December 1, 2019
How to Defer, Avoid Paying Capital Gains Tax on Stock Sales thumbnail

How to Defer, Avoid Paying Capital Gains Tax on Stock Sales

The markets are hitting all-time highs, so if you are thinking of selling stocks now or in the near future, there is a good chance that you will have capital gains on the sale. If you’ve held the stocks for more than a year, then they will qualify for the more favorable long-term capital gains tax (instead of being taxed at ordinary income rates for short-term sales). But the total tax due can still be enough to warrant some tax planning. Luckily, the tax laws provide for several ways to defer or even completely avoid paying taxes on your securities sales. 1. Using Tax Losses Utilizing losses is the least attractive of all the options in this article since you […]
November 1, 2019
Tax Changes 2019 thumbnail

Tax Changes 2019

With the start of the fourth quarter of 2019 underway, it’s time to see what the Internal Revenue Service (IRS) will expect of filers for their 2019 taxes. The following are a list of major changes that filers need to be aware of: 1. Removal of the Affordable Care Act’s (ACA) Individual Mandate Penalty With the passage of the Tax Cuts and Jobs Act (TCJA), filers and households who failed to carry adequate health insurance according to the ACA’s minimum coverage requirements will no longer have to pay the penalty on their 2019 taxes. This is because the TCJA lowered the penalty to zero dollars permanently. In previous years, households not meeting ACA health insurance requirements were mandated to pay […]
October 1, 2019
How to Get the IRS to Pre-Approve Your Taxes thumbnail

How to Get the IRS to Pre-Approve Your Taxes

It might seem odd, but it is possible to get the IRS to give you a straight-forward and binding answer to ambiguous tax positions in advance. How does this happen, you ask? The answer is through an IRS private letter ruling. IRS private letter rulings provide many benefits, but they are not easy to obtain. There are costs, potential delays, and even then, you run the risk of not being granted a ruling. This dynamic might seem odd as the entire point of applying for a private letter ruling is to obtain certainty. If your position is weak from a tax law perspective, the government could refuse to rule on it. Alternatively, if the position you are seeking is obviously […]
September 1, 2019
The Five Key IRS Rules of Taxation for Lawsuit Settlements thumbnail

The Five Key IRS Rules of Taxation for Lawsuit Settlements

Coming out on the winning side of a lawsuit as a plaintiff can be a gratifying feeling, especially if there is a financial settlement involved. There is likely a sense of both relief and vindication. Unfortunately, far too often people are in for a shock when they realize that they must pay taxes on the award. You can even be taxed on your attorney fees! However, a little tax planning can go a long way, especially if you do it before the settlement is finalized and the award is substantial. Below are the five key rules to know so you can make the right move. The Origin of the Claim Largely Determines the Tax ConsequencesThe taxation of legal settlements is […]
August 1, 2019
3 Big Tax Issues to Look Out for in Your Estate Plan thumbnail

3 Big Tax Issues to Look Out for in Your Estate Plan

There are three big tax issues that can derail an otherwise well-executed estate plan. These include Family Limited Partnerships, Revocable Trust Swap Powers and Trust Situs. Below we explore the pitfalls with each issue. Fixing FLPs Family Limited Partnerships (FLP) are often created to hold investments or business assets in order to leverage a valuation discount, exert control and provide asset protection. First, to understand the valuation discount, take the example in which an FLP owned a family business valued at $10 million. A straight 25 percent interest in this business would therefore be worth $2.5 million. However, due to valuation discounts for a non-controlling interest that would not be readily available for sale or able to control liquidation, the […]
July 1, 2019
Why Some People Are Afraid of the Hobby Loss Rules thumbnail

Why Some People Are Afraid of the Hobby Loss Rules

Many tax advisors are very cautious when it comes to claiming hobby losses – and some would argue overly so. This conservative view stems from the impression that the taxpayer usually loses when challenged by the IRS. While technically true that the odds aren’t in your favor of winning a challenge, the overall risk often works out in the taxpayer’s favor over the long run. Below we’ll look at why tax advisors should start from the assumption of taking the losses. Always a Loser Taxpayers usually lose hobby loss cases. Typically, the odds are around 3-to-1 in favor of the IRS. So, on the surface it seems like the smart bet is to assume you’ll lose, but there are reasons […]
June 1, 2019
When Saving for Retirement in Taxable Account Is a Good Idea thumbnail

