Is your business required to report employee health coverage?
Certain employers are required to report information about employees’ health coverage. Does your business have to comply? “Applicable large employers” (ALEs) with 50 or more full-time employees must use Forms 1094-C and 1095-C to report information about offers of health coverage and enrollment in health coverage. Specifically, an ALE uses Form 1094-C to report summary information for each employee and to transmit Forms 1095-C to the IRS. A separate Form 1095-C is used to report information about each employee. In addition, 1094-C and 1095-C are used to determine whether an employer owes payments under the employer shared responsibility provisions (also referred to as the employer mandate).
Provide employee parking? Here’s what the IRS wants to know
Does your business provide parking as a fringe benefit, either on or near your premises or at a location from which employees commute? If so, a recently revised IRS webpage (https://bit.ly/3zk2PTl) reveals what the tax agency may investigate during an audit. The IRS is chiefly concerned with how employers determine the fair market value of parking benefits. The webpage explains that the value of employer-provided parking must be established following the same general rules as those used for valuing other fringe benefits under Treasury regulations. Be sure to document how you determine the value of your parking benefit and be ready to produce that documentation in the event of an IRS audit.
Is your withholding adequate? Here’s how to check
When you filed your federal tax return this year, were you surprised to find you owed money? Or did you wind up getting a large refund? Either situation might mean it’s time to review and adjust your withholding. This might be necessary because something in your life is different this year (for example, you got married, divorced, had a child, purchased a home or had changes in your income). The IRS has a withholding calculator where you can perform a paycheck checkup. You can access the calculator at https://bit.ly/33iBcZV. Contact us if you need help determining whether you should adjust your 2022 withholding.
Three tax breaks for small businesses
Sometimes small is better: Your small business may be eligible for tax breaks that aren’t available to large businesses. For example, the qualified business income (QBI) deduction is available to eligible individuals but not to C corporations or their shareholders. The deduction can be up to 20% of: 1) QBI earned from a sole proprietorship or single-member LLC treated as one for federal income tax purposes, plus 2) QBI passed through from a pass-through business, meaning a partnership, S corp or LLC classified as a partnership. Pass-through businesses report tax items to their owners, who then take them into account on their own returns. The rules are complex. Contact us with questions.
How to avoid the early withdrawal tax penalty on IRA distributions
If you take withdrawals from your traditional IRA, you probably know they’re taxable. But there may be an additional penalty tax on “early” withdrawals. An early distribution is defined as taken before age 59½. You’ll be hit with a 10% penalty tax unless an exception applies. Fortunately, there are several exceptions. Common examples include: 1) to pay for medical costs that exceed 7.5% of your adjusted gross income; 2) to pay for qualified higher education expenses; 3) to pay up to $10,000 to buy or build a first home; and 4) to take annuity-like annual withdrawals under IRS guidelines. We can tell you if you’re eligible for these or other exceptions to the 10% early withdrawal penalty tax.
6 steps to easing employees’ fears about innovation
Often, the greatest obstacle to business innovation isn’t the change itself, but employees’ resistance to it. Here are six helpful steps: 1) Communicate an innovation’s purpose and expected impact, including its anticipated benefits and initial challenges. 2) Ask employees from every department for their input about the concept and, over time, the details. 3) Assemble an implementation team that includes a strong leader and at least one employee champion. 4) Plan to offer sufficient training related to the innovation. 5) Conduct a “beta test” to catch oversights and fix glitches. 6) If necessary, ask for help from outside consultants. Contact us for assistance with your next innovation.
How to treat business website costs for tax purposes
These days, most businesses have websites. But determining the proper tax treatment for the costs involved in developing a website can be difficult. The IRS hasn’t released formal guidance on when website costs can be deducted, so you must apply existing guidance that’s available on other costs to the issue of website development costs. The exact treatment of website design costs depends on whether they’re software or hardware and whether they’re part of a start-up business. If you hire third parties to set up and run your website, payments are currently deductible as ordinary and necessary business expenses. Contact us if you have questions or want to plan for website costs.
The kiddie tax: Does it affect your family?
The kiddie tax rules may impose substantial limitations on income shifting to your children. They apply if: 1) the child hasn’t reached age 18 before the close of the tax year, or 2) the child’s earned income doesn’t exceed half of his or her support and the child is age 18 or is a full-time student age 19 to 23. The kiddie tax rules apply to your children who are under the cutoff age(s) described above, and who have more than a certain amount of unearned (investment) income for the tax year ($2,300 for 2022). A child’s investment income that’s taxed under the kiddie tax rules may be reduced or eliminated if the child invests in vehicles that produce little or no current taxable income.
Important considerations when engaging in a like-kind exchange
A business or individual might be able to dispose of appreciated real property without being taxed on the gain by exchanging it rather than selling it. You can defer tax on your gain through a “like-kind” or Sec. 1031 exchange. A like-kind exchange is a swap of real property held for investment or for productive use in your trade or business for like-kind investment real property or business real property. Like-kind is very broadly defined and most real property is considered to be like-kind with other real property. However, the real property can’t be held primarily for sale. If you have questions or you’re interested in a tax-deferred like-kind exchange, contact us.
How to keep remote sales on point
One interesting byproduct of the pandemic is that it has created a somewhat involuntary experiment in telework. If your company still has a remote sales staff, don’t assume it will “run itself” or that this tech-based approach is finished evolving. Continue to devise and implement sound sales and marketing strategies. Keep existing customers as happy as possible and target only well-researched prospects. Stay on the lookout for upgrades to video-based solutions, as well as ways to create better presentations and to leverage brandable “microsites.” Last, your remote sales staff must ensure that customers’ experiences with both your technology and people are positive. Contact us for help.