Feature Article

The premium tax credit (PTC) is a refundable credit that is available to certain individuals “whose household income for the taxable year equals or exceeds 100%, but does not exceed 400% of an amount equal to the poverty line for a family of the size involved.” In other words, it’s a refundable tax credit that specifically subsidizes the cost of insurance purchased on a health care marketplace for individuals who are over the federal poverty level (FPL), but not by 400 percent or more. This credit is available as an advance paid directly to the marketplace for qualifying taxpayers who cannot afford (or do not wish) to pay their full monthly premium out of pocket. The amount of the credit is calculated based on estimated annual household income. When taxpayers receive more advance credit than they are entitled to, they must repay the excess. So, the consequences for an intentional or inadvertent underestimation of annual income can be severe. What follows is an overview of how the credit works and describes strategies for reducing the amount of advance premium tax credit (APTC) the taxpayer must repay both immediately and after the fact.

March 18, 2020, was a big day for tax bonuses. Congress passed the Families First Coronavirus Response Act (FFCRA). The bad news is this bill requires certain employers to provide two weeks of paid leave to employees impacted by COVID-19. The good news is that when you provide it to your employees, you get a juicy tax credit to reimburse you for these benefits. If you’re self-employed, you may have noticed you tend to miss out on certain tax benefits designed for companies with employees. But in the case of FFCRA, these credits are also available when you are your own boss. Continue reading to find out how to get this cash as soon as the end of the current quarter.

“Say dog.” My dad once told me that a friend paid for his lunch and said, “Say dog, then I can write this off.” She bred show dogs. File that under “nope.” That is not how the meals and entertainment (M&E) deduction works. Not even before the Tax Cuts and Jobs Act (TCJA) changed the rules. The deduction for M&E is a favorite of many of our clients and rightfully so. Nevertheless, it can be a fraught area if taxpayers and their advisors don’t have a comprehensive understanding of how the rules for deducting expenses apply across the many different scenarios in which our clients are likely to apply them. The IRS issued the final regulations for deducting M&E expenses under Internal Revenue Code (IRC) § 274 on October 9, 2020. It made some additional, short-term adjustments when the Consolidated Appropriations Act (CAA) became law on December 27, 2020. Here is an overview of the new regulations, how to use them to your clients’ benefit, and how to avoid the most common pitfalls.

You may be familiar with the concept of a 1031 exchange as a way to defer gain on the sale of rental or investment real estate. But what happens when you want to completely exit the real estate game? A 1031 Exchange may not be the best option for you. There are a few drawbacks associated with a 1031 exchange, including the limited time frame you must acquire the replacement property, and that you must continue to invest in real estate. If you’re looking to continue deferring current or previously exchanged gains, a Delaware Statutory Trust (DST) may provide a solution to these issues. But investing in a DST property or properties is like any investment. It comes with its own risks and rewards. Read on to find out more.

Whether you’re preparing to have kids in the future or already have kids, there are tax strategies available (but often overlooked) that you should take advantage of. These are proven ways to save you money on your tax return. How do I know? Well, I use them myself. Bringing children into this world is a great joy and brings immense satisfaction. It’s important to remember, though, having children is a significant responsibility you should take seriously. From a very early age, you need to begin planning for your financial future to ensure you care for your children. There are 10+ unique ways the wealthy families in this country use their families to “qualify” for deductions that often go unused by the middle class. They go unused, not because the middle class can’t qualify; it’s that they don’t make the time to take proactive steps to prepare themselves. Here are just a few of the things you should know as you begin tax planning for your family.

The basic concept of the “backdoor Roth IRA contribution” is relatively straightforward. Contributing directly to a Roth IRA is restricted for higher-income individuals; once a married couple has an AGI in excess of $193,000 (or $131,000 for an individual), the maximum contribution limit to a Roth IRA reduces to zero. However, anyone with earned income can contribute to an IRA, regardless of how high their income is; at worst, higher income levels may limit the deductibility of that IRA contribution (for those who are an active participant in an employer retirement plan), but not the ability to make the IRA contribution. In addition, under the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), there have been no income limits on Roth conversions of traditional IRAs since 2010. As a result, anyone who has funds in a traditional IRA, whether originally deductible or not, is eligible to do a Roth conversion. In other words, while income limits remain on Roth contributions, there are no income limits for a Roth conversion.

The IRS loves to issue penalties to taxpayers. In fiscal year 2019, the IRS imposed a whopping $40.5 billion in civil penalties.1 If a taxpayer wants to contest an IRS penalty, it usually takes a really good explanation plus a lot of time and effort. However, there is a little-known IRS policy that allows a taxpayer to get penalty relief with no explanations required. Taxpayers who file returns late can quickly rack up huge penalty bills.

As 2020 winds to a close, we have seen many beneficial programs provided by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Families First Coronavirus Response Act (FFCRA). While most media coverage has focused on loans to employers such as PPP and EIDL, it is important to remember some of the lesser covered programs also included in the tax relief programs. In fact, eligible businesses may qualify to get cash back in some instances. The employee retention credit (ERC) under the CARES Act offers a refundable payroll tax credit for certain wages and health plan expenses paid by businesses during the economic hardship. However, many business owners have uncertainty as to how to qualify when they have also received a PPP loan. The paid sick leave and paid family medical leave credits also offer a refundable tax credit for qualifying wages and Medicare tax and health plan expenses. These refundable tax credits are stackable for maximum benefit when used correctly. Read on to discover how to qualify.