All Forum Posts by: Account Closed

Looks as though the IRS is providing relief to individual and business taxpayers in Texas by extending the federal tax deadline to June 15.  I'd be shocked if the deadline for all taxpayers doesn't receive the same extension.

Extending the deadline for taxpayers in 1 state only?!?!?    The IRS truly does not make it easy on themselves.....

Depending on the structure of the business being sold and the type of gain (capital gain), investing in opportunity zone funds may be a way to defer the tax liability of capital gains.  Some long term tax planning listed above may be used in tandem with OZF to reduce tax bill substantially.  The facts and circumstances are going to be very important for the answer to this questions. 

The registered agent is the one in place to receive those exact items.  The registered agent receives lawsuits and documents on behalf of the business.  If you would prefer to receive those directly and are not currently the agent of record, you would need to make an amendment.  Addresses of businesses should always be updated.

Long term capital gain rates are currently 0%, 15%, and 20% based on how much income you make in total.  So a couple filing joint with less than $80,000 in income could technically pay 0% in capital gains, theoretically.  Also, you could consider an installment sale to spread the capital gain over a number of years.  Depreciation recapture is what kills your idea if you've had any of the properties being sold for a number of years as recapture is not taxed as a capital gain, but rather ordinary income that could push you into a higher tax bracket. 

@Llewelyn A. @Jess Archives

Llewelyn, your post is in reference to multiple owners of a primary residence, NOT a rental property.  Different tax treatment for investment properties and how partners allocate expenses/profits.

@Quintin Green

LLC's (especially when starting out) are truly only there for liability purposes, but as others mentioned above, until you have significant equity and assets to protect, they don't offer much. A single member LLC is disregarded as an entity all together for tax purposes. If there are any other partners, you would need to file a partnership tax return annually which can be expensive. If there are significant profits (mainly from flips or short term rentals) there could be some tax planning strategies to reduce your overall tax bill, but you're moving in the right direction.

@Daniel Dietz

Yes, you would be able to pay back the distribution and avoid taxation.  In certain circumstances, your broker may send you a tax document reporting the distribution as taxable, but you would be able to go back and amend those tax returns once the distribution is paid back. 

A word to the wise before everyone starts cashing out retirement accounts: there is a requirement that to take COVID related retirement distributions that you are a qualified individual.  The main idea being that you had adverse financial consequences due to to COVID19.  I'm sure most taxpayers can find a way to justify this and it's probably near impossible for the IRS to determine if every single taxpayer who takes a retirement distribution was adversely affected by COVID19..... nonetheless, something to keep in mind in case your distribution is reviewed.

@Chris M.

What type of business is it?  There are really 3 ways to reduce your taxable income (deductions, depreciation and deferrals).  Depending on what type of income is being generated, passive or active, you may be able to purchase new or used business equipment, defer through retirement accounts if eligible, or pre-pay future expenses such as software subscriptions or advertising.

These are just some very basic ideas. Working with a tax professional would give them a more well rounded idea of your financial situation and allow for a more detailed tax plan to keep taxes to a minimum... such as how you elect to have the LLC taxed.

Significant profits in 2020 means your business is doing well!  Congrats and keep it up!

The guidance from the CARES Act on the Coronavirus Distributions (CVD's) is still very vague, but anyone impacted by the virus (forced closure of a business would qualify) is able to access 401k funds up to $100k as a loan that needs to be repaid in the next few years (the details are available in previous threads or online).  If repaid on time, there is no early distribution penalty or taxes.

If the plan is to take retirement funds as a distribution and not pay back, then there's going to be a number of factors that will determine the tax treatment (example: if you're still employed, if it's a 401k with current employer, current financial situation, your age, what the funds are used for, etc...).

A financial advisor or tax professional with all your specific details should be able to help provide a plan to reduce your taxes and penalties accordingly.

The "free" or "cheap" money totally defeats the purpose of these loans and will bite those that take it for those purposes in the ***!

With such little factual information, we've been informing clients that if you need the loans, you might as well apply.  If you actually receive the loans and then a month from now we find out those loans won't be forgiven for real estate investors, landlords, flippers, developers, etc... there is NO prepayment penalty.  Just pay it back at that time without penalty or tax consequences.

  Or if you desperately need the funds, the loan terms are very generous and can still be used to keep your business afloat....even if the amounts are not forgiven. Flexibility and careful planning is very important through this situation.