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An effective tax strategy minimizes what you are paying and can help improve cash flow, gain competitive advantage and increase profitability.  All businesses can benefit from tax planning at both state and federal levels. Cogent can ensure your business is set up in the right way and that you are reporting accurately so as to minimize what you are paying.

Based on your business strategy, a more detailed and in-depth tax analysis may be beneficial to help achieve your goal of wealth preservation.

We stay committed and dedicated to provide Business Owners the knowledge and experience to help improve their business. Please utilize our list of resources including: Blogs, Articles, and Case Studies focusing on Tax Minimization.

List of Tax Deductions and Credits

Previously we had provided an extensive list of tax deductions that you should be aware of as you prepare receipts and records for filing 2018 deductions in 2019. Tax minimization is always going to be a top priority for small to middle-size businesses. As promised, we’re providing an updated list of deductions and credits of which you should be aware. Some of these deductions are not well-known. For tax planning purposes, if you estimate that you may be eligible, either prepare for these deductions and credits within your accounting software program or consult with your tax person to ensure that you’re receiving these deductions and credits. All of these deductions and credits apply to small businesses.

  • Accounting Fee Deductions– Small businesses may deduct the costs for services rendered by an accountant, CPA or any other financial advisor as long as it is for business only and if the business operates as a for profit.
  • Advertising/Marketing – Deductible when it provides the ability to manage brand image, reach clients/customers. No anonymous donations or sponsorships will be deductible as they will fail to represent the business.
  • Amortization (Depreciation)– According to the IRS ” You may be able to depreciate property you own that is used in a business with a determinable useful life beyond one year, and that is not categorized as excepted property.”
  • Bad/Uncollectable Debts – IRS – ” To deduct a bad debt, you must show that there was an intention at the time of the transaction to make a loan and not a gift; AND you have no reasonable expectation that the non-business bad debt will be repaid.”
  • Board Meeting Expenses – These meetings are meant for company directors and will depend on the company or organization. Since the meetings are related to the business, they are deductible.
  • Building Maintenance/Repairs – A small business may deduct maintenance and repairs to tangible property as long as the amounts that are paid are not going to be required to be capitalized upon. (See Section 7 about maintenance and repair costs).
  • Business Association Membership Fees/Dues – A portion of these fees/dues are deductible depending upon how the fees paid will be used by the association. These are classified as miscellaneous deductions by the IRS.
  • Business/Travel Expense Deductions – IRS – ” You can deduct travel expenses paid or incurred in connection with a temporary work assignment away from home. However, you can’t deduct travel expenses paid in connection with an indefinite work assignment.”
  • Car Expense Deductions – If your vehicle is used for work or even driving to assist in a charitable act, there are some deductions available.
  • Commissions to Non-Employees – IRS – ” A fee paid to a nonemployee, including an independent contractor, or travel reimbursement for which the nonemployee did not account to the payer, if the fee and reimbursement total at least $600. To best determine whether someone is an independent contractor or an employee, see Pub. 15-A”
  • Computers and Technological Peripherals and Supplies – If you’re using a computer to assist in conducting your business more than 50% of the time it’s in use, you may deduct the entire cost of the machine (new or used) under an IRS provision called Section 179.
  • Continuing Ed (Work Related) – IRS – ” To be deductible, your expenses must be for education that (1) maintains or improves your job skills or (2) that your employer or a law requires to keep your salary, status, or job.” Not for acquiring skills for a new job
  • Conventions/Trade Show Expenses – IRS – ” You may be able to deduct the ordinary and necessary business-related expenses you have” – ” An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your business. “
  • Credit Card Convenience Charges – IRS – ” Credit card companies charge a fee to businesses who accept their cards. This fee when paid or incurred by the business can be deducted as a business expense.”
  • Depreciation – IRS – ” If property you acquire to use in your business is expected to last more than 1 year, you generally cannot deduct the entire cost as a business expense in the year you acquire it. You must spread the cost over more than 1 tax year and deduct part of it each year on Schedule C. This method of deducting the cost of business property is called depreciation.” Also, see IRS Publication 946.
  • Dining During Travel for Business (Meals) – IRS – ” It is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. The meal is business-related entertainment.”
  • Education/Training for Employees – IRS – ” If you pay or reimburse education expenses for an employee, you can deduct the payments if they are part of a qualified educational assistance program.”
  • Employee Wages – The IRS Revenue Code considers the amount you pay in employee wages and salaries as normal business expenses. Be advised that the relationship (employee) must satisfy all IRS requirements before deductions are considered.
  • Entertaining Clients/Customers – IRS – “You may be able to deduct the ordinary and necessary business-related expenses you have for entertainment.”
  • Equipment Deductions for Business – According to Section179.org “Essentially, Section 179 of the IRS tax code permits companies to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year.”
  • Equipment Repairs (Business Equipment) – IRS – “Election to capitalize repair and maintenance costs are deductible.”
