Even those in their 20s should review this tip! Although you won’t become eligible for Social Security until your 60s, there’s a lot you can do to prepare before then. Here’s a rundown of steps you can take during each decade of your life:
0 Comments
Tax ramifications can be good or BAD! There are few things as frustrating as not being paid what is owed to you. If it becomes clear the debt is not going to be paid, you might be able to recoup some of the lost money via a tax deduction. The IRS has two classifications for bad debt: business and non-business, each with its own deductibility rules.
Business bad debt In order to be considered a deductible business bad debt, the IRS states that the debt must be closely related to your trade or business. To qualify as a deduction, both of the following must be true:
There are many ways to determine the worthlessness of a debt, but at a minimum, you should be able to produce a summary of your collection efforts. If you determine that the debt is indeed bad debt, you can deduct it as a business expense if the aforementioned statements are true. Non-business bad debt All bad debt not defined as business-related is classified as non-business. For a non-business bad debt deduction, the debt must be considered 100 percent worthless. There is no partial deduction available. In addition, you need to prove that the debt is a loan intended to be repaid and not a gift – especially if loaned to a friend or family member. The best way to prove this is with a signed agreement. If you determine the bad debt is valid, you can report the amount as a short-term capital loss. The loss is subject to capital loss limitations and you need to submit a statement with your tax return that includes the following:
The other side of the coin If, on the other hand, you owe someone money and they write off the debt, the tax code generally requires you to record the forgiven debt as income on your tax return. There are cases, however, when this is not required. So if during the year you have forgiven debt, you should ask for a review of your tax situation. This is especially true if the forgiven debt is a discharge of:
While no one wants to be in a position to write off debt, it’s nice to know that you can at least benefit from a tax deduction. If you find yourself in this situation or are planning to loan funds in the future, call to set up a plan of action. "Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office. The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs. We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA  Towards the end of the year, many are undergoing an annual review of their retirement funds. It certainly was a tough year and one of the decisions many parents are grandparents are facing is the difficult decision to either save for retirement or use funds to pay for their children’s or grandchildren's college education. Here are some thoughts on the matter:
Prioritize retirement over education In most cases it is more important to put the financial needs of retirement ahead of college education. Here's why:
Ways to plan for both There are plenty of opportunities to fund both retirement and college education in a tax-advantaged way. Consider funding basic retirement needs first, then look at educational savings accounts and related programs. Here are some suggestions:
Making financial decisions like this can be tough, but with proper planning and insight, a path that works for you can often be found. Call if you want to discuss your specific situation. "Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office. The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs. We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA  One way to reduce your tax bill this year is to donate appreciated stock to a charity of your choice versus making a cash donation. While this will be a tough challenge in today's market, it is still one of the best tax planning strategies available to you. This part of the tax code provides a tax benefit in two ways:
1. Higher deduction. Your charitable gift deduction is the higher fair market value of the appreciated stock on the date of your donation and not what you originally paid for it. 2. No capital gains tax. You do not have to pay tax on the profits you made after selling the stock. As long as you have owned the investment for more than one year, you can avoid paying long-term capital gains tax on the increased value of your stock. A Sweet Example Winnie and Christopher each own 100 shares of Honey, Inc. that they purchased three years ago for $1,000. Today the stock is worth $5,000 (after taking a bit of a sticky hit in the down market). Winnie sells the stock and donates the proceeds to “Save the Bees” while Christopher donates his stock directly to “Honey Overeaters: Finding a Cure”. Assuming a 15% long-term capital gains tax rate*, a 25% income tax bracket, and no other limitations: Not only does Christopher see $750 in additional federal tax benefit by donating his appreciated stock, but Honey Overeaters has $600 in additional funds to use for their charitable program. Other benefits
Things to consider
If you think this opportunity is right for you, please contact a trusted advisor to ensure you handle the donation correctly. * The total tax rate on this type of investment can be as high as 23.8% (20% capital gains tax plus 3.8% net investment income tax) if you have qualified investment income above applicable threshold amounts. "Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office. The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs. We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA |
BLOGTo better serve our clients and friends, to keep you up-to-date and informed, our blog is a resource for tax tips and overall accounting related articles. We hope you find this useful! CATEGORIES
All
ARCHIVES
September 2023
|
RSS Feed
|
Phone: (630) 320-3720
Monarch Accounting Group Inc 145 Tower Drive, Suite 10 Burr Ridge, IL 60527-7836 Email: [email protected] |
|
|
|
