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Recent blog posts

New Law May Boost C Corporations

Posted on in Tax

The recently-signed Protecting Americans from Tax Hikes Act of 2015 reinstates some expired tax benefits retroactively and makes them permanent. On the list is the 100% tax exclusion of the gain from sales of qualified small business stock (QSBS).

Example 1: Nick Oliver creates a company in 2016 and sells all the stock in it in 2022 for a $3 million gain. If the stock meets the requirements to be QSBS, Nick will owe no tax on that $3 million profit. (In most cases, tax-free gains of QSBS are capped at $10 million.)

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It's All Fun and Games Until the Taxes

Posted on in Tax

As 2016 began, people were lining up to buy tickets for the Powerball lottery, which eventually reached a total prize of $1.58 billion. Many states have lotteries, and countless participants win prizes, albeit usually much smaller than the Powerball jackpot. Are such winnings taxable? The answer, in a word, is yes. (As an exception to this rule, some states exempt their lottery winnings from state income tax.)

According to the IRS, lotteries are a form of gambling, along with pastimes such as raffles, horse racing, and casino games. Cash winnings are taxable income, as is the fair value of prizes such as cars and trips. All of your gambling winnings must be declared on Form 1040 of your tax return as “Other Income.”

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Data breaches at large companies often make headlines. The good news is that major corporations have the resources (and, increasingly, the motivation) to protect themselves from electronic intruders. If your company does business with firms in the S&P 500, your personal and business data probably are secure. The bad news? Thwarted hackers and identity thieves may step up attacks on small and medium-sized companies. Such firms often do not have strong defenses in place, so they may be vulnerable.

Consequently, your company’s customer data and banking information may be targets. Dealing with electronic theft can be costly and time consuming—and extremely stressful. If you suffer a data breach and word gets out, damage to your reputation can be severe. Small companies may even be forced out of business as a result.

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Charitable Cash Distribution Rules for Tax Returns

Posted on in Tax

 Charitable donations usually can be deducted on Schedule A of Form 1040, along with other itemized deductions. You should have the required support materials, in case your charitable deduction is questioned. This article will cover the rules on cash contributions: donations by cash, check, electronic funds transfer, debit or credit card, or payroll deduction. Separate rules apply to noncash donations; contact our office if you have questions about noncash contributions.

 To be deductible, your gift must go to a qualified organization. Public charities, nonprofit groups, and educational institutions generally qualify. The IRS provides an app for investigating charitable organizations at https://apps.irs.gov/app/eos/.  You can deduct only the amount that exceeds the fair market value of any benefit you received for your contribution. That’s the case if the amount you gave entitled you to merchandise or admission to an event, such as a charity dinner.

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Avoid Penalties with Tax-Efficient IRA Withdrawals

Posted on in Tax

Many people save for retirement by putting pretax dollars into an employer-sponsored retirement plan, such as a 401(k). Those dollars may be rolled into an IRA, perhaps at retirement or after a change in jobs. An IRA rollover can maintain the tax deferral.  

Ultimately, those pretax dollars will be withdrawn and reported as taxable income. If you are retired then, in a lower tax bracket because you no longer have earned income, the entire process might have saved you considerable amounts of tax. That’s not necessarily the outcome you’ll experience, though. You might find your income is relatively high when you take IRA distributions.

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Going through a divorce can be a stressful experience, and some items may be overlooked. Nevertheless, if you are in this situation, it is critical to plan for  future health insurance. Medical bills and health insurance premiums can be extremely expensive; any lapse in coverage might lead to a financial crisis. The fine points of paying for health insurance after a divorce will vary by your specific circumstances, including the terms of current coverage and state law. That said, here are some general thoughts to help you in this area.

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