A Business Valuator is a Must-Have When Filing a Business Interruption Claim

Meteorologists warn that the 2024 hurricane season could break records, possibly surpassing 2020, the worst hurricane season on record. Even if hurricanes aren’t a threat where your business operates, other natural disasters — such as floods, wildfires and tornadoes — could impact your normal operations. Interruptions from these disasters and other crises can cause significant financial losses. Business owners may purchase business interruption insurance to safeguard against potential losses. These policies can allow you to recoup lost profits, repair damaged assets and cover other incremental expenses. When a covered event occurs, it’s important to hire a business valuation professional to explain your coverage and estimate your losses. Understanding your coverage Business interruption insurance is arguably one of the most complicated insurance products on the market today. And most...

Business Website Expenses: How They're Handled for Tax Purposes

Most businesses have websites today. Despite their widespread use, the IRS hasn’t issued formal guidance on when website costs can be deducted. But there are established rules that generally apply to the deductibility of business expenses and provide business taxpayers launching a website with some guidance about proper treatment. In addition, businesses can turn to IRS guidance on software costs. Here are some answers to questions you may have. What are the tax differences between hardware and software? Let’s start with the hardware you may need to operate a website. The costs fall under the standard rules for depreciable equipment. Specifically, for 2024, once these assets are operating, you can deduct 60% of the cost in the first year they’re placed in service. This favorable treatment is allowed...

Assemble a Comprehensive Cybersecurity Plan

Regardless of their size, businesses rely heavily on technology. Although your network and computer-related tools are essential to function, they’re also a potential liability because they can offer cybercriminals access to your company. To protect against this complex and ever-evolving threat, businesses must deploy a comprehensive cybersecurity program. Your arsenal You should already have a cybersecurity software package to protect technology assets. But to provide the best protection from hackers and other fraud perpetrators, arm your business with these seven additional weapons: 1. Strong passwords. Given a choice, most computer users select passwords that are easy to remember and input. But cybercriminals use password-cracking software that can guess simple passwords in almost no time. So require all employees to choose complex passwords that combine upper- and lowercase letters, numbers...

IRS Reminds Car Dealers to be Aware of Phishing Scams

(As appearing in IR 2024-186) IRS reminds car dealers and sellers to be aware of phishing scams In light of the CDK ransomware attack, the Internal Revenue Service would like to remind car dealers and sellers to be aware of evolving phishing and smishing scams that could impact day-to-day operations of the business. In light of the recent ransomware attack against CDK, the IRS is warning individuals and businesses to remain vigilant against these attacks. Fraudsters and identity thieves attempt to trick the recipient into clicking a suspicious link, filling out personal and financial information or downloading a malware file onto their computer. Scammers are relentless in their attempts to obtain sensitive financial and personal information, and impersonating the IRS remains a favorite tactic. The IRS urges car dealerships...

Protecting Your Business from Real Estate Fraud

Whether your company acquires businesses that own real estate or you invest in real estate directly, fraud poses an ever-present threat. Buying and selling real estate is complicated, and it’s relatively easy for crooks to manipulate the process. To help mitigate real estate fraud threats, thorough due diligence is essential. Staying current on common schemes and red flags also may enable you to identify risky transactions before you put down any money. 5 schemes First, be aware of these five common real estate fraud schemes: Fake documents. Every real estate transaction requires extensive documentation. To make an acquisition more enticing, sellers could fake rent rolls, financial statements or other documents that indicate an asset’s profitability. Additionally, sellers might doctor environmental impact reports to, for example, hide the...

Considering Borrowing from your Corporation But Structure the Deal Carefully

If you own a closely held corporation, you can borrow funds from your business at rates that are lower than those charged by a bank. But it’s important to avoid certain risks and charge an adequate interest rate. Basics of this strategy Interest rates have increased over the last couple years. As a result, shareholders may decide to take loans from their corporations rather than pay higher interest rates on bank loans. In general, the IRS expects closely held corporations to charge interest on related-party loans, including loans to shareholders, at rates that at least equal applicable federal rates (AFRs). Otherwise, adverse tax results can be triggered. Fortunately, the AFRs are lower than the rates charged by commercial lenders. It can be advantageous to borrow money from your...

What Might Be Ahead as Many Tax Provisions are Scheduled to Expire?

Buckle up, America: Major tax changes are on the horizon. The reason has to do with tax law and the upcoming elections. Our current situation The Tax Cuts and Jobs Act (TCJA), which generally took effect in 2018, made sweeping changes. Many of its provisions are set to expire on December 31, 2025. With this date getting closer each day, you may wonder how your federal tax bill will be affected in 2026. The answer isn’t clear because the outcome of this November’s presidential and congressional elections is expected to affect the fate of many expiring provisions. A new political landscape in Washington could also mean other tax law changes. Corporate vs. individual taxes The TCJA cut the maximum corporate tax rate from 35% to 21%. It also lowered rates...

Recent FTC Rule Could Affect the Value of Noncompete Agreements

Noncompete agreements can be valuable to a business, especially after a merger or acquisition. Estimating the value of these agreements has become more complicated in light of a controversial new final rule issued by the Federal Trade Commission (FTC) that will ban noncompetes for most employees and independent contractors, starting in September 2024. Types of noncompetes Noncompete agreements have been a standard business practice for decades. Some are required as a condition of employment or upon termination of employment. Here, the employer requires an employee to sign a noncompete agreement to protect the employer’s business interests, guard against disclosure of trade secrets, and prevent the employee from poaching customers or clients. These agreements generally limit employment activities in the same field for a specified period. Noncompetes also may...

Should Your Convert Your Business from a C to an S Corporation?

Choosing the right business entity has many implications, including the amount of your tax bill. The most common business structures are sole proprietorships, partnerships, limited liability companies, C corporations and S corporations. In some cases, a business may decide to switch from one entity type to another. Although S corporations can provide substantial tax benefits over C corporations in some circumstances, there are potentially costly tax issues that you should assess before making the decision to convert from a C corporation to an S corporation. Here are four considerations: 1. LIFO inventories. C corporations that use last-in, first-out (LIFO) inventories must pay tax on the benefits they derived by using LIFO if they convert to S corporations. The tax can be spread over four years. This cost must be weighed against the potential tax gains from...

Tax Tips When Buying the Assets of a Business

After experiencing a downturn in 2023, merger and acquisition activity in several sectors is rebounding in 2024. If you’re buying a business, you want the best results possible after taxes. You can potentially structure the purchase in two ways: Buy the assets of the business, or Buy the seller’s entity ownership interest if the target business is operated as a corporation, partnership or LLC. In this post, we’re going to focus on buying assets. Asset purchase tax basics You must allocate the total purchase price to the specific assets acquired. The amount allocated to each asset becomes the initial tax basis of that asset. For depreciable and amortizable assets (such as furniture, fixtures, equipment, buildings, software and intangibles such as customer lists and goodwill), the initial tax basis determines...