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Michael Eagan, J.D., LL.M.

Michael Eagan, J.D., LL.M.

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TAX TALK: Volunteering?  Here’s what you can and can’t Deduct

Posted by Michael Eagan, J.D., LL.M. on Jul 16, 2018 9:20:00 AM

Because donations to charity of cash or property generally are tax deductible (if you itemize), it only seems logical that the donation of something even more valuable to you — your time — would also be deductible. Unfortunately, that’s not the case.

Donations of time or services aren’t deductible. It doesn’t matter if it’s simple administrative work, such as checking in attendees at a fundraising event, or if it’s work requiring significant experience and expertise that would be much more costly to the charity if it had to pay for it, such as skilled carpentry or legal counsel.

However, you potentially can deduct out-of-pocket costs associated with your volunteer work.

The Basic Rules

As with any charitable donation, for you to be able to deduct your volunteer expenses, the first requirement is that the organization be a qualified charity. You can use the IRS’s “Tax Exempt Organization Search” tool (formerly “Select Check”) to find out.

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Topics: TAX TALK

TAX TALK: A Green Home can save on Taxes

Posted by Michael Eagan, J.D., LL.M. on Jul 9, 2018 9:20:00 AM

“Going green” at home — whether it’s your principal residence or a second home — can reduce your tax bill in addition to your energy bill, all while helping the environment.  The catch is that, to reap all three benefits, you need to buy and install certain types of renewable energy equipment in the home.

Invest in Green and save Green

For 2018 and 2019, you may be eligible for a tax credit of 30% of expenditures (including costs for site preparation, assembly, installation, piping, and wiring) for installing the following types of renewable energy equipment:

  • Qualified solar electricity generating equipment and solar water heating equipment;
  • Qualified wind energy equipment;
  • Qualified geothermal heat pump equipment; and
  • Qualified fuel cell electricity generating equipment (limited to $500 for each half kilowatt of fuel cell capacity).
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Topics: TAX TALK

TAX TALK: Know the ABCs of HSAs, FSAs, and HRAs

Posted by Michael Eagan, J.D., LL.M. on Jul 2, 2018 9:20:00 AM

There continues to be uncertainty about the Affordable Care Act and the potential impact on health care costs.  So it’s critical to leverage all tax-advantaged ways to fund these expenses, including HSAs, FSAs and HRAs. Here’s how to make sense of this alphabet soup of health care accounts.

HSAs

If you’re covered by a qualified high-deductible health plan (HDHP), you can contribute pretax income to an employer-sponsored Health Savings Account — or make deductible contributions to an HSA you set up yourself — up to $3,450 for self-only coverage and $6,900 for family coverage for 2018. Plus, if you’re age 55 or older, you may contribute an additional $1,000.

You own the account, which can bear interest or be invested, growing tax-deferred similar to an IRA. Withdrawals for qualified medical expenses are tax-free, and you can carry over a balance from year to year.

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Topics: TAX TALK

TAX TALK: 2018 Q3 - Key Tax Deadlines for Businesses

Posted by Michael Eagan, J.D., LL.M. on Jun 25, 2018 9:17:00 AM

Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2018.  Keep in mind that this list is not 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 second quarter 2018 (Form 941), and pay any tax due. (See the exception below, under “August 10.”)
  • File a 2017 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension.
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Topics: TAX TALK

TAX TALK: Don’t Gamble on your Taxes

Posted by Michael Eagan, J.D., LL.M. on Jun 18, 2018 9:20:00 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.

Wins
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%.