  • Franchise Fees – When you’re purchasing rights to operate under a franchisor, these would be considered “start-up costs.” These costs are deductible. Once you’ve established your franchise, the regular payments made to the franchisor will continue to be deductible under “regular business expenses.”
  • Freight/Shipping Costs – As long as your shipping costs are used for business related purposes, these costs are deductible from stamps to large UPS and FedEx shipments.
  • Furniture/Fixtures for Business – IRS – “You generally can’t deduct in one year the entire cost of property you acquired, produced, or improved and placed in service for use either in your trade or business or to produce income if the property is a capital expenditure. Instead, you generally must depreciate such property.”
  • Group/Health Insurance Premiums (Must Qualify) – IRS – “You generally can deduct premiums you pay for the following kinds of insurance related to your trade or business.”
  • Guard Dog for Business Protection – According to Nolo “If you use a guard dog to guard your business premises, you can deduct the cost as a business expense.” You will have the ability to deduct dog food, veterinarian bills as well as other costs related to the guard dog. There are qualifying factors.
  • Hiring a Veteran (And other targeted groups) – IRS – ” The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) retroactively allows eligible employers to claim the Work Opportunity Tax Credit (WOTC) for all targeted group employee categories that were in effect prior to the enactment of the PATH Act, if the individual began or begins work for the employer after December 31, 2014 and before January 1, 2020.”
  • Home Office Deductions – IRS – ” You can have more than one business location, including your home, for a single trade or business. To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that business.”
  • Internet and Hosting Service Fees – IRS – ” Generally, you can deduct Internet-related expenses including domain registration fees and webmaster consulting costs.”
  • Investment Advisory Services – IRS – ” You can deduct fees you pay for counsel and advice about investments that produce taxable income. This includes amounts you pay for investment advisory services.”
  • Legal and Professional Fees (Business Related) – IRS – ” Legal and professional fees, such as fees charged by accountants, that are ordinary and necessary expenses directly related to operating your business are deductible on Schedule C or C-EZ.”
  • Licensing Fees – These fees are deductible for required industry licensing related to the business only.
  • Losses (Business) Due to Theft – If there has been theft that has affected the business, these losses are deductible according to the IRS.
  • Management Fees (Business Related) – IRS – ” Generally, you can deduct the full amount of a business expense if it meets the criteria of ordinary and necessary and it is not a capital expense.”
  • Materials for Business Use (Non-Incidental) – IRS – ” If you account for inventorial items as materials and supplies that are not incidental, you will deduct the cost of the items you would otherwise include in inventory in the year you sell the items, or the year you pay for them, whichever is later.”
  • Medical and Dental Expenses (With Plan) – IRS – “Beginning January 1, 2017, you can deduct only the part of your medical and dental expenses that exceed 10% of your adjusted is deductible as income (AGI). The 7.5% rate available for certain taxpayers has expired…”
  • Office Supplies – IRS – ” Your office supplies may qualify as a recurring expense.” Deductibles for supplies will also be recurring.
  • Parking and Toll Deductions – IRS – “Fees you pay to park your car at your place of business are nondeductible commuting expenses. You can, however, deduct business-related parking fees when visiting a customer or client.”
  • Prizes for Contests – IRS – “File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year in the course of your trade or business at least $600.00 in prizes and awards.”
  • Rental Deductions – IRS – ” Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as a business expense only if the rent is for property you use in your business. If you have or will receive equity in or title to the property, you cannot deduct the rent.”
  • Research and Development – IRS – ” The costs of research and experimentation are generally capital expenses. However, you can elect to deduct these costs as a current business expense. Your election to deduct these costs is binding for the year it is made and for all later years unless you get IRS approval to make a change.”
  • Retirement Plan Deductions – IRS – ” This credit applies to pension plan startup costs of a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. For more information, see Pub. 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans).”
  • Safe-Deposit Box Rental Deductions – IRS – ” You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. You can’t deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities.”
  • Storage Rental – IRS – ” To be deductible, a business expense must be both ordinary and necessary.”
  • Previous Year’s Taxes – According to Turbotax state tax returns that were paid the previous year may be included in the itemized deductions for the next tax season.
  • Tax Credits and Deductions for Businesses Who Have (or Hire) Employees with Disabilities – IRS – ” Businesses accommodating people with disabilities may qualify for some of the following tax credits and deductions. More detailed information may be found in the IRS publications referenced.”
  • Domestic Production Activities Deduction – This deduction became active in 2005. The intention is to encourage American businesses large and small to produce goods within the U.S. The deduction applies to all types of businesses to include any business that grows, produces, extracts, manufactures, improves or develops goods within the United States. Examples of these businesses would be architecture and engineering, construction video game development, farming and agricultural services, film making and more. Although there are some limitations, this can be a great deduction for any domestic business that would qualify. For more information, click the link above.

