09 Nov 2023
0

How IRS Auditors Learn About Your Business Industry

Roger Rossmeisl, CPA
Small Business Tax Briefs
How IRS Auditors Learn About Your Business Industry

Ever wonder how IRS examiners know about different industries so they can audit various businesses? They generally do research about specific industries and issues on tax returns by using IRS Audit Techniques Guides (ATGs). A little-known fact 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 the IRS is looking for in terms of compliance with tax laws and regulations. Many ATGs target specific industries, such as construction, aerospace, art galleries, architecture and veterinary medicine. Other guides address issues that frequently arise in audits, such as executive compensation, passive activity losses and capitalization of tangible property. Issues unique to certain taxpayers IRS auditors need to examine all different types...

08 Nov 2023
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What Types of Expenses Can’t be Written Off by Your Business?

Roger Rossmeisl, CPA
Small Business Tax Briefs
What Types of Expenses Can't be Written Off by your Business?

If you read the Internal Revenue Code (and you probably don’t want to!), you may be surprised to find that most business deductions aren’t specifically listed. For example, the tax law 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, which 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.” 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...

08 Nov 2023
0

2023 Q4 Tax Calendar: Key Deadlines for Businesses and Other Employers

Roger Rossmeisl, CPA
Small Business Tax Briefs
2023 Q4 Tax Calendar: Key Deadlines for Businesses and Other Employers

Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2023. 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 businesses in federally declared disaster areas. Monday, October 2 The last day you can initially set up a SIMPLE IRA plan, provided you (or any predecessor employer) didn’t previously maintain a SIMPLE IRA plan. If you’re a new employer that comes into existence after October 1 of the year, you can establish a SIMPLE IRA plan as...

06 Nov 2023
0

It’s Important to Understand How Taxes Factor Into M&A Transactions

Roger Rossmeisl, CPA
Small Business Tax Briefs
It's Important to Understand How Taxes Factory into M&A Transactions

In recent years, merger and acquisition activity has been strong in many industries. If your business is considering merging with or acquiring another business, it’s important to understand how the transaction will be taxed under current law. Stocks vs. assets From a tax standpoint, a transaction can basically be structured in two ways: 1. Stock (or ownership interest) sale. A buyer can directly purchase a seller’s ownership interest if the target business is operated as a C or S corporation, a partnership, or a limited liability company (LLC) that’s treated as a partnership for tax purposes. The now-permanent 21% corporate federal income tax rate under the Tax Cuts and Jobs Act (TCJA) makes buying the stock of a C corporation somewhat more attractive. Reasons: The corporation will pay less tax and...

06 Nov 2023
0

Spouse-Run Businesses Face Special Tax Issues

Roger Rossmeisl, CPA
Small Business Tax Briefs
Spouse-Run Businesses Face Special Tax Rules

Do you and your spouse together operate a profitable unincorporated small business? If so, you face some challenging tax issues. The partnership issue An unincorporated business with your spouse is classified as a partnership for federal income tax purposes, unless you can avoid that treatment. Otherwise, you must file an annual partnership return, on Form 1065. In addition, you and your spouse must be issued separate Schedule K-1s, which allocate the partnership’s taxable income, deductions and credits between the two of you. This is only the beginning of the unwelcome tax compliance tasks. The self-employment (SE) tax problem The SE tax is how the government collects Social Security and Medicare taxes from self-employed individuals. For 2023, the SE tax consists of 12.4% Social Security tax on the first $160,200...

30 Oct 2023
0

New Per Diem Business Travel Rates Kicked In on October 1

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

Are employees at your business traveling and frustrated about documenting expenses? Or perhaps you’re annoyed at the time and energy that goes into reviewing business travel expenses. There may be a way to simplify the reimbursement of these expenses. In Notice 2023-68, the IRS announced the fiscal 2024 special “per diem” rates that became effective October 1, 2023. Taxpayers can use these rates to substantiate the amount of expenses for lodging, meals and incidentals when traveling away from home. (Taxpayers in the transportation industry can use a special transportation industry rate.) Basics of the method 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, provided by the IRS, vary from locality to...

30 Oct 2023
0

Update on Depreciating Business Assets

Roger Rossmeisl, CPA
Small Business Tax Briefs
Update on Depreciating Business Assets

The Tax Cuts and Jobs Act liberalized the rules for depreciating business assets. However, the amounts change every year due to inflation adjustments. And due to high inflation, the adjustments for 2023 were big. Here are the numbers that small business owners need to know. §179 deductions For qualifying assets placed in service in tax years beginning in 2023, the maximum §179 deduction is $1.16 million. But if your business puts in service more than $2.89 million of qualified assets, the maximum §179 deduction begins to be phased out. Eligible assets include depreciable personal property such as equipment, computer hardware and peripherals, vehicles and commercially available software. §179 deductions can also be claimed for real estate qualified improvement property (QIP), up to the maximum allowance of $1.16 million. QIP...

29 Oct 2023
0

Divorcing Business Owners Should Pay Attention to the Tax Consequences

Roger Rossmeisl, CPA
Small Business Tax Briefs
Divorcing Business Owners Should Pay Attention to the Tax Consequences

If you’re getting a divorce, you know the process is generally filled with stress. But if you’re a business owner, tax issues can complicate matters even more. 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. Transferring property tax-free In general, you can 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). For example, let’s say that under the...

29 Oct 2023
0

Tax Implications of Guaranteeing a Loan to Your Corporation

Roger Rossmeisl, CPA
Small Business Tax Briefs
Tax Implications of Guaranteeing a Loan to Your Corporation

Let’s say 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 implications. 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 caught unaware. A business bad debt 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...

18 Sep 2023
0

Planning Ahead for 2024: Should Your 401(k) Help Employees with Emergencies?

Roger Rossmeisl, CPA
Small Business Tax Briefs
Planning Ahead for 2024: Should Your 401(k) Help Employees with Emergencies?

The SECURE 2.0 law, which was enacted last year, contains wide-ranging changes to retirement plans. One provision in the law is that eligible employers will soon be able to provide more help to staff members facing emergencies. This will be done through what the law calls “pension-linked emergency savings accounts.” Effective for plan years beginning January 1, 2024, SECURE 2.0 permits a plan sponsor to amend its 401(k), 403(b) or government 457(b) plan to offer emergency savings accounts that are connected to the plan. Basic distribution rules If a retirement plan participant withdraws money from an employer plan before reaching age 59½, a 10% additional tax or penalty generally applies unless an exception exists. This is on top of the ordinary tax that may be due. The goal of...

ROGER ROSSMEISL, CPA

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

(714) 325-0442
roger@khopatel.com

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