tax planning

Thinking About Moving to Another State in Retirement? Don’t Forget About Taxes

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When you retire, you may consider moving to another state — say, for the weather or to be closer to your loved ones. Don’t forget to factor state and local taxes into the equation. Establishing residency for state tax purposes may be more complicated than it initially appears to be.

Identify all applicable taxes

It may seem like a no-brainer to simply move to a state with no personal income tax. But, to make a good decision, you must consider all taxes that can potentially apply to a state resident. In addition to income taxes, these may include property taxes, sales taxes and estate taxes.

If the states you’re considering have an income tax, look at what types of income they tax. Some states, for example, don’t tax wages but do tax interest and dividends. And some states offer tax breaks for pension payments, retirement plan distributions and Social Security payments.

Watch out for state estate tax

The federal estate tax currently doesn’t apply to many people. For 2019, the federal estate tax exemption is $11.4 million ($22.8 million for a married couple). But some states levy estate tax with a much lower exemption and […]

By |June 6th, 2019|property tax, retirement, sales tax, tax planning, taxes|0 Comments

Employers: Be Aware (or Beware) of a Harsh Payroll Tax Penalty

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If federal income tax and employment taxes (including Social Security) are withheld from employees’ paychecks and not handed over to the IRS, a harsh penalty can be imposed. To make matters worse, the penalty can be assessed personally against a “responsible individual.”

If a business makes payroll tax payments late, there are escalating penalties. And if an employer fails to make them, the IRS will crack down hard. With the “Trust Fund Recovery Penalty,” also known as the “100% Penalty,” the IRS can assess the entire unpaid amount against a responsible person who willfully fails to comply with the law.

Some business owners and executives facing a cash flow crunch may be tempted to dip into the payroll taxes withheld from employees. They may think, “I’ll send the money in later when it comes in from another source.” Bad idea!

No corporate protection

The corporate veil won’t shield corporate officers in these cases. Unlike some other liability protections that a corporation or limited liability company may have, business owners and executives can’t escape personal liability for payroll tax debts.

Once the IRS asserts the penalty, it can file a lien or take levy or seizure action […]

By |June 6th, 2019|employer, social security, tax, tax planning|0 Comments

Disabled Veterans in California Get a Tax Break

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Disabled veterans in California get a tax break. The California State Board of Equalization has announced increases in the property exemption amounts and the household income limit for disabled veterans’ exemptions for 2020. For the 2020 assessment year, the exemption amounts are $143,273 for the basic exemption (up from $139,437 for 2019) and $214,910 for the low-income exemption (up from $209,156 for 2019). The household income limit for those claiming the low-income exemption is $64,337 (up from $62,6147 for 2019). Contact your Linkenheimer CPA with questions.

By |June 3rd, 2019|tax planning, taxpayer|0 Comments

The Chances of IRS Audit are Down But You Should Still be Prepared

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The IRS just released its audit statistics for the 2018 fiscal year, and fewer taxpayers had their returns examined as compared with prior years. However, even though a small percentage of tax returns are being chosen for audit these days, that will be little consolation if yours is one of them.

Latest statistics

Overall, just 0.59% of individual tax returns were audited in 2018, as compared with 0.62% in 2017. This was the lowest percentage of audits conducted since 2002.

However, as in the past, those with very high incomes face greater odds. For example, in 2018, 2.21% of taxpayers with adjusted gross incomes (AGIs) of between $1 million and $5 million were audited (down from 3.52% in 2017).

The richest taxpayers, those with AGIs of $10 million and more, experienced a steep decline in audits. In 2018, 6.66% of their returns were audited, compared with 14.52% in 2017.

By |June 3rd, 2019|audit, irs, tax planning, taxpayer|0 Comments

Three Questions You May Have After You File Your Return

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Once your 2018 tax return has been successfully filed with the IRS, you may still have some questions. Here are brief answers to three questions that we’re frequently asked at this time of year.

Question #1: What tax records can I throw away now?

At a minimum, keep tax records related to your return for as long as the IRS can audit your return or assess additional taxes. In general, the statute of limitations is three years after you file your return. So you can generally get rid of most records related to tax returns for 2015 and earlier years. (If you filed an extension for your 2015 return, hold on to your records until at least three years from when you filed the extended return.)

However, the statute of limitations extends to six years for taxpayers who understate their gross income by more than 25%.

