Business Taxes Archives - Mendes Weed, LLP

Tax Tips for Business Owners: How to Set Up or Run Your Business

If you are contemplating setting up your own business or already have a business in the Walnut Creek area, here are some useful tax tips.

First, you need to make sure you choose the correct accounting method for your business and file the appropriate annual returns.
If you are a new business, you need to make sure to obtain an employer ID number (EIN).
You need to make estimated tax payments during the year to cover your federal and state tax liabilities. Payments are usually due quarterly in January, April, July, and October. Consult a tax attorney to help you calculate how much you should pay. Make sure your payments are timely and sent to the appropriate address.
If you have employees, you also need to make sure to file the appropriate tax returns annually and quarterly and make payments in a timely manner.
If you have independent contractors, you need to make sure that you file the appropriate Form 1099.
You need to keep track of all business expenses and be able to substantiate them. Mileage also needs to be accurately computed and substantiated.

How Your Business Can Affect Your Estate Plan

If your business continues to grow, you may find yourself in a position where you need to consider how the estate tax affects your estate plan. Sections 303 and 6166 of the Internal Revenue Code (IRC) can help alleviate some tax burden for small business owners who qualify. This one-time opportunity allows the estate to redeem stock with very little tax cost or to defer estate tax for a period of time. This allows the business to generate more revenue to pay some of the taxes. The requirements for this are complicated, and you should consult with an attorney if you have questions.

Consult a Tax Attorney For More Tax Tips

Please remember this is only a summary of some of the tax tips business owners need to keep in mind. There are several other matters that may affect your tax status as a business owner, and a lawyer familiar with tax law and business taxes can assist you.

Contact Mendes Weed, LLP

Mendes Weed, LLP helps businesses comply with tax laws, and we may be able to help you as well. With offices in Walnut Creek, Sacramento, and San Francisco, we are conveniently situated to serve Northern California, but we assist clients throughout California and the U.S.

Christina Weed - Taxation Law Specialist

The Effects of Trump’s Tax Plan on You and Your Business

Business Taxes

us senate

As a taxpayer, you have an invested interest on any plan that affects your tax status. While progressive change is expected and desired, at what cost will these tax changes be to your personal tax status and that of your business?

If you are concerned about the impact the proposed tax changes will have on you or your business, it’s best to consult a tax attorney.

Possible Tax Changes for Individuals

While a final bill is not expected to be handed to the President until the end of the year, here is a summary of some of the tax changes for individuals.

The number of tax brackets may be reduced.
Standard deductions doubled to $24,000 for married joint, single filers go from $6,300 to $12,000.
Personal exemption eliminated.
Increase in child tax credit and $300 credit for non-child dependents.
House eliminates Marriage Penalty in reference to Child Tax Credit.

Changes to Estate Tax

Proposed changes include doubling the estate tax exemption and possibly eliminating estate tax and generation-skipping transfer tax by January 1, 2024.

Proposed Tax Changes for Businesses

If you are a business owner, these planned tax changes might affect you:

The maximum corporate tax rate will decrease from 35% to 20%.
Small businesses would be taxed at a maximum tax rate of 25%. This includes sole proprietorships, partnerships, and S corporations, with some exceptions.
Companies can write off business expenses immediately, but only for five years.
Income that businesses earn in foreign countries would not be taxed, but a 10% tax on high-profit foreign subsidiaries would be imposed. Also, a one-time tax on profit stockpiles would be imposed.

For more information on Trump’s Tax Changes and the implications they have on you, your future, or your business, click here.

If you would like to discuss how this could affect you or your business, make sure to schedule a consultation with a lawyer who understands the tax laws.

Contact Mendes Weed, LLP for Your Personal or Business Tax Matters

If you have questions or concerns about current or future tax laws and their changes, contact Mendes Weed, LLP We have offices in Walnut Creek, Sacramento, and San Francisco and represent clients throughout the United States.

Disclaimer: The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

The Effects of Owning a Business on Your Personal Taxes and Estate Planning

Business Taxes

Owning a business allows many freedoms and possibilities, but it also comes with a sense of responsibility to protect your future, your family, your net worth, and your estate.

