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    • Should your small business elect to be taxed as an S-Corporation in 2021?

      This article isn't meant to substitute for the advice of a tax practitioner. If you are considering changing your small business's entity type, please consult your personal tax practitioner or call our office at (866) 316-1860 or arrange for a video chat with me at https://heritageincometax.com/book-online. You've been running a small business for a few years and are shocked at the amount of taxes that you're paying. Let's face it: sole proprietors (or single-member LLCs) and partnerships pay 15.3% tax towards self-employment taxes alone, and then the profits are also taxed as income at the federal, state, and sometimes the city level. I've had a few folks in tears in my office when their failure to make estimated quarterly payments caught up with them. Not pretty. So, you begin your research into the world of tax strategies. You conduct internet searches, hit the library, watch some business guru videos on YouTube, chat up a friend, or your barber, and someone inevitably mentions the amazing tax savings you might enjoy as an S-Corporation. So you look up the filing requirements and they are deceptively simple. Complete a form 2553 and send it to the IRS, and you now can write off your profits free and clear of self-employment taxes. Right? Not so fast! Let's review the basics of an S-Corp. First, S-Corps become their "own" company. You as the former sole proprietor now are employed by your own S-Corp. This has a few consequences, both positive and negative. It's up to you to decide if the financial advantages outweigh the reporting and payroll compliance requirements and then proceed cautiously, with professional assistance. Wages vs Distribution [W-2 income vs K-1 Distribution] S-Corp profits are taxed as ordinary income, and not subject to employment (FICA) taxes. This used to be a shady strategy: Pay yourself a giant distribution from your S-Corp, and ignore the payroll tax requirements. However, the IRS caught on to this a while back and issued rules about how S-Corps must compensate their employees. Reasonable Salary S-Corps are required to pay employees (even the sole shareholder) a reasonable salary. This means that the IRS may audit your business and evaluate if you've paid yourself enough salary - I will explain the reasoning for this later on. A reasonable salary can be estimated between the 25th and 75th percentile of what similar positions in your region are paid. Anything too low and the IRS may reclassify your distributions from the K-1 portion of your income as "salary" and charge you the delinquent FICA taxes, plus penalties and interest. Payroll Tax Requirements Your salary (and any other employee-shareholder's) will be W-2 reported income, so whatever you're paid will be subject to federal, state, and FICA withholdings (social security and Medicare taxes). You may also live and work in a city/municipality that charges income taxes, so those taxes must be withheld as well. Your S-Corp must maintain compliant payroll - paying you regularly, filing forms 941 or 944, and making quarterly payroll deposits to the federal government. Failure to do so will trigger a 10% penalty if all you choose to do is report your wages in quarter 4. Maintaining payroll costs time and money or both. You can use a payroll company such as Paychex or Gusto to automatically manage your withholdings but again, this is a cost you must consider. Typical payroll expenses for a very small business run between $29 and $300 per month. Filing Corporation Informational Tax Returns Tax returns for S-Corporations are more expensive, complicated, and time-consuming to prepare. (My tax practice charges no less than $1000 for an 1120S. This price does not include the taxpayer's personal 1040.) S-Corporations do not actually pay any income taxes - the shareholders report their share of the profits once the S-Corp has filed an informational return (a 1120-S). The 1120-S includes schedule K-1s for every shareholder and W-2s for every employee. Employees who are also shareholders will receive both a W-2 and a K-1. The K-1 is the way you will report your fair share of income and expenses to the IRS. It is not necessary to have the same tax preparer prepare both the 1120-S and your personal taxes, but you may be able to get a better price by hiring one tax practitioner to prepare both. It is not a good idea to try to prepare an 1120-S yourself, unless you are trained in business tax preparation. These returns are much more likely to be audited by the IRS, and an untrained person will quickly become confused about allowable expenses vs. separately stated items. An S-Corporation vs Sole Proprietor/Schedule C Cost Comparison Calculator If you are interested in a business planning video chat, I have a beautiful excel spreadsheet created by a fellow tax professional friend of mine. She is graciously allowing me to use it with my clients to help them decide if the costs of S-Corporation payroll and tax preparation are worth the tax advantages of the election. Please call me at (866) 316 1860 or self-schedule using our Calendly App for a video chat. I will share my spreadsheet results with you and assist you in making an informed decision about this election.

