Category Archives: Small Businesses

Tax Tibits: Do I have to issue my landscaper and housekeeper a 1099?

1099 and the law You are required to issue a 1099 to anyone you pay $600 or more in the course of your trade or business who is not incorporated.

Typical payments requiring a 1099 include services performed by independent contractors, such as gardeners and housekeepers for your business, as well as rents your business pays.

Received a Payment and Other Reporting Situations

Per the IRS, if, as part of your trade or business, you received any of the following types of payments, you will have to file a specific form.

Payment of mortgage interest (including points) or reimbursements of overpaid interest from individuals (1098)
Sale or exchange of real estate (1099-S)
You are a broker and you sold a covered security belonging to your customer (1099-B)
You are an issuer of a security taking a specified corporate action that affects the cost basis of the securities held by others (Form 8937)
You released someone from paying a debt secured by property or someone abandoned property that was subject to the debt (1099-A) or otherwise forgave their debt to you (1099-C)
You made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment (1099-MISC)

Not Required to File Information Returns

You are not required to file information return(s) if any of the following situations apply:

You are not engaged in a trade or business.
You are engaged in a trade or business and
- the payment was made to another business that is incorporated, or
- the sum of all payments made to the person or unincorporated business is less than $600 in one tax year (unless the recipient is an attorney or law form, see specific instructions for 1099-MISC for further details).

If you need to issue a 1099, and haven’t, we can prepare the 1099 forms if you would like. Just contact us. We can be reached at 619-589-8680.

We do more than just tax preparation at US-TaxLaws.com. We are your best source for professional tax preparation and/or financial consulting services. We give clients a total solution that can include:

Personal Tax Preparation   Business Tax Preparation   Partnership Tax Preparation
Corporate Tax Preparation  Incorporation-Choice of Entity   Business Support Services
Corporate Compliance   Audit Representation  Retirement Tax Planning   Wills & Trusts, Estate Planning   Bookkeeping   Payroll

What Are The Top Six Home Office Deductions?

IRS Talks About Home Office Deductions

If you are one of our clients, you know how we handle your home office deductions. But for those who aren’t our clients – yet – here are some tips from the IRS that you might find useful.

Issue Number:IRS Tax Tip 2015-42

If you use your home for business, you may be able to deduct expenses for the business use of your home. If you qualify you can claim the deduction whether you rent or own your home. If you qualify for the deduction you may use either the simplified method or the regular method to claim your deduction. Here are six tips that you should know about the home office deduction.

1.Regular and Exclusive Use. As a general rule, you must use a part of your home regularly and exclusively for business purposes. The part of your home used for business must also be:

Your principal place of business, or
A place where you meet clients or customers in the normal course of business, or
A separate structure not attached to your home. Examples could include a garage or a studio.

2.Simplified Option. If you use the simplified option, you multiply the allowable square footage of your office by a rate of $5. The maximum footage allowed is 300 square feet. This option will save you time because it simplifies how you figure and claim the deduction. It will also make it easier for you to keep records. This option does not change the criteria for who may claim a home office deduction.

3.Regular Method. If you use the regular method, the home office deduction includes certain costs that you paid for your home. For example, if you rent your home, part of the rent you paid may qualify. If you own your home, part of the mortgage interest, taxes and utilities you paid may qualify. The amount you can deduct usually depends on the percentage of your home used for business.

4.Deduction Limit. If your gross income from the business use of your home is less than your expenses, the deduction for some expenses may be limited.

5.Self-Employed. If you are self-employed and choose the regular method, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. You can claim your deduction using either method on Schedule C, Profit or Loss From Business. See the Schedule C instructions for how to report your deduction.

6.Employees. If you are an employee, you must meet additional rules to claim the deduction. For example, your business use must also be for the convenience of your employer. If you qualify, you claim the deduction on Schedule A, Itemized Deductions.

For more on this topic, see Publication 587, Business Use of Your Home. You can view, download and print IRS tax forms and publications on IRS.gov/forms anytime.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Additional IRS Resources:

FAQs – Simplified Method for Home Office Deduction

US-TaxLaws is your best source for professional tax preparation and/or financial consulting services. We make your tax dollars work for you. Find out how we can help you. Give us a call at 619-589-8680.

