Accounting Freedom

With summer fast approaching, you might be considering hiring young people at your small business. If your children are also looking to earn some extra money, why not put them on the payroll? You may be able to turn your high-taxed income into tax-free or low-taxed income by shifting some business earnings to your child for services performed. To deduct the wages as a business expense, the work done must be legitimate and the child’s salary must be reasonable. You also may be able to achieve Social Security tax savings (if your business isn’t incorporated) and your child may even be able to make retirement plan contributions. Contact us if you have any questions. www.accountingfreedom.com

Our awesome team spent the afternoon on 4/15 celebrating the end of a great tax season by playing some Whirley Ball and bowling! Big shout out to our Firm Director Daisy for planning a great event! #workhardplayhard

As a reminder, our offices will be closing early today to celebrate the end of another great tax season!

Are you considering incorporating your business? If so, beware of the reasonable compensation conundrum. As a C corporation, you’ll likely want to pay highly compensated employees more compensation and lower dividend amounts because compensation is tax deductible and dividends aren’t. But the IRS is watching: If the tax agency believes you’re excessively compensating a highly compensated employee, it may challenge your compensation approach. Such challenges can result in compensation being reclassified as dividends, with penalties and interest potentially added. You may contest an IRS determination, but doing so will involve time and legal expenses. Contact us for more information.

We have 1 week left before the 4/15 tax deadline. Please take note our offices will be closing early on 4/15 to celebrate the end of another successful tax season!

For federal income tax purposes, rental real estate losses are generally considered passive activity losses (PALs), which can only be deducted against passive income from other sources. If you don’t have enough passive income, excess PALs are suspended and carried forward to future years. They can be deducted later when you have enough passive income or sell the property. But there’s an exception for real estate professionals. If you qualify, rental losses can be treated as non-passive, allowing you to deduct them currently, regardless of passive income. This can provide a significant tax break if you’re eligible. You may also be eligible for other exceptions. Contact us for help. www.accountingfreedom.com

Business owners: Each of the three parts of your financial statements is a valuable tool that can guide you toward good operational decisions. For example, the balance sheet’s primary purpose is to tally your assets, liabilities and net worth, creating a snapshot of your company’s financial health during the statement period. Meanwhile, the income statement’s purpose is to show sales, expenses, and income or profits earned after expenses over the period. It can help you assess profitability. Finally, the statement of cash flows aims to track all sources (inflows) and recipients (outflows) of your cash. It can allow you to optimally manage liquidity. Contact us for more information. www.accountingfreedom.com

Staying compliant with payroll tax laws is crucial for small businesses. Mistakes can lead to fines, strained employee relationships and legal consequences. Here are four quick tips: 1) Maintain organized records so you can verify to the IRS that you’re withholding and remitting the correct amounts. 2) Understand withholding and adhere to filing and deposit deadlines. A “responsible person” who willfully fails to withhold or deposit employment taxes can be held personally liable for a steep penalty. 3) Stay current with regulatory changes. 4) Seek professional advice. We can help you select the right system, calculate employee withholding, navigate multi-state filing requirements and more. www.accountingfreedom.com

A popular benefits model for many businesses is sponsoring a high-deductible health plan (HDHP) accompanied by Health Savings Accounts (HSAs). HSAs are participant-owned, tax-advantaged accounts that accumulate funds for eligible medical expenses. To own an HSA, participants must be enrolled in an HDHP (as defined by the IRS), have no other insurance and not qualify for Medicare. For businesses, HDHPs generally have lower premiums than other insurance plans, and optional employer contributions are tax deductible. For participants, HSAs are powerful savings vehicles that they own for life. However, the HDHP + HSA model has potential drawbacks for both parties. Contact us for more info. www.accountingfreedom.com

When it’s time to consider your business’s future, succession planning can protect your legacy and successfully set up the next generation of leaders or owners. Here are five options to consider: 1) Transfer the business directly to family members through a sale or gifts. 2) Transfer ownership through a trust. 3) Engage in an employee or management buyout. 4) Establish an employee stock ownership plan. 5) Sell stock or assets to an outside buyer. Each of these options has tax implications. The best approach for you depends on factors including your retirement timeline, financial goals and family or employee involvement. Contact us about how to move forward in your situation. www.accountingfreedom.com