Tax-free fringe benefits help small businesses and their employees
In today’s tightening job market, to attract and retain the best employees, small businesses need to offer not only competitive pay, but also appealing fringe benefits. Those that are tax-free are especially attractive to employees. Examples include many types of insurance (health, disability, long-term care, life) and assistance plans (dependent care, adoption and educational), subject to certain limits. The tax treatment of some benefits, such as moving expense reimbursements and transportation benefits, has changed under the TCJA. Contact us to learn more.
Could a cost segregation study help you accelerate depreciation deductions?
Businesses that acquire, construct or substantially improve a building should consider a cost segregation study. It combines accounting and engineering techniques to identify building costs that are properly allocable to tangible personal property rather than real property. This may allow you to accelerate depreciation deductions, thus reducing taxes and boosting cash flow. And the potential benefits are now even greater due to enhancements to certain depreciation-related breaks under the TCJA. Contact us for help assessing the potential tax savings.
Businesses aren’t immune to tax identity theft
Tax identity theft may seem like a problem only for individuals. But increasingly businesses are becoming victims. Business tax identity theft occurs when a criminal uses information from a business (such as the Employer Identification Number) to obtain tax benefits or enable individual tax identity theft schemes. Here are some prevention tips: 1) Educate employees on how to spot tax fraud schemes. 2) Use secure methods to send W-2 forms to employees. 3) Implement risk management strategies designed to flag suspicious communications. Contact us to learn more.
Be sure your employee travel expense reimbursements will pass muster with the IRS
Does your business reimburse employees’ work-related travel expenses? If you do, you know that it can help attract and retain employees. If you don’t, you may want to start. Changes under the TCJA make such reimbursements even more attractive to employees: Employees are no longer allowed to deduct such expenses. Travel reimbursements also come with tax benefits, but only if you follow a method that passes muster with the IRS. To learn more, contact us. We can help you determine whether you should reimburse such expenses and which method is right for you.
How to reduce the tax risk of using independent contractors
Classifying a worker as an independent contractor frees a business from payroll tax liability and responsibility for withholding income taxes and the worker’s share of payroll taxes. But if the IRS reclassifies a worker as an employee, your business could be hit with back taxes, interest and penalties. When assessing worker status, the IRS typically looks at the level of behavioral and financial control the business has over the worker and the relationship of the parties. Fortunately, there are strategies for minimizing your exposure. Contact us to learn more.
Assessing the S corp
The S corporation business structure offers many advantages, including limited liability for owners and no double taxation (at least at the federal level). But not all businesses are eligible, and S corps may not be quite as attractive from a tax perspective as they once were. The C corp tax rate is now only 21%, while the top individual rate is 37%, so double taxation may be less of a concern. On the other hand, S corp owners may benefit from the new qualified business income (QBI) deduction, which can be equal to as much as 20% of QBI. Contact us for details.
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
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.
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 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.
2018 Q4 tax calendar: Key deadlines for businesses and other employers
Here are a few key tax-related deadlines for businesses and other employers during Quarter 4 of 2018. OCT. 15: If a calendar-year C corp. that filed an extension, file a 2017 income tax return. OCT. 31: Report income tax withholding and FICA taxes for Q3 2018 (unless eligible for Nov. 13 deadline). DEC. 17: If a calendar-year C corp., pay fourth installment of 2018 estimated income taxes. Contact us for more about the filing requirements and to ensure you’re meeting all applicable deadlines.
Keep it SIMPLE: A tax-advantaged retirement plan solution for small businesses
If your small business doesn’t have a retirement plan and has 100 or fewer employees, consider a SIMPLE IRA. Offering a retirement plan can provide your business with valuable tax deductions for its contributions and help attract and retain employees. As the name implies, a SIMPLE IRA is easy to set up and maintain. Eligible employees can defer up to $12,500 in 2018 (plus a catch-up of up to $3,000 for those age 50 or older). The deadline for setting one up for this year is Oct. 1, 2018. Contact us to learn more about SIMPLE IRAs and other retirement plan options.
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.
2 tax law changes that may affect your business’s 401(k) plan
When you think about recent tax law changes and your business, retirement benefits probably aren’t what first come to mind. But if your business sponsors a 401(k) plan, be aware of two changes: 1) Beginning in 2018, former employees with outstanding plan loan balances have until their tax return filing due date (plus extensions) to repay the loan or contribute the outstanding balance to an IRA or other qualified plan and avoid taxes and penalties. 2) Beginning in 2019, limits on employee 401(k) hardship withdrawals will increase. Contact us to learn more.
What businesses need to know about the tax treatment of bitcoin and other virtual currencies
Most small businesses aren’t yet accepting bitcoin or other virtual currency payments, but more and more larger businesses are. And the trend may trickle down to smaller businesses. What are the tax consequences? The IRS has yet to offer much guidance, but it has established that bitcoin should be treated as property, not currency, for federal income tax purposes. So businesses accepting bitcoin payments must report gross income based on the fair market value of the virtual currency when received, measured in equivalent U.S. dollars. Contact us to learn more.
Tax Cuts and Jobs Act: Key provisions affecting businesses
The recently passed Tax Cuts and Jobs Act includes a multitude of provisions that will have a major impact on businesses. For example, it creates a flat corporate rate of 21% and temporarily provides a new 20% qualified business income deduction for owners of flow-through entities (such as partnerships and S corporations) and sole proprietorships. It also enhances some breaks, but it limits or eliminates many others. The changes generally apply to tax years beginning after December 31, 2017. Contact us for more details and to discuss the impact on your business.
