8 Year-Round Business Tax Strategies Are Vital



Dec. 26, 2015 –

Many business owners find they can plan their futures, operate their businesses more efficiently year-round, and take maximum advantage of tax savings when they file their returns.

Ask your tax advisor about these eight strategies:

1. If you need equipment and the price is right, make your purchases.

You can take advantage of Section 179 deductions. Section 179 is designed to help small business buy as much as $500,000 a year in equipment like computers, machinery and vehicles.

Qualifying capital items can be written off immediately on business taxes instead of spreading the deduction over sever years. So again check with you tax advisor.

office-620822_1280

2. Enhance your retirement account.

Many baby boomers have learned about retirement the hard way because they weren’t proactive. Retirement has come before they knew it.

It’s much easier to make contributions to a qualified retirement plan periodically throughout the year instead of waiting until the last second.

It’s possible to postpone as much as $17,500 in salary to a 401 (k) plan — even more if you’re 50 years old or older — up to $23,000.

Another option is to contribute the lesser of 25 percent of your pay or $52,000 to an SEP.  You can contribute $57,500 if you’re at least 50 years old.

3. Include a vacation on your business trips.

Personal expenses for recreation, of course, aren’t deductible. But business expenses are deductible eight ways.

4. Look for reasons to entertain your customers.

If you can have a substantial business discussion, fully 50 percent of the entertainment and meal expenses qualify as write-offs. A husband-wife business team will find this to be a wonderful practice.

5. Entertain your employees.

You can celebrate holiday occasions, such as July 4th or Labor Day, and deduct 100 percent of the expenses if you include all employees. (Again, ordinarily, only 50 percent of business entertainment expenses are deductible.)

You can write off minor repairs. But know the difference between repairs and improvements.

6. If you forecast an S-corporation loss, plan to recoup your money.

S-Corp shareholders can deduct losses up to their stock value. So if you’re forecasting a loss this year, increase your basis in your stock, if necessary to avoid a big hit.

In such a loss, you have two options — lend money to the S corporation or add capital to it.

7. Launch a startup.

You can deduct up to $5,000 in qualified expenses for a startup. You will be allowed to amortize the balance over the succeeding 180 months.

Stay out of trouble by commencing your launch by the end of the year.

Note: Turning a hobby into a business can be tricky. You must be able to demonstrate your hobby has become a business with the goal of earning profits.

Documentation counts. You can’t deduction a loss otherwise. If you can provide documentation, the IRS will penalize you under its “hobby loss” rules.

8. Make repairs.

You can write off minor repairs. But know the difference between repairs and improvements. It might seem odd, but the IRS will treat painting the premises or major overhauls as improvements, which aren’t deductible.

From the Coach’s Corner, more tips:

11 Payroll and Tax Tips for Small Businesses — To stay competitive in this difficult marketplace, it’s vital to be proactive on your taxes.

4 Tax Tips for Your Home Office Write Offs — The best tip I ever got from a CPA was to move my firm from a rented office space to my home. But it was important to understand the tax code for qualified write offs.

Keys to Protect Yourself from Skyrocketing Trend – Tax Identity Theft — Tax identity theft is increasingly victimizing Americans, according to the Internal Revenue Service. As many as 1.5 million Americans were hit by tax-refund fraud in 2013, according to IRS Special Agent Kenneth Hines in a 2014 published report.

Financial Tips for Taking the Plunge to Buy a Business — So you’ve decided to take the plunge in buying a business. Congratulations. I salute such bravery. Owning a business represents one of America’s great fundamentals — our free-enterprise system. You’ll have multiple financing options.

“The only difference between death and taxes is that death doesn’t get worse every time Congress meets.”

 -Will Rogers

 __________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

8 Strategies for Business Tax Deductions on Your Vacation



Did you ever notice professional organizations hold their conventions at favorite tourist destinations? Why? It’s possible to deduct some of those travel costs as business expenses.

If you’re careful, you can write off some expenses on your vacation. That’s not to say you can turn your vacation into a tax deduction.