If you are a business owner, it’s in your best interest to perform your due diligence when it comes to matters of how your business can affect your personal taxes as well as your estate planning.

Contacting a tax law and estate planning attorney with any questions or concerns about owning a business is a smart and proactive idea.

The Impact of Owning a Business on Your Personal Taxes

If you own a small business, you will likely need to make estimated tax payments throughout the year on a timely basis. You will also need to keep track of business expenses separately and make sure you can substantiate claimed expenses and proof of payment.

Some businesses may be able to claim a home office deduction. There are requirements and restrictions if a home office exemption is claimed, and it is important to understand them. For example, the size of the deduction depends on the proportion of home used for the business.

In the event your business is audited, you will need to be able to substantiate any expenses you claim. Doing this work ahead of time will save you a lot of time and headache if you need to respond to a document request during the course of an audit.

Failing to file the appropriate returns on time or maintain substantiation for expenses may lead to increased taxes, penalties, or interest.

Estate Planning and Owning a Business

You’ve worked hard to establish and run your business. Ensure the future of your business by setting provisions in your estate plans.

Buy-sell agreements should be considered as part of the overall estate plan. This can be very useful down the line if one of the owners dies or becomes incapacitated. A lawyer familiar with tax, business, and estate planning laws can discuss the value of having this agreement in place.

A business succession plan should be drawn up and implemented. Your business succession plan should be very thorough.

Failure to plan for your business ahead of time could cause a sudden vacancy in the company’s leadership. This could cause a negative impact on the culture of the business if employees are concerned about their positions or how the business will operate moving forward. These and other factors may ultimately put the business in a poor financial situation. There are many other reasons it is important to have a business succession plan. If you have questions or concerns, you should consult with a lawyer.

Should you find yourself in need of a tax law and estate planning attorney, please contact Mendes Weed, LLP. For your convenience, we have offices in Walnut Creek, San Francisco, Oakland, and San Jose.

California Tax Law and Sales Tax Information for San Francisco Retail Businesses

Business Taxes, California State Tax Law (FTB, EDD, and SBE)

If you run a new or established retail business in the San Francisco area, you may want to take a minute to brief yourself on tax laws for businesses. According to California tax laws, as imposed by the California State Board of Equalization, every non-exempt retail business that sells tangible, personal property for storage, use, or other consumption is required to charge sales tax, collect it and provide a receipt to the purchaser, and remit it to their taxing authority.

What Constitutes a Retail Business?

A retail business sells physical goods rather than services and charges consumers money for these material products. Any retailer engaged in business and having a significant presence in California, also known as sales tax nexus, for the purposes of commerce, constitutes a retail business and must charge, collect, and remit sales tax.

Tips for Determining if Your San Francisco Retail Business Should Charge, Collect, and Remit Sales Tax

If you can answer “Yes” to any of the following questions, as a retail business, your business should be charging, collecting, and remitting sales tax.

Does your business inhabit a physical location such as an office space, warehouse, storage room, or place of distribution?
Do you have any person working for you such as a representative, sales person, or contractor?
Has your business ever sold product at an out-of-state trade show?
Have you used an affiliate to refer business via a website or other internet-based link to sell product? AND have sales from this person exceeded $10,000 in the preceding 12 months AND are your preceding 12 months’ in-state sales in excess of $1 million?
Does your business incur income due to leasing rentals of tangible products?

Avoid Penalties for Not Complying with Business Tax Law for Sales Tax

As a business owner in California, whether in San Francisco or any other city and selling material goods, it is imperative that you charge, collect, and remit sales tax on any retail items you sell.

Failure to comply with the California sales tax laws for businesses could result in penalties, fines, additional interest, court costs, and an audit of your business.

You may be required to come up with the money out-of-pocket, which could cause hardship and undue stress. Failure to collect sales tax could be construed as tax fraud, in which case, criminal charges may be brought against you.

Helping Clients in San Francisco and Throughout California With Their Tax Law Questions

If you have questions related to business tax law and sales tax as it relates to your San Francisco business, please contact Mendes Weed, LLP. We have office locations in San Francisco, Sacramento and Walnut Creek and are available to meet by appointment.