Tips to Help You Keep What You Earn in 2015

Many of our clients are in-home businesses. Entrepreneurs, start-ups, small businesses, child care providers, independent professionals, operators and so on. What makes US-TaxLaws.com different is we’re more than taxes. We’re about financial health. We help our clients make their tax dollars work for them. They’re going to have to pay taxes… the question is how much and why. Continue reading →

2015 Tax Dates

January 15, 2015

4th Quarter 2014 Estimated Tax Payment Due

April 15, 2015

Individual Tax Returns Due for Tax Year 2014

Individual Tax Return Extension Form Due for Tax Year 2014

1st Quarter 2015 Estimated Tax Payment Due

Last Day to make a 2014 IRA Contribution

June 15, 2015

2nd Quarter 2015 Estimated Tax Payment Due

September 15, 2015

3rd Quarter 2015 Estimated Tax Payment Due

October 15, 2015

Extended Individual Tax Returns Due

Last Chance to Recharacterize 2014 Roth IRA Conversion

January 15, 2016

4th Quarter 2015 Estimated Tax Payment Due

2015 SCORE Workshops in San Diego

Continuing Education for the entrepreneur, start-up and small business owner.

Note: Fees apply for most workshops.
Click on linked titles below for additional information and to register.
Access their calendar here.

Starting a Restaurant – January 20, 2015 FREE 9:00 a.m. – 12:00 p.m. PST
(Poway, CA)
This workshop is a MUST if you are serious about owning and operating your own restaurant! These essential aspects of a restaurant project will be discussed: Concept Planning…

Tax Considerations for Small Businesses – January 21, 2015 FREE 9:00 a.m. – 11:00 a.m. PST (Downtown San Diego, CA) See Parking Notes Below.
There are several types of taxes that businesses must pay during the calendar year. Understanding each one of these tax liabilities, being certain to meet the time requirements (and save penalty…

Advanced LinkedIn Marketing Hands On Laptop Training – January 21, 2015
6:00 p.m. – 8:30 p.m. PST (San Diego, CA)
This is an intensive hands on workshop designed for business owners that want to take their LinkedIn presence to the next level. It’s a packed agenda including: Advanced Networking…

Bing Ads for Small Businesses – January 23, 2015 FREE 8:30 a.m. – 10:00 a.m. PST
(Fashion Valley San Diego, CA)
Bing Ads is a robust collection of tools and information you can use to place advertisements on the web. Bing Ads can help you: Connect with customers who are engaged and likely to spend more…

Business Plan B: Setting Goals and Telling the World – January 24, 2015
9:00 a.m. – 12:00 p.m. PST (Kearny Mesa, CA)
Having identified your target market and competitive advantage in the first session, this workshop helps you develop a mission statement, preliminary goals and a marketing plan.

Notes on Parking in Downtown San Diego

The SBA/SCORE office is located across India St. from the America Plaza Trolley stop and one block away from the Santa Fe Depot Train and Trolley Station.
Parking is available in our building (entrance is on Columbia Street)
(Credit or Debit Only) $2.00 per/30 minutes – Maxium $24.00
Early Bird Special $12 (In by 9AM – Out by 6PM) – All prices subject to change without notice.
Additional parking is available in the area at indoor and outdoor lots – prices vary.
All metered street parking is limited to the time designated on the meter (usually 2 hours.) You must move your car after the time is up. You cannot add money to the meter to extend your parking time.
Allow extra driving time as construction around building may cause traffic delays.

SCORE is a Resource Partner of the U.S. Small Business Administration

SCORE services are provided without regard to race, color, religion, gender, sexual orientation, national origin, age, disability, genetic information, marital status, amnesty, or status as a covered veteran in accordance with applicable federal, state and local laws. Persons with disabilities may request reasonable special accommodations with a two week advance notice. Contact: Jill Andrews, 550 West C Street, Suite 550, San Diego, CA 92101 or (619) 727-4885. The material in this email is based on work supported by the U.S. Small Business Administration under cooperative agreement #SBAHQ12 S-0001. Any opinions, findings and conclusions or recommendations expressed in this email are provided by SCORE and do not necessarily reflect the views of the SBA.

To find a SCORE Chapter near you visit: www.score.org or web search SCORE with your city or state.

Click here to find an SBA District Office near you.

