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AttorneyBritt, Gary L. Britt, CPA, J.D., is an Austin, Texas business lawyer and CPA with 35 years experience.

AttorneyBritt helps businesses and business owners form their LLCs, corporations, and partnerships;  draft their operating, shareholder, and partnership agreements; manage, structure, and enforce their business contracts and agreements; write and review their business purchase and sale agreements; protect their assets; prosecute and defend their lawsuits; do their estate planning; draft their wills; and successfully transfer their wealth to future generations.

If you are a business owner in Austin, Texas count on us to be your dedicated legal team.  For high quality professional business law representation from a dual professional attorney and CPA, without the high hourly rates of a large law firm, call or text (512) 481-2886 or Email Us to discuss your needs or schedule a consultation.

 

"Last-Minute” Year-End 2020 Tax-Saving Moves For Individuals

There are only a few days left to go before the year ends, but here are some actions you may take before the end of the year to improve the your tax situation for 2020 and beyond.

Consider Biden's proposals. As the year comes to an end, it is hard to predict what, if anything, that Mr. Biden has proposed will become law and take effect in 2021. Many believe that taxes will have to be raised after the economic effects of the pandemic are tamed, to pay for the increased federal spending caused by the pandemic. But enacting tax legislation of any sort is likely to be a slow process and could very conceivably not affect 2021 taxes.

In any case, here are some of Mr. Biden's most noteworthy tax proposals:

Tax increase proposals

• Raise the highest individual income tax rate to 39.6% from 37%.
• Cap itemized deductions for the wealthiest Americans at 28%.
• End favorable capital gains rates, including those rates on dividends, for anyone with income of more than $1 million.
• Eliminate basis step-up at death, accompanied by taxing all appreciated investments at death.
• Dropping the estate and gift tax exemption to its pre-Tax Cuts and Jobs Act level.

Tax decrease proposals.

• $8,000 tax credit to help offset the costs of child care.
• Exclusion for student loans that have been forgiven.
• A refundable tax credit for low- and middle-income workers who contribute to IRAs and employer-provided retirement savings plans.
• Catch-up contributions to retirement plans for caregivers of any age who leave the workforce for at least a year.
• A $5,000 tax credit for family caregivers.

Solve underpayment of estimated tax/withheld tax issues.

Have an extra amount of withholding in order to solve an underpayment of estimated tax problem. Employees may discover that their prepayments of tax for 2020 have been too small because, for example, their estimate of income or deductions was off and they are underwithheld, or they failed to make estimated tax payments for unanticipated income, such as gains from sales of stock. Or they may have an underpayment of estimated tax because of the additional 0.9% Medicare tax and/or the 3.8% surtax on unearned income. To ward off or reduce an estimated tax underpayment penalty, employees can ask their employers to increase withholding for their last paycheck or paychecks to make up or reduce the deficiency. Employees can file a new Form W-4 or simply request that the employer withhold a flat amount of additional income tax. Increasing the final estimated tax payment for 2020 (due on Jan. 15, 2021) can cut or eliminate the penalty for a final-quarter underpayment only. It doesn't help with underpayments for preceding quarters. By contrast, tax withheld on wages can wipe out or reduce underpayments for previous quarters because, as a general rule, an equal part of the total withholding during the year is treated as having been paid on each quarterly estimated payment date.

Reference: See FTC 2d/FIN ¶ S-5248.

Take a retirement plan distribution in order to solve an underpayment of estimated tax problem. An individual can take an eligible rollover distribution from a qualified retirement plan before the end of 2020 if he or she is facing a penalty for underpayment of estimated tax and the extra withholding option described above is unavailable or won't sufficiently address the problem. Unless the taxpayer chooses no withholding, the withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that is not an eligible rollover distribution is 10% of the distribution. The taxpayer can also ask the payer to withhold an additional amount using Form W-4P. The taxpayer can then timely roll over the gross amount of the distribution, as increased by the amount of withheld tax, to a traditional IRA. No part of the distribution will be includible in income for 2020, but the withheld tax will be applied pro rata over the full 2020 tax year to reduce previous underpayments of estimated tax.

