• IRA Withdrawal to buy Real Estate
• Correcting same-sex spouse health insurance premiums wrongly included in 2013 W-2 Income
• Documentation necessary to substantiate vehicle expenses
• Fringe benefits provided to pass-through entity owners
Major deadlines for September
September 15 Third quarter estimated tax payment due for individuals.
2013 tax returns due for partnerships and corporations on extension.
September 26 Sand’s Solutions inaugural Euchre tournament to support the ALS Association. Beginners, as well as card sharks, welcomed to play this very Midwest card game. Light refreshments provided. 7:00 pm till 10:00 pm at 3420 NE 41st. RSVP to donnette@sandsolutions.com.
September 28 Walk to Defeat ALS in downtown Portland at noon. Meet at the Salmon Street fountain and look for the Red Wigs. Feel free to join our team, pour a bucket of ice water over your head, or make a donation by going to http://webor.alsa.org/goto/JerryCatlin.
IRA Withdrawals
Generally, a distribution from an IRA is taxable in the year of the distribution. Taxable distributions received before the taxpayer turns age 59 ½ are subject to a 10% early withdrawal penalty tax unless an exception applies. An IRA distribution is not taxable to the extent it is rolled over to an IRA or other eligible retirement plan (ERP) within 60 days of the distribution.
In order to use IRA funds to purchase real estate, the IRA plan documents must allow for alternative investments. If your current plan doesn’t allow for such investments, you can initiate a rollover or a trustee-to-trustee transfer from your current IRA to one that permits such investments. It is important that the execution of this transfer is done correctly to avoid unintended tax consequences, so seek competent professional advice if you are unsure.
Same-sex spouse health insurance premiums included in 2013 W-2 Income
The IRS provides that a same-sex spouse is treated as a spouse for federal tax purposes if the couple is legally married under state law. Accordingly, health insurance premiums paid by the employer on behalf of the spouse are excludable from the employee’s income. If you have received a Form W-2 that incorrectly includes these amounts in taxable wages, you should request a corrected W-2 or file an amended Form 1040 using the original W-2 and attach Form 4852, Substitute for Form W-2, Wage and Tax Statement.
Calendar notes not enough to substantiate vehicle expenses
Generally, a taxpayer must keep records sufficient to substantiate the amount of any deduction claimed to support the taxpayer’s tax liability. Under the Cohan rule, if a taxpayer establishes that an expense is deductible, but is unable to substantiate the precise amount, a court may estimate the amount of the taxpayer presents sufficient evidence from which to form an estimate. However, there are strict substantiation requirements related to the use of automobiles. You must maintain adequate records or produce sufficient evidence establishing the amount, date and business purpose of each expenditure. The best way to do this is to keep a contemporaneous auto log documenting the beginning and ending odometer reading for each trip along with a description of the business purposes. Get an app for that!
The federal income tax outcome when a partnership or S Corporation provides fringe benefits to its owners can get quite confusing. For some benefits, the owners are ineligible and the benefits can’t be deducted on the business return. Following are some of the benefits that can be provided tax-free to owners.
• Qualified educational assistance program
• Qualified dependent care assistance program
• No-additional-cost services
• Qualified employee discounts
• Working condition fringe benefits, such as business use portion of a company vehicle, professional dues, company provided cell phones and job related education expenses.
• De minimis fringe benefits, such as personal use of cell phones or computers maintained exclusively at the business establishment, occasional employee cocktail parties or picnics, occasional use of the copy machine and local telephone calls.
• On-premise athletic facilities
• Qualified retirement planning services.