Mendes Weed, LLP helps businesses comply with the tax laws, and we may be able to help you as well. With offices in Walnut Creek, Sacramento and San Francisco, we are conveniently situated to serve Northern California, but we assist clients throughout California and the U.S.

Disclaimer: The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

Tax Tips from the Tax Lawyer: What Retirement Plan Fits Your Business?

Business Taxes, Estate Planning

Whether your business is considering an IRA, 401(k), pension, or any other retirement plan option, it’s crucial that you find the best fit for your business size, future growth goals, and tax needs.

Retirement plans keep you and your employees on the right long-term financial track. They not only save money for both yourself and your business, they also modify how you pay taxes. Another major perk is that with the right retirement plan benefits, you ensure that your business stays competitive in the hiring market.

So, let’s take the confusion out of retirement packages and examine how each possibility impacts your taxes and long-term financial interests.

Simplified Employee Pension (SEP) IRA

Tax Tip: SEP IRAs are great for self-employed individuals or small business owners of Sole Proprietorships, Partnerships, Corporations, and S Corporations. They offer easy to set up and a low cost.

SEP IRAs have a quick and easy set-up process and do not require maintenance fees. That makes them appealing for small businesses with a smaller budget. One thing to keep in mind is that SEP IRAs offer large contributions compared to Roth IRAs—the lower of 25% of your income or $53,000. Your tax-deductible contributions go into a traditional IRA account and are not taxed until they are taken out.

A potential problem is that the employer makes 100% of the contributions in a SEP IRA. Employees do not make individual contributions. Beyond that, all employees in your organization are required to participate. That aspect is appealing to employees, but it can make growth more expensive for the business.

Savings Incentive Match Plan for Employees (SIMPLE) IRA

Tax Tip: SIMPLE IRAs work for businesses with a staff of 100 or fewer employees, including Sole Proprietorships, Partnerships, Corporations, and S Corporations. They require your business to match employee contributions.

The primary difference between SEP and SIMPLE IRAs is that with a SIMPLE IRA, your business is required to match employee contributions up to 3% of their salary or 2% of pay.

While there is some cost associated with a SIMPLE IRA, fees are lower than other plans. Your set-up costs will end up being either $25 per participant or a $350 fee for the plan as a whole. Also, like SEP IRAs, you have higher contribution limits than a Roth IRA.

One drawback is that if you are contributing to a 401(k) elsewhere, all contributions to a SIMPLE IRA will count against your 401(k)’s contribution limits. SIMPLE IRAs are also limited to small companies with a cap of 100 employees, and early withdrawal penalties are relatively high—as much as 25%.

Self-employed 401(k)

Tax Tip: Self-employed 401(k)s are perfect for small businesses with no employees other than their spouse, or corporations with no common-law employees. They give you the ability to contribute a larger amount to your retirement.

Self-employed 401(k) plans have a very flexible approach to contributions. For instance, your contributions are able to fluctuate each year and, if you are over 50, you can make a “catch up” contribution of up to $6,000. Contributions after the pre-tax limit are allowed, as they are converted into Roth solo 401(k) designated funds. Also, if your spouse does work as an employee for your small business, you can contribute to their plan as an employee and as an employer, offering greater potential savings.

If you’re looking for a very simple plan, however, a 401(k) might not be for you. With self-employed 401(k) plans, it’s crucial that you have a plan administrator, which means higher fees. You will also be required to file additional tax paperwork with the IRS, including Form 5500-EZ.

Looking to set up a self-employed 401(k)? We recommend seeking trusted advice as soon as possible.

Defined-Benefit Plan (Pension)

Tax Tip: Defined-benefit plans are best for businesses looking to have company-wide savings contributions that payout based on the duration of employment and other formulas.

While Defined-Benefit Plans are less popular these days, they do have some perks. For instance, you can combine Defined Benefit Plans with other retirement savings. Also, pension plans allow you and your employees to develop substantial benefits over a short period of time.

The catch is that Defined-Benefit Plans are the most expensive to set up and maintain. Businesses will need an enrolled actuary to file taxes and will pay high minimum contribution requirements. In addition, excise taxes can be applied if you either contribute too little or too much each year.

Thanks for reading our tips for choosing your business retirement plan. Mendes Weed, LLC is ready to work with you to pursue your best interests. Give us a call today.