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Employers and employees can
simplify their lives by using per-diem allowances for travel expenses.
If you reimburse employees based on federal per-diem rates, they’re
deemed to have been paid from an accountable plan, even if employees
spend less than the allotted amount and pocket the excess. Employees
needn’t worry about keeping track of every amount they spend, but they
still have to provide records showing the time, place and business
purpose to their employers. The federal government publishes per-diem
rates for many destinations in the United States and abroad.
For travel in the United States, you can simplify the process even more
by using the “high-low” substantiation method. Rather than tracking
different per-diem rates for each locality, you simply use one rate for
high-cost locations (currently $237) and one for low-cost locations
(currently $152). Keep in mind that you need to check IRS Publication
1542 to determine if a location is considered high or low cost.
Another option is to reimburse actual lodging expenses and use the
federal per-diem rate for meals and incidental expenses. Current
meals-only rates are $58 for high-cost locations and $45 for low-cost
locations.
To determine whether a per-diem approach is right for your business,
weigh the added convenience against the potentially larger tax
deductions available if you track actual expenses.
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Don’t get tripped up by travel expense rules
For many companies and their
employees, business travel is a way of life. And though
deducting travel expenses may seem like a routine business
practice, the rules are complex — and a wrong turn can have
significant tax consequences. If yours is like most
businesses, it reimburses workers or provides advances for
their travel expenses. The IRS tends to scrutinize expense
reimbursement plans, so it’s a good idea to review yours
periodically to be sure it qualifies as an “accountable
plan.” If it doesn’t, both your company and staff may be in
for an unpleasant tax surprise. This article reviews which
travel expenses are deductible and to what extent.
Read more
The ins and outs of
inherited retirement plans
Retirement plan withdrawals
are generally subject to income tax. So if your estate
includes substantial sums in such plans, understanding the
tax implications for your beneficiaries can help you plan
accordingly. Planning is particularly important if you’ve
designated someone other than your spouse as the beneficiary
of your 401(k) or similar retirement plan (or you’re the
nonspouse beneficiary). The tax code now permits nonspouses
to stretch plan distributions — and the resulting taxes —
out over their own life expectancies through a “nonspousal
rollover,” but not all plans offer this option. This article
looks at the minimum distribution rules and post-death
distributions associated with inheriting a loved one’s
retirement plan.
Read more
529 plans
A college savings strategy that makes the grade
As the cost of a college
education continues to soar, it’s more important than ever
to design an investment strategy that prepares your family
for this major expense. Over the last several years, the 529
plan has emerged as perhaps the most powerful tool for
financing higher education costs. And the recent expansion
of the “kiddie tax” has further enhanced the 529 plan’s
advantages over other options. This article focuses on the
tax advantages of 529 plans.
Read more
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Tax Tips
News items briefly discussed
are Health Savings Accounts, trading life insurance for
cash, contractor vs. employee relationships, and the
importance of an estate contingency plan.
Read more |
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