May 23, 2013

Posts Comments

Apple and the IRS Tax Holiday

April 18, 2011 By

A tax holiday for big corporations may mean that some of them come back to the United States with their money. Even if corporations are headquartered in the U.S., they are not necessarily holding all of their money here. In fact, they are probably not holding their money here because it is expensive.

Unlike personal tax rules, corporations are able to keep their money in offshore accounts without having to pay taxes on it until they want to bring it back into the country. Many corporations take advantage of this because the U.S. has the second highest corporate tax rate in the world. However, it would be pretty cool if we could have that money here at home and in the revenue stream rather than sitting in an account guarded by gun-wielding guards and locks the size of a car. In order to incentivize bringing those bucks back into the States, some government figures have proposed a tax holiday, a period during which big companies can repatriate their money without having to pay the same high amounts of IRS taxes.

This idea has come up in conversations in what seems like a whisper, with the loudest whispers coming from Rep. Eric Cantor (R-VA) and Sen. Orrin Hatch (R-UT). However, it is not endorsed by Treasury Secretary Timothy Geithner.

However, big name companies like Apple, Microsoft, and Pfizer have been looking around for beneficial tax venues – i.e. countries with more lax tax policies like Ireland. Since the political climate in the U.S. and the financial climate in Ireland are shifting, some of these companies might be considering coming back home.

How do we know this? Well, last fall, Apple’s Steve Jobs said his company was waiting for “one or more unique strategic opportunities” before making the move. Apple, a traditionally politically cautious company, has also signed on with Fierce, Isakowitz and Blalock in Washington, DC., a lobbying firm that is rumored to plan to try to make the new leaders in Congress think about their financial and privacy concerns. Read: Apple wants to pay less taxes and will not bring their money back into this country until they can.

While tax reform is certainly under way, it is very unclear what is going to happen with both individual and corporate taxation. A lot of new and proposed policy focuses on getting back lost revenue and closing loopholes. Corporate taxation, though is a little more unclear, and corporations whose leverage might just stay in other countries seem to have different ideas about what is best for U.S. tax policy.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , ,

Who Benefits from the IRS Payroll Tax Holiday?

March 24, 2011 By

For 2011, the checks that are issued for tax return processing may be a little larger than usual. If that is the case when you receive yours, it is not in error. There is a new benefit called Payroll Tax Holiday. This is a one-time tax break that was issued by “The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.” Payroll taxes will still be incurred; they will just be set at a lower rate for this tax season than normal.

Employer IRS payroll tax contributions on the federal level will not change and will maintain the 6.2% rate. On the other hand, employees will benefit from a reprieve. The contributions due by employees will be reduced 2%. That is, whereas the normal 6.2% Social Security contribution would apply on income levels up to $106,000, these individuals will only be subject to a 4.2% Social Security taxation. Keep in mind that Medicare contributions, which are not subject to a wage cap, will not be affected by the Payroll Tax Holiday.

This is beneficial to those in the middle and upper income level taxpayers. Those who earn $50,000 would be eligible to the 2% savings of $1,000. A jointly filed married couple earning $100,000 would receive their 2% savings of $2,000.

However, lower income taxpayers do not reap the benefits since the Payroll Tax Holiday was implemented in lieu of the Making Work Pay Credit. Because this credit was a fixed $400 for taxpayers filing separately and $800 for couple that are married, the full credit was given to lower income taxpayers regardless of whether they earned even very small amounts. Since the Payroll Tax Holiday works via a percentage, the resulting check is naturally lower for families whose income is lower.

Individuals who are self employed experience a break as well, by way of the Payroll Tax Holiday. Whereas they would normally be required to pay 12.4% in self-employment tax, they will only have to relinquish 10.4% of their earnings for Fiscal Year of 2010.

Clearly, the Payroll Tax Holiday is a nice benefit for most every taxpayer—although, alas, it is only temporary.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , , , , , ,

Make Work Pay When You File Your 2010 IRS Tax Return

February 28, 2011 By

The Making Work Pay credit is still available for your 2010 tax return, even though you may currently be seeing the benefit of the payroll tax holiday. The Making Work Pay credit is easy to forget in light of the press coverage of the 2011 payroll tax holiday. The payroll tax holiday applies to your paycheck in 2011, while the Making Work Pay tax credit applies to your 2010 federal income tax return, which you are to file this year. Keep in mind that the deadline for filing is April 18, 2011.

The credit was created to benefit working and middle class taxpayers, which means it phases out as taxpayers’ income gets higher. The credit is primarily an incentive to work and taxpayers must have earned income to qualify. This means that qualifying taxpayers must have wages from work, not just income from other sources, to receive the Making Work Pay tax credit.

The Making Work Pay tax credit is a flat credit of up to $400 for individual taxpayers and $800 for those married filing jointly. Self employed persons are also eligible. The credit is also refundable, which may mean you get a few extra bucks on your tax return this year!

