The Nanny Tax: What Household Employers Need to Know

Hiring household help, whether you employ a nanny, housekeeper or gardener, can significantly ease the burden of childcare and daily chores. However, as a household employer, it’s critical to understand your tax obligations, commonly called the “nanny tax.” If you hire a household employee who isn’t an independent contractor, you may be liable for federal income tax and other taxes (including state tax obligations).

11 05 24 1072365971 ITB 560x292

If you employ a household worker, you aren’t required to withhold federal income taxes from pay. But you can choose to withhold if the worker requests it. In that case, ask the worker to fill out a Form W-4. However, you may be required to withhold Social Security and Medicare (FICA) taxes and to pay federal unemployment (FUTA) tax.

Continue Reading

From Flights to Meals: A Guide to Business Travel Tax Deductions

As a business owner, you may travel to visit customers, attend conferences, check on vendors and for other purposes. Understanding which travel expenses are tax deductible can significantly affect your bottom line. Properly managing travel costs can help ensure compliance and maximize your tax savings.

11 04 24 2454248093 SBTB 560x292

Your Tax Home

Eligible taxpayers can deduct the ordinary and necessary expenses of business travel when away from their “tax homes.” Ordinary means common and accepted in the industry. Necessary means helpful and appropriate for the business. Expenses aren’t deductible if they’re for personal purposes, lavish or extravagant. That doesn’t mean you can’t fly first class or stay in luxury hotels. But you’ll need to show that expenses were reasonable.

Continue Reading

Make Year-End Tax Planning Moves Before It’s Too Late!

With the arrival of fall, it’s an ideal time to begin implementing strategies that could reduce your tax burden for both this year and next.

09 24 24 2289440659 ITB 560x292

One of the first planning steps is to ascertain whether you’ll take the standard deduction or itemize deductions for 2024. You may not itemize because of the high 2024 standard deduction amounts ($29,200 for joint filers, $14,600 for singles and married couples filing separately, and $21,900 for heads of household). Also, many itemized deductions have been reduced or suspended under current law.

Continue Reading

How Can You Build a Golden Nest Egg if You’re Self-Employed?

If you own a small business with no employees (other than your spouse) and want to set up a retirement plan, consider a solo 401(k) plan. This is also an option for self-employed individuals or business owners who wish to upgrade from a SIMPLE IRA or Simplified Employee Pension (SEP) plan.

10 28 24 1734850430 SBTB 560x292

A solo 401(k), also known as an individual 401(k), may offer advantages in terms of contributions, tax savings and investment options. These accounts are geared toward self-employed individuals, including sole proprietors, owners of single-member limited liability companies, consultants and other one-person businesses.

Continue Reading

Employers: In 2025, the Social Security Wage Base Is Going Up

As we approach 2025, changes are coming to the Social Security wage base. The Social Security Administration recently announced that the wage base for computing Social Security tax will increase to $176,100 for 2025 (up from $168,600 for 2024). Wages and self-employment income above this amount aren’t subject to Social Security tax.

10 21 24 2300769423 SBTB 560x292

If your business has employees, you may need to budget for additional payroll costs, especially if you have many high earners.

Continue Reading

Advantages of Keeping Your Business Separate From Its Real Estate

Does your business require real estate for its operations? Or do you hold property titled under your business’s name? It might be worth reconsidering this strategy. With long-term tax, liability and estate planning advantages, separating real estate ownership from the business may be a wise choice.

10 07 24 1757205557 SBTB 560x292

How Taxes Affect a Sale

Businesses that are formed as C corporations treat real estate assets as they do equipment, inventory and other business assets. Any expenses related to owning the assets appear as ordinary expenses on their income statements and are generally tax deductible in the year they’re incurred.

Continue Reading

Maximize Your Year-End Giving With Gifts That Offer Tax Benefits

As the end of the year approaches, many people start to think about their finances and tax strategies. One effective way to reduce potential estate taxes and show generosity to loved ones is by giving cash gifts before December 31. Under tax law, you can gift a certain amount each year without incurring gift taxes or requiring a gift tax return. Taking advantage of this rule can help you reduce the size of your taxable estate while benefiting your family and friends.

