Tax

As you may be aware, the qualified business income (QBI) deduction introduced by the Tax Cuts and Jobs Act provides a valuable tax-saving opportunity for business owners like yourself. 

Unfortunately, the QBI benefit expires after 2025, so there is a limited window of time to maximize this deduction.

The QBI deduction can be as much as 20 percent of qualified business income for eligible business entities, including sole proprietors, partnerships, S corporations, and certain LLCs. However, there are limitations, particularly for high-income earners or those in specified service trades or businesses (where the tax code for high-income phases out the deduction completely).

To help you make the most of this deduction, I recommend considering the following strategies:

• Business aggregation. If you own multiple businesses, combining them for QBI purposes may increase your deduction.
• Carefully manage depreciation. Adjusting your approach to depreciation deductions can impact your taxable income and QBI.
• Review retirement contributions. Large deductible retirement plan contributions can reduce your QBI deduction.
• Filing separately. In certain cases, filing as “married filing separately” may result in a higher QBI deduction, but it requires careful evaluation.

Consider the above strategies to maximize the QBI deduction before it sunsets in 2025.

If you want to discuss your QBI strategies, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• October 18, 2024

The clock continues to tick. Here are the upcoming deadlines for filing your Business Ownership Information (BOI) reports with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

Deadlines

If your business existed as of January 1, 2024, you must file your BOI report by January 1, 2025.

If you created your business in 2024, you have 90 days from the date of filing with your state’s Secretary of State to submit your BOI report.

Entities Required to File 

All limited liability companies (LLCs) and corporations must file. For example, if you own multiple LLCs, each requires a separate BOI report.

Penalties for Non-compliance

Failure to file on time can result in significant penalties, including fines of $591 per day, a potential $10,000 criminal penalty, and up to two years in prison.

Recent Updates from FinCEN

Companies that ceased to exist before January 1, 2024, are not required to file a BOI report if they completed the dissolution process before that date.

Companies created or still existing on or after January 1, 2024, must file a BOI report, even if they ceased operations before their filing deadline.

Special Considerations for Disregarded Entities

Disregarded entities, for U.S. tax purposes, must also file a BOI report using a valid taxpayer identification number (TIN), such as an EIN, SSN, or ITIN.

If you want to discuss your BOI filings, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• October 15, 2024

Here’s a recent update on the Employee Retention Credit (ERC) and the new IRS payback scheme.

New IRS ERC Payback Program

The IRS introduced a second ERC Voluntary Disclosure Program for 2021 claims. Under this program, you can say, “I didn’t deserve the ERC, so I’ll repay 85 percent of my claimed ERC and retain 15 percent tax-free.”

The program is available only for ERC claims from 2021, and there are specific eligibility requirements. If you claimed the ERC using a third-party payer, the third party must apply on your behalf.

Eligibility Criteria for Payback

You must not be under criminal investigation or an IRS employment tax examination for 2021 returns.

The IRS must not have notified you of ERC recapture or received third-party information about your non-compliance.

Steps to Participate

You need to complete IRS Form 15434 and upload it online by November 22, 2024.

After submitting the form, you will receive a closing agreement, which you must sign and return within 10 days.

No Appeals 

If the IRS denies your request to participate in the payback program, you have no opportunity for judicial review or administrative appeal.

Legislative Changes Pending

H.R. 7024, currently pending in the Senate, could introduce stricter penalties for ERC promoters and extend the statute of limitations for examining ERC claims to six years.

IRS ERC Processing

The IRS is currently processing a backlog of 1.4 million ERC claims. While some payments have begun, and some have been denied, many claims are still under review. It’s likely your wait for your ERC refund will continue.

If you want to discuss your ERC claims, please call me at 408-778-9651.

• By Leon Clinton
• October 11, 2024