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When Can You Destroy Old Tax Records?

Taxpayers often question how long records must be kept and the amount of time IRS has to audit a return after it is filed.  It all depends on the circumstances!  

In many cases, the federal statute of limitations can be used to help you determine how long to keep records.  With certain exceptions, the statute for assessing additional tax is 3 years from the return due date or the date the return was filed, whichever is later.  However, the statute of limitations for many states is one year longer than the federal limitation.  The reason for this is that the IRS provides state taxing authorities with federal audit results.  The extra time on the state statute gives states adequate time to assess tax based on any federal tax adjustments that also apply to the state return.

If You’re Looking for Quick Cash Avoid Retirement Savings

If you find yourself looking for a quick source of cash, your retirement savings may look like a tempting option. However, if you are under age 59½ and withdraw money from a traditional IRA or qualified retirement account, you will likely pay both income tax and a 10% early-distribution tax (also referred to as a penalty) on any previously untaxed money that you take out. Withdrawals you make from a SIMPLE IRA before age 59½ and those you make during the 2-year rollover restriction period after establishing the SIMPLE IRA may be subject to a 25% additional early-distribution tax instead of the normal 10%. The 2-year period is measured from the first day that contributions are deposited. These penalties are just what you’d pay on your federal return; your state may also charge an early-withdrawal penalty in addition to the regular state income tax.

How Employee Stock Options are Taxed

As an incentive to employees to help grow the companies’ market value, many companies will offer stock options to key employees. The options give the employee the right to buy up to a specified number of shares of the company’s stock at a future date at a specific price. Generally, options are not immediately vested and must be held for a period of time before they can be exercised. Then, at some later date, and assuming the stock price has appreciated to a value higher than the option price of the stock, the employee can excise the options (buy the shares), paying the lower option price for the stock rather than the current market price. This gives the employee the opportunity to participate in the growth of the company through gains from the sale of the stock without the risk of ownership.

Have You Lost Your Job? Here’s What You Need to Know About Taxes

 

In 2022 alone, there were approximately 15.4 million layoffs in the United States as per one recent study. About 6.9 million of them happened in the last half of the year, from August to December. It’s also worth noting that this is certainly nothing new. It has been estimated that about 40% of people have been laid off (or fired) from a job at least once in their lifetime, and about half the country experiences full-blown layoff anxiety on a regular basis.

The Tax-Filing Deadline is Drawing Near

As a reminder to those who have not yet filed their 2022 tax returns, April 18, 2023 is the due date to either file a return (and pay the taxes owed) or file for an automatic extension (and pay an estimate of the taxes owed). The due date is April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia – even if you don’t live in DC.

Learn from Henry Ford About Running Your Business

If you had to make a list of people who changed the world essentially just by existing, Henry Ford’s name would likely be on it.

Most people know him from history as the founder of the (appropriately named) Ford Motor Company. Here, he developed the assembly line method of mass production. Not only did this help cut costs enormously, creating the first automobile that average Americans could afford to buy, but it also revolutionized the manufacturing industry. The computer or mobile device that you’re reading this on would have cost a significantly larger amount of money (than it already does) had the assembly line not been invented.