The degree to which these changes will affect you...

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When are LLC members subject to self-employment tax?

Bruce Claassen

February 18, 2019

Limited liability company (LLC) members commonly claim that their distributive shares of LLC income — after deducting compensation for services in the form of guaranteed payments — aren’t subject to self-employment (SE) tax. But the IRS has been cracking down on LLC members it claims have underreported SE income, with some success in court.

SE tax...

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Why you shouldn’t wait to file your 2018 income tax return

Bruce Claassen

February 14, 2019

The IRS opened the 2018 income tax return filing season on January 28. Even if you typically don’t file until much closer to the April 15 deadline, this year consider filing as soon as you can. Why? You can potentially protect yourself from tax identity theft — and reap other benefits, too.

What is tax identity theft?

In a tax identity theft scheme, a thief uses...

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Fundamental tax truths for C corporations

Bruce Claassen

February 8, 2019

The flat 21% federal income tax rate for C corporations under the Tax Cuts and Jobs Act (TCJA) has been great news for these entities and their owners. But some fundamental tax truths for C corporations largely remain the same:

C corporations are subject to double taxation. Double taxation occurs when corporate income is taxed once at the corporate level and again at the shareholder...

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Investment interest expense is still deductible, but that doesn’t necessarily mean you’ll benefit

Bruce Claassen

February 7, 2019

As you likely know by now, the Tax Cuts and Jobs Act (TCJA) reduced or eliminated many deductions for individuals. One itemized deduction the TCJA kept intact is for investment interest expense. This is interest on debt used to buy assets held for investment, such as margin debt used to buy securities. But if you have investment interest expense, you can’t count on benefiting from the...

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Many tax-related limits affecting businesses increase for 2019

Bruce Claassen

January 31, 2019

A variety of tax-related limits affecting businesses are annually indexed for inflation, and many have gone up for 2019. Here’s a look at some that may affect you and your business.

Deductions

  • Section 179 expensing:
    Limit: $1.02 million (up from $1 million)
    Phaseout: $2.55 million (up from $2.5 million)
    Income-based phase-ins for certain limits on...


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There’s still time to get substantiation for 2018 donations

Bruce Claassen

January 28, 2019

If you’re like many Americans, letters from your favorite charities have been appearing in your mailbox in recent weeks acknowledging your 2018 year-end donations. But what happens if you haven’t received such a letter — can you still claim an itemized deduction for the gift on your 2018 income tax return? It depends.

Basic requirements

To support a...

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Higher mileage rate may mean larger tax deductions for business miles in 2019

Bruce Claassen

January 22, 2019

This year, the optional standard mileage rate used to calculate the deductible costs of operating an automobile for business increased by 3.5 cents, to the highest level since 2008. As a result, you might be able to claim a larger deduction for vehicle-related expense for 2019 than you can for 2018.

Actual costs vs. mileage rate

Businesses can generally deduct the actual...

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What will your marginal income tax rate be?

Bruce Claassen

January 18, 2019

While the Tax Cuts and Jobs Act (TCJA) generally reduced individual tax rates for 2018 through 2025, some taxpayers could see their taxes go up due to reductions or eliminations of certain tax breaks — and, in some cases, due to their filing status. But some may see additional tax savings due to their filing status.

Unmarried vs. married taxpayers

In an effort to further...

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Is there still time to pay 2018 bonuses and deduct them on your 2018 return?

Bruce Claassen

January 16, 2019

There aren’t too many things businesses can do after a year ends to reduce tax liability for that year. However, you might be able to pay employee bonuses for 2018 in 2019 and still deduct them on your 2018 tax return. In certain circumstances, businesses can deduct bonuses employees have earned during a tax year if the bonuses are paid within 2½ months after the end of that year...

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2 major tax law changes for individuals in 2019

Bruce Claassen

January 9, 2019

While most provisions of the Tax Cuts and Jobs Act (TCJA) went into effect in 2018 and either apply through 2025 or are permanent, there are two major changes under the act for 2019. Here’s a closer look.

