Choosing the right accounting method for tax purposes
The Tax Cuts and Jobs Act (TCJA) liberalized the eligibility rules for using the cash method of accounting, making this method (which is simpler than the accrual method) available to more businesses. Now the IRS has provided procedures for obtaining automatic consent to change accounting method under the TCJA. If you’re eligible for both methods, consider whether switching would be beneficial. The cash method is typically preferable, but in some cases the accrual method is advantageous. We can help you make this decision and execute the change if appropriate.
An FLP can save tax in a family business succession
A family limited partnership (FLP) can help you enjoy the tax benefits of transferring ownership in your business to the next generation yet allow you to retain control. The value of transferred interests is removed from your taxable estate. Discounts might reduce the value for tax purposes, and you can apply your $15,000 annual gift tax exclusion or $11.18 million lifetime gift tax exemption. There also may be income tax benefits. But to withstand IRS scrutiny, FLPs must, among other things, have a business purpose beyond tax savings. Contact us to learn more.
Business deductions for meal, vehicle and travel expenses: Document, document, document
Some common deductions for businesses are meal (generally 50%), vehicle and travel expenses. Deductibility depends on a variety of factors, but proper documentation is one of the most critical. Following some simple steps can help ensure your deductions will pass muster with the IRS. First, keep receipts, canceled checks or similar documentation. Also, track the business purpose of each expense (and don’t wait until year end or an IRS audit). Finally, if you reimburse employees, require them to provide such documentation. Contact us for more information.
Close-up on the new QBI deduction’s wage limit
The TCJA allows qualifying noncorporate owners of pass-through entities to deduct as much as 20% of qualified business income. But once taxable income exceeds $315,000 for married couples filing jointly or $157,500 for other filers, a wage limit begins to phase in. When the limit is fully phased in, the deduction generally can’t exceed the greater of the owner’s share of a) 50% of the amount of W-2 wages paid to employees during the tax year, or b) the sum of 25% of W-2 wages plus 2.5% of the cost of qualified business property. Contact us to learn more.
How to avoid getting hit with payroll tax penalties
For small businesses, managing payroll can be one of the most arduous tasks. A crucial aspect is withholding and remitting to the federal government the appropriate income and employment taxes. If your business doesn’t, you, personally, as the business’s owner, could be considered a “responsible party” and face a 100% penalty. This is true even if your business is an entity that normally shields owners from personal liability, such as a corporation or limited liability company. Hiring a payroll service can help. Contact us to learn more.
Does your business have to begin collecting sales tax on all out-of-state online sales?
The recent U.S. Supreme Court decision in South Dakota v. Wayfair allows states to impose sales tax on more out-of-state online sales. But does it mean your business must immediately begin collecting sales tax on online sales to all out-of-state customers? No. You must collect such taxes only if the particular state requires it. South Dakota’s law, for example, requires out-of-state retailers that made at least 200 sales or sales totaling at least $100,000 in the state to collect sales tax. But laws vary dramatically from state to state. Contact us with questions
Choosing the best business entity structure post-TCJA
On the surface, the TCJA’s new, flat 21% income tax rate for C corporations may make choosing C corp structure for your business seem like a no-brainer. After all, 21% is much lower than the 37% top rate that applies to pass-through entities (such as partnerships and S corps). But C corps can still be subject to double taxation. And pass-through entity owners may be eligible for the TCJA’s new 20% qualified business income deduction. The best entity type for your business depends on its unique situation and your situation as an owner. Contact us to learn more.
2018 Q3 tax calendar: Key deadlines for businesses and other employers
Here are some key tax-related deadlines for businesses and other employers during Quarter 2 of 2018.
APRIL 17: If a calendar-year C corporation, file or extend your 2017 income tax return and pay any tax due, and pay the first installment of 2018 estimated taxes.
APRIL 30: Report income tax withholding and FICA taxes for Q1 of 2018 (unless eligible for May 10 deadline).
JUNE 15: If a calendar-year C corp., pay the second installment of 2018 estimated income taxes. Contact us for more about the filing requirements to ensure you’re meeting all applicable deadlines.
Putting your child on your business’s payroll for the summer may make more tax sense than ever
For business owners with kids in high school or college, hiring them for the summer can provide many benefits. One is tax savings. By shifting business income to a child as wages for services performed, you can turn high-taxed income into tax-free or low-taxed income. The Tax Cuts and Jobs Act’s near doubling of the standard deduction means your child can shelter more income from taxes. Changes to the “kiddie tax” make income shifting via earned income rather than unearned income even more appealing. Many rules apply; contact us to learn more.
The TCJA changes some rules for deducting pass-through business losses
The Tax Cuts and Jobs Act restricts the losses that owners of pass-through entities (including sole proprietors) can currently deduct. For tax years beginning in 2018 through 2025, an “excess business loss” can’t be deducted in the current year. This is the excess of your aggregate business deductions for the tax year over the sum of 1) your aggregate business income and gains for the tax year and 2) $250,000 ($500,000 if you’re a married joint-filer). The excess business loss is carried over to the next tax year. Additional rules apply. Contact us for details.
