Congress Passes 2010 Tax Relief Bill

Congress passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 on December 16, 2010 and President Barack Obama signed it into law on December 17, 2010. This sweeping tax package includes, among many other items, an extension of the Bush-era tax cuts for two years, estate...

Year-End Business Planning Provides Tax Savings: Debt Instruments

You may be able to reduce your tax liability through smart debt management planning. Consider whether to defer cancellation of debt (COD) income from the reacquisition of an applicable debt instrument in 2010. The business can elect to have the cancelled COD income included in gross income ratably over five tax years beginning with the fourth tax year following the tax year in which the repurchase occurs (i.e., beginning with 2014). Contact our office for more information.

Year-End Planning Provides Tax Savings Opportunities: Retirement Plan Rollovers

Facing a penalty for underpayment of estimated taxes and the increased withholding option is unavailable or won't sufficiently address the problem? Take an eligible rollover distribution from a qualified retirement plan before the end of 2010. Income tax will be withheld from the distribution and will be applied toward the taxes owed for 2010. You 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 2010, but the withheld tax will be applied pro rata over the full 2010 tax year to reduce previous underpayments of estimated tax. Contact your CPA with questions about this tax saving opportunity.

Year-End Planning Provides Tax Savings Opportunities: Review Your FSA Contributions

To maximize your pre-tax deductions, review your FSA contributions to make sure they match up with your spending. Increase the amount you set aside for next year in your employer's health flexible spending account (FSA) if you set aside too little for this year. Don't forget that you cannot set aside amounts to get tax-free reimbursements for over-the-counter drugs, such as aspirin and antacids (2010 is the last year that FSAs can be used for nonprescription drugs).

IRS Offer-in-Compromise

If the IRS is after you to collect a tax liability that's beyond your capacity to pay, you should be aware of a technique that may allow you to settle your tax debt for a fraction of its face value. It's called an offer-in-compromise.