1. Medical expense deduction threshold

With rising health care costs, claiming whatever tax breaks related to health care that you can is more important than ever. But...

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A refresher on major tax law changes for small-business owners

Bruce Claassen

January 4, 2019

The dawning of 2019 means the 2018 income tax filing season will soon be upon us. After year end, it’s generally too late to take action to reduce 2018 taxes. Business owners may, therefore, want to shift their focus to assessing whether they’ll likely owe taxes or get a refund when they file their returns this spring, so they can plan accordingly.

With the biggest tax law...

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A review of significant TCJA provisions impacting individual taxpayers

Bruce Claassen

January 4, 2019

Now that 2019 has begun, there isn’t too much you can do to reduce your 2018 income tax liability. But it’s smart to begin preparing for filing your 2018 return. Because the Tax Cuts and Jobs Act (TCJA), which was signed into law at the end of 2017, likely will have a major impact on your 2018 taxes, it’s a good time to review the most significant provisions impacting...

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Check deductibility before making year-end charitable gifts

Bruce Claassen

December 20, 2018

As the holidays approach and the year draws to a close, many taxpayers make charitable gifts — both in the spirit of the season and as a year-end tax planning strategy. But with the tax law changes that go into effect in 2018 and the many rules that apply to the charitable deduction, it’s a good idea to check deductibility before making any year-end donations.

Confirm you...

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6 last-minute tax moves for your business

Bruce Claassen

December 14, 2018

Tax planning is a year-round activity, but there are still some year-end strategies you can use to lower your 2018 tax bill. Here are six last-minute tax moves business owners should consider:

  1. Postpone invoices. If your business uses the cash method of accounting, and it would benefit from deferring income to next year, wait until early 2019 to send invoices. Accrual-basis...

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Does prepaying property taxes make sense anymore?

Bruce Claassen

December 12, 2018

Prepaying property taxes related to the current year but due the following year has long been one of the most popular and effective year-end tax-planning strategies. But does it still make sense in 2018?

The answer, for some people, is yes — accelerating this expense will increase their itemized deductions, reducing their tax bills. But for many, particularly those in high-tax...

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Big deadline approaching related to Alimony

Bruce D Claassen

December 6, 2018

The Tax Cuts and Jobs Act has changed how alimony will be treated for tax purposes to both spouses in a divorce.   For divorce decrees executed on or before December 31, 2018, alimony is generally deductible to the payer, and taxable to the percipient.  There are a number of requirements that must be met for payments to qualify as alimony under the tax law:

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Buy business assets before year end to reduce your 2018 tax liability

Bruce Claassen

December 5, 2018

The Tax Cuts and Jobs Act (TCJA) has enhanced two depreciation-related breaks that are popular year-end tax planning tools for businesses. To take advantage of these breaks, you must purchase qualifying assets and place them in service by the end of the tax year. That means there’s still time to reduce your 2018 tax liability with these breaks, but you need to act soon.

Section...

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Mutual funds: Handle with care at year end

Bruce Claassen

November 30, 2018

As we approach the end of 2018, it’s a good idea to review the mutual fund holdings in your taxable accounts and take steps to avoid potential tax traps. Here are some tips.

Avoid surprise capital gains

Unlike with stocks, you can’t avoid capital gains on mutual funds simply by holding on to the shares. Near the end of the year, funds typically distribute all or...

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When holiday gifts and parties are deductible or taxable

Bruce Claassen

November 27, 2018

The holiday season is a great time for businesses to show their appreciation for employees and customers by giving them gifts or hosting holiday parties. Before you begin shopping or sending out invitations, though, it’s a good idea to find out whether the expense is tax deductible and whether it’s taxable to the recipient. Here’s a brief review of the rules.

Gifts...

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It’s not too late: You can still set up a retirement plan for 2018

Bruce Claassen

November 12, 2018

If most of your money is tied up in your business, retirement can be a challenge. So if you haven’t already set up a tax-advantaged retirement plan, consider doing so this year. There’s still time to set one up and make contributions that will be deductible on your 2018 tax return!

