Tax reform may have you thinking of changing your S corporation to a C corporation, partnership, or sole proprietorship.
With such a switch, you need to consider:
If you want to turn your S corporation into a C corporation, you file an S corporation election revocation statement with the IRS. Your corporation is then a C corporation for federal tax purposes.
If you don’t want your business to be either an S or a C corporation, you liquidate the S corporation and contribute the assets to a new business entity.
If you chose S corporation taxation for your limited liability company (LLC), changing that election is a little more complicated.
First, you must file the S corporation election revocation statement with the IRS. The tax law then treats your LLC as a C corporation for federal tax purposes.
If that’s what you want, stop there.
If you want a disregarded entity (single-member LLC) or a partnership (multi-member LLC), you also need to file with the IRS to also revoke the C corporation election.
The month of June is named after the wife of Jupiter, the Roman goddess Juno. Juno was known as the patron of marriage and was responsible for the wellbeing of women.
The month of June is the longest daylight hours in the Northern Hemisphere and the weather is supposed to be mild. June is the seasonal equivalent to Southern Hemisphere in December.
Collect a tip report from employees every pay period
It is the responsibility for every employee to keep track of all their tip money collected. It is unreasonable to conclude that the restaurant manager will know how much cash tip every customer gave. However, Employers must require employees to report their tips, since tips of $20 or more per month are subject to withholding tax and employers are required to pay the employer's portion of those taxes.
If you have questions on tax planning with your restaurant feel free to contact us.
You operate your professional practice as a C corporation. Your spouse rents your office to your C corporation on a triple net lease. Does your spouse qualify for the Section 199A deduction on the rental income, and if not, what can be done about it?
Under the final IRS regulations, your spouse’s rental activity can qualify for the Section 199A deduction in one of three ways:
A single triple net lease rental is generally not a tax code Section 162 trade or business.
Your spouse can’t use the new rental safe harbor for a triple net lease property.
Of the three possible paths to the deduction, you don’t have the trade or business or the rental safe harbor available.
The one way your spouse’s triple net lease rental could qualify is if the property were rented to a commonly controlled pass-through trade or business. Since the ownership of one spouse attributes to the other spouse, you’ve met the commonly controlled requirement. So far, so good.
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When possible, you want to claim that your office in your home qualifies as a principal place of business, because this classification
Take time to remember those who have fallen and appreciate the presence of your loved ones!
Fun Fact: Memorial Day wasn't officially named Memorial Day until 1967, prior to that it was known as Decorations Day.
The Affordable Care Act’s $100-a-day penalty for improper medical reimbursements likely has your attention. And it should. But you can find many reimbursements that are allowed without penalty, including the ability to reimburse Medicare when you have fewer than 20 employees.
Some group insurance plans do not cover Medicare-eligible employees if the group plan covers fewer than 20 employees because:
If you (a) offer group insurance coverage to your fewer-than-20-employee workforce and (b) have one or more of the fewer than 20 employees on Medicare, you may use a health reimbursement account (HRA) or other account-based plan to reimburse Medicare parts B and/or D and Medigap insurance, if you satisfy the following requirements:
Guidance on the application of subchapters C and S of chapter 1 of subtitle A of the Internal Revenue Code (Code) has been made available to tax and accounting professionals. The revenue ruling, 2019-13 provides an answer to:
If, during a former S corporation's post-termination transition period, the corporation distributes cash in redemption of a shareholder's stock and the distribution is characterized as a distribution under § 301 of the Internal Revenue Code (Code), should the corporation reduce its accumulated adjustments account (AAA) pursuant to § 1368 of the Code?
According to the new guidance, RR-19-13 holds that—to the extent a corporation makes such a cash distribution that is subject to section 301 of the Code by reason of section 302(d) of the Code—the cash distribution should reduce the corporation's accumulated adjustments account (within the meaning of section 1368(e) of the Code) to the extent of the proceeds of the redemption according to section 1368 of the Code.
The Tax Cuts and Jobs Act tax reform added new tax code Section 199A, which created a 20 percent tax deduction possibility for you if your rental property (a) has profits and (b) can qualify as a trade or business.
As the law now stands, with rentals that achieve trade or business status, you win. Your business-status rental property creates the following five possible tax benefits for you:
To obtain the benefits listed above, you must have a rental property that qualifies as a trade or business.
We customize tax strategies to address your life and future plans!
Tax reform’s Section 199A deduction often confuses small-business owners and tax professionals alike. It’s quite possible you’ll get a Schedule K-1 from a business that omits the information you need to calculate your deduction.
What do you do?
You have a big problem. Without a properly completed Schedule K-1, your Section 199A deduction is a big fat $0.
