By topic: Payroll
The Work Opportunity Tax Credit rewards your good deeds. And now, because of new legislation, the rules are in place for longer than usual. If you need to hire workers in your business, this dollar-for-dollar reducer of your taxes is one to know about.
The tax law can jump up and bite you in unexpected places. One example of that is the nanny tax.
This is likely it—your last chance to obtain first- and second-draw Paycheck Protection Program (PPP) monies. A new law, the PPP Extension Act of 2021, extends the expiration date to the later of May 31 or when the money runs out. Note the phrase “when the money runs out,” and be forewarned that this can happen within weeks. So, don’t procrastinate—not even for one day.
When Congress passed the CARES Act, it gave small-business owners like you two choices: get tax-free Paycheck Protection Program (PPP) monies or take the employee retention credit (ERC). Fast-forward to the new law enacted on December, 27, 2020, and you will find that you can now benefit from both programs, retroactive to March 13, 2020, as you see in this article.
Congress created the employee retention credit (ERC) to help your business that continued to pay employees even though it was impacted by COVID-19. Fast-forward to the new American Rescue Plan Act of 2021, and now you can potentially take an ERC of up to $100,000 during the last six months of 2021 if you start a new business during the pandemic. In this article, we’ll explain how this valuable provision works and the net amount it can put in your pocket.
Congress created the COVID-19 employee retention credit to help employers continue to pay employees while affected by the COVID-19 pandemic. The Consolidated Appropriations Act, 2021, and the American Rescue Plan Act expanded access to this tax credit in both tax years 2020 and 2021. In this article, you see how a small-business owner calculates and claims this most beneficial tax credit.
If you have fewer than 20 employees (including none because you are self-employed), the SBA is in the process of trying to help you. Two things are going on. First, you have an exclusive window to obtain your Paycheck Protection Program (PPP) money without competition from the big guys. Second, if you are self-employed, the SBA is creating a mechanism for more PPP money for you.
When you operate a business, you have a variety of tax breaks available. The recently enacted Consolidated Appropriations Act extends and expands some of the breaks. We bring them to your attention as a tax-strategy buffet. You will find tax breaks you can use right away and others that can be used perhaps retroactively.
Do you operate your business as an S corporation? It’s a popular choice due to the tax savings you benefit from. But if you don’t avoid the pitfalls, you risk losing those valuable tax benefits. Download this guide to maximize your S corporation tax savings and avoid common missteps.
Two things to know about the Paycheck Protection Program (PPP) first draw: (1) The first draw is for those who missed getting in on the original PPP, which expired on August 8, 2020. (2) Don’t think of a PPP draw as a loan. It’s not a loan. It’s a cash infusion. You have to repay a loan. You don’t have to repay the PPP funds.
As part of the March 2020 CARES Act, Congress created a COVID-19 employee retention credit to provide financial support to businesses to maintain payroll. But this credit was not available if you took a PPP loan. Now, thanks to the new COVID-19 relief law enacted December 27, 2020, a business with a PPP loan can retroactively claim employee retention tax credits.
A small business retirement plan can be a great way to defer income taxes and build net worth. But knowing the right plan for your small business and which plan will allow you to save the most requires some understanding of the tax laws. Choosing the wrong plan can cost you more than just taxes—it can cost you an opportunity to retire early.
The massive new stimulus law contains eight new tax breaks that help the average non-business taxpayer. These include something for everyone, both rich and poor. Wealthy taxpayers can contribute more to charity and still get a deduction; average people get an extension of the universal charitable deduction; and low-income taxpayers can get a larger earned income tax credit. Popular programs such as the lifetime learning credit are expanded to help more people. The bill also extends some favorable tax rules, such as the 7.5 percent adjusted gross income floor for the medical deduction.
Lawmakers and the IRS disagree on whether you are permitted to deduct the expenses you pay with your Paycheck Protection Program (PPP) loans. The problem started with poor drafting of the original forgiveness wording by the lawmakers. The IRS says it has to follow that bad drafting and disallow deductions for expenses paid with PPP loans. There’s much to this story, as you will learn in this article.
