04 Sep 2023
0

Pocket a Tax Break for Making Energy-Efficient Home Improvements

Roger Rossmeisl, CPA
Individual Tax Briefs
Pocket a Tax Break for Making Energy-Efficient Home Improvements

An estimated 190 million Americans have recently been under heat advisory alerts, according to the National Weather Service. That may have spurred you to think about making your home more energy efficient — and there’s a cool tax break that may apply. Thanks to the Inflation Reduction Act of 2022, you may be able to benefit from an enhanced residential energy tax credit to help defray the cost. Eligibility rules If you make eligible energy-efficient improvements to your home on or after January 1, 2023, you may qualify for a tax credit up to $3,200. You can claim the credit for improvements made through 2032. The credit equals 30% of certain qualified expenses for energy improvements to a home located in the United States, including: Qualified energy-efficient improvements...

04 Sep 2023
0

The Advantages of Using an LLC for your Small Business

Roger Rossmeisl, CPA
Small Business Tax Briefs
The Advantages of Using an LLC for your Small Business

If you operate your small business as a sole proprietorship, you may have thought about forming a limited liability company (LLC) to protect your assets. Or maybe you’re launching a new business and want to know your options for setting it up. Here are the basics of operating as an LLC and why it might be a good choice for your business. An LLC is a bit of a hybrid entity because it can be structured to resemble a corporation for owner liability purposes and a partnership for federal tax purposes. This duality may provide the owners with the best of both worlds. Protecting your personal assets Like the shareholders of a corporation, the owners of an LLC (called “members” rather than shareholders or partners) generally aren’t liable...

04 Sep 2023
0

Protecting Your Business While Using AI

Roger Rossmeisl, CPA
Fraud Briefs
Protecting Your Business While Using AI

Have you ever wondered whether the photo or video you’re viewing, the audio you’re listening to or the article you’re reading is real? Artificial intelligence (AI) can make the line between authentic and inauthentic hard to determine. For fraud perpetrators, the ability to create deepfakes, voice clones or machine-generated communications can make their scams far more compelling — and effective. Although using AI for criminal purposes is a clear-cut abuse of the technology, it’s possible for well-intentioned businesses to violate the Federal Trade Commission (FTC) Act. Sec. 5 of the FTC Act, “Unfair or Deceptive Acts or Practices” prohibits any material representation, omission or practice that’s likely to mislead consumers under ordinary circumstances. Here’s how to reduce the risk of violations. Limiting the technology’s risk Using AI can...

04 Sep 2023
0

Moving Mom or Dad into a Nursing Home? 5 Potential Tax Implications

Roger Rossmeisl, CPA
Individual Tax Briefs
Moving Mom or Dad into a Nursing Home? 5 Potential Tax Implications

More than a million Americans live in nursing homes, according to various reports. If you have a parent entering one, you’re probably not thinking about taxes. But there may be tax consequences. Let’s take a look at five possible tax breaks. 1. Long-term medical care The costs of qualified long-term care, including nursing home care, are deductible as medical expenses to the extent they, along with other medical expenses, exceed 7.5% of adjusted gross income (AGI). Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating and rehabilitative services, and maintenance or personal-care services required by a chronically ill individual that are provided under care administered by a licensed healthcare practitioner. To qualify as chronically ill, a physician or other licensed healthcare practitioner must certify an individual...

04 Sep 2023
0

Identifying and Avoiding Business Valuation Pitfalls

Roger Rossmeisl, CPA
Valuation Briefs
Identifying and Avoiding Business Valuation Pitfalls

Do-it-yourself business valuations and the use of unqualified financial experts can increase the odds of making an error, misstatement or erroneous deviation from customary valuation practice. These faux pas could trigger (or worsen) an IRS inquiry or perhaps lead to an embarrassing courtroom mishap. Here are three common valuation pitfalls that qualified valuation professionals are specifically trained to avoid. Outdated data Business valuations are contingent on the subject company’s financial health, industry trends and general economic conditions on the valuation date. Like the balance sheet, they’re valid as of a specific point in time. As conditions change, a company’s value may change. To illustrate: Consider the novice appraiser who valued an event planning company using comparable data from the last 20 years. In the wake of the COVID-19 pandemic...