It’s a complicated issue. Be diligent so you don’t trigger an Internal Revenue Service audit.

It’s all about writing off legitimate deductions — the right way. Be careful in your recordkeeping and be rigorously honest in your motives and actions.

Talk with your tax advisor about these strategies:

1. Transportation costs

Assuming your trip is essentially business related, your domestic transportation costs can be deducted.

For international travel, your trip needs to be 75 percent business-related.

Otherwise, you can only write off the percentage of travel costs that are actually for business purposes.

2. Vacation with the family

If any members of your family are actual employees or business partners and are involved in the business portion of the trip, those expenses are deductible.

This is common, of course, in a husband-wife small business, where both are employees.

In the event family members — who aren’t employees — are on the trip, there ethical ways in which you can capitalize. If you pack the family into the car that’s used for business travel, for example, the driving costs can be written off. However, any expenses stemming from upgrades for the benefit of  the family can’t be deducted.

Remember you can’t deduct expenses for family members just for helping out a little. They must be bonafide employees.

3. When you can write off meals

If you’re on a tax-deductible business trip, you can write one-half of the costs of meals you and your business associates eat.

4. If you stay longer, fine, but you can’t deduct the overstay as business expenses

It’s common for businesspeople to extend their stays on trips for a little R&R. Just be sure to keep careful records and know that you can’t write off recreational costs.

Remember you can’t deduct expenses for family members just for helping out a little. They must be bonafide employees.

5. Cruises can be deducted to a point

If you go on a business-related cruise, you can deduct it if the ship is a U.S.-registered vessel and you don’t sail to foreign destinations.

The deduction limit is $2,000 annually. Note: You must include adequate documentation in your IRS tax filing.

6. Deduct miscellaneous expenses

You have the option to deduct expenses, such as conference and seminar fees, Internet access, laundry charges, taxis, telephone calls and tips.

7. Keep great records

Obviously, you know to keep receipts. But for travel deductions, you can’t keep enough information to show the IRS. That includes any business-related material — agendas for meetings, your itineraries and programs.

8. For tax purposes, don’t turn your trip into a lavish junket

Your expenses have to be reasonable. Staying in a penthouse suite or renting a Ferrari don’t qualify as write-offs.

Visit this resource linkIRS Publication 463: Travel, Entertainment, Gift and Car Expenses.

From the Coach’s Corner, more IRS tips:

Tips on Understanding the Mindset of IRS Auditors — An IRS audit is enough to make you tense with cold sweat in the palms of your hands. More businesspeople have complained to me about the mean-spirited treatment at the hands of IRS agents than any other federal agency. 

 4 Tax Tips for Your Home Office Write Offs — The best tip I ever got from a CPA was to move my firm from a rented office space to my home. But it was important to understand the tax code for qualified write offs. 

Keys to Protect Yourself from Skyrocketing Trend – Tax Identity Theft — Tax identity theft is increasingly victimizing Americans, according to the Internal Revenue Service.  

“Income tax has made more liars out of the American people than golf.”

-Will Rogers


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Image credit: Michelle Kwajafa, www.bmorerose.com 

4 Tax Tips for Your Home Office Write Offs



The best tip I ever got from a CPA was to move my firm from a rented office space to my home. But it was important to understand the tax code for qualified write offs.

Following are some tips, but it’d be best to double-check with your tax specialist.

ID-100179577 khunaspixIn my situation, one bedroom was changed to an office for my personal assistant. Another bedroom was transformed into my office.

Both offices had oak desks, file cabinets, PCs, calculators and other office equipment. Instead of personal clothes, those closets housed  shelving for my clients’ marketing collateral, HR training workbooks, and other client projects.

Ironically, I’ve been able to use the rest of the home to work. For example, I have enjoyed my work in using my WIFI and a notebook computer while sitting in my favorite leather chair in the family room.

Once, during an immobile period when I underwent back surgery, a lot of work was conducted in the bedroom.

