28 Nov 2021
0

Recent FTB Clarifications on Pass-Through Entity Tax (AB-150)

Roger Rossmeisl, CPA
Automotive, Small Business Tax Briefs
Recent FTB Clarifications on Pass-Through Entity Tax (AB-150)

Recent pass-through entity (PTE) tax (AB-150) clarifications from the Franchise Tax Board (FTB) underscore that detailed planning is critical when considering this credit. For an overview of AB-150, also see our initial 8/15/21 post on this subject: "California AB-150 Provides SALT Cap Workaround". PTE Election The election to pay the tax is: made annually, is irrevocable, and can only be made on an original, timely filed return, including extensions   PTE Tax Due Date (2021 Tax Year) For the initial year the PTE tax credit concepts exists (2021) the tax is due by original due date of the 2021 tax year return, without regard to extensions.  For calendar-year taxpayers, that is March 15, 2022. Logistics of PTE Tax Payments / K-1 Recipient Credits Prior to the original due date of the tax...

18 Nov 2021
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Showing Appreciation and Gain Tax Breaks with Holiday Business Gifts and Parties

Roger Rossmeisl, CPA
Small Business Tax Briefs
Showing Appreciation and Gain Tax Breaks with Holiday Business Gifts and Parties

The holiday season will soon be here. At this time of year, your business may want to show its gratitude to employees and customers by giving them gifts or hosting holiday parties again after a year of forgoing them due to the pandemic. It’s a good time to brush up on the tax rules associated with these expenses. Are they tax deductible by your business and is the value taxable to the recipients? Gifts to customers If you give gifts to customers and clients, they’re deductible up to $25 per recipient per year. For purposes of the $25 limit, you don’t need to include “incidental” costs that don’t substantially add to the gift’s value. These costs include engraving, gift wrapping, packaging and shipping. Also excluded from the...

17 Nov 2021
0

Factors To Consider When Choosing a Business Entity

Roger Rossmeisl, CPA
Automotive, Small Business Tax Briefs
Factors to Consider When Choosing a Business Entity

Are you planning to launch a business or thinking about changing your business entity? If so, you need to determine which entity will work best for you — a C corporation or a pass-through entity such as a sole-proprietorship, partnership, limited liability company (LLC) or S corporation. There are many factors to consider and proposed federal tax law changes being considered by Congress may affect your decision. The corporate federal income tax is currently imposed at a flat 21% rate, while the current individual federal income tax rates begin at 10% and go up to 37%. The difference in rates can be mitigated by the qualified business income (QBI) deduction that’s available to eligible pass-through entity owners that are individuals, estates and trusts. Note that non-corporate taxpayers...

12 Nov 2021
0

Maximize Your Depreciation with a Cost Segregation Study

Roger Rossmeisl, CPA
Small Business Tax Briefs
Maximize Your Depreciation with a Cost Segregation Study

If your business is depreciating over a 30-year period the entire cost of constructing the building that houses your operation, you should consider a cost segregation study. It might allow you to accelerate depreciation deductions on certain items, thereby reducing taxes and boosting cash flow. And under current law, the potential benefits of a cost segregation study are now even greater than they were a few years ago due to enhancements to certain depreciation-related tax breaks. Fundamentals of depreciation Generally, business buildings have a 39-year depreciation period (27.5 years for residential rental properties). Usually, you depreciate a building’s structural components, including walls, windows, HVAC systems, elevators, plumbing and wiring, along with the building. Personal property — such as equipment, machinery, furniture and fixtures — is eligible for...

05 Nov 2021
0

Social Security Wage Base is Increasing in 2022

Roger Rossmeisl, CPA
Small Business Tax Briefs
Social Security Wage Base Is Increasing in 2022

The Social Security Administration recently announced that the wage base for computing Social Security tax will increase to $147,000 for 2022 (up from $142,800 for 2021). Wages and self-employment income above this threshold aren’t subject to Social Security tax. Background information The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees and self-employed workers — one for Old Age, Survivors and Disability Insurance, which is commonly known as the Social Security tax, and the other for Hospital Insurance, which is commonly known as the Medicare tax. There’s a maximum amount of compensation subject to the Social Security tax, but no maximum for Medicare tax. For 2022, the FICA tax rate for employers is 7.65% — 6.2% for Social Security and 1.45% for Medicare (the same as...

02 Nov 2021
0

Taking Advantage of the WOTC (Work Opportunity Tax Credit)

Roger Rossmeisl, CPA
Small Business Tax Briefs
Taking Advantage of the WOTC (Work Opportunity Tax Credit)

Background Businesses are having difficulties hiring an adequate number of employees as the economy resets after the COVID-19 lockdowns and their aftermath.  As such, small businesses are having to think outside the box as they work toward locating amenable workers.   If your small business hires a "targeted group" member, you are afforded the ability to claim the lucrative federal Work Opportunity Tax Credit (WOTC) for a portion of wages paid to such an individual. CAA 2021 Changes Within the Consolidated Appropriations Act of 2021 (signed into law on 12/27/20) was the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTRA 2020).  TCDTRA 2020 extended the WOTC to cover qualified first-year wages paid to eligible new hires who begin work by 12/31/25. This means that the hiring and paying...

12 Oct 2021
0

New Per Diem Business Travel Rates Became Effective on October 1

Roger Rossmeisl, CPA
Small Business Tax Briefs
New Per Diem Business Travel Rates Became Effective on October 1

Are employees at your business traveling again after months of virtual meetings? In Notice 2021-52, the IRS announced the fiscal 2022 “per diem” rates that became effective October 1, 2021. Taxpayers can use these rates to substantiate the amount of expenses for lodging, meals and incidental expenses when traveling away from home. (Taxpayers in the transportation industry can use a special transportation industry rate.) Background information A simplified alternative to tracking actual business travel expenses is to use the high-low per diem method. This method provides fixed travel per diems. The amounts are based on rates set by the IRS that vary from locality to locality. Under the high-low method, the IRS establishes an annual flat rate for certain areas with higher costs of living. All locations within the...

06 Oct 2021
0

Key Q4 2021 Tax Deadlines for Businesses

Roger Rossmeisl, CPA
Small Business Tax Briefs
Key Q1 2021 Tax Deadlines

Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2021. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements. Note: Certain tax-filing and tax-payment deadlines may be postponed for taxpayers who reside in or have a business in federally declared disaster areas.  Friday, October 15 If a calendar-year C corporation that filed an automatic six-month extension: File a 2020 income tax return (Form 1120) and pay any tax, interest and penalties due. Make contributions for 2020 to certain employer-sponsored retirement plans. Monday, November 1 Report income tax withholding and FICA taxes for third...

30 Sep 2021
0

Reporting M&A Transactions to the IRS

Roger Rossmeisl, CPA
Small Business Tax Briefs
Reporting M&A Transactions to the IRS

Low interest rates and other factors have caused global merger and acquisition (M&A) activity to reach new highs in 2021, according to Refinitiv, a provider of financial data. It reports that 2021 is set to be the biggest in M&A history, with the United States accounting for $2.14 trillion worth of transactions already this year. If you’re considering buying or selling a business — or you’re in the process of an M&A transaction — it’s important that both parties report it to the IRS and state agencies in the same way. Otherwise, you may increase your chances of being audited. If a sale involves business assets (as opposed to stock or ownership interests), the buyer and the seller must generally report to the IRS the purchase...

ROGER ROSSMEISL, CPA

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

(714) 325-0442
roger@khopatel.com

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