If your partnership has been treating you and other partners as employees of a disregarded entity owned by the partnership so the partners can participate in employee benefit plans and receive other employee benefits, you’d better read this. Tax regulations (1) issued by the IRS take aim at this practice and were written to put a stop to it.
A recent Stanford study reviewed the aftermath of the Enron collapse and the repercussions to Enron’s accounting firm’s former clients. The primary trend they identified was when former clients issued accounting restatements or revisions because of less-than-accurate bookkeeping; there was an increase in the salary demands at the affected companies.
The takeaway is that risky or sloppy financial reporting can drive up a company’s labor costs. Labor is usually one of a company’s biggest cost centers. The Stanford researchers report detailed that a company with “significantly above-average-quality reporting can cut the cost of wages, taxes, benefits, and other employee-related expenses by $3 million.” This applies to larger institutions, but the same formula would apply to companies with less revenue and head count.
Many small businesses do their books or hire inexperienced staff to cut costs. While this may seem like a cash saving in the short term, the long-term results can add up to a substantial amount.
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Are you involved in a hobby that you not only enjoy but that produces income? If so, you may have wondered whether the income is taxable, how the tax law treats hobby-related expenses, and if a net loss is tax deductible. Also to consider is if there’s a net profit, has your hobby now become a business?
Most individuals don’t get involved in a hobby intending to make money from it. But if they do, the tax law says that the hobby income must be reported on their tax return. The IRS has depended on the honesty of hobbyists to include the income on their income tax returns. However, it was relatively easy for individuals to avoid including miscellaneous income from hobbies when their only sources of sales of their products were word-of-mouth sales, flea market sales and such – generally cash transactions with no paper trail.
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Summer is upon us, which signals the need for seasonal employees to fill in for workers who are on vacation during the busy months ahead and even for some gearing up for the upcoming hectic holiday season. However, given the current labor shortage many businesses are facing a tight jobs market. So, it may be time to become creative.
One solution might be hiring family members. Financially, it makes more sense to keep the family employed rather than hiring strangers, provided, of course, that the family member is suitable for the job.
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On the one hand, it’s almost a prerequisite for entrepreneurs of all types to have that “can-do spirit.” That sense that nobody else sees things quite like they do so, whatever it is they want to accomplish, it becomes something they know they’ll have to do themselves. In a lot of ways, this is an asset as it’s a big part of what has contributed to your success thus far.
On the other hand, this type of mentality can certainly get people into trouble when it comes to the day-to-day necessities of actually running a business – with bookkeeping, accounting, and other financial matters being chief among them. While there may be a time when you can handle your books yourself, that time will likely pass. There are a few key warning signs in particular that you should watch out for to help clue you in as to when that becomes the case.
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Individuals are always looking for tax deductions that can reduce their tax liability. But what is the actual tax benefit derived from a tax deduction? There is no straightforward answer because some deductions are “above the line”, others must be itemized, some must exceed a threshold amount before being deductible, and certain ones are not deductible for alternative minimum tax purposes, while business deductions can offset both income and self-employment tax. In other words, there are many factors to consider, and the tax benefits differ for everyone, depending on their particular situation and tax bracket.
Any seasoned entrepreneur can tell you that starting your own business is not easy regardless of its size. It takes a lot of time, effort, passion, and money to get a company off the ground in any industry.
That, in essence, is what small business grants are designed to aid with. They may not be able to help with the time or effort parts, but they can and often do provide the necessary capital to get a company off the ground and moving in the right direction.
But what are small business grants, where do they come from, and how do you take advantage of them in your own situation? The answers to questions like those require you to keep a few important things in mind.
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As part of the Inflation Reduction Act, passed in August 2022, modifying Internal Revenue Code Sec. 45L, contractors will benefit from the increased tax credit for building Energy Efficient New Homes effective January 1, 2023. In addition, this credit that had previously expired after 2021, has been extended through 2032.
For 2022, the old credit rules have been retroactively extended providing a $2,000 tax credit for site built home and a $1,000 or $2,000 tax credit for manufactured homes that meet the energy saving requirements of 50% for a site built home and 30% to 50% for manufactured homes.
Beginning in 2023 and before 2033 the amount of the credit is increased, and can be $500, $1,000, $2,500, or $5,000, depending on which energy efficiency requirements the home satisfies and whether the construction of the home meets the prevailing wage requirements.
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Effective for 2022 and later years, Congress reduced the threshold for the Form 1099-K filing requirement from $20,000 to a mere $600. So, you might ask, what does that have to do with me? This change can impact taxpayers in several ways, some unexpected, so you may find yourself in for a surprise that can be unpleasant in some situations.
This article explores the several ways taxpayers can be affected. But first we need to review the purpose of the 1099-K and what can occur for you to receive one.
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