Free Seminar for San Diego Restaurant Owners

Tips and Techniques to Improve Your Restaurant and Increase Your Profits

This event is presented by the U.S. Small Business Administration, the City Heights Business Association and other Business Associations in the Area.

WHEN: Thursday, November 13th—7:30 a.m. to 10:30 a.m.
WHERE: 4305 University Avenue, 6th Floor Conference Room, San Diego, CA 92105

You’ll Learn:
* How to Improve Your Operating Efficiency
* How to Control Costs
* How to Increase Profits
* How to Best Market Your Restaurant

To view announcement as web page:
http://content.govdelivery.com/accounts/USSBA/bulletins/d4d0c5

Presenters:

Sigmund Penn is a recognized expert in the food service industry and has helped over 120 restaurant chains and many individual-owned establishments improve the quality of their food and beverage services and update marketing techniques to fill their business with customers and increase their profits.Cyndi Darlington, of Darlington Marketing will provide you with great tips on cost effectively marketing your restaurant. Her company specializes in restaurant and hospitality industries.

Register Online at: http://events.sba.gov
Contact: Rosa Rodarte, 619-727-4877

Planning To Form An LLC or Corporation? Wait!

Entity creation has a cost!

If you are thinking of forming an LLC or corporation PLEASE call me before you do anything. Over 90% of the entities we see are dissolved within the first 4 years of existence. When creating an entity you will incur ongoing addition business expenses that may not be necessary. You can reach me at 619-589-8680.

Hobby Tax Trap or For Profit Business?

What would happen if the IRS re-classified your business as a hobby?

It can happen. The IRS defines a hobby as a revenue-generating activity that lacks a profit motive. But what does that mean to you?

Most start-ups and small businesses have good years and not-so-good years. There are those that will say that if your business continually functions in the red, maybe you really need to rethink your business strategy. The IRS, on the other hand, will be looking at whether your business is really a for-profit business or is actually a hobby and the deductions or losses you have taken. “The IRS will generally assume an activity is a business if it generates a profit 3 of 5 consecutive years…“.¹ If the business has a loss for 3 of 5 consecutive years, the IRS will take a closer look at what they consider the “facts and circumstances” to evaluate whether the activity is actually a hobby or qualifies as a for-profit business.

Why is this important? Because if the IRS determines that your business doesn’t have a solid profit motive, they will re-classify your business as a hobby, then your past returns will be reviewed and deductions will be re-evaluated. If they feel your *activity* is actually a hobby, they will add back the losses claimed by you that will result in back-taxes, penalties and interest.

So here are a few tips that you should consider in support of your for-profit business in the event you are ever reviewed by the IRS. You want to be able to substantiate your business, and therefore entitled to any business losses you have claimed. These practices include being properly licensed, have separate bank accounts and credit cards, payment of business taxes, good accounting and record keeping, appropriate insurance, a separate business phone line, log or business journal of time devoted to the business and documented actions taken to help make the activity profitable.²

¹ Brett Hersh, http://www.hbsbusiness.com
² Ibid.

Need help? We do more than just tax preparation at US-TaxLaws. We are your best source for professional tax preparation and/or financial consulting services that include:

FTB Of CA Penalties and their meaning

AN EDUCATED TAXPAYER IS OUR BEST CUSTOMER.

We help our clients understand the ever-changing federal and state tax laws so they can maximize their tax deductions, and adopt best recordkeeping practices.

Many of our clients have come to us after having a bad tax preparation experience that resulted in penalties and interest. When we come across a reference document that we feel is valuable for the taxpayer – we promote it.

We have linked to the 18-page Penalties and Interest Reference Table published by the Franchise Tax Board of California.

Penalty reference chart (pdf)

EDD extension for San Diego wildfire

San Diego County – May 2014

Employers in San Diego County directly affected by the wildfire may request up to a 60-day extension of time from the EDD to file their state payroll reports and/or deposit state payroll taxes without penalty or interest. This extension may be granted under Section 1111.5 of the California Unemployment Insurance Code (CUIC). Written request for an extension must be received within 60 days from the original delinquent date of the payment or return to file/pay.

