Nick Magone, CPA, CGMA, CFP®

Does Business Structure Matter? You Bet it Does

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When you launch a new venture, there are endless decisions to make — from pricing your products and services to outsourcing or hiring in-house. But among the most important decisions is how you will legally structure your business. The structure you choose not only affects how your business is taxed, it can also be the key determinant in whether you’re held personally liable in a lawsuit. Here’s an overview of the various structures to consider:

Sole proprietorship

Sole proprietorship is a popular structure for single-owner businesses. In this structure, no separate business entity is formed, although your business may have a name (often referred to as a DBA, short for “doing business as”). A sole proprietorship does not limit liability, but insurance may be purchased for protection against risk.

In addition, business income and expenses are reported on a Schedule C — an attachment to your personal income tax return (Form 1040). Net earnings that the business generates are subject to both self-employment taxes and income taxes. As a sole proprietor, you may have employees, but you don’t cut a paycheck for yourself.

 Limited liability company

If you want protection for your personal assets in the event your business is sued, you might prefer a limited liability company (LLC). An LLC is a separate legal entity that can have one or more owners (called members). Income is usually taxed to the owners individually, and earnings are subject to self-employment taxes.

Corporation

A corporation is a separate legal entity that allows the company to transact business in its own name and file corporate income tax returns. Like an LLC, a corporation can have one or more owners, also known as shareholders. Shareholders are generally protected from personal liability, but can be held responsible for repaying any business debts they’ve personally guaranteed.

Partnership

In certain respects, a partnership is similar to an LLC or an S corporation. However, partnerships must have at least one general partner who is personally liable for the partnership’s debts and obligations. Profits and losses are divided among the partners and taxed to them individually.

No matter the structure you decide on, the laws that make that structure favorable are always subject to change. Be sure to reassess your business’s organizational structure regularly to ensure it provides the most benefits — Magone & Company can help. Call us today at (973) 301-2300 to reach our staff of professionals.

 

Maintaining Corporation Status: To Reap the Benefits, Follow the Rules

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Businesses often choose to structure as a corporation, because it offers owners the strongest protection from personal liability by treating it as a separate legal entity. But if you’re not operating your business like a corporation, you risk losing the liability security that you count on.

Getting back to the basics
No matter how long you’ve been in business, there are some elemental rules of thumb that corporations should follow to maintain their status:

  • Include the corporation’s name on all company letterhead, checks and invoices
  • Make checks out in the corporation’s name, not yours or another individual’s
  • Avoid mixing personal affairs with corporate business
  • Maintain separate bank accounts and credit cards, and keep careful records of corporate transactions
  • File tax returns and pay any corporate taxes on time

Document everything
In addition, shareholder and director meetings should be held on a regular schedule, with official minutes on the proceedings. Corporate minutes should provide documentation of key financial and legal decisions, such as:

  • Authorization for a substantial loan to or from the corporation
  • Adoption of a retirement plan or approval to make a contribution to an existing plan (for example, a profit-sharing contribution)
  • Issuance of stock
  • Purchase of property or approval of a long-term lease

By observing these formalities, you’ll have solid records on hand if the IRS, a creditor or a company insider challenges critical decisions.

Questions?
Contact Magone & Company today at (973) 301-2300 to learn how we can help you keep your corporate operations on the right track.

Time to Pay Up! Why it’s in Your Best Interests to File Your Taxes Early

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With the filing deadline moved to July 15th, you may have put off filing your taxes for as long as possible. Maybe you even requested an extension for October 15th. Most taxpayers dread the tedious task of compiling their financial documents and filing their taxes. Unfortunately, the longer you procrastinate, the greater the chances that something will go wrong. No matter the deadline, it’s always smarter to file your taxes sooner rather than later. Here’s why:

Help avoid tax identity theft. Tax return fraud is one of the most common and fastest growing forms of identity theft. In a nutshell, an identity thief steals your employment information and Social Security number, and files a fraudulent tax return on your behalf. They can steal your refund, or put you in the hole owing back taxes you might not actually owe. By filing your taxes as early as possible, a thief won’t have the chance to file a fraudulent return.