    • How to (Legally) Take a 2021 Home Office Deduction

      What is a home office deduction? If you are committed to taking every expense possible to reduce your tax liability, you may have asked yourself if it is legal to deduct the space in your home dedicated to work projects. Years ago, having an office-in-home while working as an employee might have been deducted as an un-reimbursed employee expense. However the Tax Cuts and Jobs Act of 2017 eliminated those expenses. Now, in order to take an office-in-home deduction, you must be a business owner or partner. If you are a small business owner, a home office deduction can reduce your taxable income significantly, and should not be ignored on your schedule C. The good news: Every home-related expense has a potential for factoring into the total expense of operating a home office. So it's really important to keep accurate records throughout your business year. This is great news if you pay for internet, a cell phone, air conditioning, water, sewer, and electricity. If you own a home, a home office can be depreciated. However, you cannot simply write off all these expenses. The IRS has published a document, Publication 587 Business Use of Your Home, to assist you in legally calculating these expenses. This blog post is intended to help you keep good records and provide your tax professional with adequate information to take the largest deduction possible. Where to calculate the home office deduction: Form 8829, Business Use of Your Home. Calculating the deduction using the simplified method: The office space can also be calculated using a simplified method, which does offer some advantages. This method calls for a standard deduction of $5 per square foot of home used for business (maximum 300 square feet). Any allowable home-related itemized deductions are claimed in full on Schedule A. The IRS does not allow a home depreciation deduction or later recapture of depreciation for the years the simplified option is used. If you are looking for other ways to take advantage of tax write-offs, check out my other articles for small businesses. To hire me for a consultation before or shortly after taking the plunge at being your own boss, call me toll-free at (866) 316-1860 or by setting up a virtual appointment with me today!

    • What to do if someone received PUA (unemployment benefits) using your social security number.

      If you received a 1099-G in the mail recently, and weren't expecting one, chances are your social security number was stolen in order for a thief to claim unemployment benefits in your name. If you received a 1099-G and did not receive any unemployment benefits yourself, the IRS has published clear instructions on what to do. You do NOT need to file form 14039, Identity Theft Affidavit, unless someone filed a tax return using your social security number. You would discover this after attempting to e-file a tax return and that return is rejected by the IRS. (Whenever a return is rejected, you will receive a code listing the reason). What you should do instead is contact the appropriate state's unemployment agency and report the fraudulent claim. Request a new 1099-G with "0" listed as unemployment benefits received. If, however, you do not receive a corrected 1099-G in a timely fashion, the IRS states that you should file your federal tax return only reporting income that you actually received. In other words, do not report those unemployment benefits. Finally, request an Identification Protection PIN. This is a 6-digit number issued annually by the IRS that is unique to you. Future tax returns will only be able to be e-filed if the correct IP PIN is entered into the 1040. By requesting a IP PIN, you protect yourself from future fraudulent tax returns filed in your name. You can initiate an IP PIN application here. Incidentally, the IRS now allows any taxpayer to request an IP PIN, it is no longer solely for those affected by identity theft. If you have any concerns that your social security number might be used fraudulently in the future to file tax returns in your name, this is one proactive step you can take to protect yourself.

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    • EXPAT Tax Services | Heritage Income Tax

      Expat Tax Services and Representation LAST DAY TO RECEIVE 2017 TAX REFUND: APRIL 15, 2021 Aubrey Corcoran, EA (513) 900-9513 aubrey@heritageincometax.com Contact Us Submit Below is an excerpt from my blog. If you are an expat and would like help filing your U.S. taxes, please email me at . I respond within 24 hours. aubrey@heritageincometax.com Help for Delinquent Expat Tax Filers Play Video Facebook Twitter Pinterest Tumblr Copy Link Link Copied

    • Heritage Income Tax and IRS Debt Resolution

      Veteran-Owned & Trustworthy Tax Preparation Services Our Tax Team (513) 900-9513 (Sole proprietor, Partnership, S Corp and C Corp) Business Tax Preparation Payroll and Bookkeeping Personal Tax Preparation Back Taxes Amended Tax Returns Clergy or Pastor Tax Preparation Expat Tax Preparation IRS Tax Resolution Services FAFSA form preparation Will preparation for Ohio residents Our Services TESTIMONIALS Click to read more reviews on our Google Business Site "Heritage Income Tax Service was very easy to work with. Aubrey gave us personal attention and went out of her way to give us excellent tax preparation. She & her husband are professional yet with a personal touch. Their rates are very competitive as I did shop for tax prep this year. The entire process was seamless and we got our return done in a very timely manner. I would highly recommend their services." -Julie J. "Tax time is really such a hassle to me every year! My spouse and I are not the typical W-2 tax return household. As a result, there are lots of different rules/guidelines that apply to us. In previous years, we have, at a later date, found out that our completed returns had errors even though they were prepared by a tax professional. This year, we tried Heritage and are really happy with the level of detail and effort that went into knowing our tax return. In addition, Aubrey was pleasant to work with, offered prompt responses, explained things, and had our return done quickly. You should check them out"! -Tammy T. Bryan Corcoran Tax Strategist Bryan is a licensed tax attorney and specializes in tax planning and advisement. IRS debt relief expert. Read More Aubrey Corcoran Enrolled Agent Aubrey specializes in tax preparation for small businesses and clergy. Read More With all these great reasons to hire the best, what are you waiting for? Call for a quote today! (513) 900 - 9513 File Exchange Should your small business elect to be taxed as an S-Corporation in 2021? How to (Legally) Take a 2021 Home Office Deduction What to do if someone received PUA (unemployment benefits) using your social security number.

    • PRICING | Heritage Income Tax

      Fill out this form and you will receive a document in your inbox. Our prices are to beat the national chain tax prep companies. It's simple: we do not have the level of overhead that they do, and we pass those savings onto our clients. guaranteed Request Pricing List Submit Request Check your spam folder for the price list you requested.

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