Small Business Tax Strategies

Q. In your recent article on Section 529 plans, you mention state income tax on distributions. But don’t state taxes also affect contributions? A.C., via email

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A taxpayer can claim deductions for bad debts that can’t be collected and become worthless. But the IRS often regards such deductions with a healthy dose of skepticism when transactions involve related parties, such as a purported loan from a business owner to his or her corporation. This type of arrangement proved to be the undoing of a taxpayer in a new Tax Court decision.

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After months of silence in the wake of the U.S. Supreme Court striking down Section 3 of the Defense of Marriage Act (DOMA), the IRS has finally issued definitive guidance on the issue.

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Business is booming and you’re as busy as ever. However, you may suddenly find yourself short-staffed in the office. In the past, you may have asked your kids to pitch in, but now they’re back at school or out on their own. Strategy: Hire your spouse to help out.

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Suppose you’ve carried forward a short-term capital loss from securities sales in prior years. Now you’re poised to sell stock at a sizable long-term capital gain. Think twice. Unless circumstances dictate otherwise, postpone the sale or realize a short-term gain instead.

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The tax law limits deductions for travel and entertainment (T&E) expenses, in­­cluding meals. But if an arrangement involves a third party—say, a leasing company—who does the limit apply to?

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Due to a little-noticed provision, employers in many states may not be able to claim the maximum amount of state unemployment credits to offset 2013 liability for federal unemployment tax (FUTA).

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Environmental cleanup costs generally must be capitalized, which means that there’s no current write-off. Strategy: Claim a current deduction for the cost of removing mold from a business building. The IRS differentiated a situation involving mold removal in a private letter ruling back in 2006.

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The price tag on a college diploma keeps going up, but at least you might be able to salvage some tax benefits if you’re paying the tab. Strategy: Maximize benefits for the American Opportunity Tax Credit.

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Of course, higher taxes are a major concern for upper-income taxpayers in 2013. The top tax rate increases from 35% to 39.6% on ordinary income, while the maximum rate for capital gains and qualified dividends soars from 15% to 20%. But that isn’t the only tax obstacle in your path this year. Strategy: Don’t forget about the Alternative Minimum Tax (AMT).

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