Avoid an Audit

Facing an audit by the IRS can be a daunting situation for any individual or business. Even if all your taxes are in order, audits can take a lot of time and energy. Fortunately for the taxpayer, the IRS Restructuring and Reform Act of 1998 resulted in kinder and gentler practices from the IRS. Unfortunately, due to extremely low audit rates in years following, resulting in political embarrassment, audit rates have begun to climb back up. Everyone should make sure to file their tax return properly each year, but there are some people who should be warier of an audit than others. These people include high income earners, people filing a business tax form (especially large corporations), and people claiming the earned income tax credit (EITC). To avoid being audited, it may benefit you to treat the situation like a battle with the IRS, where the first defense is a strong … Read More

More uses for Coverdell

Paying for a child’s college education is often a stressful ordeal for parents, which is why there are plans such as the Coverdell Education Savings Account (CESA) and Section 529 that assist with payment. Unfortunately for parents using the CESA, this method is not the best way to save up, as it has a much lower contribution limit than the Section 529 plan. The money contributed to this account can hardly be considered useless though, as there are multiple alternatives that can be used to capitalize on these tax-free distributions

Though a 529 is better for college savings, a CESA can help pay for private schooling.

The CESA, under current law, allows for parents or grandparents to contribute up to $2,000 annually per child or grandchild. After the contributions are made, the account can grow on a tax-deferred basis and money can be withdrawn, tax-free, to pay for school related expenses. … Read More

Saving on business meals

Under the recently enacted Tax Cuts and Jobs Act (TCJA), there has been a crackdown on which meal and entertainment expenses are tax deductible. Under the previous law, 50% of all business-related meal and entertainment expenses were tax deductible at the end of the year, but the TCJA has cut this discount down to solely meal related expenses. This change initially caused confusion, but a recent notice sent out by the IRS was able to make light of the new rules. In order to make to proper deductions and fully utilize the law for your business, it is important to understand the rules of what can be deducted and how to record it.

Under the TCJA meal expenses are still 50% tax deductible

The most important part of getting the full deduction for your business is making sure to obtain receipts that denote separate charges for food bought in connection with … Read More