10 22 24 1114973234 ITB 560x292

Taxpayers can transfer substantial amounts, free of gift taxes, to their children or other recipients each year through the proper use of the annual exclusion. The exclusion amount is adjusted for inflation annually, and in 2024 is $18,000. It covers gifts that an individual makes to each recipient each year. So a taxpayer with three children can transfer $54,000 ($18,000 × 3) to the children this year, free of federal gift taxes. If the only gifts during a year are made this way, there’s no need to file a federal gift tax return. If annual gifts exceed $18,000 per recipient, the exclusion covers the first $18,000 and only the excess is taxable.

Continue Reading

Unlock Your Child’s Potential by Investing in a 529 Plan

If you have a child or grandchild planning to attend college, you’ve probably heard about qualified tuition programs, also known as 529 plans. These plans, named for the Internal Revenue Code section that provides for them, allow prepayment of higher education costs on a tax-favored basis.

10 08 24 1783935791 ITB 560x292

There are two types of programs:

  1. Prepaid plans, which allow you to buy tuition credits or certificates at present tuition rates, even though the beneficiary (child) won’t be starting college for some time; and
  2. Savings plans, which depend on the performance of the fund(s) you invest your contributions in.

Continue Reading

How Your Business Can Prepare for and Respond to an IRS Audit

The IRS has been increasing its audit efforts, focusing on large businesses and high-income individuals. By 2026, it plans to nearly triple its audit rates for large corporations with assets exceeding $250 million. Under these plans, partnerships with assets over $10 million will also see audit rates increase tenfold by 2026. This ramp-up in audits is part of the IRS’s broader strategy, funded by the Inflation Reduction Act, to target wealthier entities and high-dollar noncompliance.

10 14 24 427898086 SBTB 560x292

The IRS doesn’t plan to increase audits for individuals making less than $400,000 annually. Small businesses are also unlikely to see a rise in audit rates in the near future, as the IRS is prioritizing more complex returns for higher-wealth entities. For example, the tax agency has announced that one focus area is taxpayers who personally use business aircraft. A business can deduct the cost of purchasing and using corporate planes, but personal trips, including vacation travel, aren’t deductible.

Continue Reading

Is Your Money-Losing Activity a Hobby or a Business?

Let’s say you have an unincorporated sideline activity that you consider a business. Perhaps you offer photography services, create custom artwork or sell handmade items online. Will the IRS agree that your venture is a business, not a hobby? It’s an essential question for tax purposes.

10 15 24 1296458923 ITB 560x292

If the expenses from an activity exceed the revenues, you have a net loss. You may think you can deduct that loss on your personal federal income tax return with no questions asked. Not so fast! The IRS often claims that money-losing sidelines are hobbies rather than businesses — and the federal income tax rules for hobbies aren’t in your favor.

Continue Reading

Can Homeowners Deduct Seller-Paid Points as the Real Estate Market Improves?

The recent drop in interest rates has created a buzz in the real estate market. Potential homebuyers may now have an opportunity to attain their dreams of purchasing property. “The recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months,” said National Association of Realtors Chief Economist Lawrence Yun.

10 01 24 2139687791 ITB 560x292

If you’re in the process of buying a home, or you just bought one, you may wonder if you can deduct mortgage points paid on your behalf by the seller. The answer is “yes,” subject to some significant limitations described below.

Continue Reading

Understanding Your Obligations: Does Your Business Need to Report Employee Health Coverage?

Employee health coverage is a significant part of many companies’ benefits packages. However, the administrative responsibilities that accompany offering health insurance can be complex. One crucial aspect is understanding the reporting requirements of federal agencies such as the IRS. Does your business have to comply, and if so, what must you do? Here are some answers to questions you may have.

09 30 24 378165586 SBTB 560x292

What Is the Number of Employees Before Compliance Is Required?

The Affordable Care Act (ACA), enacted in 2010, introduced several employer responsibilities regarding health coverage. Certain employers with 50 or more full-time employees (called “applicable large employers” or ALEs) must use Forms 1094-C and 1095-C to report information about health coverage offers and enrollment for their employees.

