DEW14 - Business taxes made simple

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DEW14 - Business taxes made simple

  1. 1. Business Taxes Made Simple Presented by Ford Tax and Accounting, LLC And SCORE - Detroit Chapter
  2. 2. Agenda 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 Ford Tax and Accounting, LLC 2 Detroit Entrepreneur Week
  3. 3. Agenda (con.) 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) Ford Tax and Accounting, LLC 3 Detroit Entrepreneur Week
  4. 4. Presentation Purpose X 3 Awareness Compliance Opportunity Ford Tax and Accounting, LLC 4 Detroit Entrepreneur Week
  5. 5. Do You Have A Business Partner? Yes! The IRS is your business partner The IRS allows tax breaks that lower taxable income & allows you to pay less tax… Ford Tax and Accounting, LLC 5 Detroit Entrepreneur Week
  6. 6. Do You Have A Business Partner? 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% Ford Tax and Accounting, LLC 6 Detroit Entrepreneur Week
  7. 7. Federal Taxes and Your Business Choice of Business Entity Sole Proprietors Limited Liability Company Partnerships S Corporations C Corporations Which is best choice? It depends… Ford Tax and Accounting, LLC 7 Detroit Entrepreneur Week
  8. 8. Business Facilities • Purchase Depreciation Cost Segmentation • Lease Depreciation of Leasehold Improvements • Home Direct/Indirect Expenses Depreciation Ford Tax and Accounting, LLC 8 Detroit Entrepreneur Week
  9. 9. Start Up Cost/Organizational Costs vs. “Regular” Business Expenses • Start Up Cost - 1st Year Expense “Election” - Capitalization • Organizational Costs • “Regular” Operating Costs - Ordinary and Necessary - Current Year Deduction Ford Tax and Accounting, LLC 9 Detroit Entrepreneur Week
  10. 10. Estimated Tax and Self-Employment Tax • Sole Proprietors • Partners • C Corporations • S Corporations (shareholders) NOT subject to self-employment tax…yet? Ford Tax and Accounting, LLC 10 Detroit Entrepreneur Week
  11. 11. Money In… Money Out Tax Implications for Business Owners Money In... Money Out… Capital Contributions Equity Financing Debt Financing Loans Officer Wages Dividends Return of Capital Guaranteed Partnership Payments Loans Ford Tax and Accounting, LLC 11 Detroit Entrepreneur Week
  12. 12. Employees vs. Independent Contractors • Do you have a choice? Well… Yes and No • “Control” is key • Penalties Non Filing of Information Returns Non Payment of Payroll Taxes Ford Tax and Accounting, LLC 12 Detroit Entrepreneur Week
  13. 13. “Control” is Key… • Behavioral Control Instructions Training • Financial Control Investment of Resources Reimbursed Expenses • Relationship of Parties Intent of the parties Indefinite relationship Ford Tax and Accounting, LLC 13 Detroit Entrepreneur Week
  14. 14. Hiring Family Members • “Reasonable” Compensation Children, Spouse, Parents • Benefits to the Business Pay Less Payroll Taxes • Corporations vs. Sole Proprietorships Ford Tax and Accounting, LLC 14 Detroit Entrepreneur Week
  15. 15. Employee Benefits • • • • Health Insurance Premiums Health Savings Accounts Auto Reimbursements Accountable vs. Non Accountable Plans Retirement Plans Ford Tax and Accounting, LLC 15 Detroit Entrepreneur Week
  16. 16. S Corporation Issues • Officers UNreasonable Compensation Low Salary/High Distribution • Officers Health Insurance Premium Paid by S Corp Taxed as Income Not Subject to Payroll Taxes Ford Tax and Accounting, LLC 16 Detroit Entrepreneur Week
  17. 17. American Taxpayer Relief Act Of 2012 (“Fiscal Cliff”) 1 • 50% Extra 1st Year Depreciation (extended) -business equipment and vehicles • Higher IRC Sec.179 Property Expense (extended) - qualifying equipment and computer software Ford Tax and Accounting, LLC 17 Detroit Entrepreneur Week
