Individual Tax Briefs Archives - Page 23 of 32

28 Dec 2020

Qualifying for a Medical Expense Tax Deduction

You may be able to deduct some of your medical expenses, including prescription drugs, on your federal tax return. However, the rules make qualifying for a medical expense tax deduction difficult for many people to qualify. But with proper planning, you may be able to time discretionary medical expenses to your advantage for tax purposes. Itemizers must meet a threshold For 2020, the medical expense deduction can only be claimed to the extent your unreimbursed costs exceed 7.5% of your adjusted gross income (AGI). This threshold amount is scheduled to increase to 10% of AGI for 2021. You also must itemize deductions on your return in order to claim a deduction. If your total itemized deductions for 2020 will exceed your standard deduction, moving or “bunching” non-urgent medical...

28 Dec 2020

Avoid Wash Sales If Selling Stock by Year-End

Roger Rossmeisl, CPA

Individual Tax Briefs

Avoid Wash Sales If Selling Stock by Year-End

Are you thinking about selling stock shares at a loss to offset gains that you’ve realized during 2020? If so, it’s important to avoid wash sales if selling stock by year-end. IRS may disallow the loss Under this rule, if you sell stock or securities for a loss and buy substantially identical stock or securities back within the 30-day period before or after the sale date, the loss can’t be claimed for tax purposes. The rule is designed to prevent taxpayers from using the tax benefit of a loss without parting with ownership in any significant way. Note that the rule applies to a 30-day period before or after the sale date to prevent “buying the stock back” before it’s even sold. (If you participate in any...

12 Dec 2020

Taking a Traditional IRA Distribution

Roger Rossmeisl, CPA

Individual Tax Briefs

Although planning is needed to help build the biggest possible nest egg in your traditional IRA (including a SEP-IRA and SIMPLE-IRA), it’s even more critical that you plan for withdrawals from these tax-deferred retirement vehicles. There are three areas where knowing the fine points of the IRA distribution rules can make a big difference in how much you and your family will keep after taxes. Here are some things to know when taking a traditional IRA distribution. Early distributions What if you need to take money out of a traditional IRA before age 59½? For example, you may need money to pay your child’s education expenses, make a down payment on a new home or meet necessary living expenses if you retire early. In these cases, any...

07 Dec 2020

How Series EE Savings Bonds are Taxed

Roger Rossmeisl, CPA

Individual Tax Briefs

Many people have Series EE savings bonds that were purchased many years ago. Perhaps they were given to your children as gifts or maybe you bought them yourself and put them away in a file cabinet or safe deposit box. You may wonder: How is the interest you earn on EE bonds taxed? And if they reach final maturity, what action do you need to take to ensure there’s no loss of interest or unanticipated tax consequences? Fixed or variable interest Series EE Bonds dated May 2005, and after, earn a fixed rate of interest. Bonds purchased between May 1997 and April 30, 2005, earn a variable market-based rate of return. Paper Series EE bonds were sold at half their face value. For example, if you own a...

27 Nov 2020

How is Disability Income Taxed?

Roger Rossmeisl, CPA

Individual Tax Briefs

Many Americans receive disability income. You may wonder . . . if, and how is disability income taxed? As is often the case with tax questions, the answer is … it depends. The key factor is who paid for the benefit. If the income is paid directly to you by your employer, it’s taxable to you as ordinary salary would be. (Taxable benefits are also subject to federal income tax withholding, although depending on the employer’s disability plan, in some cases aren’t subject to the Social Security tax.) Frequently, the payments aren’t made by the employer but by an insurance company under a policy providing disability coverage or, under an arrangement having the effect of accident or health insurance. If this is the case, the tax treatment...

27 Nov 2020

Tax Issues Divorcing Couples Should Understand

Roger Rossmeisl, CPA

Individual Tax Briefs

Tax Issues Divorcing Couples Should Understand

When a couple is going through a divorce, taxes are probably not foremost in their minds. But without proper planning and advice, some people find divorce to be an even more taxing experience. Several tax concerns need to be addressed to ensure that taxes are kept to a minimum and that important tax-related decisions are properly made. Here are four tax issues divorcing couples should understand if they're in the midst of a divorce. Issue 1: Alimony or support payments For alimony under divorce or separation agreements that are executed after 2018, there’s no deduction for alimony and separation support payments for the spouse making them. And the alimony payments aren’t included in the gross income of the spouse receiving them. (The rules are different for divorce...

07 Nov 2020

Mutual Fund Buy-Sell Tax Pitfalls

Roger Rossmeisl, CPA

Individual Tax Briefs

If you invest in mutual funds, be aware of some potential mutual fund buy-sell tax pitfalls that can surprise the unwary. Surprise sales You may already have made taxable “sales” of part of your mutual fund investment without knowing it. One way this can happen is if your mutual fund allows you to write checks against your fund investment. Every time you write a check against your mutual fund account, you’ve made a partial sale of your interest in the fund. Thus, except for funds such as money market funds, for which share value remains constant, 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. Here’s another way...

06 Nov 2020

What Tax Records Can You Throw Away?

Roger Rossmeisl, CPA

Individual Tax Briefs

October 15 was the deadline for individual taxpayers who extended their 2019 tax returns. (The original April 15 filing deadline was extended this year to July 15 due to the COVID-19 pandemic.) Now that you’re finally done filing last year’s return, you might wonder: Which tax records can you toss once you’re done? Now is a good time to go through old tax records and see what you can discard. The general rules At minimum, you should keep tax records for as long as the IRS has the ability to audit your tax return or assess additional taxes, which generally is three years after you file your return (four years for California). This means you potentially can get rid of most records related to tax returns for...

01 Nov 2020

Innocent Spouse Tax Liability Relief

Roger Rossmeisl, CPA

Individual Tax Briefs

If you file a joint tax return with your spouse, you should be aware of your individual liability. And if you’re getting divorced, you should know that there may be relief available if the IRS comes after you for certain past-due taxes . . . so-called innocent spouse tax liability relief. What’s “joint and several” liability? When a married couple files a joint tax return, each spouse is “jointly and severally” liable for the full tax amount on the couple’s combined income. That means the IRS can come after either spouse to collect the entire tax — not just the part that’s attributed to one spouse or the other. Liability includes any tax deficiency that the IRS assesses after an audit, as well as penalties and interest....

28 Oct 2020

Income Tax Planning as Part of Your Estate Plan

Roger Rossmeisl, CPA

Individual Tax Briefs

Income Tax Planning as Part of Your Estate Plan

As a result of the current estate tax exemption amount ($11.58 million in 2020), many estates no longer need to be concerned with federal estate tax. Before 2011, a much smaller amount resulted in estate plans attempting to avoid it. Now, because many estates won’t be subject to estate tax, more planning can be devoted to saving income taxes for your heirs. While saving both income and transfer taxes has always been a goal of estate planning, it was more difficult to succeed at both when the estate and gift tax exemption level was much lower. Here are some strategies to consider. Plan gifts that use the annual gift tax exclusion One of the benefits of using the gift tax annual exclusion to make transfers during life is...

Qualifying for a Medical Expense Tax Deduction

Avoid Wash Sales If Selling Stock by Year-End

Taking a Traditional IRA Distribution

How Series EE Savings Bonds are Taxed

How is Disability Income Taxed?

Tax Issues Divorcing Couples Should Understand

Mutual Fund Buy-Sell Tax Pitfalls

What Tax Records Can You Throw Away?

Innocent Spouse Tax Liability Relief

Income Tax Planning as Part of Your Estate Plan

ROGER ROSSMEISL, CPA

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