TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

How much of a tax break or hike would you see under the proposal? Figure out the difference between the total cost of your healthcare plan and the federal cap on your health tax benefit ($7,500 for single coverage; $15,000 for family coverage). Then multiply that difference by the sum of your top tax rate plus 7.65 percent (which is the portion of payroll taxes you pay for Social Security and Medicare). This will give you a ballpark idea of your tax savings or tax increase. So if your plan costs $12,000, the difference between your expense and the $15,000 family deduction is $3,000. If you're in the 25 percent tax bracket, you'd multiply $3,000 by 32.65% (25% + 7.65%), which would give you tax savings of about $980. Conversely, if you pay $3,000 more than the deduction cap for insurance, you'd pay an extra $980 in income tax and payroll tax.

Democrats push for more IRS Audits! January 17, 2007 -House Democrats are holding hearings on whether federal tax collectors are too quick to close audits of large companies, potentially leaving billions of dollars in taxes uncollected. Reps. Richard Neal, D-Mass., and Rahm Emanuel, D-Ill., said they were concerned about a recent story in the New York Times in which IRS employees said they were under pressure from superiors to quickly close audits with agreements to collect only a fraction of the taxes that are potentially owed. IRS officials told the Times that the complaints by the IRS employees were misguided. Debbie Nolan, the I.R.S. official in charge of auditing large and medium-size businesses, denied that audits were being closed over the objections of agents who had evidence that significant additional taxes were owed, the newspaper reported.

IRS to Target Schedule C Filers In a recent telephone conference, IRS commissioner Mark Everson said that they will be conducting more audits on individuals running unincorporated businesses (i.e. self-employed individuals). While Schedule C filers have long been audit targets for the IRS, they are now stepping up their audit efforts because they believe that self-employed individuals represent a large portion of those individual taxpayers underreporting their income. If you are self-employed and file Schedule C, always keep detailed and organized records, don't deduct your personal (non-business) expenses on your Schedule C and make sure you report all of your income. You are already on the IRS radar; there's no need to make their job easier.

Wide-Ranging Tax Gifts For Businesses and Individuals Before heading home for the holidays, Congress passed a long-awaited bill that retroactively extends several valuable tax breaks that expired last year. The law also includes a new deduction for certain taxpayers buying homes in 2007, and it contains several provisions that make Health Savings Accounts more attractive. Why Some IRS Forms Are Already Out of Date For the 2006 Tax Year The Tax Relief and Health Care Act of 2006 is filled with many provisions that can save taxpayers money. Unfortunately, it was passed after the IRS printed the tax forms and other materials it provides to taxpayers. In some cases, printed materials will not have a line for certain deductions, such as the one for state and local sales taxes. The tax agency is now scrambling to print new mailings, update information on its Web site and launch a media campaign to inform taxpayers about the new and extended tax breaks. Professional assistance in th...

Section 529 Plans Can Provide Tax-Smart Learning for Kids and Adults Contributing to a Section 529 Plan before year end on behalf of children or grandchildren can be a wise idea. But have you ever thought about one of these tax-favored accounts for yourself — to pay for post-secondary courses you might want to take in the future? Adults can open up Section 529 plans (also called Qualified Tuition Programs) and make themselves the beneficiaries. The plans allow you to put money in a state plan for tuition, fees, books, supplies, and equipment that are required to attend an eligible educational institution. What's an eligible school? "It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions," according to the IRS. That means you can generally use withdrawals to study for a second career, go to graduate school, or do coursework in retirement. Section 529 advantages include: Y...

Purchase Equipment before Year-End! Under current tax guidelines, businesses can deduct up to $108,000 in equipment purchases, as long as they do not buy more than $430,000 in equipment. Therefore, if you're going to buy something in January, buy it now and get the deduction this year !

YEAR END TAX PLANNING Help Minimize Your Company's 2006 Tax Bill A basic principle of year-end tax saving is, accelerate deductible expenses into this year and defer income until next year. Of course, that doesn’t work in all cases. The right strategy for your company depends on several factors, including how you answer these questions: Does your business operate on a cash or accrual basis? Do you expect a profit or a loss for 2006? Do you anticipate that 2007 will bring significantly higher revenue or expenses, or a tax bracket change? Depending on the answer, you could be better off reserving some tax breaks for next year or New Court Case: Accounting for Inventory Shrinkage Astute inventory accounting at the end of the year can help improve the bottom line. But as one new Tax Court case illustrates, there’s no need to be greedy. Facts of the case: The Tax Court ruled that a company could not increase reported purchases by the same amount it had properly allocate...