Blog - Linkenheimer LLP CPAs & Advisors

Businesses Considering Incorporation Should Beware of the Reasonable Compensation Conundrum

Small to midsize businesses have valid reasons for incorporating, not the least of which is putting that cool “Inc.” at the end of their names. Other reasons include separating owners’ personal assets from their business liabilities and offering stock options as an employee incentive.

If you’re considering incorporation for your company, however, it’s essential to be aware of the associated risks. One of them is the reasonable compensation conundrum.

How much is too much?

Let’s say you decide to convert your business to a C corporation. After completing the incorporation process, you can pay owners, executives and other highly compensated employees some combination of compensation and dividends.

More than likely, you’ll want to pay your highly compensated employees more in compensation and less in dividends because compensation is tax deductible and dividends aren’t. But be careful — the IRS may be watching. If it believes you’re excessively compensating a highly compensated employee for tax avoidance purposes, it may challenge your compensation approach.

Such challenges typically begin with an audit and may result in the IRS being allowed to reclassify compensation as dividends — with penalties and interest potentially tacked on. What’s worse, if the tax agency succeeds with […]

By Linkenheimer LLP|2025-04-11T18:57:28+00:00April 11th, 2025|business, corporation|0 Comments

An Essential Tax Deadline is Coming Up

Mark your calendars and stock up on coffee—Tuesday, April 15, 2025, is just around the corner. Yes, it’s that special day when accountants celebrate their “New Year’s Eve,” fueled by spreadsheets, calculators, and an unhealthy amount of caffeine. For taxpayers, it’s the infamous annual filing deadline, but wait—there’s more! It’s also the day the IRS expects your first quarterly estimated tax payment for 2025. That’s right, it’s a double-header of deadlines designed to keep you and your CPA on your toes.

Basic details

You may have to make estimated tax payments for 2025 if you receive interest, dividends, alimony, self-employment income, capital gains, prizes or other income. If you don’t pay enough tax through withholding and estimated payments during the year, you may be liable for a tax penalty on top of the tax that’s ultimately due.

Estimated tax payments help ensure that you don’t wind up owing one large lump sum — and possibly underpayment penalties — at tax time.

When payments are due

Individuals must pay 25% of their “required annual payment” by April 15, June 15, September 15, and January 15 […]

By Linkenheimer LLP|2025-04-10T22:19:26+00:00April 10th, 2025|estimated tax payments, tax deadlines|0 Comments

6 Essential Tips for Small Business Payroll Tax Compliance

Staying compliant with payroll tax laws is crucial for small businesses. Mistakes can lead to fines, strained employee relationships and even legal consequences. Below are six quick tips to help you stay on track.

1. Maintain organized records

Accurate recordkeeping is the backbone of payroll tax compliance. Track the hours worked, wages paid and all taxes withheld. Organizing your documentation makes it easier to verify that you’re withholding and remitting the correct amounts. If you ever face an IRS or state tax inquiry, having clear, detailed records will save time and reduce stress.

2. Understand federal withholding

Federal income tax. Employees complete Form W-4 so you can determine how much federal income tax to withhold. The amounts can be calculated using IRS tax tables.
FICA taxes (Social Security and Medicare). Your business is responsible for withholding a set percentage from each employee’s wages for Social Security and Medicare, and you must match that amount as an employer. The current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee (12.4% total). Taxpayers only pay Social Security tax up to a wage base limit. For 2025, the wage base limit is $176,100. […]

By Linkenheimer LLP|2025-04-04T19:09:36+00:00April 4th, 2025|payroll|0 Comments

Cybersecurity Alert: Don’t Let Tax Season Scammers Get the Last Laugh

As the April 15th tax deadline approaches, cybercriminals are having their own version of “busy season.” Unfortunately, they don’t file returns—they steal them. We’re seeing a rise in scams targeting both individuals and businesses during this tax season.

Here’s what you need to know to keep your data safe, your stress levels manageable, and your sense of humor intact.

Why Tax Season Is Cybercrime Season
The chaos of tax time creates a prime opportunity for scammers:

More financial activity online = more targets
People rushing to file = more hasty clicks
Sensitive data flying everywhere = hacker heaven
Everyone’s talking to the IRS = easier to impersonate them

Basically, it’s like a buffet for cybercriminals—and they didn’t even bring a casserole.

Scams to Watch Out For (and Maybe Laugh At, Just a Little)
Phishing Emails with a Tax Twist
These emails […]

By Linkenheimer LLP|2025-04-01T19:28:18+00:00April 1st, 2025|cybersecurity, Tech|0 Comments

Discover If You Qualify for “Head of Household” Tax Filing Status

When we prepare your tax return, we’ll check one of the following filing statuses: single, married filing jointly, married filing separately, head of household or qualifying widow(er). Only some people are eligible to file a return as a head of household. But if you’re one of them, it’s more favorable than filing as a single taxpayer.

To illustrate, the 2025 standard deduction for a single taxpayer is $15,000. However, it’s $22,500 for a head of household taxpayer. To be eligible, you must maintain a household that, for more than half the year, is the principal home of a “qualifying child” or other relative of yours whom you can claim as a dependent.

Tax law fundamentals

Who’s a qualifying child? This is one who:

Lives in your home for more than half the year,
Is your child, stepchild, adopted child, foster child, sibling, stepsibling (or a descendant of any of these),
Is under age 19 (or a student under 24), and
Doesn’t provide over half of his or her own support for the year.

If the parents are divorced, the child will qualify if he or she meets these tests for the custodial parent — […]

By Linkenheimer LLP|2025-04-01T17:00:05+00:00April 1st, 2025|head of household|0 Comments