Our Office will be closed Nov.21 – Nov.25 in observance of Thanksgiving. We will return to regular business hours on Monday, Nov. 28.
Our Office will be closed Nov.21 – Nov.25 in observance of Thanksgiving. We will return to regular business hours on Monday, Nov. 28.
As the 2021 tax filing season progresses, small businesses and self-employed taxpayers should make certain they are taking advantage of all of the tax deductions and opportunities available to them on their 2021 federal income tax returns. Tax savings increases after-tax cash flow and can mean greater return on investment and more money to fund expansion and the overall growth of the business. The following are 10 top tax breaks for small businesses and business owners to keep in mind when finalizing their tax returns for 2021 and planning for 2022.
#1: Travel expenses. Work-related travel expenses are deductible. Qualifying expenses include airfare, hotels, rentals, car expenses, dry cleaning and more. However, the business trip must be longer than a normal workday and require an overnight stay.
#2: Business meals. Up to 50% of the costs of business meals (both food and beverages) may be tax deductible if certain requirements are met. The deduction increases to 100% for meals at restaurants during 2021 and 2022 under a pandemic-related exception. To qualify as deductible, the meal must be business related, the business owner (or an employee) must be present at the meal and the expense cannot be lavish or extravagant. In addition, the cost of the meal must be separately stated on the bill or receipt from any costs associated with entertainment, which are generally not deductible.
#3: Bonus depreciation + Section 179 Deductions. Bonus depreciation of 100% applies to qualifying new or original use property, as well as non-original use property, with a tax life of 20 years or less — this means that qualifying property can be fully expensed in the year it is placed in service. The 100% bonus depreciation deduction also applies to certain other classes of property, including “qualified improvement property,” which is a broad category of internal improvements made to non-residential buildings after the buildings are placed in service. From 2023, the bonus depreciation percentage decreases by 20% per year until it is fully phased out beginning in 2027. Businesses should consider placing qualifying assets in service before the end of 2022 to take advantage of the 100% rate.
Section 179 also allows a limited deduction of up to $1,050,000 for the full cost of qualifying assets placed in service during 2021 and is generally used by smaller businesses before taking bonus depreciation. Unlike bonus depreciation, Section 179 expense is not added back for AMT purposes and applies on an asset-by-asset basis rather than to an entire class of assets. The Section 179 deduction is phased out when asset purchases exceed $2,620,000 and no deduction may be claimed by businesses whose asset purchases exceed $3,670,000 for the year.
#4: Home office expenses. Self-employed taxpayers (such as sole proprietors, active shareholders in an S corporation and partners in a partnership) who work from home may be able to deduct a portion of their rent or mortgage as well as other direct and indirect costs as home office expenses. To qualify, the home office must be used exclusively and regularly as the primary place of business and meet certain other requirements. Employees who work from home are not able to deduct home office expenses.
Direct home office expenses include, for example, the costs of painting or repairing the home office and depreciation deductions for furniture and fixtures used in the home office. Examples of indirect home office expenses include the allocable share of utility costs, depreciation, and insurance for the home, as well as the allocable share of mortgage interest, real estate taxes, and casualty losses. The allocation is generally based on the square footage of the home office relative to the total square footage of the home.
#5: Start-up costs. Taxpayers starting a new business can deduct up to $5,000 for start-up costs related to getting the new business up and running, and another $5,000 for organizational costs related to setting up the entity’s governing provisions. Qualifying expenditures include costs for advertising, marketing and research, and professional fees. Amounts that exceed the deduction limits are capitalized and amortized over 15 years.
#6: Tax accounting methods. Changing to optimal methods of accounting can provide opportunities for small businesses and their owners to reduce their current tax expense by accelerating deductions and/or deferring income. Changes in methods of accounting may also result in a significant favorable “catch-up” deduction in the year of the change. Automatic consent method changes can be made by filing a Form 3115 with the timely filed (including extensions) federal income tax return for the year of change and include the following, among others:
#7: Compensation planning. An accrual basis corporation or partnership can take a deduction for bonuses properly accrued on its books in the current tax year but not actually paid to its employees until the following tax year provided (i) the overall bonus pool is fixed and determinable at year end, and (ii) the bonus is paid within the first two and a half months of the following tax year. However, the bonus must be paid before the end of the year if paid by a personal service corporation to an employee-owner, by an S corporation to any employee-shareholder, or by a C corporation to a direct or indirect majority owner. Bonuses paid to partners are subject to special guaranteed payment rules. Guaranteed payments are ordinary income to the receiving partner and must be included in taxable income for the tax year within which ends the partnership tax year in which the partnership deducted the payments.
