Business Entity Selection and the Tax Consequences of Converting

For this post Brandon Rains, founder of the Rains Laws Firm and an expert on business formation espouses his observations about business structure changes and I address the income tax reporting requirements of those changes therein. Generally speaking there are five choices when it comes to business structure and income reporting requirements: Sole Proprietorship (IRS Form…

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Why to Revoke An S Election and How to Do It – Internal Revenue Code Section 1362(d); Reg § 1.1362­6(a)

Many entrepreneurs get caught up in selecting the “most appropriate business structure” – particularly people planning to conquer the moon right out of the gate. If this is you beware as business structure is a determination that is best driven out of operational efficacy. Why? Most all new businesses fail, it is a fact of life. Properly…

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Can You Establish a SEP Plan if you are a Sole Proprietor? What if that Sole Proprietorship Had Historically Passive Income?

Regardless of their nature or topic matter, off beat questions are one of the spices of life. When it comes to the realm of taxation generally speaking the answers frequently distill down to – it depends. These two questions were asked of me on my last trip to New York City and I couldn’t restrain…

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What is the best Business Structure to form If Any?

What I love most about Colorado, more than the 300+ days of sun every year and the glorious rocky mountains, are the people.  For the most Coloradans are risk taking job creators, starting new businesses from scratch out of their garages and turning passions for a hobby into a business with a profit motive. Of…

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A Brief Introspection of Repair vs. Improvement: IRS Revenue Procedures 2014-16 and 2014-17

That’s right Y’all this is another one of those quite game changers for owners of tangible property concerned about keeping the IRS at bay by actually adhering to the specific US Tax Code and subsequent IRS Revenue Procedures. My apologies for being so brazen but I more than most appreciate the fact the the IRS compliance…

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IRC 7216 Disclosure Issues to Consider When Selling Your Practice – Start With A Tight NDA

As many of you know who follow this blog I also currently serve in a voluntary capacity as the President of the Colorado Society of Enrolled Agents, a state affiliate chapter of the National Association of Enrolled Agents. In this capacity I have been blessed with the opportunity to connect with many different tax practitioners…

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How to calculate stock and loan basis in an S Corp for tax purposes

If you are a shareholder of an S corporation you are responsible for keeping track of your own basis (investment value) in the S corporation of which you own shares. Tracking shareholder basis is usually not the S corporation’s responsibility. You can have stock basis and loan basis, adjusted each year based on the S corporation’s operations.  It is important to annually calculate…

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Withholding Tax for Social Security Goes to 6.2% of Wages

Contrary to the manufactured ‘news’ dribbling out of the main stream media to sell advertising, last week the IRS published updated employer’s withholding guidance clearly stating that employers are to now withhold Social Security tax at the rate of 6.2 percent of wages rather than the previous rate of 4.2 percent in place for the past two years. Alas…

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The Self-Employment Contributions Act

The Self-Employment Contributions Act (SECA) imposes two taxes on self-employed individuals: an old-age survivors and disability insurance tax (OASDI) commonly referred to as Social Security tax, and a hospital insurance or Medicare tax (HI). These SECA taxes apply to net earnings from self-employment above a $400 minimum for the tax year. There is an annually-adjusted ceiling limitation on the amount subject to…

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Start Up Expenses

The two major start up business expenses are the costs to organize and the costs of normal business expenses incurred prior to the beginning of business or the point where the business is ready to receive revenue. Sole proprietors do not normally have costs to organize because a business entity is not formed however they could expend substantial up-front business…

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