Anthony Sykes & Company

                 Starting a business is hard work and can be expensive. Some of these costs can be deducted over time and recovered by the business. This can be done over a period of 15 years after the business is active, but it does not apply to every expense.           A qualifying start-up cost must be paid before the business is active. It must also be related to the field the business operates in. It can include advertisements for opening the business, travel costs related to securing suppliers and customers, and fees for consultants and other professional services. Costs related to investigating whether to purchase another business can also be deducted.           Not all costs qualify. Interest, taxes, and costs for experiments do not qualify for deduction. The actual purchase of another business cannot be deducted from federal taxes. The...

          The Internal Revenue Service ( IRS ) knows that people are looking to make contributions and charitable donations this time of year. In fact, they want to support this effort, as many individuals and businesses are still trying to recover. Certain temporary tax changes have been extended to the end of the year.           Deductions. Normally if a taxpayer were to use the Standard Deduction, they would not be able to deduct a charitable contribution. The law now allows for a deduction of up to $300 for a single individual. For a business, the limits of what can be claimed as a charitable donation in cash or food have changed as well. It varies depending on the type of business you have, and the increase in limits is not automatic. To find out what you can do before the end of the year, make an appointment with your Qualified Tax Professional .

          It is easier to create different streams of income than ever before. With that ability comes certain obligations. Primarily, you must understand your tax responsibilities. All income is subject to tax. That includes part time, temporary, and side jobs. The payment may be in cash, property, goods, or even virtual currency. All of it must be reported, this means that a good record keeping system must be used during the year.           In addition, every employee must be classified correctly. This does not mean that the employer decides who is an employee and who is an independent contractor. An accurate classification is based on an examination of how the employer influences the work being done and how it is accomplished. When this is done correctly, all parties understand what is required from a tax standpoint. An employee will have income taxes withheld according to what is stated on the Form W-4 . A ...

     The Internal Revenue Service ( IRS ) has announced that any Personal Protective Equipment ( PPE ) that was bought to stop the spread of COVID-19 is tax deductible. This means that masks, hand sanitizer, sanitizing wipes, gloves, and other tools used to fight the spread of Coronavirus and keep safe can be deducted from your Tax Return.      These items must have been purchased in 2020. You do not qualify for the deduction if you were reimbursed by insurance or other health savings account. If you have not yet filed your Tax Return, this is another reason to keep good records. You never know when you might need them and a new deduction might become possible. Take action to have all your information ready for your Qualified Tax Professional before the May 17 deadline.

                 For those who felt left out of the last 2 Paycheck Protection Program ( PPP ) openings, there is another chance. Starting on February 24, and continuing for 2 weeks, there is an exclusive window for Small Businesses with 20 employees or less to apply for a PPP loan. This is a particular group that has felt shut out of the program to this point.           This means that sole proprietors and independent contractors will have an even greater opportunity to receive this funding. However, the calculations that would increase the amounts of the loans for these Small Businesses will not be updated by the Small Business Administration ( SBA ) until March 1 . Specific written guidance will also be issued at that time. So it might be best for business owners to wait until that time so their applications will be subject to the most updated rules.

     The Paycheck Protection Program ( PPP ) has been a very useful tool to help many businesses stay open during these challenging times. However, there are many questions surrounding when is the best time to submit the applications for forgiveness of these loans. There are different ideas, but this series of posts has shed some light on what to do in different situations.      This post will give the best reason why a borrower might want to wait to submit their application. Some businesses have potential forgiveness reductions . Our last post discussed how fewer full-time employees or reductions in salary would impact the qualified expenses that could be claimed.      It may be best for some of these businesses to wait until after December 31 to file their applications to see if they were able to restore any of their employees and/or salaries. That would allow them to qualify for what are known as Safe Harbors and not have to reduce t...

     The Paycheck Protection Program ( PPP ) has been a very useful tool to help many businesses stay open during these challenging times. However, there are many questions surrounding when is the best time to submit the applications for forgiveness of these loans. There are different ideas, but this series of posts will shed some light on what to do in different situations.      The last post shared why a borrower might apply early and may want to wait. Another reason to wait is if the borrower has reductions to forgiveness due to fewer full-time employees or reductions in salary . It would be best to wait until the end of their covered period. This is because the reduction applies to all qualified expenses, not loan forgiveness. At the end of the covered period all the expenses can be added and then reduced by the necessary amount. If this is greater than the loan, a borrower can still qualify for full forgiveness. A Qualified Tax Professional is esse...

