Starting A Business?

The IRS Video Portal has videos with information on a wide range of topics.  If you're thinking of starting a business, here are some videos that might be helpful to you.

• Tips for new businesses
• Business taxes for the self-employed
• Who needs to file Schedule C and how to do it?
• Things to ask an accountant
• Avoiding the biggest tax mistakes

Source: The IRS

Home Office Deduction

Taxpayers who use their home for business may be eligible to claim a home office deduction. It allows qualifying taxpayers to deduct certain home expenses on their tax return. This can reduce the amount of the taxpayer’s taxable income.

• The home office deduction is available to both homeowners and renters.
• There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
• The term "home" for purposes of this deduction:
• Includes a house, apartment, condominium, mobile home, boat or similar property.
• Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.
• Doesn’t include any part of the taxpayer’s property used exclusively as a hotel, motel, inn or similar business.
• There are two basic requirements for the taxpayer’s home to qualify as a deduction:
• There must be exclusive use of a portion of the home for conducting business on a regularly basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
• The home must be the taxpayer’s principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home, but also uses their home to conduct business may still qualify for a home office deduction.
• Expenses that relate to a separate structure not attached to the home will qualify for a home office deduction. It will qualify only if the structure is used exclusively and regularly for business.
• Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction: 
• The simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500.
• When using the regular method, deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses.  Direct expenses are deducted in full.

Source: The IRS

Taxpayer Who Itemize

Taxpayers who itemize their deductions may be doing things that will affect the tax returns they file next year.
The higher standard deduction means fewer taxpayers are itemizing their deductions. However, taxpayers who still plan to itemize next year should keep these tips in mind:

• Deducting state and local income, sales and property taxes. The deduction that taxpayers can claim for state and local income, sales and property taxes is limited. This deduction is limited to a combined, total deduction of $10,000. It is $5,000 if married filing separately. Any state and local taxes paid above this amount can’t be deducted.
• Refinancing a home. The deduction for mortgage interest is also limited. It’s limited to interest paid on a loan secured by the taxpayer’s main home or second home. For homeowners who choose to refinance, they must use the loan to buy, build, or substantially improve their main home or second home, and the mortgage interest they may deduct is subject to the limits described in the next bullet under “buying a home.”
• Buying a home. People who buy a new home this year can only deduct mortgage interest they pay on a total of $750,000 in qualifying debt for a first and second home. It’s $375,000 if married filing separately. For existing mortgages, if the loan originated on or before Dec. 15, 2017, taxpayers continue to deduct interest on a total of $1 million in qualifying debt secured by first and second homes.
• Donating items and deducting money. Taxpayers must itemize deductions to deduct charitable contributions and must have proof of all donations.
• Deducting mileage for charity. Driving a personal vehicle while donating services on a trip sponsored by a qualified charity could qualify for a tax break. Itemizers can deduct 14 cents per mile for charitable mileage driven in 2019.

Source: The IRS

Registered Agent Responsibilities

What are my duties as a registered agent or as an appointed agent?

A registered or appointed agent’s duties are:

• To receive or accept, and forward to the represented entity at the address most recently provided to the registered agent by the represented entity, or otherwise notify the represented entity at that address regarding, any process, notice, or demand that is served on or received by the registered agent; and
• Provide the notices required or permitted by law to be given to the represented entity to the address most recently provided to the registered agent by the represented entity.

Who can be a registered agent?

Generally, an individual Texas resident or an organization that is registered or authorized to do business in Texas with a business office at the same address as the entity's registered office may consent to serve as the registered agent. Although an officer, owner, or employee may serve as an entity's registered agent, an entity may not serve as its own registered agent. An entity may contract for the provision of registered agent services from another business entity, such as a service company. The secretary of state, or other governmental agency or authority, cannot serve as an entity's registered agent

My registered agent resigned or moved. Do I need to file anything with the secretary of state?

Yes. A domestic or foreign filing entity is required to continuously maintain a registered agent and registered office in Texas. Failure to do so may result in the involuntary termination of a domestic filing entity or in the revocation of a foreign filing entity's registration. Therefore, it is important that an entity file a statement of change of registered agent and/or registered office with the secretary of state to keep the name of the registered agent and the registered office address current. See Form 401 (Word, PDF).

