Beware of Trust Fund Penalties

The term “trust fund recovery penalty” refers to a tax penalty assessed against the directors or officers of a business entity that failed to pay a required tax on behalf of its employees. For example, employers withhold income taxes and FICA payroll taxes from employees’ wages. These funds actually belong to the government and are referred to as “trust funds.” They cannot be used by the employer to pay other business expenses.

Tax law provides that employers are personally responsible for remitting the trust funds to the government. If the employer is ...

1031 Exchange

If you own real property that you could sell for a substantial profit, you may have wondered whether there’s a way to avoid or minimize the taxes that would result from such a sale. The answer is yes, if the property is business or investment related. Normally, the gain from a sale of a capital asset is taxable income, but Section 1031 of the Internal Revenue Code provides a way to postpone the tax on the gain if the property is exchanged for a like-kind property that is also used in business or held for investment. These transactions ...

Tax Break for Sales of Inherited Real Estate

Clients are usually pleasantly surprised by the answer—that special rules apply to figuring the tax on the sale of any inherited property. Instead of having to start with the decedent’s original purchase price to determine gain or loss, the law allows taxpayers to use the value at the date of the decedent’s death as a starting point (sometimes an alternate date is chosen). This often means that the selling price and the inherited basis of the property are practically identical, and there is little, if any, gain to report. In fact, the computation ...

1099 Filing Requirement

The 1099s for 2012 must be provided to the independent contractor no later than January 31 of 2013. We can issue the 1099s for you.

The following are the exceptions to the above rule:

1. You do not need to issue a 1099- MISC. to a corporation unless the service provider/corporation is either an attorney or a medical practitioners.

Example 1: If your engineer is incorporated, you do not need to issue him or her a 1099- MISC. However, if he or she is not incorporated, then you do.

Example 2: Whether your attorney or your ...

Understanding The Accounting Term EBITDA And How To Use It

The accounting term EBITDA is an acronym that is widely used. It stands for Earnings Before Interest, Taxation, Depreciation, and Amortization.

It is an extremely helpful tool for understanding how one business or industry is faring based on comparing it to others that are doing the same thing. EBITDA’s value lies in the fact that it gives a very quick assessment of a business’s earnings potential; but, because it is not part of generally accepted accounting principles, or GAAP, it is frequently excluded from a business’s official financial statement.