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Deducting Business Meal Expenses Under Today’s Tax Rules

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In the course of operating your business, you probably spend time and money “wining and dining” current or potential customers, vendors and employees. What can you deduct on your tax return for these expenses? The rules changed under the Tax Cuts and Jobs Act (TCJA), but you can still claim some valuable write-offs.

No more entertainment deductions

One of the biggest changes is that you can no longer deduct most business-related entertainment expenses. Beginning in 2018, the TCJA disallows deductions for entertainment expenses, including those for sports events, theater productions, golf outings and fishing trips.

Meal deductions still allowed

You can still deduct 50% of the cost of food and beverages for meals conducted with business associates. However, you need to follow three basic rules in order to prove that your expenses are business related:

  1. The expenses must be “ordinary and necessary” in carrying on your business. This means your food and beverage costs are customary and appropriate. They shouldn’t be lavish or extravagant.
  2. The expenses must be directly related or associated with your business. This means that you expect to receive a concrete business benefit from them. The principal purpose for the meal must be business. […]
By |April 19th, 2019|business, deduction, deductions, expensing, irs, New Tax Laws|0 Comments

Three Questions You May Have After You File Your Return

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Once your 2018 tax return has been successfully filed with the IRS, you may still have some questions. Here are brief answers to three questions that we’re frequently asked at this time of year.

Question #1: What tax records can I throw away now?

At a minimum, keep tax records related to your return for as long as the IRS can audit your return or assess additional taxes. In general, the statute of limitations is three years after you file your return. So you can generally get rid of most records related to tax returns for 2015 and earlier years. (If you filed an extension for your 2015 return, hold on to your records until at least three years from when you filed the extended return.)

However, the statute of limitations extends to six years for taxpayers who understate their gross income by more than 25%.

You’ll need to hang on to […]

By |April 18th, 2019|irs, New Tax Laws, tax planning, tax time|0 Comments

Disaster Relief Continues for Certain Californians

Disaster relief continues for certain Californians. The CA Franchise Tax Board has updated its Disaster Loss webpage, for victims of storms and fires that plagued the state in recent months. The updated list now includes many CA counties that suffered storm damage in 2019, and several counties which suffered wildfires in late 2018. Taxpayers directly affected by federally declared disasters may be eligible for tax relief, including extensions of time to file and pay taxes until 4/30/19. If you have questions, please contact your Linkenheimer CPA. Here’s the full list and more information: https://bit.ly/298JVSt 

By |April 11th, 2019|disaster, tax, tax planning|0 Comments

Don’t Forget: Tax Deadline is April 15th

If you’re a California resident who owes estimated CA tax payments, your next payment due date is rolling up fast. By April 15, the first installment of your 2019 state tax is due. Generally, you must make estimated payments if you expect to owe at least $500 for 2019, after you subtract withholding or credits you may have, or face penalties. To learn more about who is required to make estimated payments, how to pay, and how to obtain a handy worksheet to calculate the correct amount, click on https://bit.ly/2FJ03wl or contact your Linkenheimer CPA for help.

By |April 11th, 2019|tax deadlines, tax planning|0 Comments

Responding to the Nightmare of a Data Breach

It’s every business owner’s nightmare. Should hackers gain access to your customers’ or employees’ sensitive data, the very reputation of your company could be compromised. And lawsuits might soon follow.

No business owner wants to think about such a crisis, yet it’s imperative that you do. Suffering a data breach without an emergency response plan leaves you vulnerable to not only the damage of the attack itself, but also the potential fallout from your own panicked decisions.

5 steps to take

A comprehensive plan generally follows five steps once a data breach occurs:

1. Call your attorney. He or she should be able to advise you on the potential legal ramifications of the incident and what you should do or not do (or say) in response. Involve your attorney in the creation of your response plan, so all this won’t come out of the blue.

By |April 10th, 2019|business|0 Comments

Seniors: Medicare Premiums Could Lower Your Tax Bill

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Americans who are 65 and older qualify for basic Medicare insurance, and they may need to pay additional premiums to get the level of coverage they desire. The premiums can be expensive, especially if you’re married and both you and your spouse are paying them. But one aspect of paying premiums might be positive: If you qualify, they may help lower your tax bill.

Medicare premium tax deductions

Premiums for Medicare health insurance can be combined with other qualifying health care expenses for purposes of claiming an itemized deduction for medical expenses on your individual tax return. This includes amounts for “Medigap” insurance and Medicare Advantage plans. Some people buy Medigap policies because Medicare Parts A and B don’t cover all their health care expenses. Coverage gaps include co-payments, co-insurance, deductibles and other costs. Medigap is private supplemental insurance that’s intended to cover some or all gaps.

