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.

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The Sharing Economy & How It Impacts You

The IRS recently launched a new resource center on IRS.gov aimed at providing tips for individuals that are taking part in the sharing economy. The past few years, the sharing economy has changed the way people travel, commute, and vacation. With new streams of revenue from assets that individuals already possess, come new requirements to ensure individuals file accurate tax returns.

The IRS, working in conjunction with the National Taxpayer Advocate, is taking steps to provide additional information to taxpayers, including the creation of the new Sharing Economy Resource Center on IRS.gov.

To help people meet their tax reporting responsibilities, the new Sharing Economy Resource Center offers tips and resources on a variety of topics ranging from filing requirements and making quarterly estimated tax payments to self-employment taxes and special rules for reporting vacation home rentals.

Here are a few key points people involved in the sharing economy should keep in mind:

  • Taxes. Income received is generally taxable, even if the recipient does not receive a Form 1099, W-2 or some other income statement. This is true if the sharing economy activity is only part-time or a sideline business and even if the recipient is paid in cash. On the other hand, depending upon the circumstances, some or all business expenses may be deductible.
  • Deductions. There are some simplified options available for deducting many business expenses for those who qualify. For example, a person who uses his or her car for business often qualifies to claim the standard mileage rate, currently 54 cents a mile for 2016.
  • Rentals. Special rules generally apply to the rental of a home, apartment or other dwelling unit that is used by the taxpayer as a residence during the taxable year. Usually, rental income must be reported in full, any expenses need to be divided between personal and business purposes and special deduction limits apply. But if the dwelling unit is rented out fewer than 15 days during the year, none of the rental income is reportable and none of the rental expenses are deductible.
  • Estimated Payments. The U.S. tax system is pay-as-you-go, based on the wherewithal to pay. This means that people involved in the sharing economy often need to make estimated tax payments during the year to cover their tax obligation. These payments are due on April 15, June 15, Sept. 15 and Jan. 15. Use Form 1040-ES to figure these payments.
  • Payment Options. The fastest and easiest way to make estimated tax payments is to do so electronically using IRS Direct Pay or the Treasury Department’s Electronic Federal Tax Payment System (EFTPS).
  • Withholding. Alternatively, people involved in the sharing economy who are employees at another job can often avoid needing to make estimated tax payments by having more tax withheld from their paychecks. File Form W-4 with the employer to request additional withholding. The Withholding Calculator on IRS.gov can also be a helpful resource.

If you have any questions about how the sharing economy may impact your taxes, feel free to contact our office.

 

Three Tips for Starting a Business

When starting a business, understanding your tax obligation is one key to business success. With the internet and the wealth of information found on the web, it’s easy to be misinformed. Hopefully this post will clear up any questions or concerns you may have when starting your business.

  1. Business Structure. One of the first decisions you will make when starting a business is deciding on a business structure. Business structures can have a huge impact on the tax liability of your operations, therefore it is always best to seek council from a CPA or lawyer. The most common forms of businesses are:
    • Sole Proprietorships
    • Partnerships
    • Corporations
    • S-Corporations
    • Limited Liability Company (LLC)
      • There are many misconceptions surrounding the LLC as a business structure.
      • Here are the facts: An LLC is a business structure that is allowed by state statute. Each state has it’s own statutes regarding the requirements for ownership. An LLC has default treatments for federal taxation that may only be changed by timely filing the correct elections. The default treatments are as follows:
        • An LLC with one member (whether individual or another business) is disregarded for federal tax purposes (but still a separate entity for employment taxes and excise taxes)
        • An LLC with two or more members is by default a partnership
      • If an LLC would like to elect a treatment other than the default, it can do so by filing Form 8832 or Form 2553. An LLC can elect to be treated as a Corporation or S-Corporation. An LLC is NOT by default, either of these entities.
  2. Business Taxes. There are four general types of taxes that businesses pay:
    • Income Tax – All business except partnerships must file an annual income tax return. Partnerships, however, file an information return.
    • Self-Employment Taxes -these are social security and medicare taxes primarily levied on individuals who work for themselves (examples would include sole proprietors, single member LLC’s where an individual is the sole owner, and in some cases, partnerships)
    • Employment Taxes – businesses with employees have a responsibility to pay and file forms related to social security taxes, medicare taxes, federal income taxes, and federal unemployment (FUTA) taxes.
    • Excise Taxes – some businesses may be required to pay excise taxes, more information on these taxes can be found on the IRS website.
  3. Employer ID Number (EIN). An EIN or Federal Tax Identification Number is used to identify a business entity. Most businesses can apply for an EIN on the IRS website free of charge. An EIN is recommended, even for sole-proprietors, to obtain a bank account and provide to vendors who may request tax information.

If you have any questions about entity selection or getting your business Launched!, feel free to contact our office or schedule a consulting meeting.

Accelerated Due Date for FinCEN Form 114

FinCEN Form 114, formerly referred to as “FBAR”, Report of Foreign Bank and Financial Accounts, is used to report a financial interest in or signature authority over a foreign financial account. The “FBAR” is due June 30 this year to report 2015 accounts, with no extensions allowed.

As part of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, tax years beginning after December 31, 2015 (beginning Jan 1, 2016), will be due April 15 with a maximum extension of 6 months.

