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Content about Taxation

May 1, 2012
Building a Retirement Nest Egg

CHICAGO — Building a nest egg sufficient to provide a comfortable retirement can be

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.

April 26, 2012
Changes in Repair or Replace Tax Rules (Part 1 of 2)

ARDMORE, Pa. — Are certain expenditures currently deductible or must they be capitalized

ARDMORE, Pa. — In an effort to resolve the controversy over whether certain expenditures made by a drycleaning business are currently deductible as repair expenses, or whether they must be capitalized and deducted over the life of the underlying business asset, the Internal Revenue Service has finally released new regulations.

The IRS’s long-awaited expanded regulations for determining whether an expense must be capitalized because it betters or improves tangible business property or equipment, restores it, or adapts it to a new and different use, will have a significant impact on every drycleaning business that acquires, produces, or improves its tangible property. 

In addition to clarifying and expanding the current rules, the new regulations create “bright-line” tests for applying the repair-or-capitalize standards, provides guidance for accounting for—and disposing of—repaired property, as well as clarifying other aspects of the repair/capitalize dilemma.

January 4, 2012
Fight Trim and Pay Fair Share of Taxes (Part 2 of 2)

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:

December 5, 2011
Last-Minute Tips to Lower Your 2011 Income Tax Bill (Part 1 of 2)

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.

November 16, 2011
IRS Launches Voluntary Worker Reclassification Program

WASHINGTON — The Internal Revenue Service (IRS) has launched a program that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers.

This new program will allow employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.

The new Voluntary Classification Settlement Program (VCSP) is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government. Under the program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees.

The VCSP is available to many businesses that erroneously treat their workers as non-employees or independent contractors, and now want to correctly treat these workers as employees.

To be eligible, an applicant must:

July 20, 2011
A Real-Life Horror Story (Part 2 of 2)

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.

September 27, 2010
Obama Set to Sign Small-Business Bill

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.

March 29, 2010
House Passes Small-Business Relief Bill

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.

March 10, 2010
Payroll Penalties

With local, state and federal governments suffering the effects of the economic downturn, it should come as no surprise to anyone in the industry that tax laws will be subject to stricter enforcement to shore up plummeting revenues. What might come as a surprise is just how far the tax collector’s reach can extend, however.

November 28, 2008
The Bailout’s Breaks: Wall Street Rescue Provides Tax Credits, Deductions (Part 2 of 2)

The Emergency Economic Stabilization Act of 2008 (EESA) is designed to solve the credit crunch in the financial markets, but it’s also one of the biggest tax bills in recent years.

Many drycleaners will be affected by the rescue bill, thanks to almost 300 changes to the tax laws — including tax breaks expected to save taxpayers a whopping $150 billion.

CONTRIBUTIONS AND S-CORP CHARITABLE DEDUCTIONS

April 21, 2008
Stimulus Package Extends to Small Businesses

WASHINGTON, D.C. — The economic stimulus package that will soon issue more than 130 million consumers tax rebates of $600 to $1,200 will also offer small businesses incentives to buy new equipment.

The government’s approved package includes two provisions aimed at helping small businesses increase capital spending: a huge increase in the Section 179 tax deduction and a bonus depreciation allowance.

April 18, 2007
Maine Eyes Service Sales Tax

AUGUSTA, Maine — Maine is examining multiple proposals for tax reform that would extend the state sales tax to personal services such as drycleaning.

Legislators’ goal is to reduce state income taxes — currently a graduated system charging 2% to 8.5% on personal earnings — as well as offer property tax relief and tax rebates for low-income owners and renters.