Careful tax planning required for incentive stock options
Incentive stock options (ISOs) allow you to buy your employer’s stock in the future at a fixed price equal to or greater than the stock’s fair market value on the ISO grant date. If the stock appreciates, you can buy shares at a price below what they’re then trading for. But complex tax rules apply. If you were granted ISOs in 2018, there likely isn’t any impact on your 2018 income tax return. But if in 2018 you exercised ISOs or sold stock you acquired via exercising ISOs, t
Beware the Ides of March — if you own a pass-through entity
Shakespeare’s words don’t apply just to Julius Caesar; they also apply to calendar-year partnerships, S corporations and limited liability companies (LLCs) treated as partnerships or S corporations for tax purposes. Why? The Ides of March, more commonly known as March 15, is the federal income tax filing deadline for these “pass-through” entities. Not-so-ancient history Until the 2016 tax year, the filing deadline for partnerships was the same as that for individual taxpayers
Some of your deductions may be smaller (or nonexistent) when you file your 2018 tax return
While the Tax Cuts and Jobs Act reduces most income tax rates and expands some tax breaks, it may cause you to see these five itemized deductions shrink or disappear when you file your 2018 tax return: 1) state and local tax, 2) mortgage interest, 3) home equity debt interest, 4) miscellaneous, and 5) casualty and theft loss. The combination of a much larger standard deduction and smaller itemized deductions may mean that, even if itemizing has typically benefited you, you mi
3 big TCJA changes affecting 2018 individual tax returns and beyond
When you file your 2018 income tax return, you’ll likely find that some big tax law changes affect you, besides the much-discussed tax rate cuts and reduced itemize deductions. For 2018 through 2025, the TCJA: 1) eliminates personal exemptions, 2) increases the standard deduction and 3) expands the child credit. The degree to which these changes will affect you depends on whether you have dependents and, if so, how many. It also depends on whether you typically itemize deduct
When are LLC members subject to self-employment tax?
Limited liability company (LLC) members commonly claim that their distributive shares of LLC income — after deducting compensation for services in the form of guaranteed payments — aren’t subject to self-employment (SE) tax. But the IRS has been cracking down on LLC members it claims have underreported SE income, with some success in court. SE tax background Self-employment income is subject to a 12.4% Social Security tax (up to the wage base) and a 2.9% Medicare tax. General
Why you shouldn’t wait to file your 2018 income tax return
The IRS opened the 2018 income tax return filing season on Jan. 28. Consider filing as soon as you can, even if you typically don’t file this early. It can help protect you from tax identity theft, in which a thief files a return using your Social Security number to claim a bogus refund. If you file first, it will be returns filed by any would-be thieves that are rejected by the IRS, not yours. Other benefits: You’ll get your refund sooner or, if you owe tax, you’ll know how
Fundamental tax truths for C corporations
The flat 21% federal income tax rate for C corporations under the Tax Cuts and Jobs Act (TCJA) has been great news for these entities and their owners. But some fundamental tax truths for C corporations largely remain the same: C corporations are subject to double taxation. Double taxation occurs when corporate income is taxed once at the corporate level and again at the shareholder level as dividends are paid out. The cost of double taxation, however, is now generally less b