For more information on updated Tax Breaks for Small Business Owners check out 15 Must See Tax Breaks for Small Business Owners on the Quickbooks by Intuit website!

As you implement these tax minimization strategies in your business, don’t forget to explore other ways of increasing profitability in your business:

The IRS is Granting Help For Small Business

Although many small businesses have already either filed their tax returns or have filed their Form 4868 for the purpose of requesting an extension, there are many small businesses and individuals who may receive an extension without having even to request permission from the IRS.

In an April 16th, 2018 IRS news release ” The IRS said nearly 14 million taxpayers are expected to get an extension this filing season.” Businesses who have fallen victim to any of the following circumstances will be automatically granted additional filing time regardless as to whether or not they have had the opportunity actually to request permission for extension formally.

We would like to provide detailed information pertaining to exactly who may have undocumented permission from the IRS, deadline dates and various forms and publications to help victims of special circumstances:

If Your Business Has Fallen Victim to Natural Disasters:

  • If your business was affected by wildfires, mudslides or flooding in portions of Southern California, you would have until April 30, 2018, to file and pay your business taxes. The IRS also includes relief by offering additional time to make contributions to your 2017 IRA. The same will apply to organizations holding tax-exempt status.
  • If your business was located in Puerto Rico or the U.S. Virgin Islands and your business was affected by Hurricane Maria, you will automatically qualify for an extension to file your tax returns and pay taxes owed by June 29, 2018. This same date shall apply to businesses that had fallen victim to Tropical Storm Gita that occurred in American Samoa.
  • For more extensive information, please feel free to review the updated Disaster Relief IRS Publication 976

Additional Publications for Other Special Circumstances:

  • Publication 54 Tax Guide For U.S. Citizens and Resident Aliens Abroad will offer information regarding filing and tax payment rules for those who own businesses or are currently working abroad.
  • Penalty Relief Due to Reasonable Circumstances If your small business or yourself as an individual have experienced a disaster such as fire, casualty or any other serious disturbance, the IRS may be willing to remove penalties from what you owe. To see if you may be eligible for removal of IRS tax penalty amounts, read this publication to see if you qualify. You will only approach these issues if the IRS has actually mailed you notice with regard to penalties.
  • Armed Forces Tax Guide 2017 will offer updated information pertaining to those who are currently serving in all branches of the U.S. Armed Forces and are still located in combat zones.

2017 was a trying time for so many Americans, and the Internal Revenue Service is more willing than ever to offer solutions, to what can be very difficult and complicated small business tax issues. The devastating natural disasters that had occurred in 2017 has not only prompted the Legislature and the IRS to provide lengthy extensions for filing and payment. If your business has been affected and you’ve not yet filed, be certain to take advantage of other disaster-related situations that may have affected your business and your employees. The IRS is willing to help.

If your business was located in an area that was declared a disaster area and you retained your employees until the business had become operable, you may still receive a retention credit. This credit will be offered to any employer who retained their employees long enough to have paid them at least $6000.00. At that point, you will receive a $2400.00 tax credit for every employee you had retained and paid $6000.00 and over.

Your business must have been active and engaged at the time the disaster had commenced, and your business ceased due to destruction in the following areas and during the following periods:

  • Beginning on August 23, 2017, for businesses impacted by Hurricane Harvey.
  • September 4, 2017, for those businesses who were impacted by Hurricane Irma.
  • September 16, 2017, for all businesses impacted by Hurricane Maria

Ending dates would be either once the business had once again become able to resume a significant amount of business or January 1, 2018 (the first occurring date).

See IRS Publication – FAQs for Hurricane Victims – Employee Retention Credit

We hope this information helps those businesses who have been adversely impacted by any kind of disaster, natural or otherwise. We know that many small businesses have had the opportunity to recover and yet many still are attempting to recover, and we do hope to continue to support you in any way possible. We are confident that these IRS publications will help make your tax filing and payment easier. While you are here, take the opportunity to visit the IRS Newsroom for up to date information.

More information about tax planning can be found here.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

A Brief Update For Tax Deadlines for 2018

We cannot possibly stress the importance of investing time each month to calculate your small business taxes and making proper payments required by the IRS. Many small business owners are simply wearing too many hats making tax calculations each month near impossible and taking from the personalization you would like to provide as the owner of your business.

