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Do you buy or lease computer software to use in your business? Do you develop software for use in your business, or for sale or lease to others? You should be aware there are complex rules that may apply to determine the tax treatment of the expenses. The rules depend on whether the software is purchased, leased or developed by your business. For example, you must deduct amounts you pay to rent leased software in the tax year they’re paid, if you’re a cash-method taxpayer, or the tax year for which the rentals are accrued, if you’re an accrual-method taxpayer. We can assist you in applying the tax rules for treating computer software costs in the way that is most advantageous for you.
The current federal estate tax exemption ($11.58 million in 2020) means that many people aren’t concerned with estate tax. But they should still plan to save income taxes. For example, be careful making lifetime transfers of appreciated assets. It’s true that the assets and future appreciation generated by them are removed from your estate. But the gift carries a potential income tax cost because the recipient receives your basis upon transfer. He or she could face capital gains tax on the sale of the gifted property in the future. If the appreciated property is held until death, under current law, the heir will get a “step-up” in basis that will reduce or wipe out the capital gains tax.
The business use of websites is widespread. But determining the proper tax treatment for the costs involved in developing a website can be difficult. The IRS hasn’t yet released formal guidance on when website costs can be deducted, so you must apply existing guidance that’s available on other costs to the issue of website development costs. The exact treatment of website design costs depends on whether they’re software or hardware and whether they’re part of a start-up business. If you hire third parties to set up and run your website, payments are currently deductible as ordinary and necessary business expenses. Contact us if you have questions or want to plan for website costs.
In some cases, investors have related expenses, such as the cost of subscriptions to financial periodicals and clerical expenses. Are they tax deductible? Currently, they’re only deductible if you can show that your investment activities rise to the level of carrying on a trade or business. In that case, you may be considered a trader, rather than an investor. A trader is entitled to deduct investment-related expenses as business expenses. A trader is also entitled to deduct home-office expenses if the home office is used exclusively on a regular basis as the trader’s principal place of business. However, be aware that trader status is difficult to achieve. Contact us with questions.
Here are a few key tax-related deadlines for businesses and other employers during Quarter 4 of 2020. OCT. 15: If you’re the owner or operator of a calendar-year C corp. which filed an extension, file a 2019 income tax return. NOV. 2: Report income tax withholding and FICA taxes for Q3 2020 (unless you’re eligible for a Nov. 10 deadline because you deposited on time (and in full) all of the associated taxes due). DEC. 15: If a calendar-year C corp., pay the fourth installment of 2020 estimated income taxes. Contact us for more about the filing requirements and to ensure you’re meeting all applicable deadlines.
The passive activity loss rules affect business ventures you’re engaged in or might engage in. If the ventures are passive activities, the passive activity loss rules prevent you from deducting expenses that are generated by them in excess of their income. You can’t deduct the excess expenses (losses) against earned income or against other nonpassive income. Nonpassive income for this purpose includes interest, dividends, annuities, royalties, gains and losses from most property dispositions, and income from certain oil and gas property interests. There are different rules for rental activities. Contact us if you’d like to discuss how these rules apply to your business.
Oct. 15 is the deadline for individual taxpayers who extended their 2019 tax returns. If you’re finally done filing last year’s return, you might wonder: Which tax records can you toss once you’re done? Now is a good time to go through old tax records and see what you can discard. A common rule of thumb is to keep tax records for at least six years from filing, after which the IRS generally no longer can audit your return or assess additional taxes, even if your income was understated. But hang on to certain records longer including the tax returns themselves, W-2 forms and records related to real estate, investments and retirement accounts.
IRS audit rates are historically low, according to the latest data, but that’s little consolation if your return is selected. But with proper preparation and planning, you should fare well. But it helps to know what might catch the attention of the IRS. For example, some audit “red flags” are unusually high deductions, major inconsistencies between previous years’ tax returns and the current one, profit margins and expenses markedly different from those of similar businesses. The IRS normally has three years within which to conduct an audit. If the IRS selects you for an audit, we can help you understand the issues, gather the needed documents and respond to the inquiries effectively.
