Category Archives: Accounting

What’s the best way to pay your employees?

by Joe Heinrich, SCORE Seattle

Congratulations!! You’ve grown your small business so much that you need help, and so you’ve hired your first employee. Now you’re confronted with the task of paying that employee properly in accordance with IRS regulations and State of Washington statutes, along with making payments to taxing authorities and reporting to them periodically. And now you’re stomach’s churning!!

payroll

Overview

To correctly pay an employee in Washington, the employer needs to deduct the following taxes from the employee’s pay and report and remit timely these amounts to the relative taxing authorities:

  • Social Security Tax and Medicare Tax (just the employee’s share)
  • Federal Income Tax
  • Washington Labor & Industry Premiums (just the employee’s share)
  • Washington Paid Family & Medical Leave Tax (just the employee’s share)

There may be other withholdings from the employee’s pay, such as garnishments for child support, contributions to a retirement plan, donations, and the like. Continue reading

Washington State’s new paid family and medical leave.

by Johnnie Hawkins, CPA
Parker Mooers & Cena, Silverdale

Starting in 2020, Washington will be the fifth state in the nation to offer paid family and medical leave benefits. This benefit offers partially paid leave to care for yourself or a loved one in times of serious illness or injury, to bond with a new child joining your home through birth, adoption or foster placement, and for certain military-connected events if you have a family member in active duty service.  This isn’t like paid sick leave; you will file your claim with the Employment Security Department (ESD), and your payment will come from ESD. Typically, you’ll have access to up to 12 weeks of paid leave.

Premium collection starts on Jan 1, 2019. In 2019, the premium is 0.4% of wages, or $3.85 per week for someone making $50,000 a year. Employers can either pay the full premium or opt to withhold a portion of the premium from their employees. Employers who choose to withhold premiums from their employees may withhold up to 63 percent of the total premium, or $2.44 per week for an employee making $50,000 annually. The employer is responsible for paying the other 37 percent. Businesses with fewer than 50 employees are exempt from the employer portion of the premium but must still collect or opt to pay the employee portion of the premium.

You can learn more about the program at www.paidleave.wa.gov/employers or contact us with questions at 360-692-8808. Continue reading

Tax Time: A Guide to Completing the Schedule C

 

Before the cold sweat and anxiety of tax season gives you a clammy embrace, make sure you know what you need to complete your Schedule C Tax Return.

tax time clockIf you operate a sole proprietorship or single-member limited liability company (LLC), tax time can be worrisome, especially if you’re doing your own taxes.

A little preparation and you’ll likely find there’s nothing much to worry about.

What is the Schedule C Form?

At its core, the Schedule C is nothing more than a profits and losses worksheet for sole proprietors and single-member LLCs (as long as the LLC hasn’t elected to be taxed as a corporation).

Before jumping into the details of Schedule C, it’s important to note that if you have $5,000 or less in business expenses, you may be able to file a Schedule C-EZ instead. Schedule C-EZ is a similar but much simpler form. It’s worth taking a moment to look at the list of requirements at the top of the form to see if your business qualifies.

The rest of this article, however, focuses on the more complex Schedule C. Continue reading

The #1 reason small businesses fail… and how to avoid it.

Cash flow.

Mention those two little words to almost any small business owner, and you’ll see them flinch.

Very few business terms get as cool a response. And sadly, those two little words (both of them four-letter words, interestingly enough), are the #1 reason small businesses fail. They take out more small businesses than any other factor.

In fact, 82% of small businesses fail due to cash flow problemsContinue reading

Personal Property Tax: The forgotten tax for many small businesses?

by Joe Heinrich, Volunteer Business Mentor, Seattle SCORE

Most small business owners are perfectly aware of the Federal, Washington and city taxes they are obliged to pay. However, the one that tends to fall through the cracks is the local Personal Property Tax on businesses by the county in which the business is located. This article explains what personal property is, how to self-report a business’s personal property, how the tax is assessed and how much a business may have to pay in Personal Property Tax.

What is “personal property” of a business?

Taxable Personal Property typically includes items used by a company to conduct business. Examples of personal property which may be assessed include furniture, fixtures, electronic equipment, telephones and machinery. Leasehold improvements and leased equipment are also included as personal property. However, personal property does not include property which is attached to a building or to the land which a business owns as that is considered “real property”.

Exempt personal property includes inventory (i.e., items owned to be resold or used as raw materials to products to be manufactured and sold) and vehicles used on the roadways.  Continue reading

What are the qualified business deductions under the Tax Cuts and Jobs Act?

tax deductionsThe Tax Cuts and Jobs Act (TCJA) created a new 20% deduction for pass-through entities. Though the IRS has not fully interpreted the new rules—which won’t go into effect until the 2019 tax season—many of the implications are clear. This article’s companion piece examined what qualifies as a Pass-Through Entity (PTE).

This blog hopefully sheds some light on how PTEs will be impacted by the new law.

Why a Deduction for Pass-Through Entities?

Since their inception, pass-through entities have been a popular choice for entrepreneurs, especially after the 1986 Tax Reform Act (TRA). Better known as President Reagan’s second tax cut, the TRA was passed by Congress to simplify the tax code and adjust the federal tax brackets.  Continue reading

Services subject to sales tax in Washington.

From the Washington Department of Revenue website… 

There is a misconception that services are not subject to sales tax. This article clarifies that some services are indeed subject to retail sales tax. Following is a listing of services that are subject to sales tax when provided to consumers.

Construction services (WAC 458-20-170)

  • Constructing and improving new or existing buildings and structures. Installing, repairing, cleaning, improving, constructing and decorating real or personal property for others
  • Cleaning, fumigating, razing or moving structures, including painting and papering, cleaning and repairing furnaces and septic tanks, and snow removal
  • Clearing land and moving earth  Continue reading