Remember that even if you currently see evidence of the payroll tax holiday, the Making Work Pay credit is still available for you on your 2010 tax return. The credit is usually figured on Schedule M. You can also find more details on the IRS website at http://www.IRS.gov, or you can talk to a tax specialist to see if it applies to you.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , , , , ,

IRS Tax Help: February 14th Filing Delay

January 24, 2011 By

The IRS has a Valentine for you. On Feb. 14, you can turn in your taxes which were affected by last month’s changes in tax law. After the Dec. 17 enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, the IRS had to update their systems to accommodate the new tax laws and extensions of the old ones. They also had to take extra care to avoid disruption of other filing season operations.

Affected filers can begin filing on Feb. 14 to include Schedule A itemized deductions. The IRS will begin processing both paper and e-filed returns which include Schedule A as well as the educator expenses deduction and the Form 8917 higher education tuition and fees deduction.

For taxpayers who e-file, you may be able to complete your documents ahead of time. If you use a commercial software provider to help you file your taxes, check with your provider for specific instructions. Many software providers have announced that they will accept these affected returns immediately, but they will hold onto them to wait until the Feb. 14 filing date. Your preparer may have also held onto your information to wait for these updates.

This delay does not affect some popular tax breaks such as the Earned Income Tax Credit (EITC), education tax credits, and the child tax credit. The Act extended these and other deductions like the state and local sales tax deduction, which were set to expire this year.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , ,

Holiday Tax Relief Tip: Payroll Taxes

December 22, 2010 By

The Holidays Mean Parties, Giving, and Tax Relief!

There are employers who use the Xmas season to give their employees a party, gifts or a bonus. If you are an employee you don’t have to claim the worth of gifts. Employees only claim for a cash bonus. If you are an employer, Uncle Sam permits you to simply write off such costs but they must meet specific limitations.

A gift in common law differs from a gift bestowed by an employer. A common law gift is one that is given for no reason and only to please the recipient. Normally, an employer bestows a gift to an employee as a reward for previous service or as an incentive for forthcoming performance. Tax law recognizes these differences. If an employer wants to be disqualified from payroll taxes then Uncle Sam stipulates an employer’s gift ‘must be made generously with respect, admiration, charity or like impulses’.

An employer’s gift that is not liable for payroll taxes and is a deductible business cost is a ‘de minims benefit. This is according to the Internal Revenue Code Section 132(e) (1).

Any non-cash holidays gift from an employer to an employee is not within that employee’s salary and is not liable for payroll taxes. It is permissible to give items such as gift baskets, flowers and books. For such gifts to be non-taxable they must be a ‘low fair market value’. There are no exact regulations regarding the monetary worth of such gifts.

Employers are permitted to subtract the expenses of infrequent events such as picnics for employees and guest, birthday parties etc. Infrequent sports and theater tickets are also not liable for payroll taxes. However, a cash gift or gifts ‘easily exchangeable for cash’ is part of an employer’s earnings and liable for payroll taxes. Objects that can be swapped for cash like stocks are also taxable. Employees must show it on a tax return and employers are liable for extra payroll taxes.

HAPPY HOLIDAYS!

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , ,

Holiday Tax Relief Tip: Charitable Giving- Careful Planning

December 9, 2010 By

Charitable Gifts Require a Good Heart But, Careful Thought

Not many taxpayers realize it is very easy to muddle up a charitable donation left under your Will and Trust. Your heart may be in the right place but your good deed may become extremely complex. For example, your request must be clearly understood and it must have all the necessary IRS requirements. If you leave out any of the requirements it is extremely hard to put right. This may require expert advice in order to avoid a seemingly tiny error that results in a massive complication.

  • You must use the correct name of the charitable organization. Be safe and make contact with the charity. If your donation is anonymous simply don’t reveal your identity.
  • A charity must be an accepted 501(c) (3) organization according to the Internal Revenue Code.
  • Stipulate the money is only to be awarded to that charity if it is still in existence at your death.
  • You can either leave a donation that is to be used as the charity sees fit or you can stipulate exactly how you want the donation to be used. Example, you could leave a donation to a certain child care organization to be used for their feeding scheme. Bear in mind such a fund may no loner exist at your death.
  • You must decide on a Will or Trust. Charities that are registered do not pay income tax. Retirement accounts left to them are not taxed. The same accounts left to family or friends are substantially taxed. If you leave $300,000 to charity they keep the full amount. If you leave $300,000 to family or friends they get $200,000 and the IRS takes $100,000.
  • You could give a donation in your lifetime. A donation of $300,000 that is received in twenty years time means the charity gets the full amount plus interest without being taxed.

For more holiday tax relief tips, click here!

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , ,

Start Your New Year Off With Tax Relief!

December 8, 2010 By

End of the Year Tax Relief Tips

Late Payments Lowers Tax – Early Home Payments Lowers Tax

Postponing Payments

As a taxpayer it is your right to reduce your tax base as much as possible but within the demands of the tax laws. The most used means of achieving this is by above-the-line subtractions. The other way is to earn less. It’s not as ridiculous as it sounds. You defer (postpone) earnings stemming from a year with a high tax bill probability to the next year due to a lower tax earnings probability.

