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William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Small business’

Almost half of tax returns still due in remaining 25 days to file!

Posted by William Byrnes on March 21, 2014


The IRS announced in Newswire 2014-32 that almost half of the tax returns expected to be filed for the year 2013 had yet to be filed by March 14, 2014. How many returns will be filed in this last 25 day period?  About 70 million tax returns of the total expected 149 million returns of 2013! If half of these outstanding tax returns are filed with the assistance of a tax preparer, that’s 35 million potential clients in the past 25 days of the tax season! Not a bad profession to be in!

Over the next 25 days this blog will contain many articles for small business owners on taking certain deductions and obtaining various tax credits that allow a small business owner or entrepreneur to minimize the tax imposed on the trade or business and thus maximize the business’ after-tax return.

The IRS reminds small business owners and entrepreneurs of three tax facts that may impact the outstanding 2013 return.

Tax Fact 1: Optional safe harbor method to determine the business use of a home deduction.  Also known as the simplified option for claiming the home office deduction, beginning in 2013, taxpayers can use the optional safe harbor method to determine the deduction for the business use of a home.

If a taxpayer works from home, then it may be possible for the taxpayer to claim the home office deduction.  However, in years past this home office deduction has been rather complicated to calculate.

1. Generally, in order to claim a deduction for a home office, a taxpayer must use a part of your home exclusively and regularly for business purposes. Also, the part of your home used for business must be:

  • the principal place of business, or
  • a place where the taxpayer meets clients or customers in the normal course of business, or
  • a separate structure not attached to the home. Examples might include a studio, garage or barn.

What clearly does NOT qualify for a home office deduction?  By example, a taxpayer sets up a computer in her bedroom on a dresser that she uses for personal emails and for keeping her business records.  In the dresser drawers are pens, paperclips, some receipts, as well as hair clips and some pieces of jewelry.  The IRS isn’t going to allow a home office deduction based on that computer on that dresser.

The taxpayer may be able to use the simplified option to claim the home office deduction instead of claiming actual expenses. Under this method, the taxpayer multiplies the allowable square footage of the office area by a prescribed rate of $5.  The maximum footage allowed by the IRS is 300 square feet. The deduction maximum limit using this method is thus $1,500 per year.

If the taxpayer is self-employed and chooses the actual expense method, then the taxpayer should use Form 8829Expenses for Business Use of Your Home, to calculate the amount of the home office deduction.  The taxpayer claims the deduction on Schedule CProfit or Loss From Business, whether using the simplified or actual expense method.

If the taxpayer is an employee, then additional rules apply to claim the deduction. For example, in addition to the above tests, the business use must also be for the employer’s convenience.  By example: a “work from home” arrangement.

Tax Fact 2: Standard mileage rate. Beginning in 2013, the standard mileage rate for the cost of operating a car, van, pickup, or panel truck for each mile of business use is 56.5 cents per mile.

Tax Fact 3: Additional Medicare Tax. Beginning in 2013, a 0.9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than:

  • $125,000 if married filing separately,
  • $250,000 if married filing jointly, or
  • $200,000 if single, head of household, or qualifying widow(er) with dependent child.

Medicare wages and self-employment income are combined to determine if a taxpayer’s income exceeds the threshold. RRTA compensation should be separately compared to the threshold.

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Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

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IRS Small Business Tax Center ….

Posted by William Byrnes on March 7, 2014


IRS Tax Tip 2014-09 posted February a couple weeks ago and I excerpt relevant portions for the small business community, many actively engaging with their tax preparers for tax season.

The Center includes these resources:

  • You can apply for an Employer Identification Number, get a form or learn about employment taxes.
  • IRS Video Portal.  Watch helpful videos and webinars on many topics. Find out about filing and paying business taxes or about how the IRS audit process works. Under the ‘Businesses’ tab, look for the ’Small Biz Workshop.’ Watch it when you want to learn the basics about small business taxes.
  • Online Tools and Educational Products.  The list of Small Business products includes the Tax Calendar for Small Businesses and Self-Employed. Install the IRS CalendarConnector tool and access important tax dates and tips right from your smart phone or computer, even when you’re offline.
  • Small Business Events.  Find out about free IRS small business workshops and other events planned in your state.

