Liz Smith, CPA, MSTFP

Employers claiming a $2,400 Work Opportunity Tax Credit (WOTC) for hiring felons must follow a strict set of procedures to qualify for the credit. The first step is to have the potential employee complete IRS Form 8850 before offering them employment. You’ll then need to have the qualifying candidate certified by the state and file…

Federal tax credits and deductions both reduce tax owed, but each provides tax savings in a different way. Tax deductions reduce the income subject to tax. Tax credits reduce the tax owed on the income and, in some instances, may result in a refund even when no tax is owed. Determining Your Marginal Tax Rate…

In this article, we explain how to fill out Schedule F for reporting farming and agricultural income and expenses. In accordance with the IRS’s Schedule F instructions, the information below includes details on document assembly, form completion, and filing. As an additional resource, we’ve provided a sample completed form. Step 1: Assemble Supporting Workpapers It…

Operating a limited liability company (LLC) comes with the advantages of limited liability protection, ease of setup, flexibility in ownership type, and the ability to specially allocate distributions. Meanwhile, drawbacks include inconsistency in state law, finite entity life, and self-employment tax. While an LLC does have disadvantages, the benefits frequently outweigh the cons for small…

A limited liability company (LLC) is a form of business that protects a business owner’s personal assets from legal claims against the business. Unlike with limited partnerships, protection extends to all members of the LLC, including those with managerial authority. If the election to tax the LLC as an S corporation (S-corp) is made, then…

The cost of educating yourself or your employees is a deductible business expense if it is a condition of employment or maintains or improves skills used in the current business—the courses can’t qualify the student for a new career. In some cases, an education expense might qualify for both the business deduction and a personal…

The list below includes the most common business expense categories that a small business may encounter; it’s not an exhaustive list. In general, you may deduct expenses that are ordinary and necessary for your business. The IRS website defines “ordinary” as something common for your industry and “necessary” as something helpful and appropriate for your…

Our article provides Form 8027 instructions by section, from basic business information to the amounts of tips to be allocated. The form is used to report food and beverage sales, report tips declared by employees, and identify any additional allocation of tips by the employer. It must be completed by large food or beverage establishments,…

The steps below are designed to help you make sense of the IRS Form 8846 instructions for claiming the FICA tip credit. Examples of the completed form have been provided for reference. To prepare the form, you’ll need to have the company’s legal name, EIN, and total tips paid to employees during the year. Form…

Without QJV rules, a business that is not formally organized with a state but is solely owned and operated by a married couple would default to being treated like a partnership for tax purposes—even when there is no official partnership agreement. Being treated as a partnership for tax purposes would subject the taxpayers to more…

The FICA tip credit is an income tax credit claimed by employers in food and beverage industries to offset the cost of the employer FICA they pay on reported tips. It encourages employer reporting of tip income by providing an income tax credit based on the amount of payroll tax paid on employee tip income…

Rental property depreciation is the process of deducting the cost of your rental property over time. With it, investors in income-producing property can deduct the cost of the asset over a series of tax years; the cost of land is not depreciated. The annual depreciation deduction is based on two factors: Your basis in the…