SALT TALK: Terminating Your NYC Domicile and Establishing a NYS Only Domicile

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on May 19, 2020 12:31:48 PM

As my readers know, domicile is generally defined as the place that you intend to be your permanent home – the place to which you return whenever absent. For those who want to change from a New York City to a New York State domicile, NY law requires that you prove by clear and convincing evidence that you have abandoned your NYC domicile and established a new domicile elsewhere.

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TAX TALK: Still Time for a Deductible IRA Contribution for 2019

Posted by Hal Zemel, CPA, J.D., LL.M. on May 18, 2020 9:20:00 AM

Do you want to save more for retirement on a tax-favored basis? If so, and if you qualify, you can make a deductible traditional IRA contribution for the 2019 tax year between now and the extended tax filing deadline and claim the write-off on your 2019 return. Or you can contribute to a Roth IRA and avoid paying taxes on future withdrawals.

You can potentially make a contribution of up to $6,000 (or $7,000 if you were age 50 or older as of December 31, 2019). If you’re married, your spouse can potentially do the same, thereby doubling your tax benefits.

The deadline for 2019 traditional and Roth contributions for most taxpayers would have been April 15, 2020. However, because of the novel coronavirus (COVID-19) pandemic, the IRS extended the deadline to file 2019 tax returns and make 2019 IRA contributions until July 15, 2020.

Of course, there are some ground rules. You must have enough 2019 earned income (from jobs, self-employment, etc.) to equal or exceed your IRA contributions for the tax year. If you’re married, either spouse can provide the necessary earned income.

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Topics: TAX TALK

T&E TALK: Time May Be Right to Consider Forgiving Intrafamily Loans

Posted by Scott T. Ditman, CPA/PFS on May 18, 2020 7:00:00 AM

If you have outstanding loans to your children, grandchildren, or other family members, consider forgiving those loans to take advantage of the current, record-high $11.58 million gift and estate tax exemption. Bear in mind that in 2026, the exemption amount is scheduled to revert to $5 million ($10 million for married couples), indexed for inflation.

Under the right circumstances, an intrafamily loan can be a powerful estate planning tool because it allows you to transfer wealth to your loved ones free of gift taxes — to the extent the loan proceeds achieve a certain level of returns. But an outright gift is a far more effective way to transfer wealth, provided you don’t need the interest income and have enough unused exemption to shield it from transfer taxes.

Do Intrafamily Loans Save Taxes?

Generally, to ensure the desired tax outcome, an intrafamily loan must have an interest rate that equals or exceeds the applicable federal rate (AFR) at the time the loan is made. The principal and interest are included in the lender’s estate, so the key to transferring wealth tax-free is for the borrower to invest the loan proceeds in a business, real estate or other opportunity whose returns outperform the AFR.

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Topics: T&E TALK


Posted by Hal Zemel, CPA, J.D., LL.M. on May 11, 2020 9:20:00 AM

The COVID-19 pandemic has affected many Americans’ finances. Here are some answers to questions you may have right now.

My employer closed the office and I’m working from home. Can I deduct any of the related expenses?

Unfortunately, no. If you’re an employee who telecommutes, there are strict rules that govern whether you can deduct home office expenses. For 2018–2025 employee home office expenses aren’t deductible. (Starting in 2026, an employee may deduct home office expenses, within limits, if the office is for the convenience of his or her employer and certain requirements are met.)

Be aware that these are the rules for employees. Business owners who work from home may qualify for home office deductions.

My son was laid off from his job and is receiving unemployment benefits. Are they taxable?

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Topics: TAX TALK

T&E TALK: Rules Have Changed for your IRAs, RMDs and Estate Plan

Posted by Scott T. Ditman, CPA/PFS on May 11, 2020 7:00:00 AM

Many people’s estates typically include IRAs. Be aware that two major laws passed into law recently, the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, have had a direct effect on IRAs.

In a nutshell, the CARES Act waives required minimum distribution (RMD) rules for IRAs (and certain defined contribution plans) for calendar year 2020. If you’re fortunate enough that you don’t need to make withdraws from your IRA, there’s an opportunity to leave more for your heirs in your retirement plan. However, bear in mind that because the SECURE Act generally put an end to “stretch” IRAs, the estate planning benefits of inheriting IRAs are somewhat muted.

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Topics: T&E TALK

TAX TALK: Are Your Independent Contractors Properly Classified?

Posted by Hal Zemel, CPA, J.D., LL.M. on May 4, 2020 9:20:00 AM

As a result of the COVID-19 crisis, your business may be using independent contractors to keep costs low. But you should be careful that these workers are properly classified for federal tax purposes. If the IRS reclassifies them as employees, it can be an expensive mistake.

The question of whether a worker is an independent contractor or an employee for federal income and employment tax purposes is a complex one. If a worker is an employee, your company must withhold federal income and payroll taxes, pay the employer’s share of FICA taxes on the wages, plus FUTA tax. Often, a business must also provide the worker with the fringe benefits that it makes available to other employees. And there may be state tax obligations as well.

These obligations don’t apply if a worker is an independent contractor. In that case, the business simply sends the contractor a Form 1099-MISC for the year showing the amount paid (if the amount is $600 or more).

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Topics: TAX TALK

T&E TALK: Major Life Shocks, Like COVID-19, Signal a Review of Your Estate Plan

Posted by Scott T. Ditman, CPA/PFS on May 4, 2020 7:00:00 AM

With a life shock as monumental as the COVID-19 pandemic, now is a good time to review your estate planning documents to ensure that they are up to date — especially if you have not reviewed them in a number of years.

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Topics: T&E TALK

SALT TALK: State Nexus Implications of Telecommuting due to the COVID-19 Pandemic

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Apr 27, 2020 11:40:00 AM

With millions following government-imposed stay at home directives, my colleague Sarah Kim looks at the state tax nexus implications and what guidance is being issued by state taxing authorities.

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TAX TALK: Questions About Your Economic Impact Payment?

Posted by Hal Zemel, CPA, J.D., LL.M. on Apr 27, 2020 9:20:00 AM

Millions of eligible Americans have already received their Economic Impact Payments (EIPs) via direct deposit or paper checks, according to the IRS. Others are still waiting. The payments are part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Here are some answers to questions you may have about EIPs.

Who’s Eligible?

Eligible taxpayers who filed their 2018 or 2019 returns and chose direct deposit of their refunds automatically receive an Economic Impact Payment. You must be a U.S. citizen or U.S. resident alien and you can’t be claimed as a dependent on someone else’s tax return. In general, you must also have a valid Social Security number and have adjusted gross income (AGI) under a certain threshold.

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Topics: TAX TALK

T&E TALK: COVID-19 and Charitable Giving

Posted by Scott T. Ditman, CPA/PFS on Apr 27, 2020 7:00:00 AM

The COVID-19 pandemic and the resulting economic fallout is dealing a crushing blow to charitable organizations. Indeed, during a time when food banks, disaster relief, and other nonprofit services are needed most by the public, their funding is suffering due to cancelled fundraising events and other factors.

If philanthropy is an important part of your legacy, now is a good time to make as many donations as possible. Your gifts reduce your taxable estate, and the Coronavirus Aid, Relief, and Economic Security (CARES) Act has expanded charitable contribution deductions.

CARES Act Incentives

Individual taxpayers can take advantage of a new above-the-line $300 deduction for cash contributions to qualified charities in 2020. “Above-the-line” means the deduction reduces adjusted gross income (AGI) and is available to taxpayers regardless of whether they itemize deductions.

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Topics: T&E TALK

About Berdon Blogs

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