Does your employer provide you with group term life insurance?
If so, and depending on the amount of coverage, this employee benefit may create undesirable income tax consequences for you. The first $50,000 of group term life insurance coverage that your employer provides is excluded from taxable income and doesn’t add anything to your income tax bill.
But the employer-paid cost of group term coverage in excess of $50,000 is taxable income to you. It’s included in the taxable wages reported on your Form W-2 — even though you never actually receive it.
Contact us if you have questions about group term coverage or how much it is adding to your tax bill. http://ow.ly/chB350BnyTC
#LifeInsurance #BenefitQuestions
For hundreds of years, businesses have engaged in bartering. It’s popular during times of economic downturns, which many businesses are suffering now due to COVID-19. But if you trade goods or services, be aware of the tax consequences.
#Bartering #TaxQuestions #DYK
RAMSAYCPA.COM
Even if no money changes hands, bartering is a taxable transaction
If your child has been awarded a scholarship, congratulations! But be aware that there may be tax implications.
Scholarships and fellowships are generally tax-free for students at elementary, middle, and high schools, as well as those attending college, graduate school, or accredited vocational schools. It doesn’t matter if the scholarship makes a direct payment to the student or reduces tuition.
However, certain conditions must be met. A scholarship is tax-free if it’s used to pay for: tuition and fees required to attend the school, and fees, books, supplies, and equipment required of students. Room and board, travel, research, and clerical help don’t qualify. Contact us to learn more. http://ow.ly/ETry50BnyRB
#TaxQuestions #ScholarshipQuestions #PayingForSchool
Fall is here! Tell us your favorite fall activity.
#FirstDayOfFall #NewSeason
If you need money due to COVID-19, you may be able to take a tax-free “coronavirus-related distribution” from a retirement plan. The IRS has released guidance explaining who qualifies for one of these distributions.
#COVID19 #CARESAct #COVID19Relief
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What qualifies as a “coronavirus-related distribution” from a retirement plan?
If you’re a partner in a business, you may wonder: Why in some years were you taxed on more partnership income than was distributed to you from the partnership? The answer lies in the way partnerships and partners are taxed.
Unlike regular corporations, partnerships aren’t subject to income tax. Instead, each partner is taxed on the partnership’s earnings whether or not they’re distributed. Similarly, if a partnership has a loss, the loss is passed through to partners. (However, various rules may prevent a partner from currently using their share of a partnership’s loss to offset other income.)
Contact us if you’d like to discuss how you’re taxed as a partner. http://ow.ly/jMGd50BnyOQ
#BusinessPartnershps #TaxQuestions #BusinessTaxes
The business use of websites is widespread.
But determining the proper tax treatment for the costs involved in developing a website can be difficult. The IRS hasn’t yet released formal guidance on when website costs can be deducted, so you must apply existing guidance that’s available on other costs to the issue of website development costs.
The exact treatment of website design costs depends on whether they’re software or hardware and whether they’re part of a start-up business. If you hire third parties to set up and run your website, payments are currently deductible as ordinary and necessary business expenses. Contact us if you have questions or want to plan for website costs. http://ow.ly/bt6f50BSntG
#BusinessQuestions #BusinessAdvice #StartUpCosts
You may use a qualified disclaimer to refuse a bequest from a loved one. Doing so will cause an asset to bypass your estate and go to the next beneficiary in line. Often cited as the main incentive for using a qualified disclaimer is gift and estate tax savings.
Despite lofty gift and estate tax exemption amounts, wealthier individuals, including those who aren’t married and can’t benefit from the unlimited marital deduction or portability, still might have estate tax liability concerns.
By using a disclaimer, you ensure that the exemption won’t be further eroded by the inherited amount. Contact us to learn additional reasons why it may be advantageous to disclaim an inheritance. http://ow.ly/NP3M50BSmft
#GiftTax #EstateTax #InheritanceQuestions
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More parents may owe “nanny tax” this year, due to COVID-19 | Blog
Do you have a nanny, housekeeper, or other household worker? If you pay them cash wages of $2,200 in 2020, you must withhold and pay Social Security and Medicare taxes. Learn about this and other tax obligations for household workers.
#COVID #HouseholdWorkers #COVID19 #NannyTax
https://ramsaycpa.com/blog/2020/10/19/parents-may-owe-nanny-tax-year-due-covid-19/
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More parents may owe “nanny tax” this year, due to COVID-19 | Blog
Still have questions about the President's executive action to defer the employee portion of some workers’ Social Security taxes? Here’s a look at the issue.
#PayrollTax #PayrollTaxDeferral #TaxPlanning
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What does the defer payroll taxes mean for your business? | Blog
Despite the COVID-19 pandemic, many students have gone back to school, either remotely, in person, or a combination of the two.
In any event, parents may be eligible for certain tax breaks to help defray the cost of education. For example, with the American Opportunity Tax Credit (AOTC), you can save a maximum of $2,500 for each full-time college or grad school student. This applies to qualified expenses including tuition, room and board, books and computer equipment, and other supplies.
But the credit is phased out for moderate-to-upper income taxpayers. This is only one of the tax breaks available for education. Contact us for assistance in your situation. http://ow.ly/VZ4r50BREde
#BackToSchool #EducationTaxBreaks #EducationCost
A letter of instruction can provide valuable guidance for your family and act as a road map to the rest of your estate.
