Coordinating Sec. 179 tax deductions with bonus depreciation
Your business should generally maximize current year depreciation write-offs for newly acquired assets. Two federal tax breaks can help achieve this goal: first-year Section 179 depreciation deductions and first-year bonus depreciation deductions. These deductions can potentially allow businesses to write off some or all of their qualifying expenses in Year 1. However, Sec. 179 is subject to limits and annual inflation adjustments, and the bonus depreciation percentage in 2024 is 60% (down from 80% in 2023). The current tax-saving strategy is to write off as much of the cost of qualifying assets as you can with Sec. 179 deductions. Then claim as much first-year bonus depreciation as you can.
The tax deadline is almost here: File for an extension if you’re not ready
The April 15 tax filing deadline is right around the corner. However, you might not be ready to file. Sometimes, it’s not possible to gather your tax information by the due date. If you need more time, you should file for an extension on Form 4868. An extension will give you until Oct. 15 to file and allow you to avoid “failure-to-file” penalties. However, it only provides extra time to file, NOT TO PAY. Whatever tax you estimate is owed must still be sent by April 15, or you’ll incur penalties, and they can be steep. Contact us if you have questions about IRS penalties or about filing Form 4868.
2024 Q2 tax calendar: Key deadlines for businesses and employers
Here are some key tax deadlines for businesses during the second quarter of 2024. APRIL 15: Calendar-year corporations file 2023 income tax returns (Form 1120) or file for a six-month extension (Form 7004) and pay any tax due. APRIL 15: Corporations pay the first installment of 2024 estimated income taxes. APRIL 30: Employers report income tax withholding and FICA taxes for the first quarter of 2024 (Form 941) and pay any tax due. MAY 15: Employers deposit Social Security, Medicare and withheld income taxes for April if the monthly deposit rule applies. JUNE 17: Corporations pay the second installment of 2024 estimated income taxes. Contact us to learn more about filing requirements.
Bartering is a taxable transaction even if no cash is exchanged
If your small business is strapped for cash (or likes to save money), you may find it beneficial to barter for goods and services. Bartering isn’t new, but the internet has made it easier. However, if your business barters, 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 one, 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’d like assistance or more information.
B2B businesses: Assess customer credit carefully
Does your company operate in the B2B marketplace? If so, it’s critical to keep a close eye on how you assess customer credit. If you’ve been using the same credit application for a while, reevaluate it to see whether you should add questions or update the design. Consider asking privately owned customers for a set of their most recent financial statements or, at the very least, their latest income statements and balance sheets. Be sure to request and follow up on bank and multiple trade references as well. Order credit reports on prospective customers, too. Finally, consider “adverse media screening” to look for bad or concerning news about credit applicants. Contact us for help.
Better tax break when applying the research credit against payroll taxes
The credit for increasing research activities is a valuable tax break for eligible businesses. Claiming it involves complex calculations. But in addition to the credit, be aware that it also has a feature that’s favorable to eligible small businesses. The credit can be used against the employer’s Social Security and Medicare 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). The Inflation Reduction Act doubled the amount of the payroll tax credit election for eligible businesses, from $250,000 to $500,000.
Maximize the QBI deduction before it’s gone
The qualified business income (QBI) deduction is available to eligible businesses through 2025. After that, it’s scheduled to disappear unless Congress acts to extend it. So make the most of the tax break while it’s still on the books. The QBI deduction can be up to 20% of: 1) QBI earned from a sole proprietorship or single-member LLC that’s treated as a sole proprietorship for tax purposes, plus 2) QBI from a pass-through partnership, LLC that’s treated as a partnership or S corporation. QBI is defined as qualified income and gains, reduced by certain items including deductible contributions to certain retirement plans and the deduction for 50% of self-employment tax. Questions? Contact us.
A job loss is bad but the tax implications could make it worse
Unemployment is currently low, but some people are still losing their jobs. If you’re one of them, taxes probably aren’t on your mind. However, there may be tax implications. For example, what should you do with amounts you’ve accumulated in your former employer’s retirement plan? A tax-free rollover to an IRA is often the best move. If you keep group health coverage under COBRA, the premiums paid for health insurance are a medical expense. Therefore, they’re deductible if you itemize deductions and your medical expenses exceed 7.5% of adjusted gross income. Complex situations arise if you receive incentive stock options or a golden parachute payment. We can help you make the best decisions.
Beware of a stealth tax on Social Security benefits
Some people mistakenly think that Social Security benefits are free from federal income tax. Unfortunately, that’s often not the case. Depending on how much “provisional income” you have, some benefits could be hit with federal tax. Provisional income is your adjusted gross income with some additional calculations. For example, if your provisional income is above $44,000, and you file jointly with your spouse, you must report up to 85% of your Social Security benefits as income on Form 1040. If you don’t file a joint return and your provisional income is above $34,000, you generally must report up to 85% of your Social Security benefits as income. We can calculate any tax on your benefits.
Empower your sellers with sales enablement
The driving revenue force of just about every kind of business is sales. That’s why many companies today are investing in sales enablement. This is an enterprise-wide, collaborative and continuous approach to empowering the sales department to do its best work. Most sales enablement programs feature four primary components: ongoing training, various forms of informative content, coaching (whether external or internal) and a mindful approach to technology. A well-designed program can help new hires get up to speed faster, boost overall sales productivity, enhance sales reps’ knowledgeability and improve employee engagement. If you decide to implement one, contact us for help.