Download your PDF copy of the 2020 retirement plans desktop reference for one-person businesses.
Does your business have a retirement plan for you and your employees, if any? It should. You have more new reasons in 2020 to get your retirement plan in place and perhaps make changes in existing plans.
Business owners who have established 105-HRAs, Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), and Individual Coverage Health Reimbursement Accounts (ICHRAs) to reimburse their employees for medical expenses need to pay an annual fee to help support the Patient-Centered Outcomes Research Institute (PCORI).
Following a presidential executive order, the IRS says employers can stop withholding and paying employee Social Security taxes for the rest of 2020. But employers who do so face potential risks. Do employers have to accept the offer?
Tax law definitions do not apply to much of the Payroll Protection Program, making it new ground for owners of S corporations. Here are answers to four questions of concern to many S corporation owners.
If you report your business income and expenses on Schedule C of your Form 1040, your PPP loan forgiveness is straightforward, as you see in the five answers in this article.
In this article, we offer insights into (1) how good faith at the time of the PPP application works; (2) the differences in the PPP, EIDL advance, and EIDL; (3) the possibility of automatic loan forgiveness without applying for it; and (4) the four categories of owner-employees.
The COVID-19 pandemic may create tax benefit opportunities for you and your family members. For example, you could hire your under-age-18 children, pay them, say, $10,000 each, and they could pay zero federal income taxes. And you or your corporation, the employer, would deduct the $10,000 you paid to each of the children. The child wins. You win. There’s more, as you will see in this article.
Congress passed many tax benefits for small-business owners due to the COVID-19 pandemic. But if you are an S corporation owner, you likely know that the tax law sometimes treats you, as a more-than-2-percent shareholder, differently from other employees. In this article, we explain how the most common COVID-19 tax provisions impact the S corporation owner specifically.
Millions of small-business owners like you are getting PPP loans and looking forward to non-taxable loan forgiveness. But how does this impact your tax deductions for the expense payments you use to qualify for that forgiveness? The IRS just gave us its opinion, as you will find in this article.
The federal government has given you many ways to find relief from the effect of COVID-19 on your business. You have to like the rescue. But it does require you to make choices as to which assistance to accept, because the selection of one type may preclude benefiting from a second type.
COVID-19 has hit American businesses hard, to say the least. You may be eligible for up to $10 million to help pay workers and keep your doors open under a brand-new SBA program. And with this program, you may qualify to obtain some loan relief.
When you operate a husband-wife partnership, you likely are paying far more than you need to pay in self-employment taxes. This article gives you three strategies you can use to save some serious money on the payment of self-employment taxes.
A special tax loophole exists for disaster-related payments. Such qualified payments are deductible by the payor and tax-free to the recipient. The COVID-19 pandemic qualifies as a disaster and activates this tax benefit. We’ll tell you how both you and your employees can benefit from this provision today.
If you are in business for yourself—say, as a corporation or self-employed—payroll taxes and self-employment taxes are likely two of your biggest tax burdens. Here’s some possible good news: Congress decided to give you significant relief from these taxes due to the COVID-19 pandemic. We’ll tell you what relief options are available and whether or not you qualify.
With incentive stock options (ISOs), you could be on your way to a very nice payout. But you must consider both the regular federal income tax results and the alternative minimum tax results. In addition, you must pay attention to special rules that apply to so-called disqualifying dispositions of shares acquired by exercising ISOs. This sounds complicated, and it is a little, but we help you find clarity in this article.
If you’re a business owner, should you take advantage of per diems when you travel? The short answer is yes and no—and perhaps surprisingly, keeping track of your actual expenses is often a better plan anyway. Here’s why.
You or your spouse may have the opportunity to obtain non-qualified stock options. Or you may have your corporation issue non-qualified stock options to its employees. In all cases, you will want to know both how these options work and what happened to Sheedy.
If you have employees who travel for your business, would the IRS travel per diem method simplify your record keeping and reduce your risk of audit disallowance?
Download your PDF copy of the retirement plans desktop reference for one-person businesses.
