Ignoring a tax debt could cost you more than you might think. Traditionally, states have made use of liens and wage garnishments as the primary method for collecting delinquent taxes. However, the reeling nature of the economy has emboldened states to employ a much more aggressive tactic. On October 4, California passed a law mandating that state’s motor vehicle department to suspend the driver licenses of the top 1,000 tax debtors. Moreover, all their names are to be published online. At least 19 states, including New Jersey and New York, have followed California’s lead and are likewise listing the names of tax delinquents online. While they have not yet suspended driver licenses, these states are desperate for additional tax revenue. It would be wise to take care of your tax liability to ensure not having to move over to the passenger’s side.
Deadline to Convert Roth IRAs to Traditional IRA is Oct 17th
In 2010, the law permitted you to convert your traditional IRA to a Roth and defer recognizing income on the amount converted until future years. For example, if your account was $100,000 you would declare no income on your 2010 return and $50,000 of taxable income in both 2011 and 2012. As a result of the volatility in the stock market, that $100,000 you converted might only be worth $60,000. Here’s where the problem arises: the tax you pay in 2011 and 2012 on the Roth conversion is NOT based on the current value of the account, but rather on the value at the time of conversion. In our example, assuming a tax bracket of 33%, you would end up with just $27,000 of your original $100,000 investment! ($100,000 investment – $40,000 loss of market value – $33,000 Uncle Sam’s portion = $27,000). There is a solution to this problem, but the deadline is October 17, 2011. [Read more…] about Deadline to Convert Roth IRAs to Traditional IRA is Oct 17th
Non-Profits are not 100% Tax-Exempt
Many people think that tax-exempt organizations don’t pay federal income tax. While this assumption is true under most circumstances, there are times that they are indeed subject to income tax. When tax exempt organizations engage in commerce unrelated to their exempt status, Congress legislated that they are in fact required to pay their fair share in taxes. This is known as “Unrelated Business Income Tax” or UBIT for short. [Read more…] about Non-Profits are not 100% Tax-Exempt
Gift Tax Valuations enjoy new IRS Loophole
With the current low asset values and the estate/ gift- tax exemption slated to be reduced to $1 million in 2013 (from its current $5 million level), many are considering sheltering their assets by making large gifts. A prevalent concern is the valuation of these large gifts. What if the IRS challenges your estimate and wants more gift taxes? In Estate of Petter vs Commisioner, a popular technique to sidestep gift taxes was affirmed. [Read more…] about Gift Tax Valuations enjoy new IRS Loophole
IRS INTRODUCES COMPLIANCE PROGRAM FOR EMPLOYEE CLASSIFICATION
As part of the “Fresh start” initiative by the IRS to encourage more corporate and individual tax compliance, a new voluntary program has been announced to encourage employers to properly classify employees as such, rather than as independent contractors. Under the program, employers can obtain substantial relief from federal payroll taxes they would have owed in the past, if they prospectively classify their hires as employees. To be eligible, an applicant must: [Read more…] about IRS INTRODUCES COMPLIANCE PROGRAM FOR EMPLOYEE CLASSIFICATION
NJ Estate Valuation Case Highlights Importance of Buy-Sell Agreement Terms
When drawing up a buyout clause it is critical to specify, in no uncertain terms, the value to be applied to the partner’s share. There will often be a significant disparity between book value and current market value, as many years may have transpired by the time the triggering event takes place. If book value is chosen, it can result in someone else reaping the fruits of the bought-out partner’s labor. [Read more…] about NJ Estate Valuation Case Highlights Importance of Buy-Sell Agreement Terms