Sole proprietorships and pass-through entity structures, which include partnerships, S corporations and certain limited liability companies (LLCs), provide owners with some valuable tax benefits, such as avoidance of double taxation and the potential ability to deduct losses from the business on their individual tax returns. But the Tax Cuts and Jobs Act (TCJA) has placed some limitations on deducting business losses. Here’s a look at the changes in the rules and how they might affect you.
Business Tax Strategies
The Tax Cuts and Jobs Act (TCJA) introduced a variety of tax benefits for businesses. Among other things, it slashed corporate income tax rates, temporarily reduced individual rates and established a new 20% deduction for certain pass-through income. At the same time, the act placed limits on several tax breaks, including the amount of interest expense a business may deduct.
Does your business need to add one or more vehicles? If so, the purchases may qualify for tax breaks under current tax law. Here are the details.
Earlier this year, the IRS published a proposed safe harbor giving owners of certain rental real estate interests the opportunity to take advantage of the qualified business income (QBI) deduction. The QBI write-off was created by the Tax Cuts and Jobs Act (TCJA) for pass-through entities. The IRS has now released final guidance (Revenue Procedure 2019-38) on the safe harbor that clearly lays out the requirements that taxpayers must satisfy to benefit.
Taxes are a major consideration in mergers and acquisitions (M&As).
If your small business is unincorporated, you may be fed up with paying the federal self-employment (SE) tax. This tax is how the federal government collects Social Security and Medicare taxes from self-employed individuals. However, you may be able to lower your exposure to these taxes if you structure your business as a subchapter S corporation for federal tax purposes. Here are the details on how this tax-saving strategy can work.
The many changes brought about by the Tax Cuts and Jobs Act (TCJA) have been largely beneficial for businesses across all industries. One change in regard to tax accounting methods is particularly advantageous for contractors and manufacturers: an increased annual gross receipt threshold of $25 million for tax years beginning after December 31, 2017.
Federal income tax rates for C corporations have been reduced to a flat 21%, starting in 2018 under the Tax Cuts and Jobs Act (TCJA). But what about pass-through businesses?
The Tax Cuts and Jobs Act (TCJA) includes a provision that Secretary of the Treasury Steven Mnuchin said should lead to $100 billion in capital investments in distressed areas. The provision allows taxpayers to defer tax on capital gains by investing in such Opportunity Zones. And now the IRS has released proposed regulations for this tax incentive.
If you’ve done any research into employee benefits for your business recently, you may have come across a bit of alphabet soup in the form of “HSA + HDHP.” Although perhaps initially confusing, this formula represents an increasingly popular model for health care benefits — that is, offering a Health Savings Account (HSA) coupled with, as required by law, a high-deductible health plan (HDHP).
The Tax Cuts and Jobs Act (TCJA) establishes a new federal income tax credit for employers that provide qualifying paid family and medical leave benefits to their employees. This credit is only available for two employer tax years — those beginning between January 1, 2018 and December 31, 2019 — unless Congress extends the deal. Here are some FAQs about this tax break.
On October 3rd, 2018, the IRS issued additional guidance to the Tax Cuts and Jobs Act (TCJA). The previous omission in the TCJA related to food and beverage deduction (50%) for expenses created a lot of confusion in the business community. This article is a summary to help you better understand the latest IRS guidance on Sec. 274, and how it could be applied when planning your business activities that involve meals and entertainment.
As its name suggests, the Tax Cuts and Jobs Act (TCJA) will reduce taxes for many businesses.
In a much-anticipated ruling that confounded the expectations of many court watchers, the U.S. Supreme Court has given state and local governments the green light to impose sales taxes on out-of-state online sales. The 5-4 decision in South Dakota v. Wayfair, Inc. was met by cheers from brick-and-mortar retailers, who have long believed that the high court’s previous rulings on the issue disadvantaged them, as well as state governments that are eager to replenish their coffers.
Recently proposed IRS regulations provide aggregation rules that allow eligible individuals to "aggregate" their businesses in order to maximize the new qualified business income (QBI) deduction. Specifically, they may be able to combine income, W-2 wages and the unadjusted basis immediately after acquisition (UBIA) of qualified assets from qualified businesses conducted as pass-through entities.
