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Make a Deductible IRA Contribution for 2018. It’s Not Too Late!

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Do you want to save more for retirement on a tax-favored basis? If so, and if you qualify, you can make a deductible traditional IRA contribution for the 2018 tax year between now and the tax filing deadline and claim the write-off on your 2018 return. Or you can contribute to a Roth IRA and avoid paying taxes on future withdrawals.

You can potentially make a contribution of up to $5,500 (or $6,500 if you were age 50 or older as of December 31, 2018). If you’re married, your spouse can potentially do the same, thereby doubling your tax benefits.

The deadline for 2018 traditional and Roth contributions for most taxpayers is April 15, 2019 (April 17 for those in Maine and Massachusetts).

There are some ground rules. You must have enough 2018 earned income (from jobs, self-employment or alimony) to equal or exceed your IRA contributions for the tax year. If you’re married, either spouse can provide the necessary earned income. And you can’t make a deductible contribution to a traditional IRA if you were 70½ or older as of December 31, 2018. (But you can make one to a Roth IRA after […]

By |April 2nd, 2019|deductions, ira, roth ira|0 Comments

Understanding How Taxes Factor into an M&A Transaction

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Merger and acquisition activity has been brisk in recent years. If your business is considering merging with or acquiring another business, it’s important to understand how the transaction will be taxed under current law.

Stocks vs. assets

From a tax standpoint, a transaction can basically be structured in two ways:

1. Stock (or ownership interest). A buyer can directly purchase a seller’s ownership interest if the target business is operated as a C or S corporation, a partnership, or a limited liability company (LLC) that’s treated as a partnership for tax purposes.

The now-permanent 21% corporate federal income tax rate under the Tax Cuts and Jobs Act (TCJA) makes buying the stock of a C corporation somewhat more attractive. Reasons: The corporation will pay less tax and generate more after-tax income. Plus, any built-in gains from appreciated corporate assets will be taxed at a lower […]

By |April 2nd, 2019|business, New Tax Laws, tax|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

How to Get Tax Credit for Your Home’s Green Energy Upgrades

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If you have questions about Green Energy and tax breaks, please contact your Linkenheimer CPA.

By |March 25th, 2019|tax credit|0 Comments

2019 Q2 Tax Calendar: Key Deadlines for Businesses and Other Employers

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Here are some of the key tax-related deadlines that apply to businesses and other employers during the second quarter of 2019. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

April 1

  • File with the IRS if you’re an employer that will electronically file 2018 Form 1097, Form 1098, Form 1099 (other than those with an earlier deadline) and/or Form W-2G.
  • If your employees receive tips and you file electronically, file Form 8027.
  • If you’re an Applicable Large Employer and filing electronically, file Forms 1094-C and 1095-C with the IRS. For all other providers of minimum essential coverage filing electronically, file Forms 1094-B and 1095-B with the IRS.

April 15

  • If you’re a calendar-year corporation, file a 2018 income tax return (Form 1120) or file for an automatic six-month extension (Form 7004) and pay any tax due.
  • Corporations pay the first installment of 2019 estimated income taxes.

April 30

  • Employers report income tax withholding and FICA taxes for the first quarter of 2019 (Form 941) and pay any tax due.

May 10

  • Employers […]
By |March 25th, 2019|business, tax deadlines|0 Comments

Are you a California Employer Who Must File State Copies of W2s and 1099s?

Are you a California employer who must file state copies of W2s and 1099s? Returns that are paper-filed with the IRS will be forwarded to the CA Franchise Tax Board (FTB), so there’s no need for you to also file with the FTB. Generally, the IRS and FTB have the same filing requirements. If you have 250 or more returns, electronic filing with the FTB is required. The e-filing due date is 3/31/19. If you use the IRS Combined Federal/State Filing Program, only one filing is necessary. The IRS will forward original or corrected data to the FTB. If you have questions about filing, please contact your Linkenheimer CPA. 

By |March 20th, 2019|1099, business, CA tax, california, employer, ftb, w2|0 Comments

Careful Tax Planning Required for Incentive Stock Options

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Incentive stock options (ISOs) are a popular form of compensation for executives and other employees of corporations. They allow you to buy company stock in the future at a fixed price equal to or greater than the stock’s fair market value on the ISO grant date. If the stock appreciates, you can buy shares at a price below what they’re then trading for. But careful tax planning is required because of the complex rules that apply.

Tax advantages abound

Although ISOs must comply with many rules, they receive tax-favored treatment. You owe no tax when ISOs are granted. You also owe no regular income tax when you exercise ISOs. There could be alternative minimum tax (AMT) consequences, but the AMT is less of a risk now because of the high AMT exemption under the Tax Cuts and Jobs Act.

There are regular income tax consequences when you sell the stock. If you sell the stock after […]

By |February 26th, 2019|business, income tax, New Tax Laws, strategy, tax planning|0 Comments

Best Practices When Filing a Business Interruption Claim

Many companies, especially those that operate in areas prone to natural disasters, should consider business interruption insurance. Unlike a commercial property policy, which may cover certain repairs of damaged property, this coverage generally provides the cash flow to cover revenues lost and expenses incurred while normal operations are suspended because of an applicable event.

But be warned: Business interruption insurance is arguably among the most complicated types of coverage on the market today. Submitting a claim can be time-consuming and requires careful preparation. Here are some best practices to keep in mind:

Notify your insurer immediately. Contact your insurance rep by phone as soon as possible to describe the damage. If your policy has been water-damaged or destroyed, ask him or her to send you a copy.

Review your policy. Read your policy in its entirety to determine how to best present your claim. It’s important to understand the policy’s limits and deductibles before spending time documenting losses that may not be covered.

Practice careful recordkeeping. Maintain accurate records to support your claim. Reorganize your bookkeeping to segregate costs related to the business interruption and keep supporting invoices. Among the necessary documents are:

  • Predisaster financial statements and income tax […]
By |February 14th, 2019|business, disaster|0 Comments

When are LLC Members Subject to Self-Employment Tax?

Limited liability company (LLC) members commonly claim that their distributive shares of LLC income — after deducting compensation for services in the form of guaranteed payments — aren’t subject to self-employment (SE) tax. But the IRS has been cracking down on LLC members it claims have underreported SE income, with some success in court.

SE tax background

Self-employment income is subject to a 12.4% Social Security tax (up to the wage base) and a 2.9% Medicare tax. Generally, if you’re a member of a partnership — including an LLC taxed as a partnership — that conducts a trade or business, you’re considered self-employed.

General partners pay SE tax on all their business income from the partnership, whether it’s distributed or not. Limited partners, however, are subject to SE tax only on any guaranteed payments for services they provide to the partnership. The rationale is that limited partners, who have no management authority, are more akin to passive investors.

By |February 12th, 2019|business, irs, liability|0 Comments

Financial Statements Tell Your Business’s Story, Inside and Out

Ask many entrepreneurs and small business owners to show you their financial statements and they’ll likely open a laptop and show you their bookkeeping software. Although tracking financial transactions is critical, spreadsheets aren’t financial statements.

In short, financial statements are detailed and carefully organized reports about the financial activities and overall position of a business. As any company evolves, it will likely encounter an increasing need to properly generate these reports to build credibility with outside parties, such as investors and lenders, and to make well-informed strategic decisions.

These are the typical components of financial statements:

Income statement. Also known as a profit and loss statement, the income statement shows revenues and expenses for a specified period. To help show which parts of the business are profitable (or not), it should carefully match revenues and expenses.

Balance sheet. This provides a snapshot of a […]

By |February 7th, 2019|business|0 Comments