Michelle Roberts

Business Organizational Structures

by Michelle Roberts | Aug 14, 2020 | Business Formation

One of the decisions that a business owner has to make is what type of organizational structure their business is going to use. There are four main types of business structures in the U.S:

Sole Proprietorship – the simplest business structure, in which a sole person retains ownership and control of the business. This is common for home-based business or services offered from your home that meet a need or customers or clients utilize your services from your home office. These businesses are responsible for their own record keeping and paying the IRS in the form of self-employment taxes and are held personally responsible for their company’s debt and financial obligations.
Partnership – is formed when two or more people join together to run a business. Each partner has equal share in the net profits and losses of their business. Like a sole proprietor, each partner reports their income on their personal tax return and pays self-employment taxes to the IRS. They are also personally liable for financial debt and obligations of their company and the actions of other partners.
Limited Liability Company – is a structure that can provide owners the protection from liability and other obligations similar to a corporation. Limited liability companies can also be set up and managed like partnerships. The taxation of LLCs also depends on its structure.
Corporations – probably the business structure most familiar to people. Corporations are the most complex business structure. Separates the liabilities and obligations incurred by company operations from being the responsibility of the owners. Corporations are regulated by the laws of the state they are set up in. Unlike sole proprietor and partnership businesses, corporations are taxed as separate entities at corporate tax rates.

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Businesses should implement best practices

by Michelle Roberts | Aug 12, 2020 | Bookkeeping, Payroll, Taxes

State and federal employment laws and labor regulations are continually being updated. Therefore, it can become more complicated for small businesses to keep current in regard to HR and payroll trends.

Be mindful of the following things as a basis of implementing best practices.

Paid Leave – States are passing paid leave legislation at a rapid rate – Michigan was first among these – and it may be a challenge for a small business to monitor having fewer resources than a larger business. The most notable change in Michigan is that businesses with 50 or more employees must offer leave to all types of staff, including temps and independent contractors. This may not apply to your business at the onset, but that may change whether it be through regulatory changes or the success and growth of your business.
Payroll Fraud – It happens much more frequently in small businesses than in larger companies. Payroll fraud can be committed by employers, who engage in wage theft; employees, such as those who work in the payroll department; third parties, such as cyber criminals. There are certainly things a business can do, here, to combat this, from routine audits of payroll, implementing safeguards against timecard manipulation and segregating payroll duties to a few people and having a “checks and balances’ policy, as well as providing cyber awareness training to your employees, including your payroll staff.
Timekeeping – Whatever the size of your business, federal law strictly mandates that employees who should be paid, i.e., those who are not volunteers, are to be paid the contract wage for each hour worked.
The New W-4 – Without the W-4 form, payroll processors cannot make the correct deductions from an employee’s wages. The form has been in place for decades, but for the tax year beginning 2020, an updated version is being issued.
Exempt versus Nonexempt – Determining whether an employee is exempt or nonexempt under the Fair Labor Standards Act (FLSA) and state law can be a chore –which is probably why some small businesses simply pay their entire staff a salary and then treat everyone as exempt – but identifying everyone as salaried-exempt without considering their job duties, these small businesses risk violating federal and state wage-and-hour laws. That’s why it’s always best to consult an expert like Dunham Tax Services to know how to proceed.
Pay Satisfaction – Always ensure you pay your employees fairly and accurately, on time, and when contractually obligated to do so. Moreover, make sure to offer convenient methods of disbursement, e.g., paper check, direct deposit, pay card.
Outsourcing – this may be an option for a small business to use an outside service provider than to hire staff to do this.

Seasonal Employees / Independent Contractors

by Michelle Roberts | Aug 10, 2020 | Taxes

It is still Summer and it’s important to consider a couple of things in the waning months regarding your seasonal employees:

Seasonal Employees – Employers usually must withhold Social Security and Medicare taxes from pay for part-time and season workers even if the employees don’t earn enough to meet the federal income tax filing threshold. Self-employed workers or independent contractors need to pay their own Social Security and Medicare taxes, even if they have no income tax liability.
Classification – Businesses must correctly determine whether summer workers are employees or independent contractors. Independent contractors are not subject to withholding, making them responsible for paying their own income taxes plus Social Security and Medicare taxes.

Owner-Operators: Dunham Tax Professionals LLC can help

by Michelle Roberts | Aug 7, 2020 | Bookkeeping, Taxes

Many owner-operators not only own and operate their own equipment; they all but live in their rigs: they also do most or all of the repair and maintenance on their own equipment not to mention stay in compliance with regulations.

