27 Sep 2021
0

Tax Depreciation Rules for Business Automobiles

Roger Rossmeisl, CPA
Small Business Tax Briefs
Tax Depreciatiation Rules for Business Automobiles

If you use an automobile in your trade or business, you may wonder how depreciation tax deductions are determined. The rules are complicated, and special limitations that apply to vehicles classified as passenger autos (which include many pickups and SUVs) can result in it taking longer than expected to fully depreciate a vehicle. Cents-per-mile vs. actual expenses First, note that separate depreciation calculations for a passenger auto only come into play if you choose to use the actual expense method to calculate deductions. If, instead, you use the standard mileage rate (56 cents per business mile driven for 2021), a depreciation allowance is built into the rate. If you use the actual expense method to determine your allowable deductions for a passenger auto, you must make a separate depreciation...

26 Sep 2021
0

California Main Street Small Business Tax Credit II Begins 11/1/21

Roger Rossmeisl, CPA
Automotive, Small Business Tax Briefs
California Main Street Small Business Tax Credit II Begins 11/1/21

California Assembly Bill No. 50 (AB-50) established the California Main Street Small Business Tax Credit II, which will provide COVID-19 financial relief to qualified small business employers. Overview Beginning 11/1/21, and ending 11/30/21, the California Department of Tax and Fee Administration (CDTFA) will be accepting applications through their online reservation system for qualified small business employers to reserve $1,000 per net increase in qualified employees, not to exceed $150,000.  Tentative credit reservation amounts will generally be reduced by credit amounts reserved or received under the first Main St. Small Business Tax Credit.  The credits are reserved on a first-come, first-served basis.  Qualified small businesses will be able to offset either their income taxes or their sales and use taxes with the credit when filing their returns. Qualifications This credit...

17 Sep 2021
0

Claiming a Theft Loss Deduction if Your Business is the Victim of Embezzlement

Roger Rossmeisl, CPA
Small Business Tax Briefs
Claiming a Theft Loss Deduction if Your Business is the Victim of Embezzlement

A business may be able to claim a federal income tax deduction for a theft loss. But does embezzlement count as theft? In most cases it does but you’ll have to substantiate the loss. A recent U.S. Tax Court decision illustrates how that’s sometimes difficult to do. Basic rules for theft losses  The tax code allows a deduction for losses sustained during the taxable year and not compensated by insurance or other means. The term “theft” is broadly defined to include larceny, embezzlement and robbery. In general, a loss is regarded as arising from theft only if there’s a criminal element to the appropriation of a taxpayer’s property. In order to claim a theft loss deduction, a taxpayer must prove: The amount of the loss, The date the...

17 Sep 2021
0

Tax Breaks to Consider During National Small Business Week

Roger Rossmeisl, CPA
Small Business Tax Briefs
Tax Breaks to Consider During National Small Business Week

The week of September 13-17 has been declared National Small Business Week by the Small Business Administration. To commemorate the week, here are three tax breaks to consider. 1. Claim bonus depreciation or a §179 deduction for asset additions Under current law, 100% first-year bonus depreciation is available for qualified new and used property that’s acquired and placed in service in calendar year 2021. That means your business might be able to write off the entire cost of some or all asset additions on this year’s return. Consider making acquisitions between now and December 31. Note: It doesn’t always make sense to claim a 100% bonus depreciation deduction in the first year that qualifying property is placed in service. For example, if you think that tax rates will...

06 Sep 2021
0

What IRS Auditors Know About Your Business Industry

Roger Rossmeisl, CPA
Automotive, Small Business Tax Briefs
What IRS Auditors Know About Your Business Industry

In order to prepare for a business audit, an IRS examiner generally does research about the specific industry and issues on the taxpayer’s return. Examiners may use IRS “Audit Techniques Guides (ATGs).” A little-known secret is that these guides are available to the public on the IRS website. In other words, your business can use the same guides to gain insight into what IRS auditors know, and what the IRS is looking for in terms of compliance with tax laws and regulations.  Many ATGs target specific industries or businesses, such as new vehicle dealerships, construction, aerospace, art galleries, architecture and veterinary medicine. Others address issues that frequently arise in audits, such as executive compensation, passive activity losses and capitalization of tangible property. Unique issues IRS auditors need to...

