Berdon Blogs

TAX TALK: Tax Planning Strategies for Businesses

Posted by Hal Zemel, CPA, J.D., LL.M. on Jul 24, 2017 11:40:00 AM

Tax reform has been a major topic of discussion in Washington, but it’s still unclear exactly what such legislation will include and whether it will be signed into law this year. However, the last major tax legislation that was signed into law — back in December of 2015 — still has a significant impact on tax planning for businesses. Let’s look at three midyear tax strategies inspired by the Protecting Americans from Tax Hikes (PATH) Act:

  1. Buy Equipment. The PATH Act preserved both the generous limits for the Section 179 expensing election and the availability of bonus depreciation. These breaks generally apply to qualified fixed assets, including equipment or machinery, placed in service during the year. For 2017, the maximum Sec. 179 deduction is $510,000, subject to a $2,030,000 phaseout threshold. Without the PATH Act, the 2017 limits would have been $25,000 and $200,000, respectively. Higher limits are now permanent and subject to inflation indexing.
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Topics: TAX TALK

SALT TALK: Remote Sellers - Cry Uncle, Not Wolf?

Posted by Wayne Berkowitz CPA, J.D., LL.M. on Jul 24, 2017 9:24:00 AM

Some of my readers may have thought that I was crying wolf as far back as February 29, 2016 and again on May 8, 2017 as well as October 24, 2016.  As it turns out, I wasn’t and now just might be the time we have to face the music.  You see dear readers, as of July 1, Colorado is now enforcing the infamous “tattle-tale” rule enacted almost seven years ago.

I’m not sure if Colorado was Connecticut’s inspiration, but rumor has it that Connecticut has been recently sending demand letters to remote sellers (sellers with no place of business or other connection with the State, other than its customers) requesting that the remote seller either register for and collect and remit Connecticut sales tax or provide to the Department of Revenue Services (“DRS”) a list of Connecticut customer names, addresses, items purchased, quantities sold and amounts paid.  Apparently DRS wasn’t crying wolf as a press release was issued back in March indicating this was in the works.

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Topics: SALT TALK

T&E TALK: IRS Simplifies Rules for Making the Portability Election

Posted by Scott T. Ditman, CPA/PFS on Jul 24, 2017 7:05:00 AM

Recently, the IRS issued a Revenue Procedure that allows certain estates to make a late portability election without first filing a ruling request. Portability is a tax law provision that permits a surviving spouse to take advantage of the deceased spouse’s unused combined gift and estate tax exemption which is currently $5.49 million.

But portability isn’t automatic: It’s available only if the deceased spouse’s estate makes a portability election on a timely filed estate tax return. This return is due nine months after death, with a six-month extension option, regardless of whether any tax is owed.

What’s New?

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Topics: T&E TALK

SALT TALK: Traps In Transactions:  To Bulk Up or Not?

Posted by Wayne Berkowitz CPA, J.D., LL.M. on Jul 17, 2017 11:40:00 AM

I have lost count as to the number of times I have received a panicked call (from non-clients, of course) days before a transaction is about to close. The question is often the same; “What’s all this noise I hear about the bulk sales tax?”

Well, the good news is there is no additional tax added to the sale of a business or all of its assets. The bad news, however, is that states have a bulk sales notification requirement and the rules are as diverse as the states themselves.

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Topics: SALT TALK

TAX TALK: Tax Consequences of Renting Out Your Vacation Home

Posted by Hal Zemel, CPA, J.D., LL.M. on Jul 17, 2017 10:27:37 AM

Now that we’ve hit midsummer, if you own a vacation home that you both rent out and use personally, it’s a good time to review the potential tax consequences:

If you rent it out for less than 15 days: You don’t have to report the income. But expenses associated with the rental (such as advertising and cleaning) won’t be deductible.

If you rent it out for 15 days or more: You must report the income and you will have to split your expenses between deductible rental expenses and nondeductible personal expenses. The expenses are split based on the ratio of the personal use days and the rental use days. You can deduct any mortgage interest and real estate taxes allocated to your personal use as an itemized deduction, subject to the mortgage interest limitations.

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Topics: TAX TALK

T&E TALK: Fraudulent Transfer Laws Can Undo Your Estate Plan

Posted by Scott T. Ditman, CPA/PFS on Jul 17, 2017 7:05:00 AM

A primary goal of your estate plan is to transfer wealth to your family according to your wishes and at the lowest possible tax cost. However, if you have creditors, be aware of fraudulent transfer laws. In a nutshell, if your creditors challenge your gifts, trusts, or other strategies as fraudulent transfers, they can quickly undo your estate plan.

