Author: Howard Tax Prep LLC

Howard Tax Prep LLC is authorized to represent our clients in front of the IRS, and we are your #1 source for tax reduction & wealth building strategies. Our practice is focused on showing clients how to LEGALLY reduce their taxes, and properly structure their small/medium business in the areas of accounting, bookkeeping, and compliance. You can research our credentials on the IRS.gov directory of CREDENTIALED & QUALIFIED tax preparers under Howard, 60647, and check the box that reads: Annual Filing Season Program Participant. In addition to tax preparation, we also provide tax help for notices received from the IRS. Howard Tax Prep LLC Chicago tax resolution services can help you settle tax debt, negotiate monthly payments, or apply for a tax debt hardship. If you have received an IRS notice CP2000, IRS notice CP504 intent to levy letter, or a notice before collection action letter, please contact us IMMEDIATELY. The longer you wait, the worse the situation becomes.

Family Tax Issues, General Information, Retirement Income, TAXES

Tax Consequences of Paying Your Retired Parents To Watch Your Children

January 6, 2019 Howard Tax Prep LLC

Author: Trudy M. Howard

QUESTION: Can I claim the money I pay my mom to watch my children after school? She is on S.S. and I would not want to impact her benefits as she is retired. I pay her $260 a week.

ANSWER: With the IRS most answers usually begin with “it depends” and this is one of those answers; it depends. There are several moving parts to this scenario that will determine the tax benefit/liability to you, and the tax benefit/liability to your mom. Tax liability is determined by figuring what location the child care is taking place in, your marital status, the age of the child, and your mom’s total income. It is unclear to me if you have a business, and you are wanting to “claim the money” as in deduct the total amounts paid from your taxable income as a business expense (which you cannot do), or if you want to “claim the money” for the dependent care credit. I’ll get into the dependent care credit later in the article, but for now, let’s start with is your mom an employee, or an independent contractor.

If your mom is doing the babysitting in your home, you may be considered a household employer, and you will NEED TO PAY EMPLOYER TAXES on the money that you paid to your mom. Employer taxes are Federal Unemployment taxes of 6% of the first $,7000 in wages, 6.2% for Social Security, and 1.45% for Medicare. However, as with everything concerning the IRS there is an exception to this rule. You do not have to count the wages paid for social security and Medicare taxes if:

The child is under 18 years of age, or has physical or mental condition that requires the personal care of an adult for at least 4 continuous weeks, AND

You’re divorced and haven’t remarried.
You’re a widow or widower.
You’re living with a spouse whose physical or mental condition prevents him or her from caring for your child for at least 4 continuous weeks in the calendar quarter services were performed.

If your mom is watching your child outside of your home, (say you are dropping your child off to your mom), then your mom would be considered a “self-employed person” which means that she will need to pay self-employment taxes on her income. The reason she will need to pay report and pay self-employment taxes is because she would have earned over $400 in self-employment income.

TAXES MOM WILL HAVE TO PAY.

Because your mom is self-employed, she would have to pay SELF EMPLOYMENT TAXES in the amount of $1,591.20 (calculated using the 20% qualified business income deduction only, not with any business expense deductions), and if she has over $25,000 in income (social security income plus self-employment income), she may also have to pay INCOME TAXES on the earnings.

TAX BENEFIT TO YOU:

By paying your mom to watch your child, you may be eligible to claim the nonrefundable child and dependent care tax credit. The Child and dependent care tax credit ranges from 20%-35% of either $3,000 or $6,000 depending on your adjusted gross income. A qualifying individual for the child and dependent care credit is:

Your dependent qualifying child who is under age 13 when the care is provided.
Your spouse who is physically or mentally incapable of self-care and lived with you for more than half of the year.
An individual who is physically or mentally incapable of self-care, lived with you for more than half of the year, and either: (i) is your dependent; or (ii) could have been your dependent except that he or she has gross income that equals or exceeds the exemption amount, or files a joint return, or you (or your spouse, if filing jointly) could have been claimed as a dependent on another taxpayer’s 2018 return.

