By topic: Spouse
In most circumstances, you save federal tax when you’re married by filing a joint return versus two separate returns. But for tax year 2020, due to how Congress wrote some of the temporary COVID-19 tax benefit provisions, you may end up pocketing more money by filing separate returns. We’ll show you why this is the case and how to determine which filing status you should use.
The American Rescue Plan Act of 2021 provided billions of dollars in new expanded tax credits for individuals like you for tax years 2021 and/or 2022. The three main tax credits Congress increased are the child tax credit, the dependent care credit, and the premium tax credit for health insurance. Learn how you can get thousands more in your pocket for tax year 2021 due to these changes.
In this part 3 of this three-part series, learn how to handle key non-tax issues when a loved one passes away. There is much to know and to consider, from a simple matter such as how many “original” death certificates you should obtain to how you deal with the revocable trust that’s now irrevocable because of the death.
Do you own your own business? Do you have close relatives? If you responded yes to both, you have a golden opportunity to slash your business taxes. With the help of family members, you can utilize several tax-saving strategies to reap some nice financial benefits for both you and your relatives.
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?
If you own your own business, hiring your spouse to work as your employee can be a great tax savings strategy. But the tax savings may be a mirage if you don’t pay your spouse the right way. And the arrangement is subject to attack by the IRS. Here are five things to know before you hire your spouse that will maximize your savings and minimize the audit risk.
If a loved one passes away and you serve as the executor or inherit assets, you need to consider your duties and/or tax planning. This is Part 1 in a three-part series where we consider your duties should you be the executor, along with planning to avoid the exorbitant tax rates that could apply to a living trust, special filing rules for the widow or widower, required minimum distributions, and more.
If you are thinking of getting married or divorced, you need to consider December 31, 2020, in your tax planning. Here’s another planning question: Do you give money to family or friends (other than your children who are subject to the kiddie tax)? If so, you need to consider the zero-taxes planning strategy. And now, consider your children who are under age 18. Have you paid them for work they’ve done for your business? Have you paid them the right way? You’ll find the answers here.
Yes, December 31 is just around the corner. That’s your last day to find tax deductions available from your existing business and personal (yes, personal) vehicles that you can use to cut your 2020 taxes. In this article, you will learn how to find and release tax deductions that the tax code trapped inside your existing business cars, SUVs, trucks, and vans. And you will learn how the Tax Cuts and Jobs Act makes it possible for you to find a big deduction from your existing personal vehicle.
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.
When you operate a husband-wife partnership, you likely are paying far more than you need to pay in self-employment taxes. This article gives you three strategies you can use to save some serious money on the payment of self-employment taxes.
If you and your spouse work together in a business that you do not operate as a corporation, you can run into the partnership rules—and they are not usually friendly to a spouse partnership. In Part 1 of this article, you will see how the partnership rules work. You will also see how spouses can elect joint venture tax return treatment.
The Tax Cuts and Jobs Act altered the rules of the road in divorce planning. The significant change is that alimony is no longer tax-deductible; therefore, you want to avoid paying alimony. You may be able to sidestep alimony by transferring assets to your ex—and also have your ex carry the tax burden associated with those assets.
As with all financial transactions, divorce comes with tax consequences. And those consequences have changed for tax years 2018 and later thanks to the Tax Cuts and Jobs Act (TCJA). If you are thinking of divorce or are currently in the process, make sure to read this article.
Yes, December 31 is just around the corner. That’s your last day to find tax deductions available from your existing business and personal (yes, personal) vehicles that you can use to cut your 2019 taxes. In this article, you will learn how to find and release tax deductions that the tax code trapped inside your existing business cars, SUVs, trucks, and vans. And you will learn how the Tax Cuts and Jobs Act makes it possible for you to find a big deduction from your existing personal vehicle.
