Alloy Silverstein - Resources

Archive 1999

12/27/1999 - Know the difference between a tax deduction and a tax credit.

A tax credit is worth more to you than a tax deduction. A tax credit is a dollar-for-dollar reduction in your tax liability. A $100 tax credit means that you will pay $100 less tax, no matter what tax bracket you are in. A $100 deduction on the other hand saves you only a percentage of the $100. The amount you save depends on your tax bracket. In the 28% bracket, a $100 deduction would reduce your taxes by $28.

12/20/1999 - Bonuses are just more taxable income.

If you receive a bonus from your employer, it will be treated as additional compensation. It is subject to income tax as well as normal payroll tax.

12/13/1999 - Bartering creates taxable income

There are hundreds of bartering clubs nationwide. Some have a thousand or more members. You can trade your merchandise or services for a wide selection of other goods or services. Barter clubs must report the exchanges in accordance with special IRS rules. Non-club members are still subject to the bartering tax laws.

12/6/1999 - Know your basis before you sell.

Basis is just another word for cost. It is cost with a few possible tax adjustments. When you sell an asset, your gain or loss will be calculated by comparing your sales proceeds with your tax basis (cost).

11/29/1999 - Not all interest expenses are deductible.

The income tax laws specify several types of interest expense which are not deductible against taxable income.

11/22/1999 - Innocent Spouse or Injured Spouse?

How responsible are you for your spouse's income tax liability or other obligations to which tax refunds are applied? The Internal Revenue Service has specific guidelines to determine when you are not liable for your spouse's debts. Of even greater concern to many are the financial obligations of a prior spouse.

11/15/1999 - Get a tax deduction even if you don�t change jobs.

Job-hunting expenses are tax-deductible if you follow the rules. If you are seeking a new job, but will be doing the same kind of work as you currently do, you can take a deduction for your job-hunting expenses. You are entitled to the deduction even if you decide not to change jobs. If you are looking for a new type of work, you are not allowed to take a tax deduction for any of your expenses.

11/8/1999 - The sale of your home office may create a tax liability.

The current tax laws for the sale of a personal residence are quite liberal, as tax laws go. A married couple who meets the qualifications can exclude from taxes up to $500,000 of profit from the sale of their principal residence. A single taxpayer is allowed to exclude from income up to $250,000. To qualify, the person must have owned and occupied the home as a principal residence for an aggregate of at least two years of the five years before the sale. The exclusion can be used only once every two years.

11/1/1999 - Commuting to and from work is not normally deductible.

The cost to get to and from your job is usually a nondeductible expense. The exceptions are for traveling between job locations and for "temporary" job site travel.

10/18/1999 - The IRS is giving you more time to make Roth changes.

On October 14, 1999, the IRS issued a News Release giving taxpayers until December 31, 1999, to change 1998 Roth IRA contributions or conversions for which they were not eligible.

10/11/1999 - It is a shame to need tax planning, but you do.

Our tax laws are so complicated that the person who takes time to do tax planning can save large sums of money. On the other hand, the lack of planning can be very costly.

10/4/1999 - Your IRA could be taxed twice.

Most people realize that the benefits they receive from an individual retirement account (IRA) will be subject to income tax. But for some people, the value of their IRA could also be subject to estate tax as high as 55 percent. And, if not properly planned, the person receiving the IRA account could be faced with income taxes as high as 39.6 percent on the balance received from the estate.

9/27/1999 - Gifting can reduce your taxes on two fronts.

A major element of family financial planning is a gifting program. If parents have more assets and more income than they need for retirement, gifting some of those assets can save taxes on two fronts. The gifted property is removed from the parents' estate and any income the asset produces will no longer be taxed on the parents' income tax return.

9/20/1999 - There are three types of IRS audits.

The Internal Revenue Service tries to complete their audits as efficiently as possible. To accomplish this, they have different levels of audits:

9/13/1999 - Be ready for an IRS audit.

