Federal Income Tax

Awarded money in a lawsuit or settlement? It’s only tax-free in certain circumstances

Leave a Comment / Antidiscrimination Laws, Federal Income Tax, Small Business, Small Business Owners, Small Business Tax Tips / By Douglas Freeman

You generally must pay federal tax on all income you receive but there are some exceptions when you can exclude it. For example, compensatory awards and judgments for “personal physical injuries or physical sickness” are free from federal income tax under the tax code. This includes amounts received in a lawsuit or a settlement and …

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Key tax issues in M&A transactions

Assets, Business Income Tax, Capital Gains, Federal Income Tax, LLC, Merger & Acquisition, Partnerships, S Corporation, Small Business, Small Business Tax Tips, Sole Proprietors, Stocks, Taxes 2023 / By Douglas Freeman

Merger and acquisition activity dropped dramatically last year due to rising interest rates and a slowing economy. The total value of M&A transactions in North America in 2022 was down 41.4% from 2021, according to S&P Global Market Intelligence. But some analysts expect 2023 to see increased M&A activity in certain industries. If you’re considering …

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Employers should be wary of ERC claims that are too good to be true

(ERC) Employee Retention Credit, COVID-19, Employee Retention Tax Credit (ERTC), Federal Income Tax, Income Tax, Paycheck Protection Program / By Douglas Freeman

The Employee Retention Credit (ERC) was a valuable tax credit that helped employers that kept workers on staff during the height of the COVID-19 pandemic. While the credit is no longer available, eligible employers that haven’t yet claimed it might still be able to do so by filing amended payroll returns for tax years 2020 …

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Choosing a business entity? Here are the pros and cons of a C corporation

C Corporations, Compensation and Benefits, Employee Benefits, Federal Income Tax, Income Tax, Small Business, Small Business Owners / By Douglas Freeman

If you’re launching a new business venture, you’re probably wondering which form of business is most suitable. Here is a summary of the major advantages and disadvantages of doing business as a C corporation. A C corporation allows the business to be treated and taxed as a separate entity from you as the principal owner. …

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Adopting a child? Bring home a tax break too

Adoption, Federal Income Tax / By Douglas Freeman

Two tax benefits are available to offset the expenses of adopting a child. In 2022, adoptive parents may be able to claim a credit against their federal tax for up to $14,890 of “qualified adoption expenses” for each child. This will increase to $15,950 in 2023. That’s a dollar-for-dollar reduction of tax. Also, adoptive parents …

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You may be liable for “nanny tax” for all types of domestic workers

Domestic Workers, Federal Income Tax, Federal Unemployment (FUTA Tax, Form SS-4, Medicare Taxes, Nanny Tax, Social Security & Medicare (FICA) taxes, Sole Proprietors / By Douglas Freeman

You’ve probably heard of the “nanny tax.” But even if you don’t employ a nanny, it may apply to you. Hiring a house cleaner, gardener or other household employees (who isn’t an independent contractor) may make you liable for federal income and other taxes. You may also have state tax obligations. If you employ a …

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An “innocent spouse” may be able to escape tax liability

Civil Fraud, Federal Income Tax, Income Tax, Innocent Spouse, State Tax, Tax Return / By Douglas Freeman

When a married couple files a joint tax return, each spouse is “jointly and severally” liable for the full amount of tax on the couple’s combined income. Therefore, the IRS can come after either spouse to collect the entire tax — not just the part that’s attributed to one spouse or the other. This includes …

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Three tax breaks for small businesses

C Corporation, Cash Method of Accounting, Federal Income Tax, LLC, Past-Through Entities, Qualified Business Income Deducton (QBI), S Corporation, Section 179, Shareholder, Small Business, Sole Proprietors, Tax, Tax Deduction / By Douglas Freeman

Sometimes, bigger isn’t better: Your small- or medium-sized business may be eligible for some tax breaks that aren’t available to larger businesses. Here are some examples. 1. QBI deduction. For 2018 through 2025, the qualified business income (QBI) deduction is available to eligible individuals, trusts, and estates. But it’s not available to C corporations or …

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The tax obligations if your business closes its doors

C Corporation, Corporations, Federal Income Tax, Income Tax, Independent Contractors, Partnerships, Small Business, Small Business Owners, Sole Proprietors / By Douglas Freeman

Sadly, many businesses have been forced to shut down recently due to the pandemic and the economy. If this is your situation, we can assist you, including taking care of the various tax responsibilities that must be met. Of course, a business must file a final income tax return and some other related forms for …

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How disability income benefits are taxed

Disability Income, Federal Income Tax, Income Tax, Social Security & Medicare (FICA) taxes / By Douglas Freeman

If you’ve recently begun receiving disability income, you may wonder how it’s taxed. The answer is: It depends. The key issue is: Who paid for the benefit? If the income is paid directly to you by your employer, it’s taxable to you just as your ordinary salary would be. (Taxable benefits are also subject to …

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