Here’s an easy question: Do you need more 2019 tax deductions? If yes, continue on. Next easy question: Do you need a replacement business vehicle? If yes, you can simultaneously solve or mitigate both the first problem (needing more deductions) and the second problem (needing a replacement vehicle), but you need to get your vehicle in service on or before December 31, 2019. This article helps you find the right vehicle for the deduction you desire.
Both you and your spouse have your own businesses. Your spouse’s business provides paid services to your business. Could this arrangement cause you problems when claiming a Section 199A deduction?
If you have been looking for some good news on tax-deductible business meals, you will find it in this article. And along with the good news, you will find clarity as to what post-Tax Cuts and Jobs Act rules currently apply to your tax-deductible business meals.
When you have both personal and rental use of a dwelling, you trigger some tricky tax code rules you need to know. With both personal and rental use, you create the possibility of tax-free rent, rental property deductions, and additional personal residence deductions.
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.
You find much beauty and little beast in using a single-member LLC for your real estate ownership. Of course, the big beauty is corporate-style liability protection without tax complexity, as you see in this article.
We took a deep dive into the 263 strategy articles that apply to the self-employed and pulled out 10 that you should spend time with.
If you own more than 2 percent of an S corporation, you have to follow special rules to deduct your health insurance premiums. The health insurance rules can also apply to family members who work in the business and don’t own a single share of stock. Don’t let the zero stock be a surprise and cost your family money.
When you are in business for yourself, you have options when it comes to creating tax deductions for your health insurance. The tax rules treat Medicare as health insurance, and that means you have options for how to create your tax deductions for Medicare.
When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans. But year-end is approaching, and now’s the time to take action. This article gives you six action steps for 2018 that can help you reduce your taxes and pocket extra money.
In many business environments, you compete for employee talent in a variety of ways, including perhaps by implementing a medical and family leave policy. The good news on this front is that your federal government may have given you a tax credit (yes, that lovely dollar-for-dollar offset to your taxes) for what you wanted to do anyway.
Your rental properties provide tax shelter when you can deduct your losses against your other income. One step to deducting the losses is to pass the tax code’s 750-hour test. One step to finding the hours you need may be your drive time.
Tax reform changed the rules of the game when choosing your best tax structure. A properly structured spousal partnership could now be your best choice, even over the S corporation in some circumstances. But beware, you need to navigate nuances in the law to do this correctly.
If you are married, operate as a sole proprietor or as a single-member LLC taxed on Schedule C of your Form 1040, and have no employees, you absolutely, positively must consider hiring your spouse and creating the 105-HRA medical reimbursement plan. In this situation, the 105-HRA can cut your taxes without you spending one penny.
Learn how the Tax Cuts and Jobs Act changes the alimony rules and what you need to do at this moment if you are in the process of getting a divorce and paying alimony. If you don’t act quickly, your cost of alimony could double.
If you operate your business as a sole proprietorship, the government takes a big chunk of your profits in the form of self-employment taxes. But there’s good news. With the help of your spouse, you can reduce your self-employment tax bill by using a simple rental strategy.
When the two-vehicle tax-deduction strategy works for you, you find new deductions without spending a penny or driving a mile farther. In this article, you find that both the IRS and the courts approve of your use of two or more vehicles for business.
You can deduct NFL tickets under the associated entertainment rules. In this Q&A, our member is traveling from Portland to Atlanta to attend a business conference, and while at that conference, he and his team members will attend the NFL game. The conference creates an easy path to this deduction.
You need to know how the related-party rules work if you don’t want to destroy your tax-loss deductions. You are reading this right: you can lose your tax losses when you sell to a related party.
Conventional wisdom says that it’s best to (1) fund your retirement before your child’s college, and (2) use your retirement savings for your retirement and not your child’s college expenses. But conventional wisdom is like a general tax rule. There are exceptions.
Sending a child to a special needs school can be an onerous financial burden, with some tuitions reaching even $100,000 per year. Tax law lets you deduct tuition and other related costs as medical expenses, but you need to know which expenses qualify and how you should deduct them. This article shows you not only how to qualify but also a possible best way to maximize those deductions.