06 Aug 2023
0

A Tax-Smart Way to Develop and Sell Appreciated Land

Roger Rossmeisl, CPA
Small Business Tax Briefs
A Tax-Smart Way to Develop and Sell Appreciated Land

Let’s say you own highly appreciated land that’s now ripe for development. If you subdivide it, develop the resulting parcels and sell them off for a hefty profit, it could trigger a large tax bill. In this scenario, the tax rules generally treat you as a real estate dealer. That means your entire profit — including the portion from pre-development appreciation in the value of the land — will be treated as high-taxed ordinary income subject to a federal rate of up to 37%. You may also owe the 3.8% net investment income tax (NIIT) for a combined federal rate of up to 40.8%. And you may owe state income tax too. It would be better if you could arrange to pay lower long-term capital gain (LTCG) tax rates...

06 Aug 2023
0

Retirement Account Catch-Up Contributions Can Add Up

Roger Rossmeisl, CPA
Individual Tax Briefs
Retirement Account Catch-up Contributions Can Add Up

If you’re age 50 or older, you can probably make extra “catch-up” contributions to your tax-favored retirement account(s). It is worth the trouble? Yes! Here are the rules of the road. The deal with IRAs  Eligible taxpayers can make extra catch-up contributions of up to $1,000 annually to a traditional or Roth IRA. If you’ll be 50 or older as of December 31, 2023, you can make a catch-up contribution for the 2023 tax year by April 15, 2024. Extra deductible contributions to a traditional IRA create tax savings, but your deduction may be limited if you (or your spouse) are covered by a retirement plan at work and your income exceeds certain levels. Extra contributions to Roth IRAs don’t generate any up-front tax savings, but you can take...

06 Aug 2023
0

Corporate Officers or Shareholders: How Should You Treat Expenses Paid Personally?

Roger Rossmeisl, CPA
Small Business Tax Briefs
Corporate Officers or Shareholders: How Should you Treat Expenses Paid Personally?

If you play a major role in a closely held corporation, you may sometimes spend money on corporate expenses personally. These costs may end up being nondeductible both by an officer and the corporation unless the correct steps are taken. This issue is more likely to happen with a financially troubled corporation. What can’t you deduct? In general, you can’t deduct an expense you incur on behalf of your corporation, even if it’s a legitimate “trade or business” expense and even if the corporation is financially troubled. This is because a taxpayer can only deduct expenses that are his own. And since your corporation’s legal existence as a separate entity must be respected, the corporation’s costs aren’t yours and thus can’t be deducted even if you pay them. To...

06 Aug 2023
0

How Secure is Your Accounts Receivable Department?

Roger Rossmeisl, CPA
Fraud Briefs
How Secure is Your Accounts Receivable Department?

Asset misappropriation schemes make up more than half of all occupational fraud schemes, according to the Association of Certified Fraud Examiners. It’s a broad category that includes everything from skimming cash to stealing inventory to paying “ghost” employees. One hotspot for asset misappropriation is the accounts receivables department, where dishonest staffers could potentially divert customer payments for their own use. If you don’t have strong internal controls for receivables, what are you waiting for? Lapping leads The most common form of receivables fraud is lapping, where perpetrators apply receipts from one account to cover misappropriations from another. For example, rather than credit Customer A’s account for its payment, a thief may pocket the funds and later post a payment from Customer B to A’s account, Customer C’s payment...

06 Aug 2023
0

Inheriting Stock or Other Assets? You’ll Receive a Favorable “Stepped-up Basis”

Roger Rossmeisl, CPA
Individual Tax Briefs
Inheriting Stock or Other Assets? You'll Receive a Favorable "Stepped-up Basis"

If you’re planning your estate, or you’ve recently inherited assets, you may be unsure of the “cost” (or “basis”) for tax purposes. How do the rules work? Under the current fair market value basis rules (also known as the “step-up and step-down” rules), an heir receives a basis in inherited property equal to its date-of-death value. So, for example, if your grandfather bought stock in 1940 for $600 and it’s worth $1 million at his death, the basis is stepped up to $1 million in the hands of your grandfather’s heirs — and all of that gain escapes federal income tax. The fair market value basis rules apply to inherited property that’s includible in the deceased’s gross estate, and those rules also apply to property inherited from foreign...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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