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March Newsletter

March 18th, 2010

Small businesses face both tax opportunities and challenges in 2010

As 2010 unfolds, small businesses are confronted with tax challenges and opportunities on many fronts. Lackluster consumer spending, combined with tight credit, has many small businesses in a holding pattern. Congress may respond with a new tax credit to encourage hiring. Small businesses are also faced with uncertainty over many temporary provisions in the federal Tax Code. Many of these incentives have expired. At the same time, small businesses are uncertain how health care reform, the fate of the federal estate tax and proposed retirement savings initiatives may impact them.
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S Corporations — Audit Triggers

S corporations have enjoyed exponential growth over the years, becoming “king of the entities” among those forms of doing business nationwide. Except for the unincorporated sole proprietorships, the S corporation is the most popular form of small business in the United States. In fact, over the past 15 years, the number of S corporations has quadrupled. S corporations are estimated to make up roughly 13 percent of all businesses. The growth of S corporations has not gone unnoticed by the IRS.
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FAQ: What constitutes income from the cancellation of debt?

Debt that a borrower no longer is liable for because it is discharged by the lender can give rise to taxable income to the borrower. Debt forgiveness income or cancellation of debt income (“COD” income) is the amount of debt that a lender has discharged or canceled. However, in many situations, the canceled debt is excluded from taxable income.
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How Do I? Maximize Storm Damage Deductions?

When your personal property or home is damaged or destroyed by a storm or other catastrophe, the IRS provides some relief … depending on the amount of the damage and how much income you have in order to absorb at least some of the loss yourself. Property losses caused by damage from certain types of storms and similar “casualties” – from wind and rain to floods and tornadoes – are tax deductible to the extent allowed under Internal Revenue Code Section 165. While the tax law regarding casualty losses from storm damage is complicated, don’t be put off — understanding the tax law is key to maximizing your deduction.
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Withdrawals from retirement savings: Tough rules may change

In response to the economic downturn that has affected the retirement portfolios of millions of individuals across the country, Congress has been considering a variety of alternatives to offer relief to those who face financial emergencies and need immediate access to their funds. Two of the most significant proposals that have been recommended include: (1) significant broadening of the suspension of the 10 percent penalty tax on early withdrawals from IRAs and defined contribution plans, and (2) extending the temporary suspension of the penalty tax imposed on individuals age 70 1/2 or older who do not take required minimum distributions (RMDs) from certain retirement plans.
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