Compensation – DougFreemanCPA.com

4 ways corporate business owners can help ensure their compensation is “reasonable”

C Corporations, Compensation, Compensation and Benefits, Employees, Small Business, Small Business Owners, Stocks, Tax Return / By Douglas Freeman

If you’re the owner of an incorporated business, you know 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. Therefore, if funds are paid as dividends, they’re taxed …

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Making withdrawals from your closely held corporation that aren’t taxed as dividends

Business Loans, Closely Held Corporations, Compensation, Corporations, Debt-to-equity Ratio, Dividend Distribution / By Douglas Freeman

Do you want to withdraw cash from your closely held corporation at a minimum tax cost? The simplest 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.” It’s also not deductible by the corporation. Five alternatives. …

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How are court awards and out-of-court settlements taxed?

(ADEA) Age Discrimination in Employment Act, Awards, Awards and Settlements, Compensation, Court Settlements / By Douglas Freeman

Awards and settlements are routinely provided for a variety of reasons. For example, a person could receive compensatory and punitive damage payments for personal injury, discrimination or harassment. Some of this money is taxed by the federal government, and perhaps state governments. Hopefully, you’ll never need to know how payments for personal injuries are taxed. …

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Many factors are involved when choosing a business entity

Alternate Minimum Tax (AMT), Business Income Tax, C Corporation, Compensation, Federal Income Tax, LLC, Partnerships, Past-Through Entities, Qualified Business Income Deducton (QBI), S Corporation, Shareholder, Small Business, Sole Proprietors / By Douglas Freeman

Are you planning to launch a business or thinking about changing your business entity? If so, you need to determine which entity will work best for you — a C corporation or a pass-through entity such as a sole-proprietorship, partnership, limited liability company (LLC) or S corporation. There are many factors to consider and proposed …

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

C Corporations, Compensation, Small Business, Tax, Tax Planning / By Douglas Freeman

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

Compensation, Contributions, Employees, Income Tax, Retirement, Simplified Employee Pension (SEP), Small Business, Tax Planning / By Douglas Freeman

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

C Corporation, Compensation, Employees, Internal Revenue Service (IRS), Shareholder, Small Business, Stocks / By Douglas Freeman

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

Closely Held Corporations, Compensation, Income Tax, Small Business, Tax, Tax Planning / By Douglas Freeman

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?

Compensation, Deductions, Employee Benefits, Federal Tax Credit, Qualifying Leave for Family Medical Leave, Small Business, Tax Credits, Tax Cuts and Job Acts (TCJA), Uncategorized / By Douglas Freeman

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

401 K, 529 Saving Plan, Compensation, Compensation and Benefits, Federal Income Tax Filing, Income Tax, Nonqualified Deferred Compensation (NQDC), Tax, Tax Cuts and Job Acts (TCJA), Tax Planning, Tax Savings / By Douglas Freeman

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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