The Department of Labor ("DOL") regulations require an audit for a “Large Plan.” The number of “eligible” participants determines whether the plan is a large plan, and is based on the number of eligible participants at the beginning of the plan year.
Loans vs. Gifts
When you loan money to a friend or family member with the intention of having the money paid back you should take necessary steps to document the agreement, including an executed promissory note, interest, and a repayment schedule. You can use the applicable federal rate (AFR) to calculate interest on the loan based the maturity date. Generally, loans like these are either demand loans, which have no set maturity dates and are payable on demand, or term loans with set maturity dates. The interest earned is taxable to the lender and could be deductible by the borrower, depending on what the loan proceeds are used for.
For family loans over $100,000, the IRS requires you to charge interest. If you do not charge interest, or the interest charged is below the Applicable Federal Rate (imputed interest), the loan is considered to be below-market and could have gift and income tax consequences.
Contact your KS-LLP professional to learn more about dealing with gift taxes and filing estate and gift tax returns.
What to do when you receive an IRS notice
For most taxpayers, receiving correspondence from the IRS is stressful. As instances of fraud and phone scams are at an all time high, it is important to know is how the IRS will contact you. The IRS will not call you without first sending correspondence. The IRS will also not demand payment without giving you the opportunity to question, respond or appeal the bill. Millions of IRS scam cases are reported each year, it is important verify the legitimacy of the letter you receive. You can call the taxpayer helpline at 1-800-829-1040 or provide a copy of the notice to a tax professional.
Although notices from the IRS can be intimidating, it is important that you do not ignore them. Notices can be about several things, from changes to a tax return, taxes due, missing information or an audit/examination request. The IRS provides a timeline for you to respond; it is important that you do to avoid incurring any unnecessary interest and penalties.
Speaking to a tax professional regarding your IRS Notice may be the best way to reduce the stress and uncertainty surrounding your tax issues. Contact your KS-LLP professional to learn more about dealing with your IRS Tax Notice; we can provide you with ideas on how to respond to the notice.
Critical items to consider when you inherit an Individual Retirement Account (IRA)
There are a few crucial steps to take when you inherit a non-spousal IRA.
First, you will need to determine whether or not the original account holder was required to take minimum distributions (RMD) in the year of their death. If a RMD was required, you must confirm the distribution was taken prior to last day of the year in the year of death. If the RMD was not taken, the beneficiary must take the distribution on their behalf.
If you missed taking the RMD in the year of death please see our article on What to do if you missed your Individual Retirement Account Required Minimum Distribution.
Second, you’ll need to determine which distribution method to utilize. Inherited IRA have special rules for RMD’s. The traditional IRA RMD rules, distributions after age 59 ½ and RMD’s after age 70 ½ do not apply to inherited IRAs/ RMD’s must begin imeadiatly under one of 3 methods:
lump sum
5 year method
beneficiary life expectancy
Each of these methods results in a different tax and financial impact, for which you willl want proper planning and considerations in place to avoid any surprises. Our office works with inherited IRAs often and can assist with this process.
Contact your KS-LLP professional to learn more about inherited IRAs and proper tax planning for the distribution method you select.
When does my Employee Benefit Plan need to have an audit?
How to determine if you have hired a 1099 Contractor or an Employee
What to do if you missed your Individual Retirement Account Required Minimum Distributions
2018 Tax Cuts and Jobs Act: What changes were made to itemized deductions for individual taxpayers?
Tax Treatment of a Cash-out Refinance
Real Estate Gains and Losses
Real property that is held primarily for sale to customers in the ordinary course of business is not a capital asset. Any gain or loss on its disposition is ordinary. The seller is identified as a dealer. However, if the property is acquired and held principally for investment, any gain is capital. The determination of whether property is held primarily for sale depends on the facts of the case; the courts have identified a number of factors for making this determination.
Under Code Sec. 1231, property must be property used in the trade or business for taxpayers to apply Code Sec. 1231, which treats gains as capital and losses as ordinary for gains and losses resulting from the sale or exchange of the property. Rental real estate can be a trade or business if the owner rents properties and is substantially involved on a regular basis with renting, servicing tenants, and maintaining the properties. However, a taxpayer with a single rental property may have a harder time demonstrating that the rental is a trade or business.
Every business is unique and has particular tax considerations. Please contact our office so that we can set a time to discuss your business in more detail.