Exploring business entities: Is an S corporation the right choice?
Are you starting a business with partners and considering the best entity to form? An S corporation might be the ideal choice. One significant advantage of an S corp over a partnership is that, as an S corp shareholder, you won’t be personally liable for corporate debts. If you anticipate early losses, an S corp is more favorable than a C corp from a tax perspective. C corp shareholders typically don’t benefit from such losses, but S corp shareholders can deduct their share of the losses on their personal tax returns, up to their basis in the stock and any loans made to the entity. Contact us for more information.
Choosing the right sales compensation model for your business
What motivates salespeople? First and foremost, equitable and enticing compensation. And therein lies a challenge: Choosing the right sales compensation model isn’t easy and may call for reevaluation. The most common options include: 1) Straight salary (or hourly wages); this is the simplest option but doesn’t address motivation. 2) Commission only; it’s all about motivation but doesn’t offer employees financial stability. 3) Salary plus commission; this model offers stability but may be complex to administer. 4) Hybrid; here, you offer a salary plus performance-based incentives, an increasingly popular approach. Contact us for help assessing your company’s sales compensation model.
The 2024 gift tax return deadline is coming up soon
Did you make significant gifts to your children, grandchildren or other heirs last year? If so, it’s important to determine whether you must file a gift tax return by April 15 (Oct. 15 if you file for an extension). The annual gift tax exclusion was $18,000 in 2024 (increasing to $19,000 in 2025). Generally, you’ll need to file a return if you made gifts in 2024 that exceeded the $18,000-per-recipient gift tax annual exclusion (though there are exceptions in certain situations). But it may be desirable to file a gift tax return even if you aren’t required to. Contact us if you’re unsure whether you must (or should) file a 2024 gift tax return.
Ways to manage the limit on the business interest expense deduction
Current tax law generally limits deductions of business interest, with certain exceptions. If your business has significant interest expense, it’s important to understand the impact of the Section 163(j) deduction limit on your tax bill. Unless your company is exempt, your maximum business interest deduction for the tax year equals the sum of 1) 30% of your company’s adjusted taxable income (ATI), 2) your company’s business interest income, if any, and 3) your company’s floor plan financing interest, if any. If your company is affected by the business interest deduction limitation, contact us to see if you can avoid it or reduce the impact. We can help assess what’s right for your business.
5 steps to creating a pay transparency strategy
Pay transparency is the practice, or lack thereof, of a company sharing its compensation philosophy, policies and procedures with job candidates, employees and even the public. If your business has yet to formalize or articulate its pay transparency strategy, here are five general steps to creating one: 1) Conduct a payroll audit to get a complete picture of your compensation structure. 2) Define or refine your criteria for making pay decisions. 3) Develop a communications “substrategy” that includes written guidelines and Q&A sessions. 4) Train your supervisors to champion and accurately explain your strategy. 5) Get input from professional advisors such as your attorney and our firm.
Can I itemize deductions on my tax return?
You may wonder if you can claim itemized deductions on your tax return. Perhaps you made charitable contributions and were told in the past they couldn’t be claimed because you didn’t have enough deductions to itemize. How much do you need? You can itemize deductions if the total of your allowable itemized write-offs for the […]
How a business owner’s home office can result in tax deductions
As a business owner, you may be eligible to claim home office tax deductions that will reduce your taxable income. However, it’s crucial to understand the IRS rules to ensure compliance and avoid potential IRS audit risks. There are two methods for claiming this tax break: the actual expense method and the simplified method. Here […]
Are your employees suffering from retirement plan leakage?
Today’s small to midsize businesses are often urged to help employees improve their financial wellness. And for good reason: Financially struggling workers tend to have higher stress and anxiety levels. They may be less productive and more prone to errors. Some might even decide to commit fraud. One hallmark of an employee facing serious financial […]
You may be able to make a deductible IRA contribution for last year this year
Getting ready to file your 2024 return and finding your tax bill is higher than you’d like? There may still be an opportunity to lower it. If you qualify, you can make a deductible contribution to a traditional IRA up until this year’s April 15 filing deadline and benefit on your 2024 return. An eligible taxpayer can make a 2024 IRA contribution of up to $7,000 ($8,000 if you’re 50 or older). You must meet income requirements to qualify. Business owners can also set up and contribute to SEP plans up until the filing due date, including extensions. For 2024, the most you can contribute to a SEP is $69,000. Contact us for more information about growing your nest egg on a tax-favored basis.
Do you have an excess business loss?
If an individual taxpayer has substantial business losses, unfavorable federal income tax rules may come into play. If your business or rental activity throws off a tax loss (and many do during the early years), things can get complicated. For example, you can’t deduct an excess business loss in the current year. For 2024, an excess business loss is the excess of your aggregate business losses over $305,000 ($610,000 for married joint filers). For 2025, the thresholds are $313,000 and $626,000, respectively. An excess business loss is carried over to the following tax year and can be deducted under the rules for net operating loss (NOL) carryforwards. Contact us with any questions.
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