Weekly Tax Brief

Buying and selling mutual fund shares: Avoid these tax pitfalls

Details: Published: 21 October 2020 21 October 2020

If you invest in mutual funds, there are potential pitfalls involved in buying and selling shares. For example, you may already have made taxable “sales” of part of your mutual fund without knowing it. One way this can happen is if your mutual fund allows you to write checks against your fund investment. If you write a check against your mutual fund account, you’ve made a partial sale of your interest in the fund (except for funds such as money market funds, for which share value remains constant). Thus, you may have taxable gain (or a deductible loss) when you write a check. And each such sale is a separate transaction that must be reported on your tax return. Contact us with questions.

Understanding the passive activity loss rules

Details: Published: 16 October 2020 16 October 2020

The passive activity loss rules affect business ventures you’re engaged in or might engage in. If the ventures are passive activities, the passive activity loss rules prevent you from deducting expenses that are generated by them in excess of their income. You can’t deduct the excess expenses (losses) against earned income or against other non-passive income. Non-passive income for this purpose includes interest, dividends, annuities, royalties, gains and losses from most property dispositions, and income from certain oil and gas property interests. There are different rules for rental activities. Contact us if you’d like to discuss how these rules apply to your business.

The tax rules for deducting the computer software costs of your business

Details: Published: 09 October 2020 09 October 2020

Do you buy or lease computer software to use in your business? Do you develop software for use in your business, or for sale or lease to others? You should be aware there are complex rules that may apply to determine the tax treatment of the expenses. The rules depend on whether the software is purchased, leased or developed by your business. For example, you must deduct amounts you pay to rent leased software in the tax year they’re paid, if you’re a cash-method taxpayer, or the tax year for which the rentals are accrued, if you’re an accrual-method taxpayer. We can assist you in applying the tax rules for treating computer software costs in the way that is most advantageous for you.

The tax rules for deducting the computer software costs of your business

Details: Published: 02 October 2020 02 October 2020

Can investors who manage their own portfolios deduct related expenses?

Details: Published: 23 September 2020 23 September 2020

In some cases, investors have related expenses, such as the cost of subscriptions to financial periodicals and clerical expenses. Are they tax deductible? Currently, they’re only deductible if you can show that your investment activities rise to the level of carrying on a trade or business. In that case, you may be considered a trader, rather than an investor. A trader is entitled to deduct investment-related expenses as business expenses. A trader is also entitled to deduct home-office expenses if the home office is used exclusively on a regular basis as the trader’s principal place of business. However, be aware that trader status is difficult to achieve. Contact us with questions.

Tax implications of working from home and collecting unemployment

Details: Published: 14 September 2020 14 September 2020

COVID-19 has resulted in many changes in our lives, and some of them have tax implications. For example, many employers have required employees to work from home. Unfortunately, employee business expense deductions (including expenses to maintain a home office) are disallowed from 2018 through 2025. However, if you’re self-employed and work from a home office, you can be eligible to claim home off ice deductions for your related expenses if you satisfy the strict rules. Another tax-related situation involves people who are laid off and collecting unemployment benefits. Be aware that these benefits are taxable and must be reported on federal income tax returns for the tax year received.

5 key points about bonus depreciation

Details: Published: 11 September 2020 11 September 2020

You’re probably aware of the 100% bonus depreciation tax break that’s available for a wide variety of qualifying property. There are some important points to be aware of when it comes to this powerful tax-saving tool. Asset depreciation can be a complex area of tax law. Contact us with questions about your situation.

Back-to-school tax breaks on the books

Details: Published: 31 August 2020 31 August 2020

Despite the COVID-19 pandemic, students are going back to school this fall, either remotely, in-person or a combination. In any event, parents may be eligible for certain tax breaks to help defray the cost of education. For example, with the American Opportunity Tax Credit (AOTC), you can save a maximum of $2,500 for each full-time college or grad school student. This applies to qualified expenses including tuition, room and board, books and computer equipment and other supplies. But the credit is phased out for moderate-to-upper income taxpayers. This is only one of the tax breaks available for education. Contact us for assistance in your situation.

What happens if an individual can’t pay taxes

Details: Published: 26 August 2020 26 August 2020

While you probably don’t have a problem paying your tax bills, you may wonder: What happens if you (or someone you know) can’t pay taxes on time? It’s important to file a properly prepared return even if full payment can’t be made. Include as large a partial payment as you can. You may be able to get an installment agreement with the IRS or borrow the money to make the payment. In some cases, a payment extension may be available if you can show payment would cause “undue hardship.” Not filing and paying could lead to escalating penalties and having liens assessed against your assets and income. It could also result in seizure and sale of your property. Contact us about your options.

The President’s action to defer payroll taxes: What does it mean for your business?

Details: Published: 21 August 2020 21 August 2020

On August 8th,President Trump has signed a Presidential Memorandum to defer the employee portion of Social Security taxes for some people. The action only defers the taxes, which means they must be paid in the future. However, the action directs the U.S. Treasury Secretary to explore ways to eliminate the obligation to pay the taxes deferred. Employers have questions and concerns. For example, will employers have to withhold more taxes from employees’ paychecks in the future to pay the taxes back? Without a law to forgive the taxes, will employers be liable to pay them? What if employers can’t change their software by the Sept. 1 start of the deferral? Is the deferral required? Contact us with questions.

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