Businesses that have not been taking advantage of the two-and-a-half-month rule can file an automatic Form 3115 request with their timely filed federal income tax returns for the year of change to elect this treatment for compensation such as bonuses, commissions, vacation pay, severance and sick pay.
#8: PPP loan forgiveness. Businesses that have had a Paycheck Protection Plan (PPP) loan forgiven may exclude the amount of the forgiveness from their taxable income. A partnership or S corporation may treat the excluded amount as tax-exempt income that increases a partner’s or S-corporation shareholder’s tax basis in the pass-through entity, which is the starting point for determining the amount of the pass-through entity’s losses that the partner or shareholder may deduct. For this purpose, the tax-exempt income associated with the PPP loan forgiveness may be treated as received or accrued (i) as the eligible expenses are paid or incurred, (ii) when the application for PPP loan forgiveness is filed, or (iii) when the PPP loan forgiveness is granted.
#9: Section 199A qualified business income deduction. Non-corporate owners of partnerships, sole proprietorships and S corporations may be entitled to a deduction of up to 20% of their qualified business income (within certain limitations based on the taxpayer’s taxable income, whether the taxpayer is engaged in a service-type trade or business, the amount of W-2 wages paid by the business and the unadjusted basis of certain property held by the business). A safe harbor is available to individuals and owners of pass-through entities with respect to real estate rental businesses.
#10: Bad debts and worthless investments. Accrual basis taxpayers may be able to claim a full or partial deduction for a business bad debt in the year the debt becomes wholly or partially worthless. Also, if a taxpayer owns stock in a business or an interest in a partnership that becomes wholly worthless during the taxable year, the taxpayer may recognize a capital loss for the adjusted tax basis of the ownership interest at the time of worthlessness.
Tax Alert: Tabor Refund Bill passes Senate, awaits Governor’s signature
Colorado Springs, Colo. – Stockman Kast Ryan + Co, LLP (SKR+CO), the largest locally-owned certified public accounting firm in Southern Colorado, congratulates Buddy Newton, CPA , CVA®, on being recognized for the Construction Financial Management Association’s (CFMA) 2022 Rising Stars.
CFMA, the only nonprofit dedicated to the success and growth of construction financial professionals, announces its second class of Rising Stars. These leaders under 40 years old are honored for positively impacting their companies and the construction industry.
“It is inspiring to see these young professionals recognized for building a stronger industry,” said Tom Borgia, CFMA’s 2022-23 Chairman. “With a focus on the future, I am confident that these leaders will help guide us through the changing needs of the construction industry.”
“Leaders like these Rising Stars will surely help advance our industry, strengthen CFMA, help us innovate, and build inclusive community,” says Stuart Binstock, CFMA’s President & CEO. “I am excited to see how they will help carry the construction industry — and CFMA — into the future.”
Learn more about the winners at cfma.org/risingstars.
In a Notice 2020-66 the IRS has extended more tax deadlines to cover individuals, estates, corporations and others. This extension includes a variety of tax form filings and payment obligations that are due between April 1, 2020 and July 15, 2020, including estimated tax payments due June 15 and the deadline to claim refunds from 2016.
This notice is particularly relevant to nonprofit organizations.
The Notice also suspends associated interest, additions to tax, and penalties for late filing or late payment until July 15, 2020.
Inside Public Accounting (IPA) presented its first ranking of the nation’s TOP 300 accounting firms—the only one of its kind. Stockman Kast Ryan + Co, LLP (SKR+CO), the largest locally-owned certified public accounting firm in Southern Colorado, has been named one of seven recipients of the inaugural Excellence in Firm Culture awards.
