SALT TALK: New Internet Taxes and Wayfair? Don’t Forget the Use Tax

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Sep 21, 2020 11:40:00 AM

Many science fiction adventures have posited the idea of a parallel universe, but to my knowledge, we have not found intelligent life out there yet.Readers don’t fret. If you had your heart set on discovering a parallel universe, just take the lead of state government. Go out and create your own.

The parallel universe created by the states is known as the Use Tax.The Use Tax is a virtual mirror to the Sales Tax. It is imposed on the user of goods and services that would be subject to the Sales Tax, but for the fact that the seller or service provider didn’t charge and collect the Sales Tax.

For that new 90-inch TV you just purchased from www.wedon’, your State is looking for you to voluntarily compute the amount that would have been charged as Sales Tax and submit it as Use Tax. Despite the mistaken belief that internet sales aren’t subject to tax, your State expects you to be a good citizen and hand over what you believed to be your savings.

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TAX TALK: Tax Implications of Working from Home and Collecting Unemployment

Posted by Hal Zemel, CPA, J.D., LL.M. on Sep 21, 2020 9:20:00 AM

COVID-19 has changed our lives in many ways, and some of the changes have tax implications. Here is basic information about two common situations.

Working from Home

Many employees have been told not to come into their workplaces due to the pandemic. If you’re an employee who telecommutes and communicates with your employer mainly by telephone, videoconferencing, and email, you should know about the strict rules that govern whether you can deduct your home office expenses.

Unfortunately, employee home office expenses aren’t currently deductible, even if your employer requires you to work from home. Employee business expense deductions (including the expenses an employee incurs to maintain a home office) are miscellaneous itemized deductions and are disallowed from 2018 through 2025 under the Tax Cuts and Jobs Act.

However, if you’re self-employed and work out of an office in your home, you can be eligible to claim home office deductions for your related expenses if you satisfy the strict rules.

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Topics: TAX TALK

TAX TALK: Questions and Concerns About Deferring Employees’ Social Security Taxes

Posted by Hal Zemel, CPA, J.D., LL.M. on Sep 14, 2020 9:20:00 AM

The IRS has provided guidance to employers regarding the recent presidential action to allow employers to defer the withholding, deposit and payment of certain payroll tax obligations. The three-page guidance in Notice 2020-65 was issued to implement President Trump’s executive memorandum signed on August 8.

Private employers still have questions and concerns about whether, and how, to implement the optional deferral. The President’s action only defers the employee’s share of Social Security taxes; it doesn’t forgive them, meaning employees will still have to pay the taxes later unless Congress acts to eliminate the liability. (The payroll services provider for federal employers announced that federal employees will have their taxes deferred.)

Deferral Basics

President Trump issued the memorandum in light of the COVID-19 crisis. He directed the Secretary of the Treasury to use his authority under the tax code to defer the withholding, deposit and payment of certain payroll tax obligations.

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Topics: TAX TALK

T&E TALK: Planning with the Increased Exemption Amounts, While they Last…

Posted by Ada Clapp, J.D. on Sep 14, 2020 7:00:00 AM

The federal gift, estate, and generation-skipping transfer (“GST”) tax exemptions are currently at an all-time high of $11.58 million per individual for 2020 ($23.16 million for a married couple).   However, these increased exemption amounts won’t be around forever, so if you want to preserve the current $11.58 million, you would be wise to use your gift and GST tax exemptions in 2020.

Increased Federal Exemptions Are Temporary

The federal gift and estate tax exemptions allow an individual to make lifetime gifts or transfers at death (that would not otherwise qualify for a marital or charitable deduction or an exclusion—and so would be taxable) up to the exemption amount free of gift or estate tax.   The two exemptions are “unified”; which means that any part of the $11.58 million exemption used to shelter lifetime gifts from gift tax reduces the amount available to shelter death-time transfer from estate tax.

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Topics: T&E TALK

SALT TALK: New York City Interest Rate Reduction for Late Payment of Real Property Taxes

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Sep 8, 2020 11:40:00 AM

My colleague Richard Goldstein reports on recent New York City legislation reducing the late payment interest rate for property taxes due on July 1, 2020 for eligible property owners impacted by COVID-19. For the details, click here.

Wayne Berkowitz, a tax partner and co-leader of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.

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TAX TALK: Back-to-School Tax Breaks

Posted by Hal Zemel, CPA, J.D., LL.M. on Sep 8, 2020 11:27:36 AM

Despite the COVID-19 pandemic, students are going back to school this fall, either remotely, in-person, or under a hybrid schedule. In any event, parents may be eligible for certain tax breaks to help defray the cost of education.

