Before the fast-approaching new year, it’s important to take some time and reflect on year end tax planning. The weeks pass quickly and the arrival of January 1, 2015 will close the doors to some tax planning strategies and opportunities. Fortunately, there is still time for a careful review of your year-end tax planning strategy.
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Taxpayers generally prefer to accelerate deductions to reduce their current year income and taxes. In some situations, the tax code’s accounting rules allow an accrual-basis employer to deduct a year-end employee bonus in the current year, even though the bonus will not be paid until the following year.
Even though the calendar still says summer, it’s not too early to be thinking about 2013 year-end tax planning. In fact, year-end tax planning has become around-the-year tax planning because of tax legislation (or the lack of tax legislation), new IRS rules and regulations and personal and business considerations.
On June 26, the U.S. Supreme Court held that Section 3 of the federal Defense of Marriage Act (DOMA) is unconstitutional(E.S. Windsor, SCt., June 26, 2013), which brings up an important question: what are the major tax planning implications of this ruling?
Loans without interest or at below market interest rates are re-characterized so that the lender must recognize market-rate interest income. Put another way, a below market rate loan is a loan for which a rate of interest that is lower than the applicable federal rate (AFR) (which is computed by the government and released by the IRS on a monthly bases).
Did you owe tax on your 2012 tax return? Did you receive a sizeable refund? Or, conversely, did you receive a smaller refund than you expected? If so, take another look at your tax return from this past year. It is quite possible that by making a few changes, you could put more money in your pocket in the short term.