If you have any questions, contact the EDD’s Taxpayer Assistance Center at (888) 745-3886 or at www.edd.ca.gov/Payroll_Taxes/Emergency_and_Disaster_Assistance_for_Employers.htm

Source:

Business Health Plan Review and Options

BUSINESSES NEED TO REVIEW HEALTH PLAN OPTIONS

Businesses need to do a review of their health plan options and strategy. Businesses with 100+ “full time employees” need to act this year; your mandate starts in 2015. Smaller businesses (50-99) have a little more time. Your mandate begins in 2016. See all of our posts on the effects of the Affordable Care Act.

IRS Encourages Small Employers to Check Out Small Business Health Care Tax Credit; Helpful Resources, Tax Tips Available on IRS.gov
IR-2014-27, March 10, 2014 — With business tax-filing deadlines fast approaching, the IRS encouraged small employers that provide health insurance coverage to their employees to check out the small business health care tax credit and claim it if they qualify.

Sources: IRS.gov

Use of Electronic Media for Saving Tax & Business Records

Considering the use of Electronic Media for Saving Tax & Business Records?

Whether you are starting a new business – or have an established business – you might be looking at how to improve your record keeping practices.

If you have considered the use of electronic media for saving tax & business records you will also want to be sure you are in compliance with the IRS rules and regulations for electronic storage systems. Continue reading →

Tax Reform Update for Small Businesses

How the Tax Reform Act of 2014 Will Affect Your Small Business

You may be holding your breath and wondering how tax reform will affect your small business.

The bill includes a renewal of Section 179 expensing. This tax advantage has typically been renewed every year with higher and higher thresholds, but on Jan. 1, the law reverted back to its original provision, which only allows $25,000 in the expensing of any new assets.

Purchases in excess of this amount must be depreciated over their useful lives. From 2010 to 2013, businesses were allowed a $500,000 threshold for Section 179 expensing. Proposed in the Tax Reform Act of 2014 will be a ceiling of $250,000 – levels enjoyed during 2008 and 2009.

The proposal does not allow for the renewal of bonus depreciation which also expired at the end of 2013. This allowed businesses to deduct 50% of the cost of all assets, above and beyond the Section 179 expensing.

In a statement, National Taxpayers Union Executive Vice President Pete Sepp said that the proposed reform aims to harmonize the top tax rate for S and C Corporations with qualified domestic income to 25%. He contends that because S Corporations are pass-through entities – the individual pays the tax on profit rather than the corporation – there will be an exclusion allowed to create an equivalent 25% tax. Qualified domestic income relates specifically to the manufacturing sector.

This change should encourage production and new jobs within our borders. “The proposal rightly aims to bring a measure of tax parity between ‘pass-through’ small business entities and traditional corporations, but how it hits that target must be thoroughly examined to ensure that job creators aren’t punished in the process,” Sepp said in a statement.

He also reiterated swift action on Capitol Hill will also be necessary. “Some tax-saving provisions for businesses will be gone several years before the final, beneficial 25% tax rate kicks in. Washington must avoid the appearance of clawing back many provisions in the short-term while pushing rate relief into the long-term.”

One tax element that hits many small business owners is the Alternative Minimum Tax which can be triggered when using net operating losses against current year income and when taking depreciation and Section 179 expensing.

On the other hand, the National Federation of Independent Business (NFIB) Vice President of Federal Public Policy Brad Close made the following statement in response to Camp’s proposed reform:

“NFIB has long advocated tax reform that achieves lower rates and a simpler code,” said Close. “While we appreciate Chairman Camp pursuing tax reform that lowers some rates, we are very concerned that this plan does not address the core issues that are important to all small businesses: simplifying the code, leveling the playing field for all businesses, and addressing both corporate and individual tax rates. We look forward to working with members of the Ways & Means Committee and Chairman Camp to achieve comprehensive tax reform that does not pick winners and losers based on size and type of business.”

The tax reform is nowhere near being carved in stone; after all, this is only the discussion draft, so we shall see.

Source: http://smallbusiness.foxbusiness.com/finance-accounting/2014/02/28/how-tax-reform-act-2014-will-affect-your-small-business/

MarketWatch Highlights Tax Law Changes

Have you planned for these 7 tax law changes?