Source: Texas Secretary of State

2020 Draft of the W-4

The Internal Revenue Service released the 2020 draft for Form W-4 on May 31, 2019.

https://www.irs.gov/pub/irs-dft/fw4--dft.pdf

For most taxpayers, the draft of the 2020 W-4 intends to simplify the process of reporting the amount of federal withholding an employee wants from each paycheck. Anyone who wishes for a more accurate calculation of their federal withholding can answer a set of straightforward questions on the worksheets.

Two other ways to handle withholding are to use worksheets for individuals with other sources of income who wish to calculate additional withholding amounts. The employer will not be provided these sheets, thus assuring the taxpayer’s privacy. An employee can also use a Withholding Calculator to determine the most accurate withholding.

In the draft 2020 W-4, there are no more allowances but, rather, a shift toward dependents and deductions to align with the new tax law.  For example, the Child Tax Credit increased to $2,000 for children younger than 17 (and $500 for other dependents). Some itemized deductions that are still on the books include qualifying home mortgage interest, charitable contributions, state and local taxes (SALT), and medical expenses in excess of 10 percent of one’s income. However, due to the changes in the tax law, significantly fewer people will itemize deductions because of the increase to the standard deduction, as well as the cap to SALT ($10,000). 

Source: Paychex

How to Handle Multiple Rental Activities and the 199A Deduction

There’s a lot of confusion out there around your rental activity and Section 199A. Your Section 199A considerations multiply when you have multiple rental activities. Here’s what you need to consider:

·         Are your rental activities multiple trades or businesses, or one trade or business?

·         Can you aggregate the rentals for Section 199A purposes? Do you want to?

·         How does the Section 199A rental safe harbor impact your Section 199A deduction if you use it?

Whether your rental activities are each a trade or business, or they constitute one trade or business, is inherently based on the facts of your particular situation. The IRS also believes that multiple trades or businesses will generally not exist within an entity unless it can use different methods of accounting for each trade or business under the Section 466 regulations. These regulations explain that you can’t consider a trade or business separate and distinct unless you keep a complete and separable set of books and records for that trade or business.

This determination is an important factor for you if any one rental activity (taken individually) doesn’t rise to the level of a trade or business, but all the rental activities (viewed collectively) do rise to the level of a trade or business. One of the factors the IRS looks to when determining whether a rental activity is a trade or business is the number of properties rented.

Aggregation

The Section 199A regulations allow you to aggregate multiple trades or businesses such that you treat the aggregated group as one trade or business for determining your Section 199A deduction. This is an important consideration if one or more of your rental businesses have insufficient wages or un-adjusted basis in assets (UBIA) to get the maximum Section 199A deduction for that property.

The final regulations tell us you can aggregate, in most circumstances, provided that the rental activities share centralized administrative functions, such as accounting, legal, and human resources functions. The big wrinkle is the type of rental business: you generally can’t aggregate residential rental businesses and commercial rental businesses with each other because they aren’t the same type of property.

Rental Safe Harbor

Along with the final regulations, the IRS gave you an optional safe harbor to deem your rental activities as qualifying for the Section 199A deduction. The safe harbor isn’t the best strategy because most rentals qualify as a trade or business anyway.

Deduct Your Costs of Sponsoring Sports Teams

Have you wondered what it takes to deduct the costs of sponsoring a sports team? What if you play on the team? Could you pay for the team travel expenses?

Revenue Ruling 70-393 states that the monies spent to outfit and support a sports team are similar to monies spent on other methods of advertising; accordingly, you may deduct them as business expenses for federal income tax purposes.

In the Strong case, Strong Construction Co. Inc. advertised its business primarily through either word of mouth or athletic sponsorships. As part of the athletic sponsorships, the corporation paid for the uniforms, logo design, hats, T-shirts, sweatpants, coats, bags, and pants for all players on its sponsored teams (broomball, softball, wrestling, etc.). The court ruled that the expenses were ordinary and necessary business expenses and that Strong could deduct them as advertising or promotion.

In the Bower case, James Bower sponsored the Lafayette Bower Housing Hustlers basketball team, and he was both an assistant coach and a player. As the Hustlers’ sponsor, Bower paid for the team’s travel, lodging, food, promotions, AAU fees, tournament fees, gym rental, and uniforms. The court noted that Bower’s sponsorship increased his commodity brokerage commissions and generated additional clients; accordingly, the court ruled that Bower’s sponsorship expenses were deductible business expenses.