Do you run a business from home? You may be able to deduct home office expenses
One result of the COVID-19 pandemic is that many people now work from home. If you’re self-employed and run your business from home or perform certain functions there, you may be able to claim deductions for home office expenses against business income. There are two methods for claiming deductions. With the actual expense method, you claim direct expenses, such as the cost of painting and a proportionate share of indirect expenses, such as utilities, insurance and depreciation. With the simplified method, you deduct $5 per square foot of home office space, up to $1,500. Unfortunately, employees can’t deduct home office expenses. We can help you determine if you qualify and how to proceed.
How might the Internet of Things affect your business?
Nowadays, almost everything electronic is connected to the Internet or could be, from refrigerators to HVAC to security systems. This phenomenon is known as the Internet of Things (IoT), and business owners should learn about it. There are two big reasons why: 1) To gain or maintain a competitive edge; companies that get the IoT right may reduce costs, gain operational efficiencies, and enhance their ability to harness data to boost productivity and profitability. 2) To heighten awareness of cybersecurity; every IoT-enabled item potentially creates a gateway that hackers could exploit to steal data, hold systems for ransom or otherwise disrupt operations. Contact us for more info.
Child Tax Credit: The rules keep changing but it’s still valuable
Over the years, the Child Tax Credit (CTC) rules have changed significantly. For 2022 and 2023, the CTC applies to taxpayers with children under the age of 17 (who meet certain other requirements). The CTC is currently $2,000 for each qualifying child. A $500 credit for other dependents is available for dependents other than qualifying children. You qualify for the full amount of the CTC for each qualifying child if you meet all eligibility factors and your annual adjusted gross income isn’t more than $200,000 ($400,000 if married and filing jointly). Parents with higher incomes may be eligible to claim a partial credit. You must include the child’s Social Security number on your return.
Key tax issues in M&A transactions
Merger and acquisition activity dropped dramatically in 2022 due to rising interest rates and a slowing economy. But some analysts expect 2023 to see increased M&A activity in certain industries. If you’re considering buying or selling a business, it’s important to understand the tax implications. For tax purposes, a transaction can basically be structured in two ways: stock (or ownership interest) or assets. For tax and nontax reasons, buyers usually prefer to purchase assets, while sellers generally prefer stock sales. Buying or selling a business may be the largest transaction you’ll ever make, so seek professional advice. After a deal is done, it may be too late to get the best results.
Have employees who receive tips? Here are the tax implications
Many businesses in certain industries employ individuals who receive tips as part of their compensation. Here are some employer responsibilities: 1) Send each employee a Form W-2 that includes reported tips. 2) Keep their employees’ tip reports. 3) Withhold taxes, including income taxes and the employee’s share of Social Security tax and Medicare tax, based on employees’ wages and reported tip income. 4) Pay the employer share of Social Security and Medicare taxes based on the total wages as well as reported tip income. 5) Report this information to the IRS on Form 941. 6) Deposit withheld taxes according to federal tax deposit requirements. Contact us with any questions.
Answers to your questions about 2023 limits on individual taxes
Many people are more concerned about their 2022 tax bills than they are about their 2023 tax situations. That’s because 2022 individual tax returns are due to be filed in 10 weeks. However, it’s a good time to acquaint yourself with tax amounts for this year, many of which have increased substantially due to inflation. For example, the amount you must earn in 2023 before you can stop paying Social Security on your salary is $160,200 (up from $147,000 in 2022). If you’re eligible in 2023, you can contribute $6,500 to a traditional or Roth IRA (up from $6,000 in 2022). If you’re 50 or older, you can make another $1,000 “catch up” contribution (for 2023 and 2022). Questions? Contact us.
Sailing a steady ship in today’s interesting economy
In a word, the U.S. economy can be described as “interesting.” Unemployment is way down, and inflation has generally moderated, but much uncertainty about the future remains. How should business owners react? Sail a steady ship. Curbing expenses, within reason, is never a bad idea. But don’t stop investing in the right people, assets and technology. Work with your leadership team to prioritize expenditures and discuss major spending items. Meanwhile, maintain strong communication with your suppliers, as supply chain problems are still prevalent. Last, remain ever vigilant against internal fraud and cybercrimes. Contact us for help gathering and analyzing the right financial data
Inflation Reduction Act Changes for 2023
In August 2022, the Inflation Reduction Act was signed that increased the benefits for Section 179D, Energy-Efficient Commercial Buildings. The originally passed Section 179D legislation allowed owners of commercial buildings and developers of government owned buildings to claim a deduction for energy-efficient improvements made to the HVAC system, interior lighting system and the building envelope. […]
Look to a SWOT analysis to make better HR decisions
For many businesses, an often-overlooked area of both opportunity and trouble is HR. One way to better manage strategic HR decisions is to conduct a strengths, weaknesses, opportunities and threats (SWOT) analysis. Start by identifying internal strengths and weaknesses that affect performance in core HR competencies such as hiring, benefits administration and employee support. Next, look at external conditions (opportunities) that could lead to worthwhile improvements, such as broadening your benefits package. Finally, pinpoint external threats that could inhibit performance, such as regulatory changes. Ultimately, a SWOT analysis can help you set advisable, feasible HR objectives.
Retirement plan early withdrawals: Make sure you meet the requirements to avoid a penalty
Most retirement plan distributions are subject to income tax and may be subject to an additional 10% penalty if you take a withdrawal before age 59½. Fortunately, there are some exceptions to avoid the penalty but there are strict rules. In one case (TC Memo 2023-9), a taxpayer lost his job and took a 401(k) plan distribution before reaching age 59½. He had been diagnosed with diabetes, which he treated with insulin and other medication. The U.S. Tax Court ruled he didn’t qualify for an exception to the 10% penalty due to total and permanent disability. The reason: He had been able to work up until the distribution. We can help determine if you qualify for an exception to the penalty.
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