How Fringe Benefits for S Corporation Owners Are Taxed
In general, the value of statutory fringe benefits paid to employees is exempt from federal income tax. But special rules apply to how fringe benefits for S corporation owners, who own 2% or more of a company, are taxed. For these owner-employees, several fringe benefits are tax-exempt, but others — including some of the biggest…
5 Categories of Interest Expense: What’s Deductible?
People often ask: Is the interest paid during the year deductible on my federal income tax return? The answer is, “It depends.” Generally, the interest you incurred must be allocated among the following five “baskets” for tax purposes. Based on how the interest is classified, it may be nondeductible, partially deductible or fully deductible. Other…
Do LLC Members Owe Self-Employment Tax?
The federal tax code’s self-employment tax provisions were enacted long before the existence of limited liability companies (LLCs). As LLCs became increasingly popular, an important question arose: How do the self-employment tax rules apply to LLC members? Despite IRS attempts to make the issue go away, that question still exists for LLCs with several members, which…
Tips for Easier Tax Filing in 2022
By Jennifer Galstad-Lee | Senior Manager, Tax The U.S. tax filing season is officially underway! The IRS has started accepting and processing income tax returns for the 2021 tax-year as of Monday, January 24, 2022. Filing Basics for Individuals Remember that most income is taxable. Be sure to keep records for income items, including: Forms…
Joint Tax Filing: Spouses Are Guilty Until Proven Innocent
When you got married, you knew it was for “better or worse.” But you might not know about laws that hold you responsible if your spouse cheats on a tax return. Married couples filing jointly should be aware that: You are both responsible for tax, interest and penalties — even after a divorce or the death…
How Much Does the IRS Let Delinquent Taxpayers Live On?
The IRS uses “Collection Financial Standards” to help determine a taxpayer’s ability to pay a delinquent tax liability. Allowable living expenses include those that meet the test of being necessary to provide for a taxpayer’s (and his or her family’s) health and welfare, as well as his or her ability to produce income. The IRS allowable living standards…
Should You Diversify Your Investments with Rental Real Estate?
Many people invest in marketable securities, including stocks, bonds, money market funds and real estate investment trusts (REITs). But a less conventional investment option that’s historically paid off for many investors is purchasing a home or condo to rent out to third parties. This alternative may help diversify your existing portfolio and hedge against public market…
The ABCs of Scholarship Tax Rules
Good news: You just found out that your high school senior son or daughter will be receiving a sizeable scholarship at a prestigious university next fall. But what are the tax consequences? In most cases, scholarships awarded to students are exempt from federal income tax, assuming certain conditions are met. Comparable rules apply to fellowships for…