Advantages & Disadvantages of S Corporations

Whether you are setting up a new company or you have been in business for years, you need to evaluate which legal structure is best for your enterprise. No one option is best for every type of operation. The right choice depends on several factors including the number of owners, taxes and your business goals. These concerns lead many business owners to organize as S corps. The legal structure is similar to a C corporation, but S status provides an escape from double taxation. Since choosing a business structure may be a complicated process with long-range consequences, you should consult your Smith Schafer tax professional. Here are some of the pros and cons of S corps:


2017 Year-End Advice

As the end of the year approaches, we want to remind you of various payroll and Form 1099 related changes. As well as other items to consider when processing your year-end forms.

IRS Increases Annual Gift Tax Exclusion for 2018

The IRS has announced the annual gift tax exclusion is increasing next year due to inflation. After five years of being at $14,000, the exclusion will be $15,000 per recipient for 2018 — its highest point ever. Here is what the recent increase in the exclusion may mean for you, including how annual gift-giving can lower your taxable estate.


Impact of New Lease Accounting Rules on Construction Companies

The new lease accounting rules will have a big impact on the financial statements of construction companies leasing property, equipment, vehicles and other fixed assets. The new lease rules go into effect for public companies with fiscal years beginning after December 15, 2018 and December 15, 2019 for all other companies. 


Below are five ways the new lease rules may affect your construction company:


  1. Current leases will be incorporated in the change. 

The terms of current leases are most likely going to continue into 2019 and beyond, meaning every lease you enter into now is going to be presented differently on your future financial statements.

Save Taxes While Controlling Employee Health Costs

If rising health care costs have sent your company searching for ways to reduce expenses, you should know there are alternatives to standard medical insurance plans. Your choices are not limited to either paying the higher costs yourself or transferring the burden to your employees. Tax-advantaged strategies are available which can mitigate the effect of rising costs for you and your staff members. Here are three ideas to consider:


1. Establish a Health Insurance Premium-Only Plan (POP)

IRS Announces 2018 Contribution Limits

In mid-October, the IRS released the 2018 contribution and benefit limits for retirement and other benefit plans types. Each year a review is conducted to determine if changes need to be made to the contribution limits based on the cost of living index and other economic indicators. For 2018, most of the limits will remain the same however there were a few key increases to be aware of. For example, the IRS increased the employee’s contribution limit for 401(k) plan participants from $18,000 per year to $18,500 per year. Also, the defined contribution plan annual contribution limit increased from $54,000 to $55,000. These changes will need to be reflected in your company’s plan administration and payroll processes.

Year-End Planning: Charitable Donations

Some surveys indicate that more than 30% of all charitable giving occurs in December, and that over 10% of donations are made in the last three days of the year. The year-end holiday spirit may be a factor in the early winter philanthropy, but taxes probably play a role, as well. A check you write to your favorite charity in December gives you a tax deduction the following April, but if you wait until New Year’s, you will have to wait a full year for the tax benefit. To do well while doing good, you might reconsider the typical practice of writing checks for gifts to charity. Instead, give appreciated securities.

Year-End Planning: Business Tax

IRC Section 179 permits “expensing,” or first-year tax deduction, of outlays for business equipment that otherwise would be recovered through depreciation over many years. For 2017, expensing the costs of up to $510,000 of equipment is allowed, with a phase- out beginning after $2.03 million of purchases.

Example 1: ABC Corp. spends $400,000 on equipment and off-the-shelf computer software equipment in 2017. The company can deduct $400,000 this year on those purchases. To qualify for this Section 179 tax treatment in 2017, the equipment or software must be purchased and placed into service by December 31.

Impact of the Proposed Partnership Audit Regime

The IRS recently released new proposed regulations designed to significantly change the rule under which an audit of a partnership can occur. The reason for the changes is it makes it significantly easier and less costly for the IRS to conduct an audit and enforce rulings where appropriate. The new audit regime was originally enacted as part of the Bipartisan Budget Act of 2015 effectively replacing the existing rules enacted under the Tax Equity and Fiscal Responsibility Act (TEFRA).

Nonprofit Industry: Audit Guide

Is your nonprofit organization required to have a financial statement audit in the current fiscal year? If so, the information below will help you gain an understanding of what to do before, during and after the audit.