business

Are You Engaged in Internet Sales in California?

G S T concept with Quation

Are you engaged in Internet sales in California? In light of changes to sales and use tax that became effective in April, some retailers may not be certain if they must collect and pay over sales and use tax based on aspects of their businesses. The CA Dept. of Tax and Fee Administration has updated Publication 109 (Internet Sales) to add clarity on many issues. One key change is the addition of details that defines what “engaged in business” in CA means and doesn’t mean. For example, “Offering merchandise for sale over the phone, by mail order, or online will generally not, by itself, cause a retailer to be engaged in business in CA.” Go to https://bit.ly/2OClJka and scroll down. If you have questions or would like more info, please contact your Linkenheimer CPA. 

By |August 22nd, 2019|sales tax|0 Comments

Businesses Can Utilize the Same Information IRS Auditors Use to Examine Tax Returns

07_22_19_1128492077_SBTB_560x292

The IRS uses Audit Techniques Guides (ATGs) to help IRS examiners get ready for audits. Your business can use the same guides to gain insight into what the IRS is looking for in terms of compliance with tax laws and regulations.

Many ATGs target specific industries or businesses, such as construction, aerospace, art galleries, child care providers and veterinary medicine. Others address issues that frequently arise in audits, such as executive compensation, passive activity losses and capitalization of tangible property.

How they’re used

IRS auditors need to examine all types of businesses, as well as individual taxpayers and tax-exempt organizations. Each type of return might have unique industry issues, business practices and terminology. Before meeting with taxpayers and their advisors, auditors do their homework to understand various industries or issues, the accounting methods commonly used, how income is received, and areas where taxpayers may not be in compliance.

By using a specific ATG, an auditor may be able to reconcile discrepancies when reported income or expenses aren’t consistent with what’s normal for the industry or to identify anomalies within the geographic area in which the business is located.

For example, one ATG focuses specifically on businesses […]

By |July 22nd, 2019|audit, business, irs, tax|0 Comments

It’s a Good Time to Buy Business Equipment and Other Depreciable Property

07_15_19_865279868_SBTB_560x292

There’s good news about the Section 179 depreciation deduction for business property. The election has long provided a tax windfall to businesses, enabling them to claim immediate deductions for qualified assets, instead of taking depreciation deductions over time. And it was increased and expanded by the Tax Cuts and Jobs Act (TCJA).

Even better, the Sec. 179 deduction isn’t the only avenue for immediate tax write-offs for qualified assets. Under the 100% bonus depreciation tax break provided by the TCJA, the entire cost of eligible assets placed in service in 2019 can be written off this year.

Sec. 179 basics

The Sec. 179 deduction applies to tangible personal property such as machinery and equipment purchased for use in a trade or business, and, if the taxpayer elects, qualified real property. It’s generally available on a tax year basis and is subject to a dollar limit.

The annual deduction limit is $1.02 million […]

By |July 16th, 2019|bonus, depreciation, New Tax Laws|0 Comments

Bartering: A Taxable Transaction Even if Your Business Exchanges No Cash

07_01_19_601398828_SBTB_560x292

Small businesses may find it beneficial to barter for goods and services instead of paying cash for them. If your business engages in bartering, be aware that the fair market value of goods that you receive in bartering is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties.

Income is also realized if services are exchanged for property. For example, if a construction firm does work for a retail business in exchange for unsold inventory, it will have income equal to the fair market value of the inventory.

Barter clubs

Many business owners join barter clubs that facilitate barter exchanges. In general, these clubs use a system of “credit units” that are awarded to members who provide goods and services. The credits can be redeemed for goods and services from other members.

Bartering is generally taxable in the year it occurs. But if […]

Grading the Performance of Your Company’s Retirement Plan

Letter A, Report Card, Test Results

Imagine giving your company’s retirement plan a report card. Would it earn straight A’s in preparing your participants for their golden years? Or is it more of a C student who could really use some extra help after school? Bench-marking can tell you.

Mind the basics

More than likely, you already use certain criteria to benchmark your plan’s performance using traditional measures such as:

  • Fund investment performance relative to a peer group,
  • Breadth of fund options,
  • Bench-marked fees, and
  • Participation rates and average deferral rates (including matching contributions).

These measures are all critical, but they’re only the beginning of the story. Add to that list helpful administrative features and functionality — including auto-enrollment and auto-escalation provisions, investment education, retirement planning, and forecasting tools. In general, the more, the better.

Don’t overlook useful data

A sometimes-overlooked plan metric is average account balance size. This matters for two reasons. First, it provides a first-pass look at whether participants are accumulating meaningful sums in their accounts. Naturally, you’ll need to look at that number in light of the age of your workforce and how long your plan has been in existence. Second, it affects record-keeping fees — higher […]

By |June 28th, 2019|business, retirement|0 Comments

Which Entity is Most Suitable for Your New or Existing Business?