     The Paycheck Protection Program ( PPP ) has been a very useful tool to help many businesses stay open during these challenging times. However, there are many questions surrounding when is the best time to submit the applications for forgiveness of these loans. There are different ideas, but this post and the ones that follow will shed some light on what to do in different situations.      If you are using the last of funds or coming to the end of the forgiveness period, the application is not required until 10 months after the end of that forgiveness period. With that understanding, you do not have to wait. If the money’s all gone and you are confident that full forgiveness can be reached, it makes sense to apply. This is one reason why it makes sense to wait.      Applying early will not change forgiveness reductions . For example, if a business has reduced salaries of employees by 25%, that must be accounted for during the entire ...

     With so many staying home due to the COVID-19 pandemic, there is a steep rise in demand for food delivery services. Different companies are available in most major markets, but all of them are seeing a boom in business. For some restaurants, it is the only way they can try to stay afloat. When any industry sees major growth, state tax agencies are always ready to take a close look at their accounting practices.      One focus of many agencies will be taxes related to marketing, delivery, and processing fees. Are they being collected and paid? Since almost every state and most cities have different laws, this is a concern that must be addressed. This is similar to the situation that Online Marketplaces found themselves in 5 years ago when the US Supreme Court ruled that they must collect and pay Sales Tax wherever their items are bought, even if they do not have a physical presence in that state. Food delivery services may begin to have each transa...

     Soon information related to Paycheck Protection Program ( PPP ) loans will be made public. Specifically, the names of businesses that received over $150,000. It will also include business names, types, and addresses. This list may not be very long since the majority of loan borrowers were under $150,000. However, 75% of the $500 billion in loans went to businesses that were approved for more than $150,000.      In the beginning, no information was going to be released. When the first round of loans ran out in record time, many insisted on disclosure of who was receiving the funds. This was not expected, and the results of knowing these details is going to make some uncomfortable. There will now be a very public scrutiny for some.

         It has been well documented that there is a lot of confusion and chaos in the world today. Even as the government does its best to provide support, there are still more questions than answers. That is especially true for Small Business owners. There are a variety of programs available for Coronavirus relief. Do you know about them? Do you know how to apply for them? We are working remotely so that we can support you and be a guide through the process. Please fill out our simple form so we can show you the options available.

         The number of Online businesses is growing by leaps and bounds. It is the easiest and fastest way to become an entrepreneur. For those looking to start out on this road, it is best to calculate what will be legally required from them. The tax requirements have changed drastically, and the penalties for ignoring them are severe.           Many Online businesses did not feel they were required to pay sales taxes because they did not have a physical presence where they did business. Court rulings have changed that perspective. Essentially, wherever the sale takes place , sales tax must be collected. Starting in 2016, California began sending out collection letters demanding back taxes, along with the penalties and interest for non-payment. There are now 45 states that collect Online sales taxes and many of them are following the example of California.           Many of these bus...

       When a person has an income, they typically pay taxes on it. The more they make, the higher rate of tax they pay. This has been the accepted pattern of life. When it comes to a business, people generally expect that pattern to continue. However, this is not always the case. For example, the Tax Cuts and Jobs Act ( TCJA ) changed the corporate tax code so that all businesses will be taxed at the flat rate of 21% . Another reason is that it has been proven that some companies have made billions but paid little or no taxes on that income.           This is because the companies and their subsidiaries were placed all around the world. As a result of this, they were taxed based on where they were located. This is scheme is not new but is now being implemented in a very sophisticated way. Reporting income in low tax countries has become an even more tempting option with the growing digital economy. Governments arou...

          After over a year and a half since the passage of the Tax Cuts and Jobs Act ( TCJA ), the regulations that apply to many international transactions are still not finalized. There are issues that still need to be addressed as companies are unsure how to proceed. They are making some conservative guesses but are really looking for clarity from the Internal Revenue Service ( IRS ).           For example, there is the Foreign Derived Intangible Income ( FDII ) provision. This is a potential deduction for businesses, but it can only be claimed if the business can prove that what it sells is for foreign use . In this way, a company’s decision on where to locate its headquarters will not be based on how it can avoid paying taxes where most of its goods are sold. Companies are unwilling to alter their normal business operations to prove that they qualify for FDII. The IRS has indicated that there will be more...

