by Blair Butters | Jan 12, 2021 | Uncategorized
We’ve reached the end of the year; the time of year where you’re working on closing out your books for the calendar year. You may have already started planning for the new year and have set goals for 2021, but before you do, it’s important to look back at 2020 and determine how you can best utilize 2020 deductions when reporting the activity in 2021. There has been a lot of change when it comes to tax requirements and guidelines, so in this month’s blog we break a few of these down, some related to business income and others related to personal income. Retroactive Bonus Depreciation for Business The federal coronavirus relief bill and the CARES Act were passed by Congress in order to help offset some of the financial burdens on individuals and businesses due to the current pandemic. With its passing, new opportunities for deductions have emerged. Thanks in large part to the CARES Act, a technical problem has been fixed that now allows a 100 percent bonus depreciation for qualified business improvements which are generally capital expenditures like remodeling the inside of buildings. It does not include improvements or remodeling for residential rentals or personal homes. It also does not include outside or structural remodels to your brick-and-mortar stores. However, the great news is that this is a retroactive fix, so businesses can fully deduct qualified improvements dating back to January 1st, 2018 by amending previously filed tax returns. Business Income Reduction If you are an accrual basis taxpayer, make sure that you accrue for 2020 expenses incurred prior to January 1, 2021. If you incurred...
by Blair Butters | Oct 28, 2020 | Uncategorized
When starting a small business, one of the most important decisions you will make up-front is how you’re going to structure and register it with the state and the federal government. How your business is structured will affect how you are categorized for income tax purposes, so having all the information and making an informed decision will save you any surprises when it comes to tax season, not to mention the cost of having to change the designation at a later date. So how do you know which structure is right for you? Your business structure is determined by the type of organization you select and the number of owners within the business. We will focus here on the income tax aspects of the entity choice for small start-up businesses reviewing three common structures – sole proprietorships, general partnerships, and Limited Liability Companies (LLCs). We will not consider the legal ramifications of the entity choice as you will want to consult with an attorney regarding the legal aspects of the different entities. We will also not consider other taxation issues such as sales, use or excise taxes, nor will we discuss the taxation rules of rental activities. Here’s a basic breakdown of the income tax characteristics of various small, non-corporate, business entities… Sole Proprietorship If you are the sole owner, registering as a sole proprietorship is one of the most simple and common ways to structure your business. In fact, you are automatically classified as being a sole proprietorship if you carry out business activities but are not registered as any other kind. This structure gives you complete control...
by Blair Butters | Oct 15, 2020 | Client Features
Today we are excited to introduce you to Steven (Steve) Clausen, owner and operator of Clausen Automotive and P&B Truck Accessories. The Road to Entrepreneurship Fueled by a desire to be self-employed and to use the skills he learned working at Chevrolet, Steve set out to purchase his own shop in 1975. The garage was originally located on Milwaukee Street in Madison, WI. Back then, Steve worked on cars and trucks that had carburetors, points, and plugs. All of these are now things of the past and Clausen Automotive has since transitioned to its current location on Stoughton Road, where the types of cars they work on have also evolved… More on that to come. Next to Clausen Automotive sat a retail shop: P&B Truck Accessories. The shop was owned by a company named Penda, who had originally purchased it from 2 gentlemen by the names of Paris and Burns (where the P&B came from). After a few years in business, Penda decided to stick with manufacturing, so the retail business, which sat in a building adjacent to Clausen Automotive, went up for sale. In January of 1990, Steve and his wife decided it would be the perfect opportunity to expand their business. They bought P&B Truck Accessories, which is now the largest truck accessories store in the city of Madison. Changing Gears: Innovation and Success One of the most poignant aspects of Clausen Automotive and P&B Truck Accessories is that they stay nimble and relevant in the current market by adapting to new challenges and industry upgrades. This is a process Steve has prioritized since his first days...
by Blair Butters | Aug 28, 2020 | Uncategorized
As part of the Appropriations Act of 2020 that was signed into effect at the end of 2019, several tax laws were extended (sometimes called the “extenders”) that had previously expired on December 31, 2017. Three of the more common tax items that were extended include the Nonbusiness Energy Property Tax Credit, the Mortgage Forgiveness Exclusion, and a Mortgage Insurance Premium Deduction. The applicability of these tax items was extended to the 2020 tax year and was made retroactive to December 31, 2017, meaning you can amend your 2018 and 2019 tax returns to include these items. Therefore, it could be in your best interest to see if they apply to you. The Energy Tax Credit – Nonbusiness Energy Property Tax Credit This credit applies to certain energy improvements to your principal residence. Qualified energy improvements include items such as installing new exterior windows or doors or home insulation. Residential energy improvement costs include installing certain water heaters, furnaces, and cooling systems. To qualify for the credit, the improvement must meet certain energy efficiency standards and be installed and ready to use prior to the end of the tax year. To document that the improvement qualifies for the credit, you can rely on a certification statement from the manufacturer of the product. For items such as windows, doors, and insulation, you can claim 10% of the cost of the improvement, with a $2,000 lifetime limit for windows. Note that only the actual cost of the product applies to the credit, not the installation cost. Furnaces and cooling systems have set amounts for the credit and the installed cost qualifies....
by Blair Butters | Jul 24, 2020 | Uncategorized
It’s no secret that the coronavirus has substantially impacted our economy. If you’re a business owner, chances are you applied for one of the business relief programs that were made available as part of the CARES Act (Coronavirus Aid, Relief, and Economic Security Act), a $2 trillion stimulus package that went into effect on March 27, 2020. One of the temporary programs of the stimulus package was the Paycheck Protection Program (PPP) loan. Though the PPP loan application deadline has been extended to August 8, 2020, the businesses that applied for the loan in April and May are now turning their attention to the Loan Forgiveness application. So, what exactly is the PPP loan and what do you need to know about the forgiveness application process? What is the Paycheck Protection Program Loan? At its foundation, the PPP loan was created with one simple set of rules: businesses who qualified to receive the loan have 8 weeks to spend the loan proceeds on payroll and state payroll taxes and certain non-payroll expenses, which include rent, utilities, and mortgage interest (if applicable), with a maximum spend of 25% on the non-payroll items. However, as part of the PPP Flexibility Act, the SBA added in a 24-week option and gave businesses a little more flexibility by allowing them to spend up to 40% on the specified non-payroll expenses during that time. At the end of the 8 (or 24) week period, the business may have some or all of the loan forgiven depending on how the money was spent and whether the number of full-time equivalent employees changed as compared to...
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