Find and correct mistakes sooner. Give yourself more time to fix any mistakes on your tax documents. For example, your employer might record the wrong earnings on your W-2. If you discover the mistake right before the filing deadline, you aren’t going to have enough time to get it resolved. Your tax return will end up getting delayed, which can result in having to request an extension and accrue penalties and interest.

Pay smaller penalty fees. Unfortunately, many taxpayers underestimate their tax liability during the year. That means they underpay and end up owing the government money. The IRS charges taxpayers a penalty for underpaying their taxes, as well as interest on the amount of taxes that they owe. So the sooner you file and pay any remaining taxes, the smaller your financial penalty and interest will be. If you can’t pay up front, you may have tax relief options to help you settle your debt.

Get it over with. There’s no better tax relief than just finally taking care of your taxes. If you are one of the many taxpayers that get stressed over taxes, you will actually feel better if you don’t procrastinate filing your tax return. Even if you owe back taxes, having a firm like ours represent you can be worth it in the long run.

Magone & Company specializes in tax resolution, and we’re experts in navigating the IRS maze. Reach out to our firm at (973) 301-2300 to schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax challenges.

Taxation in a Time of Crisis: 4 Tips to Make Tax Time Less Taxing

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Whether it’s a global pandemic shutting the economy down for months, a stock market crash that terrifies investors or a housing industry slide that makes real estate a risky bet, living through tough economic times is never easy. But how you handle yourself and your money during a crisis can make all the difference. If you do it right, you could emerge stronger, wiser and richer on the other side.

If your income is uncertain, it can be hard to predict how much you might owe the IRS or how you can make those payments. And if you’re self-employed or a gig worker, this economic uncertainty can be even greater. So what can you do about your taxes when the economy takes a downturn? Here are some tips to make tax time less taxing when a crisis hits.

  1. Research filing extensions and be aware of new deadlines. During a period of economic turmoil, tax filing deadlines may be extended or relaxed. Do your homework and see how much time you really have. In the wake of the COVID-19 pandemic, the IRS extended the normal tax filing deadline to July 15, and many state and local governments followed suit. The same may happen in future crises, and it never hurts to find out for sure.
  2. File promptly if you’re expecting a refund. Getting extra time to file can be a welcome relief if you owe money to the IRS. But if the government owes you, it makes sense to file as quickly as possible. The processing of tax refunds is often disrupted during a crisis, due to short staffing and different procedures suddenly in place. The sooner you file, the sooner you will have your tax refund money.
  3. File promptly even if you’re NOT expecting a refund or might owe back taxes. The IRS is starting to enforce collections again, but they’re not oblivious to the financial crisis that many Americans are experiencing. The unemployment rate recently jumped to almost 15% — the highest unemployment rate since the Great Depression. And the outlook is uncertain. The IRS will likely consider settlements and more favorable terms to taxpayers in trouble, especially if their income drastically decreased due to COVID-19. So it’s important to file your taxes and be current in order to explore tax relief options.
  4. Use investments to cover the amount you owe. It’s easy to feel depressed when the stock market is reaching new lows every day. That’s why engaging in strategic tax loss harvesting could reduce your tax bill substantially when filing season rolls around. Tax loss harvesting is when you sell investments at a loss in order to reduce your tax liability. If you have investments that have not worked out as you’d hoped, selling them now and locking in the loss can be a great way to offset capital gains and lower your taxable income. As always, this is general guidance for informational purposes only. Be sure to consult your tax advisor for advice specific to your situation.

An economic crisis can make tax time even more difficult. That’s why it’s critical to have the right CPAs in your corner. Reach out to the experts at Magone & Co at (973) 846-8265, and we’ll schedule a no-obligation confidential consultation to explain your options.

 

6 Trends That Can Impact Your Talent Acquisition Strategy

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Now more than ever, having the right talent is critical to the health of your business, giving it the best chance to grow and thrive. Though it may seem like a hirer’s market right now, having a flood of candidates can make finding the right fit even more of a challenge.

As any HR pro will tell you, success means prioritizing the candidate experience and staying up to date on these current talent acquisition trends:

Collaborative hiring. Did you know that 66% of candidates believe interactions with employees are the best way to get insight about a company? So when you have a team that loves where they work, why not involve them in the recruiting process? By tapping into the personal networks and reach of current team members, you won’t just expand your talent pool; you’ll also generate referrals from candidates who’ve heard about all the advantages of working for your company.