06_24_19_601398828_SBTB_560x292

The Tax Cuts and Jobs Act (TCJA) has changed the landscape for business taxpayers. That’s because the law introduced a flat 21% federal income tax rate for C corporations. Under prior law, profitable C corporations paid up to 35%.

The TCJA also cut individual income tax rates, which apply to sole proprietorships and pass-through entities, including partnerships, S corporations, and LLCs (treated as partnerships for tax purposes). However, the top rate dropped from 39.6% to only 37%.

These changes have caused many business owners to ask: What’s the optimal entity choice for me?

Entity tax basics

Before the TCJA, conventional wisdom was that most small businesses should be set up as sole proprietorships or pass-through entities to avoid the double taxation of C corporations. A C corporation pays entity-level income tax and then shareholders pay tax on dividends — and on capital gains when they sell the stock. For pass-through entities, there’s no federal income tax at the entity level.

Although C corporations are still potentially subject to double taxation, their current 21% tax rate helps make up for it. This issue is further complicated, however, by another tax provision that allows noncorporate owners of pass-through […]

By |June 28th, 2019|business, New Tax Laws, tax planning|0 Comments

Put a Number on Your Midyear Performance with the Right KPIs

Notebook with Toolls and Notes about KPI,concept

We’ve reached the middle of the calendar year. So how are things going for your business? Conversationally you might say, “Pretty good.” But, analytically, can you put a number on how well you’re doing — or several numbers for that matter? You can if you choose and calculate the right key performance indicators (KPIs).

4 common indicators

There are a wide variety of KPIs to choose from. Here are four that can give you a solid snapshot of your midyear position:

1. Gross profit. This figure will tell you how much money you made after your manufacturing and selling costs were paid. It’s calculated by subtracting the cost of goods sold from your total revenue.

2. Current ratio. This ratio will help you gauge the strength of your cash flow. It’s calculated by dividing your […]

By |June 24th, 2019|business|0 Comments

Hiring This Summer? You May Qualify for a Valuable Tax Credit.

Is your business hiring this summer? If the employees come from certain “targeted groups,” you may be eligible for the Work Opportunity Tax Credit (WOTC). This includes youth whom you bring in this summer for two or three months. The maximum credit employers can claim is $2,400 to $9,600 for each eligible employee.

10 targeted groups

An employer is generally eligible for the credit only for qualified wages paid to members of 10 targeted groups:

  • Qualified members of families receiving assistance under the Temporary Assistance for Needy Families program,
  • Qualified veterans,
  • Designated community residents who live in Empowerment Zones or rural renewal counties,
  • Qualified ex-felons,
  • Vocational rehabilitation referrals,
  • Qualified summer youth employees,
  • Qualified members of families in the Supplemental Nutrition Assistance Program,
  • Qualified Supplemental Security Income recipients,
  • Long-term family assistance recipients, and
  • Qualified individuals who have been unemployed for 27 weeks or longer.

For each employee, there’s also a minimum requirement that the employee have completed at least 120 hours of service for the employer, and that employment begin before January 1, 2020.

Also, the credit isn’t available for certain employees who are related to the employer or work more than 50% of the time outside of a trade or business of the employer (for […]

By |June 18th, 2019|business, employer, tax credit|0 Comments

Your Succession Plan May Benefit from a Separation of Business and Real Estate

Pie chart - 3D rendering

Like most businesses, yours probably has a variety of physical assets, such as production equipment, office furnishings and a plethora of technological devices. But the largest physical asset in your portfolio may be your real estate holdings — that is, the building and the land it sits on.

Under such circumstances, many business owners choose to separate ownership of the real estate from the company itself. A typical purpose of this strategy is to shield these assets from claims by creditors if the business ever files for bankruptcy (assuming the property isn’t pledged as loan collateral). In addition, the property is better protected against claims that may arise if a customer is injured on the property and sues the business.

But there’s another reason to consider separating your business interests from your real estate holdings: to benefit your succession plan.

Ownership transition

A common and generally effective way to […]

By |June 17th, 2019|business, succession planning|0 Comments

Buy vs. Lease: Business Equipment Edition

Life presents us with many choices: paper or plastic, chocolate or vanilla, regular or decaf. For businesses, a common conundrum is buy or lease. You’ve probably faced this decision when considering office space or a location for your company’s production facilities. But the buy vs. lease quandary also comes into play with equipment.

Pride of ownership

Some business owners approach buying equipment like purchasing a car: “It’s mine; I’m committed to it and I’m going to do everything I can to familiarize myself with this asset and keep it in tip-top shape.” Yes, pride of ownership is still a thing.

If this is your philosophy, work to pass along that pride to employees. When you get staff members to buy in to the idea that this is your equipment and the success of the company depends on using and maintaining each asset properly, the business can obtain a great deal of long-term value from assets that are bought […]

By |May 14th, 2019|business, deductions, expensing|0 Comments