Qualifying for IRAs
Posted by taxguru on October 27, 2008
Q-1:
Subject: sep ira tax calculations
can profit distributions to an owner of an s corp. be used to calculate contributions to a sep ira?
A-1:
No it can’t.
Only earned income that is subject to Social Security tax is eligible for the SEP earning test. Since S corp net profit on a K-1 is not subject to any SS tax, it doesn’t count towards SEP-IRA eligible income.
Whether or not it makes sense for you to intentionally restructure your S corp income in such a way so as to pay in some SS tax and thus make it possible to use that income as a means of qualifying for a SEP-IRA contribution is something you need to work on with your professional tax advisor. It may or may not be counter-productive to do that.
Good luck.
Kerry Kerstetter
Q-2:
kerry can someone have a sep ira and a roth ira or any other retirement combination with a sep ?
A-2:
You can simultaneously have several types of retirement accounts. The tricky part comes in determining which ones you are allowed to contribute to each year.
Rather than ask me about each potential combination of plans, the more efficient approach would be to work with a professional tax advisor to run each of the scenarios until you find one that suits your unique situation and goals.
Good luck.
Kerry Kerstetter
Posted in Retire | Comments Off on Qualifying for IRAs
Gifts made after death?
Posted by taxguru on October 27, 2008
Q:
Subject: gifting
In the year of death can the surviving spouse make a $24000 gift to her daughter after her husband has passed away? She gets to claim him as an exemption in 2008 even though he died Jan 2008.Can she still use his annual gift exclusion to make gifts in 2008 after his date of death?
A:
What you are proposing is not allowed. Once a person passes away, s/he can no longer make gifts or use the Gift Splitting option between spouses. Any transfers of assets owned by the deceased will need to be treated as a distribution of estate assets.
Even though the widow can’t exclude the full $24,000 gift, the additional $12,000 can still be given tax free as part of her one million dollar lifetime exclusion, which may or may not make sense depending on the potential size of her taxable estate.
A qualified professional tax advisor should be consulted to work out the most sensible strategy.
Good luck. I hope this helps.
Kerry Kerstetter
Posted in Gifting | Comments Off on Gifts made after death?
S Corp Payments
Posted by taxguru on October 26, 2008
Q:
Subject: S corp’s
Hi I just found your site and read about S vs C Corp’s. We have been an S Corp for years. Some questions I have is: money taken out by shareholder ( my wife and I) should that be ledgered under personal income or shareholder loans? Is that money taxable? My CPA says it is not taxable. Why would I ever pay myself in wage form if this is the case. I see as our profits get up to 65,000 or more maybe we should start a C Corp. How so you smooth out the money in a C Corp. I don’t understand. Maybe I should get a new CPA?Thanks
A:
If you’ve been operating an S corp for any period of time and your professional tax advisor hasn’t explained to you all of the details of how cash distributions are treated, it does sound like s/he has dropped the ball. That all should have been explained to you prior to your even setting up the S corp.Likewise, if your professional tax advisor isn’t aware of how to effectively utilize a C corp to smooth out your taxable income, it is time to find someone who understands this very basic tool of tax planning.
Good luck.
Kerry Kerstetter
Posted in corp | Comments Off on S Corp Payments
Accelerating capital gain taxes?
Posted by taxguru on October 26, 2008
I received this from a reader back in early September:
Subject: possible link of interest for your blog
http://www.fulcruminquiry.com/Investment-Calculator.htm
This is an online interactive calculator that addresses whether one should sell now to take advantage of lower capital gains rates that now exist.
David Nolte
Fulcrum Inquiry
I Wrote back:
David:
Thanks for passing that along. It’s an interesting calculator, albeit with too many assumptions required to be realistically practical.
I was surprised not to see any part of your discussion or calculation that takes into account the zero percent LTCG rate for sales in 2008, 2009 & 2010. That is a very real issue, as opposed to the possible future rate increases, and is a question we tax pros have been receiving frequently for the past year or so.
Your calculator could cover such an analysis as whether the transaction costs of selling now to tax advantage of the zero percent bracket justify it, plus the fact that there will still be tax on the portion of the gains that are above the new zero percent rate bracket.
Kerry Kerstetter
To date, no reply has been received
Posted in CapGains | Comments Off on Accelerating capital gain taxes?
Sharing the wealth…
Posted by taxguru on October 26, 2008
A little taste of his own medicine…
Posted by taxguru on October 25, 2008
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Posted in comix, Commies, Obambi | Comments Off on A little taste of his own medicine…
Corp taxes are passed through…
Posted by taxguru on October 25, 2008
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Posted in comix, corp, TaxHikes | Comments Off on Corp taxes are passed through…
Obambi’s Real Running Mate
Posted by taxguru on October 23, 2008
Posted in comix, Commies, Obambi | Comments Off on Obambi’s Real Running Mate
Tax Guru - Ker$tetter Letter 