Your adult child asks a big favor—help in buying his or her first home. If you are lucky enough to be able to help, you want to understand and avoid the tax pitfalls. In this article, you find five possible solutions to help your child while avoiding the tax pitfalls.
When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans. But year-end is approaching, and now’s the time to take action to cut your 2016 taxes. This article gives you six action steps for 2016 that can help you reduce your taxes and pocket extra money.
If you are thinking of getting married or divorced, you need to consider December 31, 2016, in your tax planning. Here’s another planning question: Do you give money to family or friends (other than your children who are under age 24)? If so, you need to consider the zero-tax-bracket planning strategy. And now let’s consider your children who are under age 18. Have you paid them for work they’ve done for your business? Have you paid them the right way? You’ll find the answers here.
Establish a Section 127 educational assistance plan in your business to help pay your age-21-or-older child’s college or other education costs. If you are in business and you have a child who is age 21 or older in financial need of educational assistance, this is a plan to consider.
As a member, you may download this sample Section 127 educational assistance plan in Microsoft Word format. Then, simply modify the document for your business or tax practice use.
Health insurance premiums are rising at an astronomic rate. This is one of the biggest monthly expenses for many families. That’s where, because you are in business, a properly planned and executed Section 105 plan can work for you. This plan works like magic—it turns your medical expenses into tax-favored business expenses.
Schedule C business owners and their spouses must obtain health insurance coverage for themselves (and any other dependents) or risk a penalty under health care reform. While there are many ways to get that coverage, one way—a properly established proprietorship reimbursement arrangement—can lead to three and possibly four significant tax advantages for the business owner and spouse.
When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans. But year-end is approaching, and now’s the time to take action to cut your 2015 taxes. This article gives you six action steps for 2015 that can help you reduce your taxes and pocket extra money.
If you are thinking of getting married or divorced, you need to consider December 31, 2015, in your tax planning. Here’s another planning question: Do you give money to family or friends (other than your children who are under age 24)? If so, you need to consider the zero-bracket planning strategy. And now let’s consider your children who are under age 18. Have you paid them for work they’ve done for your business? Have you paid them the right way? You’ll find the answers here.
If you want to rent one, two, or twenty bedrooms in your home, you need to avoid one big trap and navigate two sets of rules to obtain the tax benefits you likely were hoping for when you thought of this rental activity. This is an area where tax knowledge is power. Without the knowledge, you could create a very unsatisfactory tax result.
The paradox of choice applies when you consider the multitude of tax benefits available when paying educational expenses. In this article, we help you put money in your pocket by taking both the paradox of choice and the complexity out of two education tax credits with our step-by-step guide.
The self-employed health insurance deduction could give you a big surprise when you file your taxes—and that’s not good. The law imposes a couple of restrictions that many people don’t know about and that might strip you of your tax savings. Take some time right now to figure out whether you qualify for the deduction and if not, what you can do about it.
A Roth IRA is not your average retirement plan. It’s a retirement savings, boondoggle savings, down payment savings, college savings, and emergency savings plan all wrapped into one. But to realize the benefits, you need to know how to avoid taxes and penalties when you take the money out. The good news: do this right and you can tap that Roth IRA and pay ZERO taxes and ZERO penalties.
Have you ever faced this “problem”? A sudden boom in business requires you and your employees to work late in order to get everything finished. When this happens, how can you thank your employees for their overtime with a tax-free benefit that’s fully deductible to your business? You can provide a supper money fringe benefit if you follow four rules.
Four Steps to Turn a Husband-and-Wife-Only Board Meeting into a Money-Saving, Tax-Deductible Resort Stay
Where can you hold your tax-deductible board meetings if you operate your business as a corporation? Could you go to a nice resort? What if you and your spouse are the only board members? This article answers these common questions. It’s sure to make you smile.