Your chances of being audited by the IRS are probably quite small. About two percent of all tax returns filed each year are audited. Certain types of businesses and high-income taxpayers are more likely to be audited than are others. Any tax return that falls outside the "norms" the IRS has determined for taxpayers of that class are likely to be reviewed for possible audit.

9/6/1999 - IRS sends out 55,000 penalty notices.

The Internal Revenue Service is sending penalty notices to 55,000 businesses for violations concerning W-2 and Form 1099 reporting.

8/30/1999 - Special tax treatment is available for lump-sum distributions.

If you receive a lump-sum distribution from your retirement plan, you may be able to get special tax treatment on those funds.

8/23/1999 - There are benefits to hiring your children.

Teaching your children to work has its own rewards. But you can also get some good tax benefits while you are at it. Not a bad deal.

8/16/1999 - Divorce has many income tax ramifications.

It is difficult to be concerned about income tax problems when your life is being turned upside down by a divorce. But the tax aspects of dependents, financial arrangements for child support and/or alimony, and property splits can last for years to come. It will be worth your time to plan with taxes in mind.

8/9/1999 - You can't deduct spoiled meat.

The income tax laws are amongst some of the most difficult of all laws to understand. But sometimes it is just a numbers game that can be confusing. Look at this example to see why the owner of a meat market was dumbfounded to learn that he could not deduct spoiled meat. And of course, this example carries over to many other types of businesses.

8/2/1999 - Get the best tax treatment from reinvested dividends.

Dividend reinvestment plans let you use the dividends a company pays to purchase additional shares of stock in the company. This works well for many investors. The greatest problem with such investments is the recordkeeping. When you sell shares of a company in which you have purchased shares at various dates and various prices, what is your taxable gain?

7/26/1999 - Renting out your second home can be profitable.

If you rent out your home, second home, or cabin, you will probably end up with some cash in your pocket. But how much of that cash will you have to give to the IRS? It all depends.

7/19/1999 - "Traditional" and "regular" IRAs are the same thing.

There is still a lot of confusion about Individual Retirement Accounts (IRAs). What's the difference in the various kinds of IRAs, and which account is best for a given taxpayer?

7/12/1999 - Here are the two new education tax breaks.

The 1997 tax law gave us two new education tax breaks, the HOPE Scholarship Credit and the Lifetime Learning Credit.

7/5/1999 - Keep an eye on proposed tax cuts.

It can be a little scary to write about proposed tax legislation. Many items don't make it to the final draft, and others get changed as to effective dates and dollar amounts. Another concern is that when one reads about proposed laws, the mind tends to file that information as though it actually were the law. With those cautions in mind, here are the current proposals for tax law changes which could have a major impact on your tax planning. The House Ways and Means Committee will take a first look at these proposals in mid-July.

6/28/1999 - Now there is easier access to information about charities.

Have you ever wondered what a certain charity is all about? Many charities ask for money but offer little information about themselves. Now you have better access to information about tax-exempt charities.

6/21/1999 - Some smokers now get a tax break.

Programs to stop smoking are now tax-deductible. The IRS has long held that the cost of programs to stop smoking were not tax-deductible. Partly due to 10 years of the Surgeon General's reports, the IRS has changed its position. The deduction is allowed for all unreimbursed costs even though the taxpayer does not have a specific disease or ailment.

6/14/1999 - Home office deductions are easier to get.

In 1993, the U.S. Supreme Court handed down a ruling which denied many taxpayers a deduction for home office use if their "principal place of business" was elsewhere.

6/7/1999 - Estate planning can save you thousands of dollars.

When someone complains about taxes, most of us think about income tax. An even higher tax can steal as much as 55 percent of your estate at the time of your death. If your assets are valued at over $650,000, you could save thousands of dollars with minimal planning.

5/31/1999 - There are two methods for claiming vehicle expenses.

You can substantiate your vehicle expenses by keeping an exact record of your expenses for gas, insurance, and other costs. A simplified method is the standard mileage rate. This is used in lieu of actual expenses.

