Economics Finance

As a small business owner, you most likely dread hearing the words “tax season.” This time of year forces you to wear many hats. You’re not only responsible for filing your own taxes, but your employees are also relying on you to issue W-2 forms to them early in the season, so they can get to work filing their own taxes for the year. You need to provide them with accurate information in a timely manner, and depending on the size of your business, you may be responsible for doing this all yourself.

Finding the time to simply gather all this information is difficult enough. You must first go through your books for the year and ensure that the final income amounts, minus any deductions, are correct. Then you must to produce copies of W-2 tax forms, as well as any other miscellaneous documents your employees may need, before the federally-mandated deadline passes. Failure to do so can result in fines and penalties. And don’t forget; you have your own taxes to file. Continue reading ‘Finding Online Tax Forms is Fast and Simple For Small Business Owners’ »

Jobs have been fleeting the last few years. Fortunately, unemployment benefits have provided a safety net for many people. Most people don’t realize that the taxability of these benefits is an issue.

The Great Recession has move through practically every financial industry and the end result has been huge increases in unemployment numbers. As I am writing this, the unemployment rate stands at just under 10 percent. That is staggering. It means roughly 1 in 10 people are without a job. Many others are working part time or reduced hours and thus are not counted as unemployed. All and all, it is a fairly dire situation and one can only hope business picks up and jobs start being created. Continue reading ‘Are Unemployment Benefits Taxable?’ »

1031 is a derived name for tax deferred exchange, with its parent name coming from Section 1031 of the Internal Revenue Code. In other words, 1031 tax deferred exchange falls under the Section 1031 of Internal Revenue Code. 1031 is specially established for business tycoons and real estate barons. Established in the 1920’s, almost all tax payers use this as a trustworthy and powerful financial tool for generation and enhancement of wealth, as well as for money in today’s times.

It exclusively enables tax payers to sell their property, investment, income or any other valuable assets in exchange of similar kind of property or asset. It also gets its name from ‘like-kind’ or ‘tax-saving’ tool. Rather than calling it a simple sale, 1031 tax deferred exchange is a transaction where exchange of two assets takes place. It is not a mere buying and selling of property, but it focuses on how the property owner would want to sell his piece of property in exchange of another property, by deferring the ‘capital gains’ taxes to the newly obtained ‘like-kind’ property; thus a result of the property swap.

1031 exchange is flexible enough as far as choice of swap ‘like-kind’ real estate- swap is concerned. An agricultural land can be swapped with real estate property; a real estate property can be swapped with rental property, where as commercial buildings can be swapped for shops. Continue reading ‘Explanation of the Workings of a 1031’ »

Some people are concerned that consulting a credit counselor will reflect poorly on their credit score. This is just not so. First of all, if you feel you may be in need of credit counseling services, chances are that your credit score may have already taken a hit. There could be delinquencies on your report before you even engage a credit counselor. If that is the case, those delinquencies will remain on your report until time elapses and they are removed in the chronology of things.

The credit counseling service itself reports your conference and, ultimately, your repayment plan to no one. They are sworn to confidentiality.

As the credit counseling agency negotiates your repayment schedule, they will contact your creditors with an offer to accept this arrangement. Your creditors have the option to accept or decline your repayment plan. In the event they accept your offer through your credit counselor, they have the right to make a note of this arrangement on your credit report. This notation in no way affects your credit score, but if you miss payments or are late in keeping up with the promised schedule, such misdeeds will negatively affect your FICO score. Continue reading ‘How Your Credit Score is Affected by a Credit Counselor?’ »

This is another rung on the ladder of estate planning and trusts. Keep in mind that one misstep could send you down to the bottom of the board again – Similar to the children’s game of Chutes and Ladders. If properly planned, the DAPT can turn into something called a beneficiary defective inheritor’s trust, or a BDIT. This is how it works: Someone other than the doctor will set up the trust. When this is done and no gifts are made to the trust by the doctor, many of the rules associated with estate taxes will not apply. For example, if assets are given to the trust and the client retains the right to enjoy the assets that are transferred, the entire amount of those assets will be added to the estate.

Let’s say that the doctor has set up his trust in a state that allows self-settled trusts. If the doctor is not the grantor setting the trust up, the BDIT does not have to be in any particular state. So, this means that the trust can continue for as long as state laws allow. Now, there is a little twist to this. If someone else sets up the trust, how will it then be a grantor trust that will allow the doctor to avoid capital gains on the sale of any of the assets? Like the trust with the pair of deuces, there is a technique that can be used to create some income-tax magic. The designer of BDIT, states,”The tax law provides that if a person other than the grantor can vest all of the principal of the trust in himself, then he’ll be treated as the owner of the trust for income tax purposes.” In simple terms, if someone else puts annual gifts into the trust and the doctor retains the power to pull out those gifts, the trust will then be a grantor trust to the doctor, even though he did not set it up himself. The great benefit to this is that the doctor can sell valuable assets to the trust without triggering capital gains!

Since the doctor did not set up the trust, but it was done by someone else, he will be given more control over the trust and will have a much less tax and asset protection risk than if he had done all the work and set up the trust himself. In addition, Dr. Smith may also be given the right to appoint the trust assets that remain when he dies in any manner or fashion he wishes. Continue reading ‘Beneficiary Defective Inheritor’s Trust (BDIT)’ »