Once your AGI (adjusted gross income) is over $43,000 the max tax credit you will receive is $600 for 1 child, and $1,200 for 2 children. Each child must be under the age of 13. This credit is nonrefundable, so if you have a $0 tax liability & you receive the $600 credit, you would not receive a tax refund check for the $600.

CAN YOU DEDUCT THE TOTAL $13,520 FROM YOUR TAXABLE INCOME?

Per IRS PUBLICATION 926 The deduction that can be taken on Schedules C and F (Form 1040) for wages and employment taxes applies only to wages and taxes paid for business and farm employees. You can’t deduct the wages and employment taxes paid for your household employees on your Schedule C or F.

WILL THIS MONEY HAVE AN IMPACT ON YOUR MOM’S RETIREMENT BENEFITS?

There are several types of retirement income. Pension, 401k, IRA, Annuities, Social Security, SSI, Social Security Disability, Disability Payments from a Privately Owned Insurance Plan, etc. For purposes of this article I will be focusing on government sponsored retirement plans.

SOCIAL SECURITY RETIREMENT INCOME: –If your mom’s is unmarried, and her base income (including social security and all other income) is $25,000 or less, she will not have to pay any INCOME tax (remember income tax and self-employment taxes are two different taxes).

Per the benefits planner retirement section on the social security website, if your mom is at full retirement age she can earn as much as she wants, and have unlimited resources and still receive her benefits. However, if your mom is younger than full retirement age and makes more than the yearly earnings limit, her earnings may reduce her benefit amount.

“(Full retirement age is 66 for people born between 1943 and 1954. Beginning with 1955, two months are added for every birth year until the full retirement age reaches 67 for people born in 1960 or later.) If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2018, that limit is $17,040.”

To find out whether any of your benefits shown on Forms SSA-1099 and RRB-1099 may be taxable, compare the base amount (explained later) for your filing status with

the total of:

One-half of your benefits, plus
All your other income, including tax-exempt interest

SOCIAL SECURITY DISABILITY: –This benefit is based on an inability to work, and work history. Per the disability section on the social security website: “Social Security Disability Insurance pays benefits to you and certain members of your family if you are “insured,” meaning that you worked long enough and paid Social Security taxes.” While there are limits on what a person can earn while on disability, they can receive help from outside sources and retain their benefits.

SSI–SOCIAL SECURITY SUPPLEMENTAL INCOME--The Supplemental Security Income (SSI) program pays benefits to disabled adults and children who have financial need, and limited income/resources. This benefit pays a small amount to those that are disabled, but don’t qualify for regular social security disability. The basic monthly SSI payment for 2019 is the same nationwide. It is:

—$771 for one person; or

—$1,157 for a couple.

Not everyone gets the same amount. You may get more if you live in a state that adds money to the federal SSI payment. You may receive less if you or your family has other income. Where and with whom you live also makes a difference in the amount of your SSI payment. SSI eligibility is based on a person’s access to money & assistance, (aka means, aka support, income, total household income), and per the SSA “Income is any item an individual receives in cash or in-kind that can be used to meet his or her need for food or shelter. Income also includes (for the purposes of SSI), the receipt of any item which can be applied, either directly or by sale or conversion, to meet basic needs of food or shelter.” Resources are limited to $2,000 for single people.
Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, or need business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office at 855-743-5765. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Family Tax Issues, General Information, TAXES

5 Steps To Take When Someone Illegally Uses Your Child’s Social Security Number On A Tax Return.

January 3, 2019January 3, 2019 Howard Tax Prep LLC

Author Trudy M. Howard

It’s the end of tax season, you’ve finally gotten all of your documents together, and then it happens; your electronically filed tax return is rejected. Here in our South Loop Chicago Tax Preparation office, I work with many Chicago tax preparation clients that receive the dreaded IRS Reject Codes R0000-507-01 and F1040SSPR-507 . Rejected electronic file codes R0000-507-01 and F1040SSPR-507 mean that the IRS system recognizes the child’s social security number as being claimed on another return. While it may be frustrating, if you are truly entitled to file the child/dependent in question, there are steps you can take to claim your child on your refund after someone filed them.

