Good news! Business taxpayers may still be able to take actions to lower their federal income tax liabilities for 2020, as well as for future years. Consider these ideas before you file last year’s return. Claim 100% First-Year Bonus Depreciation—Or Maybe Not For qualifying assets placed in service in 2020, business taxpayers can deduct 100%… Continue reading

When one door closes, another opens. The COVID-19 pandemic has forced many  small businesses to permanently shutter. But it has also provided new opportunities, especially for gig economy workers and other sole proprietors who were laid off or furloughed during the pandemic. (See “Start-Up Hot Spots” below.) In fact, the Wall Street Journal recently reported that… Continue reading

Goodbye, 2020. Hello, tax season. Individual taxpayers have until April 15, 2021, to pay Uncle Sam for taxes owed for 2020. (Remember, you can extend the deadline for filing your return until October 15, but you can’t extend the deadline for paying what you owe without penalty.) Unfortunately, many people are struggling to make ends… Continue reading

Attempts to claim write-offs for bad debt losses have fueled controversies with the IRS for many years. Unfortunately, bad debt losses are increasingly common during the COVID-19 pandemic. Here’s an overview of the federal income tax treatment of these losses. The Basics The IRS is always skeptical when taxpayers claim deductions for bad debt losses.… Continue reading

Individuals who are eligible for federal income tax credits can significantly lower their tax obligations. It’s important to differentiate between tax credits and tax deductions. A credit usually provides greater tax savings than a deduction because a credit reduces your tax bill dollar for dollar. A deduction reduces only the amount of income that’s subject to tax. Here… Continue reading

The following table provides some important federal tax information for 2021, as compared with 2020. Some of the dollar amounts are unchanged and some changed only slightly due to inflation. Social Security/ Medicare 2021 2020 Social Security Tax Wage Base $142,800 $137,700 Medicare Tax Wage Base No limit No limit Employee portion of Social Security… Continue reading

Restaurants have struggled mightily during the COVID-19 pandemic. Thankfully, they’re specifically targeted for a new tax relief measure found in the massive Consolidated Appropriations Act (CAA), which became law on December 27, 2020. The new provision creates a temporary but meaningful tax incentive to spend more on business-related food and beverage costs. Preexisting tax breaks for… Continue reading

The massive COVID-19 relief bill signed by President Trump on December 27, 2020, contains a variety of tax breaks and authorizes direct payments to eligible individuals (see right-hand box). The law is titled the Consolidated Appropriations Act of 2021 (CAA) but two sections of it are called the COVID-Related Tax Relief Act (COVIDTRA) and the… Continue reading

Unfortunately, many businesses have already been forced to close their doors due to the economic fallout from COVID-19, and more will surely follow. Closing a business has important federal income tax implications that owners should understand. Here’s what owners of sole proprietorships and single-member (one-owner) limited liability companies (SMLLCs) need to know. Tax Treatment Depends… Continue reading