Save Tax Dollars through Upstreaming

Upstreaming is a tried and true method of saving on taxes by skillfully moving income from one subsidiary to its parent. Things are rarely simple when it comes to taxes, but there are various scenarios where upstreaming can produce substantial tax savings. Of course, in a business situation, you will need to show there was a business reason for your actions beyond just saving on taxes, and you will need to document your actions in preparation for any future audit. Upstream to a Company in … [Read more...]

Five Tips to Avoiding the Tax Hazards of Renting to Relatives

If a taxpayer has more than one home, renting one to a relative may appear at first glance to be a win/win. The son, daughter, cousin or old mother would take good care of the property, and the taxpayer could help their relative by giving them a break on their rent. But the taxpayer may not be aware that the tax consequences of renting to related parties are different from renting to others and may easily trigger a trap that reclassifies rental property into a personal residence. When that … [Read more...]

How 1400z Opportunity Zone Investment Drastically Reduces Capital Gains

To taxpayers facing large capital gains, very few strategies exist to defer or eliminate the tax altogether. That all changed with tax reform.  The Tax Cuts and Jobs Act passed at the end of December 2017 created major changes in the tax structure, and not the least of these may be found in IRC Sections 1400Z-1 and 1400Z-2, the code sections that govern Opportunity Zones. These changes enable investors to take advantage of heretofore unavailable tax breaks that can save huge amounts of money … [Read more...]

Good News for the Rich: No Clawback on the Recent Doubled Tax Exemption for Estates and Gifts

The federal government taxes large estates, but under the recent Tax Cuts and Jobs Act, (TCJA), P.L. 115-97, which went into effect January 1, 2018, the exemption for estate and gift taxes doubled – temporarily. The double exemption disappears after 2025 unless Congress extends it.  There has been concern that when the exemption goes back to normal, those who took advantage of the boon might under some circumstances have to pay the piper for those taxes. This is often referred to as a … [Read more...]

IRS Services Are Available During the Government Shutdown: What You Need to Know

As the longest government shutdown in US history continues, many Americans are wondering how IRS services are being affected. An IRS-wide furlough began on December 22, 2018. What makes the shutdown even more challenging for the IRS is that most provisions of the new tax laws went into effect January 1, 2018, and they were in the midst of training for them. However, the IRS is scheduled to begin accepting tax returns for individuals on schedule on January 28. (The IRS began accepting business … [Read more...]

The Hazards of Selling to a Related Party

  You may have a client who comes to you with a “great idea” to sell their property to a family member at a loss in order to get a juicy tax deduction. Your client may ask the family member to resell it to them later, or maybe your client plans to just continue to use the land and keep it in the family. Unfortunately for your client, this is strictly forbidden by 26 U.S. Code § 267. This section of the code relates to sales within a family, some corporate sales, and some transfers … [Read more...]

Why and How to Revoke an S Corporation: What You Need to Know

Many small businesses operate as S corporations to avoid the complexities of C corporations and to avoid double taxation. C corporations are taxed before money is distributed to their shareholders who are taxed yet again. On the other hand, the income of S corporations flows directly to shareholders who pay for taxes on their personal returns.  There sometimes a day, however, when an organization outgrows its S corp status, and the company would like to revoke it in favor of operating as a C … [Read more...]

How to Decrease Your Payroll Taxes with a Common Paymaster

Today’s large businesses are often comprised of many different companies such as subsidiaries in various locations. If some employees work for more than one of those related companies, and if the companies have their own payrolls, both the business and the affected employees may be overpaying FICA (social security) and FUTA (federal unemployment) taxes. Fortunately, the federal government provides a solution. Multi-entity corporations may avoid overpaying payroll taxes and duplicating payroll … [Read more...]

Breaking Down the New Mortgage Deduction Rules

Homebuying and homebuilding are good for the economy. That fact, and not lawmakers’ desire to give working families a break, is what makes the mortgage interest deduction a sacred cow. The government sees the deduction as something of a reverse stimulus. By encouraging people to buy houses, and therefore encourage builders to construct houses, the economy prospers. Not all nations see it that way. Some industrialized countries, most recently Japan, have either tinkered with the MID or done … [Read more...]

Dealing With The New Alimony Deduction Rules

For about a generation, spousal support payments have been tax-deductible for obligors and alimony receipts have been tax-reportable for obliges. Effective January 2019, the times they are a-changin’. Payments will no longer be tax deductible and receipts will no longer be tax-reportable. According to some, the change is just a ripple in the ocean. According to others, it’s the biggest change to family law since California began the no-fault divorce revolution in 1969. From an income tax … [Read more...]