06 Jan 2021
0

CAA Doubles Meal Deductions and Makes Favorable PPP Loan Changes

Roger Rossmeisl, CPA
Small Business Tax Briefs
CAA Doubles Meal Deductions and Makes Favorable PPP Loan Changes

The COVID-19 relief bill, signed into law on December 27, 2020, provides a further response from the federal government to the pandemic. It also contains numerous tax breaks for businesses. Here are some highlights of the Consolidated Appropriations Act of 2021 (CAA), which also includes other laws within it. Business meal deduction increased  The new law includes a provision that removes the 50% limit on deducting business meals provided by restaurants and makes those meals fully deductible. As background, ordinary and necessary food and beverage expenses that are incurred while operating your business are generally deductible. However, for 2020 and earlier years, the deduction is limited to 50% of the allowable expenses. The new legislation adds an exception to the 50% limit for expenses of food or beverages provided by...

31 Dec 2020
0

Business Meals Provided by Restaurants Deductible in 2021-2022

Roger Rossmeisl, CPA
Small Business Tax Briefs
Business Meals Provided by Restaurants Deductible in 2021-2022

The recent stimulus legislation, the Consolidated Appropriations Act of 2021, (CAA 2021) included a provision that removes the 50% limit on deducting business meals provided by restaurants in 2021 and 2022 and makes those meals fully deductible. Here are the details. In general, the ordinary and necessary food and beverage expenses of operating your business are deductible. However, the deduction is limited to 50% of the otherwise allowable expense. The new legislation adds an exception to the 50% limit for expenses for food or beverages provided by a restaurant. This rule applies to expenses paid or incurred in calendar years 2021 and 2022. The use of the word "by" (rather than "in") a restaurant makes it clear that the new rule isn't limited to meals eaten on the...

28 Dec 2020
0

Cash in on Depreciation Tax Savers

Roger Rossmeisl, CPA
Small Business Tax Briefs
Cash in on Depreciation Tax Savers

As we approach the end of the year, it’s a good time to think about whether your business needs to buy business equipment and other depreciable property. If so, you can cash in on depreciation tax savers such as §179 for business property. The election provides a tax windfall to businesses, enabling them to claim immediate deductions for qualified assets, instead of taking depreciation deductions over time. Even better, the §179 deduction isn’t the only avenue for immediate tax write-offs for qualified assets. Under the 100% bonus depreciation tax break, the entire cost of eligible assets placed in service in 2020 can be written off this year. But to benefit for this tax year, you need to buy and place qualifying assets in service by December 31. What qualifies? The §179...

28 Dec 2020
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Tax Breaks When Buying a Heavy SUV for Business

Roger Rossmeisl, CPA
Small Business Tax Briefs
Tax Breaks When Buying a Heavy SUV for Business

Are you considering replacing a car that you’re using in your business? There are several tax implications to keep in mind. A cap on deductions Cars are subject to more restrictive tax depreciation rules than those that apply to other depreciable assets. Under so-called “luxury auto” rules, depreciation deductions are artificially “capped.” So is the alternative §179 deduction that you can claim if you elect to expense (write-off in the year placed in service) all or part of the cost of a business car under the tax provision that for some assets allows expensing instead of depreciation. For example, for most cars that are subject to the caps and that are first placed in service in calendar year 2020 (including smaller trucks or vans built on a...

24 Dec 2020
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No Deduction in California for Expenditures Paid with Forgiven PPP Funds

Roger Rossmeisl, CPA
Small Business Tax Briefs
No Deduction in California for Expenditures Paid with Forgiven PPP Funds

With the prospect that ordinarily tax deductible business expenses will still be deductible if they were paid for with forgiven PPP loan funds contained in the Coronavirus Response and Relief Supplemental Appropriations Act, 2021, attention turns to the California treatment of same. The answer is that California currently does not conform to the federal amendment to this law contained in the new stimulus bill.  As such, business expenditures paid for with forgiven PPP loan funds must be reversed for California tax purposes. The source of this position is California AB 1577 which states that any deductions for expenses paid with forgiven PPP loan funds are specifically non-deductible. (This is Blog Post #943)  ...

