Monthly Tax Tips
September 2010
Job hunting? Tax deductions you should know about
If you are looking for a new job, you may be able to deduct some of your job-search expenses on your tax return. One key thing to know is that you must be seeking a job in your current occupation. The deductions do not apply if you are looking for a new career.
Federal Tax Watch
Consider making taxable gifts before end of 2010
To give or not to give – that is the question.
Due to inaction in Congress, estate planning has been frustrating for many in the last year. There is no federal estate tax in 2010, and the odds of any transfer tax reform are rapidly diminishing.
In 2010, there is a flat gift tax rate of 35 percent for taxable gifts in excess of $1 million. It is rarely wise to prepay a tax, but this may be one of those unique times when the family may benefit from doing so.
Married couples may avoid filing partnership return
Married couples who own an unincorporated business are usually classified as partnerships for federal tax purposes.
But a special election allows eligible married co-owners not to file a partnership return and still receive credit for Social Security and Medicare coverage. The election is available if the trade or business joint venture is not incorporated, is owned only by a husband and wife, both spouses materially participate in the business and both spouses elect this treatment.
Severance payments and FICA … The saga continues
The FICA tax treatment of severance pay has been a controversial issue over the past several years and is likely to continue as litigation ensues in the appeal of a recent federal district court case, Quality Stores.
A federal district court viewed the severance payments as wage-replacement social benefits, not remuneration subject to taxation for FICA purposes. The decision concluded that the benefits are supplemental unemployment compensation resulting from a reduction in force.
Court issues decision on reasonable compensation
The IRS has gained another victory in its attempt to subject S corp income of stockholders to employment taxes.
It says that not all S corporation earnings should be subject to employment taxes, but when owners working in the business are not paid reasonable compensation for those efforts, some of the additional earnings should be taxable as wages.
Health insurance credit helps small employers
During the past couple of months, you may have received a postcard from the IRS alerting you to the existence of a new credit for businesses or tax-exempt organizations that provide health insurance to employees.
This credit was created by the Patient Protection and Affordable Care Act, which the president signed into law on March 23, 2010.
Under the new law, eligible small employers may claim a tax credit for payments made to provide health coverage for employees for tax years 2010-2015.
New law taxes indoor tanning services
The Jersey Shores guys may be without the "T" in their GTL (Gym Tan Laundry) status if new taxes on tanning make a visit to indoor salons too costly.
Congress has imposed a new law that imposes a 10 percent excise tax on indoor tanning services.
Tax Court to IRS: LLC members are not limited partners
The IRS has continued to litigate – and lose – cases in which it argues that members of a limited liability company should be treated in the same manner as a limited partner when applying the passive activity loss rules.
Tax Court answers age-old gambling question
Recreational gamblers are generally aware of the rule that limits their tax deduction for gambling losses to the amount of their gambling winnings.
However, questions have arisen as to the timing of that determination. Do you calculate your winning/losing after every bet, at the end of each gambling session, daily, weekly or even less often?
Severance payments may be excluded from FICA tax
A federal district court has concluded that, in certain situations, FICA taxes are not required to be paid on severance payments resulting from employee layoffs.
IRS offers like-kind exchange relief
Many real estate investors use like-kind exchanges, also called Section 1031 exchanges, to defer gain by swapping one investment property for another. The tax law even allows you to use a third party, a qualified intermediary, to execute the exchange for you. During the current economic downturn, some QIs have run into financial difficulties, however.
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General Business/Management Strategies
How to place fair value on minority interests
One plus one equals two, right? If we can agree on this, we can also say that the sum of the parts equals the whole.
But, as logical as this theory may seem, it may not hold true when determining the value of a shareholder’s minority interest in a business.
(8/30/2010)
Use wire transfers with care
Moving money by wire transfer eliminates some of the risk of forgery and fraud schemes of using paper checks. But if you don’t have proper procedures in place, it can also be a way that unscrupulous people can move enormous amounts of money out of your accounts, possibly into non-U.S. accounts. (8/16/2010)
How to reduce stress in the workplace
Stress has been described as America's No. 1 health problem. Some studies suggest that 75 percent of all primary care physician visits are for stress-related problems. Today, concerns about the economy and national security weigh heavily on the minds of employees. While employers can do little to reduce these stressors, they can work to reduce job-related stress by focusing on the most frequent causes. (8/2/2010)
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