Much like the often-invoked “Bill of Rights” in the United States Constitution conveying the rights of its citizens, the IRS conveys to taxpayers a “Taxpayer Bill of Rights” that sets across the unalienable rights taxpayers have when dealing with the IRS.
“The Right to Be Informed”
The IRS makes available volumes of publications that are intended to inform taxpayers about tax rules and what they need to do to be in compliance with the law. Filing Instructions are attached to all IRS forms. However, sometimes a person’s particular tax situation may require more research.
“The Right to Quality Service”
The IRS serves taxpayers with the utmost in professional, prompt, and courteous service. Separate from any opinions and anecdotal experiences, this is something all government agencies strive for.
“The Right to Pay No More than the Correct Amount of Tax”
Taxpayers have a right to pay only the correct amount of tax that is legally due, once all factors surrounding a taxpayer’s situation has been properly assessed.
“The Right to Challenge the IRS’s position and Be Heard”
Taxpayers have a right to object to IRS rulings on their tax circumstances. For example, the IRS determining after an audit that an independent contractor working closely with a business is actually an employee and should be taxed as such. The business owner has the right to challenge such a determination.
“The Right to Appeal to an IRS Decision in an Independent Forum”
Related to the previously mentioned right, taxpayers have a right to appeal any determination made by the IRS in an independent forum. Basically, the taxpayer has the option to go as far as taking their cases to court.
“The Right to Finality”
Taxpayers are entitled a certain amount of time to challenge the IRS on its determinations of taxpayer situations. For example, going back to the previous example of an independent contractor/employee, the business has up to 90 days to file a petition for Tax court.
“The Right to Privacy”
Taxpayers have a right to privacy that basically means that the IRS cannot be more intrusive than necessary for their investigations within their jurisdiction.
“The Right to Confidentiality”
Taxpayers have a right to confidentiality with their information. The IRS is expected to not disclose information unless authorized by the taxpayer or by law. This right also extends to any third parties that may wrongfully disclose confidential information.
“The Right to Retain Representation”
Taxpayers have a right to designate an authorized representative of their choice when dealing with the IRS. Taxpayers who cannot afford representation have the right to seek assistance from the Low Income Taxpayer Clinic.
“The Right to a Fair and Just Tax System”
Taxpayers have a right to expect a tax system that considers all facts and circumstances that affect taxpayer’s ability to pay and provide information in a timely manner. For example, the IRS makes filing extensions available to taxpayers who may have trouble paying, however there is an expectation that the taxpayer files the proper paperwork.
While the IRS spells outs the rights of taxpayers, sometimes a particular business tax issue may not be immediately clear. Having a team, like us here at MiklosCPA, clarify such ambiguities in light of changing IRS tax rules can save a business owner from much headache and save some money from any penalties. Contact us if you would like to learn more of our services. Also, if you enjoyed this article, follow us on our socialmediapages for future updates.
Finding and retaining talent is one of the top priorities of employers. In a highly competitive market such as the Greater Los Angeles area, employers must not only pay competitive wages, but also offer additional benefits such as flexible work schedule and other fringe benefits. We at MiklosCPA, a California-based accounting and tax firm wish to provide clients and interested readers free tax resources and tips. It makes good sense to take advantage of offering tax-free benefits to your team while leveraging benefits from the tax deductions while they are still available.
There are numerous fringe benefits available for you to make your business more appealing while not increasing your costs. Your best employees may potentially decline higher wages offered by competitor primarily because of the benefits they have from your business.
These benefits such as Accident and Health Benefits, Dependent Care Assistance, Moving Expense Reimbursement, Transportation Benefits, and Working Condition Benefits – just to name a few- may not increase the gross income of your employees but can significantly build loyalty and increase their quality of life.
Here are some notable examples of employer sponsored tax-free benefits:
Your office is in downtown Los Angeles where pay for parking is a must?
As an employer, you can provide a Qualified Transportation Benefits. Many employers offer qualified parking benefits of up to $250 a month. This is a kind of benefit where your business can directly pay for employee parking costs. It’s tax-free extra money that can only be used for parking expenses, leaving your workforce with extra cash to use on something else!
Help the environment and encourage your office to take public transit!
Your business can also offer transit passes under the aforementioned Qualified Transportation Benefits. Say for example, a member of your staff takes the metro Gold Line downtown instead of driving on the 110 freeway. Your business may provide transit tokens or vouchers entitling a person to ride free of charge. Qualified transportation benefits often include up to $130 a month for public transportation costs. The IRS will even allow up to $20 a month for qualified bicycling commuting expenses!