As small businesses are now seeing the beginning of the end of the first quarter of 2018, you’re already making preparations to complete and pay your taxes at the end of the year. Since the beginning of 2018, you’ve already taken the steps required to remain in compliance with the Internal Revenue Service. If so, you’ve already:

  • Met the January 16th deadline for payment of your 2017 fourth quarter estimated taxes.
  • If you have employees and contractors, you will have met your January 31st deadline to deliver and file W-2 forms to your employees and by February 28th, 1099 forms for 2017 to all of your contractors.
  • If your business is an S-Corporation (S-Corp) you will have met your March 15, 2018, deadline for filing your 1120S or if your business is a partnership you will have filed your 1065.
  • If your company required an automatic extension, or if you wanted to register to become an S-Corp, this was also the deadline date for these filings.

Below you will find the remaining important dates to remember for 2018 with regard to tax deadlines, forms, and other pertinent information:

  • March 31, 2018, will be your deadline to electronically file 1098s and 1099s (exception for 1099 MISC).

Tax Day for 2018 (that would usually fall on April 15th), this year, tax day will be on Tuesday, April 17, 2018, inasmuch as April 15th will fall on a Sunday. April 17, 2018, will be the deadline for the following:

  • Filing forms 1040EZ, 1040 and 1040A
  • C-Corp must file form 1120 to pay taxes on profits.
  • April 17 is also the deadline for all 2017 payments to the IRS for the fourth quarter of that calendar year.
  • Deposits for installment one (1) for 2018 is now due for estimated payments for the first quarter of 2018.
  • For personal, individual returns, if you feel you will require an extension, this will be the deadline date for filing extension form 4868.

April 22, 2018 –

  • If you’ve already submitted an e-filing that was rejected by the IRS, you will be required to resubmit your returns by April 22, 2018 (unless you have filed for an extension). The only way to avoid fees and penalties is to resubmit your returns by this deadline date. Otherwise, your deadline date will be October 20, 2018, at which time you will also be required to calculate additional fees and penalties.

April 30, 2018 –

  • This is the deadline to make the deposit of your Federal Unemployment Tax (Act) (also known as FUTA) Reporting of this particular tax would be completed by filing IRS form 940.

June 15,2018 –

  • This will be your deadline date for making 2018 second quarter estimated tax payments.

September 17,2018 –

  • There are a couple of deadlines for this date. The first would be the deadline for third (3d) quarter 2018 estimated tax payments.
  • If you are a partnership or S-Corp and have requested an extension, this will be the deadline for filing 2017 corporate tax returns. To complete this filing, use IRS form 1120S and IRS form 1065.

October 15, 2018 –

  • If your business is a C-Corp that has filed a request for an extension, this is your deadline date for filing your returns for 2017. Use form 1120.
  • This is also the final date for individual and self-employed persons who have requested a filing extension, to complete their 1040EZ, 1040A and 1040
  • Please be advised that this will also be the deadline for electronic filings. Should you miss this date to file electronically, you will now be required to complete paper filings after midnight 10/15/2018.

January 15, 2019-

  • This will be the deadline date for 2018 estimated tax payments to complete your 2018 fourth quarter filings.

Some Information to Consider While Filing Your Taxes:
Alternative Minimum Tax (AMT)-

According to the IRS “Due to declining use and the significant increase in the AMT exemption amount provided by recent legislation, the IRS plans to retire the AMT Assistant after the 2018 filing season.”
IRS Information Regarding Marginal Tax Rate –

  • These IRS Tables and Calculator will assist you in determining your taxes on your level of income.

IRS Information Regarding Capital Gains and Losses –

  • You will find information with regard to capital gains and losses in IRS Publication 544. Locate and click on the link you’re interested in, and you will be taken to the information specific to your needs.

Payroll Tax Reporting “

Inasmuch as federal, city and state tax returns are prepared in different ways and at different times, you may find that you will be required to prepare and file many tax forms each month of the year. With this in mind, you may wish to consider saving time and money by outsourcing the payroll aspects of your company to a third party consultant and/or firm. This option would allow you the peace of mind you need as these consultants and firms have the ability to arrange for necessary changes by adjusting their software to meet the tax law changes as they occur.

The remaining tasks will take much less of your time on a monthly basis. If you plan to take time each month to complete all of your other tax tasks, or delegate these responsibilities to an in-house or freelance source as part of their job description, you will certainly create the opportunity to avoid the costs of penalties and interests not to mention the maddening dash to get it all done at year’s end. This alone will improve your level of profitability. This will leave you open to focus on the products and/or services that you are in business to provide and therefore allowing for the quality of client/customer services that you not only wish to provide but that your clients/customers deserve.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Small Business Tax Eligibilities Increase Profitability

Many small businesses do not seem to understand the importance of taking small steps all year long as one of the most vital keys to minimizing tax responsibilities and avoiding expensive tax penalties. As well, there are many eligibilities that small business owners are not even aware that they are entitled to, especially in light of the most recent tax reform laws.

The best place to keep up with any available information will be to follow the IRS Tax Reform News and Information Page.

If you run a small enterprise and would like to maximize your tax minimizations; we would like to help you succeed with some suggestions that will make a difference with your tax responsibilities by the end of the 2018 tax year. The more of this information you’re aware of, the more likely that these tips alone will increase your profitability in 2018.

  • Begin by Educating Yourself About the Forms You Must Complete For Employee Payroll
    Federal taxes will not be the only taxes upon which you will need to focus; There are also separate state and municipal, as well as additional federal forms that may be required.
  • It is Best to E-File Your Taxes and File Taxes On Time
    Filing on time will save you headaches and penalties. By E-Filing, you will receive a confirmation number that will be provided by the IRS, and there will be no question as to the date that your filing was received. Filing electronically on time will help avoid penalties that will accrue until you pay in full
  • Paying Enough Quarterly Estimated Taxes Will Help Your Business Avoid Penalties
    It is easy for new business owners to spend their W-2 income all the while believing that they can pay taxes on their entire income at the end of the tax year. The wise business owner will pay enough estimated taxes on a quarterly basis. It will benefit your business when you file your taxes next year.
  • Consider a Reputable Tax Software Program and a Separate Accounting Software Program for Properly Tracking Expenses and Revenue Acquired in Your Small Business
    Using a reputable tax software will assist in the avoidance of penalties. Doing so will also make a difference in helping you separate your personal from your business finances.
  • Integrate a Paper Filing System
    Set up a filing system of your choice, whether it is 12 folders in a filing cabinet, an expandable folder or an electronic receipt scanner and use it faithfully. Prepare a few hours monthly to organize all expense receipts, banking withdrawal, and deposit slips, etc. into their respective folders. Failing this, you will spend all of those stressful hours at the end of the year organizing all at one time. Monthly organizing will ensure that you do not lose your documents and they are correctly indexed and available at the end of the tax year.
  • Consider Implementing the Services of Independent Contractors to Save on Taxes
    Whether you are an old pro in business or you are just beginning, ICs will save small businesses money in many ways. For tax minimization, you do not have to pay taxes on their behalf. If you pay an IC $600.00 or more in a tax year, you will need to maintain records stating what you have paid them and merely provide a 1099 form at the end of the tax period. If you would like to do this, however, be sure that you understand the definition of an Independent Contractor according to the IRS.
  • Consider the Donation of Remaining Inventory
    Should you find that you must pay to store leftover inventory that you are confident will not be used, you might choose to donate that inventory to a good cause. This “philanthropy” will save money in the long run. The caveat is that donations exceeding $500.00 face far more strict reporting rules with the IRS sure gift makes sense.
  • Consider the Benefits of Implementation of a Retirement Plan
    See the “Highlights for Changes in 2018” located within this IRS Pension Limitations document.
  • There Could Be Hidden Value In The Miles You Put On Your Vehicle
    Not everyone is aware that they may have the ability to deduct miles they use to participate in charitable acts. You may also deduct miles accrued for medical purposes and even some personal uses of your vehicle. You can see what you are allowed to deduct through this IRS Standard Deduction page.
  • Where and How You Decide to Structure Your Business Will Affect Your Tax Responsibilities
    The SBA (Small Business Administration) offers a plethora of information as to how your specific business should be structured and how it will affect your tax status. This is definitely worth the read for a small business owner.
  • If You Have a Home Office Outside of Your Business
    You could be eligible for a home office deduction if you use a space within your home strictly for work conducted for your business. The IRS recommends that you keep a running list of your business activities that take place in your home office. Besides the fact that it is a good business practice, you would be surprised at other possible deductions that you may be eligible for contained in that list of activities, at the end of 2018.
  • Remember to Take Deductions From Start-Up Costs
    Start-up costs are those costs incurred before the first sale that the business produces. This deduction cannot be taken before the first sale is made. The first $5000.00 of $50,000.00 may be taken the first year after that first sale. Other start-up cost deductions may be taken over 15 years. Many small business owners are not even aware that they may be eligible for start-up cost deductions.

Visit the IRS Virtual Work Shop
This video portal is designed by the IRS specifically to assist small business owners. By visiting this site, you’ll find a lot of assistance available to you as a small business owner.