The Easiest and Funnest Deduction You’ll Claim This Year: 4 Rules for Writing Off Employee Outings—100%!
The government wants you to have happy employees. That’s why the tax code grants you extra deductions when you provide entertainment and entertainment facilities that primarily benefit rank-and-file employees. In this article, we examine how the rules work when you take your employees on a party trip.
Lawmakers may not always make your life easy, but at least you know they want you to have fun every now and then. The tax code gives you a 100 percent deduction for the parties that you throw for your employees—as long as you invite the right kind of employees.
Deduct More of Your Rental Property Losses by Qualifying as a Real Estate Professional—Even If You Don’t Work in Real Estate!
Your rental property is worth more to you than simply the generation of rental income. Your property may also create tax losses that you can use to offset your income from other sources. It’s not as easy as it used to be to make your rental property a legal tax shelter, but you can still do this if you put in the right number of hours toward the right type of work.
There are special rules that you need to know regarding the deduction of your net losses if you co-own or co-manage a business or investment with your spouse. Tax law gives you some nice advantages, but they’re not what we would call logical. If you don’t know how the rules work, you might be missing out on money-saving benefits.
December 31 is just around the corner. That’s likely your cutoff date for finding tax deductions that will cut your 2014 taxes. And remember, your 2014 taxes are the highest they’ve been in 28 years. This article helps you identify tax deductions embedded in your existing business and personal cars, SUVs, trucks, and vans.
4 Year-End Tax-Deduction Strategies for Business Owners Who Are Married, Getting Married, and/or Have Children
In your last-minute search for tax deductions, examine your children under the age of 18, your marital status, and your relatives in the zero tax bracket. With some planning, you can save good tax money here.
If you operate your business as a sole proprietorship, the government takes a big chunk of your profits in the form of self-employment taxes. But there’s good news. With the help of your spouse, you can reduce your self-employment tax bill by using a simple rental strategy.
When you own a business, you should look at all possible assets that you own personally and how you might use them to increase your business deductions. This is particularly true for vehicles. And the beauty of identifying assets such as personal vehicles that you can use for business is that you don’t spend money to create deductions. You simply use assets you already own.
If you operate your business as a proprietorship and hire your spouse as an employee, you likely have questions about the need to pay wages to make your spouse a bona fide employee. And you likely want your spouse as a bona fide employee who receives as a tax-free fringe benefit a Section 105 medical reimbursement plan—family coverage, of course.
If you have ever had a tough day on the golf course, you might not think of golf as “entertainment,” but that’s how the IRS classifies the activity. This is good news for you because it means that in the right circumstances, your golf expenses are deductible. Read this article and discover the unique rules you need to follow to ensure your deduction for golf (and other associated entertainment activities too).
Would you like to deduct business meals with your spouse? What would the IRS think about that? If the IRS said that the meals were not deductible, what would the courts say? You would think there are hundreds of rulings and court cases that explain this. Not so. There is one tax rule that mostly assures the deduction, but it requires an addition. Spend a few minutes learning how tax law treats your spouse when it comes to business meals.
Learn how employee use of your ski cabin or beach home produces a 100 percent business asset with deductions for depreciation, operating expenses, and mortgage interest. This can make for a great fringe benefit for both the employees and you. It also can make for a profitable investment.
When you incorporate your business, you have to decide which assets you want to contribute to your new corporation and which you want to keep in your own name. For some assets, you get better tax benefits and better liability protection when you don’t transfer them to your corporation.
The new 2014 Obamacare tax rules that apply to health reimbursement accounts (HRAs) such as Section 105 medical reimbursement plans make it difficult and impractical to have a Section 105 plan or other HRA when you have two or more employees. But if you have no employees or only your spouse as an employee, you escape the jaws of Obamacare and your Section 105 or other HRA plan gives you all the good tax benefits that you had before Obamacare.