If you file a joint tax return with your spouse, you should be aware of your individual liability. And if you’re getting divorced, you should know that there may be relief available if the IRS comes after you for certain past-due taxes. When a married couple files jointly, each spouse is liable for the tax on their combined income. That means the IRS can come after either spouse to collect the entire tax, penalties and interest, not just the part that’s attributed to that spouse. In some cases, spouses are eligible for “innocent spouse relief.” Generally, they were unaware of a tax understatement that was attributable to the other spouse. Contact us if you want to try and obtain relief.
If you recently launched a business, you may want to set up a tax-favored retirement plan for yourself and your employees. There are several types of qualified plans that are eligible for these tax advantages: A current deduction from income to the employer for plan contributions, tax-free buildup of the value of plan investments, and the deferral of income (augmented by investment earnings) to employees until funds are distributed. The two basic types of plans are defined benefit pensions and defined contribution plans, such as 401(k) plans. There are also SEPs and SIMPLEs, which are easy to set up and maintain. Contact us to discuss the types of retirement plans available to you.
When a couple is going through a divorce, taxes are probably not foremost on their minds. But without proper planning, some people find divorce to be even more taxing. Several concerns should be addressed to ensure that taxes are kept to a minimum. For example, if you sell your principal residence or one spouse remains living there while the other moves out, you want to make sure you’ll be able to avoid tax on up to $500,000 of gain. You also must decide how to file your return for the year (single, married filing jointly, married filing separately or head of household). There are other issues you may have to deal with. We can help you work through them.
If your small business is planning for payroll next year, be aware that the “Social Security wage base” is increasing. The Social Security Administration recently announced that the maximum earnings subject to Social Security tax will increase from $137,700 in 2020 to $142,800 in 2021. Wages and self-employment income above this threshold aren’t subject to Social Security tax. For 2021, an employer must withhold: 6.2% Social Security tax on the first $142,800 of employee wages, plus 1.45% Medicare tax. In addition, there’s a 0.9% additional Medicare tax on all employee wages in excess of $200,000. Contact us with questions. We can keep you in compliance with payroll laws and regulations.
If you invest in mutual funds, there are potential pitfalls involved in buying and selling shares. For example, you may already have made taxable “sales” of part of your mutual fund without knowing it. One way this can happen is if your mutual fund allows you to write checks against your fund investment. If you write a check against your mutual fund account, you’ve made a partial sale of your interest in the fund (except for funds such as money market funds, for which share value remains constant). Thus, you may have taxable gain (or a deductible loss) when you write a check. And each such sale is a separate transaction that must be reported on your tax return. Contact us with questions.
Owners of closely held corporations often want to withdraw money from their businesses at a low tax cost. The simplest way is to distribute cash as a dividend. However, a dividend distribution isn’t tax-efficient, since it’s taxable to you to the extent of your corporation’s “earnings and profits.” And it’s not deductible by the corporation. But there are alternatives that may allow you to withdraw cash and avoid dividend treatment. For example, you might be able to receive capital repayments, or obtain reasonable compensation for you, as well as certain fringe benefits. Contact us if you’d like to discuss these or other ideas to tax-efficiently get cash out of your corporation.
Many people have Series EE savings bonds that were purchased many years ago. Perhaps they were given as gifts or maybe you bought them yourself and filed them away. You may wonder: How is the interest taxed? EE bonds don’t pay interest currently. Instead, accrued interest is reflected in their redemption value. (But owners can elect to have interest taxed annually.) EE bond interest isn’t subject to state income tax. And using the money for higher education may keep you from paying federal income tax on it. Unfortunately, the law doesn’t allow for the tax-free buildup of interest to continue forever. When the bonds reach final maturity, they stop earning interest. Contact us with questions.
Unfortunately, COVID-19 has forced many businesses to shut down. If this is your situation, we’re here to assist you in any way we can, including taking care of various tax obligations. A business must file a final income tax return and some other related forms for the year it closes. If you have employees, you must pay them final wages and compensation owed, make final federal tax deposits and report employment taxes. Failure to withhold or deposit employee income, Social Security and Medicare taxes can result in personal liability for what’s known as the Trust Fund Recovery Penalty. There may be other responsibilities. Contact us to discuss these issues and to get answers to any questions.