  18. 18. American Taxpayer Relief Act Of 2012 (“Fiscal Cliff”) 2 • Retail Businesses and Restaurants - 15-year cost recovery period (extended) - qualifying leasehold improvements - restaurant property - retail improvement property Ford Tax and Accounting, LLC 18 Detroit Entrepreneur Week
  19. 19. American Taxpayer Relief Act Of 2012 (“Fiscal Cliff”) 3 • Payroll Tax "Holiday" of 2011-2012 Has Expired • Higher IRC Sec.179 Property Expense for 2013 Ford Tax and Accounting, LLC 19 Detroit Entrepreneur Week
  20. 20. 1099K Reporting • 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 Ford Tax and Accounting, LLC 20 Detroit Entrepreneur Week
  21. 21. Do You Need an Accounting System? These are NOT an Accounting Systems Ford Tax and Accounting, LLC 21 Detroit Entrepreneur Week
  22. 22. Accounting System? IRS Expects… 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... Ford Tax and Accounting, LLC 22 Detroit Entrepreneur Week
  23. 23. Net Operating Losses • From Business Operations Deductible Carry-back 2 years Carry-forward 20 years BEWARE OF HOBBY LOSS RULES!!! Ford Tax and Accounting, LLC 23 Detroit Entrepreneur Week
  24. 24. Ford Facts of (Business) Life… • 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 Ford Tax and Accounting, LLC 24 Detroit Entrepreneur Week
  25. 25. Common Business Tax “Opportunity” Mistakes • Wrong business entity • Wrong depreciation calculations • Wrong retirement plan • Missing family employment • Missing medical expenses • Missing home office expenses • Missing car/truck expenses Missing meals/entertainment expenses Ford Tax and Accounting, LLC 25 Detroit Entrepreneur Week
  26. 26. U.S. Government study concluded… Small Businesses Overpay the IRS by an Average of $11,638! Why does this happen? Ford Tax and Accounting, LLC 26 Detroit Entrepreneur Week
  27. 27. Lack of Business Tax Planning 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! Ford Tax and Accounting, LLC 27 Detroit Entrepreneur Week
  28. 28. THANK YOU! Lyndon Ford EA, MBA Ford 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 Ford Tax and Accounting, LLC 28 Detroit Entrepreneur Week
  29. 29. Ford Tax and Accounting, LLC 29 Detroit Entrepreneur Week
  30. 30. Ford Tax and Accounting, LLC 30 Detroit Entrepreneur Week
  31. 31. Ford Tax and Accounting, LLC 31 Detroit Entrepreneur Week
  32. 32. Ford Tax and Accounting, LLC 32 Detroit Entrepreneur Week
  33. 33. Ford Tax and Accounting, LLC 33 Detroit Entrepreneur Week
  34. 34. Ford Tax and Accounting, LLC 34 Detroit Entrepreneur Week
  35. 35. Ford Tax and Accounting, LLC 35 Detroit Entrepreneur Week
  36. 36. Ford Tax and Accounting, LLC 36 Detroit Entrepreneur Week
  37. 37. Ford Tax and Accounting, LLC 37 Detroit Entrepreneur Week
  38. 38. Ford Tax and Accounting, LLC 38 Detroit Entrepreneur Week
  39. 39. Sales Tax Individuals 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. Ford Tax and Accounting, LLC 39 Detroit Entrepreneur Week
  40. 40. Use Tax The 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-ofstate retailers. Credit is given for tax paid to another state. Ford Tax and Accounting, LLC 40 Detroit Entrepreneur Week
  41. 41. 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. Ford Tax and Accounting, LLC 41 Detroit Entrepreneur Week
  42. 42. 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. Ford Tax and Accounting, LLC 42 Detroit Entrepreneur Week
  43. 43. Ford Tax and Accounting, LLC 43 Detroit Entrepreneur Week

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