Many workers across the U.S. are going to suffer improper reclassifications because of the California Supreme Court’s decision in Dynamex and the resulting new California law. As you will see in this article, the Tax Cuts and Jobs Act (TCJA) compounds the tax problems for the workers who are reclassified.
The tax code has a carve-out that creates statutory employees out of certain independent contractors. These contractors receive a W-2 with the “statutory employee” box checked, which means that the contractor reports the W-2 income and associated business expenses (including a Section 105 plan) on his or her Schedule C.
Why is it wrong for the sole proprietor to pay himself or herself a W-2 wage? Also, why is it wrong for a partner to be paid by the partnership as a W-2 employee?
We took a deep dive into the 263 strategy articles that apply to the self-employed and pulled out 10 that you should spend time with.
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.
The Affordable Care Act’s $100-a-day penalty for improper medical reimbursements likely has your attention. 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.
When you are in business for yourself, you have options when it comes to creating tax deductions for your health insurance. The tax rules treat Medicare as health insurance, and that means you have options for how to create your tax deductions for Medicare.
If you operate your business as a corporation but own the business car personally, you have no vehicle deduction possibility without corporate reimbursement, because the Tax Cuts and Jobs Act does not allow employee business expenses for years 2018 through 2025.
The answer in this article explains how the S corporation can pay the solo owner-employee’s individually purchased health insurance without worrying about the $100-a-day penalty.
Your Section 199A tax deduction disregards W-2 wages when your Form 1040 taxable income is equal to or less than $315,000 (married, filing jointly) or $157,500 (filing as single or head of household). Also, you don’t have to think about wages for your out-of-favor business if you have taxable income above $415,000 (married, filing jointly) or $207,500 (filing as single or head of household). But if you are in a group that needs to consider the wages your business paid you and your employees, you have to follow the rules set out by the IRS, as we explain in this article.
The Tax Cuts and Jobs Act tax reform added new tax code Section 199A that gives owners of pass-through businesses a possible 20 percent tax deduction on business income. Inside the rules for qualification, you find some complications that give rise to many questions. In this article, we answer seven of those questions.
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. This article gives you six action steps for 2018 that can help you reduce your taxes and pocket extra money.
Starting now, this year (2018), you have to consider your Section 199A deduction in your year-end tax planning. If you don’t, you could end up with a big fat $0 for your deduction amount. We’ll review four year-end moves that (a) reduce your income taxes and (b) boost your Section 199A deduction at the same time.
Learn how your continuous learning employees probably suffer because of the Tax Cuts and Jobs Act. It’s likely good business for you as a business owner to ease that suffering to encourage this continuous learning. On the personal side, you’ll find the tax law subsidies for your individual education to your liking.
In many business environments, you compete for employee talent in a variety of ways, including perhaps by implementing a medical and family leave policy. The good news on this front is that your federal government may have given you a tax credit (yes, that lovely dollar-for-dollar offset to your taxes) for what you wanted to do anyway.
You have three good reasons to get your qualified small-business health reimbursement account (QSEHRA) in place on or before October 2. First, this avoids penalties. Second, your employees will have the time they need to select health insurance. Third, you will have your plan in place on January 1.
How will you fare with the new Section 199A tax deduction? This article can help you make sure that you realize the 20 percent deduction. It’s simply a tax gift if you qualify. And you can do some planning to help you qualify, but you may have to start now.
More than 2 percent shareholder-employees of S corporations don’t catch a lot of breaks when it comes to the taxation of fringe benefits. But arming yourself with the correct information will help you maximize your deductions and avoid costly penalties.
If you or you and your spouse own your business and you have children, you need to consider the financial benefits of hiring those children to work in your business. Some businesses benefit more than others, but almost all businesses likely come out ahead with this strategy. And every business needs to thank tax reform for the new increased standard deduction that a business owner’s child can use to pay zero in taxes.
You could (and can) deduct your costs for reimbursing employees for their qualified bicycle transportation costs. But tax reform now makes this bicycle transportation benefit a taxable event for your employees. As you will see in this article, even though the reimbursements are now taxable to the employees, you likely should continue the benefits.
You can pay your child to work in your business and get paid for paying your child. Yeah, we know. You think this sounds too good to be true, but it’s true. For how the government pays you and why this works, read this article.
