Compensation

Know the ins and outs of “reasonable compensation” for a corporate business owner

Owners of incorporated businesses know that there’s a tax advantage to taking money out of a C corporation as compensation rather than as dividends. The reason: A corporation can deduct the salaries and bonuses that it pays executives, but not dividend payments. Thus, if funds are paid as dividends, they’re taxed twice, once to the …

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Small business owners still have time to set up a SEP plan for last year

Do you own a business but haven’t gotten around to setting up a tax-advantaged retirement plan? Fortunately, it’s not too late to establish one and reduce your 2019 tax bill. A Simplified Employee Pension (SEP) can still be set up for 2019, and you can make contributions to it that you can deduct on your …

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Determine a reasonable salary for a corporate business owner

If you’re the owner of an incorporated business, you probably know that there’s a tax advantage to taking money out of a C corporation as compensation rather than as dividends. The reason is simple. A corporation can deduct the salaries and bonuses that it pays executives, but not its dividend payments. Therefore, if funds are …

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5 ways to withdraw cash from your corporation while avoiding dividend treatment

Do you want to withdraw cash from your closely held corporation at a low tax cost? The easiest way is to distribute cash as a dividend. However, a dividend distribution isn’t tax-efficient, since it’s taxable to you to the extent of your corporation’s “earnings and profits.” But it’s not deductible by the corporation. Different approaches. …

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Could your business benefit from the tax credit for family and medical leave?

The Tax Cuts and Jobs Act created a new federal tax credit for employers that provide qualified paid family and medical leave to their employees. It’s subject to numerous rules and restrictions and the credit is only available for two tax years — those beginning between January 1, 2018, and December 31, 2019. However, it …

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Time for NQDC plan deferral elections

If you’re an executive or other key employee, your employer may offer you a nonqualified deferred compensation (NQDC) plan. As the name suggests, NQDC plans pay employees in the future for services currently performed. The plans allow deferral of the income tax associated with the compensation. But to receive this attractive tax treatment, NQDC plans …

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Tax-free fringe benefits help small businesses and their employees

In today’s tightening job market, to attract and retain the best employees, small businesses need to offer not only competitive pay, but also appealing fringe benefits. Benefits that are tax-free are especially attractive to employees. Let’s take a quick look at some popular options. Insurance Businesses can provide their employees with various types of insurance …

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Assessing the S corp

The S corporation business structure offers many advantages, including limited liability for owners and no double taxation (at least at the federal level). But not all businesses are eligible – and, with the new 21% flat income tax rate that now applies to C corporations, S corps may not be quite as attractive as they …

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