But as long as I maintained those two rooms as bonafide office space, I was in the clear. To justify the write-offs, I used a tape measure to measure the square footage of those offices, which was then deducted from the square footage of the home.

To keep the IRS out of your face, here are examples of the ground rules:

1. Have a designated office space.

Many people launch their startups on the dining room table or garage. Great idea. Iconic companies such as Hewlett-Packard were launched in garages.

But to qualify for tax deductions, your work space cannot be a multi-purpose area.

2. You can use one of two options to deduct office expenses.

Firstly, the IRS will allow you the option of deducting $5 per square foot up to 300 square feet. That’s with a maximum of $1,500. For many entrepreneurs, this represents an unfavorable option.

Secondly, consider keeping track of all your expenses and deduct them. For most, this probably results in higher write-offs. But you still might face the prospect of allowing an IRS auditor into your home to verify your deduction. It will help if you understand the mindset of IRS auditors.

3. Depending on your legal form, you can lease your home office to your company.

It does get a little tricky. In essence, the expense is written off by the corporation. As a homeowner, you must show it as income on Schedule E of your personal return.

However, deductions aren’t allowed for your rental income if your company is a Sub S corporation.

To circumvent this rule, your corporation can reimburse you for its share of home expenses such as cleaning, repairs, property taxes and utilities. This, of course, means your corporation will use these as write-offs.

4. An option as a corporation if you rent vs. buying your home.

You can write off a percentage of the business space of your home. Cut a check for its percentage-use from your business account to you as the “landlord.” Make sure you have a personal account from which you then pay the balance for your personal use.

In other words, let’s say your home totals 2,100 square feet, your office space is 700 square feet, and your rent as a tenant is $2,100. This means your business space takes up 33 percent. So you’d pay $700 from your business account as an expense for rent and $1,400 from your personal funds for the remainder of the rent to landlord.

From the Coach’s Corner, here are more financial tips:

Keys to Protect Yourself from Skyrocketing Trend – Tax Identity Theft – Tax identity theft is increasingly victimizing Americans, according to the Internal Revenue Service.

8 Strategies When Sales Drop and Costs Cut into Your Profits – If your sales are down and costs are hurting your profits, you’re certainly not alone. This is still not a good economy for many sectors. 

Small Business Tips to Protect Your Bank Accounts – Imagine for a moment. You’re sitting at your desk enjoying a second cup of morning coffee. Then, your phone rings. It’s a call from your bank to discuss possible fraud. 

To Cope with Rising Costs, Review your Pricing Strategy – Increased costs weigh heavily on the bottom line. If you’re being pressured by costs, it’s probably time to review your pricing strategy. 

Finance – Managing Hidden Evergreen Clauses for Your Benefit – A big frustration for businesspeople in financing and leasing business and commercial equipment comes after they fail to read the fine print in contracts. Commonly found in financing and leasing contracts, evergreen clauses are designed to keep customers committed to an agreement beyond the original term. 

“We’ll try to cooperate fully with the IRS, because, as citizens, we feel a strong patriotic duty not to go to jail.”

-Dave Barry


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.




Image courtesy of khunaspix at www.freedigitalphotos.net


In Q4, Businesses Should Plan to Use at Least 5 Strategies for 2012 Tax Returns

Oct. 17, 2012

Where has the year gone?

Know your rights with the Internal Revenue Service. Businesses should start planning their 2012 tax returns – ASAP. Some IRS changes are expected to expire or be reduced after this year.

So, it’s best to take advantage of opportunities, especially if you’ve made certain investments to benefit your company. But every business situation can be unique.

For the most benefit, you should see your qualified tax advisor to at least discuss these five tax topics:

1. Section 179

Businesses can expense or deduct 100 percent of the cost of specific property this year for as much as $139,000. That can include certain personal property and off-the-shelf software –new or used – if it’s used by your company this year. Of course, you’ll be limited by the cost of your Section 179 property, and by your taxable income.

Note: The expensing allowance is scheduled to decrease to $25,000 next year.

