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CARES Act Made Changes To Excess Business Losses

The Coronavirus Aid, Relief and Economic Security (CARES) Act made changes to excess business losses. This includes some changes that are retroactive and there may be opportunities for some businesses to file amended tax returns.

If you hold an interest in a business, or may do so in the future, here is more information about the changes.

Deferral of the excess business loss limits

The Tax Cuts and Jobs Act (TCJA) provided that net tax losses from active businesses in excess of an inflation-adjusted $500,000 for joint filers, or an inflation-adjusted $250,000 for other covered taxpayers, are to be treated as net operating loss (NOL) carryforwards in the following tax year. The covered taxpayers are individuals, estates and trusts that own businesses directly or as partners in a partnership or shareholders in an S corporation.

The $500,000 and $250,000 limits, which are adjusted for inflation for tax years beginning after calendar year 2018, were scheduled under the TCJA to apply to tax years beginning in calendar years 2018 through 2025. But the CARES Act has retroactively […]

By Linkenheimer LLP|2020-09-03T20:02:03+00:00August 24th, 2020|act, business, cares act, New Tax Laws, tcja|0 Comments

Putting Your Child on Your Business’s Payroll for the Summer May Make More Tax Sense Than Ever

If you own a business and have a child in high school or college, hiring him or her for the summer can provide a multitude of benefits, including tax savings. And hiring your child may make more sense than ever due to changes under the Tax Cuts and Jobs Act (TCJA).

How it works

By shifting some of your business earnings to a child as wages for services performed, you can turn some of your high-taxed income into tax-free or low-taxed income. For your business to deduct the wages as a business expense, the work done must be legitimate and the child’s wages must be reasonable.

Here’s an example: A sole proprietor is in the 37% tax bracket. He hires his 20-year-old daughter, who’s majoring in marketing, to work as a marketing coordinator full-time during the summer. She earns $12,000 and doesn’t have any other earnings.

The father saves $4,440 (37% […]

By Linkenheimer LLP|2020-09-03T20:04:40+00:00June 1st, 2018|act, business, child, ira, tax|0 Comments

Tax Increases Coming in 2012 under Affordable Care Act

Tax Increases Coming in 2012 under Affordable Care Act

Fast forward to next year and we are looking at a number of important tax increases on the horizon. The tax increases falls under the the Affordable Care Act (the Patient Protection and Affordable Care Act, P.L. 111-148, and the Health Care and Education Reconciliation Act of 2010, P.L. 111-152), and include higher Medicare taxes for high earners, a 3.8% surtax on unearned income of higher-income individuals and caps on FSA contributions. Companies also get to look forward to compliance issues, along with new health insurance deduction limitations and fees.

Increased Medicare tax for high-earning workers and self-employed taxpayers. For the tax year beginning after 2012, an additional 0.9% hospital insurance tax applies to wages and self employment income in excess of $250,000 for joint returns, $125,000 for married filing separately and $200,000 in all other cases.

Surtax on unearned income of higher-income individuals. Starting in 2013, an unearned income Medicare contribution tax is imposed on individuals, estates, and trusts. The tax is 3.8% of the lesser of either (1) net investment income or (2) the excess of modified adjusted gross income over the threshold amount ($250,000 for a […]

By Linkenheimer LLP|2012-07-27T22:35:00+00:00July 27th, 2012|2012, act, affordable, affordable care act, care, CPA, health care reform, Linkenheimer, medicare, Santa Rosa, tax increase|0 Comments