Fewer people now itemize

Qualifying for […]

By |April 9th, 2019|deduction, deductions, medicare|0 Comments

Divorcing Business Owners Need to Pay Attention to Tax Implications

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If you’re getting a divorce, you know it’s a highly stressful time. But if you’re a business owner, tax issues can complicate matters even more. Your business ownership interest is one of your biggest personal assets and your marital property will include all or part of it.

Transferring property tax-free

You can generally divide most assets, including cash and business ownership interests, between you and your soon-to-be ex-spouse without any federal income or gift tax consequences. When an asset falls under this tax-free transfer rule, the spouse who receives the asset takes over its existing tax basis (for tax gain or loss purposes) and its existing holding period (for short-term or long-term holding period purposes).

For example, let’s say that, under the terms of your divorce agreement, you give your house to your spouse in exchange for keeping 100% of the stock in your business. That asset swap would be tax-free. And the existing basis and holding periods for the home and the stock would carry over to the person who receives them.

Tax-free transfers can occur before the divorce or at the time it becomes final. Tax-free treatment also applies to post-divorce transfers […]

By |April 8th, 2019|401k, business, ira, stock, tax planning|0 Comments

Make a Deductible IRA Contribution for 2018. It’s Not Too Late!

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Do you want to save more for retirement on a tax-favored basis? If so, and if you qualify, you can make a deductible traditional IRA contribution for the 2018 tax year between now and the tax filing deadline and claim the write-off on your 2018 return. Or you can contribute to a Roth IRA and avoid paying taxes on future withdrawals.

You can potentially make a contribution of up to $5,500 (or $6,500 if you were age 50 or older as of December 31, 2018). If you’re married, your spouse can potentially do the same, thereby doubling your tax benefits.

The deadline for 2018 traditional and Roth contributions for most taxpayers is April 15, 2019 (April 17 for those in Maine and Massachusetts).

There are some ground rules. You must have enough 2018 earned income (from jobs, self-employment or alimony) to equal or exceed your IRA contributions for the tax year. If you’re married, either spouse can provide the necessary earned income. And you can’t make a deductible contribution to a traditional IRA if you were 70½ or older as of December 31, 2018. (But you can make one to a Roth IRA after […]

By |April 2nd, 2019|deductions, ira, roth ira|0 Comments

Understanding How Taxes Factor into an M&A Transaction

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Merger and acquisition activity has been brisk in recent years. If your business is considering merging with or acquiring another business, it’s important to understand how the transaction will be taxed under current law.

Stocks vs. assets

From a tax standpoint, a transaction can basically be structured in two ways:

1. Stock (or ownership interest). A buyer can directly purchase a seller’s ownership interest if the target business is operated as a C or S corporation, a partnership, or a limited liability company (LLC) that’s treated as a partnership for tax purposes.

The now-permanent 21% corporate federal income tax rate under the Tax Cuts and Jobs Act (TCJA) makes buying the stock of a C corporation somewhat more attractive. Reasons: The corporation will pay less tax and generate more after-tax income. Plus, any built-in gains from appreciated corporate assets will be taxed at a lower […]

By |April 2nd, 2019|business, New Tax Laws, tax|0 Comments

Still Working After Age 70½? You May Not Have to Begin 401(k) Withdrawals

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If you participate in a qualified retirement plan, such as a 401(k), you must generally begin taking required withdrawals from the plan no later than April 1 of the year after which you turn age 70½. However, there’s an exception that applies to certain plan participants who are still working for the entire year in which they turn 70½.

The basics of RMDs

Required minimum distributions (RMDs) are the amounts you’re legally required to withdraw from your qualified retirement plans and traditional IRAs after reaching age 70½. Essentially, the tax law requires you to tap into your retirement assets — and begin paying taxes on them — whether you want to or not.

Under the tax code, RMDs must begin to be taken from qualified pension, profit sharing and stock bonus plans by a certain date. That date is April 1 of the year following the later of the calendar year in which an employee:

  • Reaches age 70½, or
  • Retires from employment with the employer maintaining the plan under the “still working” exception.

Once they begin, RMDs must generally continue each year. The tax penalty for withdrawing less than the RMD amount is 50% of the portion […]

By |March 26th, 2019|401k, ira, retirement, tax planning|0 Comments