TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

Keep it SIMPLE: A tax-advantaged retirement plan solution for small businesses If your small business doesn’t offer its employees a retirement plan, you may want to consider a SIMPLE IRA. Offering a retirement plan can provide your business with valuable tax deductions and help you attract and retain employees. For a variety of reasons, a SIMPLE IRA can be a particularly appealing option for small businesses. The deadline for setting one up for this year is October 1, 2018. The basics SIMPLE stands for “savings incentive match plan for employees.” As the name implies, these plans are simple to set up and administer. Unlike 401(k) plans, SIMPLE IRAs don’t require annual filings or discrimination testing. SIMPLE IRAs are available to businesses with 100 or fewer employees. Employers must contribute and employees have the option to contribute. The contributions are pretax, and accounts can grow tax-deferred like a traditional IRA or 401(k) plan, with distributions taxed when ta

Choosing the right accounting method for tax purposes The Tax Cuts and Jobs Act (TCJA) liberalized the eligibility rules for using the cash method of accounting, making this method — which is simpler than the accrual method — available to more businesses. Now the IRS has provided procedures a small business taxpayer can use to obtain automatic consent to change its method of accounting under the TCJA. If you have the option to use either accounting method, it pays to consider whether switching methods would be beneficial. Cash vs. accrual Generally, cash-basis businesses recognize income when it’s received and deduct expenses when they’re paid. Accrual-basis businesses, on the other hand, recognize income when it’s earned and deduct expenses when they’re incurred, without regard to the timing of cash receipts or payments. In most cases, a business is permitted to use the cash method of accounting for tax purposes unless it’s: Expressly  prohibited  from using the cash me

An FLP can save tax in a family business succession One of the biggest concerns for family business owners is succession planning — transferring ownership and control of the company to the next generation. Often, the best time tax-wise to start transferring ownership is long before the owner is ready to give up control of the business. A family limited partnership (FLP) can help owners enjoy the tax benefits of gradually transferring ownership yet allow them to retain control of the business. How it works To establish an FLP, you transfer your ownership interests to a partnership in exchange for both general and limited partnership interests. You then transfer limited partnership interests to your children. You retain the general partnership interest, which may be as little as 1% of the assets. But as general partner, you can still run day-to-day operations and make business decisions. Tax benefits As you transfer the FLP interests, their value is removed fro

Trump administration considers taking inflation into account when taxing capital gains As reported by Reuters: The Trump administration is considering bypassing Congress to grant a $100 billion tax cut (as projected over a decade) to taxpayers by taking inflation into account when determining capital gains tax liabilities, the New York Times reported on Monday, July 30. The 20% capital gains tax rate is currently applied to the difference between an asset's value when it is purchased and when it is sold. But the calculation does not take the effects of inflation into account, which can raise the size of the tax bill significantly depending on the inflation rate. Quoting from an interview with Treasury Secretary Steven Mnuchin, the newspaper said the Administration could change the definition of "cost" used to calculate capital gains, allowing taxpayers to adjust the value of an asset for inflation when it is sold. "If it can't get done through a legislati