When Saving for Retirement in Taxable Account Is a Good Idea

Most people associate saving for retirement with tax deferred or non-taxable accounts: 401(k)s, 403(b)s, Traditional IRAs, Roth IRAs, etc. The tax benefits of these types of retirement accounts give individuals advantages over simply investing in a regular taxable brokerage account.   Savings for retirement in a standard taxable account can also have its place – and the option shouldn’t be ignored. In this article, we’ll look at a handful of reasons why doing so might just be the best option. Your employer doesn’t offer 401(k), 403(b) or similar type plan Some employers, especially very small ones, don’t offer retirement plan options to their employees due to the cost or administrative burden. Others have restrictions on participation, such as waiting periods […]
May 1, 2019
HSA Accounts and Their Incredible Long-term Benefits thumbnail

HSA Accounts and Their Incredible Long-term Benefits

Pretty much everyone has heard about 401(k) plans, but beyond these – Health Savings Accounts (HSAs) also can be great retirement vehicles. HSAs are tax-advantaged savings accounts for those with high-deductible health plans (HDHPs). The idea is that since those with HDHPs generally have lower premiums but higher out-of-pocket expenses, they need a way to save for such expenses. Few eligible taxpayers take full advantage of HSAs. The Employee Benefit Research Institute estimated a few years ago that out of the approximately 17 million people eligible, only about 13.8 million opened HSA accounts, leaving almost 20 percent without one. The survey also revealed that very few people maximize their contributions – and nearly everyone takes current distributions, leaving balances far […]
April 1, 2019
Trump Tax Law Makes Now the Perfect Time for the Roth Conversion Retirement Trick thumbnail

Trump Tax Law Makes Now the Perfect Time for the Roth Conversion Retirement Trick

Converting a traditional IRA to a Roth IRA takes some fortitude and faith in the future numbers because this change can accelerate your tax bill. The current market and tax rate cuts from President Trump’s plan, however, are creating an environment ripe for conversions and making the move much more palatable. Together, these two factors are essentially creating new groups of taxpayers for whom a conversion makes good sense. IRA Basics Revisited Contributing to a traditional IRA gets you a tax deduction now, at the time of your contribution and allows your money to grow tax free. You’ll also need to begin withdrawing your annual required minimum distributions (RMDs) once you hit age 70½, with whatever you take out taxed […]
March 1, 2019
Winners and Losers of the Tax Bill thumbnail

Winners and Losers of the Tax Bill

In 2018 when President Trump and the Republican Congress rewrote the tax code, everyone knew there would be winners and losers. Exactly how this will play out is just starting to be seen – it closes loopholes while opening others and takes away some perks while creating new ones. Let’s see who the winners and losers really are by looking at the results of the tax law now and over time. Winners and Losers Will Change Over Time Almost all taxpayers get some type of tax cut; for example, the Tax Policy Center estimates that only about five percent of families will face an increased tax obligation in 2019. This sounds great! Initially, measured as a percentage of their total […]
February 1, 2019
When Is A Loan Not A Loan? thumbnail

When Is A Loan Not A Loan?

With the sweeping new tax legislation in 2018 capturing everyone’s attention, other changes have taken a back seat. There were several Tax Court cases in 2018 that rendered important decisions impacting how things work – one of which was Povolny Group, Inc. v. Commissioner, T.C. Memo 2018-37. The Povolny Group decision centers on a common issue where an individual uses his corporation like a personal pocketbook, transferring money in and out without any formality. Facts of the Case James Povolny joined his spouses’ company (LLC) as a minority owner. Later in 2002, he went out and started his own real-estate brokerage firm, the Povolny Group (PG), as a 100 percent owner. At one point, PG won the bid to build a […]
January 1, 2019
Divorce Can Be Taxing thumbnail

Divorce Can Be Taxing

Divorce is expensive. Aside from the emotional toll divorce takes on a family, both the process and aftermath of a divorce can be costly. Below we look at some of the steps people can take to help remove the tax sting out of an already challenging time and arrive at the best financial position. Changes to Alimony We ring in the new year with changes to alimony tax law. Prior to Jan. 1, 2019, alimony payments were deductible by the spouse who paid them and taxable to the spouse receiving them. Typically, this provided an overall benefit to the family unit as the alimony recipient, generally being the lower earner, paid a lower tax rate. Often referred to as the […]
December 1, 2018

What’s the Best Type of Business Entity for Tax Purposes

There are several major types of business entities, including S Corporations, C Corporations, Limited Liability Companies (LLCs) and being self-employed. Each type of structure has its own advantages and disadvantages when it comes to taxes, assets and liability protection. Generally, certain types of businesses are best for certain professions from a tax perspective; however, with the tax law changes last year it may be time to reconsider. Under the current tax law, what used to be the best business entity type for certain scenarios may no longer be the same due to the pass-through deduction and corporate tax rate changes. Let’s look at the most common business entity types and see what’s best. Self-employed The self-employed includes everyone who is […]
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