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Tax Tips

Pay Attention to the Details When Selling Investments

Pay Attention to the Details When Selling Investments

The tax consequences of selling an investment, as well as your net return, can be affected by a variety of factors. You’re probably focused on factors such as how much you paid for the investment vs. how much you’re selling it for, whether you held the investment long-term (more than one year) and the tax rate that will apply. But there are additional details you should pay attention to. If you don’t, the tax consequences of a sale may be different from what you expect. Here are a few details to consider when selling an investment: Which shares you’re selling? If you bought the same security...

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Dot the “I’s” and Cross the “T’s” on Loans Between Your Business and Its Owners

Dot the “I’s” and Cross the “T’s” on Loans Between Your Business and Its Owners

It’s common for closely held businesses to transfer money into and out of the company. This often takes place in the form of a loan. However, the IRS looks closely at such transactions: Are they truly loans, or actually compensation, distributions or contributions to equity? Loans to owners When an owner withdraws funds from the company, the transaction can be characterized as compensation, a distribution, or a loan. Loans aren’t taxable, but compensation is and distributions may be. If the company is a C corporation and the transaction is considered a distribution, it can trigger double...

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Coverdell ESAs: The Tax-Advantaged Way to Fund Elementary and Secondary School Costs

Coverdell ESAs: The Tax-Advantaged Way to Fund Elementary and Secondary School Costs

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...

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Choosing the Best Way to Reimburse Employee Travel Expenses

Choosing the Best Way to Reimburse Employee Travel Expenses

If you have employees that incur work-related travel expenses, you can better attract and retain the best talent by reimbursing these expenses. But to secure tax-advantaged treatment for your business and your employees, it’s critical to comply with IRS rules. Reasons to reimburse While unreimbursed work-related travel expenses generally are deductible on a taxpayer’s individual tax return (subject to a 50% limit for meals and entertainment) as a miscellaneous itemized deduction, many employees won’t be able to benefit from the deduction. Why? It’s likely that some of your employees don’t...

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Consider the Tax Consequences Before Making an Employee a Partner

Consider the Tax Consequences Before Making an Employee a Partner

In today’s competitive environment, offering your employees an equity interest in your business can be a powerful tool for attracting, retaining and motivating quality talent. However, if your business is organized as a partnership, there are some tax traps you need to watch out for. Once an employee becomes a partner, you generally can no longer treat him or her as an employee for tax and benefits purposes, which has significant tax implications. Employment taxes Employees pay half of the Social Security and Medicare taxes on their wages, through withholdings from their paychecks. The...

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Donating a Vehicle Might Not Provide the Tax Deduction You Expect

Donating a Vehicle Might Not Provide the Tax Deduction You Expect

All charitable donations aren’t created equal. Some of them provide larger deductions than others. How much or even what you donate isn’t always what 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 You can deduct the vehicle’s fair market value (FMV) if the charity: Uses the vehicle for a significant charitable purpose (such as delivering meals-on-wheels to the elderly), Sells the...

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