Lea Uradu, J.D.

A sole proprietorship is a small, unincorporated business run by a single person. This business structure is easy to set up and doesn’t require much paperwork. The entity does not exist apart from the owner, so if you start one, then you can use your first and last names as your business name or adopt…

An employer identification number (EIN) is a unique nine-digit number that identifies your small business when you file taxes, open a business bank account, get a business loan, or perform other business activities. Obtaining an EIN is free, and you can apply for it online, by fax, or by mail if your business is in…

How you pay yourself as a business owner depends largely on your business’s structure. Sole proprietorships and partners can just take money from the business account, but S Corporation (S-corp) and C Corporation (C-corp) owners must pay themselves for any services performed through payroll. The drop-down menu below lets you choose your entity type to…

Before you make changes to your rental property, you need to first figure out if the change is a repair or an improvement. You need to know this because each has its own tax handling, which will have an effect on your bottom line: Repairs are a major rental property deduction and keep the rental…

An IRS-designated hobby loss is a loss from an activity that the IRS classifies as more of a hobby than a business. In general, a trade or business is an activity conducted for the purpose of making a living or profit. The IRS may presume that an activity is a hobby if it has not…

The at-risk rules limit your ability to deduct losses from your business activities. With these rules in place, the losses you may deduct on your individual tax return are limited to your investment in the company. The most common scenario that might result in a disallowed loss under the at-risk rules is if you invest…

The qualifying business income deduction (QBID) lets pass-through entities take 20% off of their qualified business income (QBI); it essentially reduces the amount of QBI exposed to taxation. For the purpose of this deduction, QBI is the net amount of qualified income, gain, deduction, and loss from any qualified trade or business, including income from…

To be treated as a real estate professional by the IRS, you must meet the following tests: Test 1: More than half (50%) of your personal services performed in all trades or businesses during the year are in real property trades or businesses wherein you materially participate. Test 2: Perform more than 750 hours of…

The term “material participation” is used to describe your involvement in a business activity. Generally speaking, you materially participate in an activity if you’re involved in the operation of the activity on a regular, continuous, and substantial basis. If you meet these requirements, any losses from the activity are not limited by the passive activity…

The Work Opportunity Credit (WOTC) is a federal tax credit for employers who hire and pay people who are having trouble getting into the workforce. The credit is usually equal to 40% of the qualified first-year wages of employees who worked at least 400 hours. The credit is reduced to 25% of the qualified first-year…

Business tax credits can be a powerful tool for small businesses to lower their tax bill directly. If you’re eligible for any of the tax savings credits—such as Work Opportunity Tax Credit, Employer Credit for Payroll Taxes Paid on Employee Tips, Employer Credit for Paid Family & Medical Leave, and Disabled Access Credit—you’ll likely need…

The Work Opportunity Tax Credit (WOTC) is a tax incentive offered to employers who hire disabled workers. The maximum amount of credit that you can claim is $2,400, depending on when the employee was hired and how long they worked for you during the tax year. This powerful tax savings tool is set to expire…