Premiums for Medicare health insurance can add up to a substantial sum. That’s especially true if
Fortunately, the premiums can potentially help your tax situation. The dollar benefit of Medicare tax deductions depends greatly on where you can deduct the premiums:
If You Are a Sole Proprietor
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The Month of May was originally the 3rd Month of the Year, until January and February were added to move it to the 5th of the Year. May is also named after the Greek goddess Maia who has also been identified at Bona Dea; the Roman goddess of fertility.
Qualified improvement property is any improvement to the interior portion of a building that is nonresidential real property (think office buildings and shopping centers) if you place the improvement in service after the date you place the building in service.
Lawmakers intended qualified improvement property to be 15-year property and eligible for 100 percent bonus depreciation. Not so.
Due to a drafting error in the Tax Cuts and Jobs Act (TCJA), qualified improvement property is currently 39-year property and ineligible for bonus depreciation.
One possible workaround for some taxpayers: qualified improvement property is Section 179 property, so you can elect to expense it using Section 179. But as you probably know, Section 179 is not available to everyone and has its limitations, which can affect your ability to claim it.
Congress has several bills that contain the fix. For example, the Tax Technical and Clerical Corrections Act, introduced in the House of Representatives, would fix the qualified improvement property issue retroactively, along with many other TCJA issues.
The best solution is to wait. If you can, hold off filing your tax return until after lawmakers fix the problem retroactively. Then you can claim bonus depreciation on your 2018 qualified improvement property on your extended 2018 tax return.
If Congress retroactively fixes the qualified improvement property issue after you file your 2018 tax return, you’ll have to amend your tax return in order to get the benefits of qualified improvement property being 15-year property.
In efforts to improve all of our services with the IRS to expand cyber security and update protect our data, the IRS is working on a plan to improve their computerized operations!
The plan envisions the IRS being able to:
When possible, you want to claim that your office in your home qualifies as a principal place of business because this classification
Current law gives you two ways to claim your office in the home as a principal office:
Question for you: If you have an office downtown where you spend 40 hours a week, can you claim that you have an office in your home that qualifies as a principal office if you spend only 12 hours a week working in the home office? If you said no, you are not alone. But you would also be wrong.
With the administrative or management rule, you can have your principal office in your home with 12 hours of work a week, even when you work at your other office for 40 hours.
As the tax filing deadline approaches on April 15, I’d like to thank taxpayers for taking the time to file and pay their taxes. Our nation’s tax system is built around the concept of voluntary tax compliance, meaning citizens comply with their civic duty each year by preparing and filing their taxes – without direct government intervention.
This principle has helped make our tax system a model for the entire world. Thanks to taxpayers, this system helps fund our great nation. Each year, 95% of the gross receipts of our country flows through the IRS – about $3.5 trillion last year – funding critical aspects of the U.S., ranging from roads and schools to the nation’s military.
Behind the scenes, this couldn’t happen without the devoted work of IRS employees across America, in places like Atlanta, Austin, Ogden, Kansas City and elsewhere. We have employees in every state and working in numerous different capacities. Our employees interact with more Americans than any other institution, public or private. They make a difference, they care, and they take great pride in serving taxpayers and our country.
This year, their work has taken on even more importance as we faced the biggest tax law changes since 1986. Our teams labored through two holiday seasons, weekends and many even missed birthdays and family events to ensure IRS filing systems were starting in January 2019.
Due to these efforts, we’ve had a smooth filing season. Our IT systems set a new record in January, accepting more than 1.9 million tax returns in a single hour – that’s 536 tax returns a second. By the time the filing deadline hits more than 130 million tax returns will have been filed, and more than $250 billion in refunds will have been processed – all while helping protect against tax-related identity theft. Efforts to provide quality taxpayer services and protecting taxpayer data will always remain a priority for the IRS.
When taxpayers file their returns, they should feel confident that others are doing the right thing too. Fair but rigorous enforcement of the tax laws is critical to ensuring fairness in our tax system. Our employees who audit returns, collect taxes, and investigate fraud all work hard throughout the year to fairly enforce the laws while respecting taxpayer rights.
As the tax deadline approaches, I want you to know the IRS appreciates the time and personal effort everyone takes to file their taxes in support of our great nation. If someone needs tax help in the coming days, IRS.gov has many options available. And if more time is needed to file, don’t panic – taxpayers can file for an automatic six-month extension.
We sometimes refer to our employees as “IRS Ambassadors” recognizing that they routinely give back to their communities. Many volunteer to help low-income and older Americans prepare their taxes. When disaster strikes, thousands of our employees routinely help answer phone calls for victims calling in to the Federal Emergency Management Agency, provide tax information at Disaster Recovery Centers and lend a hand providing security.
