Does your business barter? Here are some facts you should know
In today’s economy, many small businesses are strapped for cash. They may find it advantageous to barter for goods and services instead of paying cash for them. But if your business engages in bartering, be aware that the fair market value of goods you receive is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties. Some businesses join barter clubs that facilitate barter exchanges. If you join such a club, you’ll be asked to provide your Social Security number or Employer Identification Number. You may receive a form that reports barter transactions. Contact us if you need assistance or would like more information.
5 ways to control your business insurance costs
Every company should carry various forms of business insurance. But that doesn’t mean you should pay unnecessarily high premiums. Here are five ways to control your costs: 1) Regularly review every policy to ensure it’s appropriate to your current circumstances and needs. 2) Shop around for better coverage, as well as for discounts you’re missing out on. 3) Actively manage workers’ compensation insurance, particularly making sure to properly classify employees. 4) Consider increasing your deductibles on certain policies so you can pay a lower premium. 5) Above all, prioritize safety through proper training, vigilance and enforcement. Contact us for help assessing the cost of your insurance.
There still may be time to cut your tax bill with an IRA
If you’re getting ready to file your 2021 tax return, and your tax bill is more than you’d like, there might still be a way to lower it. If you qualify, you can make a deductible contribution to a traditional IRA right up until the April 18, 2022, filing date and benefit from the tax savings on your 2021 return. For 2021, if you’re eligible, you can make a deductible traditional IRA contribution of up to $6,000 ($7,000 if you’re 50 or over). To be eligible, you must meet rules involving your income and whether you (or your spouse) are an active participant in an employer retirement plan. Contact us if you want more information or ask us about it when we prepare your tax return.
The election to apply the research tax credit against payroll taxes
The credit for increasing research activities, often referred to as the research and development credit, is a valuable tax break for eligible businesses. Claiming the credit involves complex calculations, which we can take care of for you. But in addition to the credit itself, be aware that it also has a feature that is especially favorable to certain eligible small businesses. The credit can be used against the employer’s Social Security payroll tax liability. To qualify for the election a taxpayer: 1) must have gross receipts for the election year of less than $5 million and 2) be no more than five years past the period for which it had no receipts (the start-up period). Contact us about whether you can benefit from the payroll tax election and the research tax credit.
Should your business address retirement plan leakage?
Under just about any circumstances, the word “leakage” has negative connotations. In a retirement planning context, leakage refers to pre-retirement withdrawals from an account. Why should business owners who sponsor a qualified plan care? Leakage can lead to higher plan expenses. It may also indicate that employees are facing unusual financial challenges, which tend to negatively affect morale, productivity and quality of work. Perhaps the most important thing you can do to limit leakage is educate and remind employees about how pre-retirement withdrawals can diminish their accounts and delay their anticipated retirement dates. Contact us with questions or for more information.
Are you ready for the 2021 gift tax return deadline?
If you made large gifts to your children, grandchildren or others in 2021, it’s important to determine whether you’re required to file a gift tax return by April 18 (Oct. 17 if you file for an extension). The annual gift tax exclusion has increased in 2022 to $16,000 but was $15,000 for 2021. Generally, you’ll need to file a return if you made 2021 gifts that exceeded the $15,000-per-recipient gift tax annual exclusion (unless to your U.S. noncitizen spouse) and in certain other situations. But sometimes it’s desirable to file a gift tax return even if you aren’t required to. If you’re not sure whether you must (or should) file a 2021 gift tax return, contact us.
Can you deduct the costs of a spouse on a business trip?
If you own your own company, you may wonder if you can deduct the costs of having your spouse accompany you on business trips. To qualify, your spouse must be your employee. This means you can’t deduct the airfare or meals of a spouse, even if his or her presence has a bona fide business purpose, unless the spouse is an actual employee of your business. If your spouse isn’t an employee, you can still deduct the costs of driving your own car or renting one to reach your destination. And you can write off the hotel costs of what you would have paid traveling alone. In other words, the single room rate rather than the double. Contact us if you have questions about this or other tax topics.
FILING RELEIF FOR K-2 AND K-3
The IRS is providing an additional exception for tax year 2021 to filing the Schedules K-2 and K-3 for certain domestic partnerships and S corporations. To qualify for this exception, the following must be met: In tax year 2021, the direct partners in the domestic partnership are not foreign partnerships, foreign corporations, foreign individuals, foreign […]
Prudent technology upgrades call for some soul searching
Strange as it may sound, business technology upgrades demand a bit of soul searching. That is, before spending the money, dig deep for insights about what your company really needs and whether end users will appreciate your efforts. Gather your leadership team and ask questions such as “What are the specific functionalities that we need?” and “Are we looking at hardware, software or both?” Consider surveying employees and/or customers as well. When you’ve settled on an upgrade, create a “hot list” of vendors most likely to provide optimal service, adequate training and good customer support. For help estimating the costs and projecting the financial impact of a tech upgrade, contact us.
Married couples filing separate tax returns: Why would they do it?
If you’re married, you may wonder if you should file joint or separate tax returns. It depends on your individual tax situation. In general, you should use the filing status that results in the lowest tax. But keep in mind that, if you and your spouse file a joint return, each of you is “jointly and severally” liable for tax on your combined income (as well as any additional tax the IRS assesses, plus interest and most penalties). Therefore, the IRS can come after either of you for the full amount. In most cases, joint filing offers more tax savings but some people can save by filing separately. We can look at both options. Contact us to prepare your tax return or if you have questions.