2. Fifty Percent bonus depreciation

Under Code Section 168(k), it’s possible to take half of certain assets’ costs that acquire and use in 2012. You’d benefit because depreciation is increased to permit 50 percent cost deductions in their first 12 months of depreciation. That’s for depreciable property with less than a 20-year recovery period, interior improvements in your leased property, and off-the-shelf software.

Note: This is scheduled to expire.

3. Bad debts

Code Section 166 allows for bad debts to be deducted in the year they’re incurred. Yes, it’s universally acknowledged – even by the IRS – that the economy is soft, and businesses are suffering from uncollectable receivables. But they must be documented.

So, you must prove the debt is valid and worthless whether it’s a partial or whole amount. Make certain you have documentation of the bad debt so you can claim it. See this article:  Tips on Understanding the Mindset of IRS Auditors.

4. Retirement plans

Benefits of the right retirement plan for your situation: You can save for your retirement to benefit your tax situation while getting a deduction on your taxes.

You can select from multiple options – a 401(k), profit-sharing, simple IRA, or a simplified employee pension plan.

Again, your goal should be to reduce your taxable income while building your retirement fund.

5. Tax classification

It’s advisable to periodically review your tax classification – whether you’re a sole proprietorship, partnership, C corporation or S corporation. Perhaps your situation has changed. Obviously, each business classification has benefits and downsides.

The IRS will, of course, allow you to change your tax classification.

So, review all your options to prepare for a year from now. If you’ll be better off under a different classification, you really can’t do anything about it for this year. The best time to make changes is at the start of a tax year. In this way, you can take advantage of all opportunities in making transactions, tax filing and structuring.

From the Coach’s Corner, see these resources:

On April 15th you count your blessings . . . and then send them to Washington.

__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Tips on Understanding the Mindset of IRS Auditors



An IRS audit is enough to make you tense with cold sweat in the palms of your hands. More businesspeople have complained to me about the mean-spirited treatment at the hands of IRS agents than any other federal agency.

Worse, the agents’ frequent lack of common sense is shocking.

True, the IRS has over-officious, mean-spirited representatives. Believe it or not, the IRS Web site has comprehensive information that will help you to stay calm in dealing with the agency.

ID-10088767 stockimagesAll taxpayers have reasons to be suspicious of the agency.

That’s in the wake of the IRS scandal in which agency employees politically targeted conservative-leaning nonprofits when they applied for nonprofit status.

This should worry any thinking citizen.

That said, the agency does have level-head, reasonable employees — especially at the lower levels.

So, understand that the IRS isn’t a 100 percent, overbearing bureaucracy.

It helps to anticipate the aspects of your return that serve as catalysts for an audit.

You can stay practically stress-free and prepare for a reasonable dialogue – if you know what IRS agents want.

Seven tips to understand the mindset of IRS auditors:

1. They first judge on appearances. Make sure you look like a business. Organize your records so that they’re ready to be inspected. That means computer software and reconciled bank accounts.

2. Be able to accurately analyze your firm’s revenue and to present it if necessitated by an audit.

3. If you don’t have adequate internal controls, IRS agents will get suspicious. Many will get hard-nosed about your records, and expand their audit. Not only will they scrutinize every single minute detail of your return, but IRS agents are known to expand the audit to other years.

4. If you have benefited from bartering or trading products or services, know that the IRS wants to know about it because it’s considered income. Yes, even if you put something out to get something in return. Agents will stop at nothing – they’ll look high and low for evidence of your participation in a bartering club. So specify your bartering at fair market value.

5. Beware of how you assign income. Auditors look for evidence that taxpayers assign income to other businesses – to avoid paying taxes or to show a net operating loss. If you do assign income to another party, be prepared to show that entity’s tax returns.

6. Separate your business from personal records, and keep a record of your revenue and expenses. IRS agents will tally all your bank deposits and compare them to your sales. So keep careful records on whether you make personal deposits to aid your business for positive cash flow or a financial gift from relatives.

