19 Aug 2021
0

It May Be Difficult to Deduct Student Loan Interest

Roger Rossmeisl, CPA
Individual Tax Briefs
It May Be Difficult to Deduct Student Loan Interest

More than 43 million student borrowers are in debt with an average of $39,351 each, according to the research group EducationData.org. If you have student loan debt, you may wonder if you can deduct the interest you pay. The answer is yes, subject to certain limits. However, the deduction is phased out if your adjusted gross income exceeds certain levels — and they aren’t as high as the income levels for many other deductions. Basics of the deduction The maximum amount of student loan interest you can deduct each year is $2,500. The interest must be for a “qualified education loan,” which means a debt incurred to pay tuition, room and board, and related expenses to attend a post-high school educational institution, including certain vocational schools. Post-graduate...

18 Aug 2021
0

How to Work with a Forensic Accountant

Roger Rossmeisl, CPA
Fraud Briefs
How to Work with a Forensic Accountant

Forensic accountants are professionals who have received specialized training to uncover fraud and protect against fraud threats. They’re uniquely qualified to review financial statements and business records and to interview employees to find evidence of misrepresentations and theft. In many cases, they’re able to help recover missing funds. So if you suspect fraud and possibly want to take a perpetrator to court, a forensic accountant can be critical. Essential expertise Forensic accountants specialize in conducting fraud audits and investigations to detect irregularities and troubling trends, looking for both telltale and subtle signs of occupational crime. Certified fraud examiners (CFEs) are specially trained in fraud discovery, recognition, documentation and prevention. Forensic accountants are also generally knowledgeable about human behavioral factors and motivations that contribute to the commission of fraud,...

18 Aug 2021
0

The Deductibility of Corporate Expenses Covered by Officers or Shareholders

Roger Rossmeisl, CPA
Small Business Tax Briefs
The Deductibility of Corporate Expenses Covered by Officers or Shareholders

Do you play a major role in a closely held corporation and sometimes spend money on corporate expenses personally? These costs may wind up being nondeductible both by an officer and the corporation unless proper steps are taken. This issue is more likely to arise in connection with a financially troubled corporation. Deductible vs. nondeductible expenses 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...

15 Aug 2021
0

California AB-150 Provides SALT Cap Work-Around

Roger Rossmeisl, CPA
Automotive, Small Business Tax Briefs
California AB-150 Provides SALT Cap Work-Around

While Congress develops legislation that would eliminate, and/or otherwise mitigate, the current TCJA implemented state and local tax (SALT) limit on an individual taxpayer's ability to take the itemized deduction for state and local taxes, California has just passed legislation which offers a work-around that will allow many Californians to mitigate the effects of the current $10,000 federal limitation on SALT deductions. On 7/16/2021, Governor Newsom signed into law AB-150, which provides a means by which certain pass-through entities (Qualified Entities) can make an election to pay California income tax (at the entity-level) on behalf of their owners, for which their consent must be given. The benefits yielded could be substantial for pass-through entity owners for which work-around makes sense. Curiously the IRS has approved these...

09 Aug 2021
0

“Stepped-Up Basis” on Inherited Property – Will it Last?

Roger Rossmeisl, CPA
Individual Tax Briefs
Stepped-Up Basis on Inhereited Property Will it Last?

If you’re planning your estate, or you’ve recently inherited assets, you may be unsure of the “cost” (or “basis”) for tax purposes. The current rules 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 grandmother bought stock in 1935 for $500 and it’s worth $1 million at her death, the basis is stepped up to $1 million in the hands of your grandmother’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 persons who...

09 Aug 2021
0

Preventing Fraud in your Construction Company

Roger Rossmeisl, CPA
Fraud Briefs
Preventing Fraud in your Construction Company

Fraud is costly for all victimized companies, but it’s even worse in the construction sector. According to the Association of Certified Fraud Examiners’ Report to the Nations: 2020 Global Study on Occupational Fraud and Abuse, construction companies affected by fraud lose a median $200,000 per fraud incident, compared with $125,000 per incident for all organizations. Some types of fraud are more prevalent in the construction industry, particularly payroll and billing fraud. These can lead to legal liability and fines. For example, paying under-the-table cash wages to avoid paying payroll taxes could result in criminal charges and significant penalties. To prevent your managers and workers from acting illegally or unethically, tighten your internal controls.  Essential controls Certain internal controls are essential — including segregation of duties. This means that...

