Category Archives: Tax Strategies

The Tax Impact of Gifts

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With Christmas just around the corner, gifts are on everyone’s mind, giving and receiving, so it’s a logical time to look at gifts from a taxation point-of-view. I’m not talking about the new game console you got your kids, but rather what the Internal Revenue Service considers a gift for tax purposes. Generally, any transfer to an individual is considered a gift when full monetary value isn’t received in return. By that definition, examples of gifts could be amounts of … Read more →

Tax Strategies

So You Want a Bigger Tax Refund

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Tax Day 2017 has come and gone and, along with many other Americans, you were expecting a little more of a kickback on the refund check. Also like many other Americans, you may want to take steps to ensure a bigger refund, but life gets in the way and before you know it, it’s Tax Day Next Year. One thing to keep in mind is that a tax refund is a return of your own money, so the apparent windfall … Read more →

Tax Strategies

Federal Estate Tax Credits – Paul Gaulkin CPA

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Below we are going to discuss two tax credits that are available against the federal estate tax. Foreign Death Taxes A foreign death tax credit is provided for United States citizens and residents. The credit applies to property that is subject to both federal and foreign death taxes in order to prevent double taxation. Taxes paid to possessions of the United States are regarded as foreign death taxes according to Code Section 2014. The foreign estate tax credit allowed against … Read more →

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Charitable Remainder Annuity Trust Defined – Paul Gaulkin CPA

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A charitable remainder annuity trust is a trust from which a specified sum or percentage (not less than five percent of the initial fair market value of all assets actually placed in trust) is to be paid annually to one or more named individuals as income beneficiaries. Timing of Trust For transfers in trust occurring after June 18, 1997, the annual payout cannot exceed 50 percent of the initial fair market value of the trust’s assets. For transfers in trust … Read more →

Tax Strategies

Earnings & Profits for Dividend Distributions – Paul Gaulkin CPA

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Although earnings and profits (E&P) have a significant impact in determining the tax status of dividend distributions, the term is not defined inside the Internal Revenue Code. Code Section 312 does provide an indication of how certain transactions will affect E&P, but it does not specifically define what E&P actually is. Defining Earnings and Profits Earnings and profits is basically a tax term. It has some similarities to retained earnings, but it is not equal to it. E&P is a … Read more →

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Health Reimbursement Arrangement Guide – Paul Gaulkin CPA

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A health reimbursement arrangement is an employer established benefit plan for employees, which is different from an MSA or HSA. Under the plan, an employer reimburses a participating employees qualified medical expenses up to a maximum dollar amount specified in the HRA plan agreement for the coverage period. Unlike an MSA or HSA which require contributions and distributions to be reported on employee’s federal tax returns, there is no tax reporting requirements for an HRA. Health Reimbursement Arrangement Benefits HRAs … Read more →

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Annuity Income Exclusion Guidelines – Paul Gaulkin CPA

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money that is locked with chain

An annuity is nothing more than a contract that pays a fixed income at set intervals for a specified period of time. The amount of income generally depends upon the premium paid, the life expectancy of the annuitant, and the number of years payments are to be received. When income is received as an annuity under an annuity, endowment, or life insurance contract, the amount received generally consists of two separate parts: 1. A nontaxable return on the investment made … Read more →

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Restricted Stock Plan Rules & Guidance – Paul Gaulkin CPA

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wall with ticker for stocks

Stock or other property that is transferred to a taxpayer by an employer as compensation for services rendered and that same stock is subject to certain restrictions that affect its value, the stock is considered restricted and is governed by the rules contained in Code Section 83. As a general rule, the value of any property transferred in connection with services provided by the taxpayer is taxable as compensation, whether the property is goods, common stock, a partnership interest, or … Read more →

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Accrual Method Tax Planning – Paul Gaulkin CPA

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Tax planning when using the accrual method of accounting can increase or decrease the amount of taxable income for the year. Listed below are a few techniques that can be used to increase or decrease taxable income for the tax year in which they are used. Income Deferral Income may be deferred by the following techniques: 1. Delays in shipping goods sold (if shipping time is accrual time) 2. Shipping free on board destination, delaying the title change ( if … Read more →

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Like Kind Three Party Exchanges – Paul Gaulkin CPA

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In the event a taxpayer is unable to find a party with who to have a like kind exchange because the party whose property the taxpayer seeks wants to sell for cash instead of doing a trade. A three party exchange is basically a way for the taxpayer to still carry out a like kind exchange but with three instead of two people. Finding Third Party If the taxpayer can find a purchaser who is willing to pay cash and … Read more →

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