More benefits

Not only are contributions tax deductible, but retirement plan funds...

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Donate appreciated stock for twice the tax benefits

Bruce Claassen

November 7, 2018

A tried-and-true year end tax strategy is to make charitable donations. As long as you itemize and your gift qualifies, you can claim a charitable deduction. But did you know that you can enjoy an additional tax benefit if you donate long-term appreciated stock instead of cash?

2 benefits from 1 gift

Appreciated publicly traded stock you’ve held more than one year is...

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Now’s the time to review your business expenses

Bruce Claassen

November 2, 2018

As we approach the end of the year, it’s a good idea to review your business’s expenses for deductibility. At the same time, consider whether your business would benefit from accelerating certain expenses into this year.

Be sure to evaluate the impact of the Tax Cuts and Jobs Act (TCJA), which reduces or eliminates many deductions. In some cases, it may be necessary or...

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Could “bunching” medical expenses into 2018 save you tax?

Bruce Claassen

October 30, 2018

Some of your medical expenses may be tax deductible, but only if you itemize deductions and have enough expenses to exceed the applicable floor for deductibility. With proper planning, you may be able to time controllable medical expenses to your tax advantage. The Tax Cuts and Jobs Act (TCJA) could make bunching such expenses into 2018 beneficial for some taxpayers. At the same time, certain...

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Tax-free fringe benefits help small businesses and their employees

Bruce Claassen

October 25, 2018

In today’s tightening job market, to attract and retain the best employees, small businesses need to offer not only competitive pay, but also appealing fringe benefits. Benefits that are tax-free are especially attractive to employees. Let’s take a quick look at some popular options.

Insurance

Businesses can provide their employees with various types of insurance...

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529 plans offer two tax-advantaged education funding options

Bruce Claassen

October 25, 2018

Section 529 plans are a popular education-funding tool because of tax and other benefits. Two types are available: 1) prepaid tuition plans, and 2) savings plans. And one of these plans got even better under the Tax Cuts and Jobs Act (TCJA).

Enjoy valuable benefits

529 plans provide a tax-advantaged way to help pay for qualifying education expenses. First and foremost,...

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Consider all the tax consequences before making gifts to loved ones

Bruce Claassen

October 23, 2018

Many people choose to pass assets to the next generation during life, whether to reduce the size of their taxable estate, to help out family members or simply to see their loved ones enjoy the gifts. If you’re considering lifetime gifts, be aware that which assets you give can produce substantially different tax consequences.

Multiple types of taxes

Federal gift and...

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Businesses aren’t immune to tax identity theft

Bruce Claassen

October 9, 2018

Tax identity theft may seem like a problem only for individual taxpayers. But, according to the IRS, increasingly businesses are also becoming victims. And identity thieves have become more sophisticated, knowing filing practices, the tax code and the best ways to get valuable data.

How it works

In tax identity theft, a taxpayer’s identifying information (such as Social...

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Could a cost segregation study help you accelerate depreciation deductions?

Bruce Claassen

October 5, 2018

Businesses that acquire, construct or substantially improve a building — or did so in previous years — should consider a cost segregation study. It may allow you to accelerate depreciation deductions, thus reducing taxes and boosting cash flow. And the potential benefits are now even greater due to enhancements to certain depreciation-related breaks under the Tax Cuts and Jobs Act...

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Charitable IRA rollovers may be especially beneficial in 2018

Bruce Claassen

October 3, 2018

If you’re age 70½ or older, you can make direct contributions — up to $100,000 annually — from your IRA to qualified charitable organizations without owing any income tax on the distributions. This break may be especially beneficial now because of Tax Cuts and Jobs Act (TCJA) changes that affect who can benefit from the itemized deduction for charitable...

