All planning involves looking ahead to reach a specific goal. People are inclined to make careful plans when they consider making a home purchase, accepting a new job, taking a dream vacation, or investing for retirement. But when it comes to taxes, they often leave matters to chance, perhaps not realizing the tax savings that can result. THE GOAL OF TAX PLANNING IS TO SAVE YOU MONEY! (more…)

There are two false tax rumors that have been circulating around and troubling clients.  To set the record straight, a brief explanation of both rumors is provided below.

False Rumor #1 – “Employer-paid health insurance benefits will be taxable in 2011.”

Not true!  Starting in 2011, the amount of employer-paid healthcare benefits was to be included on the W-2 as an information entry, but is not included in the taxable wages on the W-2.  Many sources failed to properly analyze this requirement and reported that the benefits would become taxable in 2011. (more…)

There is a fraud risk related to the Electronic Federal Tax Payment System (EFTPS) that you need to be aware of. 

Always remember that the IRS does not initiate taxpayer contact by e-mail.  Therefore, if you receive an e-mail that appears to be from a tax agency telling you that your federal electronic funds transfer (EFT) payment did not go through, it is part of a phishing scheme and you should not respond to it.  The perpetrators of this scheme have duplicated the IRS’s EFTPS logo and other characteristics of that system in an attempt to convince taxpayers that it is an official e-mail from the IRS.  It is not! (more…)

One of the greatest benefits of the tax code is the special tax rates that currently apply to gain recognized from the sale of capital assets held for more than a year (long-term).  The special tax rates apply to virtually all capital assets including land, improved real estate, your main and vacation homes, and business assets in excess of the accumulated depreciation previously deducted.  These special long-term capital gains (LTCG) rates for 2010 are 0% (yes that is correct – zero) to the extent your regular tax rate is in the 15% or 10% brackets and 15% for most other capital gains.  These rates also apply for the alternative minimum tax.  The following are some issues and strategies that you may find of interest before year’s end. (more…)

2010 is the first year in which taxpayers—including married taxpayers filing separately—are able to convert funds in regular IRAs (including SEP and Simple IRAs) to Roth IRAs, regardless of income level.  This can provide a significant opportunity for certain taxpayers.

There are several advantages to a Roth IRA – All future earnings and distributions at retirement generally will be tax-free, and Roth IRAs are not subject to the required minimum distribution rules.  Because distributions from Roth IRAs are tax-free (if they are qualified distributions), they may keep a taxpayer from being taxed in a higher tax bracket than would otherwise apply if he were withdrawing taxable distributions.  Roth IRAs don’t enter into the calculation of tax owed on Social Security payments and have no effect on AGI-based deductions.  What’s more, the benefits flow through to beneficiaries of inherited Roth IRA accounts, who also can make tax-free withdrawals from such accounts (beneficiaries, however, are subject to the same annual post-death minimum distribution rules that apply to beneficiaries of regular IRAs). (more…)

The IRS announced that it is beginning a new program using data from employees’ Forms 4137, Social Security and Medicare Tax on Unreported Tip Income, to determine the employer’s share of Social Security and Medicare taxes on unreported tips.  While employers in industries where tipping is common generally know that they must pay the employer’s share of Social Security and Medicare taxes on tips, most don’t realize that they also may be liable for these taxes on tips in excess of $20 per month that their employees don’t report to them—probably because the IRS has never before made an effort to collect the employer’s share of these taxes. (more…)

There are two tax incentives to induce businesses to hire, during 2010, individuals who have been unemployed for at least 60 days.  The first incentive exempts the employer from the matching 6.2% Social Security payroll tax on a qualifying employee’s wages for the remainder of 2010.

The second incentive is a Retention Credit, available on the employer’s 2011 tax return, for retaining the employee hired in 2010 on payroll for a continuous 52-week period.  The Retention Credit is a non-refundable tax credit equal to the lesser of $1,000 or 6.2% of the employee’s wages for the year.   (more…)