It’s about as good as it gets when you see the words “tax-free” in the tax law. Under the de minimis fringe benefit rules, your business deducts the cost of giving you or your employees flowers, fruit, books, and similar property under special circumstances. The recipients—you or your employees—receive the de minimis fringe benefits tax-free.
The IRS hit the Mescalero Apache Tribe with a bad result in an employee classification audit. The tribe took the IRS to the Tax Court and forced the IRS to turn over records on the tribe’s workers’ tax payments that will substantially reduce its tax bill. If you have a worker classification issue, you will want to know what the tribe did and why.
If you have employees who have worked for your business for years and years, you might be thinking of buying them something as a way of showing your appreciation. If you follow a few rules, you can make those presents “employee achievement awards”—and thus tax-deductible for the business and tax-free for the employees. (Depending on how you operate your business, you might even qualify as an employee eligible for the tax-free award.)
Do you pay yourself on a 1099 for the work you do in your S corporation? Why wouldn’t you, right? It makes life so simple. No payroll taxes to deal with, no withholding deposits, and no payroll services to pay for. Stop right there! Your simple life is about to get very complicated unless you make a change right now.
Small start-up businesses have an unprecedented new way to save money, and it does not involve income taxes. The new way to save money is on your payroll taxes. How? By applying research and development credits to your payroll tax bill.
Business owners and employees who do not pay their payroll taxes can find themselves personally liable for the trust fund portion of those taxes. This is true even if the business operates as a separate legal entity such as a corporation. If you are a business owner or employee in trouble with the IRS over unpaid payroll taxes, you need to consider strategies you can use to stop the IRS from assessing the trust fund penalties against you.
If you plan on paying a nanny at least $1,900 during 2015, then you need to pay the nanny tax (payroll taxes from you, the employer). This strikes fear into many taxpayers who think this is a HUGE HASSLE and a HUGE EXPENSE. But there’s no need to fear this tax. In this article, you learn how you can offset most, if not all, of the tax expense with the help of a couple of tax breaks. In fact, you may actually end up with more money in your pocket in the end.
How to Avoid Thousands in Federal Taxes and Penalties If You Misclassified Employees as Independent Contractors
You likely want to hire independent contractors whenever possible. But if you are bending and breaking the rules, you face big back taxes, horrific penalties, and interest. So, a question for you: Have you been misclassifying your workers? If so, the IRS has a good deal that lets you off the hook with just a tiny payment. We’re talking a fraction of what you would otherwise owe if you lost your contractor classification in an IRS employment tax audit.
Have you been longing for the good old days when you could offer a Section 105 health plan to your employees without having to comply with the new Obamacare rules? Well, you can still offer such a plan—provided that you limit the benefits to vision and dental.
You save employment taxes when you hire workers as independent contractors. But you want to make certain that the workers are indeed contractors, or you could subject yourself to some expensive tax penalties. In this article, we show you three steps to independent contractor status for your workers.
Whether or not you complied with Obamacare last year, we have some big news for you. It’s no problem, compliance or not, and either way the news is big for two reasons. First, if you failed Obamacare compliance in 2014, the IRS likely just released you from the monstrous $100-a-day penalty. Second, if you did it right, you may have overtaxed your employees and now, with the new IRS guidance, you can undo that overtaxation.
A November 2014 FAQ from the Department of Labor created quite a scare for S corporation owners, raising the possibility of huge Affordable Care Act (ACA) penalties simply for deducting your health insurance premiums according to IRS guidelines. However, a recent IRS notice explains how you can now safely avoid these penalties and claim your rightful deductions.
Trust, but verify. That’s the motto you should have when it comes to your payroll tax payments. You likely have a professional or business associate take care of your tax filing and payments. But you could save yourself a lot of trouble down the road by knowing how to verify that your trusted associate has done what he or she claimed to do.
The Affordable Care Act allows you to pay for employee insurance by increasing taxable compensation. But that’s not the route you want to take, since it means more taxes for both you and your employees. This article gives you ideas on how to pay for employee insurance without hiking up your tax bill.
