Digital disruption is described as the changes that occur when new technologies and businesses models have a negative effect on existing goods and services. Despite some activity, many companies are lagging when it comes to transforming to take on the challenge. Technologies Taking Hold A recent example of digital disruption is Uber, the smartphone ride-hailing app. If you’re not familiar with the service, you push an icon on your smartphone to order a driver, and the app tells you when a car has accepted the job, when it will arrive and about how much it’s going to cost (generally less
Read More
Posts by Janet Kim
Did You Miss the 60-Day Deadline for Your IRA Rollover?
If you miss the deadline for rolling over an IRA distribution to another IRA or eligible retirement plan, you could be subject to taxes and penalties. If you have a valid excuse, you may be able to obtain a hardship waiver from the IRS, but applying is time-consuming and expensive. Fortunately, the IRS recently created a new self-certification procedure to make it easier to claim eligibility for a waiver. Here’s more information on who qualifies for the new procedure and how it works. New Self-Certification Procedure Taxpayers who miss the 60-day window for tax-free IRA rollovers can use the new
Read More
It’s Time to Review Your Financial Planning Options
Fall is a good time to pause and review your financial planning strategy. A lot can happen in a year. If your personal life, market conditions or tax laws have changed, you may need to revise your long-term financial plans. Here are some retirement and estate planning considerations that may be worthwhile. Roth IRAs Do you understand the key differences between traditional and Roth IRAs? Roth IRAs can be an effective retirement-saving tool for people who expect to be in a higher income tax bracket when they retire. Here’s how it typically works. You open up a Roth IRA and
Read More
‘Loan Payments’ Can Be Taxable Corporate Distributions to Shareholders
There can be negative tax consequences when purported loan payments are recast as corporate distributions to shareholders. The courts have ruled that withdrawals from two closely held corporations were constructive corporate distributions rather than loan proceeds and repayments in some cases. As such, the withdrawals triggered capital gains and taxable dividends for the shareholders. Corporate Distribution Basics Non-liquidating distributions paid by C corporations to individual shareholders can potentially fall into three different layers for federal income tax purposes. Withdrawals from each layer have different tax consequences. First Layer: Taxable Dividends to Extent of Earnings and Profits. Corporate distributions of cash or
Read More
When Can You Deduct Moving Expenses?
Some people think you can always deduct moving expenses on your federal income tax return. Not true. However, you can deduct some moving expenses if you meet the applicable eligibility rules. Good News, Bad News The good news is allowable moving expense write-offs are “above-the-line” deductions. As such, you don’t have to itemize these costs on your tax return to benefit. And the bad news? Your move must be considered work-related for you to be entitled to any deductions. The 50-Mile Test To meet the work-related requirement, you must first pass the 50-mile test. This means the distance between your
Read More
No Current Deductions Before Business Commences
Starting up a business and wondering about how tax deductions will be handled? The most important thing to understand is that most expenses incurred before a business begins functioning cannot be deducted or amortized until the year when the business does become active. Business Expense Basics Section 162 of the Internal Revenue Code allows current deductions for ordinary and necessary business expenses. Basically, Section 162 expenses are various expenses incurred in operating an up-and-running business. Examples include rent, utilities, employee wages, advertising and so forth. Such expenses can generally be deducted in the year when they are paid or incurred. However,
Read More
Must Joint Activities Be Treated as Partnerships?
For federal income tax purposes, an unincorporated joint venture or other contractual or co-ownership arrangement under which several participants conduct a business or investment activity and split the profits is generally treated as a partnership. This general rule applies even if the joint venture or arrangement is not recognized as a separate legal entity (apart from its owners) under applicable state law. In other words, a partnership can exist for federal income tax purposes even though no partnership exists for state-law purposes. On the other hand, under certain circumstances, taxpayers can “elect out” of partnership status when a partnership would
Read More
Leaving a Legacy for Your Heirs
Despite its name, the term “dynasty trust” has nothing to do with aristocracy or the TV show that used to be popular. It involves preserving wealth for your heirs. With a dynasty trust, you transfer the assets of a business, real estate or other income-producing property to a trust. If they are handled properly, gift tax, estate tax and the generation skipping transfer tax may be avoided on transfers. Commonly, a dynasty trust is set up as an “inter vivos” trust during your lifetime, but it can also be triggered by a provision in your will upon your death. Depending
Read More
Converting an Unincorporated Business Into an S Corp
The federal self-employment (SE) tax which includes mainly FICA (Social Security tax) and Medicare just keeps going higher and higher. If you’ve reached the breaking point, there may be a way to reduce those SE taxes by converting your existing unincorporated small business into an S corporation. How to Evaluate the Option If you’re a self-employed individual – meaning a sole proprietor, partner, or LLC member – you have to pay the SE tax on your net SE income. The SE tax has two parts: 1. The 12.4 percent Social Security tax. Social Security tax is due on net SE income up to a certain
Read More
Too Much Paperwork? What You Can Throw Away After Filing
Maybe it’s a good thing that the April 15th federal tax deadline coincides with the urge to spring clean. It feels good to throw out some of the financial records stuffing your filing cabinets. But before you head for the dumpster, make sure you’re not disposing of records you may need. You don’t want to be caught empty-handed if an IRS auditor contacts you. In general, you must keep records that support items shown on your individual tax return until the statute of limitations runs out — generally, three years from the due date of the return or the date
Read More