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

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

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

TAX TALK: When Are Moving Costs Deductible?

Posted by Hal Zemel, CPA, J.D., LL.M. on Jul 5, 2017 9:15:00 AM

Summer is a popular time to move, whether it’s so the kids don’t have to change schools mid-year, to avoid having to move in bad weather or simply because it can be an easier time to sell a home. Unfortunately, moving can be expensive. The good news is that you might be eligible for a federal tax deduction for your moving costs.

Qualifying Moves

The move must be related to your work. Employees as well as self-employed individuals may be eligible for the moving expense deduction.

You also must satisfy the distance test. Your new main job location must be at least 50 miles farther from your former home than your former main job location was from the former home. For taxpayers without a former work location, the distance between the new work location and the former home must be at least 50 miles. Note that the test compares the distance of your new/old main job locations to your former home and not the distance between your new home and your former home. Therefore, your new home does not have to be 50 miles away from your former home.

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Topics: TAX TALK

TAX TALK: 2017 Q3 Tax Calendar: Key Deadlines for Businesses and Other Employers

Posted by Hal Zemel, CPA, J.D., LL.M. on Jun 26, 2017 11:08:45 AM

Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2017. 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 31

  • Report income tax withholding and FICA taxes for third quarter 2017 (Form 941), and pay any tax due. (See exception below.)
  • File a 2016 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension.
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Topics: TAX TALK

TAX TALK: Some Items to Consider When Selling Securities

Posted by Hal Zemel, CPA, J.D., LL.M. on Jun 19, 2017 9:30:00 AM

Many factors can affect the tax consequences and your net investment return on the sale of a security. You’re probably focused on factors such as how much you paid for the investment vs. how much you’re selling it for, whether you held the investment long-term (more than one year) and the tax rate that will apply.

There are additional details you should pay attention to that may impact the amount, timing, and tax costs of the gain or loss. If you don’t, the tax consequences of a sale may be different from what you expect.

Here are a few details to consider when selling a security:

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Topics: TAX TALK

TAX TALK: Coverdell ESAs: The Tax-advantaged Way to Fund Elementary and Secondary School Costs

Posted by Hal Zemel, CPA, J.D., LL.M. on Jun 12, 2017 11:32:23 AM

With school letting out you might be focused on summer plans for your children or grandchildren. But the end of the school year is also a good time to think about Coverdell Education Savings Accounts (ESAs) — especially if the children are in grade school or younger.

One major advantage of ESAs over another popular education saving tool, the Section 529 plan, is that tax-free ESA distributions aren’t limited to college expenses; they also can fund elementary and secondary school costs. That means you can use ESA funds to pay for such qualified expenses as tutoring and private school tuition.

Other Benefits

Here are some other key ESA benefits:

  • Although contributions aren’t deductible, plan assets can grow tax-deferred.
  • You remain in control of the account — even after the child is of legal age.
  • You can make rollovers to another qualifying family member.

A sibling or first cousin is a typical example of a qualifying family member, if he or she is eligible to be an ESA beneficiary (that is, under age 18 or has special needs).

Limitations

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Topics: TAX TALK

TAX TALK: Donating a Vehicle Might Not Provide the Tax Deduction You Expect

Posted by Hal Zemel, CPA, J.D., LL.M. on Jun 5, 2017 12:25:14 PM

All charitable donations aren’t created equal — some provide larger deductions than others. And it isn’t necessarily just how much or even what you donate that matters. How the charity uses your donation might also affect your deduction.

Take vehicle donations, for example. If you donate your vehicle, the value of your deduction can vary greatly depending on what the charity does with it.

Determining Your Deduction

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Topics: TAX TALK

TAX TALK: Business owners - When it comes to IRS audits, be prepared

Posted by Hal Zemel, CPA, J.D., LL.M. on May 30, 2017 11:50:00 AM

If you recently filed your 2016 income tax return (rather than filing for an extension) you may now be wondering whether it’s likely that your business could be audited by the IRS based on your filing. Here’s what every business owner should know about the process.

Red Flags

Many business audits occur randomly, but a variety of tax-return-related items may raise red flags with the IRS and lead to an audit. Here are a few examples:

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Topics: TAX TALK

TAX TALK: Are You a Real Estate Professional? Why it Matters

Posted by Hal Zemel, CPA, J.D., LL.M. on May 22, 2017 11:40:00 PM

When you rent property, the IRS automatically considers the income and losses from the activity as passive. However, if you are a real estate professional, the income and losses will not be considered passive. The main consequences of passive activity are that:

  • Passive income is currently subject to the 3.8% net investment income tax (NIIT), and
  • Passive losses generally are deductible only against passive income, with the excess being carried forward.

One note, the NIIT is part of the Affordable Care Act (ACA) and might be eliminated under ACA repeal and replace legislation or tax reform legislation. But if/when such legislation is passed and signed into law is uncertain. Even if the NIIT is eliminated, the passive loss issue will still be an important one for many taxpayers investing in real estate.

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Topics: TAX TALK

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