Claiming the business energy credit for using alternative energy
Are you wondering whether alternative energy technologies can help you manage energy costs in your business? If so, there’s a valuable federal income tax benefit (the business energy credit) that applies to the acquisition of many types of alternative energy property. The credit is available for the construction of certain property including equipment that uses solar energy to generate electricity for heating and cooling and certain small wind energy property. The credit amount is limited and based on when construction begins. Of course, there are business considerations unrelated to the tax benefits that may influence your decision to use alternative energy. We can help assess your options.
Ensure competitive intelligence efforts are helpful, not harmful
Competitive intelligence can be formally defined as the gathering and analysis of publicly available information about one or more business competitors. The practice has been around for decades but is easier than ever because of the Internet. The key is to engage in competitive intelligence legally and ethically. Best practices include: 1) Knowing the legal rules and risks; consult an attorney and beware of intellectual property laws, 2) Vet industry sources carefully to avoid violating confidentiality or non-compete agreements, 3) Don’t hide behind secret identities online, and 4) Establish a sound policy and train employees and consultants to follow it. Contact us for more information.
Unemployed last year? Buying health insurance this year? You may benefit from favorable new changes
Many people lost their jobs last year due to pandemic shutdowns. Generally, unemployment compensation is included in gross income for federal tax purposes. But thanks to the American Rescue Plan Act (ARPA), enacted on March 11, 2021, up to $10,200 of unemployment compensation can be excluded from federal gross income on 2020 federal returns for taxpayers with an adjusted gross income (AGI) under $150,000. In the case of a joint return, the first $10,200 per spouse isn’t included in gross income, meaning if both spouses lost their jobs and collected unemployment last year, they’re eligible for up to a $20,400 exclusion. Contact us if you have questions about your situation.
Know the ins and outs of “reasonable compensation” for a corporate business owner
Corporate business owners know that it’s generally better to take money out of a C corporation as compensation rather than as dividends. That’s because a corporation can deduct the salaries and bonuses that it pays, but not dividends. Thus, if funds are paid as dividends, they’re taxed twice, once to the corporation and once to the recipient. Money paid out as compensation is only taxed once to the employee receiving it. But there are limits to how much money you can take out this way. Compensation can be deducted only to the extent that it’s reasonable. Unreasonable portions aren’t deductible and may be deemed dividends. Need help determining a reasonable salary? Contact us.
Changes to premium tax credit could increase penalty risk for some businesses
The American Rescue Plan Act made several significant enhancements to the premium tax credit (PTC). The PTC is a refundable credit that helps individuals and families pay for insurance obtained from a Health Insurance Marketplace (commonly known as an “Exchange”). The expanded PTC will help eligible individuals and families obtain health care coverage. However, because applicable large employers (ALEs) could face shared-responsibility penalties if full-time employees receive PTCs, expanded eligibility could increase penalty exposure for ALEs that don’t offer affordable, minimum-value coverage to full-time employees. Contact us for help determining whether your business is at risk.
Home sales: How to determine your “basis”
The housing market in many parts of the country is strong this spring. If you’re buying or selling a home, you should know how to determine your “basis.” How it works You can claim an itemized deduction on your tax return for real estate taxes and home mortgage interest. Most other home ownership costs can’t […]
Simple retirement savings options for your small business
Are you thinking about setting up a retirement plan for yourself and your employees, but you’re worried about the administrative burdens involved in providing a traditional pension plan? Two relatively easy options are a SEP or a SIMPLE plan. When you set up a SEP for yourself and your employees, you’ll make deductible contributions to each employee’s SEP-IRA. The maximum amount of deductible contributions that you can make to an employee’s SEP-IRA, and that he or she can exclude from income, is the lesser of 25% of compensation and $58,000 for 2021. For 2021, SIMPLE deferrals are up to $13,500 plus an additional $3,000 catch-up contributions for employees age 50 and older.
Providing optimal IT support for remote employees
Over a year into the COVID-19 pandemic, remote work has become common across many industries. Although some businesses may soon reopen their offices and facilities as employees get vaccinated, telecommuting is expected to remain a valued, widely offered employment arrangement. For business owners, this means that providing optimal IT support to remote employees will remain mission critical. When tackling this challenge: 1) Survey remote workers about their IT experiences, 2) Invest in ongoing training for support staff, 3) As necessary, upgrade the systems and software you use to enable remote work, and 4) Ensure remote employees know how to telecommute safely. Contact us for more info.
Who qualifies for “head of household” tax filing status?
When you file your tax return, you must check one of the following filing statuses: Single, married filing jointly, married filing separately, head of household or qualifying widow(er). Who qualifies to file as a head of household, which is more favorable than single? To qualify, you must maintain a household, which for more than half the year, is the principal home of a “qualifying child” or other relative of yours whom you can claim as a dependent (unless you only qualify due to the multiple support rules). You’re considered to “maintain a household” if you live in the home for the tax year and pay over half the cost of running it. We can answer any questions you have about your situation.
Tax advantages of hiring your child at your small business
As a business owner, you should know that you can save family income and payroll taxes by putting your child on the payroll. You may be able to turn high-taxed income into tax-free or low-taxed income by shifting some business earnings to a child as wages for services performed. In order for your business to deduct the wages as a business expense, the work done by the child must be legitimate and the child’s salary must be reasonable. You also may be able to achieve Social Security tax savings (depending on how your business is organized) and even make retirement plan contributions for your child. Contact us if you have any questions about the rules in your situation.
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