Reference: See FTC 2d/FIN ¶ S-5248.

Charitable donations.

Use IRAs to make charitable donations. Taxpayers who have reached age 70½ by the end of 2020, own IRAs, and are thinking of making a charitable gift should consider arranging for the gift to be made by way of a qualified charitable contribution, or QCD—a direct transfer from the IRA trustee to the charitable organization. Such a transfer (not to exceed $100,000 for all such transfers for 2020) will neither be included in gross income nor allowed as a deduction on the taxpayer's return. But, since such a distribution is not includible in gross income, it will not increase AGI for purposes of the phaseout of any deduction, exclusion, or tax credit that is limited or lost completely when AGI reaches certain specified level.

Taxpayers who have reached age 72 by Dec. 31 normally must take required minimum distributions (RMDs) from their IRAs or 401(k) plans (or other employer-sponsored retired plans) by Dec. 31. However, there is no such requirement for 2020.

Nonetheless, a QCD before Dec. 31, 2020 is still a good idea for retired taxpayers who don’t need all of their as-yet undistributed RMD for living expenses. That’s because a 2020 QCD will reduce the taxpayer's retirement account balance and thus reduce the amount of the RMD that must be withdrawn in future tax years.

Reference: See FTC 2d/FIN ¶ H-12253.2 et seq.

Charitable donation by non-itemzers. Non-itemizers can deduct up to $300 of cash charitable donations that they make in 2020. While the Consoidated Appropriations Act, 2021 (CAA, 2021), if signed into law, provides for an additional charitable deduction in 2021 for non-itemizers, to get the $300 deduction for 2020, the donation must be made before year-end 2020.

And, because CAA, 2021 does provide for a charitable deduction for non-itemizers for 2021, taxpayers should consider holding off in making contributions over $300 for 2020 and making those "excess contributions" in 2021.

Reference: See FTC 2d/FIN ¶ A-2630.

Higher limit on charitable contributions. In response to the Coronavirus (COVID-19) pandemic, the limit on charitable contributions of cash by an individual in 2020 was increased to 100% of the individual's contribution base. For previous years, the limit was 60% of the contribution base. The contribution base is a modification of adjusted gross income.

While this increased limit was extended to 2021 by the CAA, 2021, taxpayers should consider increasing 2020 contributions to take advantage of the increased limit.

Reference: See FTC 2d/FIN ¶ K-3672.4.

Retirement plans.

Establish a Keogh plan. A self-employed person who wants to contribute to a Keogh plan for 2020 must establish that plan before the end of 2020. If that is done, deductible contributions for 2020 can be made as late as the taxpayer's extended tax return due date for 2020.

Reference: See FTC 2d/FIN ¶ H-10017.

Relief with respect to withdrawal from retirement plans. A distribution from a qualified retirement plan is generally subject to a 10% additional tax unless the distribution meets an exception under Code Sec. 72(t).

2020 legislation provides that the Code Sec. 72(t) 10% additional tax does not apply to any coronavirus-related distribution, up to $100,000. A coronavirus-related distribution is any distribution made on or after January 1, 2020, and before December 31, 2020, from an eligible retirement plan, made to a qualified individual.

A qualified individual is an individual

1. Who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention (CDC),
2. Whose spouse or dependent (as defined in Code Sec. 152) is diagnosed with such virus or disease by such a test, or
3. Who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury.

Other relief also applies to coronavirus-related distributions, including the ability to recognize income over a 3-tax-year period.

Reference: See FTC 2d/FIN ¶ H-11119.

Other.

Make year-end gifts. A person can give any other person up to $15,000 for 2020 without incurring any gift tax. The annual exclusion amount increases to $30,000 per donee if the donor's spouse consents to gift-splitting. Anyone who expects eventually to have estate tax liability and who can afford to make gifts to family members should do so. Besides avoiding transfer tax, annual exclusion gifts take future appreciation in the value of the gift property out of the donor's estate, and they shift the income tax obligation on the property's earnings to the donee who may be in a lower tax bracket (if not subject to the kiddie tax).