Can you deduct business travel when it’s combined with a vacation?
If you go on a business trip within the United States and tack on some vacation days, you might be able to deduct some of your expenses. Here’s what you need to know.
IRS Audit Techniques Guides provide clues to what may come up if your business is audited
Audit Techniques Guides (ATGs) were created to enhance IRS examiner proficiency, but they also can help small businesses ensure they aren’t engaging in practices that could raise red flags with the IRS.
2 tax credits just for small businesses may reduce your 2017 and 2018 tax bills
Providing employee benefits can help businesses attract and retain the best workers. But the cost can be out of reach for some small businesses. Two tax credits can help make benefits more affordable for eligible small employers: 1) a credit equal to as much as 50% of health coverage premiums paid, and 2) a credit of up to $500 for creating a retirement plan. Contact us to learn if you can take these or other credits on your 2017 tax return and to plan for credits you might be able to claim on your 2018 return if you take appropriate actions this year.
Meals, entertainment and transportation may cost businesses more under the TCJA
The Tax Cuts and Jobs Act (TCJA) curtails business deductions for meals, entertainment and transportation. Under the TCJA, deductions for business-related entertainment expenses, once 50% deductible, are disallowed. Meal expenses related to business travel are still 50% deductible, but the 50% rule now also applies to meals provided on an employer’s premises for its convenience. The TCJA also eliminates employer deductions for providing employee transportation fringe benefits, such as parking allowances and mass transit passes. Contact us for more details.
Your 2017 tax return may be your last chance to take the “manufacturers’ deduction”
While many provisions of the Tax Cuts and Jobs Act (TCJA) will save businesses tax, one break it eliminates is the Section 199 deduction. Often referred to as the “manufacturers’ deduction,” this potentially valuable break, when available, can also be claimed by eligible construction, engineering, architecture, computer software production and agricultural processing businesses. Under the TCJA, 2017 is the last tax year non-corporate taxpayers can take the deduction (2018 for C corps.). Contact us to learn whether you qualify for this break on your 2017 return.
New tax law gives pass-through businesses a valuable deduction
Owners of “pass-through” businesses may see some major (albeit temporary) relief under the Tax Cuts and Jobs Act (TCJA) in the form of a new deduction for a portion of qualified business income (QBI). For tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026, owners of entities such as sole proprietorships, partnerships, S corporations and LLCs generally can deduct 20% of QBI, subject to restrictions that can apply at higher income levels. More rules and limits apply; careful planning will be necessary to gain maximum benefit. Contact us for details.
2018 Tax Filing Season Begins Jan. 29, Tax Returns Due April 17
IR-2018-01, Jan. 04, 2018
WASHINGTON ― The Internal Revenue Service announced today that the nation’s tax season will begin Monday, Jan. 29, 2018 and reminded taxpayers claiming certain tax credits that refunds won’t be available before late February.
The IRS will begin accepting tax returns on Jan. 29, with nearly 155 million individual tax returns expected to be filed in 2018. The nation’s tax deadline will be April 17 this year – so taxpayers will have two additional days to file beyond April 15.
The TCJA temporarily expands bonus depreciation
The Tax Cuts and Jobs Act (TCJA) significantly enhances bonus depreciation. You might even be able to benefit when you file your 2017 tax return. Generally, for qualified property placed in service between Sept. 28, 2017, and Dec. 31, 2022, the first-year bonus depreciation percentage increases to 100%. In addition, the 100% deduction is allowed for not just new but also used qualifying property. The new law also allows 100% bonus depreciation for qualified film, television and live theatrical productions. Contact us for more information.
2017 company holiday party is probably tax deductible, but 2018 may not be
A business’s holiday party costs can reduce its taxes, but maybe not after 2017. For 2017, businesses are generally limited to deducting 50% of allowable meal and entertainment (M&E) expenses, but certain expenses, such as a holiday party for employees, can qualify for a 100% deduction. However, the M&E deduction for employee parties (and for many other M&E expenses) will likely be eliminated beginning in 2018 under the Tax Cuts and Jobs Act. To learn more about deducting M&E expenses, contact us.
Key deadlines for businesses and other employers
Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.
Getting around the $25 deduction limit for business gifts
At this time of year, it’s common for businesses to make thank-you gifts to customers, clients, employees and other business entities and associates. Unfortunately, the tax rules limit the deduction for business gifts to $25 per person per year, a limitation that has remained the same since it was added into law back in 1962. Fifty-five years later, the $25 limit is unrealistically small in many business gift-giving situations.
Do you qualify for the home office deduction?
Under the TCJA, employees can no longer claim the home office deduction. But if you run a business from your home or are otherwise self-employed, this deduction may still be available to you. You might qualify if part of your home is used exclusively and regularly for administrative or management activities and you don’t have another fixed location where you conduct these activities. You also might qualify if you physically meet with clients/custmers there or you use a storage area in your home exclusively and regularly for business. Contact us for details.