Now’s the time to review your business expenses

As we approach the end of the year, it’s a good idea to review your business’s expenses for deductibility. At the same time, consider whether your business would benefit from accelerating certain expenses into this year.

Be sure to evaluate the impact of the Tax Cuts and Jobs Act (TCJA), which reduces or eliminates many deductions. In some cases, it may be necessary or desirable to change your expense and reimbursement policies.

What’s deductible, anyway?

There’s no master list of deductible business expenses in the Internal Revenue Code (IRC). Although some deductions are expressly authorized or excluded, most are governed by the general rule of IRC Sec. 162, which permits businesses to deduct their “ordinary and necessary” expenses.

An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your business. (It need not be indispensable.) Even if an expense is ordinary and necessary, it may not be deductible if the IRS considers it lavish or extravagant.

What did the TCJA change?

The TCJA contains many provisions that affect the deductibility of business expenses. Significant changes include these deductions:

Meals and entertainment. The act eliminates most deductions for entertainment expenses, but retains the 50% deduction for business meals. What about business meals provided in connection with nondeductible entertainment? In a recent notice, the IRS clarified that such meals continue to be 50% deductible, provided they’re purchased separately from the entertainment or their cost is separately stated on invoices or receipts.

Transportation. The act eliminates most deductions for qualified transportation fringe benefits, such as parking, vanpooling and transit passes. This change may lead some employers to discontinue these benefits, although others will continue to provide them because 1) they’re a valuable employee benefit (they’re still tax-free to employees) or 2) they’re required by local law.

Employee expenses. The act suspends employee deductions for unreimbursed job expenses — previously treated as miscellaneous itemized deductions — through 2025. Some businesses may want to implement a reimbursement plan for these expenses. So long as the plan meets IRS requirements, reimbursements are deductible by the business and tax-free to employees.

Need help?

The deductibility of certain expenses, such as employee wages or office supplies, is obvious. In other cases, it may be necessary to consult IRS rulings or court cases for guidance.

For questions about tax deductions specific to your business, give Launch Consulting a call today.

Tax-free fringe benefits help small businesses and their employees

Tax-free fringe benefits help small businesses and their employees.

In today’s tightening job market, to attract and retain the best employees, small businesses need to offer not only competitive pay, but also appealing fringe benefits. Benefits that are tax-free are especially attractive to employees. Let’s take a quick look at some popular options.

Read more

Due Date for Forms 1099 Quickly Approaching

Form 1099-MISC along with many other informational returns are due to recipients at the end of this month. Last year, I gave a brief outline of who may be be required to file.

Penalties for late filing range from $30-100 per late or incorrectly filed return. The maximum penalty is $250,000 per year. ($75,000 for small businesses).

These are pretty steep penalties for an informational return, and they are set to increase for the 2016 filing period ($50 for the minimum and up to $175,000 for small businesses).

 

For instructions on how to prepare Form 1099-MISC for the 2015 reporting tax year, visit the IRS website.

For information on due dates, and when and where to file, check out this IRS Publication.

If you have any questions about Form 1099-MISC contact Paul Glantz, CPA at paul@launchconsultinginc.com

Controversial Charitable Contribution Regulation Withdrawn

This past September, the IRS proposed a regulation that would require charitable organizations to collect personal information from its donors and file information returns with the IRS with this personal information for donations over $250. The IRS would, in turn, would use informational returns received from the donee to match the amounts with the social security numbers of the donors.

A few days ago, we received notice that the IRS has scrapped these regulations. (whew!) This could have only led to more paperwork for non-profit organizations and greater risks for individuals to become victims of identity theft.

As a reminder, the IRS still requires contemporaneous written acknowledgement of a contribution from a charitable organization if the donation exceeds $250.  The acknowledgement must state the amount of cash or a description (but not the value) of property other than cash contributed. The letter must also state whether the donee provided any “goods or services” in consideration for the contribution. Lastly, if the goods or services received were entirely intangible religious benefits, the letter must provide a statement to that effect.

For more information on charitable contributions, please contact Paul Glantz, CPA at paul@launchconsultinginc.com

 

Highway Bill Gives IRS Power over Passports

Last week President Obama signed into law the Highway Bill, a five-year $305 billion law that will focus on improving highway and transit projects. Included in that law were two controversial provisions that didn’t receive as much press.Both these provisions were included as offsets that are expected to cover the infrastructure spending.

Aside from the IRS bringing back private debt collectors, the new law gives the State Department the power to deny or revoke the passport of individuals with unpaid disputed tax bills. The passport revocation would only occur after the IRS has issued a lien or levy. If you have a payment agreement set up with the IRS, don’t worry, you’re in the clear. As far as privatizing debt collectors, expect to see an increase in criminals posing as IRS agents or collection companies.

More information on the Highway Bill here .

If you have questions about safeguarding your personal information, be sure to check out these tips.

For additional questions on how this law may impact you, contact Paul Glantz, CPA at paul@launchconsultinginc.com

Am I required to file Form 1099-MISC for 2014?

This is a question I get asked often from new clients. In short, 1099s are issued by businesses (sole-proprietors, LLCs, partnerships, corporations, etc.) who’ve made payments in excess of $600 to individuals or other businesses during the ordinary course of business. This includes services (contract labor), rents, royalties, and interest.

There are certain exceptions that apply to this $600 threshold, but we’ll attempt to keep this post as brief as possible. Under Code Section 6041, payments made to a “corporation” do not require returns of information, however 1099’s are still issued to law firms regardless of their entity structure.

Failure to file these required informational returns will result in penalties ranging from $30-100, depending on how late they are filed.

 

For help preparing Forms 1099-MISC, contact Paul@LaunchConsultingInc.com

Form more information on requirements for filing, visit the IRS website using the link provided below:

http://www.irs.gov/pub/irs-prior/i1099msc–2014.pdf