Lea Uradu, J.D.

A net operating loss (NOL) is when a business’s tax deductions exceed its income in a tax period. Tax rules allow owners to use losses incurred in one year to reduce income in other years and boost their refund. Presently, the NOL deduction is limited to 80% of taxable income, determined without regard for the…

There are numerous tax write-offs for self-employed professionals that individuals can claim to save thousands of dollars. Here are 18 tax write-offs you should claim as a small business owner: Qualified business income tax deduction (QBID) Self-employment tax deduction Home office or work space tax deduction Depreciation deduction Internet and phone expenses Health insurance premiums…

While S corporations (S-corps) do not pay federal income taxes, they do pay payroll taxes, built-in gains tax, and excess net passive income (ENPI) tax. They also pay penalties if their annual information return Form 1120S is not filed on time. Both the ENPI and the built-in gains tax are only applicable if the S-corp…

A single-member limited liability company (LLC) and a sole proprietorship are two of the most commonly created types of small businesses: A single-member LLC is a disregarded entity that is organized under state law by filing Articles of Organization with only one owner. LLCs protect owners from personal liability for the debts and obligations of…

We’ll walk you through filling out Form 2553, which businesses and other eligible entities use to elect to pay taxes as an S corporation (S-corp). To make this election, you’ll have to fill out a four-page, four-part form. Once completed, you’ll be notified roughly 60 days after you filed whether your election was accepted or…

IRS Form 6198 helps you determine how much of your losses are deductible when you’re not at risk of losing a portion of your investment in a business. The most common example of an investment which you are not at risk of losing is a nonrecourse loan to your business that you are not personally…

A disregarded entity is a business that’s not separate from its owner for federal tax purposes—the owner reports and pays the business portion of income and taxes on their tax return. This information is often reported on Schedule C, but you may also find it on Schedule E or Schedule F. Filing Requirements of Disregarded…

A guaranteed payment is a specified payment that partnerships pay to their partners for service or use of capital (as if they were made to a person who is not a partner). These payments are made without any regard for the profits of the partnership. The goal of paying guaranteed payments is to assure that…

The accumulated earnings tax (AET) is a penalty imposed by the IRS on corporations for keeping earnings for longer than they need to run their businesses rather than paying out dividends to shareholders. The goal of the tax is to discourage corporations from accumulating excessive funds to avoid shareholder-level taxes. Corporations can avoid being exposed…

What makes an S corporation (S-corp) salary reasonable depends on several factors, such as the type of work being done, business standards, and company profit. Setting a reasonable salary is important for operating an S-corp and also keeps the IRS from reclassifying your distribution and exposing you to penalties, interest, and additional taxes. Factors Affecting…

A C corporation (C-corp) is a business structure typically used by larger companies or those seeking funds from investors. Many business owners who opt to organize as a C-corp do it because they are required to; for instance, if they have over 100 shareholders. Other owners choose it to attract investors, such as those who…

A personal service corporation (PSC) is a type of C corporation (C-corp) where the owners provide service personally to people or groups. A qualified PSC is where employees providing substantially all the professional services own at least 95% of the stock. These services can be in various professional business fields, like accounting, law, counseling, and…