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Tax planning for investments gets more complicated

Bruce Claassen

September 28, 2018

For investors, fall is a good time to review year-to-date gains and losses. Not only can it help you assess your financial health, but it also can help you determine whether to buy or sell investments before year end to save taxes. This year, you also need to keep in mind the impact of the Tax Cuts and Jobs Act (TCJA). While the TCJA didn’t change long-term capital gains rates, it did...

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Be sure your employee travel expense reimbursements will pass muster with the IRS

Bruce Claassen

September 28, 2018

Does your business reimburse employees’ work-related travel expenses? If you do, you know that it can help you attract and retain employees. If you don’t, you might want to start, because changes under the Tax Cuts and Jobs Act (TCJA) make such reimbursements even more attractive to employees. Travel reimbursements also come with tax benefits, but only if you follow a method that...

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You might save tax if your vacation home qualifies as a rental property

Bruce Claassen

September 18, 2018

Do you own a vacation home? If you both rent it out and use it personally, you might save tax by taking steps to ensure it qualifies as a rental property this year. Vacation home expenses that qualify as rental property expenses aren’t subject to the Tax Cuts and Jobs Act’s (TCJA’s) new limit on the itemized deduction for state and local taxes (SALT) or the lower debt limit...

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2018 Q4 tax calendar: Key deadlines for businesses and other employers

Bruce Claassen

September 14, 2018

 

Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements. 

October...

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Do you need to make an estimated tax payment by September 17?

Bruce Claassen

September 11, 2018

To avoid interest and penalties, you must make sufficient federal income tax payments long before your April filing deadline through withholding, estimated tax payments, or a combination of the two. The third 2018 estimated tax payment deadline for individuals is September 17.

If you don’t have an employer withholding tax from your pay, you likely need to make estimated tax...

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How to reduce the tax risk of using independent contractors

Bruce Claassen

September 5, 2018

Classifying a worker as an independent contractor frees a business from payroll tax liability and allows it to forgo providing overtime pay, unemployment compensation and other employee benefits. It also frees the business from responsibility for withholding income taxes and the worker’s share of payroll taxes.

For these reasons, the federal government views misclassifying a...

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Back-to-school time means a tax break for teachers

Bruce Claassen

August 30, 2018

When teachers are setting up their classrooms for the new school year, it’s common for them to pay for a portion of their classroom supplies out of pocket. A special tax break allows these educators to deduct some of their expenses. This educator expense deduction is especially important now due to some changes under the Tax Cuts and Jobs Act (TCJA).

The old miscellaneous...

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Do you know the ABCs of HSAs, FSAs and HRAs?

Bruce Claassen

August 28, 2018

There continues to be much uncertainty about the Affordable Care Act and how such uncertainty will impact health care costs. So it’s critical to leverage all tax-advantaged ways to fund these expenses, including HSAs, FSAs and HRAs. Here’s how to make sense of this alphabet soup of health care accounts.

HSAs

If you’re covered by a qualified high-deductible...

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"Parking Tax" revisited...

Bruce Claassen

August 24, 2018

A couple of weeks ago, I posted an article regarding a new potential "parking tax" on churches and other non-profits.  Today I received a link to this article that does a really good job of explaining the issues, and why the authors believe that many churches will not be effected.  Like many other tax professionals, I scoffed at the idea that a church might have to pay a tax on the...

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An FLP can save tax in a family business succession

Bruce Claassen

August 21, 2018

One of the biggest concerns for family business owners is succession planning — transferring ownership and control of the company to the next generation. Often, the best time tax-wise to start transferring ownership is long before the owner is ready to give up control of the business.
A family limited partnership (FLP) can help owners enjoy the tax benefits of gradually...

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Do you qualify for the home office deduction?

Bruce Claassen

August 17, 2018

Under the Tax Cuts and Jobs Act, employees can no longer claim the home office deduction. If, however, you run a business from your home or are otherwise self-employed and use part of your home for business purposes, the home office deduction may still be available to you.

Home-related expenses

Homeowners know that they can claim itemized deductions for property tax and...