Are you subject to the new 3.8 percent Obamacare tax? Do you own rental property? If so, use one of the three escapes in this article so that your rental property can avoid the 3.8 percent tax. The three escapes revolve around the concept of a rental property as a trade or business property. The IRS just released new safe-harbor rules making it easy for some owners of rental real estate to qualify their rentals as trade or business property exempt from the 3.8 percent tax.
When you buy a business, buy the assets—not the stock. The assets will significantly increase your tax savings in the early years of your new business. This article gives you the nuts and bolts of buying a business. It even explains how you can buy the stock of the target corporation and treat the stock purchase as an asset purchase.
For tax years’ beginning after December 31, 2013, Obamacare contains good and bad news for Section 105 medical reimbursement plans—health reimbursement accounts (HRAs). Bad news: the new health law requires that you pay for group health insurance if you want a Section 105 plan for more than one employee. Good news: with one employee only, such as your employee-spouse or yourself if you operate as a C corporation, you don’t have to buy group health and you can reimburse expenses as you always have.
Your tax-benefit time for your business and personal vehicles is running out on December 31. If you are going to do something, do it now. This article gives you 10 year-end tax-benefit strategies for replacing or adding a business vehicle.
You have some last-minute tax deduction opportunities with your family. Do you have children under the age of 18? If so, you should consider having them on the payroll. In this article, we explain how you benefit. Also, your marital status gives tax-planning opportunities. Have you been giving cash to relatives, other than your under-age-24 children? If so, you need to consider the 0 tax-bracket strategy in this article.
Are you thinking of converting your business to an S corporation? The IRS will be watching you closely. Learn to avoid the common mistakes that many business owners make.
The IRS just ruled that a same-sex married couple are spouses for federal income tax purposes. This means the same tax deductions and tax benefits that accrue to other married couples now accrue to same-sex married couples. The IRS ruling is a direct result of the Supreme Court’s decision in Windsor. This article sets forth business and personal tax breaks that marriage provides.
Let’s say that you have the Section 105 medical reimbursement plan in place that benefits you and your family. What happens if you or your employee-spouse retires? Here’s good news. With planning, your Section 105 plan can continue into retirement.
Do you gain or lose tax advantages when you marry? Lawmakers have tried to deal with the marriage issue for years, and they have made multiple changes in the laws. But there’s no perfect law, so winning and losing because of marriage still exists.
This article answers Section 105 medical reimbursement plan questions from two 1099 independent contractors, a husband and wife, who work for the same firm but file separate Schedule Cs. The good news is that they can substantially increase their medical deductions by using a Section 105 medical plan where one spouse becomes the employer-spouse and the other becomes the employee-spouse.
Inheriting an IRA used to mean a heavy estate tax and federal income tax burden. But recent changes to the estate tax have significantly reduced this burden. Further, spouses have special income-tax planning techniques available that can make inheriting an IRA today a much happier experience.
When you attend a convention or similar meeting, your attendance automatically qualifies as you having a substantial and bona fide business discussion. When you precede or follow a substantial and bona fide business discussion with entertainment that takes place in a non-business setting such as going to Disneyland, you qualify to deduct the cost of the Disneyland tickets.
Your ability to deduct a home office is straightforward until you allow your spouse to use the office or you add a second business to the mix. When your spouse uses the office or you add a second-business, your home-office tax deduction becomes more complicated.
If you want to do something with your business vehicles this year, you don’t have much time left. This article gives you the year-end strategies you need to ensure maximum tax benefits should you decide to replace or add a business vehicle.
Good news. As you may remember from our previous article, the 10th Circuit Court of Appeals sent the Shellito case that involved a Section 105 medical reimbursement plan back to the tax court. We report in this article good news: The tax court reversed its original decision and granted the Shellitos their deductions. Most importantly, this reversal adds clarity to making your Section 105 medical reimbursement plan work.
