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UPDATE 12/28/19: For a detailed walkthrough and instructions for completing the new W-4 for 2020, please read this article. In response to the shock of some taxpayers who are still reeling from the amount due with their 2018 tax returns, the IRS has published a draft of the updated Form W-4, which is used to...
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Health savings accounts (HSAs) are used in conjunction with high deductible health plans and offer five tax advantages compared to traditional savings accounts: Your own contributions to the HSA are tax-deductible in the current year. Employer contributions to the HSA are excluded from income. Earnings inside the HSA (i.e. interest, dividends, and capital gains) are...
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What is tax conformity? Tax conformity is a state’s adoption of the federal definitions of income, as contained in the Internal Revenue Code (IRC). For individuals, it’s the calculation of federal adjusted gross income; for businesses, it’s federal taxable income. Traditionally, Virginia adopts those definitions as of a fixed date — usually, but not always,...
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Parents who own businesses have a few tax incentives for hiring their children to work in their business: Shifting income to a lower (or 0%) tax bracket: If you hire your child to work in the business, any wages paid to him/her will be deductible by the business. Suppose that your combined federal and state...
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Note: This piece was originally meant to be included in my Year-end business Tax Planning post, but I broke it out separately due to the length and complexity of the subject. One of the biggest changes for 2018 is the new qualified business income deduction. If you are a sole proprietor, a partner in a...
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As I’m sure you’re aware, the Tax Cuts and Jobs Act of 2017 (TCJA) was enacted at the end of last year. It’s the largest tax overhaul since the 1986 Tax Reform Act and will affect almost every business in the United States. In light of all the changes that took effect this year, I...
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Just as the daylight hours are getting shorter, so is the time for fine-tuning any last-minute strategies to lower your 2018 tax bill. Unlike recent years, in which the tax rules have been fairly stable, 2018 brings extensive changes as a result of a large tax overhaul that passed Congress last December. These changes will...
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Did you know that if you’re self-employed you may be able to set up a retirement plan that allows you to contribute much more than you can contribute to an IRA or even an employer-sponsored 401(k)? There’s still time to set up such a plan for 2018, and it generally isn’t hard to do. So...
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A potential downside of tax-deferred saving through a traditional retirement plan is that you’ll have to pay taxes when you make withdrawals at retirement. Roth plans, on the other hand, allow tax-free distributions; the tradeoff is that contributions to these plans don’t reduce your current-year taxable income. Unfortunately, your employer might not offer a Roth...
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