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Free Federal Tax Advice

Giving on a yearly basis could trim both your estate and income taxes. First, there's the annual exclusion for gifts. Currently, you can give $14,000 annually to any number of recipients without paying federal gift tax. Married couples can double this amount by gift-splitting – a gift of $28,000 from one spouse is treated as if it came half from each.

Why giving is a two-way street
Gifts do more than help out children who need the money. They also reduce your estate so your estate will pay less estate tax upon your death. Apart from annual gift giving, you can currently transfer (during your lifetime or through your estate) a total of $5.49 million with no estate or gift tax liability. On amounts above this threshold, you or your estate will be faced with taxes at the current top rate of 40 percent. So a consistent program of annual gift giving might create substantial tax savings.

  • As the year draws to a close, there are several tax-saving ideas you should consider. Use this checklist to make sure you don’t miss an opportunity before the year is out.

    • Retirement distributions and contributions. Make final contributions to your qualified retirement plan, and take any required minimum distributions from your retirement accounts. The penalty for not taking minimum distributions can be high.
    • Investment management. Rebalance your investment portfolio, and take any final investment gains and losses. Capital losses can be used to net against your capital gains. You can also take up to $3,000 of capital losses in excess of capital gains each year and use it to lower your ordinary income.

    • By Jerry Lopatka, Managing Principal

      Jerry Lopatka is Dugan & Lopatka’s managing principal. He specializes in business tax planning for privately-held companies and has extensive experience in the areas of corporate tax, LLCs, real estate transactions, and succession planning.  This article appeared in the November 9, 2015, edition of the Daily Herald Business Ledger.

    • After disaster strikes, people often want to help those in need. Unfortunately, this is also when fake charities pop up. The IRS recently reported an uptick in emerging charity scams since hurricanes Harvey, Irma and others made landfall.

      Scammers commonly take advantage of donators with emails that steer people to fake websites asking for donations and other financial information. These fraudulent websites usually claim to be affiliated with authentic organizations. They try to get you to make donations or disclose your personal information.

      If you're planning on donating to a charity, follow these rules:

    • If you own a building you may be overlooking a very important tax deduction that, if applicable, can provide substantial tax savings for your business.

    • When it comes to taking qualified deductions on your federal tax return, three things must happen: (1) Recognize that an expense might be deductible on your tax return; (2) keep a record of the expense in an organized fashion; and, (3) obtain the proper (and timely) documentation to support your deduction.

      This might be obvious to most people, but here are some typical areas where taxpayers often fall short. In the long run, these items could end up costing you plenty during tax filing season, and trigger IRS audits.

      1. Cash donations to charity. To deduct and support your deduction to a qualified charity you must have valid support. Donations of cash are no longer deductible if they are not supported by a canceled check or written acknowledgement from the charity. A donation deduction of $250 or more needs to be supported by documentation created at the time of the donation. A canceled check and bank statement are not sufficient. If you get audited, having the charity issue documentation after the fact may not be enough.

    • When it comes to taxes, being self-employed has some advantages. Whether you work for yourself on a full-time basis or just do a little moonlighting on the side, the government has provided you with a variety of attractive tax breaks.

    • Taxes are rarely the first thing that entrepreneurs think about.  With that in mind, the IRS put together a short-list of tax related considerations for start-up businesses. 

      1. Pick a business structure.  One of the first things you will need to decide is how to structure your business – as a sole proprietorship, a partnership, an S or C corporation, and so on.  Each comes with different tax rules and different filing requirements, so the advice of an expert is invaluable. 

      2. Pick a tax year.  How and when a business files its taxes is determined by its tax year, which can either match the calendar year, or be a fiscal year of any 12 consecutive months.  In most cases, the business owner can choose whichever works best for them.  But, calendar years are required for businesses with no books or records, no annual accounting period, or in certain circumstances laid out in the Internal Revenue Code or the income tax regs.

    • Almost any taxpayer who owns commercial real estate can reduce his or her current income tax bill by using cost segregation. Just how much you save in taxes will depend on several variables.  The greater the cost of your property, the greater the potential for current tax savings.

      Any building that was constructed, purchased, or remodeled since 1987 may be eligible for cost segregation. Retroactive tax deductions are available on older buildings without the need to file amended tax returns.

    • The standard mileage rates you can use to calculate your deductible vehicle expenses during 2016 for business, medical, and moving mileage have decreased from last year. Here's a recap.

    • For most businesses, the end of a year is a busy time.  It's important that you get your business off to a good start in the new year by closing the books on the prior year and preparing and filing the 1099 forms by the end of January.

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