The number one way for S corporation owners to pay fewer taxes is to set the right salary. To do this, you want to find the salary sweet spot—an amount that is low enough to save you taxes but high enough to satisfy the IRS and not create a risk of audit. This article summarizes the important cases and rules you need to know in order to determine the right salary for your business.
You never, ever want to borrow money from this one place. It’s poisonous. If you don’t suffer immediately, you might wish you had. This is a situation in which the money is readily available, you think it’s yours, and you think you are simply borrowing the money. But that’s not what’s happening. You are in truth stealing the money and violating your fiduciary responsibilities.
If you operate your business as a proprietorship and hire your spouse as an employee, you likely have questions about the need to pay wages to make your spouse a bona fide employee. And you likely want your spouse as a bona fide employee who receives as a tax-free fringe benefit a Section 105 medical reimbursement plan—family coverage, of course.
If you own rental property in your name or in the name of a single-member LLC, you report your rental property income and expenses on Schedule E of your IRS Form 1040. But what happens when you have an expense for which the IRS has not created a line item on the form? Answer: If it’s an ordinary and necessary expense, it’s deductible.
That ugly alternative minimum tax (AMT) can raise its snakelike attack when you least expect it. In this court case, by changing the medical practice from a solely owned corporation to practicing as an employee of an education institution, the surgeon looked squarely in the eyes of the AMT and lost almost $20,000.
If you are an S corporation owner and you buy health insurance for yourself or your family, you need to follow the IRS rules described in this article in order to protect your tax deductions for the health insurance premiums. You also learn how to escape the Obamacare penalties for group health care even if you discriminate against your employees.
If you want to cover your employees with group health insurance but worry that the price tag will skyrocket your budget, you need to read this article. You will learn how to limit your annual cost and provide tax breaks to employees for their share of premiums. By following some or all of the strategies, you can drop your after-tax cost of group health insurance coverage.
Find out how giving stock in your S corporation rather than the same dollar amount in cash can save you over $6,000. Until recently, this income-splitting strategy worked only when giving to adults, but because of the recent Obamacare tax, you now get a benefit when you shift money to your children.
You provide your employees with an automobile for business use. You know that their personal use of the vehicle must be included in their wages, but how do you calculate that amount? What valuation rules are available? This article tells you what your choices are and how to apply them.
This article answers Section 105 medical reimbursement plan questions from two 1099 independent contractors, a husband and wife, who work for the same firm but file separate Schedule Cs. The good news is that they can substantially increase their medical deductions by using a Section 105 medical plan where one spouse becomes the employer-spouse and the other becomes the employee-spouse.
The Federal Housing Authority (FHA) guarantees loans so that lenders can make mortgage loans with lower down payments, lower closing costs, and easier credit qualifications. When the mortgage crisis hit, the FHA changed the rules for mortgage companies that had independent contractors brokering FHA mortgages. The change allowed only W-2 employees to sell FHA loans, and thus many mortgage companies converted their brokers from independent contractors to W-2 employees. For many, this new W-2 status produces a totally unfair tax result that can be overcome with knowledge.
If you have workers who are paid on a 1099 as independent contractors, you need to avoid one fatal mistake. When you make this fatal mistake, you subject your worker employment classification to either the tax court’s common-law seven-factor test or the IRS’s 20-factor common-law test. Both of these tests are hard on the employer and often result in harsh reclassification of the 1099 independent contractors to W-2 employee status.
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 lot of trouble, so why bother? Because if the money has been stolen, you (1) are out the money and (2) have to pay that same amount to the IRS. If you have to pay twice, you are going to be furious. Don’t let this happen.
The flow chart in this article helps you visualize what needs to happen at the S corporation for the owner-employee to get any tax benefit from health insurance. The tax rules are not what you would call logical, but the flow chart clarifies the rules and gives you the path to follow to ensure your tax deductions.
As you likely know, tax law contains a number of rather ugly rules. One such rule is the disallowance of 50 percent of certain meal and entertainment costs. For example, party with your employees and get a 100 percent deduction, but have a serious meeting with your employees in a restaurant and you are stuck with the 50 percent deduction. Interestingly, there is a totally different rule that gives you better tax deductions when you serve the business meal to your employees at a meeting that takes place on your business premises.