7. Keep computer records with copies of cancelled checks in all non-taxable income items that are deposited in your bank account. This should allay any IRS suspicions.

From the Coach’s Corner, here are more financial tips:

4 Strategies if You Fear Missing Year-End Forecasts How to strategically manage a financial crisis   Are you sweating over cash flow? Are you losing sleep over the prospect of missing your annual goals? Well, if so, certainly you’re not alone. Many business owners and executives have suffered from the same anxiety. But fear can be a great motivator for success.

Primer for Best Practices in Preparing Financial Statements –A good financial system is vital for your business. Not only will a properly prepared financial statement tell you what’s transpired in your business, it will give you a snapshot regarding your future.  Measurement of cash flow is paramount.

Checklist to Increase Your Startup’s Cash Flowre growing quickly, cash flow is paramount. There are at least 11 ways you can increase cash flow for your business to function properly.

Do You Know What Drives Your Profit? (There Are 4 Drivers) — For profits, entrepreneurs must learn how to manage their financials and performance, which are difficult tasks. Savvy business owners know who their ideal clients or customers are. Entrepreneurs realize financial benefits when their revenue from business exceeds their expenses and taxes. This results in a much easier task.

Accounting / Finance – Why and How to Determine Your Break-Even Point —  Uncertainty can kill hope in business. Best practices in management mean having the right information to alleviate uncertainty in business. For that you need the right tools. One important tool – know your break-even point (BEP). A BEP analysis should be an integral part of your financial planning.

“We’ll try to cooperate fully with the IRS, because, as citizens, we feel a strong patriotic duty not to go to jail.”

-Dave Barry


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy of stockimages at www.freedigitalphotos.net

Small Business Tax Tips for Your 2009 Federal Return



April 14, 2010 –

Unless you have too many write-offs or your small business lost money last year, filing your 2009 federal return might be more pleasant this year.

True, tax returns are increasingly complicated, but published reports indicate more taxpayers are doing their own taxes. Self-prepared returns filed electronically through April 2 are 6.7 percent higher than in 2009. On the other hand, professionally prepared e-filings have decreased by 1.9 percent.

Reasons for taxpayers to go-it-alone include: Concerns about privacy, lack of trust, and money savings by not paying a professional tax preparer.

Many small businesses are finding it easier because they are benefiting from The American Recovery and Reinvestment Act of 2009.

Some tips to investigate that might benefit you, include:

  • Under the amended Sec. 179, the investment of equipment normally recouped via depreciation over five years or so, can be expensed as much as $250,000 toward the cost right now.
  • If you purchased equipment for more than a quarter of a million dollars, you might be able to combine expensing with the bonus depreciation for a nice write-off. If you lost money, this wouldn’t be applicable.
  • If any of your debts were forgiven in 2009, the amounts are included as taxable income. The new law will allow you, however, to amortize the forgiven amount over five years. Looking ahead for your 2010 return, amounts forgiven this year can only be amortized for four years.
  • As for the Work Opportunity Tax Credit, small businesses can benefit by hiring certain employees – “target groups who have consistently faced significant barriers to employment.” For both 2009 and 2010, The Recovery Act has added unemployed veterans and certain minors.
  • If over the past three years your company grossed $15 million or less, you can carry back your net operating losses for three, four or five years (the former limit was two years).
  • If your income was less than $500,000 and more than half was from your small business, it’s possible to defer your taxes to 90 percent of the liability.

If cash flow is an issue, you can get 30 to 120 days to pay your tax liability by calling (800) 829-1040. The IRS terms for this are more lenient than if you get an installment agreement that would a take longer period of time.

Avoid paying your taxes by credit card. The IRS is happy to accept payment via plastic. However, depending on your credit card company, it will hurt you. Paying taxes by credit card are usually considered a bad practice. Card companies are likely to lower your limit and it will hurt your credit score.

Good luck!

From the Coach’s Corner, here are two related items:


Seattle business consultant Terry Corbell provides high-performance management services and strategies.