If you are self-employed, then postponing earnings is easy because you control the timing of job billing. Work for a customer the end of November need only be invoiced the start of January. If you utilize the cash method of accounting you only report that earning when you file for 2010 taxes.

If you are an employee it’s harder. You can request your company give your bonus at the beginning of the next year. A company on the accumulation system of accounting can subtract the bonus this year. It must establish a formula prior to the end of the year in order to pay you the next year.

Early Home Payments

When you start paying off a mortgage loan most of the money goes to interest. When it is time to list costs on Schedule A that interest is deductible. Those who own a second residence are also liable for that property’s mortgage loan’s interest if you inhabit such property. According to the IRS, it is greater of ten percent of the number of days rented to others at a reasonable fee, or fourteen days. The IRS states a vacation property or residence may be a houseboat, condominium, trailer, house or mobile home. In the case of houseboats and trailers there must bathrooms, cooking and sleeping amenities.

Pay your January mortgage by 31 December to subtract the interest on your 1040 filed next year. A mortgage payment is not rent and so it is not prepaid interest which may not be subtracted. Total loans may not exceed $1 million for vacation home and residence. Home equity loans linked to the properties may not be more than $100,000.

If your mortgage bond/s are fully paid you are still liable for property taxes. You are permitted to subtract such real estate taxes on all assets. It is not subject to only a first and second residence. This too can show on your schedule A if paid by 31 December. To get some tax respite, claim the normal deduction. Add up to $500 of property tax expense, or $1,000 if married and filing jointly to the normal subtracted number. Particulars must be shown on the new IRS Schedule L.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: ,

Holiday Tax Relief Tips: Use Your FSA and GIVE!

December 3, 2010 By

Holiday Tax Relief Tips

Use Your FSA or Lose It But Keep Giving to Charity

The holidays are great because it’s a time for gift giving. It is also a good time of year to benefit from IRS allowances on tax. Add using your FSA and being philanthropic to your Xmas list.

Using Your FSA

If you understand your FSA (flexible spending account) it can save you some tax money. There are two kinds of accounts. One is for medical costs and the other for child care.

It is usual for parents to use up the money for child care prior to closure of the benefit year therefore you don’t lose anything.

It is also usual for workers to overrate their yearly medical costs and it leads to their medical scheme having an overage of funds towards the year end. This is not in the best interest of the taxpayer. If you don’t use all the money in an FSA by a specific date you lose that money. Often the specified closing date is 31 December. There are some employers who permit an extension to 15 March. It is solely at the discretion of the employer.

There are legitimate ways to use up your excess funds such as restocking your medicine cabinet, laser eye surgery, dental appointments, annual medical exam, chiropractor visits and a prepaid health card.

Become a Philanthropist

Xmas is the perfect time of year for giving and it is also the time of year for receiving. You can take care of both by donating money to charitable organizations i.e. non-profit organizations. They get the benefit of a cash contribution and you get a tax benefit and the knowledge your money is doing good.

If you donate money it decreases your taxable earnings and leaves you with a leaner tax bill. You must make the donations by 31 December. The donation is significant for a deduction in the year it was prepared.

You are permitted to donate cash (IRS charged donations) or property such as clothing, household items or used vehicles. It is very important to understand you can only claim a tax deduction if the goods you donate are in good condition. Unfortunately, there were people who used charitable organizations as dumpsters.

Uncle Sam was so disappointed by this mean spirit he declared such an action to be in violation of the tax law. He is also aware there those who overestimate the worth of donated used vehicles. He also considers this mean spirited and in violation of his tax laws. Uncle Sam insists you have a receipt to prove every cent you donate you to charity.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , ,

IRS Tax Help | A Time For Giving

November 24, 2010 By

IRS Tax Help: Reporting a Charitable Donation

A sound time to help charitable organizations is during the holidays. Tax laws make it possible for both the donor and the recipient to benefit from donations. However, there are specific regulations governing this procedure.

In order for a taxpayer to benefit from charitable donations you must list (itemize). It is on Schedule A of the Federal Form 1040 where deductions are listed (lines 16 to 19).

If you have made cash donations of any amount, they must be backed up by a credit card receipt, cancelled check or written affirmation from the organization.

If you donate goods you are permitted to subtract fair market worth, i.e. the price it would get in its current state. Donated goods must be in a ‘good’ or ‘better’ state. If not, it will be unacceptable to the IRS. If an item is worth more than $500 and is not in a ‘good’ state; it will be permitted as a deduction but with an evaluation (appraisal). Other specific regulations apply to artwork, jewelry and appreciated stock.

It is imperative to have a receipt of proof from the charity in question. It must have the location, name, detailed description of donation and date of donation. The more detailed the better.

When it comes to charitable donations the IRS has made it easy for taxpayers to contribute either cash or goods. Their rule of deductible property being in ‘good’ or ‘better’ condition assists charities to receive worthwhile goods. Remember, an item may not be valuable to you but it could prove to be a blessing to someone else. The holidays are the perfect time to give.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , ,