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Hal Zemel, CPA, J.D., LL.M.

Hal Zemel, CPA, J.D., LL.M.
Hal Zemel, a Tax Principal at Berdon LLP, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.
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TAX TALK: Don’t Gamble on your Taxes

Posted by Hal Zemel, CPA, J.D., LL.M. on Aug 8, 2016 11:00:00 AM

For anyone who takes a spin at roulette, buys a lottery ticket, or engages in other wagering activities, it’s important to be familiar with the applicable tax rules. Otherwise, you could be putting yourself at risk for interest or penalties — or missing out on tax-saving opportunities.

You must report 100% of your wagering winnings as taxable income. The value of extraordinary complimentary items (“comps”), such as autos and jewelry, provided by gambling establishments must also be included in taxable income because comps are considered gambling winnings. The IRS has reserved its opinion on whether you can exclude “normal comps,” such as food, drink, lodging, and entertainment, from taxable income. Winnings are subject to your regular federal income tax rate, which may be as high as 39.6%.

Gambling establishments may be required to report your winnings to you on IRS Form W-2G (“Certain Gambling Winnings”).  In some cases, they may withhold federal income tax. You should be aware that anytime a Form W-2G is issued, the IRS gets a copy.  So, if you’ve received such a form, keep in mind that the IRS will expect to see the winnings on your tax return.

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Topics: TAX TALK

TAX TALK: Discover the Benefits of Qualified Charitable Distributions

Posted by Hal Zemel, CPA, J.D., LL.M. on Aug 1, 2016 1:00:00 PM

Prior to the enactment of Qualified Charitable Distributions (QCD), you were able to make a normal distribution from your IRA and contribute the cash to a qualified charity. The IRA distribution was included in income and you would deduct the charitable contribution as an itemized deduction. You would think that if the income and deduction were equal, that this would not lead to any tax liability. However, even if you contributed the entire distribution to charity, based on certain quirks in the tax code, this method may have resulted in a tax liability.

First, the IRA distribution would be included in your income and increase your adjusted gross income (AGI). The increased AGI may have reduced your itemized deductions and increased the amount of your taxable Social Security benefits. Also, if you did not itemize (i.e. you used the standard deduction) you would not receive any tax benefit for your charitable donation or, if you did itemize, the charitable donation may have been limited based on the AGI limitations. Any increase in income and/or reduced deductions would increase your taxable income and may have even pushed you into a higher tax bracket — causing an additional tax liability. Finally, in addition to that tax liability, the increase to your taxable income may increase your income-based Medicare premiums and prescription drug charges.

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Topics: TAX TALK

TAX TALK: Passive Business Losses are Not Deductible

Posted by Hal Zemel, CPA, J.D., LL.M. on Jul 25, 2016 1:00:00 PM

For income tax purposes, business income and losses are categorized as either passive or non-passive. If you do not materially participate in a business, income and loss from the business are treated as passive. Losses from passive activities are only deductible against income from passive activities.  Any excess passive loss is suspended and must be carried forward to future years.  Also, upon a complete taxable disposition of the activity, you will be able to utilize the suspended losses.

You determine material participation during the tax year based on the time you spend in a business activity.  For most business owners, the issue rarely arises for your primary source of income since you probably spend more than 40 hours per week working on that business. However, when you have secondary businesses or investments, you will need to determine if you materially participate in the business or investment to determine whether it is a passive activity.  In addition to passive loss limitations, these rules are also applied in determining net investment income for the 3.8% Medicare tax.

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Topics: TAX TALK

TAX TALK: Going Green — Save Energy & Save Taxes

Posted by Hal Zemel, CPA, J.D., LL.M. on Jul 18, 2016 7:00:00 AM

Congress enacted the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) which extends the income tax credit for certain energy-efficient home improvements and equipment purchases through 2016. That means you still have time to save both energy and taxes by making these eco-friendly investments. While the credit is nonrefundable, you can use it to offset both regular and alternative minimum tax.

Qualifying expenses
The credit applies to expenses only for your principal residence and not a second home. It equals 10% of certain qualified improvement expenses plus 100% of certain other qualified equipment expenses, subject to a maximum lifetime credit of $500. Therefore, if you claimed any credits in earlier years, then you will only be eligible to claim additional credits in 2016 up to the lifetime maximum.

