Daniel Cuddy photo
Cuddy Financial Services logo

Daniel R. Cuddy, CPA, CFP®

Personal Financial Representative

 

Cuddy Financial Services

7 William Street

Auburn, NY 13021

 

Phone:  315-252-3600

Fax:      315-252-3625

 

Email: dcuddy@cuddyfinancial.com

2022 Tax Planning Guide

Business Tax Planning - Noteworthy Considerations

View from above. Businesswoman showing pencil on laptop screen. Businessman listening to explanations and takes notes. Teamwork. On table, smartphones, digital tablet, paper, notebook, cup of coffee.

TAXABLE FRINGE BENEFITS
Generally, you must report the value of benefits you provide to your staff as employees’ taxable income—unless explicitly excluded by the IRS. This includes certain employee discounts on goods or services, parking subsidies of up to $280, company services at cost, and benefits of small value items, such as modest holiday gifts, minimal personal use of office equipment, or occasional company parties. The value of more substantial benefits must be included in taxable income. This includes things like personal use of a company car or a country club membership.


FAMILY MEMBERS ON PAYROLL
Consider adding your spouse or children to your payroll to help maximize business tax deductions. When you add your spouse to your roster, he or she may be entitled to make IRA contributions, or participate in your company’s retirement plan. Also, you can provide your spouse with family health insurance coverage, which will increase the business deduction for premium payments. And if you’re self-employed, any wages you pay children under age 18 are not subject to Social Security or Medicare taxes. Of course, your kids must work to earn the wages.


HOME OFFICE DEDUCTION
Self-employed business owners who use their home as their principal place of business and use a portion of their residence as a dedicated office (or warehouse/ storage) space can claim the home office deduction. You can deduct a portion of your mortgage interest, property taxes and insurance, and utilities equal to the percentage of your home’s square footage that’s dedicated to business use. Alternatively, the simplified method allows a maximum $1,500 deduction, depending on square footage used.


When reimbursing employees for business expenses, ensure that you receive adequate documents and receipts. All documentation should include the business purpose of the expense, and the relationship of the person for whom expenses were incurred.


EXIT PLANNING
When the time comes to sell your company, the tax consequences can have a major impact on the transaction’s profit. Consider an installment sale if the buyer lacks sufficient cash or will pay a contingent amount that’s based on the company’s performance. Installment sales have tax advantages, such as spreading the gain over many years to avoid triggering the Net Investment Income Tax or short-term capital gains. However, there can be drawbacks, including the recapture of depreciation in the year of the sale or increasing tax rates in future years. Of course, tax consequences are only one of many important considerations when planning to sell your business.


RESEARCH AND DEVELOPMENT (R&D) TAX CREDITS
The R&D tax credit has been around since the early 1980s and benefits U.S. businesses in various sectors, including manufacturing and distribution, software and technology, healthcare, construction, and consumer products. The amount of the credit is based on a company’s qualified research expenses and consists of wages, supplies used in the R&D process, and 65% of third-party contract research. Research must be completed in the U.S. and meet the IRS Four-Part Test. Your state may have its own R&D credit, so speak with your tax professional to find out if your business would be eligible.


DEFERRED PAYROLL TAXES
If your company utilized the CARES Act to elect to defer paying certain employment taxes for 2020, you should have made your first installment payment by December 31, 2021 and the remainder needs to be paid by December 31, 2022.


SUBSCRIBE

Enter your Name and Email address to get
the newsletter delivered to your inbox.

Please include name of person that directed you to my online tax guide so I can thank them personally.


CONTACT US

Enter your Name, Email Address and a short message. We'll respond to you as soon as possible.

Cuddy Financial Services and LTM Client Marketing are unrelated companies. This guide was created by LTM Client Marketing and was not written or created by the named financial professional and does not necessarily represent the views and opinions of Avantax Wealth Management® or its subsidiaries.
Avantax affiliated advisors may only conduct business with residents of the states for which they are properly licensed and registered. Securities offered through Avantax Investment Services, Member FINRA, SIPC, Investment advisory services offered through Avantax Advisory Services, Insurance services offered through an Avantax affiliated insurance agency. Not all products and services are offered by all financial professionals. Products and services listed may only be offered by properly licensed individuals.

The information and opinions contained in this web site are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for any damages resulting from the use of the published information. This web site is published with the understanding that it does not render legal, accounting, financial, or other professional advice. Whole or partial reproduction of this web site is forbidden without the written permission of the publisher.