taxable income

Protective Refund Claims for ACA-Related Income Taxes

Earlier this year, the U.S. Supreme Court recently announced they would hear a case that challenges whether the individual mandate under the Patient Protection and Affordable Care Act (ACA) is constitutional. It is possible that if the mandate is ruled to be unconstitutional, incomes taxes established under the ACA may effectively be repealed and any ACA-related income taxes paid in prior years may be refundable if a timely claim for a refund is filed. The Supreme Court will hear the case this fall and they are expected to render a decision by early 2021.

Income taxes established under ACA went into effect in 2013. These include the Net Investment Individual Income Tax (NIIT), which has a rate of 3.8% for certain net investment income of individuals, trusts and estates. Taxpayers must have both net investment income and modified adjusted gross income over the following thresholds for the NIIT to apply.

Filing StatusThreshold Amount
Married filing jointly$250,000
Married filing separately$125,000
Single$200,000
Head of household$200,000
Qualifying widower with dependent$250,000

In addition, the ACA tax includes a .9% Additional Medicare Tax, which applies to individuals’ […]

By |July 31st, 2020|investment, irs, refunds, tax planning, taxable income|0 Comments

Even If No Money Changes Hands, Bartering Is A Taxable Transaction

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During the COVID-19 pandemic, many small businesses are strapped for cash. They may find it beneficial to barter for goods and services instead of paying cash for them. If your business gets involved in bartering, remember that the fair market value of goods that you receive in bartering is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties.

For example, if a computer consultant agrees to exchange services with an advertising agency, both parties are taxed on the fair market value of the services received. This is the amount they would normally charge for the same services. If the parties agree to the value of the services in advance, that will be considered the fair market value unless there is contrary evidence.

In addition, if services are exchanged for property, income is realized. For example, if a construction firm does work for a retail business in exchange for unsold inventory, it will have income equal to the […]

By |July 20th, 2020|business, credit, irs, tax planning, taxable income|0 Comments

Answers To Your Questions About 2020 Individual Tax Limits

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Right now, you may be more concerned about your 2019 tax bill than you are about your 2020 tax situation. That’s understandable because your 2019 individual tax return is due to be filed in less than three months.

However, it’s a good idea to familiarize yourself with tax-related amounts that may have changed for 2020. For example, the amount of money you can put into a 401(k) plan has increased and you may want to start making contributions as early in the year as possible because retirement plan contributions will lower your taxable income.

Note: Not all tax figures are adjusted for inflation and even if they are, they may be unchanged or change only slightly each year due to low inflation. In addition, some tax amounts can only change with new tax legislation.

So below are some Q&As about tax-related figures for this year.

How much can I contribute to an IRA […]

Bartering: A Taxable Transaction Even if Your Business Exchanges No Cash

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Small businesses may find it beneficial to barter for goods and services instead of paying cash for them. If your business engages in bartering, be aware that the fair market value of goods that you receive in bartering is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties.

Income is also realized if services are exchanged for property. For example, if a construction firm does work for a retail business in exchange for unsold inventory, it will have income equal to the fair market value of the inventory.

Barter clubs

Many business owners join barter clubs that facilitate barter exchanges. In general, these clubs use a system of “credit units” that are awarded to members who provide goods and services. The credits can be redeemed for goods and services from other members.

Bartering is generally taxable in the year it occurs. But if […]

Beware of the 3.8% Medicare Surtax for Estates and Trusts

Ever since the United States Supreme Court upheld the Affordable Care Act, most of the focus has been on how this increased tax effects individual taxpayers.  As determined by this decision, individual taxpayers with modified adjusted gross income over $200,000 (or $250,000 for married taxpayers) are subject to an increased 3.8%  Medicare surtax on certain investment income beginning in 2013.


Little focus has been given on how this increased Medicare surtax will increase tax liabilities for trusts and estates.  Income in an irrevocable trust is either taxed to the trust or to the trust beneficiaries.  If income in the trust or estate is accumulated at the trust or estate level, then the trust or estate pays the income tax.  If the income is distributed to the beneficiaries, however, the trust receives an income tax deduction for the amount of the distributable net income (DNI) and the beneficiaries report the taxable income. 


In the case of a trust or estate, the 3.8% Medicare surcharge is imposed on the lesser of either undistributed net investment income or the excess of adjusted gross income over the highest estate or trust income tax bracket.  For 2013, the highest trust income tax bracket begins at $11,950, […]