I’m very proud of every IRS employee. They remain dedicated to helping taxpayers understand and meet their filing obligations. Our employees make a difference, and they take pride in serving taxpayers and our country. We’re also hiring people to join our IRS family– if you know someone who may be interested, please suggest they visit usajobs.gov.
Beyond technical skills, the success of the IRS also depends on respecting taxpayer rights and treating everyone we encounter with fairness. My pledge to taxpayers is that we at the IRS will continue to keep taxpayer rights paramount in all of our interactions. Inside our agency, we understand, accept and value our differences, and strive to maintain an inclusive and diverse workplace, where employees treat each other with kindness and civility. We will continue to carry those values with us in all of our dealings with taxpayers as well. We believe every person is important, none more or less so than any others. By valuing and respecting each other, we are better able to move forward together.
I’m Chuck Rettig, and that’s why I’m proud to say: “I work for the IRS.”
Chuck Rettig is the 49th Commissioner of the IRS. He joined the agency in October after spending 36 years as a tax lawyer in private practice.
A general partner is taxed on partnership income that comes to him or her in the form of guaranteed payments and profit distributions. Profit distributions are qualified business income (QBI) for the Section 199A 20 percent tax deduction. Guaranteed payments and Section 707(a) payments are not QBI.
To increase QBI, you need to increase the profit distributions and reduce the guaranteed and Section 707(a) payments. Getting to this simple solution is not so easy; after all, this is tax law.
Two points to consider: First, are the guaranteed payments really guaranteed payments or simply a lazy man’s way to distribute profits? Second, should you use the more sophisticated Section 704 partnership allocation rules to get the results you want?
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When you know the rules, you can party with your employees and deduct 100 percent of the cost. Interestingly, if you feed your employees during a training program, your deduction is only 50 percent. Make sure you know the rules that give you the 100 percent deduction for employee entertainment.
The IRS says that the following types of entertainment qualify for the 100 percent employee entertainment tax deduction:
The IRS makes it clear that the above are examples and that other types of entertainment may also qualify for the 100 percent entertainment deduction. The tax code states that “expenses for recreational, social, or similar activities (including facilities therefor) primarily for the benefit of employees” qualify for the 100 percent deduction.
Who Are These Employees?
What does filing an “extension” do?
Why does my Accountant suggest we extend my tax return?
Am I more likely to be audited if I extend?
Should I do anything differently if I am filing an extension or “going on extension”?
Is there anything I can do to avoid filing an extension if I know
I am missing some information now?
If you know you will be waiting until the last minute for one or two documents, you may be able to minimize the chance of having to file an extension by providing all other available documents to us as soon as you receive them. By doing so, we can prepare a draft return for you to review and discuss in advance. And we may be able to add the missing piece of data or last-minute information and complete your returns by April 15.*
The federal filing deadline for 2018 returns will be April 15, 2019.
If we haven't received your information we will likely need to file an extension, please contact us as we can't just file without your written consent and other information.
For 2019 the contributions limit for employees and self employed to participate in retirement plans such as 401(k), 457, tsp and 403(b) has increased by an extra $500 to $19,000. Also, IRAs have increased to $6,000 per year which has also increased by $500. This basically equals an extra $500 tax liability saving if you make contributions at the limit.
For those whom are employed and self employed you can contribute to your employers retirement plan ( and you will want to do this to their percentage of match) and your self employment plan. You want to make sure that you are not exceeding the limit in your combined contributions.
For example if you get paid $150,000 per year as an employee and you put 10% of your earnings in your 401(k), then you can only contribute $4,000 from your self employed since your combined contribution can't exceed $19,000 per year!
Your gift from Lawmakers is the new safe harbor for section 199A rental properties. If you qualify you can take it, its there for you to. According to the trade or business rule, your rental property profits can create the deduction. And now, under an alternative rule, you can use the newly created IRS safe harbor to make your rentals qualify for the deduction.
When you meet the new safe-harbor rules, the IRS deems your rental a trade or business with net rental profits that are QBI for the Section 199A tax deduction. But you may not want to use the safe-harbor rules, because they contain some onerous provisions. Also, you may not qualify to use the safe harbor. No problem. You can simply use the second method and win your 199A tax deduction using the existing trade or business tax law rules.
The IRS has provided some clarity on net capital gains in its section 199A final regulations.
It is possible for Section 199A, the new tax code, may be able to provide your net capital gains with a 20% reduction of your taxable income. The IRS has issued final regulations on Section 199A, along with that clarity they have issued on the capital gains component.
Section 199A often referred to as QBI is a tax deduction that applies to your trade or business income from pass-through entities. If your taxable income is equal to or less than the threshold of $315,000 (married, filing jointly) or $157,500 (filing as single or head of household), you apply the 20 percent to the lesser of your:
For the Section 199A calculation, your net capital gains are
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Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.