DEW14 - Business taxes made simple

Business Taxes Made Simple

Presented by

Ford Tax and Accounting, LLCAnd

SCORE - Detroit Chapter

Do you have a business partner?

Federal Taxes and Your Business

Business Facilities

Start Up Cost/Organizational Costs

“Regular” Business Expenses

Estimated Tax & Self-Employment Tax

Money In… Money Out – Tax Implications

Employees vs. Independent Contractors

Agenda

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Hiring Family Members

Health Care Tax Credit

S Corporation Issues

Small Business Jobs Act 2010

American Taxpayer Relief Act Of 2012

1099K Reporting

Do you need an accounting system?

Net Operating Loss (NOL)

Agenda (con.)

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Presentation Purpose X 3

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Awareness

Compliance

Opportunity

Do You Have A Business Partner?

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Yes! The IRS is your business

partner

The IRS allows tax breaks that lower taxable income & allows you to pay less tax…

Do You Have A Business Partner?

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Federal tax rates on Corporation taxable income vary from 15% to 35%

Individual tax rates on Sole Proprietor taxable income vary from 10% to 39.6%

Federal Taxes and Your Business

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Choice of Business EntitySole ProprietorsLimited Liability CompanyPartnershipsS CorporationsC Corporations Which is best choice? It depends…

Business Facilities

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• Purchase DepreciationCost Segmentation• LeaseDepreciation of Leasehold Improvements• Home Direct/Indirect ExpensesDepreciation

Start Up Cost/Organizational Costs vs. “Regular” Business Expenses

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• Start Up Cost- 1st Year Expense “Election” - Capitalization

• Organizational Costs• “Regular” Operating Costs

- Ordinary and Necessary- Current Year Deduction

Estimated Tax and Self-Employment Tax

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• Sole Proprietors• Partners• C Corporations• S Corporations (shareholders)NOT subject to self-employment tax…yet?

Money In… Money Out Tax Implications for Business Owners

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Money In...

Capital ContributionsEquity FinancingDebt FinancingLoans

Money Out…

Officer WagesDividendsReturn of CapitalGuaranteed Partnership PaymentsLoans

Employees vs. Independent Contractors

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• Do you have a choice?Well… Yes and No• “Control” is key• PenaltiesNon Filing of Information ReturnsNon Payment of Payroll Taxes

“Control” is Key…

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• Behavioral ControlInstructionsTraining• Financial ControlInvestment of Resources Reimbursed Expenses• Relationship of PartiesIntent of the partiesIndefinite relationship

Hiring Family Members

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• “Reasonable” Compensation

Children, Spouse, Parents• Benefits to the BusinessPay Less Payroll Taxes• Corporations vs. Sole Proprietorships

Employee Benefits

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• Health Insurance Premiums• Health Savings Accounts• Auto Reimbursements• Accountable vs. Non

Accountable Plans Retirement Plans

S Corporation Issues

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• Officers UNreasonable Compensation

Low Salary/High Distribution• Officers Health Insurance

PremiumPaid by S CorpTaxed as IncomeNot Subject to Payroll Taxes

American Taxpayer Relief ActOf 2012 (“Fiscal Cliff”) 1

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• 50% Extra 1st Year Depreciation (extended)

-business equipment and vehicles• Higher IRC Sec.179 Property

Expense (extended) - qualifying equipment and computer software

American Taxpayer Relief ActOf 2012 (“Fiscal Cliff”) 2

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• Retail Businesses and Restaurants

- 15-year cost recovery period (extended)

- qualifying leasehold improvements

- restaurant property- retail improvement property

American Taxpayer Relief ActOf 2012 (“Fiscal Cliff”) 3

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• Payroll Tax "Holiday" of 2011-2012 Has Expired

• Higher IRC Sec.179 Property Expense for 2013

1099K Reporting

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• 1099K issued by companies that process credit and debit cards

• Includes PayPal, Amazon, Google

• Exception if fewer than 200 transactions totaling less than $20,000

• IRS Effort to track unreported business income

Do You Need an Accounting System?

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These are NOT an Accounting Systems

Accounting System? IRS Expects…

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Internal Revenue Code Section 446 Requires businesses to accurately compute taxable income by using some kind of “common sense” accounting system that clearly reflects income, transactions, and business events...

Net Operating Losses

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• From Business OperationsDeductibleCarry-back 2 yearsCarry-forward 20 years

BEWARE OF HOBBY LOSS RULES!!!

Ford Facts of (Business) Life…

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• Every small business owner should get F.A.T. analysis help

• Every small business owner should NOT necessarily hire a CPA

• Many small business owners should hire an Enrolled Agent and a general accountant

Common Business Tax “Opportunity” Mistakes

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• Wrong business entity• Wrong depreciation

calculations• Wrong retirement plan• Missing family employment• Missing medical expenses• Missing home office expenses• Missing car/truck expensesMissing meals/entertainment expenses

U.S. Government study concluded…

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Small Businesses Overpay the IRSby an Average of

$11,638!

Why does this happen?

Lack of Business Tax Planning

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Business tax planning should be based on relevant parts of… 16 THOUSAND pages of Tax Code and 70 THOUSAND pages of Tax Regulations that contain rules for income, deductions, and credits.

What you don’t know CAN hurt you in your business bank account!

THANK YOU!

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Lyndon Ford EA, MBAFord Tax & Accounting, LLC

Tax Trouble Help, LLC*Available to Speak for Other

Groups*

Please connect with us on Facebook, Linkedin, Twitter, & FREE

Newsletter (248) 792-2044 • Southfield, MI

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Sales TaxIndividuals or businesses that sell tangible personal property to the final consumer are required to remit a 6% sales tax on their taxable retail sales to the State of Michigan.Who needs a sales tax license?Individuals or businesses that sell tangible personal property to the final consumer need a sales tax license.

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Use TaxThe use tax is a companion tax to the sales tax. Use tax of 6% must be paid on the total price (including shipping and handling charges) of all taxable items brought into Michigan or purchases made from out-of-state retailers. Credit is given for tax paid to another state.

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County Assesses Personal Property Tax

WHAT IS PERSONAL PROPERTY?

Personal Property is identified as the tangible assets of a business, inclusive of all related trade fixtures, though not real estate.

WHAT ARE EXAMPLES OF PERSONAL PROPERTY?

Personal Property consists of office furniture, office equipment, testing, diagnostic and electronic equipment, machinery and equipment, coin operated equipment, rental DVDs, games and video tapes, computers and computer related equipment, as well as, all related trade fixtures of a business.

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The Michigan Corporate Income Tax (CIT) was signed into law by Governor Rick Snyder on May 25, 2011. The CIT imposes a 6% corporate income tax on C corporations and taxpayers taxed as corporations federally. The CIT has one credit, the small business alternative credit, which offers an alternate tax rate of 1.8% of adjusted business income. There are no other credits, except those under the MBT election (addressed below). Insurance companies and financial institutions pay alternative taxes. The CIT replaces the Michigan Business Tax (MBT) for most taxpayers, effective January 1, 2012. Taxpayers with less than $350,000 in allocated or apportioned gross receipts and/or less than or equal to $100 in annual liability are not required to file or pay the CIT.

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