Continue Reading

Working Remotely Is Convenient, but It May Have Tax Consequences

Many employees began working remotely during the pandemic and continue doing so today. Remote work has many advantages for employers and employees, and as a result, it’s here to stay in many industries. But it may also lead to some tax surprises, especially if workers cross state lines.

08 20 24 2458349145 ITB 560x292

Double Taxation May Occur

It’s not unusual for employees to work remotely for an employer in another state. For some businesses, remote work has become a permanent arrangement that allows employees to live and work further away from a physical office.

Continue Reading

Cash or Accrual Accounting: What’s Best for Tax Purposes?

Your businesses may have a choice between using the cash or accrual method of accounting for tax purposes. The cash method often provides significant tax benefits for those that qualify. However, some businesses may be better off using the accrual method. Therefore, you need to evaluate the tax accounting method for your business to ensure that it’s the most beneficial approach.

08 19 24 2370782189 SBTB 560x292

The Current Situation

“Small businesses,” as defined by the tax code, are generally eligible to use either cash or accrual accounting for tax purposes. (Some businesses may also be eligible to use various hybrid approaches.) Before the Tax Cuts and Jobs Act (TCJA) took effect, the gross receipts threshold for classification as a small business varied from $1 million to $10 million depending on how a business was structured, its industry and whether inventory was a material income-producing factor.

Continue Reading

Reasons an LLC Might Be the Ideal Choice for Your Small to Medium-Size Business

Choosing the right business entity is a key decision for any business. The entity you pick can affect your tax bill, your personal liability and other issues. For many businesses, a limited liability company (LLC) is an attractive choice. It can be structured to resemble a corporation for owner liability purposes and a partnership for federal tax purposes. This duality may provide the owners with several benefits.

09 03 24 2363276525 SBTB 560x292

Like the shareholders of a corporation, the owners of an LLC (called members rather than shareholders or partners) generally aren’t liable for business debts except to the extent of their investment. Therefore, an owner can operate a business with the security of knowing that personal assets (such as a home or individual investment account) are protected from the entity’s creditors. This protection is far greater than that afforded by partnerships. In a partnership, the general partners are personally liable for the debts of the business. Even limited partners, if they actively participate in managing the business, can have personal liability.

Continue Reading

Understanding the $7,500 Federal Tax Credit for Buying an Electric Vehicle

Electric vehicles (EVs) have become increasingly popular. According to Kelley Blue Book estimates, the EV share of the vehicle market in the U.S. was 7.6% in 2023, up from 5.9% in 2022. To incentivize the purchase of EVs, there’s a federal tax credit of up to $7,500 for eligible vehicles.

09 10 24 2468584597 ITB 560x292

The tax break for EVs and fuel cell vehicles is called the Clean Vehicle Tax Credit. The current version of the credit was created under the Inflation Reduction Act. Here are answers to some frequently asked questions.

Continue Reading

Help Ensure Your Partnership or LLC Complies With Tax Law

When drafting partnership and LLC operating agreements, various tax issues must be addressed. This is also true of multi-member LLCs that are treated as partnerships for tax purposes. Here are some critical issues to include in your agreement so your business remains in compliance with federal tax law.

09 16 24 2478239285 SBTB 560x292

Identify and Describe Guaranteed Payments to Partners

For income tax purposes, a guaranteed payment is one made by a partnership that’s: 1) to the partner acting in the capacity of a partner, 2) in exchange for services performed for the partnership or for the use of capital by the partnership, and 3) not dependent on partnership income.

Continue Reading

Is Your Home Office a Tax Haven? Here Are the Rules for Deductions

Working from home has become increasingly common. The U.S. Bureau of Labor Statistics (BLS) reports that about one out of five workers conducts business from home for pay. The numbers are even higher in certain occupational groups. About one in three people in management, professional and related occupations works from home.

09 17 24 2172211341 ITB 560x292

Your Status Matters

If you work from a home office, you probably want to know: Can I get a tax deduction for the related expenses? It depends on whether you’re employed or in business for yourself.

