The Hazards of Selling to a Related Party

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  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...]

How to Decrease Your Payroll Taxes with a Common Paymaster

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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...]

Reassessing Some SALT Deduction Workarounds

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state and local tax

In the runup to the 2017 tax reform package, the State And Local Tax deduction “loophole” fell into the crosshairs. Lawmakers predicted that lowering the SALT limit to $10,000 a year would raise hundreds of billions of dollars. Besides, they asserted, this change will not affect 90 percent of taxpayers. That’s very small comfort to a client who happens to the in the other 10 percent. Furthermore, if your tax client is among the 5 percent of Americans who pay significant state and local taxes, … [Read more...]

Why Are Tax Industry Experts Leary of Proposed Tax Cuts?

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We don’t always agree and regardless the issue, there are always arguments on both sides, and discussions are often heated. Expect nothing less toward proposed tax cuts by the Treasury Department. They are bringing forth both anticipation and trepidation by a growing number of industry experts and economists. The plan is called unaffordable and unfair. A common concern is that capital gains and dividends are taxed at a lower rate than income earned through actual work. It’s also being … [Read more...]

Are Your Clients Taking Advantage of Sellable Tax Credits?

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State governments realize the economic benefit of spending billions of dollars on tax credits. Are your clients taking advantage of this? Many are not due to low tax liability. Nonprofit organizations or start up businesses that generate very little income are among them. Some states have found a solution. They have created a secondary market by enticing these types of businesses with transferable or sellable tax credits. The secondary market incentives are sophisticated and growing at a … [Read more...]

Is The New Tax Cut For Qualified Improvement Property Unfair to Restaurants?

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Some laws are enacted because they appear to provide solutions to issues in need of resolution. That seemed to have been the case with the Tax Cuts and Jobs Act (TCJA) for depreciation of qualified improvement property (QIP), enacted December 2017. It had an immediate impact on 2017 taxes filed after January this year. Instead of offering a solution, it is determined this was the result of a legislative oversight. No doubt a change was necessary, but things didn’t turn out as planned. One … [Read more...]

IRS Encourages Tax Pros to WARN Clients: ID Theft Against Employers

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A swelling wave of identity theft attempts against employers has the IRS pretty concerned. So much so, it is offering advice about how business owners can be on the defense to protect their businesses.   As tax pros, we all know identity theft has been around a long time and if someone falls prey, it takes a tremendous amount of work to repair the damage. In some cases it’s impossible.   Identity theft itself is nothing new. Stolen Employer Identification Numbers (EINs) … [Read more...]

Taxpayers Proceed With Caution Warns the IRS

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Not so fast, taxpayers! Proceed with caution, warns the IRS, after New York and New Jersey approved workarounds involving charitable organizations.   Earlier this year New Jersey Governor Phil Murphy and New York Governor Andrew Cuomo signed new legislations in their respective states allowing local governments to set up charitable organizations that can accept property tax payments. Homeowners can declare those “donations” as gifts to offset federal taxable income.   The … [Read more...]

Sole Proprietorships and Corporations: Do Clients Understand the Difference?

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Sole Proprietors and Corporations Have you noticed? Small businesses have been populating the business landscape in clusters? They represent all industries, sizes, and varieties. Some make it a few months and others are in it for the long haul. Where Did They Come From? The US has always been ripe for entrepreneurism. But the economic downturn earlier this century, coupled with impacts made by technological breakthroughs, made self-employment attractive to recently unemployed people … [Read more...]

Brace For the Impact Federal Tax Cap on State and Local Deductions

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Will new charitable tax credits being considered by California and other states have any impact on the 2017 federal tax overhaul’s cap on state and local deductions? Some say yes, these will work with certain qualifications. Law professor David Gamage and seven tax law professors argue that federal law enables states to offer tax credits for charitable contributions to state programs in such a way that they could circumvent the SALT deduction cap. Gamage says when structuring a state-level … [Read more...]