You may wonder if and how disability income is taxed. It depends on who paid for the benefit. If the income is paid directly to you by an employer, it’s taxable to you as ordinary salary would be. (Taxable benefits are also subject to federal tax withholding, although they may not be subject to Social Security tax.) Sometimes, payments aren’t made by an employer but by an insurance company under a policy providing disability coverage or other insurance. In this case, the tax treatment depends on who paid for the coverage. If an employer paid, the income is taxed to you just as if paid directly to you by the employer. But if it’s a policy you paid for, the payments you receive aren’t taxable.
Business owners know employee health care benefits are expensive. Therefore, your business may want to provide some of these benefits through an employer-sponsored Health Savings Account (HSA). For eligible individuals, HSAs are a tax-advantaged way to set aside funds (or have their employers do so) to meet future medical needs. An eligible employee must be covered by a “high deductible health plan.” For 2020 and 2021, a high deductible health plan has an annual deductible of at least $1,400 for self-only coverage, or $2,800 for family coverage. For 2020, an individual can contribute $3,550 in ($7,100 for a family) to an HSA. This is increasing to $3,600 and $7,200, respectively, for 2021.
If you’ve built a nice nest egg in a traditional IRA (including a SEP or SIMPLE-IRA), it’s critical that you plan carefully for withdrawals from these tax-deferred retirement vehicles. For example, if you need to take money out of a traditional IRA before age 59½, distributions will generally be taxed and may also be subject to a 10% penalty. However, there are several ways to avoid the penalty (but not the regular income tax). Once you attain age 72, traditional IRA withdrawals must generally begin or you’ll be penalized. However, the CARES Act suspended the required minimum distribution rules for 2020. Contact us with traditional IRA questions and to analyze your retirement planning.
S corporations may provide tax advantages over C corporations. This can be true if you expect the business to incur losses because C corp. shareholders generally get no tax benefit from losses. Conversely, S corp. shareholders can deduct their share of these losses on personal tax returns to the extent of their basis in the stock and any loans they make to the entity. So the ability to use losses that pass through from an S corp. depends on your basis in the corporation's stock and debt. Be aware that there are some elections available to an S corp. or its shareholders that can affect the basis adjustments caused by distributions and other events. Contact us if you’d like more information.
Are you thinking about selling stock at a loss to offset gains that have been realized during 2020? If so, it’s important not to run afoul of the “wash sale” rule. Under this rule, if you sell stock or securities for a loss and buy substantially identical stock or securities back within the 30-day period before or after the sale date, the loss can’t be claimed for tax purposes. The rule is designed to prevent taxpayers from using the tax benefit of a loss without parting with ownership in a significant way. Note that the rule applies to a 30-day period before or after the sale date to prevent “buying the stock back” before it’s even sold. We can answer any questions you may have.
Before Dec. 31, your business should buy any needed business assets and place them in service. That way, you can take advantage of the Section 179 deduction and bonus depreciation. To learn more read the full article: https://bit.ly/39AaP7m
It’s that time of year again: time to spend your unused dollars if you have an FSA. To learn more read the full article: https://bit.ly/2Jkuw8F
The Section 179 deduction provides a tax benefit to businesses, enabling them to claim immediate deductions for qualified assets, instead of depreciating them over time. For 2020, the maximum deduction is $1.04 million, subject to a phaseout rule if more than $2.59 million of eligible property is placed in service during the tax year. Even better, the Sec. 179 deduction isn’t the only avenue for immediate tax write-offs for assets such as machinery and equipment. Under the 100% bonus depreciation tax break, the entire cost of eligible assets placed in service in 2020 can be written off this year. Contact us if you want more details about how your business can make the most of the deductions.
Many employees save taxes by placing funds in their employer’s health or dependent care flexible spending arrangements (FSAs). It’s a good time to review 2020 expenditures and project amounts to be set aside for 2021. A pre-tax contribution of $2,750 to a health FSA is permitted in 2020. To avoid forfeiture of your health FSA funds because of a “use-it-or-lose-it” rule, you must make eligible medical expenditures by the last day of the plan year (Dec. 31 for a calendar year plan), unless the plan allows an optional grace period. Like health FSAs, dependent care FSAs are also generally subject to a use-it-or-lose-it rule. Other rules and exceptions may apply. Contact us with any questions.
