With precious little fanfare, the Working Families Tax Relief Act of 2004 revamped the rules for dependency exemptions. It created a uniform definition of "child" and relaxed the requirements for certain taxpayers. But the old rules still apply in some situations, resulting in even greater confusion for taxpayers. Here's a quick primer on the old rules, plus how you can take advantage of the new rules.
Small Business Tax
Section 179 vehicles should be a key part of your small business tax deduction strategies. Can Section 179 property fit in with your business tax strategies?
Let Business Management Daily help you get each and every rental property depreciation credit and business tax deduction you’re entitled to.
Have you joined the millions of taxpayers who use computer software to complete their tax returns? For do-it-yourselfers, it's usually faster and easier than plowing through the paper version, and at a relatively low cost.
Q: I am the executor of my parents' estates. My father passed away two years ago and my mother this February. Can I redirect part of my inheritance from my mother to a charity? S.J.P., Longmont, Colo.
Heads up: The IRS plans to ratchet up the audit pressure on small businesses in the coming months.
Q: You said retirement plan participants must pay a 10 percent penalty tax for withdrawals before 55 (see 4/18/05 issue). Isn't the correct age 59 1/2? C.F., via e-mail
Suppose you want to add the new guaranteed minimum withdrawal feature (see above) to an existing variable annuity, but the issuer doesn't allow that option. Are you out of luck? Not necessarily.
Q: I'm switching my business from a C corporation to an S corporation. I understand that S corporations don't pay any tax. Will I need to make quarterly tax payments? A.P., Cincinnati
Can't get enough of a good thing? To hoard even more money for retirement than the tax law allows for qualified plans (such as 401(k)s or pension plans), arrange things so your company makes contributions on your behalf to a nonqualified deferred compensation plan.
Don't count on the IRS to increase the standard mileage deduction rate.
Do you run a business through two or more related companies? These days, it's not unusual for people to own multiple operations. But you could be inadvertently paying more employment tax than required if some of your employees are "shared" by more than one company.