Tax Blog

Your resource for small-business tax advice.

Friday, January 11, 2013
Earlier this month, the government came together and Congress passed the American Taxpayer Relief Act of 2012 (ATRA) which President Obama then signed into law. While the effort failed to extend cuts to the payroll tax (the rate had been reduced from 6.2 percent to 4.2 percent for 2011 and 2012, but will now go back up to 6.2 percent) it did provide some extensions that should prove to be beneficial to the self-employed. The Small Business Administration released an article that highlighted some of the key extensions in the bill, and we encourage you to read through it. As ...
Thursday, July 19, 2012
Posted by Keith Hall (National Tax Advisor) -  Investing in your own future is always a good idea, but it’s even better knowing that Uncle Sam will help by making qualified retirement plan contributions tax deductible.  Congress and the IRS will actually let you pay less tax simply for investing in your own future. Only in America! So which plan is right for you?  There are lots of options to choose from, including making a contribution to a traditional IRA, setting up a 401(k) plan for your business, and setting up a Simplified Employee Pension Plan.  Most of us can ...
Tuesday, May 15, 2012
Question: Our small business consists of myself and my wife, doing copyediting and proofreading.  As such we don't really have much occasion to "entertain" customers, as nearly all our work consists of receiveing electronic files or hard copy and doing what we do and sending it off, often to other states.  But if we go out to dinner once a month and discuss business, such as planning, projects, office organization, etc, can we deduct that as a business meal? Answer: The easy answer to your question is absolutely YES, those business meals will be deductible.  The key point is whether ...
Tuesday, April 10, 2012
Posted by Keith Hall (NASE National Tax Advisor) - For most of us tax time is not the most rewarding time of the year and is typically ranked right up there with visiting the dentist. Statistics would indicate that our commitment to flossing is only evident in the few weeks right before that dentist appointment. And likewise our commitment to tax planning is most likely limited to the few weeks right before the return is due. Unfortunately, in both cases, by that time it is already too late to make any real difference.    Most tax planning strategies end with the ...
Monday, March 19, 2012
Posted by Keith Hall (NASE National Tax Advisor) - There are a great many horror shows that keep us up at night wondering if anything or anyone might be hiding under the bed. Psycho, Friday the 13th, Nightmare on Elm Street, you name it! Most of us know that these stories are not real, yet our hearts beat faster and our sleep comes slower just thinking of them. Perhaps none of these classics can accelerate heartbeats nor steal as much sleep as a small business owner’s fear of an IRS audit. The overall chances of being audited in any one year ...
Thursday, March 01, 2012
Q: What do I list my NASE membership dues under on my tax return? A: The best place to include business association or other deductible dues is on Line 27 of your Schedule C, Other Expenses.  You can include a specific description such as Business Association Dues, on line 48 in Part V on page 2 of the Schedule C.
Tuesday, February 14, 2012
Q: I set up an HRA 105 for my wife, who is employed by me in my home office. My understanding is that both her and my qualified medical expenses from the HRA can be deducted but cannot find a suitable category on TurboTax to enter this amount. Please advise where this amount is entered. A: If I can be so bold, let me change your terminology a bit as it relates to your HRA 105 plan.  You DID NOT set up an HRA 105 plan for your wife, but instead your Company adopted an HRA 105 plan for the benefit ...
Wednesday, January 11, 2012
Q: I read something several months ago about taking a loan from your 401K retirement plan. If you were at least 55 years old, you were not required to pay this back and there was no penalty for this. Is that true? A: From a technical standpoint you still must repay the loan. If you don't repay the loan, regardless of how old you are, then the loan becomes a distribution. The tax treatment and potential penalties for such a distribution will then be dependent upon your age. The key point is whether a 10% penalty will apply to the distribution. If ...
Friday, January 06, 2012
Prior to preparing 2011 tax forms, the self-employed and micro-businesses (fewer than 10 employees) should be aware of a number of tax law changes, but also must stay focused and connected for new changes that are inevitable during 2012. As always, stay tuned to the NASE for the most recent updates! The following tax law changes relate to 2011 returns: Self-Employed Health Insurance Deduction – Unfortunately, the payments that small-business owners make for health insurance premiums for themselves and their families won’t be as tax beneficial for 2011 tax returns as they were for 2010.  The premiums paid for health ...
Monday, December 05, 2011
Q: We have a significant quantity of clothing left in our warehouse. In prior years we have scrambled to "get rid of it" at closeout prices because our CPA says this has a tax advantage. HOWEVER at what point can we determine we are actually LOSING money by doing this? If we hold on to inventory and sell it at full price next year, perhaps that's a greater advantage? Is there a formula to help us ascertain what to do? A: I hate to take exception with your accountant, but selling inventory at less than you otherwise could, simply for ...
Monday, November 07, 2011
Q: I have following questions regarding a family employee (child who is under 15 yrs): What's the best method of payment, direct deposit payroll or checks or cash? Can we claim him as DEPENDENT for tax purposes, if the annual income paid is under the limit $4,750 applicable for year 2011? For our LLC we have been filing tax returns as a sole-proprietor, along with individual tax returns. Do we have to file additional form for child income? A: The new employee, your child, should be treated basically the same as any other non-related employee even though there are certainly some differences ...
Thursday, October 20, 2011
Q: Today, I read [NASE President] Kristie Arslan's testimony to the Senate Committee on Small Business & Entrepreneurship regarding extending the Small Business Jobs Act of 2010. I am curious to know what the difference is between the Small Jobs Act of 2010 and the HRA 105 benefit? I do not fully understand the Act but I do have a pretty good grasp on the HRA 105 and to me, they sound very similar. A: The Small Business Job Act of 2010 was a comprehensive act that affected many more areas than just health care costs but I assume you are interested in ...
Tuesday, September 13, 2011
Q: We own a small restaurant and I am unsure how to account for tips which the staff declares in the Point of Sales System at the end of the day.  How do I deal with the tips per pay period? For example, we have two GMs/bartenders who each make $250 a week (no hourly). I have figured out how to deal with payroll taxes on this set amount, but how do I account for the tips that they get on credit cards?   A: Your question is a very good one and one that I personally always thought was ...
Wednesday, August 31, 2011
Q: I am doing my 2010 taxes and told my tax preparer about the one-time business deduction for health insurance premiums for 2010. However, she still records it as an adjustment to income. How do I convince her that this is okay for 2010? A: The IRS accounted for the new deductibility differently than most people expected. The deduction for federal income tax is still accounted for in the same way as in previous years, by including the qualified premiums on page one of Form 1040, Line 29. This is an adjustment to income as you mentioned and is indeed the same as ...
Monday, August 01, 2011
Posted by Jaimie McFarlin - On July 26th, I attended a Ways and Means Committee hearing on consumption taxes. It comes at a time when the future of tax reform is certainly part of the federal debt ceiling negotiations. In this blog entry, I will break down a few of the issues and arguments regarding two types of consumption taxes: the FairTax and the Value Added Tax (VAT). About Consumption Taxes There were two panels of witnesses at this last hearing. The first panel included the former presidential candidate and governor Mike Huckabee, economic experts, Larry Kotlikoff and David G. Tuerck, ...