You’ll need to hang on to […]

By |April 18th, 2019|irs, New Tax Laws, tax planning, tax time|0 Comments

Disaster Relief Continues for Certain Californians

Disaster relief continues for certain Californians. The CA Franchise Tax Board has updated its Disaster Loss webpage, for victims of storms and fires that plagued the state in recent months. The updated list now includes many CA counties that suffered storm damage in 2019, and several counties which suffered wildfires in late 2018. Taxpayers directly affected by federally declared disasters may be eligible for tax relief, including extensions of time to file and pay taxes until 4/30/19. If you have questions, please contact your Linkenheimer CPA. Here’s the full list and more information: https://bit.ly/298JVSt 

By |April 11th, 2019|disaster, tax, tax planning|0 Comments

Don’t Forget: Tax Deadline is April 15th

If you’re a California resident who owes estimated CA tax payments, your next payment due date is rolling up fast. By April 15, the first installment of your 2019 state tax is due. Generally, you must make estimated payments if you expect to owe at least $500 for 2019, after you subtract withholding or credits you may have, or face penalties. To learn more about who is required to make estimated payments, how to pay, and how to obtain a handy worksheet to calculate the correct amount, click on https://bit.ly/2FJ03wl or contact your Linkenheimer CPA for help.

By |April 11th, 2019|tax deadlines, tax planning|0 Comments

Divorcing Business Owners Need to Pay Attention to Tax Implications

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If you’re getting a divorce, you know it’s a highly stressful time. But if you’re a business owner, tax issues can complicate matters even more. Your business ownership interest is one of your biggest personal assets and your marital property will include all or part of it.

Transferring property tax-free

You can generally divide most assets, including cash and business ownership interests, between you and your soon-to-be ex-spouse without any federal income or gift tax consequences. When an asset falls under this tax-free transfer rule, the spouse who receives the asset takes over its existing tax basis (for tax gain or loss purposes) and its existing holding period (for short-term or long-term holding period purposes).

For example, let’s say that, under the terms of your divorce agreement, you give your house to your spouse in exchange for keeping 100% of the stock in your business. That asset swap would be tax-free. And the existing basis and holding periods for the home and the stock would carry over to the person who receives them.

Tax-free transfers can occur before the divorce or at the time it becomes final. Tax-free treatment also applies to post-divorce transfers […]

By |April 8th, 2019|401k, business, ira, stock, tax planning|0 Comments

Still Working After Age 70½? You May Not Have to Begin 401(k) Withdrawals

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If you participate in a qualified retirement plan, such as a 401(k), you must generally begin taking required withdrawals from the plan no later than April 1 of the year after which you turn age 70½. However, there’s an exception that applies to certain plan participants who are still working for the entire year in which they turn 70½.

The basics of RMDs

Required minimum distributions (RMDs) are the amounts you’re legally required to withdraw from your qualified retirement plans and traditional IRAs after reaching age 70½. Essentially, the tax law requires you to tap into your retirement assets — and begin paying taxes on them — whether you want to or not.

Under the tax code, RMDs must begin to be taken from qualified pension, profit sharing and stock bonus plans by a certain date. That date is April 1 of the year following the later of the calendar year in which an employee:

  • Reaches age 70½, or
  • Retires from employment with the employer maintaining the plan under the “still working” exception.

Once they begin, RMDs must generally continue each year. The tax penalty for withdrawing less than the RMD amount is 50% of the portion […]

By |March 26th, 2019|401k, ira, retirement, tax planning|0 Comments

There’s Still Time for Small Business Owners to Set Up a SEP Retirement Plan for Last Year

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If you own a business and don’t have a tax-advantaged retirement plan, it’s not too late to establish one and reduce your 2018 tax bill. A Simplified Employee Pension (SEP) can still be set up for 2018, and you can make contributions to it that you can deduct on your 2018 income tax return.

Contribution deadlines

A SEP can be set up as late as the due date (including extensions) of your income tax return for the tax year for which the SEP is to first apply. That means you can establish a SEP for 2018 in 2019 as long as you do it before your 2018 return filing deadline. You have until the same deadline to make 2018 contributions and still claim a potentially substantial deduction on your 2018 return.

Generally, other types of retirement plans would have to have been established by December 31, 2018, in order for 2018 contributions to be made (though many of these plans do allow 2018 contributions to be made in 2019).

Discretionary contributions

With a SEP, you can decide how much to contribute each year. You aren’t obligated to make any certain minimum contributions annually.

But, if your business […]

By |March 11th, 2019|business, contributions, investment, ira, tax planning, year-end|0 Comments