What Businesses Need to Know About the Tax Treatment of Bitcoin and Other Virtual Currencies

Over the last several years, virtual currency has become increasingly popular. Bitcoin is the most widely recognized form of virtual currency, also commonly referred to as digital, electronic or crypto currency.

While most smaller businesses aren’t yet accepting bitcoin or other virtual currency payments from their customers, more and more larger businesses are. And the trend may trickle down to smaller businesses. Businesses also can pay employees or independent contractors with virtual currency. But what are the tax consequences of these transactions?

Bitcoin 101

Bitcoin has an equivalent value in real currency and can be digitally traded between users. It also can be purchased with real currencies or exchanged for real currencies. Bitcoin is most commonly obtained through virtual currency ATMs or online exchanges.

Goods or services can be paid for using “bitcoin wallet” software. When a purchase is made, the software digitally posts the transaction to a global public ledger. This prevents the same unit of virtual currency from being used multiple times.

Tax impact

Questions about the tax impact of virtual currency abound. And the IRS has yet to offer much guidance.

The IRS did establish in a 2014 ruling that bitcoin and other convertible virtual currency should be […]

By |June 5th, 2018|credit, irs, payments, tax, tax implications|0 Comments

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

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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 |June 1st, 2018|act, business, child, ira, tax|0 Comments

Do You Need to Adjust Your Withholding?

If you received a large refund after filing your 2017 income tax return, you’re probably enjoying the influx of cash. But a large refund isn’t all positive. It also means you were essentially giving the government an interest-free loan.

That’s why a large refund for the previous tax year would usually indicate that you should consider reducing the amounts you’re having withheld (and/or what estimated tax payments you’re making) for the current year. But 2018 is a little different.

The TCJA and withholding

To reflect changes under the Tax Cuts and Jobs Act (TCJA) — such as the increase in the standard deduction, suspension of personal exemptions and changes in tax rates and brackets — the IRS updated the withholding tables that indicate how much employers should hold back from their employees’ paychecks, generally reducing the amount withheld.

The new tables may provide the correct amount of tax withholding for individuals with simple tax situations, but they might cause other taxpayers to not have enough withheld to pay their ultimate tax liabilities under the TCJA. So even if you received a large refund this year, you could end up owing a significant amount of tax when you file […]

By |May 11th, 2018|irs, tax, withhold|0 Comments

Tax Extenders Reinstated

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In the massive budget deal passed last week, Congress has bestowed surprise tax breaks on homeowners, students and the climate conscious. There are tax breaks for mortgage insurance premiums, higher-education expenses, energy-efficient home-improvement projects and more. These were tax breaks that expired at the end of 2016, but are now back on for 2017, now that Trump has signed them into law.

The immediate good news for taxpayers: You could see additional tax savings on the tax return you’re filing now—for the 2017 tax year. Below are some highlights. For a complete list, click here. 

Tax Relief for Families and Individuals

Extension and modification of exclusion from gross income of discharge of qualified principal residence indebtedness. The provision extends through 2017 the exclusion from gross income of a discharge of qualified principal residence indebtedness. The provision also modifies the exclusion to apply to qualified principal residence indebtedness that is discharged pursuant to a binding written agreement entered into in 2017.

Extension of mortgage insurance premiums treated as qualified residence interest. The provision extends through 2017 the treatment of qualified mortgage insurance premiums as interest for purposes of the […]

By |February 13th, 2018|deduction, deductions, New Tax Laws, tax, tax implications|0 Comments

New Individual, Estate and Trust Rate Schedules

With the new tax law changes, we will be posting a series of of updates outlining all the changes that will take place. If you have any questions, please contact your Linkenheimer CPA.

FOR MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES:

If taxable income is: The tax is:

Not over $19,050 10% of taxable income

Over $19,050 but not over $77,400 $1,905 plus 12% of the excess over $19,050

Over $77,400 but not over $165,000 $8,907 plus 22% of the excess over $77,400

Over $165,000 but not over $315,000 $28,179 plus 24% of the excess over $165,000

Over $315,000 but not over $400,000 $64,179 plus 32% of the excess over $315,000

Over $400,000 but not over $600,000 $91,379 plus 35% of the excess over $400,000

Over $600,000 $161,379 plus 37% of the excess over $600,000

FOR SINGLE INDIVIDUALS (OTHER THAN HEADS OF HOUSEHOLDS AND SURVIVING SPOUSES):

If taxable income is: The tax is:

Not over $9,525 10% of taxable income

Over $9,525 but not over $38,700 $952.50 plus 12% of the excess over $9,525

Over $38,700 but not over $82,500 $4,453.50 plus 22% of the excess over $38,700

Over $82,500 but not over $157,500 $14,089.50 plus 24% of the excess over $82,500

Over $157,500 but not over $200,000 $32,089.50 […]

By |January 5th, 2018|income tax, New Tax Laws, tax, tax planning|0 Comments

Disaster Relief Tax Seminar

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Disaster Relief and Tax Consequences Seminar

November 28th, December 5, 12, 19th; 9-10:30am

Space is limited and will fill up quickly. Please RSVP below and let us know the day you would like to attend. We look forward to seeing you and answering any questions you might have. Breakfast will be provided and the seminar will be held at our office at 187 Concourse Blvd, Santa Rosa, CA. 95403.