A gift by check to a noncharitable donee is considered to be a completed gift for gift and estate tax purposes on the earlier of:

1. The date on which the donor has so parted with dominion and control under local law so as to leave the donor with no power to change its disposition, or
2. The date on which the donee deposits the check (or cashes it against available funds of the donee) or presents the check for payment, if it is established that:
   • The check was paid by the drawee bank when first presented to the drawee bank for payment;
   • The donor intended to make a gift;
   • The donor was alive when the check was paid by the drawee bank;
   • Delivery of the check by the donor was unconditional; and
   • The check was deposited, cashed, or presented in the calendar year for which completed gift treatment is sought and within a reasonable time of issuance.

Thus, for example, a $15,000 gift check given to and deposited by a grandson on Dec. 31, 2020 is treated as a completed gift for 2020 even though the check doesn't clear until 2021 (assuming the donor is still alive when the check is paid by the drawee bank).

Reference: See FTC 2d/FIN ¶ Q-1916.

Watch out for the use-it-or-lose-it rule. Unused cafeteria plan amounts left over at the end of a plan year must generally be forfeited (use-it-or-lose-it rule). A cafeteria plan can provide an optional grace period immediately following the end of each plan year, extending the period for incurring expenses for qualified benefits to the 15th day of the third month after the end of the plan year. Benefits or contributions not used as of the end of the grace period are forfeited. Under an exception to the use-it-or-lose-it rule, at the plan sponsor's option and in lieu of any grace period, employees may be allowed to carry over up to $500 of unused amounts remaining at year-end in a health flexible spending account.

Taxpayers thus should make sure they understand their employer's plan and should make last-minute purchases before year end to the extent that not doing so will result in losing benefits. In most cases, a trip to the drug store, dentist or optometrist, for goods or services that the taxpayer would otherwise have purchased in 2021, can avoid "losing it."

Reference: See FTC 2d/FIN ¶ H-2417.

Paying by credit card creates deduction on date of credit card transaction. Taxpayers should consider using a credit card to pay deductible expenses before the end of the year. Doing so will increase their 2020 deductions even if they don't pay their credit card bill until after the end of the year.

Reference: See FTC 2d/FIN ¶ G-2436.

Renew ITINs that expire on Dec. 31. Any individual filing a U.S. tax return is required to state his or her taxpayer identification number on that return. Generally, a taxpayer identification number is the individual's Social Security number (SSN). However, IRS issues Individual Taxpayer Identification Numbers (ITINs) to individuals who are not eligible to be issued an SSN but who still have a U.S. tax filing obligation.

Unlike SSNs, ITINs expire if not used on a return for three consecutive years or after a certain period. For example, ITINs issued in 2012 and 2013 (i.e., those with middle digits 90, 91, 92, 94, 95, 96, 97, 98 or 99) expire on December 31, 2020.

Anyone whose ITIN is expiring at the end of 2020 needs to file a complete renewal application, Form W-7, Application for IRS Individual Taxpayer Identification Number.

Reference: For the ITIN program, see FTC 2d/FIN ¶S-1582.1 et seq.

Increase 2020 itemized deductions via a "bunching strategy." Many taxpayers who claimed itemized deductions in prior years will no longer be able to do so. That’s because the standard deduction has been increased and many itemized deductions have been cut back or abolished. Paying some otherwise-deductible-in-2021 itemized deductions in 2020 can decrease taxable income in 2020 and will not increase 2021 taxable income if 2021 itemized deductions would otherwise have still been less than the 2021 standard deduction. For example, a taxpayer who expects to itemize deductions in 2020 but not 2021, and usually contributes a total of $1,500 to charities each year, should consider making a total of $3,000 of charitable contributions before the end of 2020 (and skipping charitable contributions in 2021).

Reference: See FTC 2d/FIN ¶ G-243

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

 

 

5 Stars - Kev's 5 Best Corporate Attorneys In Austin

5 Stars - Kev's 5 Best Corporate Attorneys In Austin   🥇

AttorneyBritt offers services from professional business attorneys. Attorney Gary L. Britt, CPA, J.D. is experienced in the field of business law. He has represented numerous clients for business cases. A strong negotiator and great intellect comprises his personality. He also serves large companies as a tax advisor and auditor. He is approachable and kind to his clients. The law firm provides excellent services and legal advice. Their services include handling of corporate mergers and partnership and shareholder buyouts. They also specialize in minimizing costs in managing litigation strategies.