Continue Reading

It’s Time for Your Small Business to Think about Year-End Tax Planning

With Labor Day in the rearview mirror, it’s time to take proactive steps that may help lower your small business’s taxes for this year and next. The strategy of deferring income and accelerating deductions to minimize taxes can be effective for most businesses, as is the approach of bunching deductible expenses into this year or next to maximize their tax value.

09 09 24 2440902723 SBTB 560x292

Do you expect to be in a higher tax bracket next year? If so, then opposite strategies may produce better results. For example, you could pull income into 2024 to be taxed at lower rates, and defer deductible expenses until 2025, when they can be claimed to offset higher-taxed income.

Continue Reading

6 Tax-Free Income Opportunities

Believe it or not, there are ways to collect tax-free income and gains. Here are some of the best opportunities to put money in your pocket without current federal income tax implications:

09 03 24 2476880617 ITB 560x292

  1. Roth IRAs offer tax-free income accumulation and withdrawals. Unlike withdrawals from traditional IRAs, qualified Roth IRA withdrawals are free from federal income tax. A qualified withdrawal is one that’s taken after you’ve reached age 59½ and had at least one Roth IRA open for over five years, or you are disabled or deceased. After your death, your heirs can take federal-income-tax-free qualified Roth IRA withdrawals, with proper planning.

Continue Reading

Navigating Tax Complexities: Craft Partnership Agreements and LLC Operating Agreements With Precision

Partnerships are often used for business and investment activities. So are multi-member LLCs that are treated as partnerships for tax purposes. A major reason is that these entities offer federal income tax advantages, the most important of which is pass-through taxation. They also must follow some special and sometimes complicated federal income tax rules.

08 26 24 2270669753 SBTB 560x292

Governing Documents

A partnership is governed by a partnership agreement, which specifies the rights and obligations of the entity and its partners. Similarly, an LLC is governed by an operating agreement, which specifies the rights and obligations of the entity and its members. These governing documents should address certain tax-related issues. Here are some key points when creating partnership and LLC governing documents.

Continue Reading

Are You Liable for Two Additional Taxes on Your Income?

Having a high income may mean you owe two extra taxes: the 3.8% net investment income tax (NIIT) and a 0.9% additional Medicare tax on wage and self-employment income. Let’s take a look at these taxes and what they could mean for you.

08 27 24 2504549239 ITB 560x292

1. The NIIT

In addition to income tax, this tax applies on your net investment income. The NIIT only affects taxpayers with adjusted gross incomes (AGIs) exceeding $250,000 for joint filers, $200,000 for single taxpayers and heads of household, and $125,000 for married individuals filing separately.

Continue Reading

Understanding Taxes on Real Estate Gains

Let’s say you own real estate that has been held for more than one year and is sold for a taxable gain. Perhaps this gain comes from indirect ownership of real estate via a pass-through entity such as an LLC, partnership or S corporation. You may expect to pay Uncle Sam the standard 15% or 20% federal income tax rate that usually applies to long-term capital gains from assets held for more than one year.

08 12 24 2235158723 SBTB 560x292

However, some real estate gains can be taxed at higher rates due to depreciation deductions. Here’s a rundown of the federal income tax issues that might be involved in real estate gains.

Continue Reading

Are You Unfairly Burdened by a Spouse’s Tax Errors? You May Qualify for “Innocent Spouse Relief”

Navigating the complexities of tax law can be difficult, especially when faced with an unexpected tax bill due to the errors of a spouse or ex-spouse. The reason for such a bill has to do with the concept of “joint and several” liability. When a married couple files a joint tax return, each spouse is liable for the full amount of tax on the couple’s combined income. Therefore, the IRS can come after either spouse to collect the entire tax — not just the part that’s attributed to one spouse or the other. This includes any tax deficiency that the IRS assesses after an audit, as well as any penalties and interest.

08 13 24 1906976266 ITB 560x292

There May Be Relief

In some cases, spouses are eligible for “innocent spouse relief.” This generally involves an individual who was unaware of a tax understatement that was attributable to his or her spouse. To qualify, you must show that you didn’t know about the understatement and that there was nothing that should have made you suspicious. In addition, the circumstances must make it inequitable to hold you liable for the tax.

