Axley & Rode, LLP

Does your organization offer a 401(k) plan to its employees? This is a common fringe benefit for the rank and file. However, some employers might want to take their benefits packages to the next level by offering special options to key employees. In such cases, a nonqualified deferred compensation (NQDC) plan could fit the bill. Qualified vs. nonqualified When understanding the concept of an NQDC plan, first know the difference between a qualified and nonqualified plan. Under a qualified plan, so long as the employer follows various tax law requirements, its contributions are deductible, and payments to participants are guaranteed. A 401(k) is a type of qualified deferred compensation plan. With a nonqualified plan, participants rely on the employer’s promise to pay out the benefits at a specified date — but there are no guarantees. Participants run the risk th...

Sales and registrations of electric vehicles (EVs) have increased dramatically in the U.S. in 2022, according to several sources. However, while they’re still a small percentage of the cars on the road today, they’re increasing in popularity all the time. You may be eligible for a federal tax break if you buy one. The tax code provides credit to purchasers of qualifying plug-in electric drive motor vehicles, including passenger vehicles and light trucks. The credit is equal to $2,500 plus an additional amount, based on battery capacity, that can’t exceed $5,000. Therefore, the maximum credit allowed for a qualifying EV is $7,500. Be aware that not all EVs are eligible for the tax break, as described below. The EV definition For purposes of the tax credit, a qualifying vehicle is defined as one with four wheels that’s propelled to a significant extent by an electric motor, which draws electricity ...

If you’ve recently begun receiving disability income, you may wonder how it’s taxed. The answer is: It depends. The key issue is: Who paid for the benefit? If the income is paid directly to you by your employer, it’s taxable to you just as your ordinary salary would be. (Taxable benefits are also subject to federal income tax withholding. However, depending on the employer’s disability plan, in some cases they aren’t subject to Social Security tax.) Frequently, the payments aren’t made by an employer but by an insurance company under a policy providing disability coverage. In other cases, they’re made under an arrangement having the effect of accident or health insurance. In these cases, the tax treatment depends on who paid for the insurance coverage. If your employer paid for it, then the income is taxed to you just as if it was paid directly to you by the employer. On the other hand, if it’s a policy you paid for, the ...

The Tax Cuts and Jobs Act (TCJA) significantly boosted the potential value of bonus depreciation for taxpayers — but only for a limited duration. The amount of first-year depreciation available as a so-called bonus will begin to drop from 100% after 2022, and businesses should plan accordingly. Bonus depreciation in a nutshell Bonus depreciation has been available in varying amounts for some time. Immediately prior to the passage of the TCJA, for example, taxpayers generally could claim a depreciation deduction for 50% of the purchase price of qualified property in the first year — as opposed to deducting smaller amounts over the useful life of the property under the modified accelerated cost recovery system (MACRS). The TCJA expanded the deduction to 100% in the year qualified property is placed in service through 2022, with the amount dropping each subsequent year by 20%, until bonus ...

Employers spend a lot of time on motivation. You create marketing plans to, in part, motivate those you serve to support your mission — be they customers, members or some other constituency. And you likely deploy many resources to motivate employees to stay with your organization and do their best work. It’s not easy, is it? One approach that’s taken off in recent years, especially with the widespread popularity of apps and social media, is gamification. The term generally refers to integrating characteristics of game-playing into business-related interactions or tasks. External campaigns Sometimes gamification is used externally. For example, a business might award customers points for purchases that they can collect and use toward discounts. Or a company might offer product- or service-related games or contests on its website to generate traffic and visitor engagement. A nonprofit could use gamification...

It’s not just businesses that can deduct vehicle-related expenses on their tax returns. Individuals also can deduct them in certain circumstances. Unfortunately, under current law, you may not be able to deduct as much as you could years ago. For years prior to 2018, miles driven for business, moving, medical and charitable purposes were potentially deductible. For 2018 through 2025, business and moving miles are deductible only in much more limited circumstances. The changes were a result of the Tax Cuts and Jobs Act (TCJA), which could also affect your tax benefit from medical and charitable miles. Fortunately, if you’re eligible to deduct driving costs, the IRS just increased the standard amounts for the second half of 2022 due to the high price of gas. Current vs. past limits Before 2018, if you were an employee, you potentially could deduct business mileage not reimbur...