The IRS has done a pretty good job with assuming this role on behalf of the Financial Crimes Enforcement Network and the Department of the Treasury. The first step they took was the electronic filing mandate a few years ago, and now, matching the deadline to the individual taxpayer deadline and adding an extension makes for a smoother filing season.

For more information on whether you may be required to file FinCEN Form 114, 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

 

IRS to Begin Contacting Employers with Late Payroll Tax Payments

Falling behind on payroll taxes? Expect a call from the IRS soon.

In a recent news release, the IRS announced its plans to launch a new initiative aimed at monitoring payroll deposit patterns. Employers that are falling behind on payments will receive a letter or automated phone message reminding them of their payroll tax responsibilities.

For more information on Employment Tax & Reporting due dates, visit the IRS website.

For questions about payroll reports or taxes, contact Paul Glantz, CPA at paul@launchconsultinginc.com

How to Choose a Tax Preparer

With the 2015 tax filing season quickly approaching, I thought I would share this article the IRS published earlier this month about how to “Make a Wise Choice when Selecting a Tax Preparer”. I summarized a few key points below, because lets face it, it’s 2015 and nobody has the attention span to read a full article.

Here are some key take-aways:

  • Select a professional you trust. Since they will have access to sensitive data, including your social security number along with income and investment data, make sure you aren’t handing an engagement over to someone who could compromise your personal data. At Launch Consulting, we safeguard your data and use a secure file exchange software to protect your privacy.
  • Ask about preparation fees upfront. No-one likes surprises, especially in April around deadline time. Avoid any preparer that charges a fee based on refund, or says they can get you a larger refund. If a CPA is telling you this, it’s 100% unethical and against the rules of the State Board holding their license.
  • Make sure your preparer doesn’t disappear after April. Sometimes questions arise and you need your preparer to clarify. At Launch Consulting, we are with you year round, not just for tax preparation, but for tax planning and business consulting. We want to see you succeed, and we promise to be there every step of the way to help.

Lastly, only Enrolled Agents (EA), Certified Public Accountants (CPA), and Attorneys have unlimited representation rights in front of the IRS. As a licensed CPA, I can represent you on any matters including audits, payment/collection issues, and appeals.

 

The full article can be read here.

For any questions about business or personal taxes, contact Paul Glantz, CPA at paul@launchconsultinginc.com

Where did your tax dollars go in 2014?

With the 2014 Tax filing season behind us, whitehouse.gov‘s  interactive tool shows you exactly where your tax dollars were spent. It’s no surprise that over 50% of your taxes went to health care and national defense, but I think one of the more interesting numbers is the 9% we pay just to cover net interest from our nations deficit. Curious to know where your money went? Check out the tax calculator below!

Five Tax Strategies Now for Refunds in April

As the year winds down, there is nothing more important than discussing year-end tax strategy. Building communication between yourself, your CPA, and your investment advisor will guarantee you are a winner come April 15. Far too often, poor decision making and bad planning will lead to a big bill from the IRS. I’ve compiled a list of five powerful tips you can use now to help reduce your tax bill next year.

  1. If you had any big losers in the market this year, consider “realizing” these losses, and preserving your investment position by purchasing back that same security 31 days later.
  2. Consider using a credit card to pay deductible expenses before the end of the year. The IRS operates on the “year of swipe” principle. So while you will not receive the bill for these expenses until 2016, you can benefit from the deduction in 2015.
  3. Apply strategy to your itemized deductions. In some states, and cities (like Austin, Texas), you can make your property tax payment between October and January. If planned correctly, you can double your real estate tax deduction every other year, while still taking advantage of the standard deduction for in-between years.
  4. Defer income and accelerate your deductions. Ask your boss to hold on to that year-end bonus until January or have your employer bump up your last few 401k contributions. Other strategies for accelerating your deductions include increasing the amount you set aside for next year’s FSA or, if eligible, make a full years worth of HSA contributions before December 1, 2015.
  5. If you made a Traditional to Roth IRA conversion earlier in the year, and the value of the assets has since declined, you could wind up paying a higher tax than necessary. You can combat this by backing out of the transaction, and re-characterizing the conversion. Later, you can reconvert to a Roth.

Stay tuned for more tax planning tips as we wait for information on any “extender legislation” for temporary tax rules set to expire Dec 31.

For more information on year end planning, contact Paul Glantz, CPA at paul@launchconsultinginc.com

 

Tax Relief for Disaster Victims in Texas

On its website, the IRS announced relief for taxpayers in Harris, Hayes, and Van Zandt who were affected by the severe storms, tornadoes, straight-line winds, and flooding that took place in Texas beginning on  May 4, 2015.

This means affected taxpayers are eligible for an extension of time to perform time sensitive tasks such as filing and paying taxes. Some of the qualifications include:

  • Taxpayers whose principal residence, or business entity whose principal place of business is located in the counties mentioned above
  • Individuals who are relief workers assisting with the disaster area

Launch Consulting, Inc. sends its deepest gratitude to clients and their friends and families impacted by the flooding caused by adverse weather in the Austin area.

For more information on additional taxpayers who may be eligible for relief, please visit the IRS website.

For questions on the tax implications of losses please contact Paul Glantz, CPA at paul@launchconsultinginc.com