28 Dec 2020
0

Maximize Your 401(k) Plan to Save for Retirement

Roger Rossmeisl, CPA
Individual Tax Briefs
Maximize Your 401(k) Plan to Save for Retirement

Contributing to a tax-advantaged retirement plan can help you reduce taxes and save for retirement. If your employer offers a 401(k) or Roth 401(k) plan, a decision to maximize your 401(k) Plan can be a smart way to build a substantial sum of money. If you’re not already contributing the maximum allowed, consider increasing your contribution rate. Because of tax-deferred compounding (tax-free in the case of Roth accounts), boosting contributions can have a major impact on the size of your nest egg at retirement. With a 401(k), an employee makes an election 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...

28 Dec 2020
0

Qualifying for a Medical Expense Tax Deduction

Roger Rossmeisl, CPA
Individual Tax Briefs
Qualifying for a Medical Expense Tax Deduction

You may be able to deduct some of your medical expenses, including prescription drugs, on your federal tax return. However, the rules make qualifying for a medical expense tax deduction difficult for many people to qualify. But with proper planning, you may be able to time discretionary medical expenses to your advantage for tax purposes. Itemizers must meet a threshold For 2020, the medical expense deduction can only be claimed to the extent your unreimbursed costs exceed 7.5% of your adjusted gross income (AGI). This threshold amount is scheduled to increase to 10% of AGI for 2021. You also must itemize deductions on your return in order to claim a deduction. If your total itemized deductions for 2020 will exceed your standard deduction, moving or “bunching” non-urgent medical...

28 Dec 2020
0

Cash in on Depreciation Tax Savers

Roger Rossmeisl, CPA
Small Business Tax Briefs
Cash in on Depreciation Tax Savers

As we approach the end of the year, it’s a good time to think about whether your business needs to buy business equipment and other depreciable property. If so, you can cash in on depreciation tax savers such as §179 for business property. The election provides a tax windfall to businesses, enabling them to claim immediate deductions for qualified assets, instead of taking depreciation deductions over time. Even better, the §179 deduction isn’t the only avenue for immediate tax write-offs for qualified assets. Under the 100% bonus depreciation tax break, the entire cost of eligible assets placed in service in 2020 can be written off this year. But to benefit for this tax year, you need to buy and place qualifying assets in service by December 31. What qualifies? The §179...

28 Dec 2020
0

Avoid Wash Sales If Selling Stock by Year-End

Roger Rossmeisl, CPA
Individual Tax Briefs
Avoid Wash Sales If Selling Stock by Year-End

Are you thinking about selling stock shares at a loss to offset gains that you’ve realized during 2020? If so, it’s important to avoid wash sales if selling stock by year-end. IRS may disallow the loss 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 any 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. (If you participate in any...

28 Dec 2020
0

Tax Breaks When Buying a Heavy SUV for Business

Roger Rossmeisl, CPA
Small Business Tax Briefs
Tax Breaks When Buying a Heavy SUV for Business

Are you considering replacing a car that you’re using in your business? There are several tax implications to keep in mind. A cap on deductions Cars are subject to more restrictive tax depreciation rules than those that apply to other depreciable assets. Under so-called “luxury auto” rules, depreciation deductions are artificially “capped.” So is the alternative §179 deduction that you can claim if you elect to expense (write-off in the year placed in service) all or part of the cost of a business car under the tax provision that for some assets allows expensing instead of depreciation. For example, for most cars that are subject to the caps and that are first placed in service in calendar year 2020 (including smaller trucks or vans built on a...

24 Dec 2020
0

No Deduction in California for Expenditures Paid with Forgiven PPP Funds

Roger Rossmeisl, CPA
Small Business Tax Briefs
No Deduction in California for Expenditures Paid with Forgiven PPP Funds

With the prospect that ordinarily tax deductible business expenses will still be deductible if they were paid for with forgiven PPP loan funds contained in the Coronavirus Response and Relief Supplemental Appropriations Act, 2021, attention turns to the California treatment of same. The answer is that California currently does not conform to the federal amendment to this law contained in the new stimulus bill.  As such, business expenditures paid for with forgiven PPP loan funds must be reversed for California tax purposes. The source of this position is California AB 1577 which states that any deductions for expenses paid with forgiven PPP loan funds are specifically non-deductible. (This is Blog Post #943)  ...

13 Dec 2020
0

Reminder for Businesses to Register with CalSavers

Roger Rossmeisl, CPA
Automotive, Small Business Tax Briefs
Reminder for Businesses to Register with CalSavers

California has begun their mandate of employer participation in the CalSavers Program.  The program's 3-year phase-in is as follows: Number of Employees: Registration Required by: >100 09/30/2020 >50 06/30/2021 >=5 06/30/2022 What is CalSavers? CalSavers is California’s new retirement savings program for workers in the private sector who do not currently have a way to save at work (i.e. the employer does not provide an employee retirement plan (EBP)). While "eligible employers" are required to make the Plan available, it is voluntary for employees.  CalSavers operates similar to a Roth IRA. Plan is funded by employee savings (no employer fees or contributions). "Eligible Employers" must enroll all employees in a CalSavers account unless the employee formally opts-out. Employee participation is completely voluntary and they can opt-in or opt-out at any time. Plan is administered by...

12 Dec 2020
0

The Importance of S Corporation Basis and Distribution Elections

Roger Rossmeisl, CPA
Small Business Tax Briefs
The Importance of S Corporation Basis and Distribution Elections

S corporations can provide tax advantages over C corporations in the right circumstances. This is true if you expect that the business will incur losses in its early years because shareholders in a C corporation generally get no tax benefit from such losses. Conversely, as an S corporation shareholder, you can deduct your percentage share of these losses on your personal tax return to the extent of your basis in the stock and any loans you personally make to the entity. Losses that can’t be deducted because they exceed your basis are carried forward and can be deducted by you when there’s sufficient basis. Therefore, your ability to use losses that pass through from an S corporation depends on your basis in the corporation’s stock and debt....

12 Dec 2020
0

Taking a Traditional IRA Distribution

Roger Rossmeisl, CPA
Individual Tax Briefs
Taking a Traditional IRA Distribution

Although planning is needed to help build the biggest possible nest egg in your traditional IRA (including a SEP-IRA and SIMPLE-IRA), it’s even more critical that you plan for withdrawals from these tax-deferred retirement vehicles. There are three areas where knowing the fine points of the IRA distribution rules can make a big difference in how much you and your family will keep after taxes.  Here are some things to know when taking a traditional IRA distribution. Early distributions What if you need to take money out of a traditional IRA before age 59½? For example, you may need money to pay your child’s education expenses, make a down payment on a new home or meet necessary living expenses if you retire early. In these cases, any...

12 Dec 2020
0

5 Ways to Take Cash Out of Your Corporation

Roger Rossmeisl, CPA
Small Business Tax Briefs
5 Ways to Take Cash Out of Your Corporation

Owners of closely held corporations are often interested in easily withdrawing money from their businesses at the lowest possible 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.  Fortunately, there are several alternative methods that may allow you to withdraw cash from a corporation while avoiding dividend treatment. Here are 5 ways to take cash out of your closely-held corporation to consider: Capital repayments. To the extent that you’ve capitalized the corporation with debt, including amounts that you’ve advanced to the business, the corporation can repay the debt without the repayment being treated as 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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