Category Archives: Tax Issues

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

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

Zero cost federal tax deduction — business use of your home.

by Joe Heinrich, Certified SCORE Mentor

Nirvana would be that a small business owner could generate a deduction from her/his business’s taxable income at no cost. Well, that situation is available for many small business owners: the business use of the home deduction. However, not all of small business owners are taking advantage of this deduction due to not knowing about it or fearing that taking the deduction will trigger an IRS audit.

First, the facts. IRS regulations allow a business owner to take a deduction for the business use of the home, provided that the space is used “exclusively and regularly” for business purposes. The space can either be a room, a part of a room, a closet, the basement or garage, or a separate building on the home’s lot.  Continue reading

The 3 things keeping small business owners up at night.

Small business owners heading into 2018 have a lot to be happy about — but they’ve also got some major concerns about the continued success of their businesses.

Capital One polled small business owners about their hopes and fears, and here’s what the latest Small Business Growth Index has to say about their responses.

Positive Outlook

All told, small business owners feel good about their finances. Nearly half (47 percent) say their businesses’ sales rose in the past six months—the highest percentage recorded by the survey since the second quarter of 2013. Some 37 percent say their financial position has improved from one year ago, too.

But it’s not all sunshine. While small business owners are happy with their finances, they’re also wondering how long the good times will last. In fact, two of the top three concerns cited by entrepreneurs in the survey are financial in nature.  Continue reading

Ask SCORE: What is the Washington State B&O Tax?

from the Department of Revenue…

The B&O tax (short for “Business & Occupation Tax”) is a gross receipts tax. It is measured on the value of products, gross proceeds of sale, or gross income of the business.

Washington, unlike many other states, does not have an income tax. Washington’s B&O tax is calculated on GROSS income from activities. This means there are no deductions from the B&O tax for labor, materials, taxes, or other costs of doing business.

The Business and Occupation (B&O) tax is a gross receipts tax levied on a business for the privilege of doing business in Washington. Almost all businesses located or doing business in the state of Washington are subject to the state B&O tax. It is an out-of-pocket cost for engaging in business activities.

The classification and rate of the B&O tax are based on the type of business activity conducted in this state. A business may perform more than one type of activity. Businesses performing multiple activities may be subject to tax under one or more B&O tax classifications.

Learn more about the Washington State B&O Tax. 

Learn about your city’s B&O Tax rates.