Tax Strategies for Small Business

1. Introduction
2. Agenda 00:02:26
3. Choosing a Business Organization 00:04:26
4. Eligible Business Deductions 00:04:42
5. What Difference Does It Make? 00:07:03
6. Safe Harbor Presumption 00:08:43
7. Safe Harbor Presumption of Profit Intent 00:09:40
8. Liability Protection 00:10:43
9. Corporate Tax Rate 00:12:47
10. TCJA Changes Affecting Entity Choice 00:14:01
11. Check the Box Corporations 00:14:55
12. Accumulated Earnings Tax 00:17:01
13. Cheating on FICA 00:19:04
14. S Corporation Eligible Shareholders 00:22:48
15. Two Considerations 00:24:27
16. Tax Options: Corporations 00:26:43
17. Tax Options: Partnerships & LLCs 00:27:19
18. Restrictions  - S Corp/Partnership 00:26:53
19. Restrictions  - C Corp/S Corp/Partnership/LLC 00:29:19
20. 3-Step Approach 00:29:55
21. Series LLCs 00:31:08
22. SALT and Pass-Throughs (PTE) 00:33:58
23. The 199ADeduction 00:36:19
24. The 199A Deduction in General 00:37:41
25. Qualified Business Income 00:38:24
26. Rental Activity 00:39:39
27. Exception for Commonly Controlled Rental Activities 00:39:57
28. Safe Harbor 00:41:58
29. Rental Services 00:43:06
30. Not Rental Services 00:43:27
31. Not Applicable 00:44:28
32. Two Limitations 00:45:14
33. W-2 Wages - Do Not Include 00:45:39
34. W-2 Wages - Do Include 00:46:59
35. What is “Qualified Property”? 00:48:15
36. Depreciation Period 00:49:31
37. Example 00:50:01
38. SSTB Exception 00:50:51
39. Specified Service Businesses 00:51:11
40. 2024 Phase-Out Ranges 00:52:19
41. QBI Calculation 00:55:25
42. Overall Limitation 00:55:38
43. Two Limitations 00:56:28
44. Employment Issues 00:58:46
45. Independent Contractor Pros 01:00:02
46. The Common-Law Factors 01:03:27
47. Three IRS Categories 01:05:37
48. Section 530 Relief 01:07:24
49. Employment Eligibility Verification 01:08:59
50. Employment Eligibility Verification - Sections A, B, and C 01:09:06
51.  E-Verify 01:09:37
52. What is E-Verify? 01:09:46
53. New Hire Reporting 01:10:53
54. FLSA Requirements 01:14:46
55. Trust Fund Penalties 01:17:26
56. Workers’ Comp and Unemployment Insurance 01:19:55
57. Inventory 01:20:09
58. Inventory Accounting 01:20:42
59. UNICAP Exception 01:22:09
60. Accounting Methods 01:23:00
61. Cash vs. Accrual 01:23:12
62. Cash Method Restrictions 01:24:52
63. Cash Method Allowed 01:25:36
64. Accounting Periods 01:26:44
65. S Corporation Tax Year 01:28:55
66. Partnership Required Tax Year 01:31:11
67. Section 444 Election 01:32:25
68. Natural Business Year 25% Gross Receipts Test 01:33:41
69. The Home Office 01:35:47
70. Basic Requirement 01:35:57
71. Exclusivity 01:36:59
72. Regular Use 01:37:26
73. Regular vs. Simplified Method 01:38:35
74. Presenter Closing 01:40:23
75. Presentation Closing 01:40:46

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  Chuck Borek

  Chuck Borek is a practicing attorney and founder of  the Borek Group, LLC. Chuck is also a CPA, and his background includes  five years as a partner in a public accounting firm. He received his law degree and MBA summa cum laude from the University of Baltimore in 1993, where he was editor [...]