Go to the Small Business and Self-Employed Tax Center and use the A-Z index to find whatever you need.

For more than half a century, Tax Facts has been an essential resource designed to meet the real-world tax-guidance needs of professionals in both the insurance and investment industries.  For over 110 years, National Underwriter has been the first in line with the targeted tax, insurance, and financial planning information you need to make critical business decisions.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

tax-facts-online_medium

The company also points out that the expert authors—Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.

“The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation | Tagged: , , | Leave a Comment »

Act Now on End of Year Expiring Tax Breaks: IRA Charitable Rollovers, Bonus Depreciation

Posted by William Byrnes on December 18, 2013


Individual clients may have one final chance to satisfy required minimum distribution (RMD) requirements without increasing taxable income.

Small business clients, on the other hand, should be advised that the time to expand is now, as special expensing and bonus depreciation rules are also set to expire at year’s end.

Regardless of your client’s situation, the list of expiring tax breaks is robust enough to grab everyone’s attention.

Read Professor William Byrnes and Robert Bloink’s end of year planning tips at > Think Advisor <

 

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U.S. Tightens Scrutiny of Small Businesses Skirting Obamacare Mandate

Posted by William Byrnes on November 6, 2013


The Affordable Care Act (ACA) mandate that will require employers with more than 50 full-time employees to provide health coverage for those employees or pay a penalty that can reach $3,000 per employee has many small business clients scrambling to plan for years ahead.  Because independent contractors are not counted toward the 50-employee limit, some small business clients may be tempted to reclassify common law employees as independent contractors to avoid the mandate.

Read Professor William Byrnes and Robert Bloink’s analysis of the issues, challenges, pitfalls and solutions for addressing a business’ future in a world of Obama Care at > Think Advisor <

 

Posted in Compliance, Tax Policy | Tagged: , , , , , , , | Leave a Comment »

Overlooked Obamacare Silver Lining: Savings for Small Businesses

Posted by William Byrnes on October 2, 2013


Your small business clients know that the health insurance exchanges set up under the Affordable Care Act (ACA) are coming—and soon—but they may not realize that they create significant benefits for employers in the form of dramatic cost savings above and beyond the current rules governing deductibility of premiums and eligibility for certain tax credits.

Beginning Nov. 1, small business clients will be eligible to sign up online for a specially created Small Business Health Options Program (the SHOP exchange), but clients are unlikely to have realized that the rules of the game have changed with the advent of SHOP.

Read William Byrnes and Robert Bloink’s analysis at Think Advisor

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DB(k): A 10-Year Retirement Strategy for Business Owners

Posted by William Byrnes on September 19, 2013


Small business clients who have seen their businesses return to profitability following the economic crisis of the past few years may have secured their continued viability, but many have done so at the expense of personal retirement security. As a result, a vast portion of the baby boomer population is now struggling to play catch up. Unfortunately, traditional retirement savings vehicles, with their strict contribution limits, often are not enough to replace years’ worth of lost savings.

For many baby boomer clients who own small businesses, a new strategy that combines a defined benefit plan with elements of a voluntary 401(k) plan can allow the client to save more than 10 times as fast as a traditional plan, with dramatic tax savings that your clients will have to see to believe.

Read William Byrnes’ full analysis at  > Think Advisor <

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Fully Funded Retirement in 10 Years: A DB Plan for Now

Posted by William Byrnes on December 17, 2012


Your small business clients are faced with the increasing likelihood of higher taxes in 2013 and beyond; those aiming to reduce the slope of the fiscal cliff next year will want to take a closer look at the benefits of a defined benefit plan. …. read our strategy article at http://www.advisorone.com/2012/12/13/fully-funded-retirement-in-10-years-a-db-plan-for

Posted in Retirement Planning, Uncategorized, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

The Perils of Top-Hat Plans

Posted by William Byrnes on July 22, 2011


An executive top-hat plan can be a great way to become desirable to highly qualified executives or supplement a business owner’s compensation. However, these plans are accompanied with a significant downside. Because the plans are generally unfunded, major events at the sponsor, like a sale or insolvency, can decimate a plan and leave participants empty handed. The effect on a top-hat plan when a sponsor liquidates its assets is illustrated by a recent Seventh Circuit Court of Appeals case. Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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Tax Court Revives Partnership Self Employment Tax Debate

