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Death and Taxes

When someone dies, an executor is appointed to identify the assets of the estate, pay its debts, and distribute what is left to the heirs. What some not realize is that the executor is also responsible for arranging to pay any taxes and filing the appropriate tax forms. This is a situation that can become very complicated for several reasons, so here are a few details to help get you through a difficult time.
For an unmarried person, the last Form 1040 should be filed the same as it would normally. It would cover the time from January 1 to the day of their death. There is the possibility of being able to deduct uninsured final medical expenses. If they are married, and the surviving spouse remains single until December 31 of that year, then the last Form 1040 can be filed as a joint return. In this way, they can continue to enjoy more favorable income tax rules. This may even be possible for the next 2 years.
Dealing with the death of a loved one is stressful for so many reason…

International Rules Still Not Complete

After over a year and a half since the passage of the Tax Cuts and Jobs Act (TCJA), the regulations that apply to many international transactions are still not finalized. There are issues that still need to be addressed as companies are unsure how to proceed. They are making some conservative guesses but are really looking for clarity from the Internal Revenue Service (IRS).
For example, there is the Foreign Derived Intangible Income (FDII) provision. This is a potential deduction for businesses, but it can only be claimed if the business can prove that what it sells is for foreign use. In this way, a company’s decision on where to locate its headquarters will not be based on how it can avoid paying taxes where most of its goods are sold. Companies are unwilling to alter their normal business operations to prove that they qualify for FDII. The IRS has indicated that there will be more options given to prove that they qualify. This rule was proposed on March 4 and there will …

How to Deal with the SALT Limit

One of the most talked about issues surrounding the Tax Cuts and Jobs Act (TCJA) was the deduction limitation of $10,000 when applying State and Local Taxes (SALT) to Federal taxes. One immediate idea that certain high tax states proposed, was to create charitable accounts where Taxpayers could give money to states to pay taxes, and yet have them considered as charitable contributions. In this way people could make up for the Tax deductions they lost. Some states loved the idea and started to put it into action, while the Internal Revenue Service (IRS) said it would not work. The rules have now been established.
One of the rules being applied should be somewhat familiar. The whole idea behind a truly charitable donation is that a person is giving money or other goods in exchange for nothing. If there is an expectation of something in return, then it is really a payment and no charity is involved. From the perspective of the IRS, if a Taxpayer were to contribute in this way, th…

Foreign Individuals Dealing with New US Tax Surprises

One of the goals of the 2017 Tax Cuts and Jobs Act (TCJA) was to keep multinational corporations from hiding profits offshore to avoid paying US taxes. While this Tax Reform has taken great steps toward reaching this goal, unanticipated results have come to be seen. In applying this law, any foreigner who becomes a US citizen must report the global income of any family businesses in the US and pay the tax on the income of those businesses.
          The changing of tax rules in this area do not only impact business interests, these can be applied to domestic trusts,partnerships, and estates. This is a sharp increase in tax responsibility that many are unprepared for. This is a real situation that many are dealing with and have very limited options moving forward. With guidance, some can navigate this tricky situation, without having to renounce their claims or move out of the country.

Private Companies are now Collecting Business Tax Debt

In 2017, the Internal Revenue Service (IRS) put into action a plan to use private debt collection agencies to collect unpaid taxes from individuals that met certain criteria. This started from a 2015 law that allowed for all inactive tax debts to be sent to these companies. These companies will now have the authority to collect from businesses.
The goal is to collect unpaid employment taxes, which the IRS always contends is the legal responsibility of every employer to collect and pay. These debts are typically higher than individuals. Companies are being assigned these cases because they are considered inactive. Hundreds of cases per week will be assigned to these 4 authorized debt collection agencies. If you have a business debt that has not been resolved, the IRS has not forgotten.

Time to Check Your Business Credits and Deductions!

Deductions and credits help the bottom line for every self-employed person and small business owner. With most of the year still ahead, this is a good time to check your options and eligibility which will allow you the ability to plan for the future.
Business Expenses. To be considered a deductible business expense, the expense must be considered ordinary (common and acceptable in this trade) andnecessary (helpful and appropriate for the business). For example, if part of a Taxpayer’s home is used for a business, some of the mortgage interest insurance, utilities and depreciation can be deducted. Usually rent can be considered a deductible expense if the property is used for the business.
Business Credits. A new credit that was created by the Tax Cuts and Jobs Act (TCJA) is a credit for paid family and medical leave. To be eligible, employers must have a written policy that meets certain requirements and pays at least 2 weeks of paid leave to full time employees on leave. The …

New Form W-4 Draft is Here!

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After a time of adjustment, the Form W-4 has been redesigned and is available for comment from the public. It is expected to be used in 2020. This is the form used to determine how much tax is to be withheld from an employee’s paycheck. This version will reflect the changes brought on by the Tax Cuts and Jobs Act (TCJA). A portion of the draft has been provided below.
          It will require the Taxpayer to list every position they have. Essentially, they must tell their employer if they are holding another job, which is becoming increasingly common in the age of the side hustle. This might make some uncomfortable, but it is important to get the right balance on your Paycheck Withholding. This year, many were shocked to see their refunds shrink, or turn into a surprise debt. This is because the TCJA changed the withholding tables, and often this meant more take home pay during the year.  In the end, the Internal Revenue Service (IRS) will keep track of what it feels is the …