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• 199A Deduction 00:02:39, 00:34:00, 00:37:32, 00:47:37, 00:49:48, 00:51:01, 00:52:15
• Accrual Method Of Accounting 01:23:13, 01:26:40
• Asset 00:32:31, 00:50:02
• Audit 01:07:21
• Capital Gain 00:55:56
• Cash Method Of Accounting01:23:14, 01:25:31
• C Corporation 01:24:58
• Code section 183(a) 00:04:58
• Code section 61 00:07:27
• Cost 01:02:14
• Depreciable Period 00:48:58, 00:49:40
• Depreciable Property 00:57:12
• Depreciation 00:50:19, 01:40:22
• E-Verify 01:09:37
• Expense 01:24:02
• Fair Labor Standards Act (FLSA) 01:14:46
• Federal Insurance Contributions Act (FICA) 00:19:06, 00:19:08, 00:19:19, 01:00:21, 01:17:41
• Federal Unemployment Tax Act (FUTA) 01:00:30, 01:02:26
• Form I-9 01:09:04
• Form W-2 00:45:29, 00:56:45, 01:07:57
• Generally Accepted Accounting Principles (GAAP) 01:23:50
• Independent Contractor 01:00:08, 01:07:43, 01:20:07
• Inventory 00:02:58, 01:20:09, 01:37:09
• Liability 00:32:42
• Limited Liability Company (LLC) 00:10:56, 00:11:39, 00:16:19, 00:19:35, 00:26:27, 00:32:10, 00:35:05, 00:40:51, 01:26:12
• Overtime 01:15:44
• Pass-Through Entity (PTE) 00:34:19
• PTP - Publicly Traded Partnership 00:38:05, 00:56:37
• Qualified Business Income (QBI) 00:37:53, 00:41:03, 00:55:27
• Qualified Property 00:48:33, 00:57:06
• Safe Harbor 00:08:48, 00:41:59, 00:44:28
• Schedule A 00:34:33
• S Corporation 00:22:13, 00:22:54, 00:23:23, 00:24:06, 00:35:06, 01:25:39, 01:28:55
• Section 162  00:39:57
• Section 444 Election 01:29:04, 01:32:30
• Section 530 Relief 01:07:27
• Series LLC 00:31:25, 00:33:15
• Shareholder 00:23:54, 00:26:58
• Subchapter C 00:25:54, 00:26:33, 00:26:51, 00:27:33, 00:30:07
• Subchapter K 00:26:05, 00:26:36, 00:27:35, 00:28:38
• Subchapter S 00:26:04. 00:26:35, 00:27:11, 00:27:34, 00:28:36, 00:28:56, 0:30:31
• Tangible Property 00:57:12
• Tax Cuts and Jobs Act 00:14:23
• Tax Shelter 01:25:12
• UNICAP Rules 01:22:03
• Wage 00:45:30, 00:57:02, 01:17:37

199A Deduction: This deduction, created by the 2017 Tax Cuts and Jobs Act, allows non-corporate taxpayers to deduct up to 20% of their qualified business income (QBI), plus up to 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income.

Accrual Method Of Accounting: Accrual accounting is an accounting method where revenue or expenses are recorded when a transaction occurs versus when payment is received or made. The method follows the matching principle, which says that revenues and expenses should be recognized in the same period.

Asset: Property owned by a person or company, regarded as having value and available to meet debts, commitments or legacies.

Audit: A formal examination of an organization's or individual's accounts or financial situation

C Corporation: A C corporation, under United States federal income tax law, refers to any corporation that is taxed separately from its owners. A C corporation is distinguished from an S corporation, which generally is not taxed separately. Most major companies are treated as C corporations for U.S. federal income tax purposes.

Capital Gain: Capital gain is an economic concept defined as the profit earned on the sale of an asset that has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares.

Cash Method Of Accounting: Cash accounting is an accounting method where payment receipts are recorded during the period in which they are received, and expenses are recorded in the period in which they are actually paid. In other words, revenues and expenses are recorded when cash is received and paid, respectively.

Code section 183(a): Internal Revenue Code Section 183 (Activities Not Engaged in for Profit) limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the “hobby loss rule.”

Code section 61: Section 61(a) of the Internal Revenue Code defines gross income as income from whatever source derived, including (but not limited to) “compensation for services, including fees, commissions, fringe benefits, and similar items.”

Cost: The sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location

Depreciable Period: The term “depreciable period” means, for the qualified property of a taxpayer, the period beginning on the date the property was first placed in service by the taxpayer and ending on the later of the date that is 10 years after such date, or the last day of the last full year in the applicable recovery period that would apply to the property under section 168 (determined without regard to subsection (g) thereof).

Depreciable Property: Depreciable property is any asset that is eligible for tax and accounting purposes to book depreciation in accordance with the Internal Revenue Service (IRS) rules. Depreciable property can include vehicles, real estate (except land), computers, and office equipment, machinery, and heavy equipment.

Depreciation: A reduction in the value of an asset with the passage of time, due in particular to wear and tear.

E-Verify: E-Verify is an Internet-based system that compares information entered by an employer from an employee's Form I-9, Employment Eligibility Verification, to records available to the U.S. Department of Homeland Security and the Social Security Administration to confirm the employment eligibility

Expense: Offset (an item of expenditure) as an expense against taxable income.

Fair Labor Standards Act (FLSA): The Fair Labor Standards Act of 1938 29 U.S.C. § 203 is a United States labor law that creates the right to a minimum wage, and "time-and-a-half" overtime pay when people work over forty hours a week. It also prohibits most employment of minors in "oppressive child labor".

Federal Insurance Contributions Act (FICA): The Federal Insurance Contributions Act is a United States federal payroll contribution directed towards both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, people with disabilities, and children of deceased workers.

Federal Unemployment Tax Act (FUTA): The Federal Unemployment Tax Act (FUTA) is a federal law that imposes an unemployment tax on employers. The FUTA tax funds the federal government's oversight of each state's unemployment program. Only employers pay FUTA tax. You must deposit the tax quarterly and file an annual form.

Form I-9: Form I-9 is used for verifying the identity and employment authorization of individuals hired for employment in the United States. All U.S. employers must ensure proper completion of Form I-9 for each individual they hire for employment in the United States. This includes citizens and noncitizens.

Form W-2: Form W-2 is an Internal Revenue Service tax form used in the United States to report wages paid to employees and the taxes withheld from them. Employers must complete a Form W-2 for each employee to whom they pay a salary, wage, or other compensation as part of the employment relationship. - Wikipedia (https://en.wikipedia.org/)

Generally Accepted Accounting Principles (GAAP): A set of rules and guidelines developed by the accounting industry for companies to follow when reporting financial data. Following these rules is especially critical for all publicly traded companies.

Independent Contractor: An independent contractor is a person or entity contracted to perform work or provide services to another entity as a non-employee. As a result, independent contractors must pay their own Social Security and Medicare taxes. - Investopedia (https://www.investopedia.com/)

Inventory: A company's inventory typically involves goods in three stages of production: raw goods, in-progress goods, and finished goods that are ready for sale. Inventory or stock refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilization.

Liability: In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.

Limited Liability Company (LLC): An LLC is a corporate structure where members cannot be held accountable for the company’s debts or liabilities. This can shield business owners from losing their entire life savings if, for example, someone were to sue the company. Can be a single member (much like a sole proprietor) or a multi-member. It shares certain traits of both corporations as well as partnerships or sole proprietorships. It is not a corporation.

Overtime: Overtime is time and a half of what an employee earns for every hour worked over 40 in a workweek. The FLSA salary threshold is the minimum salary employers must pay employees for them to be exempt from overtime wages.

PTP - Publicly Traded Partnership: A publicly traded partnership (PTP) is a business organization owned by two or more co-owners whose shares are regularly traded on an established securities market. A publicly traded partnership is a type of limited partnership managed by two or more general partners that can be individuals, corporations or other partnerships, and that is capitalized by limited partners who provide capital but have no management role in the partnership.

Pass-Through Entity (PTE): The key benefit to a PTE election is the full federal deductibility of the entity's state income taxes paid with a PTE tax. While the income and tax reported is dependent on each state's rules, there is no federal limit to the amount of PTE tax that is deductible.

