IRS audits now routinely review S corp payments to shareholders to see if payroll taxes are being avoided by treating payments to shareholder-officers as loans or shareholder distributions of cash or property.
An officer performing services for a corporation is entitled to payment; those payments are wages. For federal employment tax purposes, corporate officers are employees.
Avoiding employment taxes by treating compensation as cash distributions, expense reimbursements, or loans rather than as wages is illegal.
Make sure you are paying your shareholders correctly! Get a check-up of your books.
Wednesday, December 31, 2008
Friday, November 28, 2008
Christmas Tax Tips
Tax tips: Gifts to employees and company parties
Nontaxable gifts. Fruit baskets, hams, turkeys, wine, flowers and occasional entertainment tickets, such as to a show or sports event, generally are nontaxable as de minimis fringe benefits.
Taxable gifts. Gift certificates (“cash in kind”) are wages subject to FIT, FITW, FICA, and FUTA—even for a de minimis item. For example, a gift certificate for a turkey is taxable even though the gift of a turkey is not. Cash gifts of any amount are wages subject to all taxes and withholding.
Parties and picnics. The cost of occasional parties is nontaxable to employees and their families as a de minimis fringe—if they are infrequent and for the purpose of promoting employee health, goodwill, contentment, or efficiency. Examples: occasional holiday celebrations, cocktail parties and company picnics. Such parties are fully deductible to the business (they are not subject to the 50% limit on business meals).
Get your books in order for the end of the year. Consider hiring a freelance bookkeeper if you don't already have one.
Nontaxable gifts. Fruit baskets, hams, turkeys, wine, flowers and occasional entertainment tickets, such as to a show or sports event, generally are nontaxable as de minimis fringe benefits.
Taxable gifts. Gift certificates (“cash in kind”) are wages subject to FIT, FITW, FICA, and FUTA—even for a de minimis item. For example, a gift certificate for a turkey is taxable even though the gift of a turkey is not. Cash gifts of any amount are wages subject to all taxes and withholding.
Parties and picnics. The cost of occasional parties is nontaxable to employees and their families as a de minimis fringe—if they are infrequent and for the purpose of promoting employee health, goodwill, contentment, or efficiency. Examples: occasional holiday celebrations, cocktail parties and company picnics. Such parties are fully deductible to the business (they are not subject to the 50% limit on business meals).
Get your books in order for the end of the year. Consider hiring a freelance bookkeeper if you don't already have one.
Friday, November 21, 2008
Health Savings Account Fact Sheet
As the cost of health care coverage continues to rise, Health Savings Accounts provide access to affordable health care coverage for small business owners, employees, and the self employed.
• A Health Savings Account (HSA) is a tax preferred account owned by an individual used to pay for current and future medical expenses, including deductibles, co-payments and other forms of cost-sharing.
• HSAs are funded by tax deductible contributions. Both employees and employers may contribute to the employees’ HSA, which is different from other tax-preferred health care coverage which limits contributions to only one party.
• HSAs are available to individuals covered by HSA-eligible health plans, like high deductible plans and other consumer-directed health plans.
• HSAs are portable, meaning that the individual has ownership of the resources in the HSA. An individual is not dependent on a particular employer, should the individual change jobs or become unemployed. Instead, the HSA travels with the individual.
• Individuals with HSAs have flexibility to use their HSA account funds to pay for current medical expenses or save the money in the account to pay for future medical expenses.
• Today’s health-care environment often presents high or unexpected bills. HSAs matched with the individuals HSA-eligible insurance provide security against high or unexpected bills.
• Since the HSA is owned by the individual, the individual has control over the account. This lets the individual make all decisions about the account; including how much to put in the account, whether to save the account for future expenses or for current medical expenses, which medical expenses to pay with the account, and which company will hold the account.
• For small business owners, HSAs avoid the administrative time and costs, since employees self-administer their HSA.
• Small business owners can determine how much they want to contribute to their employees’ accounts and are able to choose the frequency with which they make such contributions. No minimum contributions are required.
For more information on HSAs, visitwww.hsa.gov
• A Health Savings Account (HSA) is a tax preferred account owned by an individual used to pay for current and future medical expenses, including deductibles, co-payments and other forms of cost-sharing.
• HSAs are funded by tax deductible contributions. Both employees and employers may contribute to the employees’ HSA, which is different from other tax-preferred health care coverage which limits contributions to only one party.
• HSAs are available to individuals covered by HSA-eligible health plans, like high deductible plans and other consumer-directed health plans.
