28 Jun 2019
0

Beware the 100% Payroll Tax Penalty

Roger Rossmeisl, CPA
Small Business Tax Briefs
Beware the 100% Payroll Tax Penalty

If federal income tax and employment taxes (including Social Security) are withheld from employees’ paychecks and not handed over to the IRS, the so-called 100% Payroll Tax Penalty can be imposed. To make matters worse, the penalty can be assessed personally against a “responsible individual.” If a business makes payroll tax payments late, there are escalating penalties. And if an employer fails to make them, the IRS will crack down hard. With the “Trust Fund Recovery Penalty,” also known as the “100% Payroll Tax Penalty,” the IRS can assess the entire unpaid amount against a responsible person who willfully fails to comply with the law. Some business owners and executives facing a cash flow crunch may be tempted to dip into the payroll taxes withheld from employees....

28 Jun 2019
0

Consider a Roth 401(k) Plan

Roger Rossmeisl, CPA
Small Business Tax Briefs
Consider a Roth 401(k) Plan

Roth 401(k) accounts have been around for 13 years now. Studies show that more employers are offering them each year. A recent study by the Plan Sponsor Council of America (PSCA) found that Roth 401(k) Plans are now available at 70% of employer plans, up from 55.6% of plans in 2016. However, despite the prevalence of employers offering Roth 401(k)s, most employees aren’t choosing to contribute to them. The PSCA found that only 20% of participants who have access to a Roth 401(k) made contributions to one in 2017. Perhaps it’s because they don’t understand them. If you offer a Roth 401(k) Plan or you’re considering one, educate your employees about the accounts to boost participation. Roth 401(k) Plans: a 401(k) with a twist As the name implies, these...

26 Jun 2019
0

Combining Business with Pleasure Travel

Roger Rossmeisl, CPA
Small Business Tax Briefs
Combining Business with Pleasure Travel

Summer is here, so you might be thinking about getting some vacation time. If you’re self-employed or a business owner, you have a golden opportunity for combining business with pleasure travel for a few extra days and offset some of the cost with a tax deduction. But be careful, or you might not qualify for the write-offs you’re expecting. Combining business with pleasure travel: basic rules Business travel expenses can potentially be deducted if the travel is within the United States and the expenses are: “Ordinary and necessary” and Directly related to the business. Note: The tax rules for foreign business travel are different from those for domestic travel. Business owners and the self-employed are generally eligible to deduct business travel expenses if they meet the tests described...

26 Jun 2019
0

Key Q3 2019 Deadlines for Businesses

Roger Rossmeisl, CPA
Small Business Tax Briefs
KeyQ3 2019 Deadlines for Businesses

Here are some of the key Q3 2019 deadlines for businesses and other employers that are tax related. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. July 31 Report income tax withholding and FICA taxes for the second quarter of 2019 (Form 941) and pay any tax due. (See the exception below, under “August 12.”) File a 2018 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension. August 12 Report income tax withholding and FICA taxes for the second quarter of 2019 (Form 941), if you deposited on time and in full all of the associated taxes due. September 16 If a calendar-year C corporation, pay the third installment of 2019...

19 Jun 2019
0

Hire Your Children This Summer

Roger Rossmeisl, CPA
Small Business Tax Briefs
Hide Your Children This Summer

If you’re a business owner and you hire your children (or grandchildren) this summer, you can obtain tax breaks and other non-tax benefits. The kids can gain on-the-job experience, save for college and learn how to manage money. And you may be able to: Shift your high-taxed income into tax-free or low-taxed income, Realize payroll tax savings (depending on the child’s age and how your business is organized), and Enable retirement plan contributions for the children. Hire your children, but it must be a real job When you hire your child, you get a business tax deduction for employee wage expenses. In turn, the deduction reduces your federal income tax bill, your self-employment tax bill (if applicable), and your state income tax bill (if applicable). However, in...

17 Jun 2019
0

Ordinary and Necessary Business Expenses

Roger Rossmeisl, CPA
Small Business Tax Briefs
Ordinary and Necessary Business Expenses

If you've read the Internal Revenue Code, you may be surprised to find that most business deductions aren’t specifically listed. It doesn’t explicitly state that you can deduct office supplies and certain other expenses. Some expenses are detailed in the tax code, but the general rule is contained in the first sentence of §162.  It states you can write off “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” Ordinary and necessary business expenses basic definitions In general, an expense is ordinary if it’s considered common or customary in the particular trade or business. For example, insurance premiums to protect a store would be an ordinary business expense in the retail industry. A necessary expense is defined as...

10 Jun 2019
0

Employee vs Independent Contractor

Roger Rossmeisl, CPA
Small Business Tax Briefs
Employee vs Independent Contractor

Employee vs Independent Contractor is an age old question.  Many employers prefer to classify workers as independent contractors to lower costs, even if it means having less control over a worker’s day-to-day activities. But the government is on the lookout for businesses that classify workers as independent contractors simply to reduce taxes or avoid their employee benefit obligations. Why it matters When your business classifies a worker as an employee, you generally must withhold federal income tax and the employee’s share of Social Security and Medicare taxes from his or her wages. Your business must then pay the employer’s share of these taxes, pay federal unemployment tax, file federal payroll tax returns and follow other burdensome IRS and U.S. Department of Labor rules. You may also have to...

03 Jun 2019
0

Tax Treatment of New Business Expenses

Roger Rossmeisl, CPA
Small Business Tax Briefs
Tax Treatment of New Business Expenses

Have you recently started a new business? Or are you contemplating starting one? Launching a new venture is a hectic, exciting time. Before you even open the doors, you generally have to spend a lot of money on new business expenses. 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 be deducted right away. The way you handle some of your initial expenses can make a large difference in your tax bill. Key points on how new business expenses are handled When starting or planning a new enterprise, keep these factors in mind: Start-up costs include those incurred or paid while creating an active trade or business — or investigating the creation...

14 May 2019
0

Deducting Business Meals Under TCJA

Roger Rossmeisl, CPA
Small Business Tax Briefs
Deducting Business Meals

In the course of operating your business, you probably spend time and money “wining and dining” current or potential customers, vendors and employees. Is deducting business meals still possible? The rules changed under the Tax Cuts and Jobs Act (TCJA), but you can still claim some valuable write-offs. No more entertainment deductions One of the biggest changes is that you can no longer deduct most business-related entertainment expenses. Beginning in 2018, the TCJA disallows deductions for entertainment expenses, including those for sports events, theater productions, golf outings and fishing trips. Deducting business meals still allowed You can still deduct 50% of the cost of food and beverages for meals conducted with business associates. However, you need to follow three basic rules in order to prove that your expenses are...

09 May 2019
0

Taxation of Divorcing Business Owners

Roger Rossmeisl, CPA
Small Business Tax Briefs
Divorcing Business Owners

Taxation of divorcing business owners add complications to an already stressful time. Your marital property will include all or part of your business ownership interest . . . one of your biggest personal assets. Transferring property tax-free You and your ex-spouse can generally divide most assets, 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).  The receiving spouse also takes over the asset's existing holding period (for short-term or long-term holding period purposes). Example Under the terms of your divorce agreement, you give your house to your spouse in exchange for keeping 100% of the stock in your business. That asset swap would...

ROGER ROSSMEISL, CPA

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

(714) 325-0442
roger@khopatel.com

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