You have a wide variety of choices on how to travel for business. You can use a car, train, plane, or boat. You can fly economy, business, or first class. Should you own a plane, you can use it for business travel. Special rules apply to the plane, boat, and car; accordingly, if you travel for your business, you should know the rules in this article.
Do you own an airplane? If not you, how about your corporation? This month, we are writing about the new IRS regulations that govern your use of your C or S corporation’s aircraft. In this article, you will find more than a half dozen strategies that you can use to minimize the tax bite caused by personal use of your corporation’s aircraft.
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.
If you and your spouse work together in your business, you need to know the rules of the road for owning and operating your proprietorship, limited liability company, or corporation. In part 1 of this article we discussed how you can save both self-employment and income taxes with the right mix of income and employee status of your spouse. In this part 2, you learn what you need to do to ensure that your operating business entity allows you to achieve the benefits of part 1.
Your husband-and-wife business may already be a success. That’s great. Now, with a little tax planning for the husband-and-wife business, you can increase your after-tax profits and sleep better at night knowing that your business form is good.
Because you are in business, you likely have the opportunity to improve your tax deduction for long-term care insurance. In fact, you might achieve a 100 percent deduction. If you are married, the 100 percent deduction can include your spouse.
To know if the S corporation is the best choice of entity for your business, first you need to consider three advantages and nine disadvantages. Next, you need to take the S corporation advantages and disadvantages that apply to you and get a bottom-line number comparison with your second choice for an operating entity. In this way, you can make a logical choice, knowing that your best choice will stay with you for a number of years and let you pocket more after-tax cash while you sleep better at night.
When the husband or the wife cheats on taxes, both spouses are liable for the unpaid taxes and penalties. However, the non-cheating spouse can qualify as an innocent spouse or for equitable relief. In new guidance, the IRS has made it easier for the non-cheating spouse to get out of paying the taxes.
When you and/or your spouse own more than one business, you must look at all businesses as one business when applying the Section 105 medical reimbursement plan discrimination rules. If you are blocked by the discrimination rules, consider discriminating in health insurance coverage to your benefit.
The IRS admits that its regulation that made the single-member LLC a corporation for payroll tax purposes is unfair to small business family employment. To right this wrong, the IRS allows the single-member LLC to use the family employment rules to exempt FICA and Medicare taxes retroactively to January 1, 2009. The regulation granting this change expires on or before October 31, 2014.
In the right circumstances, the single-member limited liability company (LLC) gives you corporate liability protection combined with easy Schedule C (proprietorship) rules for your tax return. In this article, you learn the two tax advantages and two tax disadvantages to the single-member LLC.
Are you looking for more tax deductions this year? It’s not too late. Learn 12 last-minute tax-planning ideas that you can implement to create or push more deductions into this year so you can pay less in taxes this year.
The appeals court remanded the Shellito case back to the Tax Court along with its road map for establishing the Section 105 plan. In the right circumstances, the 105 medical plan creates tax deductions where none existed before, and its tax-free fringe benefits can operate as the sole remuneration to the employee-spouse.
If you are married, operate your business as a proprietorship, and have only your spouse as an employee, you likely want a Section 105 medical reimbursement plan that can turn most, if not all, of your medical expenses into business deductions on your Schedule C. Before health care reform, you did not need to give your employee-spouse a W-2 for Section 105 medical plan reimbursements. Now, thanks to the IRS, the Section 105 medical reimbursement W-2 requirement for small businesses does not apply before the 2014 W-2 reporting season—and may not apply afterward.
Part 2 of the divorce series of articles covers your retirement plans and IRAs. Your goal when giving a little or a lot of your retirement plan to your ex is likely to be that he or she who gets the cash should pay the taxes. To make the taxes follow the money, you need specific words in the right divorce documents. If you fail to put the words in the right place, you can give the cash to your ex and double whammy yourself by paying taxes and penalties to the IRS.
You have at least three parties in your divorce: you, your soon-to-be ex, and your Uncle Sam. Yes, as with almost everything, there are tax consequences to a divorce. This article puts you on a path that will help you protect your money and your assets.