Did you relocate your top talent from San Jose to Arcadia during the year?
If you, as an employer, paid for your associate’s relocation costs, some of those expenses may be tax-free. In general, if the move was more than fifty miles for a full-time job, the employer has the option to pay for reimbursements of household moving costs which are not taxable income for the newly hired and can be tax deductible expenses for your business! As always, exceptions exist and the details are important, so keep those receipts and check with a tax expert (like MiklosCPA) before claiming this benefit.
Bear in mind, tax reform may have altered the applicability of these benefits to your firm and employees. Regardless, employers must differentiate themselves from the rest of the competition. Employee benefits are a simple way to win loyalty and retain talent. As we all know, without a great team, no business can succeed. At MiklosCPA, we have helped businesses utilize benefits like the ones discussed as well as assist them with their accounting needs through our “virtual office” services. If you are interested in learning more about our services, contact us!
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You’ve made a decision to start a new company! Congratulations! Now comes the hard part – which one do you become? An S-Corp? An LLC? So many choices! There are multiple ways to classify your business and each classification offers some benefits that may be advantageous for taxation purposes. An LLC is one common classification that combines the benefits of sole proprietorships, partnerships, corporations, as well as limited partnerships. Whether you own your own business or are a partner of a business, it is worth taking the time to understand how an LLC could protect you from unnecessary liability, as well as make taxation of your company more simplified.
Types of LLCs
A business has multiple choices for what classification of LLC can be elected. Within those choices are requirements and in some cases default elections:
LLCs Classified as Partnerships: Requires at least two members to maintain classification. The partners should designate a member manager to be responsible for tax matters. If partnership drops below two members, the classification will default to a Disregarded Entity.
Example: Tom and Nick own a landscaping Services business classified as a Partnership LLC in Pasadena. Tom decides to buy out of the partnership. The classification for the LLC will have to change to a Disregarded Entity.
LLCs Classified as Disregarded Entities: Requires one-member owner to maintain classification. This classification requires the owner to report income, deductions, gains, losses, and credits on the owner’s tax return. Rather than being considered an employee of the LLC, the owner is treated in a similar manner to a sole proprietorship.
LLCs Classified as Corporations: Can have either a single member or multiple members. This classification requires either electing to classify as a C Corporation or an S Corporation. Taxation varies depending on which Corporation Classification is selected. However, classification changes must be approved by the IRS using Form 8832.
These classifications are not permanent as subsequent elections for classification can be done after prescribed periods when your business structure changes.
Still a bit confused? That’s okay. MiklosCPA knows that the IRS has some rules which are difficult to figure out. Our California-based firm can help you determine if an LLC is appropriate for your business and which classification would maximize benefits to your business. At MiklosCPA, we have helped businesses with their tax and accounting needs through our “virtual office” services. Give us a call to learn about how we work and how our services can benefit your business.
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You work hard for your paycheck, but are you taking advantage of all you can from your job? There are often employer benefits that employees may overlook in utilizing. Did you know that many employers offer non-taxable benefits that can increase your quality of life without increasing your tax bill? Here are a few tax-savings examples from our CPA firm which can help you and your family to reduce your tax burden.
Are you a working parent?
Dependent care assistance is a special benefit to help a working parent pay for the cost of daycare. You, as an employee under this plan can elect to have up to $5,000 of your pre-tax salary placed into a Dependent Care Reimbursement Spending Account to pay for your child’s costs.
Example: Living in the city of South Pasadena, and having a taking your child to a reputable daycare provider is expensive. Your $5,000 of salary after taxes (taxed at 25%) would provide $3,750 to pay for daycare. However, your Altadena employer offers dependent care assistance program, therefore the entire $5,000 can be excluded from your gross income is available to pay for child care. You just saved $1,250!
A few rules apply but it is worthwhile to check with your employer’s benefits coordinator to see if this benefit is available.
Are you going to night school?
Education is a great way to enhance your career and increase your earning potential. Many employers provide Educational Assistance Program, a type of tax free fringe benefit for their employees. Your employer can make a direct payment to your school or reimburse you of up to $5,250 for tuition, books, and fees you have incurred for taking classes towards your degree or a certification program. Some good news! The payment is excluded from your taxable income and is available every year for you to take advantage of this employer provided benefit.
Example: You are studying towards your MBA at University of Southern California (USC). You are attending the PM program which will take three years to complete from start to finish. During this time, you are also employed at a tech firm in Santa Monica which offers the Educational Assistance Program.