One of the biggest changes under the Tax Cuts and Jobs Act (TCJA) is the permanent installation of a flat 21% federal income tax rate for C corporations for tax years beginning after 2017. The new 21% rate applies equally to personal service corporations (PSCs). (Under prior law, PSCs were taxed more heavily than other C corporations.)
The Tax Cuts and Jobs Act (TCJA) imposes a limit on deductions for business interest for taxable years beginning in 2018. The limit, like other aspects of the law, has raised some questions for taxpayers. In response, the IRS has issued temporary guidance in Notice 2018-28 that taxpayers can rely on until it releases regulations. While the guidance provides some valuable information, it also leaves some questions unanswered.
On September 13, the House Ways and Means Committee passed three separate bills that will be the cornerstone of what is being referred to as Tax Reform 2.0.
Late summer and early fall, when so many families have members returning to educational facilities of all shapes and sizes, is also a good time for businesses to creatively step up their business development efforts, whether it’s launching new marketing initiatives, developing future employees or simply generating goodwill in the community. Here are a few examples that might inspire you.
The IRS recently released highly anticipated regulations addressing the deduction for up to 20% of qualified business income (QBI) from pass-through entities. The deduction was a major component of the Tax Cuts and Jobs Act, which became law late last year. It has also been referred to as the pass-through deduction, the QBI deduction or the Section 199A deduction.
With generous corporate tax write-offs and rates, the Tax Cuts and Jobs Act has been well received by nearly every industry. Unfortunately, a simple error has prevented franchisees from reaping many of its benefits.
The Tax Cuts and Jobs Act (TCJA) expands the first-year depreciation deductions for vehicles used more than 50% for business purposes. Here's what business owners need to know and how to take advantage.
On June 21, the U.S. Supreme Court issued a ruling overturning a 1992 precedent that had barred states from requiring online retailers without a "physical presence" there to collect sales taxes. Going forward, this decision will present numerous challenges to businesses of all sizes that have out-of-state sales, not solely those that sell products online. Talk with your tax advisor, there may be more you need to know - even if you aren't an e-commerce business.
The Tax Cuts and Jobs Act (TCJA) introduced a flat 21% federal income tax rate for C corporations for tax years beginning in 2018 and beyond. Under prior law, profitable C corporations paid up to 35%. This change has caused many business owners to ask: What's the optimal choice of entity for my business?
The Tax Cuts and Jobs Act effectively changed and rebuilt the U.S. tax code as we knew it. Now that the dust has settled, it's time to take a deeper look at the impacts felt by the construction industry in 2018 and beyond.
Now that the TCJA is in place, business owners should schedule discussions with their CPA or tax professional about the potential advantages of entity structure changes, relative to their future goals. The following is a guide to begin that journey.
The IRS is strict about collecting payroll taxes and tough on "responsible persons" who don't pay them. A recent court case shows that a person may not be able to escape the penalty even if someone else is primarily responsible for handling payroll taxes.
The Tax Cuts and Jobs Act (TCJA) provides businesses with more than just lower income tax rates and other provisions you may have heard about. Here's an overview of some lesser-known, business-friendly changes under the new law, along with a few changes that could affect some businesses adversely.
For most business owners, making quarterly estimated tax payments to the IRS is rarely an option; it's a requirement. Here's why you shouldn't ignore this to-do.
For tax years beginning in 2018, the TCJA establishes a new deduction based on a noncorporate owner’s qualified business income (QBI). This new tax break is available to individuals, estates and trusts that own interests in pass-through business entities. This article includes an analysis of how the new law may impact business owners.
Here is a quick rundown of some of the key changes affecting businesses. Except where noted, these changes are effective for tax years beginning after December 31, 2017. Be sure to consult your tax professional for your specific situation
The 754 election isn't widely known, but it can bring about substantial tax benefits for commercial real estate partnerships. Here's what it could mean for you.
For unprepared businesses, a sales and use tax audit has the potential to be costly. Here are four simple steps you can take to mitigate your risk.
