Business Tax (5)

I just wrote a blog post about this debunking some ideas about payroll. This was one of the myths. Read the entire blog post, but here’s my answer to that myth.

  • Qualified benefits offered under a cafeteria or Section 125 plan are exempt from FICA.
  • This includes contributions made toward a medical, dental, vision and accident insurance plan and a flexible spending account, such as dependent care assistance and medical care reimbursements.
  • Payments toward health savings accounts and group-term life insurance of $50,000 or less, plus qualified transportation expenses and disability insurance, are exempt from FICA.
Category: Business Tax
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I just wrote a blog post about this debunking some ideas about payroll. This was one of the myths. Read the entire blog post, but here’s my answer to this question.

  • FICA: If your total FICA tax liability does not exceed $2500.00, you can pay those taxes quarterly with your 941 filing.
  • 944 Filer: If you are a 944 filer and your liabilities, don’t exceed $2500.00 for the year you can make payment with your 944 filing.
  • Liabilities: If your liabilities exceed $2500.00 in any quarter, you become a monthly depositor with deposits due by the 15th of the following month.
  • Payroll Taxes: If your payroll taxes exceed $50,000 per year in the lookback period or ever exceed $100,000.00 in a period, then you become what is called a semiweekly depositor and must deposit far more often.
  • Deposits: In any deposit period your liability exceeds $100,000.00, those liabilities must be deposited the next business day.
  • See Circular E-Publication 15 from the IRS for exact details on these two paragraphs. They take several pages in the publication to cover the details.
Category: Business Tax
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You are not actually being taxed twice on the same income. You refer to corporate tax; if your business is a corporation, then the corporation is taxed on its earnings, but the salary that is paid to you (and which is what you are taxed on) is a deduction. So that salary is only taxed once.

If your business is an S-corporation, the corporation itself doesn’t pay tax; everything is passed through to your individual return. So, again, no double tax. If you didn’t mean to refer to “corporate tax”, and your business is a sole proprietorship or a single-member LLC, again everything just appears on your individual return — the business is not a separate taxpayer. (If the business were a partnership or multiple-member LLC, you probably would not have said: “I own a small business”, so I’m ignoring those. But there would be no double taxation, either. I am also assuming that you would not elect to have an LLC taxed as a corporation — which you could do — but if you did, the same treatment described above would apply.)

There is one situation when there is double taxation — a corporate dividend is taxable to you but is not deductible by the corporation. So if you have a corporation (not a sub-S) and you receive a distribution as a dividend, then tax would be paid twice (but it is once by the corporation and once by you). That may not seem fair, but (i) you probably won’t be receiving dividends, and (ii) that’s the way dividends work for individuals in the US.

Category: Business Tax
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There are many tax deductions available, but there are a few that are frequently overlooked by business owners. Here’s a brief breakdown of commonly missed tax breaks:

  1. Equipment pieces for your business (purchases like 3D printers and industrial kitchen supplies) are deductible up to $500,000. You can also potentially deduct the amount the equipment depreciated in value during the first year that you owned the item.
  2. You are able to deduct the fees for online services that you use to run your business. This would include services like online bookkeeping, or a Dropbox subscription.
  3. Taxes such as sales tax, employment tax, and real estate tax may qualify as deductions for your small business.
Category: Business Tax
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I just wrote a blog post about this debunking some ideas about payroll. This was one of the myths. Read the entire blog post, but here’s my answer to this question.

  • The trust fund recovery penalty is only for the taxes that were withheld from the employee’s payroll.
  • That portion of the employment taxes that the corporation is required to pay is dischargeable in bankruptcy of the corporation or LLC, and you will not be held personally liable, period.
  • Further, the trust fund recovery penalty is only for responsible parties as defined by the IRS and the courts.
Category: Business Tax
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