Charles Woodson | TaxConnections

26 Oct 2018

Tax Reform: Big Changes To 529 College Savings Plans

Charles Woodson - Tax Reform And Changes To College Savings Plans

Tax reform added some new taxpayer-advantageous changes to college savings plans. These plans are also known as qualified tuition programs (QTPs) or Sec. 529 plans, named after the part of the Internal Revenue Code that established them.

Background: Sec. 529 plans allow taxpayers to put away larger amounts of money than other tax-advantaged education savings plans do, limited only by the contributor’s gift tax concerns and the contribution limits of the intended plan. There are no limits on the number of contributors, and there are no income or age limitations. The maximum amount that can be contributed per beneficiary (the intended student) is based on the projected cost of college education and will vary between the states’ plans. Some states base their maximum on the projected costs of an in-state four-year education, but others use the cost of the most expensive schools in the U.S., including graduate studies. Most have limits in excess of $200,000, with some topping $370,000. Generally, additional contributions cannot be made once an account reaches the state’s maximum level, but that doesn’t prevent the account from continuing to grow.

Written by Chuck Woodson | Posted in College Savings Plans • Tax Reform

19 Oct 2018

Tax Reform Enables Deferral Of Taxable Gains Into Investments In Opportunity Zones

Charles Woodson- Tax Reform Enables Deferral Of Tax

Those who have a large taxable gain from the sale of a stock, asset, or business and who would like to defer that gain with the possibility of excluding some of it from taxation should investigate a new investment called a qualified opportunity fund (QOF), which was created as part of the recent tax reform.

To help communities that have not recovered from the past decade’s economic downturn, lawmakers included in the Tax Cuts and Jobs Act the new code Sections 1400Z-1 and 1400Z-2, which are intended to promote investments in certain economically distressed communities through QOFs. Investments in QOFs provide unique tax incentives that lawmakers designed to encourage taxpayers to participate in these funds:

Written by Chuck Woodson | Posted in Charles Woodson • Investment In Opportunity Zones

17 Oct 2018

The Affordable Care Act, Medical Insurance And Taxes

The Affordable Care Act (ACA) imposed significant penalties on taxpayers and their families who do not have ACA-compliant health insurance. Even though the tax reform removed these penalties after 2018, they still apply for this year and can be as high as the greater of $2,085 or 2.5% of the family’s household income. So, just about everyone is being forced to carry medical insurance, and it is probably one of your largest expenses. Even though the penalty is going away in 2019, it is important to understand how the health insurance expense is handled for tax purposes so you can get the most tax benefits possible.

Written by Chuck Woodson | Posted in Medical Insurance And Taxes

10 Oct 2018

Rejoice – Business Meals Are Still Deductible

Charles Woodson- Business Meals Are Still Deductible

If you are a business owner who is accustomed to treating clients to sporting events, golf getaways, concerts and the like, you were no doubt saddened by the part of the tax reform that passed last December that did away with the business-related deductions for entertainment, amusement or recreation expenses, beginning in 2018. You can still entertain your clients; you just can’t deduct the costs of doing so as a business expense.

While the ban on deducting business entertainment was quite clear in the revised law, a lingering question among tax experts has been whether the tax reform’s definition of entertainment also applied to business meals, such as when you take a customer or business contact to lunch. Some were saying yes, and others no. Either way, both sides recommended keeping the required receipts and documentation until the issue was clarified.

Written by Chuck Woodson | Posted in Business Meals Deductions

03 Oct 2018

Having Two IRA Rollovers In One Year

Two IRA Rollovers In One Year Tax law permits you to take a distribution from your IRA account, and as long as you return the distribution to your IRA within 60 days, there are no tax ramifications. However, many taxpayers overlook that you are only allowed to do that once in a 12-month period, and violating this rule can have some nasty and unexpected tax ramifications.

The one-year period is measured based on the date a distribution is received. If the second distribution is received before the same date one year later, it is a disqualified rollover.
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Written by Chuck Woodson | Posted in Charles Woodson

19 Sep 2018

Business And Personal Records: Are You Prepared For A Disaster?

Charles Woodson - Business And Personal Tax Records- Are You Prepared For A Disaster

This year’s wildfires, record rains, flooding, tornadoes, hurricanes and potential for earthquakes should all act as reminders that you should be prepared for a disaster. Sure, it will take some effort on your part and you may never be affected by a disaster, but if you are, you will sure wish you had been prepared. It can become a nightmare, whether it impacts you personally or your business.

Business Owners – If you are a business owner, unexpected events can have a devastating effect on your business. You need to be protected from any number of natural and unnatural events, such as fire, computer failure and illness or the loss of key staff, all of which can make it difficult or even impossible to continue day-to-day operations.

Good planning can help you take steps to minimize the impact of a disaster and protect your business. The following recommendations can help your business cope with an unforeseen calamity.