Continue Reading

Do You Owe Estimated Taxes? If So, When Is the Next One Due?

Federal estimated tax payments are designed to ensure that certain individuals pay their fair share of taxes throughout the year. If you don’t have enough federal tax withheld from your paychecks and other payments, you may have to make estimated tax payments. This is the case if you receive interest, dividends, self-employment income, capital gains, a pension or other income that’s not covered by withholding.

08 06 24 2452062729 ITB 560x292

Individuals must pay 25% of a “required annual payment” by April 15, June 15, September 15, and January 15 of the following year, to avoid an underpayment penalty. If one of those dates falls on a weekend or holiday, the payment is due on the next business day.

Continue Reading

How Are Series EE Savings Bonds Taxed?

Savings bonds are purchased by many Americans, often as a way to help fund college or show their patriotism. Series EE bonds, which replaced Series E bonds, were first issued in 1980. From 2001 to 2011, they were designated as “Patriot Bonds” as a way for Americans “to express support for our nation’s anti-terrorism efforts,” according to the U.S. Treasury Department.

07 23 24 2486175639 ITB 560x292

Perhaps you purchased some Series EE bonds many years ago and put them in a file cabinet or safe deposit box. Or maybe you bought them electronically and don’t think about them often. You may wonder: How is the interest you earn on EE bonds taxed? And if they reach final maturity, what steps do you need to take to ensure there’s no loss of interest or unanticipated tax consequences?

Continue Reading

Business Website Expenses: How They’re Handled for Tax Purposes

Most businesses have websites today. Despite their widespread use, the IRS hasn’t issued formal guidance on when website costs can be deducted.

07 29 24 622093349 SBTB 560x292

But there are established rules that generally apply to the deductibility of business expenses and provide business taxpayers launching a website with some guidance about proper treatment. In addition, businesses can turn to IRS guidance on software costs. Here are some answers to questions you may have.

Continue Reading

The Tax Implications of Disability Income Benefits

Many Americans receive disability income. Are you one of them, or will you soon be? If so, you may ask: Is the income taxed and if it is, how? It depends on the type of disability benefit and your overall income.

07 30 24 2431682807 ITB 560x292

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.)

Continue Reading

Six Tax Issues to Consider if You’re Getting Divorced

Divorce entails difficult personal issues, and taxes are probably the farthest thing from your mind. However, several tax concerns may need to be addressed to ensure that taxes are kept to a minimum and that important tax-related decisions are properly made. Here are six issues to be aware of if you’re in the process of getting a divorce.

07 16 24 1279735426 ITB 560x292

1. Personal Residence Sale

In general, if a couple sells their home in connection with a divorce or legal separation, they should be able to avoid tax on up to $500,000 of gain (as long as they’ve owned and used the home as their principal residence for two of the previous five years). If one former spouse continues to live in the home and the other moves out (but they both remain owners of the home), they may still be able to avoid gain on the future sale of the home (up to $250,000 each), but special language may have to be included in the divorce decree or separation agreement to protect this tax exclusion for the spouse who moves out.

Continue Reading

Closing a Business Involves a Number of Tax Responsibilities

While many facets of the economy have improved this year, the rising cost of living and other economic factors have caused many businesses to close their doors. If this is your situation, we can help you, including taking care of various tax responsibilities.

07 22 24 1839575923 SBTB 560x292

To start with, a business must file a final federal income tax return and some other related forms for the year it closes its doors.

Continue Reading

If Your Business Has Co-owners, You Probably Need a Buy-Sell Agreement

Are you buying a business that will have one or more co-owners? Or do you already own one fitting that description? If so, consider installing a buy-sell agreement.

07 15 24 1027571638 SBTB 560x292

A well-drafted agreement can do these valuable things:

  • Transform your business ownership interest into a more liquid asset,
  • Prevent unwanted ownership changes, and
  • Avoid hassles with the IRS.

Continue Reading

More Articles ...