Income the IRS Can’t Touch

Wouldn’t it be nice to have a source of nontaxable income? You may be more fortunate than you realize. Listed here are a number of income items that the IRS does not tax.

1. Tax-Free Interest. Municipal bond interest is federal tax-free. This includes bonds issued by a state or municipality. The tax-free benefit increases the higher your income, but caution must be taken to ensure the underlying municipality is not in dire financial condition.
2. Health Insurance Premiums. For now, health insurance premiums are tax-free. This is scheduled to change in the future to help pay for health care reform, but for now this benefit can be paid in pre-tax dollars.
3. Income from Roth IRA and Roth 401(k) Accounts. While the amounts contributed to these retirement savings accounts is taxed, any earnings made on these contributions is federal tax-free as long as holding period and distribution rules are followed.
4. Health Related Spending Accounts (HSA). Contributions and earnings in these health related spending accounts are tax-free as long as the proceeds in the account are used to pay for qualified health care expenses.
5. Child Support Received. Unlike alimony received, child support income is federal tax-free.
6. Car Pool Revenue. While commuting expenses are not generally deductible, any reimbursement of your commuting expenses by fellow passengers is not reportable as income.
7. Home Sale Gains. Up to $250,000 ($500,000 for married filing jointly) of capital gains on a sale of your principal residence can be tax-free.
8. Certain Employer Compensation. In addition to health care premiums there are a number of employee benefits that are not taxable. All have limits, but every tax-free dollar is money in your pocket. These include;
• airline miles earned on business credit card expenses,
• certain employee provided tuition expenses,
• qualified adoption expense reimbursement,
• up to $50,000 in employer paid term life insurance,
• flex spending accounts for dependent care and health care, and
• commuting expense benefits for parking and mass transit commuting.

Remember any time you can pay for something in pre-tax dollars is like giving yourself a raise. Are you taking advantage of all your federal tax-free income opportunities? We’d be happy to help you review your income to see if it is nontaxable. Reach out to schedule a meeting here: https://www.bas-pc.com/appointment-center/

 

Read For More :

Please Click Here : Bookkeeping services NJ

Thanks for reading this blog. You can subscribe for regular update about technology news and tips via RSS Feed. you can also follow us on facebook & twitter.Thanks for visiting!.

Is a Section 529 plan the right college savings plan for you?

There are many ways to save for college, but one thing is certain: it is never too early to start. One way to save for college is with a “Section 529” plan. These plans offer a way to pay for college expenses with some nice tax advantages.

What are they?

Section 529 plans allow you to set up a tax-advantaged account to pay for your child’s college education. There are two types of Section 529 plans: prepaid tuition programs and college savings plans.

• Prepaid tuition programs let you lock in today’s tuition costs by purchasing tuition credits or certificates that a student redeems when he or she starts college.

• College savings plans let you make contributions to a state-sponsored savings account to build a fund for your child’s college expenses. These accounts are generally managed by a private mutual fund company. This is the Section 529 plan you’ve probably been hearing about, and it is this type of college plan that is the focus of this article.

How do Section 529 college savings plans work?

• Make a gift to set up an account. You start by setting up an account and naming your child (or anyone else) as the beneficiary. Your contribution is considered a gift. Your contributions qualify for the $14,000 annual tax-free gift exclusion ($28,000 for married couples making a joint gift).

Special rules for 529 plans let you average your gift over five years. This means married couples can make a $140,000 joint gift and individuals can make a $70,000 gift in a single year, without incurring gift tax. However, you cannot make additional gifts to your child for five years, or you may owe gift tax.

• Your contribution is limited. You aren’t permitted to make contributions to a 529 plan beyond what is necessary to pay for your child’s college expenses. Each plan sets its own limit.

Most plans allow you to make either a lump sum contribution or a series of monthly contributions. All contributions must be made in cash; you can’t contribute shares of stock or other property to these plans.

• You remain in control. You cannot choose the investments in the fund -you must choose one of the plan’s investment options. However, you do remain in charge of all withdrawal decisions. You can allow your child to make withdrawals to pay for college expenses. If your plan permits it, you can change the beneficiary to one of your other children. If you change your mind about maintaining the account, you can even request a refund (tax and penalties will apply).

• Your child can withdraw money to pay for college expenses. Section 529 funds must be used for qualified higher education expenses, such as tuition, fees, books, and supplies. They can also be used to cover certain room and board expenses, as long as your child attends school at least half-time. If your child receives a scholarship, you can request a penalty-free refund up to the amount of the scholarship. In addition, you can withdraw the funds if your child becomes disabled or dies.

If the funds are withdrawn for any other purpose, you (not your child) pay tax on the earnings that have accumulated in the fund.

• You can change plans. You can make a tax-free rollover to another plan with the same beneficiary. That allows you to move your child’s plan to another state’s plan without losing the tax benefits.This tax-free rollover treatment only applies to one transfer within any 12-month period read More...

Read For More :

 

Please Click Here : Bookkeeping services NJ

Thanks for reading this blog. You can subscribe for regular update about technology news and tips via RSS Feed. you can also follow us on facebook & twitter.Thanks for visiting!.