CALL US - 619-589-8680 Seven significant new income tax law changes went into effect at the beginning of the year as a result of two pieces of legislation:

The 2010 Health Care Reform Act
The American Taxpayer Relief Act of 2012

Although the new laws are primarily designed to increase taxes for those with higher levels of income, everyone with earned income is affected. With the first seven months of 2013 behind us, have you begun planning for these changes? Continue reading →

Important Tax Date – February 28

FOR ALL BUSINESSES – TAX FILING INFORMATION

CAUTION TAX FORMS NEEDED! File information returns (for example, Forms 1099 for certain payments you made during 2013. There are different forms for different types of payments. Use a separate Form 1096, Annual Summary and Transmittal of U.S. Information Returns, to summarize and transmit the forms for each type of payment. See the General Instructions for Certain Information Returns for information on what payments are covered, how much the payment must be before a return is required, which form to use, and extensions of time to file.

If you file Forms 1097, 1098, 1099, 3921, 3922, or W-2G electronically, your due date for filing them with the IRS will be extended to March 31. The due date for giving the recipient these forms generally remains January 31.

All businesses.

Give annual information statements to recipients of certain payments you made during 2013. You can use the appropriate version of Form 1099 or other information return. Form 1099 can be issued electronically with the consent of the recipient. Payments that may be covered include the following.

Cash payments for fish (or other aquatic life) purchased from anyone engaged in the trade or business of catching fish.
Compensation for workers who are not considered employees (including fishing boat proceeds to crew members).
Dividends and other corporate distributions.
Interest.
Rent.
Royalties.
Payments of Indian gaming profits to tribal members.
Profit-sharing distributions.
Retirement plan distributions.
Original issue discount.
Prizes and awards.
Medical and health care payments.
Debt cancellation (treated as payment to debtor).
Cash payments over $10,000. See the instructions for Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

This information is available in IRS Publication 509 – Tax Calendars for Use in 2014

Communicating Your Child Care Business Policies

SHOULD YOU CREATE A POLICY HANDBOOK FOR YOUR CHILD CARE BUSINESS? ABSOLUTELY!

It is your responsibility to communicate your policies in your business. Clients will appreciate the information, and creates a basis of communication between you and the client. It establishes how you conduct your business, and gives parents an “inside look” of what to expect in your performance. It also lets them know what is expected of them. To learn more about what to include in your handbook, see Communicating Your Child Care Business Policies

One Million+ getting a letter from the Franchise Tax Board!

More than 1 million Californians did not file a 2012 state income tax return!

Sacramento – Last year, the FTB collected more than $727 million dollars through their diligent campaign to find people who did not file!

The FTB receives more than 400 million income records from bank, employers, state departments, the IRS and other sources.

This program is designed to find wage earners and self-employed who did not file – it also tracks down other nonfilers through sources such as occupational licenses and mortgage interest payments.

If contacted, you have 30 days to file or to show why one isn’t due. For those who do not respond, the FTB will issue a tax assessment using income records to estimate the amount of state tax due. It will include interest, fees and penalties. If you get a letter, contact us immediately. Do not wait. Do not hesitate. Call us at 619-589-8680.

The FTB administers two of CA’s major tax programs – Personal Income Tax and Corporation Tax. They take their job seriously and are responsible for collecting more than 65% of California’s general fund. For more information visit taxes.ca.gov.

Tax information is not tax advice. Always speak with your tax professional before making decisions. If you need to speak with a tax professional, give us a call today at 619-589-868.

Affordable Care Act Tax Provisions: Employer Provided Health Coverage in Form W-2

Reporting Employer Provided Health Coverage in Form W-2

The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD. Many employers are eligible for transition relief for tax-year 2012 and beyond, until the IRS issues final guidance for this reporting requirement.

The amount reported does not affect tax liability, as the value of the employer excludable contribution to health coverage continues to be excludable from an employee’s income, and it is not taxable. This reporting is for informational purposes only, to show employees the value of their health care benefits.

More information about the reporting can be found on Form W-2 Reporting of Employer-Sponsored Health Coverage.

Source: http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

Image Credit: ClipArt

Affordable Care Act Tax Provisions : Small Business Health Care Tax Credit

Small Business Health Care Tax Credit

This credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers.

The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.

In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. On Aug. 23, 2013, the Department of Treasury and the IRS issued proposed regulations which include information on the transition of eligibility for the credit and requiring the purchase of insurance coverage through an Exchange. Additionally, IRS Notice 2014-06 provides transition relief for employers in certain counties in Washington and Wisconsin with no SHOP coverage available. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers.

Source: http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions