Every week as SmallBizLady, I conduct interviews with experts on my Twitter talk show #SmallBizChat. The show takes place every Wednesday on Twitter from 8-9 pm ET. This is excerpted from my recent interview with Eva Rosenberg, EA @TaxMama. Eva is the publisher of TaxMama.com, where your tax questions are answered for free. Eva is a best-selling author of several books and ebooks, including Small Business Taxes Made Easy – and the new Deduct Everything! Eva teaches tax pros how to pass their IRS enrolled agent examinations atIRSExams.com and other tax courses for tax pros and the public at http://www.cpelink.com/teamtaxmama.
SmallBizLady: WHAT ARE THE THREE COMMON TYPES OF TAXPAYERS?
Eva Rosenberg: There are Three Types of Taxpayers:
1) Tax Pushover – Pushovers passively let taxes happen to them. They don’t review any financial documents and then are shocked when they owe a lot.
2) Tax Vigilante – The Vigilante is excessive: researching, asking everyone for tax advice, and squeezing every dime out of her refund.
3) Tax Aware – An Aware Taxpayer is best. They plan, but leave the research to their tax professional. They pay the least taxes of all.
SmallBizLady: WHAT IS THE GREAT NEWS FOR BUSINESS TAXPAYERS THIS YEAR?
Eva Rosenberg: No more uncertainty about some of the big tax issues. The PATH Act of 2015 made some important tax loopholes permanent – and extended many through 2016 – 2020. You can read more about that in the summary from the House of Representatives http://waysandmeans.house.gov/wp-content/uploads/2015/12/SECTION-BY-SECTION-SUMMARY-OF-THE-PROPOSED-PATH-ACT.pdf
SmallBizLady: WHAT ARE SOME OF THE MOST IMPORTANT TAX ISSUES AFFECTING BUSINESSES THIS YEAR?
Eva Rosenberg: First, Section 179 Depreciation lets you write off business assets purchases in the year you buy them, up to $500,000. If you buy more than $2 million worth of assets, it will reduce the deduction. It applies to new or used assets. Make sure you use these assets for the IRS-designated useful life, or you have to pay the money back. More here https://www.irs.gov/publications/p946/ch02.html
SmallBizLady: WHAT IS THE NEW LAW ABOUT BONUS DEPRECIATION?
Eva Rosenberg: Bonus depreciation encourage us to buy new assets (not used). This deduction starts at 50% in 2015 down to 30% in 2019. It does not apply to luxury cars & is limited to $8k. But, you don’t have to pay it back if you stop using the asset. Read more about Bonus Depreciation here: https://www.irs.gov/publications/p946/ch03.html you can share lists and market to a larger audience.
SmallBizLady: IF BUSINESS OWNERS PLAN TO TAKE THEIR BUSINESS PUBLIC, WHAT IS NEW?
Eva Rosenberg: The 100-Percent Gain Exclusion on Qualified Small Business Stock is the #1 reason to establish your business as a corporation. Set up as a corporation and buy your stock. Sell stock to a round or two of investors. Then, everyone holds the stock for five years.
If your corporation assets are worth less than $50 million when you go public or sell, you avoid all IRS taxes on the profits. Read more here: IRS Publication 550 – https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010688
SmallBizLady: WHAT DEDUCTIONS APPLY TO BUSINESSES WITH EMPLOYEES?
Eva Rosenberg: The Work Opportunity Tax Credit encourages hiring people w/disabilities, seniors, disadvantaged youth, veterans and others. Depending on the person and how many hours they work, the credit is 25% – 40% of wages for the first year or two. The employees must get an official certification from a government agency. It’s a great way to provide jobs to your community – and get the IRS to subsidize the new hires. https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Work-Opportunity-Tax-Credit-Frequently-Asked-Questions-and-Answers
SmallBizLady: WHAT ABOUT BUSINESSES WHO EMPLOY ACTIVE MILITARY? ANYTHING FOR THEM?
Eva Rosenberg: There is a credit if you keep paying employees in the uniformed services of the US on active duty for more than 30 days. This applies whether you pay their full wages, or only continue their partial compensation while they are on active duty. Find details on this credit is on Form 8932 – scroll down (they’re almost clear as mud) https://www.irs.gov/pub/irs-access/f8932_accessible.pdf
SmallBizLady: TELL US ABOUT THE NEW WAYS TO PAY TAXES ELECTRONICALLY.
Eva Rosenberg: This is so cool! For businesses who pay $10k+ in payroll and taxes, you can now use DirectPay instead of EFTPS. There’s nothing to set up. Log in and select the tax form and year. Enter bank account info – and voila! You are done. Log in to see payments you have made – and print them for your tax return. And, there are no fees! However, if you have a payroll and must pay payroll taxes, you must use EFTPS – still good for scheduling payments in advance.
SmallBizLady: WHAT ABOUT DEDUCTING REPAIRS TO CAPITAL ASSETS?
Eva Rosenberg: Finally, the IRS released some looser requirements. You may now write off the first $2,500 of repairs without an audit. This changed because many tax professionals started screaming about rigid compliance rules associated with $500 limits. The $2,500 limit starts 1/16, but the IRS promises not to disallow it if you use it before 2016. https://www.irs.gov/uac/Newsroom/For-Small-Businesses-IRS-Raises-Tangible-Property-Expensing-Threshold-to-$2,500-Simplifies-Filing-and-Recordkeeping
SmallBizLady: ANYTHING FOR BUSINESS OWNERS WITH HOME OFFICES?
Eva Rosenberg: It’s not new – but it’s a good deal. The deduction is limited to $5 x 300 sq ft, but it can be nice for a home-based biz. You don’t take depreciation, so when you sell the house, you don’t pay it back. And you get mortgage int & prop tax deduct You don’t have to keep as many records for utilities, cleaning, and other expenses. You reduce your audit risk. There are drawbacks, so learn more about how the deduction applies to your situation. https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Simplified-Option-for-Home-Office-Deduction
SmallBizLady: MANY SMALL BUSINESS OWNERS USE FREELANCERS. WHAT SHOULD THEY KNOW?
Eva Rosenberg: There is a new amnesty program for employers who have been treating their employees as 1099 freelancers instead of W-2s. It’s a good deal. The IRS has many ways to catch and penalize employers who are not putting workers on the payroll. With the deal, the IRS will only charge 1/10th of the taxes for one year. Period. No interest, no penalties, no audit.
Find out more here: https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Voluntary-Classification-Settlement-Program
SmallBizLady: DO YOU HAVE ANY FINAL THOUGHTS TO SHARE?
Eva Rosenberg: Melinda, THANK YOU and your team so very much for having me here. And thank you to all our guests for your great questions and feedback! Of course, there is always so much more, but I am delighted to be a resource for your audience.
If you found this interview helpful, join us on Wednesdays 8-9 pm ET; follow @SmallBizChat on Twitter. Here’s how to participate in #SmallBizChat: http://bit.ly/1hZeIlz
For more tips on how to start or grow your small business subscribe to Melinda Emerson’s blog http://www.succeedasyourownboss.com.