Guest Article

One of the most common non-tax questions clients ask tax professionals is “How long should I keep this?” “This” could mean bank records, copies of tax returns, or virtually any other piece of business information. This reasonably comprehensive overview focuses on keeping business records for tax compliance, specifically, what to keep and how long to keep it in case a taxing authority ever decides to examine (audit) a business return. Records management is an entire field unto itself! Hiring an in-house records manager is beyond the needs or the budget of most small businesses, but it’s important to understand that proper records management is serious business.

2020 saw a huge increase in taxpayers working from home. A good internet connection can allow taxpayers in many industries to work almost anywhere. Whether it is because the typical workspace has closed or there’s a need to be home to care for a family member, the shift to working from home can come with substantial tax savings. Claiming the home office deduction allows the taxpayer to take a typically non-deductible expense and make it deductible, reducing the amount of income subject to tax. The most important item to note is the Tax Cuts and Jobs Act of 2017 (TCJA) suspended this deduction for employees until 2025. However, this deduction is still available to taxpayers who are self-employed or independent contractors. (Some states may still allow a deduction for an employee). While it’s not as easy as claiming the expenses and calling it a day, home office deductions provide fantastic ways to get a tax deduction for amounts you ordinarily would spend but are not eligible as write-offs. Keep reading to learn the details and how to deduct things like your homeowner’s association dues, security systems, and other home improvements.

Considering hiring your kids to work in your business or renting property you own to your business to save money on taxes? Both of these strategies can work (and work well), but often those promoting them (the mainstream media, social media, etc.) hold forth heavily on the benefits of the strategies without considering the nuances and fine print that can end up costing money rather than saving it if you end up on the bad side of an audit. Keep reading for how to maximize tax savings on summer homes and summer jobs without getting burned.

As cryptocurrency grows in popularity, so do the complications of tax reporting. At present, there is no consistent 1099 reporting for crypto transactions. This is primarily because no 1099 form currently exists to adequately report cryptocurrency. The IRS has yet to issue third party reporting requirements to exchanges, so companies must determine on their own what information to report to the IRS and how they will report it. Some exchanges will attempt to report transactions on a traditional 1099-B, but the easily accessible transferability of crypto makes it nearly impossible for an exchange to correctly report basis information. Incorrect reporting can result in the IRS sending an unnecessary CP2000 notice, which can be both expensive and time-consuming for the taxpayer to resolve. Other exchanges issue a 1099-Misc for certain transactions, but again this doesn’t reflect the full picture. Some exchanges choose to issue a 1099-K to customers, showing only the gross proceeds of crypto transactions and also doesn’t show the full picture. Here’s what to do to avoid getting a dreaded notice from the IRS.

Let’s face it, many small businesses would love to offer retirement and healthcare benefits to their employees, especially owner employees. In addition to the obvious benefits (healthcare coverage and tax-deferred retirement savings), providing healthcare and retirement benefits to owner employees through a business can shift non- or partially deductible personal expenses to fully tax-deductible business expenses. Even for non-owner employees, these types of benefits are a great way to provide additional compensation without incurring additional payroll taxes. As with everything tax and business related, however, there are rules and employers must be careful to follow them, especially when it comes to what types of benefit plans are offered and to whom. Providing healthcare and retirement benefits is expensive which is why many small business owners would like to be able to limit who receives them. But if you think providing benefits is expensive not paying attention to the rules for providing them can be even more expensive. To ensure your clients’ benefits plans remain tax deductible, it is important to understand the federal, state, and local labor and tax laws that affect the plans. This article provides an overview of what small employers and their advisors need to consider when evaluating potential benefits options and takes a more in-depth look at the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act (ERISA) non-discrimination provisions that are most likely to affect small employers.

Imagine your clients, a couple, tell you they are going to start a business. They will breed horses, start a band, get into car racing, or write a book about beekeeping. Of course, there will be losses starting out, but they have plenty of income to shelter and in the long run, they figure they can make money. If you are as I used to be, you may discourage them from deducting the losses, particularly if there are other complications on their return. You figure the Schedule C or Schedule F will be a red flag, and they will likely lose on audit. I’d like to suggest that you rethink that attitude. It is fine if you want to talk your physician client out of going into horse breeding or raising cattle, but if they are going to do it anyway, you should not try to talk them out of claiming the losses. Rather, you should talk to them about what they need to do to beef up their chances of winning an audit of their cattle ranch. And the great thing is that you are the one who can help them more than anybody. Read on to find out how.

Buying a vehicle is a way to potentially receive a large tax deduction, but is it always the best thing to do? What about buying versus leasing? The tax code treats vehicles differently from other types of assets and business expenses, so it helps to make sure you’re informed when thinking about using your vehicle to reduce your tax liability. Background A vehicle purchase by a business is treated as the purchase of an asset. This means you can deduct part of the expense each year in the form of depreciation deductions. Vehicles also might qualify for accelerated depreciation methods. In this current era of the Tax Cuts and Jobs Act (TCJA) and 100% bonus depreciation, that means a 100% deduction when you buy a vehicle … right? Not so fast. Section 280F of the Tax Code places restrictions on depreciation deductions for vehicles. The terminology used in this section of the Code is “luxury vehicle” (in fact the title of §280F is “Limitation on depreciation for luxury automobiles”), but this is a misleading term. When we think of “luxury vehicle” we likely think of a high-end vehicle. But the reality is, the tax law defines such a vehicle as any 4-wheeled vehicle with an unloaded gross vehicle weight of 6,000 pounds or less. I bet you didn’t think your 5 year old minivan with high mileage falls into the “luxury vehicle category,” but it can! This means you may be limited in how much you can write off against your taxable income. Can leasing a vehicle work as a way to get around the §280F limitations? The IRS has thought about that too. But keep reading - we’ll give you some loopholes that work around the luxury auto limitation and help you decide if leasing or buying your next vehicle will help you pay less in tax.

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.