The new under-age-27 health insurance coverage grants windfalls, pitfalls, and planning opportunities.
The newly enacted tax cut creates a new 2011 and 2012 estate tax. The new rules are taxpayer friendly in two respects. First, they are easy to understand. Second, they contain a $5 million exclusion (portable, if properly elected, for husband and wife, giving a married couple an exclusion of $10 million).
Tax law gives choices to the executors who are handling the estates of those who died in 2010. Choice one is to apply the 2010 rules. Choice two is to apply the newly enacted 2011 and 2012 estate tax rules.
New guidance from the IRS on the new health care law says the owner of a business (proprietorship, corporation, LLC, etc.) may not claim the 35 percent tax credit on the health insurance premiums paid to cover his or her spouse.
Do you provide supper or other meal money when you require your employees to work overtime? If so, is the meal money a tax-free fringe benefit or is it additional W-2 compensation to the employees?
This issue contains 21 last-minute tax tips that you can use for 2010. We broke the tips into two articles: one for vehicles and one not related to vehicles. This article contains 12 last-minute tax tips that are not related to vehicles.
If you are married, you need to consider your spouse’s W-2 and other income sources in your Section 179 expensing eligibility. The inclusion of your spouse often enhances the amount you can deduct using Section 179 expensing.
With one business use of the home office and no personal use, you qualify for the deduction. The second business use, employee use, and spouse use must equally qualify for the home-office deduction, or else.
Computers and programs like Quicken make it easier to track business and personal activities. Even so, there are rules of the road that you should follow to ensure the best results.
Section 179 expensing is available against business income. For this purpose, business income is defined to include, among others, W-2 income.
With net business income less than $115,647, the sole proprietor with two qualifying children and a stay-at-home spouse can hire the spouse and pay a wage of $6,000 to create a $1,200 child care credit with no change in their joint income taxes—other than realization of the $1,200 credit.
When you claim a Section 179 expensing deduction, you make a deal with the government. You agree to give back your early tax benefits if, during the recapture period, your business use drops to 50 percent or less.
The Heineman case gives a roadmap to how a husband and wife might deduct the cost of attending a board of directors meeting where they are the only participants. Using the principles enunciated in Heineman, husband-and-wife corporate owners will find deducting the out-of-town board meeting easier than deducting board meetings that occur in town.
The first thing to get straight with the skiing deduction is that it is deductible as associated entertainment. Thus, you need a bona fide business discussion in a business setting before or after the skiing. If you are staying overnight, remember that lodging for business entertainment purposes is not deductible, but lodging for business education or meetings is deductible.
Use this Section 105 medical reimbursement plan template to make sure you provide maximum medical benefits to you and your family while legally discriminating under both tax law and ERISA rules.
You are talking to yourself (for tax purposes) when you discuss business with your husband over dinner. This is a nondeductible experience.
The sole proprietor may not claim a business deduction for child care that enables him to work. The tax benefit for this type of child care comes on the personal income tax return as a dependent care credit.
When husband and wife receive individual 1099s from the same firm, they generally can improve their after-tax cash results by having one spouse earn the 1099 income and having the other spouse work as an employee.
The IRS just posted the limits on its website, but there is still one way to elect single-member status. We give you the details and planning strategies.
CPAs are not always right! One couple tries to get Section 105 benefits, and is incorrectly refuted by their accountant. We give evidence to support our position, and advice on how to get Section 105 benefits.
To file for joint partnership of a business, you must attach a written statement to your 1040. There is no official form to use, so we give you an example of what you can say.
If you are single, forming an S corporation can be your “no-hassle spouse.” Rent from the corporation, and you can save money in self-employment tax.
In an ISP, the IRS asserted that the Section 105 medical reimbursement plan may not reimburse the employee-spouse for the cost of health insurance purchased in the employee-owner’s name. This court case held that this IRS position is wrong and that the owner may deduct the cost of medical insurance purchased in his name when that insurance is covered by the Section 105 medical reimbursement plan.