Employees complicate your retirement plan design, but you have many design options. This article takes you through six plan designs that open your eyes to the many possibilities you have to ensure that you get from your retirement plan the maximum retirement benefits you want.
Have you considered the options that are available to you in designing your retirement plan? In this article, you will see how you might put away as much as $214,404 when you earn only $140,000. On the other hand, you might not want to put anything into retirement this year, and this article explains how your plan design can enable a zero contribution.
CPA subscriber points out that for the Section 105 medical reimbursement plan to work, marriage is not required.
You might justify a zero salary to the owner of an S corporation in the right circumstances. But there are some pitfalls, particularly if your purpose is to avoid payroll taxes. Further, and this is often overlooked, state law can come into play on the zero-salary game.
To know if the S corporation is the best choice of entity for your business, first you need to consider three advantages and nine disadvantages. Next, you need to take the S corporation advantages and disadvantages that apply to you and get a bottom-line number comparison with your second choice for an operating entity. In this way, you can make a logical choice, knowing that your best choice will stay with you for a number of years and let you pocket more after-tax cash while you sleep better at night.
Do you operate your business as a corporation, an LLC, or a proprietorship? Your choice of entity impacts a variety of tax deductions, and now the cell phone creates a win for the corporate owner and a loss for the proprietorship and the single-member LLC.
The IRS admits that its regulation that made the single-member LLC a corporation for payroll tax purposes is unfair to small business family employment. To right this wrong, the IRS allows the single-member LLC to use the family employment rules to exempt FICA and Medicare taxes retroactively to January 1, 2009. The regulation granting this change expires on or before October 31, 2014.
New IRS Forgiveness Program for Improper 1099 Payments to W-2 Employees Is Not the Gift It Appears to Be
Is your worker an independent contractor or an employee? You want to get this right at the beginning. But if you improperly classified an employee as an independent contractor, the IRS has a tax penalty relief program for you. Should the IRS plan not have the best relief for you, consider the Section 530 employer protection plan.
In the right circumstances, the single-member limited liability company (LLC) gives you corporate liability protection combined with easy Schedule C (proprietorship) rules for your tax return. In this article, you learn the two tax advantages and two tax disadvantages to the single-member LLC.
Tax law makes it hard for the owner of an S corporation to win deductions for his health insurance. First, the corporate-provided health insurance is not a tax-free fringe benefit for the owner. Second, the S corporation has to pay for the health insurance or the owner will suffer a loss of tax deductions. Third, the S corporation payment for the health insurance will produce wages either exempt or nonexempt from FICA and Medicare taxes. This article shows you how to make the three tax deduction rules work for you.
The appeals court remanded the Shellito case back to the Tax Court along with its road map for establishing the Section 105 plan. In the right circumstances, the 105 medical plan creates tax deductions where none existed before, and its tax-free fringe benefits can operate as the sole remuneration to the employee-spouse.
If you want to operate your business as an S corporation, you need to recognize that the S corporation is a separate legal entity and that you are an employee agent of that corporation. You also need to ensure that the S corporation is the earner of the income. You may not assign your income to your corporation.
Your business ownership creates an opportunity for a tax plan that can give you tax deductions for hiring your children and can give your children tax-free income. But your tax plan does not stop there. Your children might start Roth IRAs where they can invest their tax-free income in a college fund. Done right, as described in this article, the government pays you for your help with this plan.
Does your chart of accounts contain two categories for your business entertainment tax deductions? It should. Your tax deduction for an employee party goes into a different deduction category from your regular business entertainment. Learn about the two accounts and how to get more tax deductions when you party with your employees.
The courts have determined that the alternative minimum tax (AMT) cheats many commissioned W-2 employees out of their rightful deductions. To fix this problem, the courts have allowed certain commissioned W-2 employees to move their employee business expenses from the IRS Form 2106 itemized deduction category to the tax-advantaged sole proprietorship on Schedule C.
