Tax breaks to consider during National Small Business Week
Sept. 13-17 has been declared National Small Business Week by the SBA. To commemorate, here’s a tax break to consider. Your business may be able to claim 100% bonus depreciation for asset additions. Under current law, first-year bonus depreciation is available for qualified new and used property that’s acquired and placed in service in 2021. That means your business may be able to deduct the entire cost of some or all asset purchases on this year’s return. To take advantage of this, you may want to make acquisitions before Dec. 31. The bonus depreciation tax break can also be used for eligible heavy SUVs, pickups and vans used over 50% for business. Contact us to help evaluate your options.
Think like a lender before applying for a business loan
As your business pushes forward, you may find yourself in need of cash. Before applying for a commercial loan, think like a lender to be as prepared as possible and know for sure that the loan is a good idea. Basically, a lender wants to know four things: 1) how much money you need, 2) what you’ll use it for, 3) when you need it by, and 4) when you’ll be able to pay it back. Discuss these questions thoroughly with your leadership team. Also consider the three C’s of your company: character (strength and reputation of management), capacity (soundness of your finances and financial plan) and collateral (viable assets to back the loan). Contact us for help with the loan process.
Claiming a theft loss deduction if your business is the victim of embezzlement
If your business is victimized by theft, embezzlement or internal fraud, you may be able to claim a tax deduction for the loss. Keep in mind that a deductible loss can only be claimed for the year in which the loss is discovered, and that you must meet other tax-law requirements. Keep records to substantiate the claimed theft loss, including when you discovered the loss. If you receive an insurance payment or other reimbursement for the loss, that amount must be subtracted when computing the deductible loss for tax purposes. Contact us with any questions you may have about business theft and casualty loss tax deductions.
5 questions to ask about your marketing efforts
For many businesses, marketing requires a leap of faith that the benefits will outweigh the costs. Here are five questions that can help determine whether you’re on the right track: 1) What do we hope to accomplish? Identify what success looks like. 2) Where and how often will we spend the money? Choose which avenues you’ll traverse and the mix of recurring activity versus “one off” initiatives. 3) Can we track sources of new business, leads and customers? The right software can help. 4) Can we gauge brand awareness? Find ways to measure the impact of marketing efforts. 5) Are we prepared for an increase in demand? You might “suffer from success” if you can’t satisfy all your new customers!
You can only claim a casualty loss tax deduction in certain situations
In recent weeks, some Americans have been victimized by severe storms, flooding, wildfires and other disasters. Unexpected disasters may cause damage to your home or personal property. The rules for deducting personal casualty losses on a tax return have changed through 2025. Specifically, taxpayers generally can’t deduct losses unless an event qualifies as a federally declared disaster. (The rules for business or income-producing property are different.) Another factor that now makes it harder to claim a casualty loss is that you must itemize deductions. Through 2025, fewer people will itemize because the standard deduction amounts have been greatly increased. Contact us if you need help.
Want to find out what IRS auditors know about your business industry?
To prepare for a business audit, an IRS examiner generally does research about the specific industry and issues on the taxpayer’s return. Examiners may use IRS “Audit Techniques Guides (ATGs).” These guides are available on the IRS website. So your business can use them to gain insight into what the IRS is looking for in terms of compliance. Many ATGs target specific industries, such as architecture, art galleries and veterinary medicine. Others address issues that frequently arise in audits, such as executive compensation and passive activity losses. The IRS has revised or added new guides this year, including for construction and retail. For a complete list of ATGs: http://bit.ly/2rh7umD
Possible tax consequences of guaranteeing a loan to your corporation
What if you guarantee a loan to your closely held corporation? Before agreeing to act as a guarantor of a debt of your corporation, be aware of the possible tax consequences. If the business defaults on the loan, and you make good on the obligation, the payment of principal or interest generally results in either a business or a nonbusiness bad debt deduction. If it’s a business bad debt, it’s deductible against ordinary income. A business bad debt can be either totally or partly worthless. If it’s a nonbusiness bad debt, it’s deductible as a short-term capital loss (subject to certain limitations). A nonbusiness bad debt is deductible only if it’s totally worthless.
ABLE accounts may help disabled or blind family members
There may be a tax-advantaged way for people to save for the needs of family members with disabilities, without having them lose eligibility for their government benefits. It’s done though an ABLE account, which is a tax-free account that can be used for disability-related expenses. Eligible individuals must have become blind or disabled before turning age 26. 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 ($15,000 in 2021), can be made to an account each year. Contact us if you have questions about setting up or maintaining an ABLE account.
IRS additional guidance addresses COBRA assistance under ARPA
Recently, in Notice 2021-46, the IRS issued additional guidance on the COBRA premium assistance provisions of the American Rescue Plan Act (ARPA). Under the ARPA, a 100% COBRA premium subsidy and additional COBRA enrollment rights are available to certain assistance eligible individuals (AEIs) during the period beginning on April 1, 2021, and ending on September 30, 2021. The guidance provides helpful details on matters such as the extended coverage period, the end of an AEI’s subsidy period and comparable state continuation coverage. The guidance also addresses how businesses and other employers can claim a tax credit related to the COBRA subsidies. Contact us for more information.
Getting a divorce? Be aware of tax implications if you own a business
If you’re a business owner and getting divorced, tax issues can complicate matters. Your business interests are one of your biggest assets and in many cases, your marital property will include all or part of it. You can generally divide most assets, including business ownership interests, between you and your soon-to-be ex-spouse without any federal income or gift tax consequences. When an asset falls under the tax-free transfer rule, the spouse who receives the asset takes over its existing tax basis and existing holding period. Later on, there will be tax implications for assets received tax-free in a divorce. Contact us. We can help plan for the best tax outcome in your divorce.