31 May 2022
0

Businesses May Receive Notices About Information Returns That Don’t Match IRS Records

Roger Rossmeisl, CPA
Small Business Tax Briefs
Businesses May Receive Notices About Information Returns That Dont Match IRS Records

The IRS has begun mailing notices to businesses, financial institutions and other payers that filed certain returns with information that doesn’t match the agency’s records. These CP2100 and CP2100A notices are sent by the IRS twice a year to payers who filed information returns that are missing a Taxpayer Identification Number (TIN), have an incorrect name or have a combination of both. Each notice has a list of persons who received payments from the business with identified TIN issues. If you receive one of these notices, you need to compare the accounts listed on the notice with your records and correct or update your records, if necessary. This can also include correcting backup withholding on payments made to payees. Which returns are involved?  Businesses, financial institutions and other payers are...

31 May 2022
0

Valuing Non-Compete Agreements in Business Combinations

Roger Rossmeisl, CPA
Valuation Briefs
Valuing Non-Compete Agreements in Business Combinations

Purchase price allocations are an important part of negotiating a successful M&A transaction. The value of most assets — such as receivables, inventory and equipment — may be fairly straightforward. But the value of non-compete agreements is often a sticking point. To complicate matters, the buyer and seller may have conflicting tax objectives. This is because the buyer must amortize the amount allocated to non-competes over 15 years, whereas the seller must recognize the allocation as ordinary income. When the buyer and seller allocate different amounts to a non-compete agreement on their respective tax forms, they may trigger unwanted attention from the IRS. An objective business valuation professional can help the parties come to an agreement on the allocation amount before the deal closes. Factors to consider Under a...

31 May 2022
0

Want to Turn a Hobby into a Business? Watch Out for the Tax Rules

Roger Rossmeisl, CPA
Individual Tax Briefs
Want to Turn a Hobby into a Business? Watch out for the Tax Rules

Like many people, you may have dreamed of turning a hobby into a regular business. You won’t have any tax headaches if your new business is profitable. But what if the new enterprise consistently generates losses (your deductions exceed income) and you claim them on your tax return? You can generally deduct losses for expenses incurred in a bona fide business. However, the IRS may step in and say the venture is a hobby — an activity not engaged in for profit — rather than a business. Then you’ll be unable to deduct losses. By contrast, if the new enterprise isn’t affected by the hobby loss rules because it’s profitable, all otherwise allowable expenses are deductible on Schedule C, even if they exceed income from the...

31 May 2022
0

The Tax Mechanics Involved in the Sale of Trade or Business Property

Roger Rossmeisl, CPA
Small Business Tax Briefs
The Tax Mechanics Involved in the Sale of Trade or Business Property

What are the tax consequences of selling property used in your trade or business? There are many rules that can potentially apply to the sale of business property. Thus, to simplify discussion, let’s assume that the property you want to sell is land or depreciable property used in your business, and has been held by you for more than a year. (There are different rules for property held primarily for sale to customers in the ordinary course of business; intellectual property; low-income housing; property that involves farming or livestock; and other types of property.) General rules Under the Internal Revenue Code, your gains and losses from sales of business property are netted against each other. The net gain or loss qualifies for tax treatment as follows: 1) If the...

30 May 2022
0

Autonomous Ride-Hailing Will Displace Industry Incumbents

Roger Rossmeisl, CPA
Automotive, Technology
Autonomous Ride-Hailing Will Displace Industry Incumbents

As posted to the ARK Invest YouTube Channel on 5/19/22 (Run Time: 16 min, 20 sec) ARK Invest believes that autonomous ride-hailing will reduce the cost of mobility to one-eighth the average cost of ride-hail today, spurring widespread adoption and unleashing unprecedented economic productivity.  ARK believes that this could be "one of the most meaningful economic productivity delivering innovations of all time" and the GDP contribution from autonomous ride-hail systems could total around $26 trillion by 2030. Originally aired on 1/25/22, Big Ideas Summit 2022 features in-depth presentations from ARK's research team and seeks to educate attendees on the impact of breakthrough technologies and the investment opportunities they could create. (This is Blog Post #1209) ARK Invest ARK is an investment manager focused solely on disruptive innovation. Rooted in over...

30 May 2022
0

How to Qualify for – and Keep – Cyber Insurance Coverage

Roger Rossmeisl, CPA
Fraud Briefs
How to Qualify for - and keep - Cyber Insurance Coverage

These days, it’s common for businesses to purchase cyber insurance to help mitigate financial losses from network breaches. According to the U.S. Government Accountability Office, the proportion of businesses adding cyber coverage increased from 26% in 2016 to 47% in 2020. But in the event of a loss, processing such claims can be expensive, and insurers are becoming more selective about the companies they agree to insure and for how much. In response to mounting losses from cybercrime, insurers are also raising premiums. If your company wants to qualify for cyber insurance at an affordable price, we recommend the following five steps: 1. Spend time with the application.  Insurers ask applicants to complete a security questionnaire to help them understand the risks facing the companies. Answering the...

30 May 2022
0

Thinking About Converting Your Home Into a Rental Property?

Roger Rossmeisl, CPA
Individual Tax Briefs
Thinking About Converting Your Home into a Rental Property?

In some cases, homeowners decide to move to new residences, but keep their present homes and rent them out. If you’re thinking of doing this, you’re probably aware of the financial risks and rewards. However, you also should know that renting out your home carries potential tax benefits and pitfalls. You’re generally treated as a regular real estate landlord once you begin renting your home. That means you must report rental income on your tax return, but also are entitled to offsetting landlord deductions for the money you spend on utilities, operating expenses, incidental repairs and maintenance (for example, fixing a leak in the roof). Additionally, you can claim depreciation deductions for the home. You can fully offset rental income with otherwise allowable landlord deductions. Passive activity...

30 May 2022
0

Tax Considerations When Adding a New Partner at Your Business

Roger Rossmeisl, CPA
Small Business Tax Briefs
Tax Considerations When Adding a New Partner at Your Business

Adding a new partner in a partnership has several financial and legal implications. Let’s say you and your partners are planning to admit a new partner. The new partner will acquire a one-third interest in the partnership by making a cash contribution to it. Let’s further assume that your bases in your partnership interests are sufficient so that the decrease in your portions of the partnership’s liabilities because of the new partner’s entry won’t reduce your bases to zero. Not as simple as it seems Although the entry of a new partner appears to be a simple matter, it’s necessary to plan the new person’s entry properly in order to avoid various tax problems. Here are two issues to consider: First, if there’s a change in the partners’...

30 May 2022
0

Taking a Red Pen to Financials for Valuation Purposes

Roger Rossmeisl, CPA
Valuation Briefs
Taking a Red Pen to Financials for Valuation Purposes

Financial statements are an important source of data for valuing a business. But they tell only part of the story. An accurate business valuation hinges on a comprehensive understanding of the subject company’s relative performance and its future earnings power. To help clarify matters, experts often make various adjustments to the financials. Here are some examples. Non-recurring adjustments From a valuator’s perspective, an obvious shortcoming of financial statements is that they demonstrate historic results, not expected performance. Historical data is less relevant if operations are expected to change in the future. For example, a valuator might remove extraordinary or unusual items — such as proceeds from a legal settlement or short-term effects of hurricane damage — from a company’s income statement. Similarly, to better reflect future earnings potential,...

ROGER ROSSMEISL, CPA

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

(714) 325-0442
roger@khopatel.com

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