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Topics: TAX TALK

TAX TALK: Hidden Pitfalls in Mutual Fund Investing

Posted by Hal Zemel, CPA, J.D., LL.M. on Jul 11, 2016 7:49:06 AM

Mutual funds provide an easy way to diversify your portfolio, which is one reason why they are a common investment in retirement plans such as IRAs and 401(k)s. However, if you invest in mutual funds in your taxable accounts, or are considering such investments, beware of these three hidden tax costs:

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Topics: TAX TALK

TAX TALK: Tax Deferral Opportunities for RSU Awards

Posted by Hal Zemel, CPA, J.D., LL.M. on Jul 5, 2016 11:00:00 AM

Executives and other key employees are often compensated with more than just salary, fringe benefits, and bonuses: They may also be awarded stock-based compensation, such as restricted stock or stock options. Another form of compensation that’s becoming more common is restricted stock units (RSUs). If RSUs are part of your compensation package, you should be aware that there may be planning opportunities to defer your tax liabilities.

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Topics: T&E TALK

TAX TALK: Certain Meal and Entertainment Expenses are 100% Deductible

Posted by Hal Zemel, CPA, J.D., LL.M. on Jun 27, 2016 7:00:00 AM

Many businesses host various entertainment activities for their employees including summer outings, holiday parties, and cruises. These activities provide a win-win situation: they are good for employee morale and you may be entitled to deduct the entire cost of the event.

Deduction limits
Generally, only 50% of the costs of meals and entertainment expenses are deductible. However, certain expenses are 100% deductible, including expenses:

  • For recreational or social activities for employees, such as summer picnics and holiday parties and cruises;
  • For food and beverages furnished at the workplace primarily for employees, including an employee cafeteria, bagel breakfasts, and free soda and water; and
  • That are excludable from employees’ income as de minimis fringe benefits.
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Topics: TAX TALK

TAX TALK: Comparison of Tax-Advantaged Funding of Health Care Costs

Posted by Hal Zemel, CPA, J.D., LL.M. on Jun 20, 2016 7:00:00 AM

Health care costs are expensive and continue to climb. Here are a few tax-advantaged ways to pay for these expenses. Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs) all provide opportunities for tax-advantaged funding of health care expenses. The plan attributes are summarized below:

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Topics: TAX TALK

TAX TALK: How You Can Partially Deduct a Family Vacation as a Business Expense

Posted by Hal Zemel, CPA, J.D., LL.M. on Jun 13, 2016 7:00:00 AM

If you are planning on turning a business trip into a family vacation, you may be able to deduct a portion of the costs as business expenses.

Reasonable and necessary
Generally, you may deduct travel expenses (or exclude from your taxable income if your employer is paying the expenses or reimbursing you through an accountable plan) if the primary purpose of your trip is business. Reasonable and necessary travel expenses generally include:

  • Air, taxi and rail fares,
  • Baggage handling,
  • Car use or rental,
  • Lodging,
  • Meals, and
  • Tips.
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Topics: TAX TALK

TAX TALK: Take Advantage of Market Downturns to Reduce Tax on ROTH Conversions

Posted by Hal Zemel, CPA, J.D., LL.M. on Jun 6, 2016 1:00:00 PM

While market downturns are never pleasant, if you have a traditional Individual Retirement Account (“IRA”), you should consider taking this opportunity to convert your traditional IRA to a ROTH IRA at a lower tax cost.

Traditional IRAs
The benefits of a traditional IRA are that contributions may be deductible, depending on your modified adjusted gross income (MAGI) and whether you participate in a qualified retirement plan, such as a 401(k). Also, funds in the account grow tax-deferred.

The downside is that you generally pay income tax on withdrawals at ordinary income tax rates, and, with only a few exceptions, you’ll face a penalty if you withdraw funds before age 59½. You will face an even larger penalty if you don’t take your required minimum distributions (RMDs) after age 70½. If you were not permitted to deduct your contributions, a portion of your IRA distributions will be allowed tax free and you will pay tax only on the income earned and capital appreciation of the IRA assets.

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Topics: TAX TALK

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