        One of the goals of the 2017 Tax Cuts and Jobs Act ( TCJA ) was to keep multinational corporations from hiding profits offshore to avoid paying US taxes. While this Tax Reform has taken great steps toward reaching this goal, unanticipated results have come to be seen. In applying this law, any foreigner who becomes a US citizen must report the global income of any family businesses in the US and pay the tax on the income of those businesses.           The changing of tax rules in this area do not only impact business interests, these can be applied to domestic trusts, partnerships , and estates . This is a sharp increase in tax responsibility that many are unprepared for. This is a real situation that many are dealing with and have very limited options moving forward. With guidance, some can navigate this tricky situation, without having to renounce their claims or move out of the country.

          Deductions and credits help the bottom line for every self-employed person and small business owner. With most of the year still ahead, this is a good time to check your options and eligibility which will allow you the ability to plan for the future.             Business Expenses. To be considered a deductible business expense, the expense must be considered ordinary (common and acceptable in this trade) and necessary (helpful and appropriate for the business). For example, if part of a Taxpayer’s home is used for a business, some of the mortgage interest insurance, utilities and depreciation can be deducted. Usually rent can be considered a deductible expense if the property is used for the business.           Business Credits . A new credit that was created by the Tax Cuts and Jobs Act ( TCJA ) is a credit for paid family and medical leave. ...

        Falsely inflating tax credits and deductions is something that is so easy to do. It can be tempting to lower your tax responsibility in this way, but this scheme is well-known to the Internal Revenue Service ( IRS ). Therefore, it has earned a spot on the IRS 2019 “ Dirty Dozen” list of scams.           Often this scam will manifest itself as overstating charitable contributions or very large business expenses . Sometimes Tax Credits are claimed falsely. These tactics are seen throughout the year, but they commonly peak at this time. When these deceptions are found out, the penalties are steep and severe.           The Tax filer may be cited 20% of the amount of the credit that they falsely claimed. This would be in addition to paying the full amount of the tax owed. If it is determined that a fraudulent Tax Return was filed willfully, then more fines can...

         There seems to be chaos everywhere we look in the business landscape. From uncertainty in the stock market to an abundance of (unanswered) questions about how to simply file taxes this year, it can feel overwhelming. Considering this is the longest Federal government shutdown in history, we may feel like we are living in unprecedented times and have no way of making an informed decision. It can be frustrating, but you are not alone.           Change is good because it can challenge us to grow. We will look at the world, not as we want it to be, but as it really is. As we learn more, we might see the need for a clear perspective to help us make the right choices. This is the time to reach out and communicate, build connections and help each other.           We are in the middle of it just like all of you reading this. At Anthony Sykes and Company , we are ...

          After the federal changes made by the Tax Cuts and Jobs Act, many people are looking to see what moves their states will make. Some states have a relatively simple tax system (no state income tax or low property tax), and they want to keep it that way. Other states made their own changes that impacted tax collection in 2018. For example, Kentucky made adjustments that now allow for more taxes to be collected from the activities of non-profits.           Then there are the other states that want to do something but are not sure what. The state of California can fall into this category. The last major change to the state tax code occurred in 1935, and property tax has been limited since 1978 due to voter passed Proposition 13. This means that the majority of California’s income comes from personal income taxes. With its progressive nature, those who make the most, also pay the most. That is also true of b...

         There has been much discussion and debate over this past year. We have all done our best to get an understanding of what the future of taxes will look like. In January, the theories will end, and the tax filings will begin. However, this is only the start of the changes in store. Let’s consider the example of tax brackets and rates.           A year ago, we wrote a post that covered the topic of tax brackets and rates. There are 7 rates that range from 10% - 37%. The brackets will change depending on the filing status. This information was understood at the end of 2017. There are new tax brackets that have been released, but they will apply to when filing taxes in the year 2020. There are aspects of the Tax Cuts and Jobs Act that will change year by year .           For Taxpayers who are not planning any big changes, all that is needed is to keep an eye on th...