Answering “yes” to the 11 puts you on the road to audit-proof status for your Section 105 medical reimbursement plan.
The husband and wife who work together must consider the joint venture election if they want the business treated by the IRS the way they think it should be treated.
Taking a cruise ship to Mexico for a business meeting is an acceptable, and deductible, form of travel.
This proprietor paid his employee-wife $12,000 in wages. Now, she wants to contribute the entire $12,000 as an elective deferral to her 401(k) account but she no longer has $12,000 because of payroll taxes. With some mechanical adjustments, the employee-wife may contribute the full $12,000.
The combination of a Section 105 medical plan and a $15,500 salary to the spouse generated a $32,875 tax deduction for the business, no taxable income for the spouse, and a cash contribution to the spouse’s 401(k) retirement account of $19,375.
Talking business with your husband does not create a tax deduction for entertainment. For this to work, you need to create a situation where you can use the closely connected rule.
One spouse’s business losses can be written off against the other spouse’s income. Think like this: In a loss year, the business spouse provides tax shelter.
The new Iraq war funding law contains a new tax law section on “family business tax simplification.” If you and your spouse work together in the business, it is time to pay attention and examine this new law.
As owners of an S corporation, you probably are allowed to forego the stockholders’ and directors’ meetings. However, you may not want to. By skipping these meetings and other “corporate” activities, you appear less like a corporation in the eyes of the law.
The $250,000 home-sale exclusion is a major tax break. To qualify for the exclusion, you must have owned and lived in your home for two of the past five years. You can get out of the “two out of five year” rule by unforeseen circumstances, like, say, marriage.
Tax court and the IRS establish that child care is not an ordinary and necessary expense and, thus, is not deductible. This ruling, though sloppy (we show you why), establishes a precedent. However, under section 129 in the tax law, the employer may provide child care benefits.
It is possible to save big on medical insurance if you use the Section 105 Medical Reimbursement Plan. If you navigate the tax law correctly, you might be able to save $4,000, like one taxpayer. Knowledge is power.
Schedule E allows wages, but it does not have a separate line item for them. So, when you are hiring your spouse to work on your rental properties, file the work as “ordinary and necessary expenses to save money on taxes.
If you hire your spouse, you can save a lot of money in taxes by not paying him/her a wage. Instead, cover him/her and your family with medical benefits under Section 105.
When you win a top producer award trip to a fancy resort or location, create educational events for yourself to qualify your trip for business travel deductions. When you get this right, you offset the 1099 award value with bona fide business travel expenses.
Incorporated and unincorporated businesses can use the solo 401(k) to benefit the owner (including a husband and wife). In most cases, the solo 401(k) allows the one-owner or husband-and-wife owners to put away more than they could in other plans (up to $49,000 this year, depending on age and earnings—adjusted for inflation in future years).
The more than 2 percent owner of an S corporation may not benefit from a fringe benefit like corporate paid health insurance. Further, this owner-employee is not “self employed” for purposes of deducting self-employed health insurance on page 1 of IRS Form 1040. This leaves the more than 2 percent owner with only one IRS approved method for gaining the maximum deduction from health insurance.
The one-owner or husband-and-wife owned businesses can gain significant income by learning how to reduce the largest expense they pay during their lifetimes (taxes). In this respect, the self-employed are both cursed and blessed. Cursed because they pay a larger percentage of their net income in taxes than anyone else in the country. Blessed with business deductions that, when used properly, not only balance their taxes with those of the average employee, but actually mean (if they are paying attention) that they pay a whole lot less.
At death, IRAs are not treated like homes, which pass to the heirs at fair market value with no income tax issues. Instead, the IRA faces both the estate tax and the income tax. In this court case, the combined estate and income taxes devoured $1.6 million and the heirs had $1.1 million left to spend.