Personalization. Do you treat each job offer as a unique proposition for the individual or a generic package that you hand out to anyone filling that position? By tailoring employee perks and benefits to better meet the needs of specific demographics, your organization can set itself apart from the competition. From volunteer time off to student loan repayments, think about how you can make your next offer uniquely attractive to the person receiving it.

Workplace flexibility. Today’s job candidates are increasingly looking for companies that provide an appealing work/life balance. Offering remote workplace hours or even a four-day workweek can help attract new prospects and increase engagement with your current workforce. Flexibility can be the deciding factor on whether someone accepts your offer or goes elsewhere.

Culture. What makes your business stand out? How do you support your employees day in and day out? Twenty-two percent of American workers say that culture matters most when it comes to employee satisfaction. It’s critical to create and foster a workplace environment that makes people want to come to work each day.

Employer branding. In today’s job market, employer branding is more significant than ever. How visible is your brand? Is your presence consistent across every touchpoint? Cohesive branding done right will embody your business philosophy and values throughout every interaction, building your reputation as a desirable place to work.

Artificial Intelligence (AI). Automated recruiting platforms help hiring managers cut through the clutter of unqualified candidates and better focus their resources on bigger-picture issues. From screening resumes and scheduling interviews, AI can help ensure you’re only dealing with the best people for the job.

Step back and take a fresh look at how your organization approaches talent acquisition. If your recruiting efforts are falling flat, it may be time to rethink your strategy with these trends in mind. The success of your business is counting on it.

IRS Installments Agreements — When You Can’t Pay Your Taxes in Full

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Despite the IRS being slammed right now due to the pandemic, millions of Americans still owe back taxes for previous years. And they are increasingly finding themselves unable to pay up all at once. An installment agreement is just one of many tax relief options that may help you settle with the IRS or lower your amount owed.

COVID-19’s impact on collections
The current pandemic has forced many businesses to shut down or modify how they do business —including the IRS. Not only is the agency busy processing their usual tax returns, it’s also tasked with processing the stimulus payments for millions of Americans. To top it all off, the IRS is scrambling to adjust to the new filing deadline (July 15, 2020), while a large portion of its workforce is working from home, making things slower than usual.

As a result, the IRS announced its “People First Initiative”, taking unprecedented actions to ease the burden on Americans facing tax issues. These new changes range from postponing certain payments related to installment agreements and Offers in Compromise, to limiting certain enforcement actions.

When the bill comes due
Despite their immediate actions, the IRS will soon flip the enforcement switch back on. Come July 15th, a lot of people who made higher income in 2019 will likely owe back taxes. Failure to pay your tax bill immediately may result in penalties and interest on the balance due after July 15th. If you find yourself unable to pay in full, an installment agreement may help you settle your tax burden over a period of time.

How installment agreements work
The IRS divides their installment plans by taxpayers who owe more than $50,000 and less than $50,000:

Taxpayers owing less than $50,000 may request an installment agreement via the IRS website, by mailing Form 9465-FS Installment Agreement Request or by phone at (800) 829-1040. You’ll need to provide your Social Security number, date of birth, caller ID from your recent IRS notice, PIN number or AGI, bank address, employer address and the proposed monthly payment amount.

Taxpayers owing more than $50,000 may request an installment agreement by filling out form 433-F Collection Information Statement. This form requires information regarding your bank accounts, lines of credit, real estate, total number of dependents, assets, credit cards, wages, non-wage household income, monthly living expenses, down payment amount and proposed monthly payment.

Installment agreements require a minimum monthly payment of $25, and can vary from 120 days to 60 months, depending on your ability to repay. Installment agreements that take more than 120 days also require a set-up fee. You may be eligible for a decreased fee if you meet their low income guidelines. Also note that the IRS charges a reinstatement fee if you don’t pay your bill and your agreement goes into default.

Help is a call away
At Magone & Company, we can help you navigate the IRS maze and help ensure that you’re on the right payment plan. Don’t hesitate to reach out at (973) 301-2300 to schedule a no-obligation, confidential consultation to explain your options to permanently resolve your tax issue.