Liz Smith, CPA, MSTFP

An initial boost of cash to keep operations afloat until the company can support itself may be obtained through outside funding. However, if an owner has cash available, then follow our guide on how to loan your business money. The process begins with creating a formal agreement. Next, you’ll transfer funds from your personal bank…

Paying your kids from your business is a legal way to reduce taxes for your company while utilizing your child’s standard deduction to provide tax-free income to your child. This strategy allows you to take a business deduction, teach your kids the family business, and keep money in the family. All businesses can deduct fair wages…

Leasing or renting property to your own business is an innovative way to create a business deduction while retaining and building real estate equity. When you own the building, you can manage the equity and take advantage of depreciation deductions on your personal tax return. If you lease or rent property to your partnership, S…

Installment sales are often used for the sale of a business and for real estate transactions. This sale structure is often chosen for the significant tax benefits to the seller and the unencumbered cash flow afforded to the buyer. How Does an Installment Sale Work? Without the installment sale rules, a gain or loss would…

Reading an IRS transcript can be very manageable if you know what to look for. You’ll first need to choose the right kind of transcript, review it for accuracy, and analyze the codes provided. You may have additional action items based on the information provided, but most likely, you’ll need to just sit tight and…

Code 150 on an IRS transcript means that the IRS has accepted your return for processing and has created a current-year file for you. Transcript code (TC) 150 may be shown with a dollar amount, representing the tax liability assessed. The tax assessment does not automatically mean you will owe the IRS money, as credits…

When transcript code (TC) 766 appears on an IRS transcript, it generally means a refundable credit has been applied to a taxpayer’s account. Refundable credits can generate refunds even when no tax is owed on the return. Sometimes, the transcript description for code 766 will say “tax relief credit”—and since tax relief is government assistance…

A corporate tax return is amended by filing Form 1120X. An amended return may be required to account for information that was either not reported or incorrectly reported on the original filing. The reason for the amendment must be detailed in Form 1120X, Part II—and any forms or schedules that changed should be labeled “As…

IRS Form 1125-A is used by corporations, partnerships, and multimember limited liability companies (LLCs)―filers of Forms 1120, 1120-C, 1120-F, 1120-S, or 1065―to calculate their cost of goods sold (COGS) for the year. It applies to businesses that sell products while businesses that sell services generally don’t need it—unless they also sell parts and supplies. Example…

In general, the IRS allows operators of daycare centers to take ordinary and necessary deductions needed to generate income. Aside from traditional business deductions, home daycare operators can take advantage of an expanded deduction for business use of homes—even if no rooms are used exclusively for the daycare. Here is the home daycare tax deductions…

IRS Schedule SE (Form 1040) is used by freelancers, sole proprietors, and independent contractors to calculate their Social Security and Medicare tax on self-employment income of $400 or more for the year. The form calculates what is similarly withheld on a W-2 as FICA tax for employees. A self-employed individual would generally be classified as…

The Commercial Clean Vehicle credit, also known as the IRC §45W credit, is a reduction in tax of up to $40,000 for qualified vehicles placed in service before Jan. 1, 2033. A clean vehicle is more energy efficient than vehicles without the “clean vehicle” classification. The specific criteria for clean vehicles are established by the…