21 Apr 2022
0

What to Know if Your Business Barters

Roger Rossmeisl, CPA
Small Business Tax Briefs
What to Know if Your Business Barters

In today’s economy, many small businesses are strapped for cash. They may find it beneficial to barter or trade for goods and services instead of paying cash for them. Bartering is the oldest form of trade and the internet has made it easier to engage with other businesses. But if your business gets involved in bartering, be aware that the fair market value of goods that you receive in bartering is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties. How it works Here are some examples: A computer consultant agrees to exchange services with an advertising agency. A plumber does repair work for a dentist in exchange for dental services. In these cases, both parties are taxed...

28 Mar 2022
0

The Election to Apply the Research Tax Credit Against Payroll Taxes

Roger Rossmeisl, CPA
Small Business Tax Briefs
The Election to Apply the Research Tax Credit Against Payroll Taxes

The credit for increasing research activities, often referred to as the research and development (R&D) credit, is a valuable tax break available to eligible businesses. Claiming the credit involves complex calculations, which we can take care of for you. But in addition to the credit itself, be aware that the credit also has two features that are especially favorable to small businesses: Eligible small businesses ($50 million or less in gross receipts) may claim the credit against alternative minimum tax (AMT) liability. The credit can be used by certain even smaller startup businesses against the employer’s Social Security payroll tax liability. Let’s take a look at the second feature. Subject to limits, you can elect to apply all or some of any research tax credit that...

28 Mar 2022
0

Why What an S Corp Shareholder Receives and Reports is Different

Roger Rossmeisl, CPA
Small Business Tax Briefs
Why What an S Corp Shareholder Receives and Reports is Different

You may have wondered why, in a given year, you may be taxed on more S corporation income than was distributed to you from the S corporation in which you are a shareholder. The answers lies in the way S corporations and their shareholders are taxed. But before explaining those rules, be assured you that when you are taxed on undistributed income, you won't be taxed again if and when the income ultimately is paid to you. Unlike a regular or C corporation, an S corporation generally isn't subject to income tax (California does charge a 1.5% entity-level tax). Instead, each shareholder is taxed on the corporation's earnings, whether or not the earnings are distributed. Similarly, if an S corporation has a loss, the loss is passed...

28 Feb 2022
0

SB 113 Provides Additional Relief from SALT Deduction Limits

Roger Rossmeisl, CPA
Automotive, Individual Tax Briefs, Small Business Tax Briefs
SB 113 Provides Additional Relief from SALT Deduction Limits

Back in 2017, the Tax Cuts and Jobs Act was signed into law which instituted a cap on the amount of state and local taxes (SALT) that individuals could report as Itemized Deductions on Schedule A.  Starting with the 2018 tax year, the maximum SALT deduction available was $10,000. Previously, there was no limit.  Since then, roughly 20 states have come up with workarounds intended to negate, or at least mitigate the effect of the SALT limitation. In 2021 California passed AB 150, which provides that, in the taxable years 2021-2025, a so-called "qualified entity" (a S corporation, partnership, or LLC taxed as a partnership or S corporation) to make an election to pay a new pass-through entity (PTE) elective tax equal to 9.3% of its...

23 Feb 2022
0

Can You Deduct the Costs of a Spouse on a Business Trip?

Roger Rossmeisl, CPA
Small Business Tax Briefs
Can Your Deduct the Costs of a Spouse on a Business Trip?

If you own your own company and travel for business, you may wonder whether you can deduct the costs of having your spouse accompany you on trips. The rules for deducting a spouse’s travel costs are very restrictive. First of all, to qualify, your spouse must be your employee. This means you can’t deduct the travel costs of a spouse, even if his or her presence has a bona fide business purpose, unless the spouse is a bona fide employee of your business. This requirement prevents tax deductibility in most cases.  A spouse-employee If your spouse is your employee, then you can deduct his or her travel costs if his or her presence on the trip serves a bona fide business purpose. Merely having your spouse perform some...