13 Dec 2020
0

Reminder for Businesses to Register with CalSavers

Roger Rossmeisl, CPA
Automotive, Small Business Tax Briefs
Reminder for Businesses to Register with CalSavers

California has begun their mandate of employer participation in the CalSavers Program.  The program's 3-year phase-in is as follows: Number of Employees: Registration Required by: >100 09/30/2020 >50 06/30/2021 >=5 06/30/2022 What is CalSavers? CalSavers is California’s new retirement savings program for workers in the private sector who do not currently have a way to save at work (i.e. the employer does not provide an employee retirement plan (EBP)). While "eligible employers" are required to make the Plan available, it is voluntary for employees.  CalSavers operates similar to a Roth IRA. Plan is funded by employee savings (no employer fees or contributions). "Eligible Employers" must enroll all employees in a CalSavers account unless the employee formally opts-out. Employee participation is completely voluntary and they can opt-in or opt-out at any time. Plan is administered by...

12 Dec 2020
0

The Importance of S Corporation Basis and Distribution Elections

Roger Rossmeisl, CPA
Small Business Tax Briefs
The Importance of S Corporation Basis and Distribution Elections

S corporations can provide tax advantages over C corporations in the right circumstances. This is true if you expect that the business will incur losses in its early years because shareholders in a C corporation generally get no tax benefit from such losses. Conversely, as an S corporation shareholder, you can deduct your percentage share of these losses on your personal tax return to the extent of your basis in the stock and any loans you personally make to the entity. Losses that can’t be deducted because they exceed your basis are carried forward and can be deducted by you when there’s sufficient basis. Therefore, your ability to use losses that pass through from an S corporation depends on your basis in the corporation’s stock and debt....

12 Dec 2020
0

5 Ways to Take Cash Out of Your Corporation

Roger Rossmeisl, CPA
Small Business Tax Briefs
5 Ways to Take Cash Out of Your Corporation

Owners of closely held corporations are often interested in easily withdrawing money from their businesses at the lowest possible 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.” And it’s not deductible by the corporation.  Fortunately, there are several alternative methods that may allow you to withdraw cash from a corporation while avoiding dividend treatment. Here are 5 ways to take cash out of your closely-held corporation to consider: Capital repayments. To the extent that you’ve capitalized the corporation with debt, including amounts that you’ve advanced to the business, the corporation can repay the debt without the repayment being treated as a...

12 Dec 2020
0

Health Savings Account for Your Small Business

Roger Rossmeisl, CPA
Small Business Tax Briefs
Health Savings Account for Your Small Business

Small business owners are well aware of the increasing cost of employee health care benefits. As a result, your business may be interested in providing some of these benefits through an employer-sponsored Health Savings Account (HSA). Or perhaps you already have an HSA. It’s a good time to review how these accounts work since the IRS recently announced the relevant inflation-adjusted amounts for 2021. The basics of HSAs For eligible individuals, HSAs offer a tax-advantaged way to set aside funds (or have their employers do so) to meet future medical needs. Here are the key tax benefits: Contributions that participants make to an HSA are deductible, within limits. Contributions that employers make aren’t taxed to participants. Earnings on the funds within an HSA aren’t taxed, so the...

09 Dec 2020
0

QBI Deduction Basics and Year-End Tax Tip

Roger Rossmeisl, CPA
Small Business Tax Briefs
QBI Deduction Basics and Year-End Tax Tip

If you own a business, you may wonder if you’re eligible to take the qualified business income (QBI) deduction. Sometimes this is referred to as the pass-through deduction or the §199A deduction. The QBI deduction: Is available to owners of sole proprietorships, single member limited liability companies (LLCs), partnerships, and S corporations, as well as trusts and estates. Is intended to reduce the tax rate on QBI to a rate that’s closer to the corporate tax rate. Is taken “below the line.” In other words, it reduces your taxable income but not your adjusted gross income. Is available regardless of whether you itemize deductions or take the standard deduction. Taxpayers other than corporations may be entitled to a deduction of up to 20% of their QBI. For...

ROGER ROSSMEISL, CPA

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

(714) 325-0442
roger@khopatel.com

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