Step 1: Complete a paper tax return claiming all of your rightful dependents.

Step 2: Complete an IRS Identity Theft Affidavit (IRS form 14039)

Step 3: Locate the IRS mailing address for your state, and mail your paper tax return along with the completed form 14039.

Step 4: Wait on acknowledgment letter that form 14039 was received, and allow the IRS from 120-180 days to resolve your case.

Step 5: The IRS may determine that you need to placed into the PIN program, which means that on an annul basis you will receive a 6 digit Identity Protection pin number that has to be entered on your tax returns.

Also per the IRS Website: “If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost or stolen purse or wallet, questionable credit card activity or credit report, contact the IRS Identity Protection Specialized Unit at 800-908-4490 (Monday – Friday, 7 a.m. – 7 p.m. local time; Alaska and Hawaii follow Pacific time).”

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Business Strategies, General Information, Tax Reduction, TAXES

Conversion Strategy for Your Business Losses after Tax Reform

December 28, 2018December 28, 2018 Howard Tax Prep LLC

Tax reform made a lot of good changes in the tax law for the small-business owner.

But the changes to the net operating loss (NOL) deduction rules are not in the good-changes category. They are designed to hurt you and put money in the IRS’s pocket.

Now, if you have a bad year in your business, the new NOL rules are designed to stop you from using your business loss to find some immediate cash. The new (let’s call them bad-for-you) rules certainly differ from the prior beneficial rules.

Old NOL Rules

You have an NOL when your business deductions exceed your business income in a taxable year.

Before tax reform, you could carry back the NOL to prior tax years and get refunds of taxes paid in those prior years.

Alternatively, you could have elected to waive the NOL carryback and instead carry forward the NOL to offset some or all of your taxable income in future tax years.

New NOL Rules

Tax reform made two key changes to the NOL rules:

You can no longer carry back the NOL (except for certain qualified farming losses).
Your NOL carryforward can offset only up to 80 percent of your taxable income in a tax year.

The changes put more money in the IRS’s pocket by

eliminating your ability to get an immediate tax benefit from your NOL carryback, and
delaying your ability to get tax benefits from future NOL carryforwards.

We are bringing the NOL rules to your attention in case you need to do some planning with us. We likely have some strategies that can help you get some immediate benefits from your business loss. Listed below is a strategy that we commonly use with our South Loop tax preparation business owner clients.

Conversion Strategy: Roth IRA Conversion

If you have traditional IRA assets, you can convert them to Roth IRA assets regardless of income. You include the conversion amounts in your taxable income, but you don’t pay the 10 percent penalty on the converted monies. This brings up a planning opportunity for your business loss. Use the loss to offset the income that you had to include because of the conversion to a Roth IRA. If your loss can offset the entire income inclusion, the conversion is tax-free to you, and the tax-free converted funds continue their growth tax-free inside the Roth IRA. You’ll also reduce future required minimum distributions (RMDs) after age 70 1/2 since you don’t take RMDs from a Roth IRA account.5

Example: In 2018, John, who is single, takes the standard deduction and has a Schedule C loss of $30,000. John has no other tax items on his tax return. John has $55,000 in traditional IRA assets. John can convert $42,000 ($30,000 loss plus $12,000 of standard deduction) of his traditional IRA to a Roth IRA in 2018 and pay no tax on the conversion amount.
Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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General Information, Tax Reduction, TAXES

5 last-minute strategies you can use to cut your 2018 tax bill!

December 26, 2018December 26, 2018 Howard Tax Prep LLC

Trudy Howard

In my South Loop Chicago Tax Preparation office, I often see clients looking for tax savings at years end. Although December 26th is cutting it close, your year-end tax planning doesn’t have to be hard. I have outlined below five strategies that will increase your tax deductions or reduce your taxable income so that Uncle Sam gets less of your 2018 cash.

