Every once in a while, you trip over something that is interesting and worth sharing.
The Wall Street Journal does a great job of helping businesses. Whether getting ideas on technology changes to help businesses grow, or getting a handle on the economy in your industry, using the Wall Street Journal as a resource is helpful.
With that in mind, check out this article about family businesses and their special concerns.
Also check out the small business section of the Wall Street Journal, which may provide even more helpful hints for small business owners.
http://online.wsj.com/article/SB10001424052748703794104575546553171806306.html?mod=WSJ_myyahoo_module
Please note- I am not affiliated with the Wall Street Journal, its companies or affiliates.
Monday, November 15, 2010
Friday, November 5, 2010
8109-B coupons/ Federal Tax payments/ EFTPS
If you are a small business owner you may have recently received a notice from the federal government regarding signing up for EFTPS. The information probably included a PIN and a phone number to contact the IRS directly.
Do not be alarmed by this notice. Also be sure to take note that the IRS is contacting you pursuant to proposed regulation. The fact of the matter is, that many banks are no longer going to accept payment coupons because they see no benefit in offering the service to their customers.
EFTPS is a program that directly transfers amounts from your banking institution to the federal government. You can use either the automated phone system or the online system. At this point in time, we are recommending that all of our clients sign up with EFTPS, as their bank will not be accepting coupon payments in the near future. If you need help making this change please contact your accountant, or check out this link to the IRS website.
http://www.irs.gov/efile/article/0,,id=98005,00.html
Do not be alarmed by this notice. Also be sure to take note that the IRS is contacting you pursuant to proposed regulation. The fact of the matter is, that many banks are no longer going to accept payment coupons because they see no benefit in offering the service to their customers.
EFTPS is a program that directly transfers amounts from your banking institution to the federal government. You can use either the automated phone system or the online system. At this point in time, we are recommending that all of our clients sign up with EFTPS, as their bank will not be accepting coupon payments in the near future. If you need help making this change please contact your accountant, or check out this link to the IRS website.
http://www.irs.gov/efile/article/0,,id=98005,00.html
Medical reimbursement plans for self employed individuals (sect. 105 plans)
We all know that health insurance premiums for self employed individuals (individuals filing Schedule(s) C, E, or F on their personal income tax return) are deductible on the front page of a personal income tax return. The issue becomes much muddier when you have a self employed individual that has a wife and children, whom are not covered under their own plan. One tax smart move, may be to start a section 105 medical plan.
This plan also known as a self-insured medical reimbursement plan offers many benefits (and a few pitfalls, if it is not implemented properly).
Usually, the first step in this exercise is to hire the spouse of the self employed individual as an employee. A helpful hint in this exercise is to draft an employment contract with the spouse employee, highlighting job duties, pay, hours of work required, etc. This employee will receive compensation for his/her work, but much of that compensation may end up being paid through tax-free reimbursements of medical expenses.
The second step is to create the plan. The employer must have a plan document and provide both the plan document and an agreement with all employees.This document offers them coverage under the plan. Keep signed copies of both the plan document and employee offers in a safe place. The plan document should highlight specific definitions, as well as how medical expenses will be reimbursed. In addition, most plans of this type have a maximum dollar amount that the business will reimburse for employees (this as well as other things can be amended in the future).
Benefit(s):
1. For the spouse- They receive medical reimbursements tax free.
2. For the family- They would have previously filed these expenses on Schedule A and had to apply a 7.5% (of AGI) floor against these medical expenses before a deduction would have been available. With this change they do not have to worry about this ‘penalty’.
3. For the business- These items are deductible against self-employment income avoiding the additional tax (SE) on their personal income tax return.
Warning- Follow these steps very carefully and do your homework. There is nothing illegal or improper about these plans, but the IRS is on the lookout for self employed individuals who are not following the rules and attempting to avoid paying their fare share of taxes. For more information consult IRC section 105, your accountant, or tax attorney.
This plan also known as a self-insured medical reimbursement plan offers many benefits (and a few pitfalls, if it is not implemented properly).
Usually, the first step in this exercise is to hire the spouse of the self employed individual as an employee. A helpful hint in this exercise is to draft an employment contract with the spouse employee, highlighting job duties, pay, hours of work required, etc. This employee will receive compensation for his/her work, but much of that compensation may end up being paid through tax-free reimbursements of medical expenses.
