Tag Archive for taxes

Planning Your IRA Withdrawal?

Retire word with clock image with hi-res rendered artwork that could be used for any graphic design.

Advance planning can, in many cases, minimize or even avoid taxes on IRA distributions and other qualified plan distributions. When contemplating future retirement and when to begin tapping taxable IRA and other qualified retirement accounts, taxpayers need to consider a number of important issues.

Early Distributions (before 59.5) – If funds are withdrawn before reaching age 59 ½, the taxpayer is also subject to a 10% early withdrawal penalty (and state penalties if applicable) in addition to the income tax on the IRA distribution, unless what is referred to as the substantially equal payment exemption is utilized. Under this exception, an early retiree can begin taking substantially equal payments at least once a year over the owner’s life or joint lives of the owner and designated beneficiary. The payments must Read more

What Has Jeeves Got To Do With Taxes?

TaxConnections Picture - Jeeves - white - square

If you know Jeeves, he is the fictional character in the series of humorous (read rib-tickling funny) short stories by P.G. Wodehouse. Jeeves is a very, very capable valet who gets his employer, Wooster out of many a sticky situation.

My father introduced me to P.G.Wodehouse’s books and there was no turning me back after that. The brilliant comic genius’ writing has kept me enthralled through long train rides, boring summer afternoons, quick breaks in the midst of grueling exams, you get the drift!

Now we may not all be able to afford a Jeeves in our lives, but a very common trend these days is to hire a nanny or an “au pair” if one has small gifts. Considering the sky-rocketing Read more

8 Facts On Late Filing And Payment Penalties

TaxConnections Picture - Number 8 - 5-19-15 - square

April 15 is the annual deadline for most people to file their federal income tax return and pay any taxes they owe. If, for whatever reason, you missed the deadline you may be assessed penalties for both failing to file a tax return and for failing to pay taxes they owe by the deadline. Here are eight important facts every taxpayer should know about penalties for filing or paying late:

1. Two penalties may apply. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline.

2. File even if you can’t pay. The failure-to-file penalty is generally more than the failure- Read more

How Do Taxes Influence Behavior?

TaxConnections Picture - Man - Thinking - 4-20-15- square

Legislators have three needs in mind as they prepare tax laws- -the need to raise revenue, the need to be fair to taxpayers, and the need to influence taxpayers’ behavior. Below are three excise taxes that have affected the economy and consumers’ behaviors. All are direct taxes.

A sin tax is used to discourage the use of products and services that could pose a risk to someone’s health, such as alcohol and cigarettes. Puritan colonists used the earliest sin taxes in this country.

The gasoline excise tax is a user tax on gasoline purchases. People who use gasoline pay taxes on it. These revenues maintain and build roads and highways and regulate Read more

Paying Too Much Or Too Little In Taxes? First Look At Your Withholdings

Text onTexture of wood background

Are you an early filer or do you like to wait? I guess some of that depends on whether you are getting money back or you owe! When my clients owe money to the government and we have gone down every route there could possibly be to reduce their taxes, I remind them about their missed October tax planning appointment and we usually look at their withholdings.

An employer requires you to give them information on how much tax needs to be withheld from your paycheck. Based on the information that is provided to them, the employer then proceeds to withhold & submit income taxes on your behalf to the Internal Revenue Service. This information from you is obtained by means of the Form W-4. Read more

FLASH ALERT! WOTC: IRS Notice 2015-13: Providing Transition Relief For Employers Submitting Late WOTC Applications

TaxConnections Picture - NEWS on TV 2 - square

We Have Been Waiting For This!

The IRS has released IRS Notice 2015-13, which provides transition relief given the late retroactive renewal of the Work Opportunity Tax Credit program in December 2014. Notice 2015-13 waves the 28-day deadline for submitting IRS Form 8850 (the WOTC Pre-screen Notice) for qualifying employees hired in 2014.  The extended deadline for submitting the applications for affected employees is now April 30, 2015.

From the Notice:


Read more

2014 Depreciation Limits on Luxury Autos: IRS Rev Proc 2014-21

TaxConnections Picture - Car - square

According to 26 U.S. Code § 280F – Limitation on depreciation for luxury automobiles the first year’s depreciation expense for a newly procured vehicle should be prorated over the tax year based on the in service date not to exceed the limitations spelled out in IRS Rev Proc 2014-21

For passenger automobiles the 2014 Tax Year Amount is:

1st Tax Year $ 3,160
2nd Tax Year $ 5,100
3rd Tax Year $ 3,050

Read more

Shakespeare, Building Your Vocabulary… And Taxes

TaxConnections Picture - Gavel House and Law Book 1 - square

Tax cases can be interesting not only for the facts or legal issue involved, but also sometimes for how the judge writes the opinion. A recent example is Fresenius Medical Care Holdings, Inc. v. U.S., No. 13-2144 (1st Cir. 8/13/14). The tax issue was whether any portion of $385 million paid by the taxpayer to the government under a False Claims Act matter should be treated as a non-deductible penalty. There was already agreement that $101 million of the total of $486 million was a non-deductible criminal fine.

The legal issue is interesting, but I’ll save that for another post.

Here, I’ll just focus on the intriguing language of Judge Bruce M. Selya in writing the opinion. It includes footnote 5: Read more

State Tax Considerations For American Expats

TaxConnections Picture - Tax Lifted - square

One of the more common tax questions from American Expats is do I have to file a State return?

Unfortunately, there is not an easy answer to that question, as it depends on the State and your personal situation… but you may have to file a return. There are a few factors that you need to look at first.

• Do you still own property in the State? Some expats keep their home and rent it out. In that case a return must be filed.

• Are you still receiving income from the State? Interest, dividends, bank accounts, mailing address and other types of State sourced income may trigger a need to file. Read more