1.) Prepaying your 2019 expenses right now reduces your taxes this year, without question. While it’s true you kicked the can down the road some, perhaps you have an offset with a big deduction planned for next year. And even if you don’t have such a plan at the moment, you have plenty of time to create one or to put more big deductions in place for 2019.

2.) The easiest year-end strategy of all is simply to stop billing your customers, clients, and patients. Once again, this kicks the can down the road some and makes your 2019 tax planning more important.

3.) Thanks to the new tax laws With 100 percent bonus depreciation and increased Section 179 expensing in 2018, you can make significant purchases of equipment, machinery, and furniture and write off 100 percent of the value. Make sure you place the assets in service on or before December 31, 2018, to get the deduction this year.

4.) Charges to your credit cards can create deductions on the day of the charge. This is absolutely true if you are a sole proprietor or you operate as a corporation and the credit card is in the name of the corporation. But if you operate as a corporation and the credit card is in your personal name, your corporation needs to reimburse you before December 31 to create the 2018 deduction at the corporate level.

5.) And finally, claim all your legitimate deductions. Don’t think you have too many, and don’t try to guess which of your too-many deductions could be a red flag. First, it’s unlikely you could have enough deductions to create a red flag. Second, no one knows what those red flags are. Third, if the deduction is legitimate, it doesn’t matter if the IRS audits it—you’ll win.

As you can see from the five strategies above, there’s much you can do to control your tax bite. Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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General Information

5 THINGS YOU SHOULD CHECK IMMEDIATELY.

December 18, 2018December 18, 2018 Howard Tax Prep LLC

Author Trudy M Howard #smallbiztaxlady

5 THINGS YOU SHOULD CHECK IMMEDIATELY.

1.) Your beneficiaries. This one is huge! Countless people forget to change beneficiaries after a divorce, break-up, etc. and sadly, monies are distributed to the original beneficiaries, not the intended beneficiaries. Take a moment to review your retirement accounts, bank accounts, life insurance, (even that free accidental death policy from your bank), and ensure that your beneficiaries reflect your intended beneficiaries, and not old beneficiaries.

2.) Your Insurance coverage. It’s estimated that 70% of people purchase insurance, put the policy in the drawer, and simply pay the premiums as they come in. This is a HUGE MISTAKE! As your life changes, so should your coverage. Do you have more valuables in your home then when you first purchased it? Are your earning more (which means you need to increase your disability/life insurance coverage)? Is your insurance company still competitive? Loyalty to a brand can cost you THOUSANDS in premiums & coverage. Call around and get some quotes from a broker that represents several carriers. The more carriers, the more options & BENEFITS you have available to you.

3.) Your bank account. Are you being charged fees that you are unaware of? Banks like to institute new fees such as account maintenance, and non ATM withdrawal fees at the beginning of the year. Also, go over your old statements to see if there are any charges that you don’t recognize. Scammers and identify theft thieves rely on people not monitoring their accounts; remember the thieves that stole millions by taking PENNIES at a time!

4.) Your 401k allocations. Are you one who just sets it and forgets it? If so, now is the perfect time to see if your fund is performing the way that you intended. If you are losing money, you may need to reallocate funds from heavy equity investments to more debt securities. As a rule of thumb, remember the longer the fund date, the more risk. A 2040 retirement fund will have heavier investments in stocks & riskier products than the 2025 retirement fund.

5.) Your health, AKA YOUR ANNUAL PHYSICAL! Without our health, everything suffers. Make sure you get your suggested screenings, know your blood pressure readings (high blood pressure is related to stroke, wreaks havoc on your heart, and a host of other issues), and monitor your weight. Also know your A1C levels (monitors how your body regulates insulin)! This is especially important to those of African American & Hispanic heritage as those groups are more susceptible to Diabetes.