Posted by William Byrnes on July 21, 2011


The Tax Court has reopened the question of whether status as a limited partner entitles them to an exemption from self-employment taxes—an issue that’s been idle for over 13 years.  The Tax Court recently declared that status as a limited partner does not necessarily exempt a partner from self-employment taxes. Instead, the exemption is derivative on how substantial of a role the partner played in the partnership business. Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of small businesses in Advisor’s Journal, see IRS Announces Lenient Lien Program for Small Business (CC 11-48)

For in-depth analysis of partnership taxation, see Advisor’s Main Library: H–Partnership Taxation

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Obama Administration Targets S Corps in Corporate Tax Reform War

Posted by William Byrnes on July 13, 2011


Treasury Secretary Timothy Geithner sparked outrage when he suggested at a recent House Ways and Means subcommittee meeting that “Congress has to revisit this basic question about whether it makes sense for us as a country to allow certain businesses to choose whether they’re treated as corporations for tax purposes or not.” Geithner’s comments about pass-through entities evoked a sweeping gasp from millions of small business owners who could become virtually non-competitive if subject to a double tax regime.   Behind client referrals, professional referrals were the second biggest producer.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous Advisor’s Journal coverage of the Obama administration’s budget and tax proposals, see Obama Budget Would Undercut Utility of Life Insurance in Small Business Planning (CC-11-41) & Obama Tax Compromise Provides 100 Percent Bonus Depreciation of Business Assets Through 2011 (CC 11-01).

For in-depth analysis of S corporation taxation, see Advisor’s Main Library: B—Corporation’s Election Under Subchapter S.

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IRS Announces Lenient Lien Program for Small Businesses

Posted by William Byrnes on July 11, 2011


If you have small business clients who are struggling with back taxes and/or tax liens, you can tell them help is on the way. The IRS is offering assistance for both individuals and small businesses that are struggling to “meet their tax obligations, without adding unnecessary burden to [the] taxpayers.”  The new program includes a number of features discussed in today’s Advanced Markets Journal.   Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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1099 B2B Reporting To Be Repealed

Posted by William Byrnes on March 29, 2011


Why is this Topic Important to Wealth Managers? This discussion is focused on a hot topic in Washington and around the country.  The new 1099 reporting requirements that are expected to come into effect next year may be amended or removed all together. Wealth managers would be well served to be knowledgeable on the subject that not only affects clients and their businesses, but it also directly affects many wealth managers themselves who pay for goods and services as a trade or business. Thus, here at Advanced Markets we bring wealth managers in particular the most relevant and up-to-date information on the web.

Repeal of the health reform law’s business-to-business 1099 reporting requirement is a step closer, with the U.S. Senate passing an amendment on February 2 that would repeal the provision.  Praising passage of the Senate amendment, Senator Stabenow said, “Today we provided a common-sense solution for business owners so they can focus on creating jobs, not filling out paperwork for the IRS…. If left unchecked, 40 million small businesses would see their IRS 1099 paperwork increase 2000 percent.”

President Obama even praised the repeal efforts in his state of the union address, receiving a resounding round of applause.  Acknowledging that his health care reform law has its share of flaws, and offering to work with the Congress to correct those flaws, he said that “We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses.”  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

The House of Representatives passed H.R. 4, the Small Business Paperwork Mandate Elimination Act of 2011 by majority vote (314-112, with 76 Democrats joining a unanimous House GOP).[1] The legislation, if passed by the Senate and signed into law by President Obama, would repeal an expansion currently scheduled to take effect in 2012 of information that businesses must report to the Internal Revenue Service on Form 1099.

Specifically, the new legislation would amend the Internal Revenue Code to repeal the expanded 1099 information reporting requirements on payments made to corporations, rental property expense payments, and payments for property and other gross proceeds.  The legislation would thus strike portions of section 6041 of the Internal Revenue Code which were added by the Patient Protection and Affordable Care Act of 2010 (PPA).