IRS Issues 2020 Inflation-Adjusted Amounts For Health Savings Accounts

In a new Revenue Procedure (Rev Proc 2019-25, 2019-22 IRB), the IRS has provided the 2020 inflation-adjusted contribution, deductible, and out-of-pocket expense limits for health savings accounts (HSAs). 

HSA basics. 

Eligible individuals may, subject to statutory limits, make deductible contributions to an HSA. Employers and other persons (e.g., family members) also may contribute to an HSA on behalf of an eligible individual. Generally, employer contributions are treated as employer-provided coverage for medical expenses under an accident or health plan and are excludable from income.

In general, a person is an "eligible individual" if he or she is covered under a high deductible health plan (HDHP) and is not covered under any other health plan, unless the other coverage is permitted insurance (e.g., for worker's compensation, a specified disease or illness, or providing a fixed payment for hospitalization). General purpose health accounts, such as flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs), constitute "other coverage" that will usually preclude HSA eligibility. However, exceptions apply for, among other things, FSAs and HRAs that provide only certain benefits, such as dental and vision, and those imposing high annual deductibles.

HSA distributions not used to pay for qualifying medical expenses generally are included in income and are subject to a 10% penalty tax.

Annual contribution limitations for 2020. 

For calendar year 2020, the limitation on deductions under Code Sec. 223(b)(2)(A) for an individual with self-only coverage under an HDHP is $3,550 (up from $3,500 for 2019). For calendar year 2020, the limitation on deductions under Code Sec. 223(b)(2)(B) for an individual with family coverage under an HDHP is $7,100 (up from $7,000 for 2019).

HDHP for 2020. For calendar year 2020, an HDHP is defined under Code Sec. 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,400 (up from $1,350 for 2019) for self-only coverage or $2,800 (up from $2,700 for 2019) for family coverage, and with respect to which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, not including premiums) do not exceed $6,900 (up from $6,750 for 2019) for self-only coverage or $13,800 (up from $13,500 for 2019) for family coverage. 

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

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2019 IRS Income Tax Deductions For Automobile Costs

Businesses that use a car or other vehicle may be able to deduct the expense of operating that vehicle on their taxes.

Businesses generally can use one of the two methods to figure their deductible vehicle expenses:

• Standard mileage rate

• Actual car expenses

For 2019, here are the standard mileage rates for calculating the deductible costs of operating an automobile for business, charitable, medical or moving purposes:

• 58 cents per mile driven for business use
• 20 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

Of course, business taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Here are some facts to help business owners understand the differences between the two methods of figuring their deductible vehicle expenses:

• Businesses that want to use the standard mileage rate for a car they own must choose to use the standard mileage rate in the first year they use the vehicle. Then, in later years, they can choose to use either the standard mileage rate or actual expenses.
  
  
• If a business wants to use the standard mileage rate for a car they lease, they must use this rate for the entire lease period.
  
  
• The business must make the choice to use the standard mileage rate by the due date of their return, including extensions. They can’t revoke the choice.
  
  
• A business that qualifies to use both methods may want to figure their deduction both ways to see which gives them a larger deduction.
  
  
• Here are some examples of actual car expenses that a business can deduct:

o Licenses
o Gas
o Oil
o Tolls
o Insurance
o Repairs
o Depreciation – limitations and adjustments may apply  

Businesses can see Publication 463, Travel, Gift and Car Expenses, for a full list of actual expenses and how to calculate them.

More Information:
IRS issues standard mileage rates for 2019
IRS Notice 2019-02
National Small Business Week


For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

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User CSS For Firefox And Thunderbird

User CSS Contributions For CustomizeMyBird and Custom CSS For FX

The repository at https://github.com/JYLD/User-CSS-For-Firefox-And-Thunderbird has user submitted CSS customizations for:

1. The very excellent Firefox and Thunderbird add-ons by Aris-t2 at https://github.com/Aris-t2 ; and
2. Other useful CSS contributions for Firefox and Thunderbird.

