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Top 5 Tax Savings Tips When Renting To Your Relatives

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Renting property to a loved one may seem like a no-brainer. They’re your family, of course, you want to help them find a good place to call home. Plus, you know and trust them, so surely they’ll be excellent tenants and can keep you well informed about necessary improvements or issues. What could go wrong? Plenty. The truth is, if you’re not careful, renting to relatives can trigger all kinds of tax consequences you may not even be aware of. Fortunately, we can enlighten you on some red flags to look out for.  To maintain rental expense deductions you need to ensure you’re renting property. That begins with fully grasping exactly how the IRS classifies rental property. According to the IRS , “a dwelling is considered a residence if it’s used for personal purposes during the tax year for more than the greater of 14 days or 10 percent of the total days rented to others at a fair rental value.” But what does personal use mean? The IRS defines personal use as: Any person who owns an intere

A Simple Guide to the Most Common Tax Forms Used by Small Businesses

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Starting and running a small business doesn’t just take ingenuity, grit, and resolve.  It also takes a whole lot of paperwork.  From getting your Employer Identification Number, to filing your business income taxes, to everything in between, here’s a simple guide to some of the most common tax forms that small business owners should be familiar with.  Tax forms for when you’re just starting out: Form SS-4, Form 2553, Form 8832 Form SS-4, Application for Employer Identification Number : When you start your business, you’ll need to fill out this form to receive an EIN. This number is what you’ll use to identify your business on your tax return as well as on wage and payment forms you send out to employees or contractors.  However, if you are a sole proprietor without employees, you may opt to use your social security number instead of an EIN.  Form 2553, Election by a Small Business Corporation : If you decide to form your business as an S corporation, this is the form you’ll fill out. I

Are Government-Issued Grants During COVID-19 Taxable?

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In 2020, billions of dollars in grants were issued due to the COVID-19 pandemic. If you received a government-issued grant for yourself or your business, you may be wondering if those grants are taxable. Depending on the circumstance, you may or may not have to pay taxes on them. As a general rule grants are taxable income irrespective of the source unless the Internal Revenue Code provides an exception. Are COVID-19 Grants Given to Individuals Taxable? The COVID-19 related grants to individuals are not taxable. The general welfare exclusion allows individual taxpayers to exclude payments made by government units in connection with a qualified disaster. In broad terms, payments to promote the general welfare include necessary personal, family, or living expenses.  Since COVID-19 is a qualified disaster, this rule is in effect. Individuals do not pay tax on grants related to COVID-19. Are COVID-19 Grants Given to Businesses Taxable? However, the businesses, grants are taxable. These pay

Retirement Planning For Small Business Owners and Freelancers: How Do You Choose Between a SEP IRA and a Solo 401(k)?

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If you’re a small business owner, planning for retirement can get a little confusing. How do you know which retirement savings plan will work best for you? Specifically, how do you choose between the Simplified Employee Pension (SEP) IRA and a Solo 401(k)?  Each has its own benefits and drawbacks, but after reading this post, you should be able to see which one will work the best for your circumstances.  Here’s a walkthrough of how both types of accounts work and their pros and cons.  What is a SEP IRA?  A SEP IRA is an account that’s similar to a traditional IRA.  Account owners can make tax-deductible contributions throughout the year, and the money in the account can grow tax-free. Once you do retire, you’ll be taxed on the qualified withdrawals you make.  The SEP IRA is designed to allow small business owners, whether sole proprietors, partnerships, or corporations, to make contributions for themselves and their employees (if they have any).  However, if you do have employees and y

Should You Employ Your Spouse for Financial and Tax Purposes?

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There are some for whom family and business go together like music and lyrics. These business owners may have been part of a family business for generations, in which the business is passed down from parent to adult child, and include that adult child’s spouse, siblings, even extended family.  For others, mixing business and family sounds like a terrible idea. Perhaps the family members have tried working together before but found it to cause conflict and strife. Or maybe they’ve simply heard stories of how challenging it can be to work with family or spouses and haven’t wanted to take the risk.  Whichever camp you may fall into, the truth is that it can actually make good financial and business sense to employ your spouse—although you should always talk to a financial or tax advisor to see what makes the most sense for your particular situation. Here are a few reasons why.  Increase your retirement savings One potential reason to hire your spouse and add them to your company’s payroll

4 Tactics to Make Filing Taxes Easier This Year

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No matter how well-prepared you are, tax time is nearly always stressful for small business owners.  Finding receipts, keeping track of all your expenses, listing out deductions—it’s a lot to manage, more so if you have employees that you should file additional paperwork for.  And while it’s probably impossible to get rid of all the anxiety associated with tax time, it is definitely possible to reduce it.  Here are our 4 tactics to make filing your small business taxes easier in 2021.  Start early and split your tax-related task list into chunks.  Rather than devoting an entire day to do everything from finding your documents to signing and sending off your tax return, it makes much more sense to list down all the related tasks and accomplish them one after the other. Do a little at a time.  This way, if you end up running into obstacles or issues that require additional time or professional assistance, you’ll still be ahead of the game.  Know what form you’ll need to file.  Small busi