Join the Linkenheimer team as we discuss the tax relief and implications of the local wildfires that have affected so many. There will be a discussion and Q&A time where we will answer your questions regarding your disaster relief options, IRS implications and more.

By |October 31st, 2017|Community, disaster, relief, tax|0 Comments

Payments to Employees Affected by the Local Fires

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During these tragic times businesses may want to help employees affected by the local fires.  The purpose of the following information is to highlight some tax efficient opportunities to help employees affected by the local fires which were declared a qualified disaster by President Trump.  IRC section 139 allow employers to provide qualified disaster relief payments to employees that have incurred unreimbursed expenses due to a qualified disaster (such as the local fires) and have those payments excluded from the employees gross income and included as deductible expense for the business making the payment.   For the payments to be considered qualified disaster relief payments, they should be for either items i. or ii. below, but only to the extent not already covered by insurance.

  1. Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a disaster. This would include expenses related to loss of use.
  2. Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster.

Other items to point out:

To […]

By |October 19th, 2017|business, Community, disaster, relief, tax|0 Comments

Tips for Tax Payers Traveling for Charity

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During the summer, some taxpayers may travel because of their involvement with a qualified charity. These traveling taxpayers may be able to lower their taxes.

Here are some tax tips for taxpayers to use when deducting charity-related travel expenses:

  • Qualified Charities.  For a taxpayer to deduct costs, they must volunteer for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are generally qualified, and do not need to apply to the IRS. A taxpayer should ask the group about its status before they donate. Taxpayers can also use the Select Check tool on IRS.gov to check a group’s status.
  • Out-of-Pocket Expenses.  A taxpayer may be able to deduct some of their costs including travel. These out-of-pocket expenses must be necessary while the taxpayer is away from home. All costs must be:
    • Unreimbursed,
    • Directly connected with the services,
    • Expenses the taxpayer had only because of the services the taxpayer gave, and
    • Not personal, living or family expenses.
  • Genuine and Substantial Duty.  The charity work the taxpayer is involved with has to be real and substantial throughout the trip. The taxpayer can’t deduct expenses if they only have nominal duties or do not […]
By |July 28th, 2017|charity, deduction, tax|0 Comments

Trump’s 2017 Tax Reform Unveiled

The White House  issued President Trump’s goals and key features for tax reform, including cut corporate tax rates, flattened individual marginal income tax brackets, and repeal of the estate and alternative minimum taxes. He outlined these proposals in a one page bulletin which you can see below. The individual and business tax reform highlights include the following:

Proposed individual tax provisions:

  • Down from the current seven tax rates to three- 10%, 25% and a top rate of 35% (down from 39.6%).
  • Elimination of the Estate Tax.
  • Elimination of itemized deductions outside of mortgage interest and charitable contributions.
  • Repeal of the Alternative Minimum Tax (AMT).
  • Repeal of the 3.8% tax on net investment income.
  • Doubling of the standard deduction for married couples and individuals.
  • Tax relief for families and dependent care expenses.

Proposed business tax provisions:

  • Decreasing the top corporate tax rate to 15% (current top tax rate is 35%).
  • The 15% tax rate would apply to business income of pass-through entities such as partnerships, S corporations and limited liability companies.
  • A one time tax on business profits (at an unspecified tax rate) in foreign countries repatriated to the United States.
  • Introduction of a territorial tax system in place of the current worldwide tax regime.

Below is the one page bulletin released from the White House. […]

By |May 4th, 2017|tax, tax planning|0 Comments

Tax Deadline is Around the Corner, So Here’s Some Humor to Help You Through It…

So April 15th is just a few days away, and yes, we know the real deadline is the 18th, but we’re telling our clients it’s the 15th (we don’t want to get shoeboxes of receipts next Monday afternoon). To help ease the stress that sometimes is associated with this time of the year, it seems some humor might be appropriate. We hope you enjoy and remember, no dropping off boxes of receipts on the 18th; boxes of chocolate on the other hand… they will be accepted.

“Two things you need to know about taxes. They’ve extended the deadline to April 18, and when you write your check, just make it out to China.” –David Letterman

“Tax day is the day that ordinary Americans send their money to Washington, D.C., and wealthy Americans send their money to the Cayman Islands.” –Jimmy Kimmel

“Because of a holiday, the deadline for taxes is April 18, so you have three extra days to dig through restaurant dumpsters for receipts.” –Jimmy Kimmel

“Worried about an IRS audit?  Avoid what’s called a red flag.  That’s something the IRS always looks for.  For example, say you have some money left in your bank account after […]

By |April 14th, 2016|accounting, Linkenheimer, tax, tax time|0 Comments