Financial Basics: Buy the Right Insurance

To keep your insurance costs down, don’t buy insurance to pay for every small medical bill, auto repair, or financial loss. Build a savings account to handle life’s small financial inconveniences. Think of insurance as protection against catastrophes.

You can lower your insurance premiums significantly by taking larger deductibles. Also, look for comprehensive insurance, not coverage for one specific event. Buy a good health insurance policy rather than a cancer policy, for example.

Health Health insurance is often provided by your employer. However, self-employed individuals and many others must find their own policies and pay the premiums. Generally speaking, you should purchase a good major medical policy with the highest deductible you can handle.

Auto Auto insurance generally includes bodily injury, liability, property damage, collision, and comprehensive coverage. You should understand each type of coverage and how much it adds to your premiums.

Homeowner Your homeowner’s insurance should be reviewed to be sure your coverage takes increased replacement cost into account. Also check your coverage on household contents; they may have changed substantially since you took out the policy.

Personal Property Coverage for your personal property should include the contents of your home, if you’re a renter rather than a homeowner, and such assets as jewelry, stamp collections, boats, airplanes, and other valuables which are not covered by another policy.

Life There are two basic kinds of life insurance -term and cash-value insurance. When you buy term insurance, you purchase pure protection; that is, if you die, your beneficiaries receive the policy amount. If you live, you receive nothing. Cash-value insurance comes in numerous packages. What they all have in common is a combination of insurance and a savings/investment feature. The premiums on term insurance are much lower than for cash-value insurance, usually one-fifth to one-fourth the cost. Your insurance and investment needs should be reviewed to determine which program is best for you.

Disability You may have as much life insurance as you need, but not enough disability insurance. Disability insurance will provide you with income if you become disabled and cannot work, a situation that is four times more likely to happen than dying before age 65.

Business Your business insurance policies should include insurance for building and equipment, inventory, receivables, errors and omissions, key man life insurance, joint-venture insurance, and whatever else applies in your business circumstances. Review all of your coverage, plus purchases and sales of assets, with your agent at least annually.

General Liability You may want more protection than specific insurance policies provide. You can take an umbrella liability policy to supplement your other insurance coverage. Such policies usually are inexpensive.

Specialty & Other Insurance Anything can be insured, even a racehorse or a movie star’s legs. Common specialty insurance includes such things as rental car insurance, cancer insurance, vacation insurance, contact lens insurance, and air travel life insurance. Never purchase any of these without serious consideration. In many cases, you are simply wasting your premium dollars.

If you’d like assistance with financial planning, please feel free to reach out to your team. We’d be happy to help show you ways to keep your costs down: https://www.bas-pc.com/appointment-center/

Read For More :

 

Please Click Here : Bookkeeping services NJ

Thanks for reading this blog. You can subscribe for regular update about technology news and tips via RSS Feed. you can also follow us on facebook & twitter.Thanks for visiting!.

Six Questions Every Family Business Should Answer

Tax and business planning is important for the success of any organization, but especially for the family-owned enterprise. Here are some important questions that owners of family businesses need to address.

1. Do you have a plan? Without a plan, your business has no direction and possibly no future. You can be sure your strong competitors have written plans. Write a business plan that includes both short and long-range goals. Include specific goals such as profit, growth, and market-share targets. Plans for conflict resolution and transition should also be included.

2. Who’s running the store -family, outsiders, or employees? When several family members participate in the company, an organization chart should be drawn to clearly show lines of authority. Promotions should be based on a clear, fully understood set of guidelines.

3. Should the legal form of the organization be changed? Whether your business is a sole proprietorship, a partnership, a regular corporation, an S corporation, or a limited liability company, you should review your business form periodically to see if it’s still the best choice for your business. The legal form under which you operate can make a difference in the taxes you pay, the costs of doing business, and the amount of paperwork and red tape you’ll have.

4. Have you reviewed your retirement and fringe benefit plans? The types of plans available depend on your business form. Besides being an excellent tax planning tool, such plans can be effective in motivating and retaining employees.

5. Are formalities observed? Family members occasionally overlook the fact that business assets are not personal assets. Company loans to family members need to be documented. Shareholder or employee use of corporate assets, such as automobiles, may have income tax consequences. Get advice so you structure transactions properly.

6. Who’s next in line? Many family businesses are lucky enough to have a very strong member at the helm. But that person won’t live forever.

The survival of any family business depends on how wisely one generation passes ownership to the next. The more family members, the more complex the situation is likely to become.

Facts show that only 30 percent of family-owned businesses survive to the second generation, and only 13 percent survive to a third generation. Careful planning while you’re still at the helm may prevent the demise of your business.

If you’re ready to put a plan into action for your family business, we’re here to help make your family business last for generations to come. Schedule a meeting with our team to get started: https://www.bas-pc.com/appointment-center/

Read For More :

 

Please Click Here : Bookkeeping services NJ

Thanks for reading this blog. You can subscribe for regular update about technology news and tips via RSS Feed. you can also follow us on facebook & twitter.Thanks for visiting!.