When it comes to the sale of real property, determining whether you're a dealer or an investor could be a million-dollar question. Here's what you should know about this highly litigated area of tax.
When you're in the weeds of running a restaurant, it's easy to forget about sales and use tax. Here's a quick refresher to help you prevent costly penalties.
The present law partnership audit rules, also known as TEFRA, have been replaced with new procedures that may require adjustment of all items of income, gain, loss, deduction or credit at the partnership level rather than at the partner level. This puts the partnership liable for any resulting underpayment of tax. It's time to explore your options.
The Section 199 deduction is often known as the "domestic production deduction." But it's not limited to manufacturers! Contractors, architects, engineers, and even design firms may qualify, too.
Benefits of an IC-DISC: How Manufacturers and Exporters Can Determine If It’s Right for Their Business
Paul Simons was recently featured in Minnesota Business Magazine's experts section for manufacturing business owners, called "Gears and Gadgets | GuidePosts." For qualifying manufacturers and exporters there is an often overlooked tax advantage that they may want to consider that offsets operating income with lower taxed IC-DISC dividend.
Thinking of remodeling or improving the interior of non-residential property this year? A recent change in the PATH Act lifts many restrictions to "qualified improvement property" and could provide your business with a significant tax-savings opportunity.
Tax reform will likely be a priority for President-elect Donald Trump and the Republican-controlled Congress in 2017 by consolidating the individual tax rates into three brackets, eliminating the 3.8% surtax on upper-earners, and potentially reducing the tax-savings impact of current deductions. With all this in mind, here are some important strategies for taxpayers to consider this year.
One minute you’re making a sale. The next, you’re making a personnel decision. Later in the day, you’re on to payroll. If you’re an entrepreneur or have a growing small business, your to-do list never ends. And to top it off, you’ve got to keep your business in the black. Running a profitable business can … Continued
Tax legislation at the end of 2015 (The PATH Act) made significant changes to the Research and Development (R&D) tax credit. This new legislation makes the R&D credit available to many small and midsized companies that had previously believed the credit out of reach to them. The credit was made permanent back to January 1, 2015 so U.S. companies can budget with confidence that the credit will be there in future years rather than periodically expiring as in the past.
Beginning in 2016, qualified small business startups can allocate up to $250,000 of R&D tax credits generated after January 1, 2016 to offset the employer OASDI portion of their payroll taxes. For small startup companies, a payroll tax offset may also result in a significant cash savings.
Does your business operate (or are you considering) a loyalty or customer rewards program? If so, you should know that a Tax Court ruling was recently reversed in favor of a prominent grocery retail store chain.
Small construction firm owners and contractors can find it especially difficult to comply with the strict letter of the law when it comes to filing their income tax returns. The IRS recognizes the potential problems and wants to lend a helping hand. The tax agency periodically updates several publications geared to contractors, most notably Publication 3780, … Continued
The Protecting Americans from Tax Hikes (PATH) Act of 2015 makes the Research and Development Tax Credit (R&D) permanent for costs related to qualified activity incurred after December 31, 2014. No more waiting at year-end to see if the credit will be extended! Hooray! For small and medium sized businesses, the new rules significantly … Continued
At the end of last year, the Protecting Americans from Tax Hikes Act of 2015 was signed into law. Known as the PATH Act, it does more than just extend expired and expiring tax provisions for another year. The new law makes many temporary tax breaks permanent. This provides some stability in planning. When it comes … Continued
Consider a Revised Tangible Property Expensing Policy for Your Small Business – IRS Increases Threshold to $2,500
The threshold for commonly expensed items (such as smartphones, computers, machinery and equipment parts) will we be increased to $2,500. Review your Accounting Capitalization Policy or speak with our CPAs to make sure you can take advantage of these important tax savings.
In December, the House and Senate approved the “Protecting Americans from Tax Hikes” (PATH) Act of 2015. The President signed this legislation referred to by tax professionals as “The Tax Extenders Provision”, which extends or modifies many extensions/changes that tax payers should discuss with their CPA.
Given the constant media attention regarding tax law changes and tax reform, it’s an important question to examine. The way your business is structured generally affects the extent to which you and any other owners of the business are personally protected from liabilities of the business as well as how your business is taxed.
