business - Linkenheimer LLP CPAs & Advisors

Taking the Opposite Approach: Ways Your Business Can Accelerate Taxable Income and Defer Deductions

Typically, businesses want to delay recognition of taxable income into future years and accelerate deductions into the current year. But when is it prudent to do the opposite? And why would you want to?

One reason might be tax law changes that raise tax rates. There have been discussions in Washington about raising the corporate federal income tax rate from its current flat 21%. Another reason may be because you expect your noncorporate pass-through entity business to pay taxes at higher rates in the future, because the pass-through income will be taxed on your personal return. There have also been discussions in Washington about raising individual federal income tax rates.

If you believe your business income could be subject to tax rate increases, you might want to accelerate income recognition into the current tax year to benefit from the current lower tax rates. At the same time, you may want to postpone deductions into a later tax year, when rates are higher, and when the deductions will do more tax-saving good.

To accelerate income

Consider these options if you want to accelerate revenue recognition into the current tax year:

Sell appreciated assets that have capital gains in […]

By Linkenheimer LLP|2022-03-21T20:35:25+00:00March 21st, 2022|business, deduction, deductions, tax deductions, tax planning|0 Comments

Does Your Business Barter? Here Are Some Facts You Should Know

In today’s economy, many small businesses are strapped for cash. They may find it beneficial to barter or trade for goods and services instead of paying cash for them. Bartering is the oldest form of trade and the internet has made it easier to engage with other businesses. But if your business gets involved 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.

How it works

Here are some examples:

A computer consultant agrees to exchange services with an advertising agency.
A plumber does repair work for a dentist in exchange for dental services.

In these cases, both parties are taxed on the fair market value of the services received. This is the amount they would normally charge for the same services. If the parties agree to the value of the services in advance, that will be considered the fair market value unless there’s contrary evidence.

In addition, if services are exchanged for property, income is realized. For example,

If a construction firm does work for a retail business […]

By Linkenheimer LLP|2022-03-08T18:52:59+00:00March 8th, 2022|business, irs|0 Comments

Can You Deduct the Costs of a Spouse on a Business Trip?

If you own your own company and travel for business, you may wonder whether you can deduct the costs of having your spouse accompany you on trips.

The rules for deducting a spouse’s travel costs are very restrictive. First of all, to qualify, your spouse must be your employee. This means you can’t deduct the travel costs of a spouse, even if his or her presence has a bona fide business purpose, unless the spouse is a bona fide employee of your business. This requirement prevents tax deductibility in most cases.

A spouse-employee

If your spouse is your employee, then you can deduct his or her travel costs if his or her presence on the trip serves a bona fide business purpose. Merely having your spouse perform some incidental business service, such as typing up notes from a meeting, isn’t enough to establish a business purpose. In general, it isn’t sufficient for his or her presence to be “helpful” to your business pursuits […]

By Linkenheimer LLP|2022-02-22T18:08:28+00:00February 22nd, 2022|deduction, deductions, travel|0 Comments

Prudent Technology Upgrades Call For Some Soul Searching

By now, most business owners view technology upgrades as inevitable. Whether hardware or software, the tech your company relies on to operate will need to change slightly or even drastically for you to stay competitive.

Strange as it may sound, technology upgrades demand a bit of soul searching. That is, before spending the money, you need to dig deep for insights about what your business really needs and whether your employees or customers will appreciate your efforts.

Ask the right questions

Begin the decision process with a series of inquiries. That is, sit down with your leadership team and ask questions such as:

What are the specific functionalities that we need?
Do we need hardware, software or both?
If software, are we looking at an entirely new platform or a smaller upgrade within our existing systems?

Assuming you already have a technology infrastructure in place, compatibility is an issue, too. If you’re using an older operating system, new software could be buggy or flat-out incompatible. In either case, you could incur substantial additional costs to update or replace your operating system, which might involve new hardware and impact other software.

When deciding whether to upgrade internal systems, […]

By Linkenheimer LLP|2022-02-17T20:22:21+00:00February 17th, 2022|business, tax implications|0 Comments

Let Your Financial Statements Guide You To Optimal Business Decisions

Now that 2022 is up and running, business owners can expect to face a few challenges and tough choices as the year rolls along. No matter how busy things get, don’t forget about an easily accessible and highly informative resource that’s probably just a few clicks away: your financial statements.

Assuming you follow U.S. Generally Accepted Accounting Principles (GAAP) or similar reporting standards, your financial statements will comprise three major components: an income statement, a balance sheet and a statement of cash flows. Each one contains different, but equally important, information about your company’s financial performance. Together, they can help you and your leadership team make optimal business decisions.

Revenue and expenses

The first component of your financial statements is the income statement. It shows revenue and expenses over a given accounting period. A commonly used term when discussing income statements is “net income.” This is the income remaining after you’ve paid all expenses, including taxes.

It’s also important to check out “gross profit.” This is the income earned after subtracting the cost of goods sold from revenue. Cost of goods sold includes the cost of direct labor and materials, as well as any manufacturing overhead […]

By Linkenheimer LLP|2022-01-28T19:27:09+00:00January 28th, 2022|business, Financial Reporting Framework, tax planning|0 Comments