05 Aug 2021
0

How New Business Start-up Expenses are Handled on your Tax Return

Roger Rossmeisl, CPA
Small Business Tax Briefs
How New Business Start-up Expenses are Handled on your Tax Return

Despite the COVID-19 pandemic, government officials are seeing a large increase in the number of new businesses being launched. From June 2020 through June 2021, the U.S. Census Bureau reports that business applications are up 18.6%. The Bureau measures this by the number of businesses applying for an Employer Identification Number. Entrepreneurs often don’t know that many of the expenses incurred by start-ups can’t be currently deducted. You should be aware that the way you handle some of your initial expenses can make a large difference in your federal tax bill. How to treat expenses for tax purposes If you’re starting or planning to launch a new business, keep these three rules in mind: Start-up costs include those incurred or paid while creating an active trade or business...

05 Aug 2021
0

Can Taxpayers Who Manage Their Own Investment Portfolios Deduct Related Expenses?

Roger Rossmeisl, CPA
Individual Tax Briefs
Can Taxpayers Who Manage Their Own Investment Portfolios Deduct Related Expenses?

Do you have significant investment-related expenses, including the cost of subscriptions to financial services, home office expenses and clerical costs? Under current tax law, these expenses aren’t deductible through 2025 if they’re considered investment expenses for the production of income. But they’re deductible if they’re considered trade or business expenses. For years before 2018, production-of-income expenses were deductible, but they were included in miscellaneous itemized deductions, which were subject to a 2%-of-adjusted-gross-income floor. (These rules are scheduled to return after 2025.) If you do a significant amount of trading, you should know which category your investment expenses fall into, because qualifying for trade or business expense treatment is more advantageous now. In order to deduct your investment-related expenses as business expenses, you must be engaged in a...

04 Aug 2021
0

Who in your Business Can Be Hit with the “Trust Fund Recovery Penalty”?

Roger Rossmeisl, CPA
Small Business Tax Briefs
Who in your Business can be Hit with the Trust Fund Recovery Penalty?

There’s a harsh tax penalty that you could be at risk for paying personally if you own or manage a business with employees. It’s called the “Trust Fund Recovery Penalty” and it applies to the Social Security and income taxes required to be withheld by a business from its employees’ wages. Because taxes are considered property of the government, the employer holds them in “trust” on the government’s behalf until they’re paid over. The penalty is also sometimes called the “100% penalty” because the person liable and responsible for the taxes will be penalized 100% of the taxes due. Accordingly, the amounts IRS seeks when the penalty is applied are usually substantial, and IRS is aggressive in enforcing the penalty. Wide-ranging penalty The Trust Fund Recovery Penalty is...

04 Aug 2021
0

Prevent Conflicts of Interest from Costing Your Business

Roger Rossmeisl, CPA
Fraud Briefs
Prevent Conflicts of Interest from Costing Your Business

Without trust between you and your employees, your business probably wouldn’t be very successful. Delegating responsibility, sharing ideas, working as a team — all require a certain level of trust. However, too much trust can lead to occupational fraud and conflicts of interest. To maintain the proper balance, establish a policy that outlines your disclosure expectations and require employees to follow it. Purchasing power What constitutes conflict of interest? Let’s look at a fictional example: Veronica is the manager of a manufacturing company’s purchasing department. She’s also part owner of a business that sells supplies to the manufacturer — a fact she hasn’t disclosed to her employer. And, in fact, Veronica has personally profited from her business’s lucrative long-term contract with her employer. What makes this scenario a...

ROGER ROSSMEISL, CPA

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

(714) 325-0442
roger@khopatel.com

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