Weekly Tax Brief

Small businesses: Get ready for your 1099-MISC reporting requirements

Details: Published: 22 November 2019 22 November 2019

Early next year, your business may be required to comply with Form 1099 rules. You may have to send forms to independent contractors, vendors and others whom you pay nonemployee compensation, as well as file them with the IRS. There are penalties for noncompliance. Employers must provide a Form 1099-MISC for nonemployee compensation by Jan. 31, 2020, to each noncorporate service provider who was paid at least $600 for services during 2019. (1099-MISCs generally don’t have to be provided to corporate service providers.) A copy of each Form 1099-MISC with payments listed in box 7 must also be filed with the IRS by Jan. 31. If you have questions about your reporting requirements, contact us.

You may be ABLE to save for a disabled family member with a tax-advantaged account

Details: Published: 18 November 2019 18 November 2019

There’s a tax-advantaged way for people to save for the needs of family members with disabilities, without having them lose eligibility for government benefits to which they’re entitled. It’s done though an ABLE account, which is a tax-free account that can be used for disability-related expenses. ABLE accounts can be created by eligible individuals to support themselves, by family members to support their dependents, or by guardians. Contributions up to the annual gift-tax exclusion amount, currently $15,000, can be made to an account each year. If the beneficiary works, he or she can also contribute some income to their ABLE account. Contact us if you’d like more details.

Small businesses: Stay clear of a severe payroll tax penalty

Details: Published: 15 November 2019 15 November 2019

Managing payroll is a laborious task for small businesses. But it’s critical to withhold the right amount of taxes from employees and pay them over to the federal government on time. If you don’t, you could be hit with the Trust Fund Recovery Penalty, also known as the 100% penalty. It applies to the Social Security and income taxes required to be withheld by a business from its employees’ wages. It’s called the 100% penalty because people liable or responsible for the taxes can be personally penalized 100% of the taxes due. Absolutely no failure to withhold and no “borrowing” from withheld amounts should ever be allowed in your business. Contact us for more information.

IRA charitable donations are an alternative to taxable required distributions

Details: Published: 12 November 2019 12 November 2019

Are you charitably minded and have a significant amount of money in an IRA? If you’re age 70-1/2 or older, and don’t need the money from required minimum distributions, you may benefit by giving these amounts to charity. Contact us for more information.

Thinking about converting from a C corporation to an S corporation?

Details: Published: 08 November 2019 08 November 2019

The right entity choice can make a difference in the taxes you owe for your business. Although S corporations can provide substantial tax advantages over C corporations in some situations, there are potential tax problems you should assess before deciding to convert from C to S status. One of the issues to consider is last-in, first-out (LIFO) inventory. A C corporation that uses LIFO inventory must pay tax on the benefits it derived by using LIFO if it converts to an S corporation. Other issues to understand are the built-in gains tax, passive income tax and unused net operating losses. We can explain how these factors will affect your company and develop strategies to minimize taxes.

Selling securities by year end? Avoid the wash sale rule

Details: Published: 04 November 2019 04 November 2019

If you’re planning to sell assets at a loss to offset gains that have been realized during the year, it’s important to be aware of the “wash sale” rule. Under this rule, if you sell stock or securities for a loss and buy substantially identical stock or securities back within the 30-day period before or after the sale date, the loss can’t be claimed for tax purposes. The rule is designed to prevent taxpayers from using the tax benefit of a loss without parting with ownership in a significant way. Note that the rule applies to a 30-day period before or after the sale date to prevent “buying the stock back” before it’s even sold. Contact us if you have any questions.

Setting up a Health Savings Account for your small business

Details: Published: 01 November 2019 01 November 2019

Given the escalating cost of employee health care benefits, your business may be interested in providing some of these benefits through an employer - sponsored Health Savings Account (HSA). An HSA provides a number of tax benefits for your business and its employees. Contact us if you have questions or you're interested in setting one up.

Selling securities by year end? Avoid the wash sale rule

Details: Published: 29 October 2019 29 October 2019

Use a Coverdell ESA to help pay college, elementary and secondary school costs

Details: Published: 21 October 2019 21 October 2019

You may be able to save for your child’s or grandchild’s education with a Coverdell Education Savings Account (ESA). There’s no upfront federal tax deduction for contributions, but the earnings grow tax-free. No tax is due when the account funds are withdrawn, to the extent the amounts don’t exceed the child’s qualified education expenses. Qualified expenses include college tuition, fees, books and room, as well as elementary and secondary school expenses. The annual contribution limit is $2,000 a year from all contributors for all ESAs for the same child. The amount you can contribute is phased out if your modified adjusted gross income exceeds $95,000 ($190,000 for married joint filers).

Understanding and controlling the unemployment tax costs of your business

Details: Published: 18 October 2019 18 October 2019

Employers must pay federal unemployment tax on amounts up to $7,000 paid to each employee as wages during the year. Typically, the more claims made against a business, the higher the unemployment tax bill. But there may be ways to control costs. Don’t hire employees to fill short-term jobs. To avoid layoffs, use temps.

If you must hire, do so carefully to increase the chance that employees will work out. And if you terminate someone, provide severance and outplacement services, which may delay the start of unemployment benefits and cause them to end sooner. Contact us for more ideas.

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