Have you been contributing enough to your employer’s 401(k) plan or Roth 401(k)? Here are the contribution limits for this year and the recently announced limits for 2021. To learn more read the full article. https://bit.ly/2Kdy6kT
Some taxpayers may be able to achieve significant savings with the QBI deduction by taking certain steps at year end. To learn more read the full article. https://bit.ly/3naD28O
Are you eligible to claim the qualified business income (QBI) deduction? Taxpayers other than corporations may be entitled to a deduction of up to 20% of their QBI. For 2020, if taxable income exceeds $163,300 for single taxpayers, or $326,600 for a married couple filing jointly, the QBI deduction may be limited in certain cases. Taxpayers may be able to save taxes with this deduction by deferring income or accelerating deductions at year end so that they come under the dollar thresholds (or be subject to a smaller phaseout of the deduction). You also may be able to increase the deduction by increasing W-2 wages before year end. The rules are complex so consult with us before taking steps.
If your employer offers a 401(k) or Roth 401(k) plan, contributing to it is a smart way to build a substantial nest egg. If you’re not already socking away the maximum allowed, consider increasing your contribution. With a 401(k), an employee elects to have a certain amount of pay deferred and contributed by an employer on his or her behalf to the plan. The contribution limit for 2020 is $19,500. Employees age 50 or older by year end are also permitted to make additional “catch-up” contributions of $6,500, for a total limit of $26,000 for 2020. The IRS recently announced that the 401(k) contribution limits for 2021 will remain the same as they are for 2020.
There are substantial tax breaks when you buy a heavy SUV for business. Here are the details if you’re purchasing new wheels before year end. To learn more read the full article here: https://bit.ly/384BuHb
Medical and dental costs are expensive and it’s hard to get a tax deduction for them. But you may qualify by including every eligible expense allowed. Here’s what it takes to get a deduction and how you might be able to benefit by moving certain expenses into 2020. To Learn more read here: https://bit.ly/2ISsHQ1
For tax purposes, Dec. 31 is more than just New Year’s Eve. It will affect the filing status box that will be checked on your tax return. When filing a return, you do so with one of 5 tax filing statuses. The box checked on your return generally depends in part on whether you’re unmarried or married on Dec. 31. Here are the statuses: Single, married filing jointly, married filing separately, head of household and qualifying widow(er) with a dependent child. Head of household status can be more favorable than filing as a single person, but special rules apply. You must generally be unmarried, have a qualifying child (or dependent) and meet certain rules involving “maintaining a household.”
Businesses face a variety of tax-related deadlines in the first quarter of 2021. Here are some of them. To read the full article click here: https://bit.ly/3hh52W5
Here are a few key tax-related deadlines for businesses during Q1 of 2021. JAN. 15: Pay the final installment of 2020 estimated tax. FEB. 1: File 2020 Forms W-2 with the Social Security Administration and provide copies to employees. Also provide copies of 2020 Forms 1099-MISC to recipients and, if reporting nonemployee compensation in Box 7, file, too. MARCH 1: File 2020 Forms 1099-MISC if not required earlier and paper filing. MARCH 16: If a calendar-year partnership or S corp., file or extend your 2020 tax return. Contact us to learn more about filing requirements and ensure you’re meeting all applicable deadlines.
If you’re self-employed and don’t have paycheck withholding, you probably have to make estimated tax payments. These payments must be sent to the IRS on a quarterly basis. The 4th 2020 estimated tax payment deadline for individuals is Friday, Jan. 15. Even if you do have some withholding from paychecks or other payments, you may still have to make estimated payments if you receive income such as Social Security, prizes, rent, interest and dividends. Generally, taxpayers send four equal installments. But people who earn income unevenly during the year (for example, from a seasonal business) may be able to send smaller payments. Contact us if you have questions about the estimated tax rules.
Are you reconsidering the choice of entity for your business? These are several factors to consider when converting from a C corporation to an S corporation. Here are four of them.