What are the requirements for employers regarding federal employment taxes? This might seem like a silly question to ask of employers, many of which have been grappling with this obligation for years or even decades. But, just as a coat of paint sometimes needs freshening up, it’s not a bad idea to occasionally review the basics of employment taxes to see whether your organization’s processes are at risk of missing any key steps, which could lead to costly penalties. Form 941 Employers must report and deposit certain employment taxes regularly. These include: Federal income tax withholding (FITW), Social Security tax (both the employer and employee portion), Medicare tax, Additional Medicare tax, and Federal unemployment tax (FUTA). Typically, an organization reports FITW...

Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2022. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements. August 1 Report income tax withholding and FICA taxes for second quarter 2022 (Form 941), and pay any tax due. (See the exception below, under “August 10.”) File a 2021 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension. August 10 Report income tax withholding and FICA taxes for second quarter 2022 (Form 941), if you deposited on time and in full all of the associated taxes due. September 15 ...

Many popular retirement and health care plans must comply with the Employee Retirement Income Security Act (ERISA). Employers that sponsor one could one day receive a request from the U.S. Department of Labor (DOL) for plan-related documents. Such a request usually initiates a DOL civil investigation, often referred to as an “audit.” If this happens to your organization, address the inquiry immediately. Failure to provide requested documents to the DOL can lead to a penalty assessment, and a prompt and cordial response can establish a positive rapport with the investigator. DOL audits generally follow a predictable path: Initial document request . Generally, a plan sponsor learns of an audit when it receives a letter or phone call from the DOL’s Employee Benefits Security Administration (EBSA) advising “plan officials” of the investigation and requesting a detailed list of documents. The investigation may be gene...

There’s a valuable tax deduction available to a C corporation when it receives dividends. The “dividends-received deduction” is designed to reduce or eliminate an extra level of tax on dividends received by a corporation. As a result, a corporation will typically be taxed at a lower rate on dividends than on capital gains. Ordinarily, the deduction is 50% of the dividend, with the result that only 50% of the dividend received is effectively subject to tax. For example, if your corporation receives a $1,000 dividend, it includes $1,000 in income, but after the $500 dividends-received deduction, its taxable income from the dividend is only $500. The deductible percentage of a dividend will increase to 65% of the dividend if your corporation owns 20% or more (by vote and value) of the payor’s stock. If the payor is a member of an affiliated group (based on an 80% ownership test), dividends from another group member are 100% ...

As a result of the current estate tax exemption amount ($12.06 million in 2022), many people no longer need to be concerned with federal estate tax. Before 2011, a much smaller amount resulted in estate plans attempting to avoid it. Now, because many estates won’t be subject to estate tax, more planning can be devoted to saving income taxes for your heirs. Note: The federal estate tax exclusion amount is scheduled to sunset at the end of 2025. Beginning on January 1, 2026, the amount is due to be reduced to $5 million, adjusted for inflation. Of course, Congress could act to extend the higher amount or institute a new amount. Here are some strategies to consider in light of the current large exemption amount. Gifts that use the annual exclusion One of the benefits of using the gift tax annual exclusion to make transfers during life is to save es...

Here’s an interesting option if your small company or start-up business is planning to claim the research tax credit. Subject to limits, you can elect to apply all or some of any research tax credits that you earn against your payroll taxes instead of your income tax. This payroll tax election may influence some businesses to undertake or increase their research activities. On the other hand, if you’re engaged in or are planning to engage in research activities without regard to tax consequences, be aware that some tax relief could be in your future. Here are some answers to questions about the option. Why is the election important? Many new businesses, even if they have some cash flow, or even net positive cash flow and/or a book profit, pay no income taxes and won’t for some time. Therefore, there’s no amount against which business credits, including the research credit, can be applied. On the other hand, a wag...