By topic: Life insurance

Tax Considerations When a Loved One Passes Away (Part 2)

If you become an executor of your loved one’s estate, you may have some important tax decisions to make, as we describe in this article. For example, on the decedent’s final Form 1040, should you elect to deduct medical expenses that are unpaid at the date of death? Should you file Form 706 when not required by law to do so?

New Law Kneecaps Stretch IRA—Here’s What You Can Do About It

The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) passed last December makes a big change in the stretch IRA—an estate planning device favored by well-off IRA holders. To cope with the downside of this new law, you need to do some planning, as we explain.

Section 105 Medical Expense Deduction Plan for Statutory Employee

The tax code has a carve-out that creates statutory employees out of certain independent contractors. These contractors receive a W-2 with the “statutory employee” box checked, which means that the contractor reports the W-2 income and associated business expenses (including a Section 105 plan) on his or her Schedule C.

Check Your Beneficiary Designations Now, Before Disaster Strikes

Surprise! You have an agreement in place that says your retirement account goes to person 1. But you have a beneficiary designation that says the account goes to person 2. Read this article to see which wins and why the winner is likely a big surprise.

Life Insurance Policy Loan: A Tax Nightmare

Do you have an inside buildup of cash value in your life insurance policy? Are you taking loans from the policy or letting the policy ride with premiums being paid from the cash value? If yes, make sure you know the tax consequences of your actions.

Q&A: Statutory Insurance Agent Wins the 199A Tax Deduction

The life insurance sales professional who receives a W-2 with the statutory employee box checked is in a special tax category for income and employment tax purposes and also sits in a favored category under the new Section 199A deduction rules. But he or she may not be favored for 1099 income.

Beyond the FBAR: Discover Little-Known Traps in Foreign Reporting

The IRS is pursuing taxpayers with foreign accounts and activities. You are likely aware of the FBAR and Form 8939 filing requirements, but the tax code has many other lesser-known required filings that carry large penalties for non-filing. Get onboard now. Learn the tax code’s requirements and how you might fix noncompliance and avoid huge penalties.

Should Your S Corporation Buy Life Insurance?

What happens if you die? Or, in particular, what happens if you own an S corporation with others and one owner dies? Will you want to deal with the heirs? If not, how will you pay off the heirs? You might find the answer in an employer-owned life insurance policy, as discussed in this article.

Big Mistake with Life Insurance Policy

Once you borrow money from your life insurance policy, you need to pay attention and ask some questions. First, are you using the loans for a business purpose? Second, are you repaying the loans? Third, if you’re not repaying the loans, what happens when the loan balance causes the insurance company to terminate your policy? If you know what happens, you’re prepared. But if you don’t know what happens, you’ll be unhappy when you receive your tax surprise.

Tax Tips for Tax-Free Life Insurance

Is your receipt of a life insurance death benefit tax free to you? For income tax purposes, the likely answer is yes. But when you get into the estate, the answers are (1) maybe, (2) no, or (3) yes, depending on who the recipient is and what type of planning has taken place. Life insurance planning is important now because the current $5.12 million exemption from estate taxes expires on December 31, 2012, and lawmakers slotted the 2013 exemption at $1 million and increased the tax rate from 35 to 55 percent.

Life Insurance Policy Loan Tax Nightmare

The inside buildup of cash value in your life insurance policy coupled with loans against the policy can create an unexpected taxable outlay on your part.

Tax Tips for the S Corporation’s Fringe Benefit Realization

Tax law creates trouble for selected fringe benefits that the S corporation gives to a more than 2 percent shareholder. The loss of benefits and accompanying complications are factors to consider in the selection of the S corporation as your choice of business entity.

New Law: Another Small-Business Economic Stimulus Package for You

The Small Business Jobs Act of 2010 spends $12 billion on small businesses, hoping to add a little stimulus to this economy. Make sure you are getting your fair share of this stimulation.

Cashing Out Real Estate Profits without Section 1031

Section 1031 exchanges are perfect when you are going to stay in the real estate rental or investment business. When it’s time to cash out, you need to look at different strategies that help you avoid taxes and give you cash to spend (liquidy).

Home Mortgage Interest Deductions Denied

Interest paid on a life insurance loan to buy a home does not count as deductible mortgage interest.

Life Insurance Loan

Interest paid on a loan used to buy an investment is considered investment interest. Investment interest is deductible to the extent of investment income. The loan used to buy this life insurance is not a loan to buy an investment.