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General Information

2018 Last-Minute Vehicle Purchases to Save on Taxes

December 17, 2018December 17, 2018 Howard Tax Prep LLC

As the #smallbiztaxlady I work with a lot of Business owners in the South Loop of Chicago that need business tax preparation. As the year ends, many business owners are looking for tips for year end tax deductions. For business owners looking for tax deductions, I have two questions: Two questions:

Do you need a replacement business car, SUV, van, or pickup truck?
Do you need tax deductions this year?

Here are some ideas for you to consider:

Buy a New or Used SUV, Crossover Vehicle, or Van with a GVWR Greater than 6,000 Pounds

Let’s say that on or before December 31, 2018, you or your corporation buys and places in service a new or used SUV or crossover vehicle that the manufacturer classifies as a truck and that has a gross vehicle weight rating (GVWR) of 6,001 pounds or more. This newly purchased vehicle gives you four big benefits:

Bonus depreciation of 100 percent (new, thanks to the TCJA)
Section 179 expensing of up to $25,000
MACRS depreciation using the five-year table
No luxury limits on vehicle depreciation deductions

Buy a New or Used Pickup with a GVWR Greater than 6,000 Pounds

If you or your corporation buys and places in service a qualifying pickup truck (new or used) on or before December 31, 2018, then this newly purchased vehicle gives you four big benefits:

Bonus depreciation of 100 percent
Section 179 expensing of up to $1,000,000
MACRS depreciation using the five-year table
No luxury limits on vehicle depreciation deductions

To qualify for full Section 179 expensing, the pickup truck must have

a GVWR of more than 6,000 pounds, and
a cargo area (commonly called a “bed”) of at least six feet in interior length that is not easily accessible from the passenger compartment.

Short bed. If the pickup truck passes the more-than-6,000-pound-GVWR test but fails the bed-length test, tax law classifies it as an SUV. That’s not bad. It’s still eligible for expensing of up to the $25,000 SUV expensing limit plus 100 percent bonus depreciation. See Section 1 above for how this works.

Buy a New or Used Qualifying Cargo or Passenger Van with a GVWR Greater than 6,000 Pounds

A new or used cargo or passenger van bought and placed in service on or before December 31, 2018, can qualify for four big tax benefits:

Bonus depreciation of 100 percent
Section 179 expensing of up to $1,000,000
MACRS depreciation using the five-year table
No luxury limits on vehicle depreciation deductions

Cargo van. To qualify for full Section 179 expensing, the cargo van must

have a GVWR of more than 6,000 pounds,
fully enclose the driver compartment and load-carrying area,
not have seating behind the driver’s seat, and
have no body section that protrudes more than 30 inches ahead of the leading edge of the windshield.

If the van passes the GVWR test but fails one of the other qualifying tests listed above, the law deems it an SUV.

Passenger van. If the van has a GVWR of greater than 6,000 pounds and seats more than nine people behind the driver’s seat, it is a tax law–defined passenger van, not an SUV, and it qualifies for full Section 179 expensing of up to $1,000,000 and 100 percent bonus depreciation.

Buy a Depreciation-Limited New or Used Car, SUV, Truck, or Van

If you or your corporation buys and places in service a new or used passenger vehicle such as a car (or a pickup, SUV, or van with a GVWR of 6,000 pounds or less) on or before December 31, 2018, then you or your corporation may claim up to $8,000 in bonus depreciation.

Tax reform increased the 2018 luxury passenger vehicle depreciation limits to

$10,000 for the first taxable year in the recovery period,
$16,000 for the second taxable year in the recovery period,
$9,600 for the third taxable year in the recovery period, and
$5,760 for each succeeding year in the taxable period.

Here’s how this works: Say you buy a car. You add the $8,000 in bonus depreciation to the $10,000 car limit, for a 2018 limit of $18,000. To get to this limit, you can use a combination of bonus depreciation and regular depreciation. You reduce the $18,000 limit by any personal use.

The vehicle tax rules can be confusing. Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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General Information, TAX DEBT RELIEF, TAXES

Get rid of tax debt fast!

