This year’s company holiday party is probably tax deductible, but next year’s may not be
Many businesses are hosting holiday parties for employees this time of year. It’s a great way to reward your staff for their hard work and have a little fun. And you can probably deduct 100% of your 2017 party’s cost as a meal and entertainment (M&E) expense. Next year may be a different story.
Should you buy a business vehicle before year end?
One way to reduce your 2017 tax bill is to buy a business vehicle before year end. But don’t make a purchase without first looking at what your 2017 deduction would be and whether tax reform legislation could affect the tax benefit of a 2017 vs. 2018 purchase.Read more
2018 Q1 tax calendar: Key deadlines for businesses and other employers
Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2018. 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.Read more
Brexit's Impact on US Taxes
The United Kingdom's vote to leave the European Union (EU) is going to have a lot of impact on international trade, not to mention the American economy and tax policy. Americans with UK-sourced income and businesses looking to enter the UK market should take heed of the impending changes and how they will affect their tax liabilities. Here's an overview of Brexit's impact on American businesses and American expats who live and work abroad in the UK.
Brexit Impact on Income Taxes
For taxpayers who have UK-sourced income, you may see a reduction in your tax bill because the exchange rate between the US dollar and pound sterling (GBP) is already down about 8% from 2015. Analysts expect that GBP could fall by 10% by 2017. You will receive fewer dollars back from GBP as it will be the closest in parity to the dollar that it's been in over 30 years. If you have business expenses in the UK this will also reduce them but your UK-sourced income will also fall.
If you have investment income that is UK-sourced, DIRT (dividend and interest retention tax) rates may change. You may have more taxes withheld from your investments which reduces the amount you receive but grant you a larger foreign tax credit or deduction. However, the EU treaties that have prevented double taxation of investment income have been nullified.
For business taxpayers with substantial income and presence in the UK, the loss of the EU's Parent-Subsidiary Directive can exponentially raise business tax bills. There is also speculation that the Capital Duties Directive will return which is a tax levied on capital raised.
Tax Treaties and Potential Further Secession
Brexit is causing treaties that relied on the massive bargaining power of the EU to be renegotiated from the ground up. The US-UK tax treaty isn't currently facing any major changes for Americans who have UK-sourced income and no substantial presence there or non-residents with UK residency and US-sourced income. The tax treaty may still be renegotiated in the face of international trade and workforce shifts and the fact that the UK has been the most major economic and political touchstone for America's dealings with the EU.
In addition to other countries discussing leaving the EU, policy analysts in Scotland and Northern Ireland have brought up seceding from the UK in order to preserve the powers and protections they receive from the EU. If your company is establishing presence in these countries or plans to earn a significant amount of income from them, now would be a good time to consider restructuring. If Scotland and Northern Ireland leave the UK, they'll also have to draft their own tax treaties.
Americans Working Abroad
Brexit's impact on expat taxes is largely tied to the currency shift and immigration laws. Because the UK uses a point system for expats who are not from EU countries which has normally allowed these residents to easily come and go, Americans working abroad won't see an immediate impact since EU status never affected them. If additional visa restrictions and work requirements are enacted now that the EU resident category doesn't exist in the UK, Americans working abroad who don't meet the new requirements may fail the substantial presence test when it comes to the foreign earned income exclusion.
To book a consultation to learn more about Brexit's potential impact on your personal taxes or business, please contact Dukhon Tax by calling 617 651 0531 or by emailing [email protected].
Article Sources:
http://www.latinotaxpro.org/blog/item/338-what-brexit-is-likely-to-mean-for-taxes-trade-and-more
https://www.dlapiper.com/en/uk/insights/publications/2016/03/brexit-implications-for-tax-law/
Tax considerations for switching jobs or unemployment
If you are about to switch jobs or experience some sort of unemployment, there are certain tax implications you may need to consider.
Accrued money
When switching jobs, you may have a sizeable amount of money accrued coming to you from vacation or sick pay. Any form of severance pay you receive is taxable in the year you receive it, in addition to the vacation or sick pay.
Withholding
When you change jobs, you will have to adjust your withholding on Form W-4. Using the worksheet provided will help you determine the right number of withholdings to avoid over or underpaying.
401(k)
If you had a 401 (k) with your previous company, you will have the opportunity to either cash in your 401(k); switch it to the new employee; or pay a penalty if you choose to take the money. If you have more than $5,000 in the account and are fine with the way it is being handled by your former employer, you may elect to leave your savings in the plan where it will continue to grow.
Job search expenses
You may be able to deduct some of the money you expend while looking for another job, but those costs must meet the requirements outlined by the IRS. These expenses can include employment agency fees, the costs associated with sending out your resume, phone and fax expenses, and in some cases, travel.
Relocation
You may be able to deduct some moving expenses that are not covered by your new employer. If your old job is at least 50 miles from the old one, and you will have full-time employment for a 12-month period, you can deduct items like the cost of packing and shipping your personal possessions, insurance and 30 days of storage. Traveling to the new home, and any expenses dealing with the car, which includes gas and oil, parking and tolls.
It is important to note that when receiving unemployment benefits, if taxes are not withheld, you may be facing a large tax bill the following year.
To find out more about tax considerations for switching jobs, or the tax issues surrounding unemployment, contact us by calling 617 651 0531 or by emailing [email protected], or by filling out this contact form:
Get in Touch with Dukhon Tax
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Taxes & Recordkeeping For Uber, Lyft & Other Rideshare Drivers
The rise of the sharing economy brings about a great deal of tax concerns, whether you rent out your home on Airbnb or pick up groceries on Instacart. Rideshare services like Uber and Lyft are a fact of life today. Whether you drive for these apps full-time or as a side hustle, you'll get a 1099 so the IRS gets a copy and you have to report this income on your tax return. What to do?
Do Lyft, Uber, Sidecar, etc. Drivers Have to Pay Self-Employment Tax?
Yes. When you work for a rideshare app, you're not considered an employee of the company so you're subject to self-employment tax. However, the good news is that there are ways to help mitigate how much you'll owe by deducting your related expenses which are primarily car-related.
What Kinds of Expenses Can I Deduct?
Unless you have a car specially meant for driving for Uber and Lyft, you must figure out a business percent of your personal car for your auto expenses. This would include:
- Gas
- Insurance
- License and registration
- Repairs and maintenance
- Cleaning and car wash
- Leasing a car
- Car payments (with some limits)
You can always deduct parking fees and tolls in full provided that it's for when you're on duty with Uber or Lyft, but devices like EZ-Pass would have to use the business percent if you also use it in your personal driving. Speeding tickets and other fines are never deductible.
Other common expenses for rideshare drivers that aren't subject to the business percent would include things like mints, bottled water, and other refreshments that you stock for your passengers.
How Should I Keep Track of My Car Expenses?
When it comes to deducting auto expenses for rideshare drivers, you need to keep good time logs and mileage logs of when you're on duty and when you're not. Based on how much time and mileage you're putting in as a rideshare driver, you need to compare this to how often you use your car on your own time in order to figure out your business percentage.
If you're bound to lose things like gas receipts, you can also use the standard mileage method to figure out your deduction. The IRS sets a business mileage rate every year, it is $0.575/mile for the 2015 tax year but you can only use one method. If you live in an area where gas and other car-related expenses have relatively low costs, it might benefit you more to use the standard mileage method. You can still deduct tolls in full, but can't deduct your other car expenses. Whereas if you live in an area where maintaining your car is pretty expensive, it probably pays to keep good records of how much you pay for gas, license renewal, and car payments among other things.
Keeping good mileage logs is important so that you can not only prove you're using your car for business reasons, but also so you can compare which way to deduct auto expenses will save you the most on taxes.
Dukhon Tax is available for any questions and concerns about Uber driver taxes and helping you determine whether your actual auto expenses or the standard mileage is best for cutting your tax bill.
Source: Standard Mileage Rates
Tax Planning for Business Sales and Purchasing
Whether you're selling or purchasing a business, conscientious tax planning is essential. Whenever a business is transferred, there are tax ramifications for both buyer and seller. These tax ramifications could greatly affect the value of the business sale for both parties -- and it can be even more complicated when partnerships or more complex entities are involved.
The Tax Implications of Selling a Business
When you sell a business, you need to pay taxes on your gains -- the amount of profit that you made off of the sale your business. At its most simplistic, the amount of profit in your business is the amount that you've sold your business for less the amount that you invested into it. But, naturally, the situation can be far more complicated than that. The amount of money you've put into your business is referred to as the tax basis, and it is affected by things such as depreciation, casualty losses, selling expenses, and other factors.
You may be able to sell your business either for a lump sum or a scheduled payment structure, known as an installment sale, both of which will also have tax ramifications -- a lump sum payment will be taxed immediately, whereas scheduled payments will be taxed upon each received payment. Depending on your personal tax situation, scheduled payments may be preferable. But either way, the taxes will need to be paid upon your next tax filing.
There are a few special situations that may apply when selling your business. If your business is being purchased by another business, it may be able to be organized as a tax-free merger. If your business includes long-term capital gains, this will be taxed at a lower rate. Further, assets and stock sales have different tax consequences than an ordinary business sale.
The Tax Implications of Buying a Business
The tax implications for a business buyer tend to be fairly less complex than for a seller -- but there are still some complications that may arise. In general, the purchaser of the business will not be responsible for federal, state, and local taxes that are owed upon the company's sale. This tax liability will be the onus of the seller of the business. However, if the business does owe these taxes, they will likely need to be paid during the escrow process. If they exceed the amount that the seller would make from the sale (and the seller cannot cover the additional funds), the business sale may not continue.
Upon acquiring ownership of the business, the buyer will assume responsibilities regarding taxes for that business. This includes payroll taxes, sales taxes, general excise taxes, and, naturally, income taxes. To ease this transition, the buyer should learn about the company's existing and scheduled tax liabilities, so that they can be paid quickly following the sale.
It's essential to consult with a company who specializes in business accounting and tax services before making the move to either purchase or sell a company. At Dukhon Tax and Accounting, you can get a free tax consultation regarding your purchase or sale. Dukhon Tax and Accounting provides expert income tax prep, tax consultations, and general tax and bookkeeping services for businesses and individuals throughout Allston.