09 Sep 2024
0

Are You Liable for Two Additional Taxes on Your Income?

Roger Rossmeisl, CPA
Individual Tax Briefs
Are You Liable for Two Additional Taxes on Your Income?

Having a high income may mean you owe two extra taxes: the 3.8% net investment income tax (NIIT) and a 0.9% additional Medicare tax on wage and self-employment income. Let’s take a look at these taxes and what they could mean for you. 1. The NIIT In addition to income tax, this tax applies on your net investment income. The NIIT only affects taxpayers with adjusted gross incomes (AGIs) exceeding $250,000 for joint filers, $200,000 for single taxpayers and heads of household, and $125,000 for married individuals filing separately. If your AGI is above the threshold that applies ($250,000, $200,000 or $125,000), the NIIT applies to the lesser of 1) your net investment income for the tax year, or 2) the excess of your AGI for the tax...

09 Sep 2024
0

Craft Partnership Agreements and LLC Operating Agreements with Precision

Roger Rossmeisl, CPA
Small Business Tax Briefs
Craft Partnership Agreements and LLC Operating Agreements with Precision

Partnerships are often used for business and investment activities. So are multi-member LLCs that are treated as partnerships for tax purposes. A major reason is that these entities offer federal income tax advantages, the most important of which is pass-through taxation. They also must follow some special and sometimes complicated federal income tax rules. Governing documents A partnership is governed by a partnership agreement, which specifies the rights and obligations of the entity and its partners. Similarly, an LLC is governed by an operating agreement, which specifies the rights and obligations of the entity and its members. These governing documents should address certain tax-related issues. Here are some key points when creating partnership and LLC governing documents. Partnership tax basics The tax numbers of a partnership are allocated to...

09 Sep 2024
0

What You Can Do About Workers’ Comp Fraud

Roger Rossmeisl, CPA
Fraud Briefs
What You Can Do About Workers' Comp Fraud

Workers’ compensation insurance can provide medical care and financial assistance to employees who are injured or incapacitated at work. However, this important benefit is also subject to fraud perpetrated by dishonest workers. The Coalition Against Insurance Fraud says that 16% of workers’ comp claims are fraudulent, adding up to $9 billion in annual losses. Such losses hurt businesses, insurers and states. But you can help reduce the possibility that a scheme will be perpetrated in your organization. Common employee and employer schemes Employees violate workers’ comp rules if they file claims for injuries they didn’t experience or injuries or illnesses they did experience, but not at work. Workers’ comp fraudsters also might exaggerate the severity of their injuries or illnesses, or falsely state that they can’t work in...

09 Sep 2024
0

Working Remotely May Be Convenient, But May Also Have Tax Consequences

Roger Rossmeisl, CPA
Individual Tax Briefs
Working Remotely May be Convenient, But May Also Have Tax Consequences

Many employees began working remotely during the pandemic and continue doing so today. Remote work has many advantages for employers and employees, and as a result, it’s here to stay in many industries. But it may also lead to some tax surprises, especially if workers cross state lines. Double taxation may occur It’s not unusual for employees to work remotely for an employer in another state. For some businesses, remote work has become a permanent arrangement that allows employees to live and work further away from a physical office. If you live in one state and work remotely for an employer in another state, familiarize yourself with the tax laws in both states and determine how they may affect you. For example, you may need to file income...

09 Sep 2024
0

Valuing a Business for a Dissenting or Oppressed Shareholder Case

Roger Rossmeisl, CPA
Valuation Briefs
Valuing a Business for a Dissenting or Oppressed Shareholder Case

Shareholders who own a minority interest in a business may not always agree with key decisions made by controlling shareholders. For instance, a minority shareholder might object to a stock-for-stock or “squeeze-out” merger. Or, if a proposed transaction will reduce a minority shareholder’s compensation or divert corporate assets, that individual may file an oppression suit. In such cases, courts will often apply a “fair value” remedy. What is fair value? Most states have adopted the Model Business Corporation Act (MBCA), which entitles dissenting or oppressed minority shareholders to receive fair value for their interests. Under the MBCA, fair value is the value of the shares immediately before the corporate action to which the dissenter objects. It generally excludes any change in value in anticipation of the corporate...

09 Sep 2024
0

Cash or Accrual Accounting: What’s Best for Tax Purposes?