It is important that the owner-operator find a qualified tax preparer who also understands that trucking is a unique industry with unique tax rules.

Dunham Tax Professionals is the company for you. Call us today so that we can help you start resolving your tax burdens. We will help you work with the IRS to reduce your taxes and work on repayment or other alternatives.
You may or may not be aware of these possible deductions as an owner-operator:

Advertising
Commissions and Regulatory Fees
Payments to employees, other drivers and contractors
Business insurance
Equipment
Health insurance
Legal and accounting costs incurred
Home Office equipment
Sleeping -related accoutrements like bedding and clocks
Retirement plans
Repair and maintenance costs
Truck supplies
2290 taxes
Tools
Per Diem
Hotel/Motel stays

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Trucking bookkeeping is a crucial task of successful owner/operators

by Michelle Roberts | Aug 5, 2020 | Bookkeeping

Trucking bookkeeping is among the most crucial tasks of successful owner/operators. The records and receipts kept are utilized in some aspects of your business – income tax minimization and reporting, warranty problems, monthly profitability, and maintenance information, just to name a few.

Here are some important tips to ensure that the IRS doesn’t take a bigger bite out of your bottom line:

Save Everything – Put an envelope inside the truck for gathering your receipts or utilize the dedicated folders on your laptop or in the cloud for e-receipts. Have them available for your month-to-month profit-and-loss statement and quarterly tax estimates. Even a scanned image of a receipt can be considered a proper record in a pinch.
Open A Separate Account – If you are an Owner Operator, open up an extra personal account, then save yourself the additional fees which are related to business accounts. Deposit all settlement checks into that account, then pay yourself for driving from that money. Pay all business costs from that account. Having a different account also will provide you convenient accessibility to necessary information in case you’re audited.
Use a Credit Card – this may seem like a no-brainer, but you should always look for a credit card that has the lowest interest rate available and no annual fee. Make a concerted effort to pay it in full each month as well.
Log It – Your Electronic Logging Device is always going to be the most accurate record you have for mileage and hours on the road and is crucial for per diems and meal expenses as well.
Carry a Notebook – in addition to your Electronic Logging Device, it is always a good idea to carry and use a notebook to keep track everything else for which you can’t get a receipt, like when you wash the truck at a coin-operated center or business usage of your personal car.
Keep It All – Anything you saved, compiled and used for a valid record for your tax return must be saved for a period of three years from that filing date.

IRS issues proposed regulations for TCJA’s simplified tax accounting rules for small businesses

by Michelle Roberts | Aug 4, 2020 | Taxes

IRS posted on 7/30/2020

WASHINGTON — The Internal Revenue Service today issued proposed regulations (PDF) updating various tax accounting regulations to adopt the simplified tax accounting rules for small businesses under the Tax Cuts and Jobs Act (TCJA).

For tax years beginning in 2019 and 2020, these simplified tax accounting rules apply for taxpayers having inflation-adjusted average annual gross receipts of $26 million or less (known as the gross receipts test).

Taxpayers classified as tax shelters cannot use the simplified rules even if they would meet the gross receipts test.

Prior to the TCJA, certain taxpayers could determine whether they were eligible to figure taxable income under the cash method of accounting by meeting a different gross receipts test. That gross receipts test was met if the taxpayer’s average annual gross receipts for all prior taxable years did not exceed $5 million.

After the TCJA, a taxpayer meets the gross receipts test and can use the cash method if average annual gross receipts for the three-taxable year period ending immediately before the current taxable year are $25 million (adjusted for inflation) or less.

The TCJA also exempted taxpayers meeting the gross receipts test from the uniform capitalization rules. Tax reform also added an exception to the requirement to use an inventory method if their inventory is treated as non-incidental materials and supplies, or in accordance with the applicable financial statement (AFS). If they do not have an AFS, taxpayers can use their books and records. The proposed regulations issued today implement these statutory changes and provide clarifying definitions.

The proposed regulations issued today also provide guidance for small businesses with long-term construction contracts and the requirements for exemption from the percentage-of-completion method and the uniform capitalization rules. For taxpayers with income from long-term contracts reported under the percentage-of-completion method, guidance is provided for applying the look-back method after repeal of the corporate alternative minimum tax and enactment of the base erosion and anti-abuse tax (BEAT).

For more information about this and other TCJA provisions, visit the IRS Tax Reform website.