Can you benefit from the massive new Consolidated Appropriation Act signed into law? Here are some of the tax highlights for individuals. To read the full article click link here: https://bit.ly/35thCNx
Businesses received several favorable tax breaks in the COVID-19 relief bill that was recently signed into law. Here are just two of them. To read full article click here: https://bit.ly/3otEe7G
Changes have been made to education tax breaks in the new Consolidated Appropriation Act. To read full article click here: https://bit.ly/3oI2x1U
The Employee Retention Tax Credit rewards employers that can afford to keep workers on the payroll during the COVID-19 crisis. Here’s how it changed under a new law. To read the full article click link here: https://bit.ly/3i9licm
Filing your tax return early will get you any refund early and may protect you from tax identity theft. Here’s why. To read the full article click link here: https://bit.ly/3pfKnFj
Businesses that have been hit hard by the COVID-19 may be able to obtain help with PPP loans. Here are the basic rules, as well as the tax implications. To Read Full Article Click Link here: https://bit.ly/35YnJJO
A filing requirement is coming up if your business pays independent contractors or makes other payments. To read full article click link here: https://bit.ly/3onC7BB
If you’re required to take distributions from a retirement plan, you may have received a respite in 2020, but you must begin taking them again this year. To read full article click link here: https://bit.ly/2M7zKpz
The price of gas is down from a year ago. How does this affect the amount your business can deduct for business driving in 2021? To read full article click link here: https://bit.ly/2MRFtzG
Thinking about buying a new electric vehicle? While you’re considering factors like acceleration and the range of the battery before recharging, check out the federal tax break that may be available. To read the full article click link here: https://bit.ly/3atxlO5
How much do your employees have to earn in 2021 before they can stop paying Social Security tax? How much can they contribute to 401(k) plans this year? Here are the answers to these and other questions about tax-related inflation adjustments and changes affecting businesses. To read full article click link here: https://bit.ly/3qgB5sQ
How much can you contribute to an IRA for 2021? How much is the standard deduction? Here are some Q&As about these and other tax-related amounts for 2021. To read full article click link here: https://bit.ly/2Ol1Luq
Buying or selling a business may be the largest transaction you’ll ever make. Pay attention to taxes. After a deal is done, it may be too late to get the best tax results. To read the full article click the link here: https://bit.ly/3s0R0Mu
In order to claim a charitable deduction on your tax return of $250 or more, you need a written acknowledgment from the charity. What if you haven’t received one yet for a charitable donation you made in 2020? To read the full article click link here: https://bit.ly/3u65BId
How much do your employees have to earn in 2021 before they can stop paying Social Security tax? How much can they contribute to 401(k) plans this year? Here are the answers to these and other questions about tax-related inflation adjustments and changes affecting businesses. To read full article click link here: https://bit.ly/3qgB5sQ
How much can you contribute to an IRA for 2021? How much is the standard deduction? Here are some Q&As about these and other tax-related amounts for 2021. To read full article click link here: https://bit.ly/2Ol1Luq
Saving now for retirement is one of the best moves you can make to help ensure financial security. If you’re eligible, you still have time to contribute to an IRA or SEP and save on your 2020 tax return. To read the full article click link here: https://bit.ly/3urPUv7
Business owners may be able to save tax with home office deductions. If you’re working from home (like lots of people these days), you may qualify. Here’s a rundown of the rules. To read the full article click link here: https://bit.ly/37IfPoF
Buying or selling a business may be the largest transaction you’ll ever make. Pay attention to taxes. After a deal is done, it may be too late to get the best tax results. To read the full article click the link here: https://bit.ly/3s0R0Mu
In order to claim a charitable deduction on your tax return of $250 or more, you need a written acknowledgment from the charity. What if you haven’t received one yet for a charitable donation you made in 2020? To read the full article click link here: https://bit.ly/3u65BId
Saving for retirement can help make your future brighter. Recent tax law changes might allow you to save more with your IRA or retirement plan. To read the full article click link here: https://bit.ly/3rgwgQT
The Work Opportunity Tax credit was set to expire on Dec. 31, 2020. But a law passed late last year extends it through Dec. 31, 2025. Here’s how employers can benefit if they’re hiring. To read full article click link here: https://bit.ly/387E9k5
