Tax Musings of a Burbank CPA: Do You Really Like Loaning the Government Money?

This is a reprint of a blog I wrote over three years ago, but it still makes sense today.  So, you have filed your income tax return with the IRS and your state, and are now waiting for the refund the government(s) owe you. You are thinking of all the things you can do with that money when you get it. Here are some things to think about as you wait:  1. These refunds are in effect interest-free loans you have made the government(s) over the year through excess withholding. They are just paying you back the money you earned over the previous year that won’t even earn interest unless you file an extension and wait even longer for your money. This is even worse than that bet that your buddy owes you because at least you know where to find him if he doesn’t pay you right away. With our government you call on the phone and wait an hour for them to tell you that the refund is being processed or go on their website and find out there is a problem and you have to call anyway!  2. You could be earning some income on this refund [...]

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Tax Musings of a Burbank CPA: Tax Reform – Entertainment Deductions That Survived

(Thanks to  the Bradford Tax Institute for this Great Breakdown of Meals and Entertainment): As you know from “Tax Reform Wipes Out 50 Percent Business Entertainment Deductions” yesterday, you may no longer deduct directly related or associated business entertainment.    Common forms of directly related and associated entertainment that are no longer deductible include business meals with clients or prospects, golf, football games, and similar business-building activities.    That’s the bad news.    The good news is that tax code Section 274(e) pretty much survived the entertainment bloodletting. Under this section, you continue to deduct:   *entertainment, amusement, and recreation expenses you treat as compensation to employees and that are included as wages for income tax withholding purposes;    *expenses for recreational, social, or similar activities (including facilities therefor) primarily for the benefit of employees (other than employees who are highly compensated employees);   *expenses that are directly related to business meetings of employees, stockholders, agents, or directors (here, the law limits expenses for food and beverages to 50 percent);    *expenses directly related and necessary to attendance at a business meeting or convention such as those held by business leagues, chambers of commerce, real estate boards, and boards of [...]

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Tax Musings of a Burbank CPA: Tax Reform Wipes Out 50 Percent Business Entertainment Deductions

(Thanks to  the Bradford Tax Institute for this Great Breakdown of Meals and Entertainment): Lawmakers destroyed a big chunk of usual and normal business entertainment on January 1, 2018. The good news is that some not-so-usual and not-so-normal entertainment survived the bloodletting. (See tomorrow’s Blog – “Tax Reform: Entertainment Deductions That Survived” for some of the survivors.) The bad news is that lawmakers massacred entertainment that was already handicapped by the 50 percent cut.  For example, during 2017, you could take a prospect or client to a business dinner followed by the theater or a ballgame and deduct 50 percent of all the monies spent, providing you passed some tax law tests on business discussion and associated entertainment.  Now, in what you thought was a business-friendly tax reform package, you find that lawmakers exterminated a big chunk of business entertainment as a business expense. Good-bye Traditional Entertainment  The new law repeals-effective January 1, 2018-the tax code section that allowed a deduction for entertainment, amusement, or recreation that was directly related to, or associated with, the active conduct of your trade or business.  Because of tax reform, you can no longer deduct entertainment that has as its mission the generation of [...]

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