Here is a summary of some of the tax breaks available for education.

  1. Higher Education Tax Credits. Generally, you may be able to claim either one of two tax credits for higher education expenses — but not both.
    • With the American Opportunity Tax Credit (AOTC), you can save a maximum of $2,500 from your tax bill for each full-time college or grad school student. This applies to qualified expenses including tuition, room and board, books and computer equipment and other supplies. But the credit is phased out for moderate-to-upper income taxpayers. No credit is allowed if your modified adjusted gross income (MAGI) is over $90,000 ($180,000 for joint filers).
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Topics: TAX TALK

T&E TALK: Estate Planning and Divorce

Posted by Ada Clapp, J.D. on Sep 8, 2020 7:00:00 AM

If you’re going through a divorce, you probably feel overwhelmed. Not only is it a difficult time emotionally, but there are a lot of legal and financial decisions you have to make to terminate your marriage.  Chances are you are not thinking about your estate planning—but you really should be. Here’s why:

Every person going through a divorce needs all of his or her estate planning documents reviewed, first when the divorce is commenced and again after the divorce is finalized. In addition, during negotiations, thought should be given to the estate or gift tax implications of proposed settlement obligations.

Wills and Trusts

To start, you should immediately review your will and revocable trust (collectively your “Will”). Under the laws of some states, bequests or fiduciary appointments (e.g., executor or trustee appointments) under a Will in favor of a former spouse are automatically revoked upon divorce. However, not all states provide for such revocation.

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Topics: T&E TALK

SALT TALK: Who Let the Dog Out? – Legislation by Administration Leads to Confusion

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Aug 31, 2020 11:40:00 AM

I’ve never been without a pet and have always considered them to be family members, not tangible personal property. Apparently, the New York State Department of Taxation and Finance agreed with me when they held “[d]og walking is not among these enumerated services subject to sales tax[1].” Yet, less than two years later, the Department growled out another Advisory finding that “pet sitting, which includes dog walking, refreshing cat litter boxes, or providing food to the pets is subject to State and local sales and use tax[2].”

The Department reasoned that “. . . maintaining, servicing or repairing tangible personal property . . .” is an enumerated service and the Regulations clearly define animals to be tangible personal property. Why the sudden shift in opinion? I would like to think it was the Department’s desire to administratively broaden the tax base and not due to any bias against cats[3].

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TAX TALK: Will You Have to Pay Tax on Your Social Security Benefits?

Posted by Hal Zemel, CPA, J.D., LL.M. on Aug 31, 2020 9:20:00 AM

If you’re getting close to retirement, you may wonder: Are my Social Security benefits going to be taxed? And if so, how much will you have to pay?

It depends on your other income. If you’re taxed, between 50% and 85% of your benefits could be taxed. (This doesn’t mean you pay 85% of your benefits back to the government in taxes. It merely means that you’d include 85% of them in your income subject to your regular tax rates.)

Crunch the Numbers

To determine how much of your benefits are taxed, first determine your other income, including certain items otherwise excluded for tax purposes (for example, tax-exempt interest). Add to that the income of your spouse, if you file joint tax returns. To this, add half of the Social Security benefits you and your spouse received during the year. The figure you come up with is your total income plus half of your benefits. Now apply the following rules:

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Topics: TAX TALK

T&E TALK: Five Good Reasons to Turn Down an Inheritance

Posted by Ada Clapp, J.D. on Aug 31, 2020 7:00:00 AM

A loved one has just left you a bequestbut should you accept it?  You are now in the unique position of doing what is called “post mortem” planning.If you don’t need the assets, or there are tax savings or other advantages to be gained, it may make sense for you to refuse thebequest.You would do this via a qualified disclaimer. A qualified disclaimerallows the bequest to bypass you and go to the next beneficiary in line. There are many reasons why you might want to disclaim a bequest-- here are five:

  1. Estate and Gift Tax SavingsThis is often cited as the main incentive for using a qualified disclaimer. In 2020, an individual can shelter a generous $11.58 million in assets from gift and estate tax. By maximizing portability of a spouse’sunused estate tax exemption, a married couple can effectively pass up to $23.16 million in 2020 to their heirs free of gift and estate taxes. The gift and estate tax exemption may be used to shelter transfers to non-spouse beneficiaries, such as your children and grandchildren, from gift or estate tax (transfers between spouses are sheltered by the unlimited marital deduction).
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Topics: T&E TALK

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