Understanding small business tax eligibility is only one of the many valuable approaches that a reputable business consultant and business consulting firm will take to increase your business’s profitability. For further information, contact a recommended business consultant or business consulting firm and schedule an appointment with them to visit your company for more information.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

A List of Small Business Tax Deductions For 2018

With the Tax Cuts and Jobs Act (TCJA) bill passed, signed by the President and implemented, small to midsized businesses may be feeling dazed and confused about just exactly how these changes will affect their current tax responsibilities. Business owners want to see for themselves what they should expect, in writing, from the IRS.

However, it seems that amid the many (somewhat chaotic) changes, although many of these changes for businesses are positive, the IRS is limited in their ability to keep business owners entirely updated as the changes are made. Currently, the best place to remain abreast of the ongoing updates is by frequently visiting the IRS-More in News page where you will be provided links to various notices and updated IRS news releases as they occur.

Meanwhile, we can help you prepare during the 2018 tax year, for your filing in 2019 by providing an extensive list of allowable small business deductions. By referring to this list taken from the IRS Publication -“Small Business and Self-Employed Tax Center” throughout the year, you will have an opportunity to remain proactive in maintaining federal tax compliance, and therefore you will be better prepared to file your taxes with confidence in 2019.

Below you will find the list we’ve compiled thus far. As additions present themselves, we will update this list accordingly.

2018 List of Small Business Standard Expense Deductions:

  • Advertising Deductions (Excluding any advertising that would be used to influence any type of legislation).
  • Uncollectible Debt
  • Banking Fees
  • Business Vehicle Expenses
  • Donations to Charity
  • Convention and Trade Show Attendance
  • Education Expenses for Business Enhancement
  • Business and Business Vehicle Insurance Premiums
  • Intangibles – (Patents, Registrations, Intellectual Property Protections, Licensing etc.)
  • Interest on Business Credit Cards, Business Loans, and/or Borrowed Funds for the Purpose of Investment.
  • Repairs, Renovations, and Maintenance Expenses
  • Office Machinery, Supplies, Tools, Service Expenses
  • Professional Costs ie: Consulting Fees for Business Enhancement, Accounting, Legal Fees etc.
  • Home Office Expenses
  • Qualifying Business Income
  • Entertainment and Meals – that are a physical part of the company property or company culture will be 100% deductible; you may deduct 50% on business meals and entertainment shared by clients or potential clients – There are requirements and exceptions to this category.
  • Rent Payments that Have Been Paid to House Your Business (Home Offices may deduct a portion of the home that is used for business).
  • Wages and Salaries
  • Business Related Utility Payments – ie: Internet, Power, Water, Telephone etc.
  • Company Travel Expenses
  • Taxes Previously Paid
  • Costs Incurred for Research and Development
  • Non-Cash Rewards and Gifts

2018 Deductible Expenses for Self-Employed:

  • You May Deduct Your Health Insurance Premiums For Yourself, and all of your dependents under the age of 27 years, as long as you’re either self-employed or own more than 2% of your S Corporation.
  • Private Retirement Plans for Self-Employed – You may have the ability to claim qualified retirement plan contributions (these would include SIMPLE IRAs, 401(k)s, IRAs, and SEP).
  • Self-Employed Moving Expenses – If you’ve moved 50 miles or more from your location for business purposes you will have the ability to deduct several expenses ie: transportation, packing, utility connection fees etc. (You must exclude meal expenses during the move and security deposits).
  • Student Loan Interests may be deductible.
  • Self-Employment Taxes that have been paid.

2018 Capital Expense Deductions:

  • Start-Up and/or Organizational Expenses – These are expenses that are directly resulting from the creation of a business or an organization. Businesses and organizations are both able to deduct expenses related to the creation of the business or organization.
  • Depreciation/Amortization – As defined by NOLO, ” The actual or theoretical gradual loss of value of an asset (particularly business equipment or buildings) through increasing age, natural wear and tear, or deterioration, even though the item may retain or even increase its replacement value due to inflation. Depreciation may be used as a business deduction for income tax reduction, spread out over the expected useful life of the asset (straight line) or at a higher rate in the early years of use (accelerated)”. *Note – Small business deductions will be conditional.
  • Goods and Services Expenses – Resellers and manufacturing companies may have the ability to capitalize costs of production and any resale activities respective to the business both direct and indirect.

Despite the fact that controversies about the creation and implementation of the new tax laws remain; we must all admit (at some point) that there are some good intentions that have been woven into this particular tapestry. As always, stated positive intentions often produce incredibly positive results.
As a nation of business owners, we can choose how we will accept and use these current changes to strengthen the relationships between ourselves and our clients/customers, our families, employees, fellow business owners, and most importantly the people who make up the communities that business owners are capable of influencing. Let’s face it, how the people within our respective communities perceive our actions will definitely, make, break or leave our businesses merely idling. This is the time for business owners to accept what has been placed before them. Take these savings and reinvent your appearance within your communities, locally and in many cases, globally.
With savings from the increased deductions now available, it would be possible to consider new ideas:

  • Hire new employees: young, and/or active elderly retirees
  • Consider an investment in becoming equipped to hire physically disabled employees
  • Create a charitable foundation or educational scholarship fund(s) for high achieving students and/or mentally or physically disabled young people who wish to continue their education.
  • Sponsor someone who is raising money to help others.
  • Reward your employees monetarily or perhaps with a paid day off with the only requirement being that they spend that time doing something good for themselves or others.

Options are limitless, and more importantly, whenever you give, you will always receive in one way or another. You will be recognized by your group of employees and in your community for your efforts. Think about what brings you joy and become a part of that. The laws are in place; this won’t change anytime soon. Remove yourself from the controversies and focus on all the positive trends you could well be responsible for creating. There is no better time than now to give back to those who have brought you to the place you are today. As stated by Norman Vincent Peale, author of “The Power of Positive Thinking”, Change your thoughts and you change your world.”

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Do You Need a Tax Attorney?

Want to get a room full of business owners fired up?

Just mention the word taxes and everyone has an opinion. It usually is a strong one, and frequently includes the words “too much”. But, strong opinions or not, all business owners have to pay them. Death and taxes…everyone knows the saying.

So, what are your options?

You may be in a position to benefit from the services of a tax attorney. Let us take a look and see if you need one.

What is a tax attorney?

In order to practice law, a tax attorney has a Juris Doctor (JD) degree and has passed the bar. She has additional training in tax law, much like a medical doctor who specializes in a certain area. Some also may have training in accounting.

How are they different from accountants?

Imagine an accountant’s and tax attorney’s knowledge as two side by side circles overlapping in the middle. They bring different experiences and skills to your business – while also having some of the same ideas and goals for your long-term financial strategy.

A tax attorney’s main focus is on the legal aspects of your financial situation. Some examples: business negotiations, navigating court systems, IRS legal problems, representing you in civil or criminal claims, initiating lawsuits, complex tax reduction, and other duties. You use them for short-term, specific legal problems, concerns and issues.

An accountant is focused mainly on basic financial management and tax preparation. Some examples: bookkeeping, employee compensation and withholding, preparing and filing routine tax paperwork, reducing routine tax liability, issuing W2s and 1099s and other duties. Your relationship with an accountant is long-term and focuses on your overall financial health.

Do you need a tax attorney and an accountant?

The short answer is – it depends. Tax rules and regulations change every year. Companies grow, shrink and get sold. Owners retire, stock changes hands and new management takes over. Sometimes you will need and benefit from a tax attorney. Other times you will not. Your individual situation will determine when and if you need both.

Most successful, growing companies can use an accountant and a tax attorney on their team. Remember, while some of their services may overlap, each one has special knowledge which will help you reach your goals. Accountants typically focus on compliance, not minimization. Tax attorneys usually look at minimization, while staying compliant.

For example – an accountant’s tax planning advice is to buy something big that you can write off if you have money left at the end of the year. You will get the 179 accelerated depreciation and save on taxes. This is a good plan for some companies.

An attorney’s advice is to write off as much as you can pretax. He looks at how much you can take as unearned income (i.e., rental income or sub lease arrangements which are not subject to Medicare/Medicaid, FICA, SSI). He also looks at what you can claim at a lower percent of tax, such as dividends. Then what is left is taxed at full earned income rates. This is a good plan for other companies.

When do you need a Tax Attorney?

Again – it depends. Your situation is unique, and there are many factors to consider.

One of the guidelines is – if you are paying over $50,000 a year in federal taxes it may be time to think about using a tax attorney. If it is lower, the ROI is not usually a good value. Obviously, the more federal taxes you pay, the more likely the ROI will be worth it.

Here are some other reasons you might need a tax attorney.

• If you are in a situation which requires attorney-client confidentiality.
• When you have complex tax issues (international law, subsidiaries, mergers, sale of company, etc.).
• You have to answer a civil or criminal complaint from the IRS.
• You are negotiating with the IRS for owing back taxes or have balances due.
• When specific issues require knowledge of the law (how to classify workers, estate planning, exit strategies, stock distributions, etc.).
• Reclassifying your business for the optimum tax advantage.

Tax planning is complicated and the rules are always changing. You need good people on your team, an accountant and/or a tax attorney can help you. Spend the time and do the due diligence to find the right expert to help. Your future is worth the effort.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Is Your Business Paying Too Much in Taxes?

If a business owner thinks that they are paying too much in taxes, they probably are.

When it comes to taxes, some companies pay little to none and other pay huge amounts. For example, companies like GE, Boeing, and IBM typically pay zero in US taxes. Another company that pays hardly any taxes, Apple. They made over 34 billion dollars a couple of years ago and paid 9.7% in taxes. The common characteristic of these companies is an aggressive tax avoidance plan. Most businesses do not realize that taxes are typically the third largest expense in a company behind materials costs and wages.

Lower Corporate Tax

Most small businesses are typically set up as an S Corporation or an LLC and are done so for either asset protection or taxation savings. Companies set up a corporation and believe that is all that needs to be done. They forget about the fiduciary responsibilities of the company, such as holding a yearly meeting and keeping minutes of that meeting as set forth in the company’s by-laws. Other companies decide that personally loaning the company money is also okay without a promissory note with an implied interest rate, which is one of the many ways to pierce your corporate veil. One must also ask, have there been any tax law changes since you started your business? Was the way you were originally set up and taxed still the best possible way to be structured?

When you are set up as a sole-proprietorship, partnership, S Corporation or LLC, those entities are reported to your personal tax return. Therefore, making company profits additional to any W-2 wages earned by you and/or your spouse. The larger your income, the higher your tax bracket. The top tax bracket for personal tax returns is now 39.6%. However, people like Warren Buffet, Mark Zuckerberg of Facebook, and Larry Elision of Oracle only pay about 20% in personal income tax. If a small business owner pays anywhere from 25% to 39.6% in income tax that they must be making more money than GE, Boeing, IBM or Apple as well as Warren Buffet, Mark Zuckerberg or Larry Elision, right? False.

How can lower taxes be achieved?

Strategic companies might have two (or many, many more) entities. Small businesses could set up a c-corporation and an s-corporation so they can take advantage of all of the possible deductions. The c-corporation might not have a calendar year-end so that income can be timed and deferred. The company might choose to have one of the companies with only the key people as employees so that the benefit plan in that company can be enhanced. The c-corporation will show some income so it is taxed at a rate below the individual’s tax rate, but still taking caution to not get involved in double-taxation. The only way to be double taxed in a C-Corporation is to take a dividend. In a nutshell, forward thinking small businesses are actively trying to minimize their taxes instead of waiting to see what is due.

Tax law is black, white and gray. Most businesses venture very little into the gray. The gray is legal and legitimate; however, it is more aggressive than almost every small business’s approach. If you are never pushing into the gray, you are paying more than your fair share of tax and our president certainly appreciates it. If you believe the federal government can spend your money more wisely than you can, then continue to donate unneeded cash to our federal government.

Why doesn’t your accountant tell you this?

The simple answer is they can’t by federal law. Ever since Enron and WorldCom failed in 2001 and 2002, the federal government passed a law called Sarbanes-Oxley which today is simply called S”OX compliance. The legislation came into force in 2002 and introduced major changes to the regulation of financial practice and corporate governance and set a number of deadlines for compliance. The Sarbanes-Oxley Act of 2002 is mandatory. ALL organizations, large and small, MUST comply. Small businesses do not have all of the same rules as publicly traded companies, but it does mandate that your accountant needs to be either a tax compliance officer or a strategic tax planner. They cannot do both. In fact, if you look at any of your financials you receive back from your CPA, there is either a Circular 230 statement or a statement where – you provided the numbers and they take no responsibility for their accuracy. In fact, the business owner signs the return under the penalty of perjury if the numbers are not true and correct. The wording on the tax return is immediately above where you sign your name. You are responsible for your taxes. You are responsible for their accuracy. You are responsible for making sure that you minimize the taxes for the business and the business owner. You are responsible for accounting and tax compliance. So, why don’t small business owners do a better job of strategic tax planning? The answer is simple. Most small businesses are trained to believe that they owe whatever the CPA says that they owe and they do not know that there are options for them to put more money into their pockets rather than the government’s pockets.

Strategic Tax Planning is more than just saving money on taxes. Strategic tax planning is something that develops a Strategic Wealth Enhancement Plan comprised of specific business and tax related strategies for the Business and the Business Owner. It touches areas such as, tax savings, proper entity structuring, proper asset protection, wealth building, retirement planning, succession planning, proper compensation at the minimum tax rates, benefit planning and different forms of education funding.

If you are interested in finding out more about how your company can keep more cash in the business or keeping more cash personally, or to provide better asset protection for your company, please contact us to have a full tax review performed for your company.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

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