Saving now for retirement is one of the best moves you can make to help ensure financial security. If you’re eligible, you still have time to contribute to an IRA or SEP and save on your 2020 tax return. To read the full article click link here: https://bit.ly/3urPUv7
Business owners may be able to save tax with home office deductions. If you’re working from home (like lots of people these days), you may qualify. Here’s a rundown of the rules. To read the full article click link here: https://bit.ly/37IfPoF
Buying or selling a business may be the largest transaction you’ll ever make. Pay attention to taxes. After a deal is done, it may be too late to get the best tax results. To read the full article click the link here: https://bit.ly/3s0R0Mu
For tax purposes, there are many ways to conduct a business. For example, you may operate as an S corporation or a partnership. But many new ventures start out as sole proprietorships. Here are some tax considerations involved in operating with that entity. To read the full article click link here: https://bit.ly/3eqJsiE
Are you required to make estimated tax payments because you don’t pay enough tax in withholding? Here are the rules. To read the full article click link here: https://bit.ly/2N84jMq
Saving for retirement can help make your future brighter. Recent tax law changes might allow you to save more with your IRA or retirement plan. To read the full article click link here: https://bit.ly/3rgwgQT
The Work Opportunity Tax credit was set to expire on Dec. 31, 2020. But a law passed late last year extends it through Dec. 31, 2025. Here’s how employers can benefit if they’re hiring. To read full article click link here: https://bit.ly/387E9k5
Saving now for retirement is one of the best moves you can make to help ensure financial security. If you’re eligible, you still have time to contribute to an IRA or SEP and save on your 2020 tax return. To read the full article click link here: https://bit.ly/3urPUv7
For tax purposes, there are many ways to conduct a business. For example, you may operate as an S corporation or a partnership. But many new ventures start out as sole proprietorships. Here are some tax considerations involved in operating with that entity. To read the full article click link here: https://bit.ly/3eqJsiE
Are you required to make estimated tax payments because you don’t pay enough tax in withholding? Here are the rules. To read the full article click link here: https://bit.ly/2N84jMq
Saving for retirement can help make your future brighter. Recent tax law changes might allow you to save more with your IRA or retirement plan. To read the full article click link here: https://bit.ly/3rgwgQT
The Work Opportunity Tax credit was set to expire on Dec. 31, 2020. But a law passed late last year extends it through Dec. 31, 2025. Here’s how employers can benefit if they’re hiring. To read full article click link here: https://bit.ly/387E9k5
Saving now for retirement is one of the best moves you can make to help ensure financial security. If you’re eligible, you still have time to contribute to an IRA or SEP and save on your 2020 tax return. To read the full article click link here: https://bit.ly/3urPUv7
Are you eligible to receive direct payments under the new law that passed on March 11? To read the full article click link here: https://bit.ly/3vuA5EC
You’ve probably heard about the new law that provides direct payments to eligible individuals. But what does the law provide to businesses? To read the full article click link here: https://bit.ly/3cHbLXl
For tax purposes, there are many ways to conduct a business. For example, you may operate as an S corporation or a partnership. But many new ventures start out as sole proprietorships. Here are some tax considerations involved in operating with that entity. To read the full article click link here: https://bit.ly/3eqJsiE
Are you required to make estimated tax payments because you don’t pay enough tax in withholding? Here are the rules. To read the full article click link here: https://bit.ly/2N84jMq
Saving for retirement can help make your future brighter. Recent tax law changes might allow you to save more with your IRA or retirement plan. To read the full article click link here: https://bit.ly/3rgwgQT
Child care is expensive. The newly enhanced child and dependent care credit may help for 2021. To read the full article click link here: https://bit.ly/3lOlrnf
What is the best choice of entity for a new business venture? It might be an S corporation. Here’s why. To read the full article click link here: https://bit.ly/31h9b5d
Are you eligible to receive direct payments under the new law that passed on March 11? To read the full article click link here: https://bit.ly/3vuA5EC
You’ve probably heard about the new law that provides direct payments to eligible individuals. But what does the law provide to businesses? To read the full article click link here: https://bit.ly/3cHbLXl
For tax purposes, there are many ways to conduct a business. For example, you may operate as an S corporation or a partnership. But many new ventures start out as sole proprietorships. Here are some tax considerations involved in operating with that entity. To read the full article click link here: https://bit.ly/3eqJsiE