Since you took advantage of this benefit, you just saved $15,750 from your hefty tuition bills. Isn’t this great? Less to worry about, not to mention the thousands saved from student loan payments!
Employee benefits offer a great way to increase your quality of life without increasing your tax bill. In fact, some of these benefits will reduce your taxes! All of these benefits are governed by complex rules and regulations which can change from year over year. At MiklosCPA, we have helped businesses with their tax and accounting questions using our “virtual office” services. If you want to learn more about us, give us a call!
If you found this this tax tip useful, share it with your family and coworkers! All of us can benefit from some tax planning and exploring available benefits. Also check our site and social media pages for future articles. We post new articles periodically.
As a business owner concerned with efficiency and growth, you look for ways to save money and manage your time efficiently. Excited that your business is expanding, you may decide to purchase a company vehicle. What may seem like a large purchase, may be an essential investment that can certainly pay off. Whether you own a service that caters food, delivers floral arrangements, or meets a specific need that relates to your industry, having a company car can certainly aid in expanding your business footprint.
But you have to ask yourself – how will this affect compensation? How will I be able to deduct and save the most money for my business?
In accordance to the IRS Employer’s Tax Guide for Fringe Benefits, YOU (the owner) are allowed to give your employees a vehicle to be used for work purposes, especially if the annual mileage is around 10,000 miles. Being able to trust and have a sense of transparency with your employees of what is considered business use may be difficult. It is important that your policy must be thoroughly explained before designating the vehicle.
The next question is what is a reasonable vehicle? The general rule is to look at what is considered reasonable. Depending on the circumstances, we may want to look at the fair market value, the industry, what a person would normally pay for a vehicle, or what would reasonably be leased for a company purpose. Obviously, it is pretty unlikely that one would use a two-seater Ferrari to deliver flowers!
When you provide an employee with a vehicle to be used for business, it’s good practice for your employee to keep a proper log of mileage purposes. While the IRS allows for incidental use by the employee, it is important for you to understand that if your employee uses the vehicle excessively for personal errands, you, as the owner, may lose out on using this vehicle for a tax break. Insist that your employees keep track of all business and incidental personal use, as this will help minimize difficulties in both your operations and your tax impact.
If you allow a company vehicle for commuting, the value of a vehicle will depend on the series of commutes your workers will make with it. Let’s say, for example, that your worker drives home and to work every weekday. Each one-way commute can be multiplied by a set amount, adding value in its use. If your team decides to share the ride and create some type of ride pool, that set value will increase for every passenger in that car.
There are other technicalities that include restrictions of who gets to use the company car. Some employees that meet a specific tax bracket or own stocks in your company are unable to receive these type of benefits. Therefore they are not allowed to use the vehicle.
We understand that when you’re a business owner, you completely feel the cost of doing business every day. You want to strive and nurture your business, but sometimes, it’s hard to figure out what the right moves will be to take your firm to the next step. MiklosCPA can help your small business make sense of all the rules and make them work for you. We’ve got it covered, so that you can charge on ahead! If you want to learn about how our services work, give us a call!
One of the questions you must ask for your new business is: what accounting method is best? A mom and pop donut shop would prefer the simpler cash method of accounting as cash rolls in daily. Conversely, a construction firm may benefit from the accrual method as they invoice clients, but may only receive payment in large, periodic amounts.
Stick to the Accounting (Method)
There are a variety of different accounting methods, each with some pros and cons for your business to weigh upon. Newly formed businesses can determine their accounting method for their first tax filing without IRS approval. After that first filing, changing accounting methods requires filing Form 3115. The following are examples of when approval is required and when it is not required from Publication 538 by the Internal Revenue Service:
Approval Required
Approval NOT required
Going from the cash to accrual method
Correction of math, such as an error in figuring tax liability
Adjusting any item of income or deduction that does not involve the proper time for including it in income or deducting it
Changing the depreciation or amortization method
Some adjustments in the useful life of a depreciable or amortizable asset
Accounting methods and IRS rules to consider may be daunting for a newly minted business owner. Having a supporting team help you navigate those concerns can benefit down the road. Accounting professionals, like us at MiklosCPA, want to share knowledge and guide you through tax questions and accounting needs. We are a California-based accounting and tax firm that utilizes “virtual office” services to help your business succeed. We also post articles like this for clients and interested readers on our website, and on our socialmedia. If you would like to learn more about our services, set up a call with us!
MiklosCPA is a top-rated cloud-based Certified Public Accounting firm in Los Angeles, Orange County, California serving small businesses and start-ups.
