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Take payroll tax withholding seriously
Employers must withhold income and employment taxes (including Social Security) on wages paid to their employees. The taxes must then be paid over to the IRS according to a payroll tax deposit schedule. Some business owners and executives facing a cash flow crunch may...
S-Corporation shareholders: Establish reasonable compensation
If you run your business as an S corporation, you’re probably both a shareholder and an employee. As such, the corporation pays you a salary that reflects the work you do for the business — and you (and your company) must remit payroll tax on some or all of your...
C-corporation shareholder-employee: Find the right balance
The IRS may object to the compensation of a C corporation shareholder-employee. If it’s deemed too high — or not “reasonable” under the circumstances — the IRS could force you to make adjustments that increase taxes. This can be particularly troublesome for C...
Employee or Independent Contractor?
Many businesses use independent contractors to keep payroll taxes and fringe benefit costs down. But using outside workers may result in other problems. The IRS often questions businesses about whether a worker should be classified as an employee or independent...
Know Your Higher Education Tax Benefits
Last week, we discussed applying for financial aid to help defer the cost of college. Besides financial aid, specific higher education tax benefits can reduce the net cost of sending a child to college. Among the three major tax breaks—American Opportunity Tax Credit,...
Make the Most of College Financial Aid
As we reported in our last article, the net price of higher education will depend on the amount of financial aid that’s received. The greater the financial aid, the lower the net cost of college. In order to obtain financial aid, a key step is filling out the Free...
The True Cost of Higher Education
The College Board reports that full-time students at in-state public schools typically paid almost $20,000 for tuition, fees, and room and board during the 2015-2016 academic year. On average, students at private institutions typically paid almost $44,000 for tuition,...
What every entrepreneur needs to know about material participation
You can only deduct losses from an S corporation, partnership or LLC if you “materially participate” in the business. Without material participation, your losses are generally “passive” and can only be used to offset income from other passive activities. Any excess...
Should you make a qualified charitable distribution from your IRA?
In 2015, a tax break valued by many charitably inclined retirees was made permanent: the qualified charitable distribution. If you are age 70½ or older, you can make direct contributions of up to $100,000 annually from your IRA to qualified charitable organizations...
Should you save for retirement or pay off credit card debt?
One question that is regularly asked by clients is whether they should invest in their company’s retirement plan or pay off high interest loans, such as credit card debt. To answer, you must evaluate your rate of return on your cash outlay. Are you giving up free...
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