Roger Rossmeisl, CPA
Small Business Tax Briefs
Cash or Accrual Accounting: What's Best for Tax Purposes

Your businesses may have a choice between using the cash or accrual method of accounting for tax purposes. The cash method often provides significant tax benefits for those that qualify. However, some businesses may be better off using the accrual method. Therefore, you need to evaluate the tax accounting method for your business to ensure that it’s the most beneficial approach. The current situation “Small businesses,” as defined by the tax code, are generally eligible to use either cash or accrual accounting for tax purposes. (Some businesses may also be eligible to use various hybrid approaches.) Before the Tax Cuts and Jobs Act (TCJA) took effect, the gross receipts threshold for classification as a small business varied from $1 million to $10 million depending on how a business was...

09 Sep 2024
0

One Spouse’s Tax Errors May Qualify the Other for Innocent Spouse Relief

Roger Rossmeisl, CPA
Individual Tax Briefs
One Spouse's Tax Errors May Qualify the Other for Innocent Spouse Relief

Navigating the complexities of tax law can be difficult, especially when faced with an unexpected tax bill due to the errors of a spouse or ex-spouse. The reason for such a bill has to do with the concept of “joint and several” liability. When a married couple files a joint tax return, each spouse is liable for the full amount of tax on the couple’s combined income. Therefore, the IRS can come after either spouse to collect the entire tax — not just the part that’s attributed to one spouse or the other. This includes any tax deficiency that the IRS assesses after an audit, as well as any penalties and interest. There may be relief In some cases, spouses are eligible for “innocent spouse relief.” This...

09 Sep 2024
0

Office Supply Fraud is Sneaky, But Preventable

Roger Rossmeisl, CPA
Fraud Briefs
Office Supply Fraud is Sneaky, But Preventable

Office supply scams are a tricky type of vendor fraud that generally use behavioral psychology and often depend on poor intraoffice communications for their “success.” Although they may not result in huge financial losses for defrauded companies, falsified invoices can add up to many thousands of dollars. Fortunately, you can help prevent them. How scams are perpetrated Office supply schemes typically begin as telemarketing fraud, with someone calling your business to obtain your street address and the name of an employee. Callers may: Ask for the “person in charge,” Claim to need information to complete an order, or Pretend to verify an office machine’s serial number. The goal is to get a name that will lend legitimacy to bogus shipments and invoices. For example, a supplier might ship...

09 Sep 2024
0

Understanding Taxes on Real Estate Gains

Roger Rossmeisl, CPA
Small Business Tax Briefs
Understanding Taxes on Real Estate Gains

Let’s say you own real estate that has been held for more than one year and is sold for a taxable gain. Perhaps this gain comes from indirect ownership of real estate via a pass-through entity such as an LLC, partnership or S corporation. You may expect to pay Uncle Sam the standard 15% or 20% federal income tax rate that usually applies to long-term capital gains from assets held for more than one year. However, some real estate gains can be taxed at higher rates due to depreciation deductions. Here’s a rundown of the federal income tax issues that might be involved in real estate gains. Vacant land The current maximum federal long-term capital gain tax rate for a sale of vacant land is 20%. The 20% rate...

11 Aug 2024
0

IRS Shares Additional Warning Signs of Incorrect Claims for ERTC

Roger Rossmeisl, CPA
Automotive, Current Events, Small Business Tax Briefs
IRS Shares Additional Warning Signs of Incorrect Claims for ERTC

As appearing in IR-2024-198 Businesses urged to proactively resolve erroneous claims to avoid penalties, interest, audits As the Internal Revenue Service intensifies work on the Employee Retention Tax Credit (ERTC), the agency today shared five new warning signs being seen on incorrect claims by businesses.   The new list comes from common issues the IRS compliance teams have seen while analyzing and processing ERTC claims. The new items are in addition to seven problem areas the IRS previously highlighted.  The IRS urged businesses with pending claims to carefully review their filings to confirm their eligibility and ensure credits claimed don’t include any of these 12 warning signs or other mistakes. Businesses with these indicators should talk to a trusted tax professional and consider using special ERTC Withdrawal Program that remains available. Business considering...

ROGER ROSSMEISL, CPA

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

(714) 325-0442
roger@khopatel.com

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