Posts

Showing posts from December, 2020

Refresher on Tax-Smart College Savings Strategies for Parents

Image
Refresher on Tax-Smart College Savings Strategies for Parents College costs lots of money these days, so saving for your college-bound child is a big deal. Saving in a tax-smart fashion can really help. In this article, we explain the most helpful federal income tax breaks that are potentially available to college savers. Here goes. College Is Expensive! Data for the 2019-2020 academic year indicates that the average cost of tuition, fees, room, and board was $32,500. Here are some average sticker-price numbers: $12,720 for a public two-year institution at the in-state rate ($3,730 for tuition and fees plus $8,990 for room and board $21,950 for a public four-year institution at the in-state rate ($10,440 for tuition and fees plus $11,510 for room and board) $38,330 for a public four-year institution at the out-of-state rate ($26,820 for tuition and fees plus $11,510 for room and board) $49,879 for a private non-profit four-year institution ($36,880 for tuition and fees plus $

Good News If Your PPP Loan Is for $50,000 or Less

Image
  You are likely at or nearing the stage where you are thinking of applying for your Paycheck Protection Program (PPP) loan forgiveness. Here’s good news: If your PPP loan (a) considered your employees and (b) is for $50,000 or less, your loan forgiveness amount may have increased to 100 percent even though you reduced pay or headcount. And regardless of whether you obtain any additional monetary benefit from this new Small Business Administration (SBA) rule, you will find that the new has made your application for loan forgiveness truly easier—not easy, but easier. Before Before the $50,000-or-less rule, you had to either suffer a reduction in loan forgiveness or meet one of the many exceptions that allowed you to cut annual salaries or hourly wages by more than 25 percent, and/or reduce the average number of employees or average hours paid. After Now, with a PPP loan of $50,000 or less, you don’t have to consider the myriad rules about employees. Regardless of what yo

COVID-19: The IRS Goes Easy on Taxpayers Who Owe Back Taxes

Image
Many taxpayers are struggling to pay their taxes due to the coronavirus (COVID-19) pandemic. Some 11.23 million Americans owe a total of more than $125 billion in back taxes to the IRS. This number is likely to grow. During the first wave of the pandemic in March, the IRS implemented the People First Initiative, which put a temporary halt to most collection efforts. The People First Initiative expired July 15, 2020. The IRS is gradually ramping up enforcement. It began sending out balance due notices to some taxpayers in late October. But the IRS remains aware that substantial numbers of taxpayers cannot pay what they owe right now. To help them, it has promulgated a new Taxpayer Relief Initiative. The Taxpayer Relief Initiative is far more modest in scope than the People First Initiative. But it still provides valuable help to Americans who owe the IRS back taxes. Here are two taxpayer rules of the road: First, don’t ever ignore a tax bill from the IRS. And second, never f

IRS Key Contact Information and Helpful Hints

  Amended Tax Return Status: 866-464-2050 www.irs.gov/filing/wheres-my-amended-return   Apply for an EIN: 800-829-4933 www.irs.gov/businesses/small-businesses-self-employed/employer-id-numbers   Estate and Gift Taxes: 866-699-4083   Excise Tax Help: 866-699-4096   FBAR Online Filing https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html   Get Tax Transcript for Individuals: 800-908-9946 www.irs.gov/individuals/get-transcript   Identity Theft: 800-908-4490   Power of Attorney (Form 2848) Fax: 855-214-7519 for Alabama, Arkansas, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, or West Virginia Fax: 855-214-7522 for Alaska, Arizona, California, Colorado, Hawaii, Idaho, Iowa, Kansas, Minnesota, Missouri, Mon

Five Things to Know About Employing Your Spouse

Image
Hiring your spouse to work as an employee in your business can save you big on taxes. The savings can be particularly great if you are a sole proprietor or have a single-member LLC taxed as a sole proprietorship or as a partnership (as long as your spouse is not a partner). But this arrangement can backfire if you don’t do it the right way. Here are four key things to know about employing your spouse. 1. Pay Your Spouse Tax-Free Employee Benefits, Not Taxable Wages You’ll realize no tax savings if you put your spouse on the payroll and pay him or her cash wages. Employee wages you pay your spouse are fully taxable. Your spouse-employee must pay federal and state income tax on wages. And you and your spouse must each pay half of the Social Security and Medicare tax on wages. As your spouse’s employer, you must withhold these taxes and pay them to the IRS. In effect, when you pay your spouse wages, you’re simply moving the income from one place on your tax return to another. Instead of w

New IRS Efforts to Destroy Tax Deductions for PPP Paid Expenses

Image
From what we know, when lawmakers originally passed the Paycheck Protection Program (PPP), they thought that under its provisions  you did not pay taxes on the forgiveness amount, and  you also could deduct the expenses that you paid with the PPP money. Fly in the Ointment In late April, the IRS issued Notice 2020-32, which asserts that PPP loan recipients may not deduct business expenses paid using the PPP monies that gave rise to forgiveness (defined payroll, rent, utilities, and interest). Lawmakers’ Take In a May 5, 2020, letter to Secretary of the Treasury Steven Mnuchin, Senator Chuck Grassley (chairman of the Committee on Finance), Senator Ron Wyden (ranking member on the Committee on Finance), and Congressman Richard E. Neal (chairman of the Committee on Ways and Means) jointly stated that the IRS got this wrong and that the intent of the CARES Act was for the PPP to be a tax-free grant. The Do-Nothings The IRS was unmoved by the lawmakers’ letter. The IRS position was clear: n