Qualified Business Income (QBI) : QBI is the net amount of qualified items of income, gain, deduction and loss from any qualified trade or business, including income from partnerships, S corporations, sole proprietorships, and certain trusts.

Qualified Property: In general The term “qualified property” means, with respect to any qualified trade or business for a taxable year, tangible property of a character subject to the allowance for depreciation under section 167 — (i) which is held by, and available for use in, the qualified trade or business at the close of the taxable year, (ii) which is used at any point during the taxable year in the production of qualified business income, and (iii) the depreciable period for which has not ended before the close of the taxable year.

S Corporation: An S corporation, for United States federal income tax, is a closely held corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. In general, S corporations do not pay any income taxes.

Safe Harbor: A safe harbor is a provision of a statute or a regulation that specifies that certain conduct will be deemed not to violate a given rule. It is usually found in connection with a vaguer, overall standard. Under the safe harbor, a “rental real estate enterprise” is treated as a trade or business for purposes of Sec. 199A if at least 250 hours of services are performed each tax year with respect to the enterprise. ... The safe harbor requires that separate books and records be maintained for the rental real estate enterprise.

Schedule A: Schedule A (Form 990) is used by an organization that files Form 990, Return of Organization Exempt From Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, to provide the required information about public charity status and public support.

Section 162: Section 162(a) allows a deduction for all the ordinary and necessary expensespaid or incurred during the taxable year in carrying on any trade or business. Section262, however, provides that no deduction is allowed for personal, living, or familyexpenses

Section 444 Election: A partnership, S corporation or personal service corporation (PSC) that desires to use a tax year other than a required tax year and that cannot establish a business purpose for using the desired tax year may still be able to elect to use the desired tax year.

Section 530 Relief: Section 530 is a relief provision that terminates a taxpayer's employment tax liability with respect to an individual not treated as an employee if three statutory requirements are met: 1) reporting consistency; 2) substantive consistency; and 3) reasonable basis.

Series LLC: A Series LLC consists of the “parent” or “umbrella” LLC with one or more series that are established under the parent. Each series has characteristics that are separate from the Series LLC itself and every other series. Each series can have its own assets, members, managers, purpose, and investment objectives.

Shareholder: A shareholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders may be referred to as members of a corporation.

Subchapter C: A C corporation or C corp (named for being in subchapter “C” of the Internal Revenue code) is an independent legal entity owned by its shareholders. A C corporation's profit is taxed twice—as business income at the entity level and the shareholder level when distributed as dividends or realized as capital gains.

Subchapter K: Subchapter K of the Internal Revenue Code of 1954 (sections 701 through 761)1 contains the statutory rules for the taxation of partners and partnerships. Anyone who has tried to gain a working knowledge of these sections will readily agree that one of the most important questions about subchapter K is how one avoids it.

Subchapter S: Subchapter S corporations, or S corporations, are corporations that are taxed on a "flow -through" basis. This means that tax liabilities from income (or deductions from losses) are passed onto the corporations' shareholders to be declared individually.

Tangible Property: Tangible property in law is, literally, anything which can be touched, and includes both real property and personal property (or moveable property), and stands in distinction to intangible property.

Tax Cuts and Jobs Act: The Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018, Pub.L. 115–97, is a congressional revenue act of the United States originally introduced in Congress as the Tax Cuts and Jobs Act, that amended the Internal Revenue Code of 1986.

Tax Shelter: A tax shelter is any legal strategy you employ to reduce the amount of income taxes you owe. After receiving much attention in the news in recent years, the term "tax shelter" has a negative connotation relating to deceptive and illegal schemes to evade income tax.

UNICAP Rules: The UNICAP rules require your business to capitalize the direct and indirect costs of its inventory, including both those inventory items you produce and those you acquire for resale. This process generally requires capitalizing certain expenditures that would otherwise be expensed.

Wage: A fixed regular payment, typically paid on a daily or weekly basis, made by an employer to an employee, especially to a manual or unskilled worker.