Tax Info Blog

Figuring Your Compensation: More Than Just Wages

Q: Tax Playa, I may have an opportunity to become a contractor for my former employer.  I need to figure out how much to negotiate for.  Should I just use my wages and go from there?
Chris, Highlandtown MD

A: Wages are only one piece of your employee compensation (albeit the most significant one).  In order to negotiate while giving yourself the requisite amount of credit, you also must include employer taxes paid, pension contributions, fringe benefits, and workplace amenities...

Barred from a Tax Break? Lawyer Fees and Employers

Q:  Tax Playa, I'm an attorney pending admission (I'll be officially admitted next month), and my employer has just reimbursed me for my bar dues.  Is that reimbursement taxable income?  Also, if my employer reimburses me for my notary public dues, is that also taxable income?  If one's taxable and the other isn't, what's the distinction?  In my Federal Income Tax course in law school, this same question regarding reimbursement of professional fees was posed because most firms reimburse their attorney's bar dues, but the query was never resolved by our professor.
Ellis, Canandaigua, NY

A: This depends on the relationship with your employer at the time the expenses were incurred, as well as whether the payments were made as part of an "accountable plan..."

Can Unemployment Insurance Be IRA Earned Income?

Q: Tax Playa, can unemployment compensation payments qualify as "taxable wages" to allow for an IRA contribution?
Mike D., Somewhere USA

A: Mike, the answer is "probably not."  The annual limit for contributing to an IRA or Roth IRA is the lesser of earned income or $4000 ($5000 if over age 50).  That begs the question, "what is earned income?"...

Owning vs. Leasing Cars for Business

Q: Tax Playa, is it better to own or to lease a company car?
Geoff, Arlington VA

A: Geoff, there are advantages and disadvantages to both.  As a general proposition, it makes more tax sense to lease a car, but more economic sense to own it.  Business owners looking to make this decision really need to run the numbers both ways before making a decision...

Extending Tax Cuts Takes on New Life

Many clients ask me to prognosticate about the temporary aspects of the tax code (Bush tax cuts, business extenders, AMT relief, etc.)  Often, I tell them that all but the Bush tax cuts are virtual locks to be extended every year. 

On the Bush tax cut side (income rate cuts, estate tax, capital gains and dividend tax cuts, etc.), my answer is necessarily more vague.  Much depends on whether the family tax cuts are taken out, who is in control of the political branches in 2010 when they expire, and what the deficit situation looks like.

There have been several developments on this last piece of data, and I wanted to add my analysis to the mix...

President Bush's Health Care Plan: How Does It Affect You?

In President Bush's "State of the Union" speech tonight, he will propose a plan outline to radically transform the tax treatment of health insurance.

Under current rules, the best tax advantages for health care are given to employers.  Other classifications of taxpayers are variously less-advantaged, or not at all. 

I want to briefly describe the proposal, and then outline what it means for various types of taxpayers...

Repairs vs. Improvements: All the Difference in the World

Q: Tax Playa, I own some rental properties and had a lot of work done to fix them up.  Can I deduct all of those costs the first year?
Maury, Fairfax VA

A: The tax code makes a distinction between a "repair" (something to keep a business asset in good working order) and an "improvement" (something that adds value to property).  This distinction makes all the difference in the world--a repair is immediately-deductible, whereas an improvement has to be slowly depreciated over as long as 40 years...

Itemized Deductions: Taxes for Grown-Ups

Q: Tax Playa, I recently bought my first home.  How will tax filing change for me?
Jennifer, Washington DC

A: 70% of taxpayers take the standard deduction.  The remaining 30% add up their various itemized deductions, and claim them instead because they are bigger.  While there are many advantages to itemized deductions, they are limited by each deduction's internal constraints, the Pease phaseout, and the AMT...

Payroll Taxes: The Nanny State Working for You

Q: Tax Playa, what type of payroll taxes do I need to pay for my employees?
Terrence, Arlington VA

A: There are three basic payroll taxes that employers must remit on behalf of employees: Social Security, Medicare (collectively known as FICA), and unemployment insurance (FUTA and state-level equivalent).  All of them work very differently, so it's important to keep all of them straight...

2007 Tax Season Letter to Clients

Dear Clients and Friends:

It's time to get geared up for another exciting tax season.  I look forward to helping each of you achieve your tax and financial goals for the coming year.

Before getting started, I wanted to share with you some of the accomplishments you have helped build and news for 2007: