Berdon Blogs

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

TAX TALK: Don’t Give the IRS an Interest Free Loan

Posted by Hal Zemel, CPA, J.D., LL.M. on May 15, 2017 7:00:00 AM

Each year, millions of taxpayers receive an income tax refund when they file their income tax returns. While receiving a refund from the IRS of a few thousand dollars can be a pleasant influx of cash, the reality is that you essentially gave the government an interest-free loan for close to a year. This is not the most efficient use of your money.

Fortunately, there is a way to begin collecting your 2017 refund now: You can review the amounts you’re having withheld and/or what estimated tax payments you’re making, and adjust them to keep more money in your pocket during the year.

Reasons to Modify Amounts

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Topics: TAX TALK

TAX TALK: Overtime Wages – Will They be Changing?

Posted by Marcy Greenfield, CPA on May 8, 2017 9:17:00 AM

On May 2nd, the House of Representatives passed a change to the Fair Labor Standards Act to allow private sector employers to give their workers paid time off instead of time and half pay for overtime. 

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Topics: TAX TALK

TAX TALK: Tax Implications of C Corp’s Buy-sell Agreement

Posted by Hal Zemel, CPA, J.D., LL.M. on May 1, 2017 11:50:00 AM

Private companies with more than one owner should have a buy-sell agreement to spell out how ownership shares will change hands should an owner depart. For businesses structured as C corporations, the agreements also have significant tax implications that are important to understand.

Buy-sell Basics

A buy-sell agreement sets up parameters for the transfer of ownership interests following stated “triggering events,” such as an owner’s death or long-term disability, loss of license or other legal incapacitation, retirement, bankruptcy, or divorce. The agreement typically will also specify how the purchase price for the departing owner’s shares will be determined, such as by stating the valuation method to be used.

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Topics: TAX TALK

TAX TALK: Individual Tax Calendar: Key Deadlines for the Remainder of 2017

Posted by Hal Zemel, CPA, J.D., LL.M. on Apr 24, 2017 11:50:00 AM

While April 15 (April 18 this year) was the main tax deadline on most individual taxpayers’ minds, there are others through the rest of the year that are also important. To help you make sure you don’t miss any important 2017 deadlines, here’s a look at when some key tax-related forms, payments and other actions are due. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you.

Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them.

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Topics: TAX TALK

TAX TALK: Avoid Late-Filing Penalties

Posted by Hal Zemel, CPA, J.D., LL.M. on Apr 17, 2017 10:46:00 AM

Because of a weekend and a Washington, D.C., holiday, the 2016 tax return filing deadline for individual taxpayers is Tuesday, April 18. The IRS considers a paper return that’s due April 18 to be timely filed if it’s postmarked by midnight. But dropping your return in a mailbox on the 18th may not be sufficient.

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Topics: TAX TALK

TAX TALK: Tax Benefits of Home Ownership

Posted by Hal Zemel, CPA, J.D., LL.M. on Apr 11, 2017 11:59:00 AM

Currently, home ownership comes with many tax-saving opportunities. Consider both deductions and exclusions when you’re filing your 2016 return and tax planning for 2017:

Property Tax Deduction. Property tax is generally fully deductible for regular tax purposes. However, property taxes are not deductible if you are subject to the alternative minimum tax (AMT). You can claim a deduction on every property that you own.

Mortgage Interest Deduction. You generally can deduct interest on up to a combined total of $1 million of mortgage debt incurred to purchase, build, or improve your principal residence and a second residence. Points paid related to your principal residence also may be deductible.

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Topics: TAX TALK

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