When most people inherit property, they assume the only question is whether to accept it. Surprisingly, federal tax law sometimes rewards doing exactly the opposite. Under Internal Revenue Code § 2518, a beneficiary may legally refuse an inheritance through what is known as a qualified disclaimer. If all of the statutory requirements are satisfied, the [...]
Many taxpayers lend money to friends or family members believing that, if the borrower never repays the loan, they will at least receive a tax deduction. Unfortunately, federal tax law is much stricter than most people realize. In many situations, a personal loan that goes unpaid does not produce an ordinary tax deduction. Instead, the [...]
Healthcare costs continue to rise, causing many employers to look for flexible ways to help employees pay medical expenses. One increasingly common option is a Health Reimbursement Arrangement (HRA). Unlike a Health Savings Account (HSA), an HRA is funded solely by the employer. Employees generally cannot contribute their own money, and when properly structured, reimbursements [...]
One of the most common misconceptions taxpayers have is that if they accidentally overpay their taxes, they can simply request the money whenever they discover the mistake. Unfortunately, federal tax law is much stricter. The Internal Revenue Code imposes firm deadlines for claiming refunds. Miss those deadlines, and even an obviously valid refund may be [...]
Can Your Employer Provide You a Home Tax-Free? Most people assume that if an employer gives an employee a place to live, the value of that lodging is automatically taxable compensation. Surprisingly, that is not always true. Under certain circumstances, the Internal Revenue Code allows employees to exclude the value of employer-provided lodging from gross [...]
Many taxpayers are surprised to learn that paying all of their taxes by the April filing deadline does not necessarily prevent an IRS penalty. If you earn income without sufficient withholding—such as self-employment income, investment income, rental income, or retirement distributions—you may be required to make quarterly estimated tax payments throughout the year. Fortunately, Congress [...]
If you received a state income tax refund this year, you may be wondering whether the IRS expects you to report it as taxable income. The answer is one of the most misunderstood in federal tax law: Sometimes yes. Sometimes no. Whether a state tax refund is taxable depends largely on whether you received a [...]
Are Disability Insurance Benefits Taxable? Many people assume disability insurance benefits are always tax-free because they are replacing lost wages after an illness or injury. Unfortunately, federal tax law is more nuanced than that. In many cases, the tax treatment depends less on the disability itself and more on who paid the insurance premiums. This [...]
Many people eventually decide to replace an old life insurance policy or annuity with a newer product that offers lower costs, better investment options, or improved benefits. What many taxpayers do not realize, however, is that cashing out an existing contract before purchasing a new one may create taxable income. Congress created Internal Revenue Code [...]
Many taxpayers know that an installment sale allows capital gains to be recognized over multiple years rather than all at once. What many sellers do not realize is that the Internal Revenue Code contains separate rules requiring interest to be charged—or even imputing interest when none is stated. These provisions prevent taxpayers from disguising interest [...]
Recent Comments