Interesting Development in IRS Audits
We're about to witness an interesting development in IRS audits. You may be aware that the statute of limitations on returns under normal circumstances is 3 years. Click here for more info.
Contact us if you are ever contacted by the IRS with any audit request, hire a professional immediately to protect you against this threat.
Should you buy a business vehicle before year end?
Buying a business vehicle by December 31 can reduce your 2017 tax bill. The vehicle may qualify for Sec. 179 expensing, allowing you to immediately deduct, rather than depreciate over several years, some or all of the cost. The normal Sec. 179 expensing limit of $510,000 generally applies to vehicles weighing more than 14,000 pounds. A $25,000 limit applies to SUVs weighing less than that but more than 6,000 pounds. Lower limits apply to lighter vehicles. But tax reform could affect whether buying in 2017 or 2018 makes more tax sense. Contact us to learn more.
Accrual-basis taxpayers: These year-end tips could save you tax
One way accrual-basis taxpayers can save tax is to properly record and recognize expenses incurred this year but that won’t be paid until 2018 so they can be deducted on the 2017 tax return. Common examples include commissions, salaries, wages, payroll taxes, advertising, interest, utilities, insurance and property tax. 2017 may be an especially good year to accelerate deductible expenses. Why? Income tax rates for many businesses could drop significantly in 2018, and deductions save more tax when rates are higher. Contact us for more year-end tax planning tips.
How we can support our veterans?
With Veterans Day on Nov. 11, it’s an especially good time to think about how we can support our veterans. One way businesses can do so is to hire them. An added bonus is that the Work Opportunity tax credit (WOTC) can save tax when you hire from “target groups,” including certain veterans.
Scam e-mails hit on taxes, e-cigarettes
The big trick in scam e-mails lately is to put consumers on edge right from the start. Get them a little anxious about something that could create super headaches... Click HEREto read more
Are you taking advantage of the tax deductions for your business? Call and schedule an appointment to make sure your expenses are applied properly.
High income and itemized deductions
Taxpayers who itemize deductions and are subject to the AMT, lose their deductions for state and local income and property taxes, among other benefits.
Small business Structures
If you are paying more than 20% in taxes, chances are changes can be made. The Eldridge Group can help you with a Multiple Entities Strategy. Click here to read more.
Now, more than ever, it is extremely important to hire a CPA or Enrolled Agent to prepare your taxes. The tax code is becoming more and more complex; and, typically, only those who are CPAs or Enrolled Agents have the full training needed to ensure every deduction is found. The Eldridge Group employs CPAs and Enrolled Agents (EAs) to prepare taxes, not just any person who passes a tax class. Contact us today about a free review or to have your taxes filed. Click hereto find out!
The Richest 1 Percent of Americans Pay 24 Percent of Federal Taxes
The Congressional Budget Office released its annual study of the distribution of income and federal taxes. It tells us what we've long known: The rich pay a lot of federal taxes, much more than the middle class and the poor...Click Here to read more.
"Sometimes dealing with the Internal Revenue Service goes smoothly. Yet there are times within this agency when one hand doesn't know what the other hand is doing. And this year especially when budget cuts have resulted in poor customer service, resolving the issue can be stressful and take much longer than anticipated." Read the issue and solution here.
Deducting Losses Due to Natural disasters
With several storms passing through the United States, it is important to keep track of what losses may be reclaimable during tax season. Click here to find out more!
Don't miss these critical retirement milestones
Most of us would love to enjoy a retirement that allows us to play golf, hang out on the beach, volunteer for worthy causes, spend time with our grand-kids, travel to Europe, and do all types of other amazing activities. But in order to maximize your ability to save on taxes, avoid government penalties and fees, and capitalize on benefits, you'll need to circle a few important dates... Click HEREto read more
Feds Sent 800,000 Obamacare Customers the Wrong Tax Forms
Taxpayers could see delays in getting their refunds this year -- as well as "unacceptable" customer service -- as the IRS commissioner warns budget cuts are forcing the agency to cut back. Read more here.
IRS boss: Please don't call during filing season
WASHINGTON— The nation's top tax collector urged taxpayers not to call the IRS during the coming tax season, saying that budget cuts have hampered the agency's ability to provide taxpayer service.
Don't delay...come see The Eldridge group today
The deadline is nearing and it is time to make a decision: Should you file now, or do you need to file an extension? No matter what choice you make, or if you are unsure of what choice to make, come see The Eldridge Group today for expert guidance before it is too late.
Reduce your 2017 tax bill by buying business assets
Depreciation-related tax breaks can provide significant tax savings. But keep possible tax law changes in mind as you consider buying business assets between now and year end.
Sec. 179 expensing allows businesses an immediate deduction
Sec. 179 expensing allows businesses an immediate deduction for the cost of eligible asset purchases (up to certain limits), rather than depreciating them over a number of years. Another depreciation break for assets that qualify is 50% first-year bonus depreciation.
Choosing the best way to reimburse employee travel expenses
If your employees incur work-related travel expenses, you can better attract and retain the best talent by reimbursing these expenses. But to secure tax-advantaged treatment for your business and your employees, it’s critical to comply with IRS rules. Reasons to reimburse While unreimbursed work-related travel expenses generally are deductible on a taxpayer’s individual tax return...Read more HERE
Getting around the $25 deduction limit for business gifts