The second step is to create the plan. The employer must have a plan document and provide both the plan document and an agreement with all employees.This document offers them coverage under the plan. Keep signed copies of both the plan document and employee offers in a safe place. The plan document should highlight specific definitions, as well as how medical expenses will be reimbursed. In addition, most plans of this type have a maximum dollar amount that the business will reimburse for employees (this as well as other things can be amended in the future).
Benefit(s):
1. For the spouse- They receive medical reimbursements tax free.
2. For the family- They would have previously filed these expenses on Schedule A and had to apply a 7.5% (of AGI) floor against these medical expenses before a deduction would have been available. With this change they do not have to worry about this ‘penalty’.
3. For the business- These items are deductible against self-employment income avoiding the additional tax (SE) on their personal income tax return.
Warning- Follow these steps very carefully and do your homework. There is nothing illegal or improper about these plans, but the IRS is on the lookout for self employed individuals who are not following the rules and attempting to avoid paying their fare share of taxes. For more information consult IRC section 105, your accountant, or tax attorney.
Tuesday, October 12, 2010
Qualified Small Business Stock
One of the most overlooked aspects of incorporating is the use of Qualified Small Business Stock (QSBS), but thanks to recent changes, the use of this stock may be more attractive than ever.
For small businesses forming from September 16, 2010 through December 31, 2010, the excluded gain upon sale of the business may qualify for 100% exclusion.
There are certain limitations as to what type of businesses qualify for QSBS, as well as dollar contribution limitations. But, if you are looking to incorporate a business between now and year end you owe it to yourself to look into QSBS and talk to a tax professional about its benefits and limitations.
Please note- in order to qualify you must hold the stock for at least five years, and other limitations do apply.
For small businesses forming from September 16, 2010 through December 31, 2010, the excluded gain upon sale of the business may qualify for 100% exclusion.
There are certain limitations as to what type of businesses qualify for QSBS, as well as dollar contribution limitations. But, if you are looking to incorporate a business between now and year end you owe it to yourself to look into QSBS and talk to a tax professional about its benefits and limitations.
Please note- in order to qualify you must hold the stock for at least five years, and other limitations do apply.
Start-up expense deductions increased for 2010
Business start-up costs, also known as Section 195 costs can traditionally be expensed up to $5,000. Amounts beyond this limitation must be amortized. However, thanks to recent changes starting in 2010 tax year the allowable expense has increased to $10,000.
Qualified real property expensing
For the first time, certain real property can be expensed under code section 179.
First I will list items that will apply, then I will list specific items that do not apply, then I will talk about further limitations.
So to start out, types of property that definitely apply include:
1. Qualified leasehold improvement property
2. Qualified restaurant property.
3. Qualified retail improvement property
Types of property that do not apply include lodging property.
Further limitations apply to the deductibility of 179 deprecation of real property. One such example is that no amounts may be deducted in a year after 2010, so you must use your deduction in 2010, then depreciate the remaining property value as you would have without considering 179 depreciation, after the 2010 tax year (similar calculation as using section 168(k) bonus depreciation).
First I will list items that will apply, then I will list specific items that do not apply, then I will talk about further limitations.
So to start out, types of property that definitely apply include:
1. Qualified leasehold improvement property
2. Qualified restaurant property.
3. Qualified retail improvement property
Types of property that do not apply include lodging property.
Further limitations apply to the deductibility of 179 deprecation of real property. One such example is that no amounts may be deducted in a year after 2010, so you must use your deduction in 2010, then depreciate the remaining property value as you would have without considering 179 depreciation, after the 2010 tax year (similar calculation as using section 168(k) bonus depreciation).
Section 179 Deduction increased for 2010 & 2011
Thanks to the small business jobs bill, key business deductions have been extended through 2010. One of which is the section 179 deduction. For 2010 and 2011, section 179 depreciation has been increased to a maximum allowable $500,000 per business per year (limited to the extent of income). This bill also increased the beginning phase-out of property placed in service limitation to $2,000,000.
Subscribe to:
Posts (Atom)