06 Sep 2021
0

Getting a Divorce? Be Aware of Tax Implications if you Own a Business

Roger Rossmeisl, CPA
Small Business Tax Briefs
Getting a Divorce? Be Aware of Tax Implications if you Own a Business

If you’re a business owner and you’re getting a divorce, tax issues can complicate matters. Your business ownership interest is one of your biggest personal assets and in many cases, your marital property will include all or part of it. Tax-free property transfers You can generally divide most assets, including cash and business ownership interests, between you and your soon-to-be ex-spouse without any federal income or gift tax consequences. When an asset falls under this tax-free transfer rule, the spouse who receives the asset takes over its existing tax basis (for tax gain or loss purposes) and its existing holding period (for short-term or long-term holding period purposes). Let’s say that under the terms of your divorce agreement, you give your house to your spouse in exchange for...

27 Aug 2021
0

Possible Tax Consequences of Guaranteeing a Loan to your Corporation

Roger Rossmeisl, CPA
Automotive, Small Business Tax Briefs
Possible Tax Consequences of Guaranteeing a Loan to Your Corporation

What if you decide to, or are asked to, guarantee a loan to your corporation? Before agreeing to act as a guarantor, endorser or indemnitor of a debt obligation of your closely held corporation, be aware of the possible tax consequences. If your corporation defaults on the loan and you’re required to pay principal or interest under the guarantee agreement, you don’t want to be blindsided. Business vs. non-business If you’re compelled to make good on the obligation, the payment of principal or interest in discharge of the obligation generally results in a bad debt deduction. This may be either a business or a non-business bad debt deduction. If it’s a business bad debt, it’s deductible against ordinary income. A business bad debt can be either totally...

25 Aug 2021
0

Large Cash Transactions with your Business must be Reported to the IRS

Roger Rossmeisl, CPA
Small Business Tax Briefs
Large Cash Transactions with you Business must be Reported to the IRS

If your business receives large amounts of cash or cash equivalents, you may be required to report these transactions to the IRS. What are the requirements? Each person who, in the course of operating a trade or business, receives more than $10,000 in cash in one transaction (or two or more related transactions), must file Form 8300. What is considered a “related transaction?” Any transactions conducted in a 24-hour period. Transactions can also be considered related even if they occur over a period of more than 24 hours if the recipient knows, or has reason to know, that each transaction is one of a series of connected transactions. To complete a Form 8300, you’ll need personal information about the person making the cash payment, including a Social Security...

23 Aug 2021
0

Is an LLC the Right Choice for Your Small Business?

Roger Rossmeisl, CPA
Small Business Tax Briefs
Is an LLC the Right Choice for your Small Business

Perhaps you operate your small business as a sole proprietorship and want to form a limited liability company (LLC) to protect your assets. Or maybe you are launching a new business and want to know your options for setting it up. Here are the basics of operating as an LLC and why it might be appropriate for your business. An LLC is somewhat of a hybrid entity because it can be structured to resemble a corporation for owner liability purposes and a partnership for federal tax purposes. This duality may provide the owners with the best of both worlds.  Personal asset protection Like the shareholders of a corporation, the owners of an LLC (called “members” rather than shareholders or partners) generally aren’t liable for the debts of the...

18 Aug 2021
0

The Deductibility of Corporate Expenses Covered by Officers or Shareholders

Roger Rossmeisl, CPA
Small Business Tax Briefs
The Deductibility of Corporate Expenses Covered by Officers or Shareholders

Do you play a major role in a closely held corporation and sometimes spend money on corporate expenses personally? These costs may wind up being nondeductible both by an officer and the corporation unless proper steps are taken. This issue is more likely to arise in connection with a financially troubled corporation. Deductible vs. nondeductible expenses In general, you can’t deduct an expense you incur on behalf of your corporation, even if it’s a legitimate “trade or business” expense and even if the corporation is financially troubled. This is because a taxpayer can only deduct expenses that are his own. And since your corporation’s legal existence as a separate entity must be respected, the corporation’s costs aren’t yours and thus can’t be deducted even if you pay...

ROGER ROSSMEISL, CPA

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

(714) 325-0442
roger@khopatel.com

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