Content about Tax

ARDMORE, Pa. — The so-called “fiscal cliff” tax package recently signed into law renewed more than 50 temporary tax breaks through 2013, saving individuals and businesses an estimated $76 billion. For the owners and operators of small- and medium-sized dry cleaning businesses, there is good news and bad news contained in the fiscal cliff tax laws.

First, the good news: greater certainty in taxes. The owners and operators of dry cleaning businesses have grown used to many longstanding tax breaks but they also have had to get used to the uncertainty of whether they will be renewed each year.

On the downside, in addition to a 3.8% Net Investment Income (NII) tax and a 0.9% Additional Medicare tax that, thanks to the Health Care and Education Reconciliation Act of 2010, began in 2013, many dry cleaners and laundry owners discovered they are subject to new taxes. Single individuals with incomes above the $400,000 level and married couples with income higher than $450,000 will pay more in taxes in 2013.

ARDMORE, Pa. — Sooner or later, every dry cleaner thinks about retirement. For those who own a closely held or family business, retirement is more than just a matter of deciding not to go to work anymore. In addition to ensuring there will be enough money to retire, dry cleaning business owners, shareholders and partners must decide what will happen to the business when they are no longer in control.

An effectively developed succession plan can involve selling the business to provide a retirement nest egg, or continuation of the dry cleaning business, with gradual changes in management and/or control, to ensure a source of retirement income or any combination thereof.

One of the more important aspects of business succession planning is working out the financial pitfalls following the death of the business owner. That requires answering questions such as where the money to pay taxes will come from, or, if the business is a partnership, where the money to buy out the deceased partner’s share will come from.

CHICAGO — With the painful volatility of the stock market playing havoc with 401(k) and IRA accounts these days, building a nest egg sufficient to provide a comfortable retirement can be a challenging assignment. What makes the job even tougher is a tax provision that may come as a nasty surprise from Uncle Sam after you retire.

Those of us who can look with some degree of satisfaction at how well we are building our tax-deferred retirement accounts need to keep in mind that all withdrawals from our 401(k) and conventional IRA accounts will be taxed at our ordinary income tax rate, which can be as high as 35%. That needn’t be a problem for you in your early retirement years when you may make small withdrawals now and then to fill an occasional need. In fact, voluntary small withdrawals prior to age 70½ may be a way to soften the increasing tax bite soon to come.

PEMBROKE, Mass. — Tax time is here again. Before I give you some tax tips, I want to tell you to pay your fair taxes. I know that not all of you do.

Having said that, you should take full advantage of legitimate deductions.

Some Available Deductions

Basically, profit determination is a process of starting with revenue and deducting all expenses and costs from all activity that went into creating that inflow stream. Any amount of expenditure is deductible if it helped you, in any way, shape or form, to run your business.

Don’t forget to include:

CHICAGO — The filing deadline for 2011 federal income taxes is not far off, but you still have time to make sure you’ve done everything you can to keep Uncle Sam’s paws off as much of your money as possible. Here are some last-minute ways to do that by reducing your 2011 income tax bill:

Save More for Retirement

One of the most important tax-savings steps you can take is contributing the maximum to your 401(k) or other tax-deferred retirement plan. If you haven’t done so, max out your retirement savings now by bringing your contribution up to the legal limit. For 2011, you may put as much as $16,500 into a 401(k), 403(b) or 457 plan. If you’re over age 50, you may add an additional $5,500.

Every dollar you contribute means you will pay less income tax. Except for Roth IRAs, all contributions to tax-deferred retirement plans are tax-deductible in the tax year for which you make your contribution.

If you can’t come up with the maximum, bump up your contribution as much as you possibly can. It may seem painful now, but you’ll benefit greatly in the future.

CHICAGO — By any definition, Joe was a “success,” and so was his business, Success Co. Although Joe was a planner, after he died, his estate plan and business succession plan turned into an economic and tax tragedy—for son Sam, wife Mary and the rest of the family.

WASHINGTON, D.C. — The Small Business Jobs Act cleared the U.S. House last Thursday on a 237-187 vote after passing the Senate earlier in the week. President Barack Obama plans to sign the $30 billion package of incentives and tax cuts into law today.

The House passed a bill Wednesday that provides $19.3 billion in tax incentives to help small businesses obtain capital, while eliminating capital gains on the sale of some small-business stock.

H.R. 4849, the Small Business and Infrastructure Tax Act, allows a 100% capital gains tax exemption from the sale of qualified small-business stock bought before 2012.

The measure also increases the tax deduction for business start-ups from $5,000 to $20,000, and extends the Build America Bonds program through June 2013.

Many plant owners are starting to plan for retirement, or at least winding down on responsibilities. Because this brings up a host of challenges, it’s never too soon to start the process.

Part 1 of this story discussed initial considerations for making the transition, along with all-cash sales and buyouts. Another type of transition is the earnout.

THE EARNOUT

Talk about last-minute changes to the tax code! The primary purpose of the Emergency Economic Stabilization Act of 2008 (EESA) is to solve the credit crunch in the financial markets, but it’s also one of the biggest tax bills in recent years.