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.
Tax time is always a bit unnerving, but when you’re hit with a large, unexpected tax bill, it can be shattering. There are few people who have the resources to simply pull out their checkbook and write a check for thousands of dollars, yet it can feel like that’s your only choice.
This is a question many taxpayers ask during this time of year, and the question is far more complicated than people believe. To fully understand, we need to consider that there are times when individuals are REQUIRED to file a tax return, and then there are times when it is to the individuals’ BENEFIT to file a return even if they are not required to file.
If your business engages the services of an individual (independent contractor), other than one who meets the definition of an employee, and you pay him or her $600 or more for the calendar year, then you are required to issue that person a Form 1099-MISC to avoid penalties and the prospect of losing the deduction for his or her labor and expenses in an audit. Payments to independent contractors are referred to as non-employee compensation (NEC).
At the last minute, Congress passed a large number of tax changes, including retirement plan issues that will become effective in 2020, as well as extensions through 2020 of a number of tax provisions that had expired or were about to end. The list of changes is quite large, so we have only included those that are most likely to affect individual tax returns. The following is a run-down on some of the new tax provisions:
If you asked brand-new entrepreneurs to make a list of everything they think might one day pose a threat to their startup, you’d probably hear a variety of answers with similar themes.
Some might be (rightfully) worried about ultimately developing a product in search of a marketplace. Others may be worried about how they’re going to overcome the cash flow issues they’ll likely face. Others still might be worried about getting “taken for a ride” by the venture capital people they’re putting so much of their faith in.While all of these are understandable concerns, none of them should be at the top of that list. The fact of the matter is, the number-one threat to your business isn’t an external factor at all. It’s the people you’ve cofounded that business with.
Here are some examples of holiday gifts you provide to members of your family, employees and others that may also yield tax benefits.
Gifts for Employees – It is common practice this time of year for employers to give employees gifts. Although gifts are generally excluded from the recipient’s gross income, an employee cannot exclude gifts from his or her employer as a gift.
People often say that an expense is “a tax write-off” and most everyone interprets this to mean that the expense will have a tax benefit. Generally, such a benefit takes the form of either a deduction or a credit; these benefits’ effects are quite different, however, and each type has various categories. As a result, the tax implications may not be as expected. This is especially true when the write-off claim comes from a salesperson who is touting the tax benefits of a product or service, as such individuals often leave out key details. In general, a deduction reduces taxable income, whereas a credit reduces the tax itself.
At their core, tax credits are a very particular type of benefit designed to offset the actual tax liability associated with SMBs around the country. This isn’t the same thing as a tax deduction, which lowers that business’s actual income. Tax credits are typically offered to incentivize everything from hiring more workers in order to stimulate the economy to making meaningful contributions to specific industries.
The late-2017 tax-reform package changed the rules for personal casualty losses, which now are only deductible if they occur in a federally declared disaster area. As a result, if a home is destroyed in a forest fire or other disaster within a declared disaster zone, the homeowner can claim a casualty loss on that year’s tax return.