Tax reform, especially corporate income tax reform, has been in the news significantly in recent months. In summary, the broadening of the tax base would come by elimination of tax incentives (called “tax expenditures”) that have been added to our tax system over the past half-century.
Recently, the IRS announced that it was extending the time for employers to file for the work opportunity tax credit (WOTC) that hired eligible workers in 2014. The WOTC is a federal tax credit that reduces the federal tax liability based on wages paid to new hires for targeted groups that are employed by privately-held businesses.
A few of my clients have asked, so here is an update to my article post on Built In Gains Recognition Period (read the original here). The President signed into law the Tax Increase Prevention Act of 2014 on December 19, 2014.
In a cash flow crunch and thinking about delaying paying the IRS payroll taxes? There are 4.5 billion reasons not to do this. In the recently published “2013 Internal Revenue Service Data Book” it was revealed that the IRS issued 6.8 million penalties totaling $4.5 billion related to payroll taxes for the YEAR...
Small business owners have become accustomed to the ability to deduct significant amounts of purchased business assets in the year of acquisition. But the future status of this deduction remains unclear and has an impact on decisions, such as buying equipment for the business.
Variable Interest Entity (VIE) rules are changing yet again, but for private companies it may actually reduce your reporting requirements! One of the largest impacts of Enron scandal, in 2001, on all entities, was the adoption of the Financial Accounting Standards Board (FASB) FIN 46 (now part of ASC 810).
All things being equal, taxpayers generally would prefer to pay taxes later rather than sooner – particularly if they are in a high tax bracket. The installment method allows taxpayers to defer taxes by recognizing profit from certain sales over several years rather than all at once.
On September 13, 2013, Treasury released final regulations regarding tangible property expenditures. The final regulations address the proper tax treatment of maintenance, repair, and property improvement activities. Additionally, the regulations provide safe-harbors for expensing property acquired...
In the past, tax preparers and business owners criticized the IRS capitalization guidelines for being ambiguous, complex, and subjective. There were few quantitative brightline rules. Instead, the appropriate tax treatment was governed by qualitative “betterment” tests and Tax Court cases.
The Section 179 deduction is valuable because it allows businesses to deduct as depreciation up to 100 percent of the cost of qualifying asset additions in Year 1 instead of depreciating the cost over a number of years. The Fiscal Cliff Law included several taxpayer-friendly changes to the Section 179 rules.
Special “bonus depreciation” provisions have been available as incentives to help stimulate the U.S. economy since 2008. Recently, the American Taxpayer Relief Act of 2012 (ATRA) extended 50% bonus depreciation availability to new asset additions placed in service prior to January 1, 2014 (certain specialized property may have a pre-January 1, 2015 in-service date requirement).
If you sell over the internet you may soon have to collect sales tax. Congress is considering legislation authorizing states to require out-of-state business selling to collect sales tax. This would require remote businesses to collect and remit sales tax according to local tax law.
Recent discussions with a local attorney reinforced my belief that there is quite a bit of confusion as it relates to the Built-In-Gain Tax recognition period. As a bit of background, when a Subchapter C Corporation is converted to a pass-through S Corporation by its shareholders...
Effective for sales or purchases made after June 30, 2013, Minnesota now adopts the “Amazon Rule,” stating that an out-of-state business making retail sales (that has no other Minnesota presence) is presumed to have a Minnesota sales tax collection requirement. As a result, after June 30, 2013 Minnesota residents and businesses who purchase online from vendors such as Amazon should expect to find sales tax imposed by the vendor on those orders.
Driving home from work recently, I happened to be flipping radio channels and ran across the CSPAN XM channel and the discussion was “tax reform”. Having just finished our April 15 tax rush as a Firm, I was interested in this but then common sense kicked in – yea right. Tax reform? Given our dysfunctional Congress, powerful special interest groups – get real!
The American Taxpayer Relief Act of 2012 also modifies or extends many business tax breaks. Here are the highlights.
After an examination of our new manufacturing client’s financial statements and tax returns, we found an opportunity for the client to claim a 9% tax deduction they previously were missing out on.