If you like Windows 7 or XP and you also like the Windows Classic XP/Win2000 look on Windows 7, then you may really like what the files mentioned here can do for you.

Note: I prefer the older look of Windows XP/2000 over the Windows 7 Aero interface. Therefore, I use the Classic Windows Theme on Win 7 as my starting point. Then I add the "Classic Start Menu" available from http://www.classicshell.net/ . Then for Firefox I use the "Classic Blue" theme from "ndnenigma" available for Firefox at https://addons.mozilla.org/en-US/firefox/user/5414873/ . This theme is a dark theme for the toolbar, bookmarks toolbar, and menu bar areas. For Thunderbird on my Windows 7 setup, I use the CustomizeMyBird and Theme and Font Size Changer add-ons. Plus my own custom CSS placed in the CustomizeMyBird user CSS window.

Various standard color choices from add-ons don't work as well as I would like (colorwise) with my Windows Classic Theme setup. Also, I like rounded tabs and spacing that is a little bit different from what the add-ons usually provide.

Therefore, I've had to modify some of the setup from Custom CSS For FX and CustomizeMyBird to get the look I find pleasing.

If you don't like the color choices in my CSS it can of course be easily modified.

If you want to further duplicate my color setup on Windows 7 then first select the Classic Windows Theme.  After that download the JYLD_Color_Choices.zip file to your computer and then double click the reg files it contains to add it to your registry.  You should save a copy of your current theme before doing this so you can go back to your original color choices.  Also note that my color choices work on Windows 7 and XP. On Windows 7 you must be using the Windows Classic Theme for these color choices to have any effect.  After adding the color choices reg file settings to your registry you will have to reboot your computer for the changes to take effect.

NOTE: I have no idea how the color choices reg files would affect Windows 8 to 10, if at all. I don't even know if the Windows Classic Theme is available on Windows 8 to 10.

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

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Six Things Taxpayers Should Know About The Sharing Economy And Their IRS Taxes

From renting spare rooms and vacation homes to car rides or using a bike…name a service and it’s probably available through the sharing economy. 

Taxpayers who participate in the sharing economy can find helpful resources in the IRS Sharing Economy Tax Center on IRS.gov. 


Here are six things taxpayers should know about how the sharing economy might affect their taxes:

1. The activity is taxable.
Sharing economy activity is generally taxable. It is taxable even when:

• The activity is only part time
• The activity is something the taxpayer does on the side
• Payments are in cash
• The taxpayer receives an information return – like a Form 1099 or Form W2

2. Some expenses are deductible.
Taxpayers who participate in the sharing economy may be able to deduct certain expenses. For example, a taxpayer who uses their car for business may qualify to claim the standard mileage rate, which is 58 cents per mile for 2019.

3. There are special rules for rentals.
If a taxpayer rents out their home or apartment, but also lives in it during the year, special rules generally apply to their taxes. Taxpayers can use the Interactive Tax Assistant tool, Is My Residential Rental Income Taxable and/or Are My Expenses Deductible? to determine if their residential rental income is taxable.

4. Participants may need to make estimated tax payments.
The U.S. tax system is pay-as-you-go. This means that taxpayers involved in the sharing economy often need to make estimated tax payments during the year. These payments are due on April 15, June 15, Sept. 15 and Jan. 15. Taxpayers use Form 1040-ES to figure these payments.

5. There are different ways to pay.
The fastest and easiest way to make estimated tax payments is through IRS Direct Pay. Alternatively, taxpayers can use the Electronic Federal Tax Payment System.

6. Taxpayers should check their withholding.
Taxpayers involved in the sharing economy who are employees at another job can often avoid making estimated tax payments by having more tax withheld from their paychecks. These taxpayers can use the Withholding Calculator on IRS.gov to determine how much tax their employer should withhold. After determining the amount of their withholding, the taxpayer will file Form W-4 with their employer to request the additional withholding.

IRS YouTube Videos:
Your Taxes in the Sharing Economy – English | ASL

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

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