December 11, 2018May 15, 2019 Howard Tax Prep LLC

Author Trudy M Howard

Nothing can be more distressing than receiving a letter from the IRS. Having tax debt can cause stress, high blood pressure, sleepless nights, and it can also cause a break down in family relationships (we see this often in marriages). At Howard Tax Prep, in our Chicago South Loop tax office, we help clients resolve their IRS tax debts and State tax debt once and for all.

So what can you do you need to solve tax problems? Here are the Top 5 things that you can do when you owe the IRS, and have tax debt.

In plain English your options are:

Don’t over pay!
Ask for a settlement.
Ask for A payment plan.
Ask them to waive the Fees.
Tell them Don’t blame me!

In IRS Speak and complicated tax language, your options are:

1. Have a competent, and experienced tax consultant review your return for MISSED DEDUCTIONS! I once found $6,000 in missed deductions that put my client into a lower tax bracket, netting her a large tax refund of over $2,000! To be honest, I was actually shocked that I found such a large tax deduction, because the missed tax deduction was something that every good Chicago tax preparer should know! 101. In plain English: Don’t over pay!

2. IRS Offer in compromise. We’re sure that you’ve heard the commercials promising to “settle your tax debt for pennies on the dollar.” While every good tax debt consultant dislikes the phrase “pennies on the dollar” in some cases you can settle your tax debt with a low payment. We’ve seen cases such as: $150,000 tax debt settled for $4,000; $20,000 tax debt settled for $50; and $200,000 tax debt settled for $10,000! Not only can you possibly lower your tax debt, while the IRS considers your offer, you have a little more time raise money for your tax debt. In plain English: Ask for a tax settlement.

3. IRS Installment agreement. When most people receive a letter from the IRS the very first thing they do is think of ways to pay down their tax debt. The IRS offers 3 types of installment plans for tax debt. IRS tax debt installment plans, are basically agreements to pay what you owe on a continual basis, over a defined period of time. In plain English: Ask for a tax debt payment plan.

4. IRS Abatement of penalties. This can reduce or eliminate your penalties. In plain English: Waive the Fees.

5. IRS Innocent spouse relief. This can free you from liability if your spouse (or ex-spouse) is the reason for your tax problems. In plain English: Don’t blame me!

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General Information

Lower Your Self Employment Taxes. Little known secret…

December 10, 2018December 10, 2018 Howard Tax Prep LLC

Author Trudy M. Howard

Become A S-Corp To Save On Taxes

Howard Tax Prep often works with Chicago residents that have to pay self-employment taxes. Although we are a nationwide tax firm, because our office is located in the South Loop of Chicago, we attract more Chicago tax preparation clients.

If you’re a sole proprietor, a 1 member LLC (SMLLC), or a general partner in a business, you know that the 15.3 percent self-employment tax can eat up your profits in a hurry. For example, let’s assume you operate a sole proprietorship and you earn $100,000 of net income. You must report your income on Schedule C of your tax return, which creates a self-employment tax liability of $14,129.55 in ADDITION to your personal income tax! In order to lower self-employment taxes some self-employed Chicago residents have our firm apply their business for the IRS Subchapter S taxation status.

What Is an S Corporation?

The Subchapter S Corporation is a special IRS election that has to be requested during a very narrow 75-day window of time that begins on the day the business owner forms the corporation or LLC. Many of our self-employed Chicago tax clients choose to keep their legal entity as a corporation or a LLC, but have their taxable entity become an S corporation.

For federal tax purposes, your S corporation is a pass-through entity, meaning that the corporation’s income, deductions, and tax credit items are passed through to you, the shareholder, on a Schedule K-1. For some business owners, this is the best of both worlds: liability protection with personal taxation.

S Corporation Special Rules

To elect S corporation status, the LLC or corporation must be: To qualify for S corporation status, the corporation must meet the following requirements:

· Be a domestic corporation

· Have only allowable shareholders

· May be individuals, certain trusts, and estates and

· May not be partnerships, corporations or non-resident alien shareholders

· Have no more than 100 shareholders

· Have only one class of stock

· Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).

