It’s common to consider making your S corporation (versus yourself) a partner in your partnership: it saves you self-employment taxes.
Does this affect your Section 199A deduction? It does.
Guaranteed payments are not qualified business income (QBI) for the Section 199A deduction.
The non-QBI guaranteed payment rule applies whether the partner receives the payment as an individual or as pass-through income from an S corporation.
Your only options to claw back your Section 199A deduction with the S corporation as a partner are to
Keep the S corporation self-employment tax savings in mind when considering your partnership activity. Often the savings can make the S-corporation-as-a-partner strategy well worth it.
If you would like me to run your numbers to see the best savings possibilities for you, contact us!
Is your last payment of payroll taxes in the hands of the IRS or in the hands of an embezzler?
How would you know?
There’s one easy way to know: simply use the IRS’s online service to check. But that’s a bit of trouble, so why bother?
Because if the money has been stolen, you (1) are out the original money and (2) now have to pay a duplicate amount to the IRS. If you have to pay twice, you are going to be furious. Don’t let this happen.
Here’s a totally underutilized trick to checking on your payroll monies: simply log in to your IRS tax account to see whether the IRS got the payroll tax money.
That’s right, the IRS makes your tax payments available to you online with its Electronic Federal Tax Payment System (EFTPS). You can log in to the EFTPS system and see whether the IRS has your payroll money.
I am happy to review with you this system and others that can protect you. If you would like my help.
Lincoln imposes the first federal income tax on this day in 1861 by signing the Revenue Act. Almost Penniless during the Civil War, Lincoln and Congress agreed to impose a 3% annual income tax of more than $ 800.
Revenue was defined as any income in the form of a gain, from any professional trade, employment or vocation carried in the United States or elsewhere, derived from any kind of property or from any source whatever, According to the U.S. Treasury Department. Lincoln defined Revenue as this due to his concern with maintaining Federal Authority over collecting the Revenue. Our ForeFather!
Wow 3% of $801 is about $24, so they were at least guaranteed to get about $24 per household.
Many IRA and retirement plan limits are indexed for inflation each year. On November 6, 2019, the IRS (Notice 2019-59) announced the inflation-adjusted numbers for 2020.
The maximum IRA contribution for 2020 is $6,000, unchanged from 2019 (the catch-up limit for those 50 and older also remains unchanged at $1,000). However, certain phaseout ranges for determining the deductibility of traditional IRA contributions, and for determining whether an individual can contribute to a Roth IRA, have increased for 2020.
For employer-sponsored retirement plans, the elective deferral limit for 401(k), 403(b), and 457(b) plans increases to $19,500 for 2020, and the catch-up limit increases to $6,500. The maximum amount that can be contributed to a defined contribution plan for 2020 increases to $57,000, and the maximum amount of compensation that can be taken into account in determining benefits for most plans for 2020 increases to $285,000.
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You’ll find much beauty and little beast in using a single-member LLC for your real estate ownership.
Should you use a single-member LLC as a real estate ownership vehicle?
That might be a very good idea.
Under the so-called check-the-box regulations put out years ago by the IRS, you can generally ignore the existence of a single-member LLC for federal tax purposes.
The exceptions are
When you choose not to treat a single-member LLC as a corporation for federal income tax purposes, the single-member LLC has disregarded entity status for those purposes, and we will call it a “disregarded single-member LLC.”
The federal income tax treatment of a disregarded single-member LLC is super-simple because its activities are considered to be conducted directly by the single-member LLC’s sole member (owner).
For instance: When an individual (like you) uses a disregarded single-member LLC to own rental real estate, you simply report the federal income tax results on Schedule E of Form 1040. You need not file a separate federal income tax return for the single-member LLC.
You get the idea. This is easy!
Although you ignore a disregarded single-member LLC for federal income tax purposes, it is not ignored for general state-law purposes.
Therefore, a disregarded single-member LLC will deliver to its sole member (owner) the liability protection benefits specified by the applicable state LLC statute. The liability protection benefits are usually similar to those offered by a corporation.
The bottom line. With a disregarded single-member LLC, you get super-simple tax treatment combined with corporation-like liability protection. This happy set of circumstances opens up planning opportunities in the real estate arena.
If you would like to learn more about how the single-member LLC for your real estate investments can work to your advantage, book a Business Consultation today!
Marriage, Kids, and Family!
If you are thinking of getting married or divorced, you need to consider December 31, 2019, in your tax planning.
Here’s another planning question: Do you give money to family or friends (other than your children who are subject to the kiddie tax)? If so, you need to consider the zero-taxes planning strategy.
And now, consider your children who are under age 18. Have you paid them for work they’ve done for your business? Have you paid them the right way?
Here are five strategies to consider that you can put in play before the end of 2019.
1. Put Your Children on Your Payroll
2. Get Divorced after December 31
3. Stay Single to Increase Mortgage Deductions
4. Get Married on or before December 31
5. Make Use of the 0 Percent Tax Bracket
I know that taxes can cause confusion. Remember, that’s why you have me, and I’m always here to be of service. If you want to discuss any of the strategies above, please book your consultation today. You can also contact us at 833-438-2937.
When you get busy with your business, it’s easy to forget about your retirement accounts and medical coverages and plans.
But year-end is approaching, and now’s the time to take action.
Here are the six strategies that you can implement before the end of the year. Five of the strategies increase your tax deductions, and one (the Roth) strategy increases your retirement benefits.
If you need more insights into these strategies, please call me on my direct line at 262-358-8297
To help you understand business travel, consider this:
You planned a personal trip to Los Angeles, arriving on Friday afternoon and leaving on Sunday afternoon.
About a week later, you learn that a vendor you need to meet with is going to be in L.A. when you are. You arrange a dinner on Friday night to finalize negotiations on a large contract.
Can you now deduct 100 percent of your flight expenses to Los Angeles? How about meals?
Trouble. You must have business as your primary purpose for the trip. In general, a business trip can involve two types of business days:
This trip we created for you works like this:
But let’s say you had this situation: you travel on Friday to meet with the vendor on Saturday and return home on Sunday, is your trip deductible?
Contact us we will help you navigate through these rules.
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
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.