Business deductions for meal, vehicle and travel expenses

Some common deductions for businesses are meal (generally 50%), vehicle and travel expenses. Deductibility depends on a variety of factors, but proper documentation is one of the most critical. Following some simple steps can help ensure your deductions will pass muster with the IRS. First, keep receipts, canceled checks or similar documentation. Also, track the business purpose of each expense (and don’t wait until year end or an IRS audit). Finally, if you reimburse employees, require them to provide such documentation. Contact us for more information.

Read more: Business deductions for meal, vehicle and travel expenses

Do you still need to worry about the AMT?

Do you still need to worry about the individual alternative minimum tax (AMT)? A repeal had been proposed, but it wasn’t included in the final version of the Tax Cuts and Jobs Act (TCJA). The act will, however, reduce the number of taxpayers subject to the AMT. Now is a good time to familiarize yourself with the changes and see if there are any steps you can take during the last several months of the year to avoid the AMT or at least minimize any negative consequences. To learn about the TCJA’s impact on the AMT and assessing your AMT risk for 2018, contact us.

Read more: Do you still need to worry about the AMT?

Close-up on the new QBI deduction’s wage limit

The TCJA allows qualifying noncorporate owners of pass-through entities to deduct as much as 20% of qualified business income. But once taxable income exceeds $315,000 for married couples filing jointly or $157,500 for other filers, a wage limit begins to phase in. When the limit is fully phased in, the deduction generally can’t exceed the greater of the owner’s share of a) 50% of the amount of W-2 wages paid to employees during the tax year, or b) the sum of 25% of W-2 wages plus 2.5% of the cost of qualified business property. Contact us to learn more.

Read more: Close-up on the new QBI deduction’s wage limit

Why the “kiddie tax” is re dangerous than ever

Under the TCJA, the big, bad kiddie tax is more dangerous than ever. For 2018, an affected child’s unearned income beyond $2,100 generally will be taxed according to the brackets for trusts and estates. As a result, in many cases, children’s unearned income will be taxed at higher rates than their parents’ income. Contact us for details.

Read more: Why the “kiddie tax” is re dangerous than ever

How to avoid getting hit with payroll tax penalties

 

 

For small businesses, managing payroll can be one of the most arduous tasks. A crucial aspect is withholding and remitting to the federal government the appropriate income and employment taxes. If your business doesn’t, you, personally, as the business’s owner, could be considered a “responsible party” and face a 100% penalty. This is true even if your business is an entity that normally shields owners from personal liability, such as a corporation or limited liability company. Hiring a payroll service can help. Contact us to learn more.

Read more: How to avoid getting hit with payroll tax penalties

3 traditional midyear tax planning strategies for individuals that hold up post

Certain strategies that were once tried-and-true will no longer save or defer tax. But some will hold up for many taxpayers. And they’ll be more effective if you begin implementing them this summer, rather than waiting until year end. Consider these three: 1) Take steps to stay out of a higher tax bracket, such as accelerating deductible expenses. 2) Bunch medical expenses into 2018 to exceed the low 7.5% of AGI deductibility floor. 3) Sell depreciated investments to generate losses to offset realized gains. Contact us to discuss your midyear planning.

Read more: 3 traditional midyear tax planning strategies for individuals that hold up post

Does your business have to begin collecting sales tax on all out-of-state online sales?

The recent U.S. Supreme Court decision in South Dakota v. Wayfair allows states to impose sales tax on more out-of-state online sales. But does it mean your business must immediately begin collecting sales tax on online sales to all out-of-state customers? No. You must collect such taxes only if the particular state requires it. South Dakota’s law, for example, requires out-of-state retailers that made at least 200 sales or sales totaling at least $100,000 in the state to collect sales tax. But laws vary dramatically from state to state. Contact us with questions.

Read more: Does your business have to begin collecting sales tax on all out-of-state online sales?

What you can deduct when volunteering

While donations to charity of cash or property generally are tax deductible (if you itemize), donations of time or services aren’t. But you potentially can deduct out-of-pocket costs associated with volunteer work, such as supplies, uniforms, transportation and even travel. To be deductible, the costs can’t be reimbursed or be “personal, living or family” expenses. And they must be directly connected to the services you’re providing and be incurred only because of your volunteering. Additional rules apply; contact us with questions.

Read more: What you can deduct when volunteering

Choosing the best business entity structure post-TCJA

For tax years beginning in 2018 and beyond, the Tax Cuts and Jobs Act (TCJA) created a flat 21% federal income tax rate for C corporations. Under prior law, C corporations were taxed at rates as high as 35%. The TCJA also reduced individual income tax rates, which apply to sole proprietorships and pass-through entities, including partnerships, S corporations, and, typically, limited liability companies (LLCs). The top rate, however, dropped only slightly, from 39.6% to 37%. 

Read more: Choosing the best business entity structure post-TCJA

Home green home: Save tax by saving energy

“Going green” at home can reduce your tax bill in addition to your energy bill, all while helping the environment. To reap all three benefits, you need to buy and install certain types of renewable energy equipment in your home. For 2018, you may be eligible for a tax credit of 30% of expenditures for installing qualified solar electricity generating equipment, solar water heating equipment, wind energy equipment, geothermal heat pump equipment and fuel cell electricity generating equipment. Additional rules and limits apply. To learn more, contact us.

Read more: Home green home: Save tax by saving energy

339 West Governor Road, Suite 202, Hershey, PA 17033
Phone: (717) 533-5154  •  Toll-Free (888) 277-1040