Learn how to avoid payroll tax problems when you hire a nanny or other household worker. Your best bet is likely a payroll service that specializes in “nanny tax” compliance.
The defined benefit retirement plan might be your choice of retirement plans if you are age 50 or older and your business earns a healthy income.
You are not self-employed for tax purposes just because your employer says so. This is true even when your employer is the British consulate general.
Does the Proprietorship Exemption from Payroll Taxes Apply when the Owner of a Single-Member LLC Hires His 15-Year-Old Child?
The single-member LLC is a disregarded entity for federal income tax purposes, but a corporation for employment tax purposes.
This is the second article in our series on the best small-business retirement plans. Here we identify the four major advantages and three disadvantages to the SEP.
You need preventative steps to ensure that you are paying the wages you think you are paying to your employees and that your payroll tax deposits are actually being sent to the IRS and not to an embezzler’s pockets.
Tax law creates trouble for selected fringe benefits that the S corporation gives to a more than 2 percent shareholder. The loss of benefits and accompanying complications are factors to consider in the selection of the S corporation as your choice of business entity.
Do you provide supper or other meal money when you require your employees to work overtime? If so, is the meal money a tax-free fringe benefit or is it additional W-2 compensation to the employees?
Under the right circumstances, you can provide tax-free lunches to your employees. That’s nice. But what about you? How do you, the business owner, qualify for this tax-free fringe benefit?
Tax credits are a true incentive for the business owner. They reduce taxes dollar for dollar. Now, you have waiting for you a hefty 35 percent tax credit on small-business health insurance coverage for employees. Here are the rules you need to know.
Do you own a business that withholds taxes from employees? If so, you need 100 percent certainty that the withheld payroll tax monies are going to the IRS. You can achieve 100 percent certainty with the IRS EFTPS registration..
You can use the transportation fringe benefit in lieu of wages. In fact, you can ask the employee to take a pay cut equal to the transportation fringe benefit. Amazingly, this swap of a pay cut for the transportation fringe benefit works out to give the employee an after-tax cash raise in pay and it puts cash in your pocket too.
You can use a Section 127 education plan to obtain tax benefits for yourself (or your corporation) while you help your grandchild through college or other learning.
As a subscriber, you may download this sample Section 127 educational assistance plan in Microsoft Word. Then, simply modify the document to your business use.
With net business income less than $115,647, the sole proprietor with two qualifying children and a stay-at-home spouse can hire the spouse and pay a wage of $6,000 to create a $1,200 child care credit with no change in their joint income taxes—other than realization of the $1,200 credit.
The law gives you no choice but to keep the proper tax records on a timely basis. This is pretty easy when you know what to do. One easy rule to follow is to never commingle your activities in your bank accounts. Both the rule that requires a mileage log and the rule that requires a time log are more difficult, but absolutely essential to proving your deductions.
Answering “yes” to the 11 puts you on the road to audit-proof status for your Section 105 medical reimbursement plan.
This proprietor paid his employee-wife $12,000 in wages. Now, she wants to contribute the entire $12,000 as an elective deferral to her 401(k) account but she no longer has $12,000 because of payroll taxes. With some mechanical adjustments, the employee-wife may contribute the full $12,000.
The IRS is not a forgiving entity. Even if a fraudulent payroll service is charged criminally, as in this case, you are still responsible for the taxes you owe. We give you a sound strategy to avoid payroll fraud.
Business owners, do not be tempted to “borrow” payroll taxes to contribute to the company. This is not only illegal (with penalties), but might leave you personally liable for the stolen money.
If you hire your spouse, you can save a lot of money in taxes by not paying him/her a wage. Instead, cover him/her and your family with medical benefits under Section 105.
When you receive a 1099 or a W-2, you should file a tax return even if no return is required.
The kiddie tax applies to unearned income. It does not apply to earned income.
Vigilance pays off. This payroll service did not know this rule: wages paid by a parent to his under-age-18 child are exempt from payroll taxes.
The expansion of the kiddie tax to children under the age of 18 has zero negative effect on the hire-your-child strategy.
The W-2 reporting requirements exempt the Section 105 medical plan reimbursements from entries on the W-2.