The PPA expanded tax information reporting requirements to require businesses to issue a Form 1099 for any payments to corporations (rather than just to individuals) and for any payments for property (rather than just for services or investment income) that exceed $600 per year per payee.  H.R. 4 would strike language requiring “amounts in consideration for property” and “gross proceeds” to be subject to 1099 reporting requirements under section 6041 of IRS Code in order to eliminate the expanded reporting requirements.  The bill would also repeal expanded information reporting requirements on rental property expense payments that are currently in effect.

According to the Joint Committee on Taxation, repealing these expanded 1099 information reporting requirements for rental property expense payments as well as certain payments of more than $600 will reduce taxes by approximately $24.7 billion over ten years. [2]

Section 6041 of the Internal Revenue Code outlines reporting requirements and generally requires information returns to be made by every person (payor) engaged in a trade or business that makes payments aggregating $600 or more in any taxable year to another person (payee) in the course of the payor’s trade or business.  The information returns must be filed with the Internal Revenue Service and corresponding statements must be sent to each payee.

Beginning in 2012, certain payments not previously subject to 1099 reporting requirements, including those made to corporations and those made for property, will become subject to the reporting requirements under the PPA.  The PPA and subsequent legislation expanded information reporting requirements of businesses for payments of $600 or more to any vendor and on rental property expense payments.  Some argue, these new requirements would likely impose a huge tax compliance burden on small businesses, forcing them to devote resources to tax filing instead of to business expansion and job creation.

 

For previous coverage of the Health Care Reform Act’s enhanced 1099 reporting requirement in Advisor’s Journal, see Health Care Reform Causes an Avalanche of 1099s (CC 10-84).

Please check back with Advisorfyi and Advisorfx for more timely information on 1099 reporting.

 

Posted in Tax Policy | Tagged: , , , , , , , | 1 Comment »

LLC Taxation

Posted by William Byrnes on March 8, 2011


A Limited Liability Company (LLC) is a business structure allowed by state statute.  LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC.  Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.

Owners of an LLC are called members.  Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities.  There is no maximum number of members.  Most states also permit “single member” LLCs, those having only one owner.

A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state’s requirements and the federal tax regulations for further information.  There are special rules for foreign LLCs.

Read the analysis at AdvisorFYI

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LLC Series and Cell Companies

Posted by William Byrnes on March 3, 2011


Late last year the IRS published proposed regulations regarding the classification for Federal tax purposes a domestic series limited liability company (LLC), a domestic cell company, or a foreign series or cell that conducts an insurance business.

A number of States, such as Delaware, have enacted statutes providing for the creation of entities that may establish series, including limited liability companies (series LLCs).  In general, most series LLC statutes provide that a limited liability company may establish separate series.

Although the series LLC generally are not treated as separate entities for State law purposes, the treatment of rights and obligations is similar to separate entities, creating in essence “associated members”.  Members’ association with one or more particular series is comparable to direct ownership by the members in such series, in that their rights, duties, and powers with respect to the series are direct and specifically identified.   If the conditions enumerated in the relevant statute are satisfied, the debts, liabilities, and obligations of one series generally are enforceable only against the assets of that series and not against assets of other series or of the series LLC.

Read the analysis at AdvisorFYI

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Selected Provisions and Analysis of the Tax Relief Act of 2010

Posted by William Byrnes on February 8, 2011


Written by the foremost experts in the field – Professor William H. Byrnes, Esq., LL.M, and Robert Bloink, Esq., LL.M

Understand the Act’s Implications for You and Your Clients

  • Analyzes important insurance, estate, gift, and other elements of the Act
  • Provides pertinent information on other important 2010 tax developments
  • Convenient Q&A format speeds you to the information you need – with answers to over 100 important questions

Summary Table of Contents

  • Analysis of the Tax Relief Act of 2010
    • Income Tax Provisions
    • Estate Tax Provisions
    • Generation Skipping Transfer Tax
    • Deduction for State and Local Sales Taxes
    • Alternative Minimum Tax
    • Tax Credits
    • Payroll Tax Holiday
    • Wage Credit for Employees who are Active Duty Members of the Military
    • Charitable Distributions from Retirement Accounts
    • Bonus Depreciation and Section 179 Expensing
    • Basis Reporting Requirements for Brokers and Mutual Funds
    • Regulated Investment Company Modernization Act of 2010
    • Health Care Act
    • Form 1099 Reporting Requirement for Businesses
    • American Jobs and Closing Tax Loopholes Act of 2010
    • Requirements for Tax Return Preparers

Price: $12.95 + shipping & handling and applicable sales tax

To order:

With our Custom Imprint program, you can place your company’s logo on the cover of this analysis and you’ll leave a lasting impression.  Call 1-800-543-0874 for additional information.

