06 Dec 2022
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Computer Software Costs: How Does Your Business Deduct Them?

Roger Rossmeisl, CPA
Small Business Tax Briefs
Computer Software Costs: How Does Your Business Deduct Them?

These days, most businesses buy or lease computer software to use in their operations. Or perhaps your business develops computer software to use in your products or services or sells or leases software to others. In any of these situations, you should be aware of the complex rules that determine the tax treatment of the expenses of buying, leasing or developing computer software. Software you buy Some software costs are deemed to be costs of “purchased” software, meaning it’s either: Non-customized software available to the general public under a nonexclusive license, or Acquired from a contractor who is at economic risk should the software not perform.   The entire cost of purchased software can be deducted in the year that it’s placed into service. The cases in which the...

13 Nov 2022
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Inflation Means You and Your Employees Can Save More for Retirement in 2023

Roger Rossmeisl, CPA
Small Business Tax Briefs
Inflation Means Your and Your Employees Can Save More for Retirement in 2023

How much can you and your employees contribute to your 401(k)s next year — or other retirement plans? In Notice 2022-55, the IRS recently announced cost-of-living adjustments that apply to the dollar limitations for pensions, as well as other qualified retirement plans for 2023. The amounts increased more than they have in recent years due to inflation. 401(k) plans The 2023 contribution limit for employees who participate in 401(k) plans will increase to $22,500 (up from $20,500 in 2022). This contribution amount also applies to 403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan. The catch-up contribution limit for employees age 50 and over who participate in 401(k) plans and the other plans mentioned above will increase to $7,500 (up from $6,500 in 2022). Therefore,...

13 Nov 2022
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In 2023, the Social Security Wage Base is Increasing

Roger Rossmeisl, CPA
Small Business Tax Briefs
In 2023, the Social Security Wage Base is Increasing

The Social Security Administration recently announced that the wage base for computing Social Security tax will increase to $160,200 for 2023 (up from $147,000 for 2022). Wages and self-employment income above this threshold aren’t subject to Social Security tax. Basics about Social Security The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees and self-employed workers. One is for the Old Age, Survivors and Disability Insurance program, which is commonly known as Social Security. The other is for the Hospital Insurance program, which is commonly known as Medicare. There’s a maximum amount of compensation subject to the Social Security tax, but no maximum for Medicare tax. For 2023, the FICA tax rate for employers is 7.65% — 6.2% for Social Security and 1.45% for Medicare (the...

13 Nov 2022
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Providing Fringe Benefits to Employees with No Tax Strings Attached

Roger Rossmeisl, CPA
Small Business Tax Briefs
Providing Fringe Benefits to Employees with No Tax Strings Attached

Businesses can provide benefits to employees that don’t cost them much or anything at all. However, in some cases, employees may have to pay tax on the value of these benefits. Here are examples of two types of benefits which employees generally can exclude from income: A no-additional-cost benefit. This involves a service provided to employees that doesn’t impose any substantial additional cost on the employer. These services often occur in industries with excess capacity. For example, a hotel might allow employees to stay in vacant rooms or a golf course may allow employees to play during slow times. A de minimis fringe benefit. This includes property or a service, provided infrequently by an employer to employees, with a value so small that accounting for it...

13 Nov 2022
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What Local Transportation Costs Can Your Business Deduct?

Roger Rossmeisl, CPA
Small Business Tax Briefs
What Local Transportation Costs Can Your Business Deduct?

You and your small business are likely to incur a variety of local transportation costs each year. There are various tax implications for these expenses. First, what is “local transportation?” It refers to travel in which you aren’t away from your tax home (the city or general area in which your main place of business is located) long enough to require sleep or rest. Different rules apply if you’re away from your tax home for significantly more than an ordinary workday and you need sleep or rest in order to do your work. Costs of traveling to your work location The most important feature of the local transportation rules is that your commuting costs aren’t deductible. In other words, the fare you pay or the miles you drive...

13 Nov 2022
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Worried About an IRS Audit? Prepare in Advance

Roger Rossmeisl, CPA
Small Business Tax Briefs
Worried About an IRS Audit? Prepare in Advance

IRS audit rates are historically low, according to a recent Government Accountability Office (GAO) report, but that’s little consolation if your return is among those selected to be examined. Plus, the IRS recently received additional funding in the Inflation Reduction Act to improve customer service, upgrade technology and increase audits of high-income taxpayers. But with proper preparation and planning, you should fare well. From tax years 2010 to 2019, audit rates of individual tax returns decreased for all income levels, according to the GAO. On average, the audit rate for all returns decreased from 0.9% to 0.25%. IRS officials attribute this to reduced staffing as a result of decreased funding. Businesses, large corporations and high-income individuals are more likely to be audited but, overall, all types...

09 Nov 2022
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Work Opportunity Tax Credit Provides Help to Employers

Roger Rossmeisl, CPA
Small Business Tax Briefs
Work Opportunity Tax Credit Provides Help to Employers

In today’s tough job market and economy, the Work Opportunity Tax Credit (WOTC) may help employers. Many business owners are hiring and should be aware that the WOTC is available to employers that hire workers from targeted groups who face significant barriers to employment. The credit is worth as much as $2,400 for each eligible employee ($4,800, $5,600 and $9,600 for certain veterans and $9,000 for “long-term family assistance recipients”). It’s generally limited to eligible employees who begin work for the employer before January 1, 2026. The IRS recently issued some updated information on the pre-screening and certification processes. To satisfy a requirement to pre-screen a job applicant, a pre-screening notice must be completed by the job applicant and the employer on or before the day...

25 Sep 2022
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Separating Your Business From Its Real Estate

Roger Rossmeisl, CPA
Small Business Tax Briefs
Separating Your Business from its Real Estate

Does your business need real estate to conduct operations? Or does it otherwise hold property and put the title in the name of the business? You may want to rethink this approach. Any short-term benefits may be outweighed by the tax, liability and estate planning advantages of separating real estate ownership from the business. Tax implications Businesses that are formed as C corporations treat real estate assets as they do equipment, inventory and other business assets. Any expenses related to owning the assets appear as ordinary expenses on their income statements and are generally tax deductible in the year they’re incurred. However, when the business sells the real estate, the profits are taxed twice — at the corporate level and at the owner’s individual level when a distribution...

24 Sep 2022
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Year-End Tax Planning Ideas for your Small Business

Roger Rossmeisl, CPA
Small Business Tax Briefs
Year-End Tax Planning Ideas for your Small Business

Now that Labor Day has passed, it’s a good time to think about making moves that may help lower your small business taxes for this year and next. The standard year-end approach of deferring income and accelerating deductions to minimize taxes will likely produce the best results for most businesses, as will bunching deductible expenses into this year or next to maximize their tax value. If you expect to be in a higher tax bracket next year, opposite strategies may produce better results. For example, you could pull income into 2022 to be taxed at lower rates, and defer deductible expenses until 2023, when they can be claimed to offset higher-taxed income. Here are some other ideas that may help you save tax dollars if you act...

ROGER ROSSMEISL, CPA

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

(714) 325-0442
roger@khopatel.com

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