Category Archives: Legal Issues

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

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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 →

Is there an embezzler in your company?

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One of the joys of running a small business is how close you and your employees can become. For many entrepreneurs, their staff is more like family. That’s why it can be so painful to think that one of your employees is an embezzler. However, employee fraud is more common than you may think.

In fact, the majority (55 percent) of embezzlement takes place at companies with fewer than 100 employees, according to a study by insurance company Hiscox.

But that’s not all. In addition to being disproportionately affected by embezzlement, small companies also face disproportionately large costs when they are robbed. Consider this: One incident of embezzlement costs small businesses a median of $289,000. Could your business take a hit that big?

Read more here…

Ask SCORE: How are pass-through entities affected by the Tax Cuts and Jobs Act?

2018 tax lawsThe passage of the Tax Cuts and Jobs Act (TCJA) brought renewed focus upon pass-through entities (PTEs). In spite of their widespread popularity, PTEs are commonly misunderstood. While thought of primarily as small businesses with few employees that generate a fraction of overall business profits, the truth about PTEs tells a very different story.

As it turns out, pass-through entities are the most popular structure in the US, employing millions of workers and churning out billions of dollars in annual revenues.

This article will demystify many of the misconceptions about PTEs and explain how the TCJA will affect these companies—and the US economy—in the future.  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 →

Ask SCORE: Is a worker an employee or an independent contractor?

by Joe Heinrich and Guy Towle, SCORE Volunteers

As mentors to SCORE clients, we are often asked by our clients, “Should I hire this person as an employee or engage them as an independent contractor to do the work I have for them?” Often, our immediate response is to suggest the least costly alternative, which is to engage the person as an independent contractor as then the client can avoid all the payroll taxes associated with an employee.

However, this advice does not take into consideration the very restrictive State of Washington statutes as they pertain to the determination of an employee vs. an independent contractor. So, let’s take a look at the applicable law.  Continue reading →

Is it time to change your business structure?

The process to change a business structure (for example, change from a sole proprietorship to a corporation) is the same as starting a new business.

Use the Business Licensing Wizard to get information and links that will help you do the following:

  1. Create your business structure with the Washington Secretary of State. (Skip this step if you are changing to a sole proprietor or general partnership.)
  2. Submit a new Business License Application to apply for a new Business License. You will be given a new Unified Business Identifier (UBI) number to be used on tax returns and other documents.
  3. Reapply for any applicable specialty, and/or city endorsements (for example, Nursery endorsements).

Note: You will probably need to re-apply for all of the licenses you currently have. For example, if you are a building contractor, you will need to reapply for your contractor’s license with the Department of Labor and Industries.

This information has been borrowed from the Washington State Business Licensing Service website. (link)

Paid Family & Medical Leave vs. Paid Sick Leave

What’s the difference?

Paid Family Medical vs Paid Sick Leave
It is important to note that paid family and medical leave and paid sick leave have two different sets of requirements. Both requirements include strictly-enforced measures that prevent employers from retaliating against employees in any way for the exercise of either or both rights.

Paid Family & Medical Leave

In 2019, employers in Washington will begin paying premiums for paid family and medical leave. Starting Jan. 1, 2020, employees will be able to apply for Paid Family and Medical Leave benefits. Benefits will be available for most employees who work at least 820 hours in the qualifying period.

Paid Family and Medical Leave will be a state-run insurance program that is funded by both employers and employees. Eligible employees are assured up to 12 weeks of leave as needed, with partial wage replacement. In certain exceptional cases 16-18 weeks may be taken.

The amount of this benefit varies depending on the employee’s weekly wage, median statewide incomes, and other factors.  Continue reading →