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Keep an eye out for extenders legislation

Bruce Claassen

August 14, 2018

The pieces of tax legislation garnering the most attention these days are the Tax Cuts and Jobs Act (TCJA) signed into law last December and the possible “Tax Reform 2.0” that Congress might pass this fall. But for certain individual taxpayers, what happens with “extenders” legislation is also important.

Recent history

Back in December of 2015, Congress...

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“Parking tax” will hit churches and other nonprofits, unless…

Bruce Claassen

August 9, 2018

The Tax Cuts and Jobs Act is barely six-months old, and has been no stranger to controversy.  It should be no surprise then that another controversial aspect of the fledgling law has been uncovered in the last couple of months as analysts continue to comb through the tombs of legislation.  This largely hidden requirement on churches and other nonprofits (hospitals, charities,...

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Business deductions for meal, vehicle and travel expenses: Document, document, document

Bruce Claassen

August 7, 2018

Meal, vehicle and travel expenses are common deductions for businesses. But if you don’t properly document these expenses, you could find your deductions denied by the IRS.

A critical requirement

Subject to various rules and limits, business meal (generally 50%), vehicle and travel expenses may be deductible, whether you pay for the expenses directly or reimburse...

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2 tax law changes that may affect your business’s 401(k) plan

Bruce Claassen

August 3, 2018

When you think about recent tax law changes and your business, you’re probably thinking about the new 20% pass-through deduction for qualified business income or the enhancements to depreciation-related breaks. Or you may be contemplating the reduction or elimination of certain business expense deductions. But there are also a couple of recent tax law changes that you need to be aware...

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Home green home: Save tax by saving energy

Bruce Claassen

July 30, 2018

“Going green” at home — whether it’s your principal residence or a second home — can reduce your tax bill in addition to your energy bill, all while helping the environment, too. The catch is that, to reap all three benefits, you need to buy and install certain types of renewable energy equipment in the home.

Invest in green and save green

For...

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Why the “kiddie tax” is more dangerous than ever

Bruce Claassen

July 27, 2018

Once upon a time, some parents and grandparents would attempt to save tax by putting investments in the names of their young children or grandchildren in lower income tax brackets. To discourage such strategies, Congress created the “kiddie” tax back in 1986. Since then, this tax has gradually become more far-reaching. Now, under the Tax Cuts and Jobs Act (TCJA), the kiddie tax...

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3 traditional midyear tax planning strategies for individuals that hold up post-TCJA

Bruce Claassen

July 23, 2018

With its many changes to individual tax rates, brackets and breaks, the Tax Cuts and Jobs Act (TCJA) means taxpayers need to revisit their tax planning strategies. Certain strategies that were once tried-and-true will no longer save or defer tax. But there are some that will hold up for many taxpayers. And they’ll be more effective if you begin implementing them this summer, rather than...

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What you can deduct when volunteering

Bruce Claassen

July 20, 2018

Because donations to charity of cash or property generally are tax deductible (if you itemize), it only seems logical that the donation of something even more valuable to you — your time — would also be deductible. Unfortunately, that’s not the case. 

Donations of time or services aren’t deductible. It doesn’t matter if it’s simple...

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The tax impact of the TCJA on estate planning

Bruce Claassen

July 20, 2018

The massive changes the Tax Cuts and Jobs Act (TCJA) made to income taxes have garnered the most attention. But the new law also made major changes to gift and estate taxes. While the TCJA didn’t repeal these taxes, it did significantly reduce the number of taxpayers who’ll be subject to them, at least for the next several years. Nevertheless, factoring taxes into your estate...

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Be aware of the tax consequences before selling your home

Bruce Claassen

July 20, 2018

In many parts of the country, summer is peak season for selling a home. If you’re planning to put your home on the market soon, you’re probably thinking about things like how quickly it will sell and how much you’ll get for it. But don’t neglect to consider the tax consequences. 

Home sale gain exclusion

The U.S. House of Representatives’...

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