Tax Articles

Life insurance is a crucial component of estate planning, offering an immediate source of wealth and liquidity to address your family's financial needs after your passing.

A landmark decision by the Supreme Court in Connelly v. United States has significant implications for how shares in closely held corporations are valued for estate tax purposes. The Supreme Court upheld that redemption obligations do not reduce the value of a corporation’s shares, creating a precedent that will likely affect future litigation and estate planning for family-owned businesses.

The IRS has issued final regulations for inherited IRAs, clarifying that most non-spouse beneficiaries must withdraw the entire balance within 10 years. These rules, effective in 2025, require annual distributions if the original account owner had started taking RMDs, while offering more flexibility for accounts where RMDs had not begun. Recent waivers also prevent penalties for missed distributions in certain cases.

The upcoming presidential and congressional elections could significantly alter the tax landscape for U.S. businesses, as many provisions of the Tax Cuts and Jobs Act (TCJA) are set to expire at the end of 2025. Potential outcomes range from the complete expiration of these provisions to their extension or replacement with new tax laws. The future impact on your business will depend on the election results and subsequent legislative changes.

A power of appointment in your estate plan provides flexibility by allowing a designated beneficiary to adjust trust distributions and modify beneficiaries based on current circumstances. There are two types of powers: general, which includes property in the holder’s taxable estate, and limited, which does not but may result in higher capital gains taxes for heirs. 

Drop shipments occur when a retailer takes an order and directs a wholesaler to ship the product directly to the customer. However, depending on the facts and circumstances, such as location and nexus status for all parties involved, how property is delivered, and how the title to property passes, the responsibility and requirement to charge and collect sales tax can change.

When launching a manufacturing company, it's essential to consider the tax implications of start-up costs. Eligible expenses can be deducted or amortized over time, with potential tax benefits depending on the total amount. Understanding these tax treatments helps ensure a strong financial foundation for your new business.

Website costs for businesses are subject to general tax rules, with specific considerations for hardware and software. Hardware costs can be deducted with bonus depreciation or under Section 179, with limits and phaseouts for each. Purchased software and license fees are generally deductible as ordinary business expenses. Payments to third-party developers are also deductible. Start-up website costs can be partially deducted or amortized, depending on the total amount. For precise guidance on handling these expenses, consult with a tax professional.

When choosing between traditional and Roth 401(k) contributions, consider both current and future tax implications as well as estate planning goals. Traditional 401(k)s offer immediate tax deductions but are subject to required minimum distributions (RMDs), potentially reducing the amount passed to heirs. Roth 401(k)s, while funded with after-tax dollars, allow for tax-free withdrawals and are exempt from RMDs starting in 2024, making them a valuable tool for estate planning.

There are various tax obligations to handle when shutting down a business due to economic challenges. Filing final tax returns, paying outstanding taxes, cancelling an Employer Identification Number (EIN), and issuing final wage and tax statements to employees are some of the many responsibilities of business owners face when closing their doors.