July - 2020

Tax Blog

Tax Blog

Net Investment Income Tax -- Part Three: How to Avoid, Limit, and Minimize the NIIT

Net Investment Income Tax -- Part Three: How to Avoid, Limit, and Minimize the NIIT

Net Investment Income Tax -- Part Three: How to Avoid, Limit, and Minimize the NIIT. Lets discuss some taxpayers and estate planning structures that are NOT subject to the NIIT. The tools of financial planning may be used to avoid the extra 3.8% tax on investment income. The IRS has listed on their website the following exemptions from NIIT: Trusts that are exempt from income taxes imposed by Subtitle A of the Internal Revenue Code (e.g., charitable trusts and qualified re

Net Investment Income Tax -- Part Two: What doesn’t count as Investment Income and How do I Know if

Net Investment Income Tax -- Part Two: What doesn’t count as Investment Income and How do I Know if

It is also important to understand which types of income are not considered or included in Net Investment Income. Below is a non-exhaustive list of common types of income that will not be considered Net Investment Income: Wages, unemployment compensation; operating income from a non passive business, Social Security Benefits, alimony, tax-exempt interest, self-employment income, Alaska Permanent Fund Dividends (see Rev. Rul. 90-56, 1990-2 CB 102) and distributions from certa

Net Investment Income Tax -- Part One: What is it?

Net Investment Income Tax -- Part One: What is it?

The Net Investment Income Tax (NIIT) effects most taxpayers; however, it has a more substantial impact on business owners and investors. Under the Internal Revenue Code (IRC) Section 1411, the NIIT was created and placed into effect on January 1, 2013. The NIIT is applied at a rate of 3.8% to certain net investment income of an individual and for trusts and estates that have income above the statutory thresholds. These thresholds, unlike most, are NOT annually adjusted for

You Can’t Be Serious… Can I REALLY Deduct That?

You Can’t Be Serious… Can I REALLY Deduct That?

With tax day looming (tomorrow, Wednesday July 15), we thought it would be interesting to take a look at some of the strangest deductions that have been challenged by the IRS. Note that some of them actually were deemed legitimate. Not all of the taxpayers claiming these deductions were so lucky. Do you own a junkyard with a rat and snake problem? If you have purchased cat food in order to keep felines around, then you can deduct the cost of the cat food as a business expense

I Owe The IRS More Than I Can Pay Right Now, Help!

I Owe The IRS More Than I Can Pay Right Now, Help!

If you are one of those people concerned about how you’re going to pay Uncle Sam next week, you have options. If you cannot come up with your payment or cover it with a credit card, you may be allowed to pay off your tax bill over time. The IRS offers a couple different ways to spread out your tax bill over the course of a few months. There are two primary ways to stretch out tax payments if you’re unable to cover it all at once. The one you choose largely depends on your sit

IRS Requests Return of Improperly Issued Stimulus Payments

IRS Requests Return of Improperly Issued Stimulus Payments

In late May, the IRS announced that they had sent out approximately 152 million economic relief payments for a total of $258 billion. However, some checks were sent to either deceased taxpayers, foreign-based workers, or incarcerated individuals. The IRS has requested these individuals to, as Spike Lee would say, “Do the right thing”. You may find it interesting that the IRS has requested that these payments be returned, they did not demand for the payments to be returned. Th

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