qualified small business - Linkenheimer LLP CPAs & Advisors

The QBI Deduction Basics And A Year-End Tax Tip That Might Help You Qualify

If you own a business, you may wonder if you’re eligible to take the qualified business income (QBI) deduction. Sometimes this is referred to as the pass-through deduction or the Section 199A deduction.

The QBI deduction:

Is available to owners of sole proprietorships, single member limited liability companies (LLCs), partnerships, and S corporations, as well as trusts and estates.
Is intended to reduce the tax rate on QBI to a rate that’s closer to the corporate tax rate.
Is taken “below the line.” In other words, it reduces your taxable income but not your adjusted gross income.
Is available regardless of whether you itemize deductions or take the standard deduction.

Taxpayers other than corporations may be entitled to a deduction of up to 20% of their QBI. For 2020, if taxable income exceeds $163,300 for single taxpayers, or $326,600 for a married couple filing jointly, the QBI deduction may be limited based on different scenarios. These include whether the taxpayer is engaged in a service-type of trade or business (such as law, accounting, health, or consulting), the amount of W-2 wages paid by the trade or business, and/or the unadjusted basis of qualified property […]

By Linkenheimer LLP|2020-12-17T18:23:09+00:00December 17th, 2020|business, qualified small business|0 Comments

Haven’t Filed Your 2019 Business Tax Return Yet? There May Be Ways To Chip Away At Your Bill

The extended federal income tax deadline is coming up fast. As you know, the IRS postponed until July 15 the payment and filing deadlines that otherwise would have fallen on or after April 1, 2020, and before July 15.

Retroactive COVID-19 business relief

The Coronavirus Aid, Relief and Economic Security (CARES) Act, which passed earlier in 2020, includes some retroactive tax relief for business taxpayers. The following four provisions may affect a still-unfiled tax return — or you may be able to take advantage of them on an amended return if you already filed.

Liberalized net operating losses (NOLs). The CARES Act allows a five-year carryback for a business NOL that arises in a tax year beginning in 2018 through 2020. Claiming 100% first-year bonus depreciation on an affected year’s return can potentially create or increase an NOL for that year. If so, the NOL can be carried back, and you can recover some […]

By Linkenheimer LLP|2020-09-03T20:02:23+00:00June 30th, 2020|business, deduction, deductions, New Tax Laws, qualified small business|0 Comments

New COVID-19 Law Makes Favorable Changes To “Qualified Improvement Property”

The law providing relief due to the coronavirus (COVID-19) pandemic contains a beneficial change in the tax rules for many improvements to interior parts of nonresidential buildings. This is referred to as qualified improvement property (QIP). You may recall that under the Tax Cuts and Jobs Act (TCJA), any QIP placed in service after December 31, 2017 wasn’t considered to be eligible for 100% bonus depreciation. Therefore, the cost of QIP had to be deducted over a 39-year period rather than entirely in the year the QIP was placed in service. This was due to an inadvertent drafting mistake made by Congress.

But the error is now fixed. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. It now allows most businesses to claim 100% bonus depreciation for QIP, as long as certain other requirements are met. What’s also helpful is that the correction is retroactive and it goes back to apply to any QIP placed in service after December 31, 2017. Unfortunately, improvements related […]

By Linkenheimer LLP|2020-09-03T20:03:05+00:00April 20th, 2020|business, irs, New Tax Laws, qualified small business|0 Comments

Time for NQDC Plan Deferral Elections

If you’re an executive or other key employee, your employer may offer you a nonqualified deferred compensation (NQDC) plan. As the name suggests, NQDC plans pay employees in the future for services currently performed. The plans allow deferral of the income tax associated with the compensation.

But to receive this attractive tax treatment, NQDC plans must meet many requirements. One is that employees must make the deferral election before the year they perform the services for which the compensation is earned. So, if you wish to defer part of your 2019 compensation, you generally must make the election by the end of 2018.

NQDC plans vs. qualified plans

NQDC plans differ from qualified plans, such as 401(k)s, in that:

NQDC plans can favor highly compensated employees,
Although your income tax liability can be deferred, your employer can’t deduct the NQDC until you recognize it as income, and
Any NQDC plan funding isn’t protected from your employer’s creditors.

While some rules are looser for NQDC plans, there are also many rules that apply to them that don’t apply to qualified plans.

2 more NQDC rules

In addition to the requirement that deferral elections be made before the start of the year, there are two […]

By Linkenheimer LLP|2018-11-21T19:10:25+00:00November 21st, 2018|qualified small business, tax planning|0 Comments

Increase in the Small Business Tax Credit

Under the Affordable Care Act (ACA), some small businesses may qualify for a small business tax credit. To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have 24 or fewer full-time equivalent employees and those employees must have average wages of less than $50,000 per year. In 2014, the tax credit goes up to 50 percent and will be available to qualified small businesses that purchase coverage through the new health insurance marketplaces in each state, called the Small Business Health Options Program (SHOP).

The SHOP marketplace will be open in October of 2013 for coverage that takes effect on January 1, 2014, or later.

For more info, click here.

Written by Mike Musson, CPA, Partner LinkedIn Profile

By Linkenheimer LLP|2020-09-03T20:05:51+00:00May 7th, 2013|affordable care act, CPA, linkenehiemer, mike musson, qualified small business, Santa Rosa, shop, single family, small business, small business health options, tax credit|0 Comments