Is Sub Chapter S A Good Fit For Your Business?

No matter how they make look the same, every tax situation is different. S Corporations are great for businesses that:

· Provide services (insurance agents, consultants, etc.);

· Do not have large start-up costs;

· Won’t be making any major equipment purchases before operations begin;

· Generate lots of revenue with minimal effort and expense.

S Corps are typically not recommended for holding real estate due to debt basis issues, transferring of real estate, and unfriendly tax treatment upon death.

If you want to know how much you can save on taxes by lowering your self-employment taxes, call our office today. Howard Tax Prep can provide you with tax reduction strategies for your business taxes, in addition to your personal tax return.

Learn More

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Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, or need business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office at 1-855-743-5765 Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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BUSINESS CREDIT, General Information

BUSINESS CREDIT TIP!

December 1, 2018December 1, 2018 Howard Tax Prep LLC

A lot of business owners like #smallbiztaxlady want to establish credit in the name of the business without using their personal social security number. This method of obtaining business credit is often referred to as “obtaining business credit with no PG.” No PG (personal guarantee) simply means obtaining business lines of credit without using your social security number. The driving force behind no PG can be low personal credit scores, to business owner(s) wisely looking to protect their personal credit, and avoid personal liability of business debts.

Like personal credit, a businesses credit history is given a score. Business credit scoring is called a Paydex score, and your goal should be to keep your score at or above 80. Listed below the Paydex scores and what they mean.

PAYDEX SCORING
100 – Pays before invoice is generated
90 – Pays during discount period
80 – Pays when invoice is due
70 – Pays 15 days beyond terms
60 – Pays 22 days beyond terms
50 – Pays 30 days beyond terms
40 – Pays 60 days bevond terms
20 – Pays 90 days beyond terms
UN – Unavailable

Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, or need business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office at 855-743-5765. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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General Information, REAL ESTATE

Act Now! Get Your 2019 Safety Net Expensing in Place.

November 30, 2018November 30, 2018 Howard Tax Prep LLC

For 2018, you can elect the de minimis safe harbor to expense assets costing $2,500 or less ($5,000 with audited financial statements or something similar).

The term “safe harbor” means that the IRS will accept your expensing of the qualified assets if you properly abide by the rules of the safe harbor.

Here are four benefits of this safe harbor:

Safe harbor expensing is superior to Section 179 expensing because you don’t have the recapture period that can complicate your taxes.
Safe harbor expensing takes depreciation out of the equation.
Safe harbor expensing simplifies your tax and business records because you don’t have the assets cluttering your books.
The safe harbor does not reduce your overall ceiling on Section 179 expensing.

Here’s how the safe harbor works. Say you are a small business that elects the $2,500 ceiling for safe harbor expensing and you buy two desks costing $2,100 each. On the invoice, you see the quantity “two” and the total cost of $4,200, plus sales tax of $378 and a $200 delivery and setup charge, for a total of $4,778.

Before this safe harbor, you would have capitalized each desk at $2,389 ($4,778 ÷ 2) and then either Section 179 expensed or depreciated it. You would have kept the desks in your depreciation schedules until you disposed of them.

Now, with the safe harbor, you simply expense the desks as office supplies. This makes your tax life much easier.

To benefit from the safe harbor, you and I do a two-step process. It works like this:

Step 1. For safe harbor protection, you must have in place an accounting policy—at the beginning of the tax year—that requires expensing of an amount of your choosing, up to the $2,500 or $5,000 limit. I can help you with this.

Step 2. When I prepare your tax return, I make the election on your tax return for you to use safe harbor expensing. This requires that I attach the election statement to your federal tax return and file that tax return by the due date (including extensions).

If you want to use this safe harbor in 2018, we need to get this set up so that it is in place on January 1. Contact me at 855-743-5765, or email me at help@howardtaxprep.com

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