As a business owner, you should be aware that you can save family income and payroll taxes by putting your child on the payroll.
Here are some considerations.
Shifting business earnings
You can turn some of your high-taxed income into tax-free or low-taxed income by shifting some business earnings to a child as wages for services performed. In order for your business to deduct the wages as a business expense, the work done by the child must be legitimate and the child’s salary must be reasonable.
The May 17 deadline for filing your 2020 individual tax return is coming up soon. It’s important to file and pay your tax return on time to avoid penalties imposed by the IRS. Here are the basic rules.
Failure to pay
Separate penalties apply for failing to pay and failing to file. The failure-to-pay penalty is 1/2% for each month (or partial month) the payment is late. For example, if payment is due May 17 and is made June 22, the penalty is 1% (1/2% times 2 months or partial months). The maximum penalty is 25%.
High-net-worth individuals donated $5.8 billion during the first six months of the COVID-19 pandemic — generous giving by most standards. This is according to a recent report, “Philanthropy and COVID-19 in the first half of 2020,” from the Center for Disaster Philanthropy and information service Candid. However, that $5.8 billion amount is deceptive, because nearly three-quarters of it came from one donor, Mackenzie Scott (the ex-wife of Amazon’s Jeff Bezos).
Are you thinking about setting up a retirement plan for yourself and your employees, but you’re worried about the financial commitment and administrative burdens involved in providing a traditional pension plan? Two options to consider are a “simplified employee pension” (SEP) or a “savings incentive match plan for employees” (SIMPLE).
In recent months, there have been a number of tax changes that may affect your individual tax bill. Many of these changes were enacted to help mitigate the financial damage caused by COVID-19.
Here are two changes that may result in tax savings for you on your 2020 or 2021 tax returns. The 2020 return is due on May 17, 2021 (because the IRS extended many due dates from the usual April 15 this year). If you can’t file by that date, you can request an extra five months to file your 2020 tax return by October 15, 2021. Your 2021 return will be due in April of 2022.
Many not-for-profits are just starting to emerge from one of the most challenging environments in recent memory due to the COVID-19 pandemic. Even if your organization is in good shape, don’t get too comfortable. Financial obstacles can appear at any time and you need to be vigilant about acting on certain warning signs. Consider the following.
Are you considering buying or replacing a vehicle that you’ll use in your business? If you choose a heavy sport utility vehicle (SUV), you may be able to benefit from lucrative tax rules for those vehicles.
The housing market in many parts of the country is strong this spring. If you’re buying or selling a home, you should know how to determine your “basis.”
How it works
You can claim an itemized deduction on your tax return for real estate taxes and home mortgage interest. Most other home ownership costs can’t be deducted currently. However, these costs may increase your home’s “basis” (your cost for tax purposes). And a higher basis can save taxes when you sell.
If you have a life insurance policy, you may want to ensure that the benefits your family will receive after your death won’t be included in your estate. That way, the benefits won’t be subject to federal estate tax.
No one needs to tell nonprofit organizations how tough the past year has been. According to the John Hopkins Center for Civil Society Studies, 7.7% of not-for-profit workers — nearly one million people — lost their jobs between February 2020 and January 2021. An even higher percentage of arts and education organizations lost jobs last year. Although the nonprofit sector received higher-than-usual donations in 2020, many nonprofits that sought COVID-19-related loans were shut out.
So the new American Rescue Plan Act’s (ARPA’s) provisions for nonprofits are welcome. Let’s take a look at some key elements.