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The Small Business Tax Credit

Posted by William Byrnes on January 26, 2011


During 2010, President Obama realized his goal of providing health care coverage to all Americans when Congress passed the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010.

Under the new health care legislation many new changes will affect taxpayers beginning last year.  This week’s blogticles are dedicated to the discussion of the health care legislation and the impact it is projected to have.  We begin with a discussion of the Small Business Tax Credit.

Under the new law, the Small Business Tax Credit allows qualified small employers to elect, beginning in 2010 a tax credit for some percentage of their employee health care coverage expenses.  Generally, a “qualified small employer” is an employer who has the equivalent of 25 full-time workers or less (e.g., a firm with fewer than 50 half-time workers would be eligible), pay average annual wages below $50,000, and cover at least 50 percent of the cost of health care coverage for their workers.

Further, the tax credit will cover up to 35 percent of the premiums a small business pays to cover its workers until 2014, when the rate will increase to 50 percent.  Nevertheless, the credit has phase out provisions which gradually reduce the credit amount for businesses with average wages between $25,000 and $50,000 and for businesses with the equivalent of between 10 and 25 full-time workers.  To read this article excerpted above, please access AdvisorFYI.

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GRAT Strategy for Avoiding Gift on High Premium Payments May Be Coming to a Close

Posted by William Byrnes on October 18, 2010


Life insurance-based estate planning strategies for high-net-worth clients with estate liquidity issues run into the problem that premiums may be so high as to exhaust the client’s annual gift tax exclusion and lifetime exemption, resulting in unwanted gift tax exposure.  One way advanced planners have dealt with the gift tax problem of high premiums is through the use of a grantor retained annuity trust (GRAT).  But the U.S. House recently passed a bill—H.R.4849, the Small Business and Infrastructure Jobs Tax Act of 2010—that would severely curtail the use of GRATs, so the utility of this technique may soon be eliminated.

To illustrate this technique while it remains open, let’s assume you have an unmarried client, Max, who owns a number of restaurant franchises. His estate will be worth about $12 million, most of which is tied up in his franchises and other illiquid investments. Max’s estate will need around $6 million in liquid death benefit to cover the pending estate tax liability.  Read today’s article in your Advisor’s Journal at GRAT Strategy (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of the topic of the use of GRATs, see Advisor’s Main Library Section 4. Estate Planning Techniques J—Grantor Retained Annuity Trusts

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

Posted in Estate Tax, Taxation, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

The Impact of the Small Business Jobs and Credit Act

Posted by William Byrnes on September 30, 2010


President Obama signed the Small Business Jobs and Credit Act of 2010, H.R. 5297, on Monday, September 27, establishing an allowance for partial annuitizations of annuity contracts from January 1, 2011.  In the coming weeks, the Advisors Journal will include in-depth examinations of the provisions of the Small Business Act that are of the most interest to advisors and insurance producers, such as the partial annuitization of annuity contracts and the Roth Conversion Extension to Employer Accounts.

In this AdvisorFX exclusive analysis, we summarize the impact of the Act’s other major provisions.  Please read the article via your AdvisorFX subscription at AdvisorFX (or sign up for a free 30 day trial).

Posted in Tax Policy, Taxation | Tagged: , , , , , , , | Leave a Comment »

The Planning Opportunity Presented When a Client Supports a Parent

Posted by William Byrnes on September 30, 2010


The business owner who supports his parent, or an adult family member, may be missing an opportunity to lower his tax burden. In the context of a properly established insurance funded buy-sell agreement, small business clients have an opportunity to provide an adult family member with a fixed income while also protecting the client’s interest in the business and avoiding adverse tax consequences.

Read the analysis by our experts Robert Bloink and William Byrnes located at AdvisorFX Journal The Planning Opportunity Presented When a Client Supports a Parent

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