Written by Chuck Woodson | Posted in Charles Woodson

18 Sep 2018

Taxpayers And Gift Tax Return Reporting

Gift taxes were created to prevent wealthy taxpayers from transferring their estates to their beneficiaries via gifts and thus avoid estate taxes when they pass away. But that does not mean only wealthy taxpayers need to be concerned with the gift tax provisions as, under many circumstances, even lower-income taxpayers may find they are liable for filing a gift tax return.

The government uses the gift tax return to keep a perpetual record of a taxpayer’s gifts during their lifetime, and gifts exceeding the amount that is annually exempt from the gift tax reduce the taxpayer’s lifetime estate tax exclusion, which is currently $11.18 million (nearly a two-fold increase from the 2017 exclusion as a result of the Tax Cuts and Jobs Act of 2017).

So what does this have to do with me you ask, since your estate is significantly less than $11.18 million? Well, your estate may be less than $11.18 million now, but what will it be when you pass away? You never know. Another concern is that the IRS requires individuals to file gift tax returns if their gifts while living exceed the annual exemption amount.

Written by Chuck Woodson | Posted in Gift Tax • Lifetime Estate Tax Exclusion

06 Sep 2018

5 Reasons To Amend A Previously Filed Tax Return

The most recent data from the IRS on individual tax returns (from the 2014 tax year) indicates that of 131 million returns filed, about 5 million were expected to be amended. This comes to less than 4 percent, but that projection still affects a significant number of taxpayers. Filing an amended tax return can be a hassle that you definitely want to avoid if possible. But there are some situations where you’ll have to do so, and it’s prudent to seek out the help of a tax advisor who can guide you through the process. Here’s why you may need to file an amended tax return.

Written by Chuck Woodson | Posted in Amend Filed Tax Return • Charles Woodson

05 Sep 2018

Understanding Tax-Deferred Investing

When you are attempting to save money for your children’s future education or your retirement, you may do so in a number of ways, including investing in the stock market, buying real estate for income and appreciation, or simply putting money away in education savings accounts or retirement plans.

Knowing how these various savings vehicles are taxed is important for choosing the ones best suited to your particular circumstances. Let’s begin by examining the tax nuances of IRA accounts.

Individual Retirement Account (IRA) – There are two types of IRA accounts—the traditional and the Roth—and even though they are both IRAs, there is a huge difference in their tax treatment.

Written by Chuck Woodson | Posted in Tax- Deferred Investing • TaxConnections

04 Sep 2018

How High-Income Professionals Can Benefit From The Pass-through Deduction

Charles Woodson - Pass-through Deductions

If you are a high-income professional who is excluded from the new pass-through deduction because you are in a specified service trade or business (SSTB), you may be able to use retirement plan contributions as a work-around so that you can benefit from that new 20% deduction.

An SSTB generally includes the following trades or businesses:

Health (services by physicians, nurses, dentists, veterinarians, and other similar health care providers, although this does not apply to spas and health clubs)
Law
Accounting
Actuarial science
Performing arts (but this does not apply to the services of others in the industry, such as promoters and broadcasters);
Consulting
Athletics
Financial services

Written by Chuck Woodson | Posted in Pass-Through Business Deduction • S-Corp

29 Aug 2018

SALT Deduction – Battle Lines Have Been Set and Swords Have Been Drawn

Charles Woodson - SALT Deduction - Battle Lines Have Been Drawn

Tax reform has limited the federal itemized deduction for state income and local government taxes (including property taxes), collectively referred to as the SALT deduction, to $10,000 a year. This set off a firestorm of protests from the capitals of states with high state income and property taxes. Many called it political retribution by the Republican-controlled Congress against blue states.

As it turns out, CA, CT, NJ and NY are among the states with the nation’s highest combined state income and property taxes, and they happen to be blue states. As a result, the legislatures in these states have passed or are working on legislation at the state level to circumvent the federal $10,000 limit on SALT deductions by transforming tax deductions into charitable deductions through some clever legislation.

Written by Chuck Woodson | Posted in SALT Deduction

28 Aug 2018

After Tax Reform, Which Is Right For You: S Corp or C Corp?

The Tax Cuts and Jobs Act has left many of today’s businesses with big questions. Incorporation remains a hot topic, but this law is shaking things up. It’s quick to assume your company should be one or the other, but without careful consideration of the facts, your organization may end up facing financial loss, hefty tax penalties or missed tax savings.

The goal of this type of incorporation is to minimize tax burdens, but the wrong decision can be costly. In a C Corp, the company pays corporate taxes to the Internal Revenue Service. But, in an S Corp, there’s no entity tax. Rather, taxes are paid through an individual return.

Written by Chuck Woodson | Posted in C-Corp • S-Corp • TaxConnections