How to NOT run a side business for tax purposes!

A few years old, but still relevant; Forbes Contributor Tony Nitti provides an insight into how to navigate the tax code when it comes to running a side business. Section 183 of the United State Internal Revenue Code, often referred to as the “hobby loss rule” limits the amount of losses that can be deducted from income derived from secondary activities and hobbies. The code lists nine factors that are used to determine whether losses from your side business can be deducted from your tax returns.

While there is no magic number of factors you should have in your favor, it helps to have as many as possible. Several of the factors are out of your control, so it helps to run up the score on the ones you can control. You can control the manner of which your business is conducted, the expertise of you and your advisers on the topic, and the time you put into the activity.

These all boil down to planning and preparation. To maximize your chances of deducting these losses, run your side activity like a regular business. You can start by developing a strategy, maintaining accurate financial records, continually seeking to improve performance, and dedicating your time to the activity.

Interested in learning more? Contact RY CPA today to find out how you can assure your side business qualifies as tax deductible.

Read the full article here.

What Small Businesses don’t know about Obamacare

FEELING INSPIRED BY OBAMA’S SPEECH LAST NIGHT???

SEE HOW OBAMACARE CAN ACTUALLY HELP YOUR SMALL BUSINESS!

Last week we posted an article from Forbes highlighting a major pitfall of the Affordable Care Act (ACA) that impacts small businesses significantly… To recap, small businesses with less than 50 employees are not required to provide health insurance to their employees, but if they reimburse these employees or pay stipends for their individual health insurance plans thenthey can be penalized up to $100/day per employee. Although this sounds bizarre, ACA, or ObamaCare actually implements an initiative with benefits that far outweigh this pitfall.

Small businesses with less than 25 full-time equivalent employee (FTE)’s that provide group health plans for their employees are eligible to receive a general business tax credit up to 50% of the amounts paid towards their employees’ insurance premiums. Yes, that is a dollar for dollar credit, not just a deduction. Any expense over the allowable credit can be used as deduction. In order to qualify, the business must have fewer than 25 FTE’s with average annual wages below $50k, pay at least 50% of employees premiums, and the group plan must be purchased through the Small Business Health Options Program (SHOP Exchanges through your state’s health insurance marketplace).

Well you might be thinking, why do I HAVE to purchase through the SHOP Exchange? Well, this is actually a benefit, not a disadvantage. Before the SHOP Exchange, larger businesses often received better deals from insurance companies due to their buying power. With the SHOP, the same insurance programs and prices are offered to large and small employers. This results in lower insurance premiums for small businesses, most of which can be offset from the small business tax credit explained above. With the appropriate tax planning, you can now offer healthcare to your employees for a fraction of the costs before ObamaCare.

Feel free to contact us in regards to this topic and ways to implement this initiative within your business.

Health Insurance and Penalties, does it affect you?

If you have under 50 employees, you must provide group healthcare coverage or provide NOTHING at all related to health insurance … If you provide any type of stipend or reimbursement then you could be penalized $100 per employee per day…
Since the enforcement of the Affordable Care Act, many of our small business clients have been asking us whether they can continue to reimburse their employees for health insurance coverage or provide a stipend to employees for use towards purchasing insurance coverage. It is not required to provide group health insurance coverage for employers with under 50 employees, but if you decide to be a nice employer and provide a reimbursement plan or Employee Payment Plan (EPP) then you might be violating the ACA standards. Wait, what??? If you violate then you could be subject to a $100 penalty, per day, per employee under Section 4980D. That is $36,500 per employee per year. And yes, that penalty can be applied beginning with January 1, 2014. How does this make sense? You’re not required to provide group coverage, but if you provide a reimbursement plan or EPP then you could be fined? Wasn’t ACA supposed to benefit employees?

Read this helpful article from Forbes for the justification behind this rule… Feel free to message us or call with questions for guidance.

Transactions run through Paypal and Venmo not subject to 1099 rules?!

Paypal and other credit card merchant processors are not required to issue 1099’s to payees, unless they received $20,000+ AND had more than 200 transactions… Whereas any other payer is required to issue a 1099 to a payee if they paid them $600 in the ordinary course of business. This DOES NOT change the fact that you are still required to report all this income as a payee.

Loophole? Sounds a little bizarre??

Read full article here.