5/24/1999 - Estate planning isn't just for the wealthy.

Estate planning can be the best thing you have ever done for your loved ones. If you die, your spouse and family members have lots to deal with. By putting your estate in order, you will save your heirs time and money. Here are a few questions to assist you in determining your estate planning needs.

5/17/1999 - There's no income tax if you trade your property.

When you sell business or investment property and reinvest in similar property, you will owe federal income tax on any gain in the transaction.

5/10/1999 - The IRS makes installment payments easier to get.

The Internal Revenue Service has relaxed its installment payment program. The new rules apply to a balance due of $25,000 or less that will be repaid within five years. You can request such a payment plan at the time you file your tax return.

5/3/1999 - Who are the most likely IRS audit candidates?

When one files an income tax return, it would be nice to know that an audit is not in store.

4/26/1999 - Taxpayers can amortize home mortgage points.

The IRS has given the go-ahead to taxpayers for amortizing mortgage points over the life of the loan.

4/19/1999 - Keep tax records for six years.

Now that one more income tax filing season is coming to a close, what should you do with all the backup documents (W-2s, 1099s, sales slips, cancelled checks, etc.)?

4/12/1999 - The IRS is wrong fifteen percent of the time.

4/5/1999 - Notices from the IRS require a response.

The Internal Revenue Service mails out millions of notices to taxpayers every year. Some of these notices are valid requests for information or taxes due. Some are incorrect and should never have been mailed.

3/29/1999 - IRS changes electronic deposit rules.

The IRS has announced yet another proposed change in the Electronic Federal Tax Payment System (EFTPS).

3/22/1999 - You might be required to make quarterly payments of income tax.

An unexpected large balance due to the government at income tax filing time is always unpleasant. You may even be subject to penalties.

3/15/1999 - File returns on time and avoid penalties.

If you anticipate a large balance due when filing a tax return with the Internal Revenue Service, there may be a tendency to not file the return on time. This is all too common for individuals who don't have the money to pay.

3/8/1999 - Undoing a Roth can cut taxes in some cases.

If you convert your traditional IRA to a Roth IRA, you are required to pay taxes on the value of your taxable IRA account.

3/1/1999 - If you live abroad, your tax filing date is extended.

Taxpayers living outside the U.S. and Puerto Rico are granted an automatic two-month extension to the due date for filing their federal income tax returns. This extension also applies to military personnel. An explanation for filing later than the regular due date must be attached to the tax return when filed.

2/22/1999 - Know the value of an IRA.

If you have ever wondered whether or not it is worth having an IRA, consider this comparison.

2/15/1999 - IRS releases new business mileage rate for 1999.

The Internal Revenue Service has released the new rates for using your vehicle for business, charitable, moving, and medical travel purposes. Effective for business travel incurred prior to April 1, 1999, the rate will remain at the 1998 level of 32.5 cents per mile. Effective April 1, 1999, the rate will drop to 31 cents per mile.

2/8/1999 - Plan your year with the new tax rates.

The Internal Revenue Service has released numerous inflation-adjusted numbers for 1999. Here are a few of those adjusted numbers:

2/1/1999 - Make an offer the IRS can�t refuse.

If you are unable to pay the Internal Revenue Service all the tax you owe, you may have a way out. This solution isn’t for those who are temporarily short of cash. It is for those who have a tax liability due to the government which exceeds all their assets and a certain amount of their future income.

1/25/1999 - You can pay the IRS in installments.

As most taxpayers who make quarterly estimates know, January 15, 1999, is the due date for the final installment of 1998 estimated income taxes.

1/18/1999 - A SIMPLE retirement plan may be for you.

"SIMPLE" stands for Savings Incentive Match Plan for Employees. This relatively new kind of retirement plan may be either in the form of an IRA or a 401(k). SIMPLEs were designed to provide an easy way for small businesses to have a retirement plan without an excessive amount of administrative work and filing requirements.