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Topics: TAX TALK

TAX TALK: QSB Stock Offers Two Valuable Tax Benefits

Posted by Michael Eagan, J.D., LL.M. on Jun 11, 2018 10:08:49 AM

Investing in qualified small business (QSB) C corporation stock offers you the opportunity to diversify your portfolio and enjoy two valuable tax benefits:

  1. Tax-free gain rollovers. If you buy other QSB stock with the proceeds of selling QSB stock within 60 days, you can defer the tax on your gain until you dispose of the new stock. The rolled-over gain reduces your basis in the new stock. For determining long-term capital gains treatment, the new stock’s holding period includes the holding period of the stock you sold.
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Topics: TAX TALK

TAX TALK: Receive Restricted Stock? Here’s a Tax-Saving Opportunity

Posted by Michael Eagan, J.D., LL.M. on Jun 4, 2018 9:20:13 AM

Today many employees receive stock-based compensation from their employer as part of their compensation and benefits package. The tax consequences can be complex — subject to ordinary-income, capital gains, employment and other taxes. But if you receive restricted stock awards, you might have a tax-saving opportunity in the form of the Section 83(b) election.

Convert Ordinary Income to Long-Term Capital Gains

Restricted stock is stock your employer grants you subject to a substantial risk of forfeiture. Income recognition is normally deferred until the stock is no longer subject to that risk (that is, it’s vested) or you sell it.

At that time, you pay taxes on the stock’s fair market value (FMV) at your ordinary-income rate. The FMV will be considered FICA income, so it also could trigger or increase your exposure to the additional 0.9% Medicare tax.

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Topics: TAX TALK

TAX TALK: TCJA Changed Rules for Deducting Pass-Through Business Losses

Posted by Michael Eagan, J.D., LL.M. on May 29, 2018 9:40:30 AM

It’s not uncommon for businesses to sometimes generate tax losses. But the losses that can be deducted are limited by tax law in some situations. Beginning in 2018, the Tax Cuts and Jobs Act (TCJA) further restricts the amount of losses that sole proprietors, partners, S corporation shareholders and, typically, limited liability company (LLC) members can currently deduct. This could negatively impact owners of start-ups and businesses facing adverse conditions.

Before the TCJA

Under pre-TCJA law, an individual taxpayer’s business losses could usually be fully deducted in the tax year when they arose unless:

  • The passive activity loss (PAL) rules or some other provision of tax law limited that favorable outcome, or
  • The business loss was so large that it exceeded taxable income from other sources, creating a net operating loss (NOL).
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TAX TALK: Before Selling your Home, Weigh the Tax Consequences

Posted by Michael Eagan, J.D., LL.M. on May 21, 2018 9:20:00 AM

In many parts of the country, summer is peak season for selling a home. If you’re planning to put your home on the market, you’re probably thinking about things like how quickly it will sell and how much you’ll get for it. But don’t neglect to consider the tax consequences.

Home Sale Gain Exclusion

The U.S. House of Representatives’ original version of the Tax Cuts and Jobs Act included a provision tightening the rules for the home sale gain exclusion. Fortunately, that provision didn’t make it into the version that was signed into law.

As a result, if you’re selling your principal residence, there’s still a good chance you’ll be able to exclude up to $250,000 ($500,000 for joint filers) of gain. Gain that qualifies for exclusion also is excluded from the 3.8% net investment income tax.

To qualify for the exclusion, you must meet certain tests. For example, you generally must own and use the home as your principal residence for at least two years during the five-year period preceding the sale. (Gain allocable to a period of “nonqualified” use generally isn’t excludable.) In addition, you can’t use the exclusion more than once every two years.

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Topics: TAX TALK

TAX TALK: Time to Adjust your Withholding?

Posted by Michael Eagan, J.D., LL.M. on May 14, 2018 9:31:16 AM

If you received a large refund after filing your 2017 income tax return, you’re probably enjoying the influx of cash. But a large refund isn’t all positive. It also means you were essentially giving the government an interest-free loan.

That’s why a large refund for the previous tax year would usually indicate that you should consider reducing the amounts you’re having withheld (and/or what estimated tax payments you’re making) for the current year. But 2018 is a little different.

The TCJA and Withholding

To reflect changes under the Tax Cuts and Jobs Act (TCJA) — such as the increase in the standard deduction, suspension of personal exemptions and changes in tax rates and brackets — the IRS updated the withholding tables that indicate how much employers should hold back from their employees’ paychecks, generally reducing the amount withheld.

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