Business Strategies Archives - Page 7 of 11 - Think Outside the Tax Box

Business Strategies

By Lewis C. Taishoff

TAX COURT ROUND-UP – January 2023

I'm new here, but I know enough not to try to do what everyone else does. I won't try to cover the wider tax picture. I cover United States Tax Court on my blog, so here's a brief round-up on what went on in Tax Court during the last month that I think is of interest to the tax planner and practitioner...


Placed in Service: Ready, Set, Deduct, or Depreciate

Why wait to deduct your depreciation over time? You can speed up your deductions with new increased depreciation rules making it possible to get your benefits up front. Here are four ways to deduct your business assets faster and save more tax now.

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Extra Taxes on S Corporation Distribution?

Question: 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? Answer: Without planning, yes, the taxpayer has to pay tax on this excess distribution amount. There is a completely legal way to either avoid or substantially reduce this tax, though. Read on to learn how.

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On the Road Again – Tax Savings for the Recreational Vehicle

There is no better time than a multi-year worldwide pandemic to reevaluate the 9 to 5 office grind. Many people are realizing it was never actually necessary to work from a fixed location as long as they have a laptop and an internet connection. So why not take the show on the road? Hop in an RV and head out to see the country and work from wherever you like that day. It’s a great plan, but what does it mean for your taxes? Is your RV a business vehicle or is it a lodging that happens to be on wheels? Buckle up and let’s find out which is best to save you the most money.

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How to Claim the Emergency Relief Credit Fast

Question: How are you pricing Employee Retention Credit claims? Answer: The Employee Retention Credit (ERC) has seemed more confusing than some of the other tax credits simply because it was mostly ignored by the tax community early in the pandemic. While small businesses happily pocketed PPP funds rather than claim the credit, the choice between the two benefits was clear. As we now know, business owners can have both PPP loan forgiveness as well as access to the ERC tax credits. But many smaller firms and payroll processors felt overwhelmed by the demand, and with refunds taking months to process, some businesses are often looking for help on their own. So many new players have entered the game selling access to these credits, up to $33,000 in cash per employee. Firms selling R&D studies and cost segregation are advertising – hard. Most are charging a percentage of the total credit amount. You don’t want to miss out on this valuable service for your client to capture this free cash, yet many advisors are passing on this work due to the time, research, and education requirements for something that has such a short shelf life. Is it worth losing income to meet everyone’s needs? Continue reading to check out the results of a short survey asking tax pros how they are charging for this type of work.

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How Are You Determining Reasonable Compensation – Legal Fact or Convenient Fiction?

Accountants are facts and figures folk. Accountants rely on data and analysis, not myths and tales. Well, not always. In 2020, we asked 4,671 tax advisors whether the IRS recognized rules of thumb such as a 50/50 split between distributions and reasonable compensation. Thirty-three percent said yes. The IRS “rule of thumb” is a myth. But it’s a fact that we found 1,555 professional accountants who relied on this myth. It’s not that they didn’t have the facts. All of those surveyed had just attended a continuing education class on reasonable compensation that walked them through, step by step, recent court cases, the IRS’s definition, rules, guidelines, and criteria for determining reasonable compensation. Nowhere in the class were they taught that the IRS accepts “rule of thumb” or “safe harbor” calculations based on percentage of distributions, sales, or revenue. So, what gives? Why do so many accountants believe these rules of thumb are actually “rules”? And more importantly, does the IRS follow the same?

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Taking Cash from Your C Corporation: Which Tactic is Best for You?

Being a shareholder owner of a C corporation comes with certain benefits, including the ability to take cash from your business. How to do so depends on your short- and long-term goals and consideration of the tax trade-offs. This article will discuss the options available to shareholder owners, other than borrowing, to realize cash from a corporation that is expected to continue.

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Employee Retention Credit for the Little People

The Employee Retention Credit (ERC) was probably the ugly step-child of the CARES Act. It received very little attention from tax practitioners, because participation in the Paycheck Protection Program (PPP) precluded ERC. The Taxpayer Certainty and Disaster Tax Relief Act changed all that. This good news to you as a business owner threatens to overwhelm smaller tax firms, some of which might leave a valuable service to be performed probably less than ideally by the sorts of firms that sell R&D studies and cost segregation. They are already advertising. To avoid missing out on this valuable service for your client or to capture this free cash for yourself as a small business owner, keep reading.

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Net Operating Loss Changes and the CARES Act: Planning Opportunities for 2020 Returns

One bright side to losing money in your business is your ability to at least use those losses as a tax deduction against other income you may have. Unfortunately due to tax reform it shredded your ability to claim NOLs after 2017 to 80% of taxable income - it all eliminated the opportunity to carry back these losses to get refunds. We’ve still been reeling from both of these changes. The CARES Act changed net operating losses (NOLs) in a major way to make usage of an NOL more taxpayer friendly … for a limited time. Because the changes are retroactive to 2018, this gives you the opportunity for 3 years of losses to provide much needed relief. The Treasury even provided a fast track to cash - keep reading to find out how.

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