tax planning - Linkenheimer LLP CPAs & Advisors

Tax-Wise Ways to Take Cash from Your Corporation While Avoiding Dividend Treatment

If you want to withdraw cash from your closely held corporation at a low tax cost, the easiest way is to distribute cash as a dividend. However, a dividend distribution isn’t tax efficient since it’s taxable to you to the extent of your corporation’s “earnings and profits,” but it’s not deductible by the corporation.

5 different approaches

Thankfully, there are some alternative methods that may allow you to withdraw cash from a corporation while avoiding dividend treatment. Here are five possible options:

1. Salary. Reasonable compensation that you, or family members, receive for services rendered to the corporation is deductible by the business. However, it’s also taxable to the recipient(s). The same rule applies to any compensation (in the form of rent) that you receive from the corporation for the use of property. In either case, the amount of compensation must be reasonable in relation to the services rendered or the value […]

By Linkenheimer LLP|2024-02-28T16:52:55+00:00February 28th, 2024|contributions, dividends, tax planning|0 Comments

Filing Jointly or Separately as a Married Couple: What’s the Difference?

When you file your tax return, a tax filing status must be chosen. This status is used to determine your standard deduction, tax rates, eligibility for certain tax breaks and your correct tax.

The five filing statuses are:

Single
Married filing jointly,
Married filing separately,
Head of household, and
Qualifying surviving spouse.

If you’re married, you may wonder if you should file joint or separate tax returns. It depends on your individual tax situation.

In general, you should choose the filing status that results in the lowest tax. But keep in mind that, if you and your spouse file a joint return, each of you is “jointly and severally” liable for the tax on your combined income. And you’re both equally liable for any additional tax the IRS assesses, plus interest and most penalties. That means the IRS can come after either of you to collect the full amount.

Although there are “innocent spouse” provisions in the law that may offer relief, they have limitations. Therefore, even if a joint return results in less tax, some people may still choose to file separately if they want to only be responsible for their own tax. This might […]

By Linkenheimer LLP|2024-02-09T15:06:08+00:00February 8th, 2024|tax implications, tax planning|0 Comments

If You Gave to Charity in 2023, Check to See That You Have Substantiation

Did you donate to charity last year? Acknowledgment letters from the charities you gave to may have already shown up in your mailbox. But if you don’t receive such a letter, can you still claim a deduction for the gift on your 2023 income tax return? It depends.

What the law requires

To prove a charitable donation for which you claim a tax deduction, you must comply with IRS substantiation requirements. For a donation of $250 or more, this includes obtaining a contemporaneous written acknowledgment from the charitable organization stating the amount of the donation, whether you received any goods or services in consideration for the donation and the value of any such goods or services.

“Contemporaneous” means the earlier of:

The date you file your tax return, or
The extended due date of your return.

Therefore, if you made a donation in 2023 but haven’t yet received substantiation from the charity, it’s not too late — as long as you haven’t filed your 2023 return. Contact the charity now and request a written acknowledgment.

Keep in mind that, if you made a cash gift of under $250 with a check or credit card, generally a canceled check, […]

By Linkenheimer LLP|2024-01-31T17:09:24+00:00January 31st, 2024|charity, tax planning|0 Comments

Answers to Your Tax Season Questions

The IRS announced it will open the 2024 income tax return filing season on January 29. That’s when the tax agency will begin accepting and processing 2023 tax year returns.

As the 2024 tax season approaches, we understand that you may have several questions regarding the latest tax laws, deductions, and how to navigate your filings efficiently. At Linkenheimer, we are committed to guiding you through this season with ease and expertise. Here are answers to some of the most frequently asked questions:

1.What are this year’s deadlines?

The filing deadline to submit 2023 returns or file an extension is Monday, April 15, 2024, for most taxpayers. Taxpayers living in Maine or Massachusetts have until April 17, due to state holidays. If taxpayers reside in a federally declared disaster area, they may have additional time to file.

2.When is my return due if I request an extension?

By Linkenheimer LLP|2024-01-23T16:01:15+00:00January 22nd, 2024|tax deadlines, tax planning|0 Comments

4 Ideas That May Help Reduce Your 2023 Tax Bill

If you’re concerned about your 2023 tax bill, there may still be time to reduce it. Here are four quick strategies that may help you trim your taxes before year end.

Accelerate deductions and/or defer income. Certain tax deductions are claimed for the year of payment, such as the mortgage interest deduction. So, if you make your January 2024 payment in December, you can deduct the interest portion on your 2023 tax return (assuming you itemize).

Pushing income into the new year also will reduce your taxable income. If you’re expecting a bonus at work, for example, and you don’t want the income this year, ask if your employer can hold off on paying it until January. If you’re self-employed, you can delay sending invoices until late in December to postpone the revenue to 2024.

You shouldn’t follow this approach if you expect to be in a higher tax bracket next year. Also, if you’re eligible for the qualified business income deduction for pass-through entities, you might reduce the amount of that deduction if you reduce your income.

Take full advantage of retirement contributions. Federal tax law encourages individual taxpayers to make the […]

By Linkenheimer LLP|2023-12-05T16:55:42+00:00December 5th, 2023|individuals, tax planning, year-end|0 Comments