Category Archive for "Tax Tips"

Lesson from Tax Court: Don’t Trap Yourself!

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Are you considering buying or selling a business? The IRS is often interested in the details of these transactions and by scrutinizing them, may find that sellers aren’t reporting all income. If you’re selling, make sure your books are in…

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How C Corporations Can Pass the Reasonable Compensation Test

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More Lessons from Tax Court: When a C corporation’s shareholder-employees are given generous salaries and benefits, the corporation should be prepared to fight IRS claims that some of the compensation payments are actually disguised dividends, which were paid according to…

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Lessons from Tax Court: Brothers Should Have Filed a Partnership Tax Return

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For federal income tax purposes, an unincorporated joint venture (or other arrangement under which several participants conduct a business or investment activity and split the income and expenses) is generally treated as a partnership. This general rule applies even if…

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IRS Rules for Deducting Home Mortgage Interest

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Unlike most other types of personal interest, home mortgage interest that meets the definition of “qualified residence interest” can be claimed as an itemized deduction on your federal income tax return. Here’s a closer look at the terminology underlying this…

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There’s Still Time to Set Up a SEP for 2016

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Simplified Employee Pensions (SEPs) are stripped-down retirement plans intended for self-employed individuals and small businesses. If you don’t already have a tax-favored retirement plan set up for your business, consider establishing a SEP — plus, if you act quickly enough,…

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How S Corporations Can Save on Federal Employment Taxes

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If you own an unincorporated small business, you may be getting fed up with high self-employment (SE) tax bills. One way to lower your SE tax liability is to convert your business to an S corporation. SE Tax Basics Sole…

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Quick Tax Tip: Don’t Overlook Miscellaneous Itemized Deductions

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Many people itemize deductions on Schedule A of their tax returns, rather than taking the standard deduction. Your tax preparer will generally advise you to do so if your allowable itemized deductions exceed the standard deduction. Most itemized deductions are…

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Quick Tip: ‘Loan Payments’ Can Be Taxable Corporate Distributions to Shareholders

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There can be negative tax consequences when purported loan payments are recast as corporate distributions to shareholders. In some cases, the courts have ruled that withdrawals from two closely held corporations were constructive corporate distributions rather than loan proceeds and repayments….

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Lessons from Tax Court: Defaulting on Retirement Plan Loans May Cause Taxable Distributions

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In one decision, the U.S. Tax Court concluded that the IRS was correct in determining that a taxpayer who failed to make timely payments on loans from her employer’s qualified retirement plan defaulted on the loans and received deemed taxable…

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Lessons From Tax Court: MBA Costs Can Be Deductible, But Don’t Get Carried Away!

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As an employee or self-employed individual, can you deduct the cost of getting an MBA? What about expenses incurred to improve your general knowledge? Two recent U.S. Tax Court decisions provide answers to these questions. But, first, here’s some background…

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