Category Archives: Tax Issues

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

Should you use crowdfunding to help finance your business?

Should You Use Crowdfunding to Help Finance Your Business?

Starting a small business can be costly, but did you know that you can use crowdfunding to help alleviate some of those costs?

Our latest infographic, “Is Crowdfunding Right for Your Small Business?,” shows what types of crowdfunding are available and the different benefits of each.

In 2018, the United States alone raised $1,038,000 in crowdfunding. This amount is expected to show an annual growth rate of 10.4%, resulting in a total amount raised of $1,298,000 by the year 2022. From a global perspective, that amount is even higher – China raised $7,463,000 in 2018!

What Types of Crowdfunding Are There?

There are three types of crowdfunding options available for your business: reward-based, equity, and debt.

Continue reading

Self-Employment Tax 101 for Small Business Owners

When you’ve made the transition from working for someone else to being your own boss, you gain the freedom to create your own professional path. You also get additional responsibilities, like paying self-employment tax.  

Self-employed individuals are required to not only submit the income tax they owe to the federal, state, and local governments, they must also submit self-employment tax to the IRS. 

Who Is a “Self-Employed Individual”?

The IRS defines a self-employed individual as someone who conducts business as a sole proprietor, independent contractor, member of a partnership, or as someone who otherwise is in business for herself or himself. 

What is Self-Employment Tax?

According to IRS.gov, “Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.”

Employees of a company pay half of their Social Security and Medicare taxes (usually withheld from their wages) and the employer pays the other half. However, as a self-employed individual, a business owner must remit the entire amount.   Continue 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

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