9 tax considerations if you’re starting a business as a sole proprietor
When launching a business, many entrepreneurs start out as sole proprietors. If you’re launching a venture as a sole proprietorship, you need to understand the tax issues involved. For example, you may be eligible for the pass-through deduction on qualified business income. You must pay self-employment taxes and make estimated tax payments on income earned. For 2024, these are due April 15, June 17, Sept. 16 and Jan. 15, 2025. If you hire employees, you need a taxpayer ID number and must withhold payroll taxes. Keep complete records of income and expenses. Also, consider setting up a retirement plan. Contact us if you want more information about the tax implications of running your business.
3 common forms of insurance fraud (and how businesses can fight back)
Businesses need insurance, but dishonest individuals can exploit it. Here are three of the most common forms of insurance fraud: 1) Premium diversion occurs when an employee or insurance agent steals funds intended to be premium payments and uses them for personal or other business expenses. 2) Workers’ compensation schemes involve employees fabricating or exaggerating injuries or illnesses to receive benefits. 3) Health insurance scams happen when someone adds a fake employee to the plan or uses a stolen identity to enroll a nonexistent dependent. To fight back, choose providers carefully, develop strict claims policies and offer a fraud prevention hotline. Contact us for help.
If you gave to charity in 2023, check to see that you have substantiation
Did you give to charity last year? To receive a tax break, you must itemize deductions on your tax return. To claim a tax deduction for a donation of $250 or more, you need a “contemporaneous” written acknowledgment from the charity. Contemporaneous means you receive it by the date you file your return, or the extended due date of the return. If you made a donation in 2023 but don’t have a letter from the charity yet, request it from the organization and wait to file your 2023 return until you receive it. Additional rules apply to certain types of donations, such as noncash contributions. Contact us if you have questions about donations you hope to deduct on your 2023 tax return.
Update on IRS efforts to combat questionable Employee Retention Tax Credit claims
The Employee Retention Tax Credit (ERTC) provided cash that helped struggling businesses retain employees during the pandemic in 2020 and 2021. The IRS reports that it has received a deluge of “questionable” ERTC claims on amended tax returns after unscrupulous promotors asserted that large refunds could easily be obtained, even though there are strict eligibility requirements. The IRS has now created a Voluntary Disclosure Program that allows businesses to pay back money they received after filing erroneous claims. The application deadline is March 22, 2024. If a business is accepted into the program, the employer only needs to repay 80% of the money it received. Contact us for help.
Seeing the big picture with an enterprise risk management program
No business can operate risk-free. Those that try will miss out on growth opportunities and probably get surpassed by more ambitious competitors. One way to manage your company’s “risk profile” is to implement an enterprise risk management (ERM) program. It’s a top-down framework that addresses risk at each organizational level. Unlike traditional risk management techniques, which are often informal and “siloed,” an ERM program recognizes that many risks are enterprise-wide and interrelated. An effective ERM program helps you not only identify major threats, but also devise feasible strategic, operational, reporting and compliance objectives. Contact us for more information.
IRAs: Build a tax-favored retirement nest egg
Traditional and Roth IRAs can help you save for retirement on a tax-favored basis. Contributions to a traditional IRA reduce your current tax bill if you’re eligible, and earnings are tax deferred. However, withdrawals are taxed in full (plus a 10% penalty if taken before age 59½, unless an exception applies). Roth IRA contributions aren’t deductible. But earnings are tax deferred and withdrawals are tax-free if certain conditions are met. The maximum annual IRA contribution is $7,000 for 2024 and $6,500 for 2023 (plus $1,000 if age 50 or over). But your contribution can’t exceed compensation includible in income for the year. There’s no age limit for making contributions if you’re eligible.
Should your business offer the new emergency savings accounts to employees?
As part of the SECURE 2.0 law, there’s a new benefit option for employees facing emergencies. It’s called a pension-linked emergency savings account (PLESA) and it became effective for plan years beginning Jan. 1, 2024. Employers with 401(k), 403(b) and 457(b) plans can opt to offer PLESAs to non-highly compensated employees. For 2024, a participant who earned $150,000 or more in 2023 is highly compensated. Contributions to the accounts are limited to $2,500 (or a lower amount determined by the plan sponsor) in 2024. The $2,500 amount will be adjusted for inflation in future years. To learn more from the U.S. Department of Labor and the IRS: https://bit.ly/3tQURm2 or https://bit.ly/3S7mWgY
Account-based marketing can help companies rejoice in ROI
For B2B companies, a generalized marketing approach could leave key customers and prospects unimpressed. Under an account-based marketing strategy, marketing and sales teams collaboratively focus on targeted high-value accounts to create a customized experience that locks in the buyer long-term through deep relationship building and personalized service. Some potential benefits are a better return on investment than other marketing methods, improved alignment between marketing and sales, and a stronger industry reputation. But there are risks. You’ve got to choose your targets carefully and execute the strategy effectively to avoid squandering the resources you invest. Contact us for help.
Did your business buy the wrong software?
A recent survey found that a perhaps surprising number of companies regret the software purchases they’ve made. Clearly, it’s in every business’s best interest to go slow when it comes to buying software. Start by asking fundamental questions such as “What functionalities do we need?” and “Who will use the software?” Think about compatibility with your existing operating system and other software. Consider surveying employees and, if appropriate, customers to determine whether the software would really be an improvement. Last, scrutinize vendors carefully. Ideally, you want to create a list of prequalified providers to choose from. Contact us for help with your next purchase.
Tax-favored Qualified Small Business Corporation status could help you thrive
Operating your small business as a Qualified Small Business Corporation (QSBC) could be a tax-wise idea. QSBCs are the same as garden-variety C corporations for tax and legal purposes, except QSBC shareholders are potentially eligible to exclude from federal income tax 100% of their stock sale gains. That translates into a 0% federal income tax rate on QSBC stock sale profits! However, you must meet several requirements set forth in the Internal Revenue Code, and not all shares meet the tax-law description of QSBC stock. Other rules apply. Consult with us if you’re interested in operating your business as a QSBC.