Tax Musings of a Burbank CPA: Reminder about Corporate and Partnership Extensions

Ok, this is a reminder that S-Corporation and Partnership extensions will expire on September 15, so after today there are only 15 days to file. You also need to remember that C-Corporation extensions now expire this year on October 16, the same as personal extensions.  You have an extra month to file this year. Make sure you file by these dates as the IRS penalizes severely if you are late.    For financial,  accounting and tax musings, You can count on us to count for you! Email: bstonercpa@sbcglobal.net  Phone: 818-317-6035   Website: www.briantstonercpa.com AWARDED BEST ACCOUNTANT IN BURBANK, CA BY BEST BUSINESSES 2016, 2015 AND 2014!   Android and the IPhone:    Has been Featured On   https://twitter.com/bstonercpa

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Tax Musings of a Burbank CPA: What Is Reasonable Compensation?

For small businesses formed as an S Corporation and with plenty of profits, reasonable compensation is a term you may want to be familiar with.   Many small businesses have organized as an S Corporation form of entity.  In many cases, the S Corp election allows a business owner to save money on self-employment taxes, especially if they are operating as a sole proprietor.  S Corp profits, or distributions, are not subject to payroll taxes.  If you are a business owner taking a salary and contributing substantially to the operations of the business, you may think that you should just take the distributions and forget the salary.  After all, think how much you would save in payroll taxes.  But this has already been tried and shot down by the IRS in the courts.  And this is where the term reasonable compensation comes in.  The IRS requires that business owners that perform a substantial contribution to the business be paid a salary according to a number of factors.  This is called reasonable compensation. You can’t pay yourself below market and take a large amount in distributions.   The IRS has issued a fact sheet that describes the guidelines that can be used to [...]

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Tax Musings of a Burbank CPA: Remember Your Auto Mileage Log or You May Regret it Later

  If you are self employed or if you have a job where you drive a lot and don’t get reimbursed for mileage by your employer, make sure you keep a log of your automobile mileage each year. You need to calculate your business miles as a percentage of total miles annually, then use either the business miles at 53 1/2 cents a mile in 2017 or use the percentage to calculate your actual auto expense. If you get audited, your auto log (complete with beginning and ending odometer readings and the purpose of all the business travel daily) is the only piece of taxpayer prepared information that the IRS auditor is supposed to accept (but it doesn’t hurt to give the auditor a couple of auto repair bills that tie to the odometer readings that are in the log). I have been involved in many IRS audits where the automobile expenses were looked at by the auditor and I am pleased to say that to date I have never had a change to taxpayer auto expenses because of the mileage percentages (once we had a problem with some of the actual auto expense documentation, but if the taxpayer took [...]

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