23 Feb 2022
0

Withdrawals from your Closely-Held Corporation that Aren’t Taxed as Dividends

Roger Rossmeisl, CPA
Small Business Tax Briefs
Withdrawals from your Closely-Helf Corporation that arent Taxed as Dividends

Do you want to withdraw cash from your closely held corporation at a minimum 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.” It’s also not deductible by the corporation. Five alternatives Fortunately, there are several alternative methods that may allow you to withdraw cash from a corporation while avoiding dividend treatment. Here are five areas where you may want to take action: 1. Capital repayments. To the extent that you’ve capitalized the corporation with debt, including amounts you’ve advanced to the business, the corporation can repay the debt without the repayment being treated as a dividend. Additionally, interest paid on the debt can be...

21 Feb 2022
0

Tax Aspects of Operating Your Business as a Sole Proprietor

Roger Rossmeisl, CPA
Small Business Tax Briefs
Tax Aspects of Operating Your Business as a Sole Proprietor

If you’re in business for yourself as a sole proprietor, or you’re planning to start a business, you need to know about the tax aspects of your venture. Here are eight important issues to consider: 1. You report income and expenses on Schedule C of Form 1040. The net income is taxable to you regardless of whether you withdraw cash from the business. Your business expenses are deductible against gross income and not as itemized deductions. If you have any losses, they’re generally deductible against your other income, subject to special rules relating to hobby losses, passive activity losses and losses in activities in which you weren’t “at risk.” 2. You may be eligible for the pass-through deduction. To the extent your business generates qualified business income,...

26 Jan 2022
0

How Entrepreneurs Expenses are Claimed on Tax Returns

Roger Rossmeisl, CPA
Small Business Tax Briefs
How Entrepreneurs Expenses are Claimed on Tax Returns

While some businesses have closed since the start of the COVID-19 crisis, many new ventures have launched. Entrepreneurs have cited a number of reasons why they decided to start a business in the midst of a pandemic. For example, they had more time, wanted to take advantage of new opportunities or they needed money due to being laid off. Whatever the reason, if you’ve recently started a new business, or you’re contemplating starting one, be aware of the tax implications. As you know, before you even open the doors in a start-up business, you generally have to spend a lot of money. You may have to train workers and pay for rent, utilities, marketing and more. Entrepreneurs are often unaware that many expenses incurred by start-ups can’t...

19 Jan 2022
0

Numerous Tax Limits Affecting Businesses Have Increased for 2022

Roger Rossmeisl, CPA
Small Business Tax Briefs
Numerous Tax Limits Affecting Businesses Have Increased for 2022

Many tax limits that affect businesses are annually indexed for inflation, and a number of them have increased for 2022. Here’s a rundown of those that may be important to you and your business. Social Security tax The amount of an employee’s earnings that is subject to Social Security tax is capped for 2022 at $147,000 (up from $142,800 in 2021). Deductions  Standard business mileage rate, per mile: 58.5 cents (up from 56 cents in 2021) Section 179 expensing: Limit: $1.08 million (up from $1.05 million in 2021) Phaseout: $2.7 million (up from $2.62 million) Income-based phase-out for certain limits on the Sec. 199A qualified business income deduction begins at: Married filing jointly: $340,100 (up from $329,800 in 2021) Single filers: $170,050 (up from $164,900) Business meals In 2022 and...

11 Jan 2022
0

Businesses with Employees who Receive Tips may be Eligible for a Tax Credit

Roger Rossmeisl, CPA
Small Business Tax Briefs
Businesses with Employees who Receive Tips may be Eligible for a Tax Credit

If you’re an employer with a business where tipping is customary for providing food and beverages, you may qualify for a federal tax credit involving the Social Security and Medicare (FICA) taxes that you pay on your employees’ tip income. Basics of the credit The FICA credit applies with respect to tips that your employees receive from customers in connection with the provision of food or beverages, regardless of whether the food or beverages are for consumption on or off the premises. Although these tips are paid by customers, they’re treated for FICA tax purposes as if you paid them to your employees. Your employees are required to report their tips to you. You must withhold and remit the employee’s share of FICA taxes, and you must...

ROGER ROSSMEISL, CPA

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

(714) 325-0442
roger@khopatel.com

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