The tax implications of a company car
The use of a company car is a valuable fringe benefit for business owners and key employees. This perk results in tax deductions for the employer and tax breaks for the owners and employees using the cars. (And of course, they get the nontax benefits of driving the cars!) For tax deduction purposes, a business will treat the car much the same way it would any other business asset. Providing an auto for an owner or key employee comes with complications and paperwork. Personal use will have to be tracked and valued under the fringe benefit tax rules and treated as income. We can help you stay in compliance with the rules and explain more about this prized perk.
4 tough questions to ask about your sales department
Companies with underperforming sales departments may stay afloat for a while, but the loss of one big customer or arrival of a tough new competitor could put them under. To ensure your sales staff is contributing to business growth, you’ve got to ask some tough questions. Do your salespeople communicate customers’ needs to the company? If not, you could be losing touch with your market. Does the sales department handle complaints promptly and satisfactorily? Doing so is critical these days, when people share everything on social media. Does your sales staff work well with other departments? Your whole company needs to work as a team. Contact us for more info.
Taking distributions from your traditional IRA
If you’re like many people, you’ve worked hard to accumulate a large nest egg in your traditional IRA (or a SEP-IRA). It’s critical to carefully plan for withdrawals. For example, if you need to take money out of your traditional IRA before age 59-1/2, the distribution will generally be taxable. In addition, distributions before age 59-1/2 may be subject to a 10% penalty tax. (However, several exceptions may allow you to avoid the penalty tax but not the regular income tax.) And once you reach age 70-1/2, distributions from a traditional IRA must begin. If you don’t withdraw the minimum amount each year, you may have to pay a 50% penalty tax on what should have been taken but wasn’t.
“Innocent spouses” may get relief from tax liability
When a married couple files a joint tax return, each spouse is liable for the full amount of tax on the couple’s combined income. Therefore, the IRS can come after either spouse to collect the entire tax, not just the part that’s attributed to that spouse. This includes any tax deficiency that the IRS assesses after an audit, as well as any penalties and interest. In some cases, spouses are eligible for “innocent spouse relief.” Generally, these spouses were unaware of a tax understatement that was attributable to the other spouse. If you’re interested in trying to obtain relief, paperwork must be filed and deadlines must be met. Contact us. We can assist you with the details.
What to do if your business receives a “no-match” letter
In recent months, many businesses and employers have received “no-match” letters from the Social Security Administration (SSA). These letters alert employers if employees’ names and Social Security numbers (SSNs) don’t match the data reported on W-2 forms, which are given to employees and filed with the IRS. If you receive a no-match letter, check to see if your information matches the name and SSN on the employee’s Social Security card. If the information matches, ask him or her to check with the local Social Security office to resolve the issue. If you have questions, contact us or check out these frequently asked questions from the SSA: https://bit.ly/2Yv87M6
Dashboard software helps you keep your eyes on the prize
Business owners are urged to identify the most important key performance indicators (KPIs) for their companies. Once you’ve done so, a natural question is: Now what? A “business dashboard” is a type of software that allows you to create a customized view of your chosen KPIs in the form of pie charts, bar graphs and other graphic elements. When shopping for such a solution, look for one that supports your KPIs; offers a visually pleasing, one-screen view of the data; and updates itself in real time. Be wary of vendors that over-promise “otherworldly” knowledge of your industry or try to upsell you on bells and whistles. We can help you set a budget and compare prices.
Should you elect S corporation status?
Operating a business as an S corporation may provide advantages, including limited liability and no double taxation (at least at the federal level). Self-employed people may also be able to lower their exposure to Social Security and Medicare taxes. But not all businesses are eligible and, with tax law changes, S corps may not be as appealing as they once were. Double taxation may be less of a concern due to the 21% flat income tax rate that now applies to C corporations, while the top individual rate is 37%. On the other hand, S corp owners may benefit from the new qualified business income (QBI) deduction, which can equal as much as 20% of QBI. Contact us for more information.
Is it time to hire a CFO or controller?
Many business owners reach a point where managing the financial side of the enterprise becomes overwhelming. In such instances, it may be time to add a CFO or controller. This executive looks beyond day-to-day financial management to do more holistic, big-picture planning. A CFO or controller also serves as the primary liaison between your company and its bank. The hire should be able to implement improved cash management practices to boost cash flow and improve budgeting, too. Making this hire, however, represents a major commitment in both time to the hiring process and dollars to your payroll. You may want to outsource the position. We can help you further assess the idea.
The tax implications of being a winner
If you’re lucky enough to be a winner at gambling or the lottery, congratulations! But be aware there are tax consequences. You must report 100% of your winnings as taxable income. If you itemize deductions, you can deduct losses but only up to the amount of winnings. You report lottery winnings as income in the year you actually receive them. In the case of noncash prizes (such as a car), this would be the year the prize is received. With cash, if you take the winnings in annual installments, you only report each year’s installment as income for that year. These are just the basic rules. Contact us with questions. We can help you minimize taxes and stay in compliance with all requirements.
The IRS is targeting business transactions in bitcoin and other virtual currencies
More businesses are accepting bitcoin and other virtual currency payments, and the IRS is taking notice. The agency just announced it is sending letters to taxpayers who potentially failed to report income and pay tax on virtual currency transactions or didn’t report them properly. The letters urge taxpayers to review their tax filings and, if appropriate, amend past returns to pay back taxes, interest and penalties. By the end of August, more than 10,000 taxpayers will receive these letters. The names of the taxpayers were obtained through IRS compliance efforts. Contact us if you have questions about virtual currency or if you receive a letter from the IRS about possible noncompliance.