What type of expenses can’t be written off by your business?
If you spend money in the course of doing business, you want to be able to deduct it on your tax return. But in order to write off expenses, they must meet certain requirements. Under federal tax law, you can deduct “ordinary and necessary” business expenses. In general, an expense is considered ordinary if it’s common or customary in the particular trade or business. A necessary expense is defined as being helpful or appropriate. In order to be deductible, an expense must also be reasonable in relation to the benefit expected. Consult with us for guidance.
Check on your refund — and find out why the IRS might not send it
Are you wondering where your tax refund is? According to the IRS, most refunds are issued in less than 21 calendar days. If you’re curious about when yours will arrive, you can use the IRS “Where’s My Refund?” tool. Go to https://bit.ly/2cl5MZo and click “Check My Refund Status.” In some cases, taxpayers may be notified that all or part of their refunds aren’t going to be paid because they’re going to “offset” past-due debts. These include federal or state tax obligations; past-due child and spousal support; and certain delinquent student loans. If you have questions about your refund, contact us.
Buy vs. lease: Business equipment edition
Life presents us with many choices. A common conundrum for business owners is whether to buy or lease their companies’ equipment. Some still take pride in owning their assets. If you do, work to pass along this dedication to employees. Also, consider enhanced tax breaks under the Tax Cuts and Jobs Act for purchasing. Meanwhile, leasing offers the flexibility to more easily upgrade equipment, along with a lesser initial cash flow hit. You can also deduct lease payments as business expenses, but you may soon be subject to new accounting rules. Contact us for help.
Should your health care plan be more future-focused?
When it comes to health care plan design, many employers are looking to “future-focused” features to encourage healthful behaviors rather than trying to slash costs. This was a finding of the 2018 National Survey of Employer-Sponsored Health Plans by Mercer. Among the hottest plan features is telemedicine, which streamlines care delivery by gathering medical data and offering interaction with providers via apps and the phone. Other examples include targeted support for people with chronic conditions and access to expert medical opinions.
Plug in tax savings for electric vehicles
If you’re interested in purchasing an electric or hybrid vehicle, you may be eligible for a federal tax credit of up to $7,500. (Depending on where you live, there may also be state tax breaks.) However, the federal credit is subject to a phaseout rule that may reduce or eliminate the tax break based on how many sales are made by a manufacturer. The vehicles of 2 manufacturers (GM and Tesla) have already begun to be phased out, which means they now qualify for a partial tax credit. For a list of manufacturers and credit amounts, visit: https://bit.ly/2vqC8vM.
Employee vs. independent contractor: How should you handle worker classification?
To save money, your business may treat workers as independent contractors, rather than employees. Be aware that the IRS looks for businesses that improperly classify workers. It’s best to handle independent contractors so the relationships comply with tax law. This includes not controlling HOW the workers perform their duties, not treating them like employees, and providing annual Forms 1099. You can file optional IRS Form SS-8 to receive a determination of a worker’s status. But filing this form may trigger an audit. Contact us for ways to proactively plan ahead.
Prepare for the worst with a business turnaround strategy
To prepare for the worst, every business owner should outline a general business turnaround strategy. It should begin with a keen awareness of warning signs such as poor key performance indicators and a rapid increase in debt and employee turnover. The turnaround will likely involve five steps: 1) assessment of the decline by external advisors, 2) re-evaluation of management and staff, 3) emergency intervention to stabilize the business, 4) operational restoration to pursue profitability, and 5) recovery and growth. For help creating your strategy, contact us.
Casualty loss deductions: You can claim one only for a federally declared disaster
The rules for writing off personal casualty losses on a tax return have changed for 2018 to 2025. Specifically, taxpayers generally can’t deduct losses unless the casualty 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 to claim one. For 2018 to 2025, fewer people will itemize, because the standard deduction amounts have been significantly increased. We can help you navigate the complex rules.
How entrepreneurs must treat expenses on their tax returns
Have you recently started a new business or are you contemplating starting one? Keep in mind that not all start-up expenses can be deducted on your federal tax return right away. Some expenses probably must be amortized over time. You might be able to make an election to deduct up to $5,000 currently, but the deduction is reduced by the amount by which your total start-up costs exceed $50,000. You can also deduct $5,000 of the organizational costs of creating a corporation or partnership. Contact us. We can help you maximize deductions for a start-up business.
Three questions you may have after you file your return
After filing a tax return, you may have questions. 1. Where’s my refund? Go to irs.gov and click on “Refund Status” to find out. 2. How long must I save tax records? You should generally save them for 3 years after filing (although keep the actual returns indefinitely). But there are exceptions to this general rule. 3. If I forgot something on my return, can I still claim a refund? You can generally file an amended return to claim a refund within 3 years after the date you filed the original return or 2 years of the date you paid the tax, whichever is later.