• HSAs are portable, meaning that the individual has ownership of the resources in the HSA. An individual is not dependent on a particular employer, should the individual change jobs or become unemployed. Instead, the HSA travels with the individual.
• Individuals with HSAs have flexibility to use their HSA account funds to pay for current medical expenses or save the money in the account to pay for future medical expenses.
• Today’s health-care environment often presents high or unexpected bills. HSAs matched with the individuals HSA-eligible insurance provide security against high or unexpected bills.
• Since the HSA is owned by the individual, the individual has control over the account. This lets the individual make all decisions about the account; including how much to put in the account, whether to save the account for future expenses or for current medical expenses, which medical expenses to pay with the account, and which company will hold the account.
• For small business owners, HSAs avoid the administrative time and costs, since employees self-administer their HSA.
• Small business owners can determine how much they want to contribute to their employees’ accounts and are able to choose the frequency with which they make such contributions. No minimum contributions are required.
For more information on HSAs, visitwww.hsa.gov
Friday, October 31, 2008
Women in Business
Women are rapidly leaving the traditional workplace and following their dreams into the small business world.
Here is some advice from Intuit Financial Freedom Foundation targeted towards women.
Intuit's advice:
Go for it – Every day, 1,600 women entrepreneurs in the United States take a leap of faith to start a small business and become their own boss.
Embrace technology – Tap into the multitude of online communities, social networking tools, and free services that help women network, start a business, and manage finances. Advances in technology give women looking for work-life balance the flexibility to work on their time and their own terms, according to the Intuit Future of Small Business Report.
Know your limits – Avoid costly overdraft fees and spend within your means by tracking finances.
Invest in you – Invest in your education and a healthy lifestyle to extend your possibilities and life span.
Organize and prioritize – File receipts in one place to save time and stress at tax time.
Lend a hand – Give back to the community with time or household items. This both helps those in need, and creates valuable tax savings.
Don't feel you have to do it all by yourself either. There are people out there with skills to help you stay on track and grow. Hire a professional freelance bookkeeper so you can focus on growth.
Here is some advice from Intuit Financial Freedom Foundation targeted towards women.
Intuit's advice:
Go for it – Every day, 1,600 women entrepreneurs in the United States take a leap of faith to start a small business and become their own boss.
Embrace technology – Tap into the multitude of online communities, social networking tools, and free services that help women network, start a business, and manage finances. Advances in technology give women looking for work-life balance the flexibility to work on their time and their own terms, according to the Intuit Future of Small Business Report.
Know your limits – Avoid costly overdraft fees and spend within your means by tracking finances.
Invest in you – Invest in your education and a healthy lifestyle to extend your possibilities and life span.
Organize and prioritize – File receipts in one place to save time and stress at tax time.
Lend a hand – Give back to the community with time or household items. This both helps those in need, and creates valuable tax savings.
Don't feel you have to do it all by yourself either. There are people out there with skills to help you stay on track and grow. Hire a professional freelance bookkeeper so you can focus on growth.
Wednesday, October 15, 2008
Keeping on Course
With the stock market roller coastering every day and more banks in trouble these are pretty serious times. If you are a small business owner it's more important than ever to stay on top of your books so you know where you stand financially at all times.
The credit crunch is happening and it is real. You need to know what your cash flow is and where your expenses are going. By reviewing your profit and loss statement and balance sheet on a regular basis you can keep from getting surprised.
If you don't have the time to keep your books up to date, outsource it to an independent bookkeeper. It will be worth it in the long run.
The credit crunch is happening and it is real. You need to know what your cash flow is and where your expenses are going. By reviewing your profit and loss statement and balance sheet on a regular basis you can keep from getting surprised.
If you don't have the time to keep your books up to date, outsource it to an independent bookkeeper. It will be worth it in the long run.
Saturday, October 11, 2008
Saving Energy at the Office
Try these simple steps to save on your utility bills.
- Use energy-efficient light bulbs, such as CFL's and LED's.
- Consider sensors that automatically turn off lights when an area is not in use.
- Turn off your electronics. Even in standby mode they are using electricity.
- Try virtual meetings to cut down on travel expenses.
Thursday, October 2, 2008
Debt Reduction Consequences
As money gets tighter and tighter you may find yourself in the situation of not being able to pay all or part of a debt. You may negotiate with your creditor to have part or all of your debt forgiven.
When a debt is forgiven or reduced the creditor will issue a Form 1099-C Cancellation of Debt for the amount forgiven or discharged. This needs to be reported as income on your tax return.
When a debt is forgiven or reduced the creditor will issue a Form 1099-C Cancellation of Debt for the amount forgiven or discharged. This needs to be reported as income on your tax return.
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