The award is based on the results of an assessment of 2,000 staff members and recognizes firms demonstrating excellence in 12 core qualities of culture as determined by third-party culture experts, CultureIQ.
“I’m so excited about this particular recognition because culture is an expression of our collective values, daily interactions and general environment,” SKR+CO Managing Partner Trinity Bradley-Anderson stated. “The survey results conveyed the trust, respect and appreciation that we each try to demonstrate every day at Stockman Kast Ryan + Company.”
The 12 core qualities measured in the Culture Assessment: Agility; Alignment; Collaboration; Customer Centricity; Empowerment; Engagement; Growth Development; Innovation; Quality; Recognition and Rewards; Trust and Integrity, and Work-life Balance.
IPA Excellence in Firm Culture award winners achieved at least 75% of the total possible score in the combined 12 core culture qualities as well as a minimum of 75% of the total possible employee Net Promoter Score.
IPA also considered the firms’ employee Net Promoter Scores (eNPS) in determining the winners. According to CultureIQ, the eNPS captures a snapshot of employees’ willingness to be ambassadors for the company by advocating employment there.
About Stockman Kast Ryan + Company
Stockman Kast Ryan + Co, LLP (SKR+CO) is Southern Colorado’s largest certified public accounting firm providing a variety of in-depth business services. Tax services for individuals include businesses, fiduciaries and nonprofit organizations, audit and accounting services. SKR+CO also offers outsourced controller and contract CFO services as well as accounting and bookkeeping services – customized to clients’ needs, estate planning, small/emerging business advisory services, business valuations and litigation support services. SKR+CO is a member of DFK International/USA, a worldwide association of independent firms. For more information on SKR+CO visit skrco.com.
About INSIDE Public Accounting
The Platt Group, based in Indianapolis, was founded in 2006 and is a highly regarded independent publication was formerly known as Bowman’s Accounting Report. IPA publishes two award-winning publications: the IPA newsletter and the annual IPA National Benchmarking Report, along with in-depth reports focused on IT, HR and firm administration. For more information, visit www.insidepublicaccounting.com.
Colorado Springs, Colo. – Stockman Kast Ryan + Co, LLP (SKR+CO), the largest locally-owned certified public accounting firm in Southern Colorado, announces ten professional staff promotions:
Courtney has a Bachelor of Science in accounting from Adams State University and a Master of Accounting from University of Washington, Tacoma. She has been in public accounting since 2017.
Katie has a Bachelor of Science in Accounting from Marquette University and a Master of Accounting from University of North Carolina, Chapel Hill. She has been in public accounting since 2017.
Rob has a Master of Accounting from University of Colorado, Colorado Springs. He has been in public accounting since 2017.
Amy has a Bachelor of Accounting from Columbus State University and has been in public accounting since 2006.
Grant has a Bachelor of Accounting from University of Colorado, Colorado Springs and has been in public accounting since 2017.
James has a Bachelor of Science in Business with Emphasis in Accounting and Finance from University of Colorado, Colorado Springs and a Master of Business Administration with Emphasis in Accounting from University of Colorado, Colorado Springs. He has been in public accounting since 2016.
Jennifer received her bachelor’s from Columbia College and has her Master of Business Administration with Emphasis in Accounting from University of Colorado, Colorado Springs. She has been in accounting since 2018.
Jessica has a Bachelor of Science in Accounting from University of Colorado, Colorado Springs and has been in public accounting since 2017.
Justin has a Bachelor of Science in Accounting from University of Colorado, Colorado Springs and has been in public accounting since 2018.
Ramses has a Bachelor of Science in Accounting from University of Colorado, Colorado Springs and has been in public accounting since 2017.
About Stockman Kast Ryan + Co
Stockman Kast Ryan + Co, LLP (SKR+CO) is Southern Colorado’s largest certified public accounting firm providing a variety of in-depth business services. Tax services for individuals include businesses, fiduciaries and nonprofit organizations, audit and accounting services. SKR+CO also offers outsourced accounting and bookkeeping services – customized to clients’ needs – estate planning, small/emerging business advisory services, contract chief financial officer services, business valuations and litigation support services. SKR+CO is a member of DFK International/USA, a worldwide association of independent firms. For more information on SKR+CO visit skrco.com.