A little over two years ago, there was a Facebook post that caught national attention. The post simply asked “What color dress do you see?” Was it blue and black or white and gold? Some people saw it one way and couldn’t imagine it be anything else. Others were uncertain because they saw it one color one day and another color the next. For the people who were sure they were right, they weighed in on the public debate, while others that were unsure may have chosen to hold back from weighing in. After a few weeks, the fervor died down and life went back to normal.
Such is the situation we find ourselves in with the conversion to a C Corporation. When the 2017 Tax Cuts and Jobs Act was passed, articles were written that touted all business owners would make the conversion to take advantage of the reduced tax rates. Nothing could shake these authors from their thoughts. There were other authors who were uncertain. Turns out, they are both correct. No matter where you land on the issue, business owners will respond based on how they feel.
Whether you are finishing up your 2017 federal and state tax returns, or trying to figure out how the new tax laws apply to your business, the next tax deadline could be as soon as tomorrow. Tomorrow is the day that you could finalize your 2017 taxes, start the process of educating yourself on the new tax laws, or make an appointment to review your current 2018 tax situation with your trusted advisor. No matter where you are in the process, setting a deadline is helpful to achieve your goals.
With the federal tax deadline behind us, you might be thinking you’re done with tax deadlines for a while. But if you own commercial property, you’re not quite in the clear. You’ve likely already received your notice of appraised value from your county, but have you filed your commercial property tax protest yet? The deadline to file a protest is fast approaching, and with so many different tax deadlines to keep up with, it’s easy to forget one.
Business owners whose companies are structured as pass-through entities (where income passes through to the Form 1040 and is taxed at personal income tax rates) sometimes think they may do better if they switch their business to a C Corporation. In a C Corporation, income is taxed at the business level, and is a flat 21% tax rate. The process to determine whether or not to switch is one of the hotly debated topics among CPAs and clients this tax season. Answers to this question include yes, no, maybe, and my favorite: it depends. In the end, the answer is universally subjective, not only to each type of business, but to each individual.
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In last month’s article, I highlighted the changes to pass-through businesses posed by the new tax bill. Today, let’s look at deductions that affect all businesses, but specifically medium to large size businesses.
When I was growing up, my mom had a saying: “You can choose to change or change will choose you.” The latter can be applied to 2018 and the new tax rates for small businesses. Seeing as it’s the beginning of the year and most people are still open to changing things in their lives, let’s look at this change and what small business owners can do for their tax situation.
During the holiday season, everyone can understand the idea of the one big gift: the hot new toy, the new game or gaming system, a car with a giant red bow, etc. While those gifts are nice, smaller gifts (usually tucked into a stocking) often give a type of enjoyment that is special, recurring in nature, or even a tradition. These gifts shouldn’t be overlooked in pursuit of the big gift.
When it comes to businesses and taxes, the same holds true. Businesses typically look for the biggest tax deductions first, and don’t spend much time thinking about the smaller ones. The trick is to look at all the options (including the smaller ones), and plan out the resources that should be allocated to each.
Halloween tricks may be over, but real tax surprises could still occur as late as next October for things that happen in 2017. And when it comes to filing and paying your taxes, surprises are never fun. Recently, I was contacted by a potential new client because the tax liability on the proposed filing of the 2016 tax return was a little north of $50,000. Needless to say, this was not the Halloween treat they had hoped for.
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The response from the professor in a classic 80’s movie: “It’s a fictional product. It doesn’t matter”, shows the difference between the theory of business and the real world. In theory, all manufacturing companies would track their product income and expenses by class and take all the deductions that are available to them. However, that usually doesn’t happen because the business owner is unaware.
Cryptocurrency, such as Bitcoin, is an electronic currency used to pay for goods and services. It can be bought, sold, or created (called mining). There are websites that allow you to purchase it directly or invest in funds that purchase it. Tracking the currency can be a challenge because fractions of the coins can be sold at a time, and there can be many transactions over the course of a day. Income recognition can also be a challenge. That’s why the IRS has issued guidance on how general tax principles apply to cryptocurrency. Let’s look at the two main types of transactions that are applicable to most business owners: investing in and accepting of payment.