Employers: Be aware (or beware) of a harsh payroll tax penalty
If payroll taxes withheld from employees’ paychecks aren’t remitted to the IRS, a severe tax penalty can be personally imposed on “responsible” individuals. The IRS can assess a penalty of 100% of the unpaid tax amount on shareholders, owners, directors, officers, employees and others. The Trust Fund Recovery Penalty (or “100% Penalty”) is assessed when there’s a willful failure to collect and pay over to the IRS taxes that are withheld from employees. Unlike some liability protections that a corporation or company may have, business execs can’t escape personal liability for payroll tax debts. Contact us for information about making tax payments.
Hire your children this summer: Everyone wins
If you’re a business owner with children, 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 your high-taxed income into tax-free or low-taxed income. You may also be able to realize payroll tax savings (depending on the child’s age and how your business is organized) and enable retirement plan contributions for the children. Everybody wins! Many rules apply. Contact us to learn more.
How entrepreneurs must treat expenses on their tax returns
Have you recently started a new business or are you contemplating starting one? Keep in mind that not all start-up expenses can be deducted on your federal tax return right away. Some expenses probably must be amortized over time. You might be able to make an election to deduct up to $5,000 currently, but the deduction is reduced by the amount by which your total start-up costs exceed $50,000. You can also deduct $5,000 of the organizational costs of creating a corporation or partnership. Contact us. We can help you maximize deductions for a start-up business.
Divorcing business owners need to pay attention to tax implications
If you’re getting a divorce, you know it’s a highly stressful time. But if you’re a business owner, tax issues can complicate matters more. For example, you can generally divide most assets, including business ownership interests, between you and your soon-to-be ex-spouse without any federal income or gift tax consequences. When an asset falls under the tax-free transfer rule, the spouse who receives the asset takes over its existing tax basis and existing holding period. Contact us. We can help minimize the adverse tax consequences of settling your divorce.