Axley & Rode, LLP

The IRS has issued guidance for farmers who’ve elected out of certain capitalization rules and want to apply the small business taxpayer exemption in the same taxable year. Small business taxpayers are exempt from the capitalization rules under the tax code. To qualify as a small business, a farming business must have gross receipts of $25 million or less for taxable years beginning in 2018, and $26 million or less for taxable years beginning in 2019. Revenue Procedure 2020-13 details how farmers can revoke their election and apply the small business taxpayer exemption in the same taxable year. Contact us for more information.

Many people who launch small businesses start out as sole proprietors. Here are nine tax rules and considerations involved in operating as that entity. 1. You may qualify for the pass-through deduction. To the extent your business generates qualified business income, you are eligible to claim the 20% pass-through deduction, subject to limitations. The deduction is taken “below the line,” meaning it reduces taxable income, rather than being taken “above the line” against your gross income. However, you can take the deduction even if you don’t itemize deductions and instead claim the standard deduction. 2. Report income and expenses on Schedule C of Form 1040. The net income will be taxable to you regardless of whether you withdraw cash from the business. Your business expenses are deductible against gross income and not as itemized deductions. If you have losses, they will generally be deductible against your other income, subject to special rules related to hobby losses, passive activ...

For small businesses, managing payroll can be one of the most arduous tasks. Adding to the burden earlier this year was adjusting income tax withholding based on the new tables issued by the IRS. (Those tables account for changes under the Tax Cuts and Jobs Act.) But it’s crucial not only to withhold the appropriate taxes — including both income tax and employment taxes — but also to remit them on time to the federal government. If you don’t, you, personally, could face harsh penalties. This is true even if your business is an entity that normally shields owners from personal liability, such as a corporation or limited liability company. The 100% penalty Employers must withhold federal income and employment taxes (such as Social Security) as well as applicable state and local taxes on wages paid to their employees. The federal taxes must then be remitted to the federal government according to a deposit schedule. If a business makes payments late, there are escalating penalties. And if ...

Payroll costs are a natural and unavoidable consequence of being an employer. But this doesn’t mean you can’t keep an eye out for ways to lower these costs or simply handle payroll more efficiently. One approach that many organizations use is issuing employees a payroll card (much like a credit or debit card) that they can use to access funds earned from working. Payroll cards are most commonly used by larger employers with many hourly workers, so they may not be the right call for every organization. Checking it out The most substantial savings typically comes from payroll cards’ advantage over paper checks. According to NACHA, a nonprofit that oversees the widely used Automated Clearing House payment system, electronic methods such as payroll cards can save employers between $2.87 and $3.15 per payment over paper. Payroll cards may also offer a more convenient and secure way of compensating employees who don’t have traditional checking accounts. Interestingly, however, a July 2018 st...