Two Fraud Types

Most states have adopted the Uniform Fraudulent Transfer Act (UFTA). The act allows creditors to challenge transfers involving two types of fraud that you should be mindful of as you weigh your estate planning options:

  1. Actual Fraud. This means making a transfer or incurring an obligation “with actual intent to hinder, delay, or defraud any creditor,” including current creditors and probable future creditors.
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Topics: T&E TALK

TAX TALK: Summer is a Good Time to Start Your 2017 Tax Planning

Posted by Hal Zemel, CPA, J.D., LL.M. on Jul 10, 2017 11:40:00 AM

You may be tempted to forget all about taxes during summertime, when “the livin’ is easy,” as the Gershwin song goes. But if you start your tax planning now, you may avoid an unpleasant tax surprise when you file next year.  Summer is also a good time to set up a storage system for your tax records. Here are some tips:

Take Action When Life Changes Occur

Some life events (such as marriage, divorce, or the birth of a child) can change the amount of tax you owe. When they happen, you may need to change the amount of tax withheld from your pay. To do that, file a new Form W-4 with your employer. If you make estimated payments, those may need to be changed as well.

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Topics: TAX TALK

SALT TALK: Texas Issues New Specialty License Plate for Complying with State Tax Law

Posted by Wayne Berkowitz CPA, J.D., LL.M. on Jul 10, 2017 9:19:00 AM

Well, not really. But if you go to the Texas DMV website you will see they have over 452 different types of specialty license plates to choose from. (55 are discontinued)  So upon receiving a “no change” letter for a recently completed Texas audit, which in addition to informing me that my client had no additional tax liability, I was awestruck by the following additional language:

Let me commend you for your diligent and successful efforts to comply with the applicable Texas law. The manner in which you have handled your obligations helps make each tax dollar go further in paying for the essential services provided by state government. I also want to thank you for the cooperation and courtesy extended to my auditor during the audit.

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Topics: SALT TALK

T&E TALK: Leaving Specific Assets to Specific Heirs is Risky

Posted by Scott T. Ditman, CPA/PFS on Jul 10, 2017 7:05:00 AM

Planning your estate around specific assets is risky and, in most cases, should be avoided. If you leave specific assets — such as a home, a car, or stock — to specific people, you could end up inadvertently disinheriting someone.

Unintended Consequences

Here’s an example that illustrates the problem: Kim has three children — Sarah, John, and Matthew — and wishes to treat them equally in her estate plan. In her will, she leaves a $500,000 mutual fund to Sarah and her $500,000 home to John. She also names Matthew as beneficiary of a $500,000 life insurance policy.

By the time Kim dies, the mutual fund balance has grown to $750,000. In addition, she has sold the home for $750,000, invested the proceeds in the mutual fund and allowed the life insurance policy to lapse. She didn’t revise or revoke her will. The result?  Sarah receives the mutual fund, with a balance of $1.5 million, and John and Matthew are disinherited.

Safer Alternatives

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Topics: T&E TALK

SALT TALK: The Founding Fathers Never Envisioned an “Internet Tax”

Posted by Wayne Berkowitz CPA, J.D., LL.M. on Jul 5, 2017 11:41:00 AM

John Adams, Benjamin Franklin, Alexander Hamilton, John Jay, Thomas Jefferson, James Madison, George Washington, Jack Dorsey, Noah Glass, Biz Stone, and Evan Williams . . . We didn’t start the fire, nor did the federal government start an internet tax this week.

It’s confusing. I used to get almost daily calls from clients, friends, potential clients and even Mom (although I still don’t believe she has ever made a purchase on the internet) insisting that the federal government banned internet taxes. The calls have decreased dramatically, after having explained for years that what the “government” prohibited was the imposition of any new taxes on internet access. Access meaning the actual service provided by the old beeping phone modems or the flashing lights of your fiber optic access point. It’s all about the connection(s).

So when President Trump tweeted on July 28th that “. . . Amazon not paying internet taxes (which they should) . . .” I was very concerned. Was the President, confused like Mom and mistaking the Internet Tax Freedom Act, which banned any new taxes on internet access, with the obligation internet merchants may or may not have to collect sales tax from their customers?

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Topics: SALT TALK

About Berdon Blogs

Our experts examine the latest trends, economics, business conditions and industry issues to provide timely information you need to maximize your tax advantages and meet your financial goals.

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