S corporation compensation requirements are often misunderstood and abused by owner-shareholders. An S corporation is a type of business structure in which the business does not pay income tax at the corporate level and instead distributes (passes through) the income, gains, losses, and deductions to the shareholders for inclusion on their individual income tax returns. If there are gains, these distributions are considered return on investment and therefore are not subject to self-employment taxes.
However, if stockholders also work in the business, they are supposed to take reasonable compensation for their services in the form of wages, and of course, wages are subject to FICA (Social Security and Medicare) and other payroll taxes. This is where some owner-shareholders err by not paying themselves a reasonable compensation for the services they provide, some out of unfamiliarity with the requirements and some purposely to avoid the payroll taxes.
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Tags:
Small Business Accounting,
Payroll Tax,
Individual Tax,
Business Entity,
Tax Liability
Alimony is the term used for payments to a separated spouse or ex-spouse as part of a divorce or separation agreement. Since 1985, to be alimony for tax purposes, the payments:
- Must be in cash, paid to the spouse, ex-spouse, or a third party on behalf of a spouse or ex-spouse;
- Must be required by a decree or instrument incident to a divorce, a written separation agreement, or a support decree;
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Tags:
Tax Reform,
Individual Tax,
TCJA,
Strategic Planning,
Alimony
Tax reform has changed the way most taxpayers need to think about and plan for their taxes. It is no longer business as usual. Advanced planning will become very important long before tax time next year.
For most taxpayers, the most significant change is the increase in their standard deduction, which on the surface seems like a big benefit. But, don’t overlook the fact that the same tax reform that nearly doubled the standard deduction took away the personal exemption as a deduction.
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Tags:
Itemizing Deductions,
Tax Planning,
Tax Deductions,
Tax Deductible Travel Expenses,
Business Tax,
Individual Tax,
TCJA
Although the drop of the corporate tax rate from a top rate of 35% to a flat rate of 21% may be one of the most talked about provisions of the Tax Cuts and Jobs Act (TCJA), C corporations aren’t the only type of entity significantly benefiting from the new law. Owners of non-corporate “pass-through” entities may see some major — albeit temporary — relief in the form of a new deduction for a portion of qualified business income (QBI).
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Tags:
Small Business Accounting,
Small Business,
Individual Tax,
TCJA
As a business owner, you know that it’s easy to spend nearly every working hour on the multitude of day-to-day tasks and crises that never seem to end. It’s essential to your company’s survival, however, to find time for strategic planning.
Business owners put off strategic planning for many reasons. New initiatives, for example, usually don’t begin to show tangible results for some time, which can prove frustrating. But perhaps the most significant hurdle is the view that strategic planning is a time-sucking luxury that takes one’s focus off of the challenges directly in front of you.
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Tags:
Small Business,
Strategic Planning
If creating a start-up business were an easy thing to do, then a lot more people would be doing it. For those who make the decision to fulfill their dreams and go for it, success relies on being fully prepared. Some of the most common stressors encountered by entrepreneurs involve tax liabilities, whether business is booming or they’re struggling to keep their head above water. The best way to avoid these pitfalls is to learn about them ahead of time. Here’s what every entrepreneur needs to know:
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Tags:
Small Business Accounting,
Selecting an Accounting Firm,
Small Business,
Business Entity
If you have already filed your federal tax return and are due to receive a refund, you can check the status of your refund online.
Where’s My Refund?
is an interactive tool on the IRS website. Regardless of whether you have split your refund among several accounts, opted for a direct deposit into one account, or asked the IRS to mail you a check,
Where’s My Refund?
will give you online access to your refund information 24 hours a day and 7 days a week.
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Tags:
Business Tax,
Individual Tax,
Tax Refund
If you aren’t one of those lucky Americans who gets a tax refund from the IRS you might be wondering about your options for paying off your tax liability by the April due date.
The IRS encourages taxpayers to pay the full amount of their tax liability on time, and it imposes significant penalties and interest on late payments. Thus, if you are unable to pay the taxes that you owe, it is generally in your best interest to make other arrangements to obtain the full funds to pay your taxes so that you are not subjected to the government’s penalties and interest. Here are a few options to consider.
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Tags:
Individual Tax Return,
Business Tax,
Individual Tax,
Tax Liability
If you are an employee (i.e., a W-2 wage earner) with substantial work-related business expenses, the Act was not kind to you. It suspended (and effectively repealed), for 2018 through 2025, all miscellaneous itemized deductions, which were previously only subject to a floor of 2% of adjusted gross income (AGI). Employee business expenses are included in that category of miscellaneous itemized deductions.
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Tags:
Itemizing Deductions,
Small Business Accounting,
Small Business,
Individual Tax,
TCJA
Congress passed the Budget Bill early in the night, and the President signed it on Friday, February 9th. To the surprise of many, the bill included a number of extenders that retroactively apply to 2017 returns. Were you lucky enough to benefit?
Needless to say, these last-minute changes may create a problem for taxpayers who have already filed their returns and will need to file amended returns to take advantage of these extenders. The retroactive changes will cause the IRS some headaches as well. Since the 2017 forms do not accommodate some of the extended provisions, the IRS will have redesign and issue updated forms or provide workaround procedures.
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Tags:
Depreciation Deduction,
Small Business,
Individual Tax,
Tax extenders
