Business Strategies Archives - Page 19 of 22 - Think Outside the Tax Box

Business Strategies

By Dominique Molina, CPA MST CTS

CTA on Pause! What Tax Pros Need to Know About the Nationwide Injunction and BOI Reporting

On December 3, 2024, a U.S. District Court judge issued a nationwide preliminary injunction prohibiting FinCEN from enforcing the Corporate Transparency Act (CTA) and its associated Reporting Rule. This injunction halts the January 1, 2025, deadline for Beneficial Ownership Information (BOI) reporting, leaving many tax professionals and business entities questioning their compliance obligations. However, this pause is temporary. The government has already filed an appeal, and the injunction could be modified or overturned at any time. FinCEN has acknowledged that reporting companies are not currently required to file BOI reports but may do so voluntarily.

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COVID Tax Relief Allows Companies to Make Tax-Free COVID-19 Payments to Employees

For a business owner, almost nothing in life is more uncertain than running a company during a pandemic. Like most people, worry about your own livelihood, family, friends, and loved ones and how you’ll cope during COVID-19 is at the top of your mind. But unlike others, you’ve got the added concern about your employees – both for their health and safety, as well as their financial health. While the government made some relief available in the earlier days of the pandemic such as forgivable loans like the Paycheck Protection Program (PPP) and Emergency Injury Disaster Loans (EIDL) one of the biggest benefits provided has to do with a little known tax provision to the tax law. This provision makes it possible to provide certain payments without tax during a terrorist attack or disaster, but if it weren’t for a certain interpretation of President Trump’s declaration in March 2020, this benefit wouldn’t exist for COVID-19.

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How to Pay Less Tax on S Corporation Distributions

Most taxpayers understand that having an S corporation often eliminates the so-called “double tax” issue C corporations pose. However, the majority of S corporations begin as C corporations and the activity that occurred during the time it was a C corporation will determine how and when to tax distributions from the S corporation. C corporations cannot avoid double taxation on profits simply by electing to be treated as an S corporation (yet there are many other ways to save this double tax on C corporations, stay subscribed to learn about them). Withdrawing C corporation profits even when it later becomes an S corporation can create an extra tax. Here’s how to avoid that.

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Extra Taxes on S Corporation Distribution?

My client plans to take about $15,000 in distributions in excess of his basis from his S corporation construction business. I know this generates tax for him. He’s in the 32 percent tax bracket and single. Does he also have to pay the 3.8 percent net investment income tax and the 0.9 percent additional Medicare tax on this amount? Is there a way for him to avoid taxes on this amount?

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My Client Stuck with a Mistaken C Corporation Election?

My client formed three limited liability companies (LLCs) to hold his rental properties. Without consulting me, he filed Form 8832, Entity Classification Election, to elect C corporation treatment, effective January 1, 2020, for these LLCs. I want the LLCs to be disregarded entities, which is the most tax-efficient structure for his situation. What is the best way to undo these elections?

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GOFUNDME & KICKSTARTER: TAXABLE? DEDUCTIBLE?

Millions of taxpayers in the United States are using crowdfunding websites like GoFundMe and Kickstarter to raise money for important needs, such as paying medical bills, paying legal fees, or funding a new business venture. Both the IRS and the courts have been surprisingly silent on the tax consequences of crowdfunding platforms. The good news is that established tax law provides a clear road map for answering most tax questions created by raising money from a crowdfunding website. By knowing these rules, taxpayers can use crowdfunding to raise cash and minimize their overall tax exposure.

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