#LastWillAndTestament #FamilyRoadMap #LastWishes
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Put pen to paper: How a letter of instruction can benefit family harmony
The current federal estate tax exemption ($11.58 million in 2020) means that many people aren’t concerned with estate tax. But they should still plan to save income taxes.
For example, be careful making lifetime transfers of appreciated assets. It’s true that the assets and future appreciation generated by them are removed from your estate. But the gift carries a potential income tax cost because the recipient receives your basis upon transfer. He or she could face capital gains tax on the sale of the gifted property in the future. If the appreciated property is held until death, under current law, the heir will get a “step-up” in basis that will reduce or wipe out the capital gains tax. http://ow.ly/3K5h50Ci9Dk
#IncomeTax #FederalEstateTax #EstatePlanQuestions #TaxAdvice
Do you buy or lease computer software to use in your business? Do you develop software for use in your business, or for sale or lease to others?
You should be aware that complex rules may apply to determine the tax treatment of the expenses. The rules depend on whether the software is purchased, leased, or developed by your business. For example, you must deduct amounts you pay to rent leased software in the tax year they’re paid, if you’re a cash-method taxpayer, or the tax year for which the rentals are accrued, if you’re an accrual-method taxpayer.
We can assist you in applying the tax rules for treating computer software costs in the way that is most advantageous for you.
http://ow.ly/L15L50Ci9Bw
#TaxQuestions #TaxAdvice #BusinessTaxes
In some cases, a married couple files a joint tax return and one spouse doesn’t disclose all of his or her income. The IRS goes after the other spouse for payment. But there may be “innocent spouse” relief.
#TaxAdvice #FilingAJointTaxReturn #Marriage
RAMSAYCPA.COM
Individual Liability | There may be relief from tax liability of a joint tax return
Today we honor all who have served. Happy Veterans Day.
#VeteransDay #ThankYou #VeteranAppreciation
With the federal gift and estate tax exemption now at a record high $11.58 million for 2020, most estates aren’t taxable. But that doesn’t mean making lifetime gifts isn’t without significant benefits — even if your estate isn’t taxable.
First, gifting removes future appreciation from the estate, saving estate tax for taxpayers with large estates.
Second, the higher exemption isn’t permanent, so taxpayers who don’t have to worry about estate tax now might have to when the exemption is scheduled to return to an inflation-adjusted $5 million after 2025.
Third, there are nontax benefits, such as succession planning or the pleasure of seeing loved ones enjoy the gifts. Contact us for details.
http://ow.ly/C1Rg50BSnSn
#EstatePlanning #GiftAndEstateTax #TaxExemptions
Business owners know employee health care benefits are expensive. Therefore, your business may want to provide some of these benefits through an employer-sponsored Health Savings Account (HSA).
For eligible individuals, HSAs are a tax-advantaged way to set aside funds (or have their employers do so) to meet future medical needs. An eligible employee must be covered by a “high deductible health plan.” For 2020 and 2021, a high deductible health plan has an annual deductible of at least $1,400 for self-only coverage, or $2,800 for family coverage.
For 2020, an individual can contribute $3,550 in ($7,100 for a family) to an HSA. This is increasing to $3,600 and $7,200, respectively, for 2021.
http://ow.ly/mxTx50D6FsY
#HealthCareBenefits #BusinessOwnersAdvice #HSAChanges
There are substantial tax breaks when you buy a heavy SUV for business. Here are the details.
#SUVTaxBreak #BusinessTaxAdvice #SmallBusinessTips
RAMSAYCPA.COM
Drive more savings to your business with the heavy SUV tax break
If you’ve built a nice nest egg in a traditional IRA (including a SEP or SIMPLE-IRA), it’s critical that you plan carefully for withdrawals from these tax-deferred retirement vehicles.
For example, if you need to take money out of a traditional IRA before age 59½, distributions will generally be taxed and may also be subject to a 10% penalty. However, there are several ways to avoid the penalty (but not the regular income tax).
Once you attain age 72, traditional IRA withdrawals must generally begin or you’ll be penalized. However, the CARES Act suspended the required minimum distribution rules for 2020. Contact us with traditional IRA questions and to analyze your retirement planning. http://ow.ly/xfib50D6FmP
#RetirementPlanning #TaxPlan #IRAQuestions
Did You Know: The Section 179 deduction provides a tax benefit to businesses, enabling them to claim immediate deductions for qualified assets, instead of depreciating them over time.
For 2020, the maximum deduction is $1.04 million, subject to a phaseout rule of more than $2.59 million if eligible property is placed in service during the tax year. Even better, the Sec. 179 deduction isn’t the only avenue for immediate tax write-offs for qualified assets. Under the 100% bonus depreciation tax break, the entire cost of eligible assets placed in service in 2020 can be written off last year. But to benefit for this tax year, you needed to buy and place qualifying assets in service by December 31.
Let us help you find other ways to maximize your deductions. http://ow.ly/gLUN50D6Fhc
#DidYouKnow #TaxDeductions #TaxQuestions
Do you know which “deadly sins” can sabotage your estate plan? Here are four.
#EstatePlanning #EstatePlanTips
RAMSAYCPA.COM
Avoid these four estate planning deadly sins | Blog | Ramsay & Associates
Have you been contributing enough to your employer’s 401(k) plan or Roth 401(k)? Here are the contribution limits for this year and the recently announced limits for 2021.
#RetirementPlanning #RetirementSavings #NewLimits
RAMSAYCPA.COM
Maximize your 401(k) plan to save for retirement | Ramsay & Associates
