Are Social Security Benefits Taxable?

A portion of social security benefits are taxable if all income, including tax-exempt interest, plus one-half of your benefits are more than an amount considered your base amount. Base amount is determined by your filing status. See base amounts for the 2019 tax year below. Individuals filing a joint return have to combine their income to determine total income

BASE AMOUNT

• $25,000 if you are single, head of household, or qualifying widow(er)

• $25,000 if you are married filing separately and lived apart from your spouse for all of 2019

• $32,000 if you are married filing jointly

• $0 if you are married filing separately and lived with your spouse at any time during 2019

Determining Which Business Tax Returns to File

Confused man

Determining what types of business tax returns you need to file can be a daunting task but once you have the tools to make the determination, you’ll be well on your way. The following general questions must be considered in order to complete your assessment:

  • What is the business structure of your company?
  • Do you have employees?
  • How much income tax do you anticipate owing?
  • What types of products or services do you sell?
  • How much in revenues did your company earn this fiscal year?

Determining the Business Structure of Your Company

Sole Proprietorships

A sole proprietorship is generally an unincorporated business that has one owner. You are probably wondering why generally is italicized. Well, a limited liability company, which is an incorporated business, can also be treated as a sole proprietorship for tax purposes under certain circumstances. We’ll cover more about the circumstances in the Limited Liability Company section. Assuming your business is, in fact, considered a sole proprietorship for tax reporting purposes, your business will generally need to file the following income tax returns:

  • 1040, U.S. Individual Income Tax Return

  • Schedule C (Form 1040), Profit or Loss from Business

  • Schedule SE (Form 1040), Self-Employment Tax

In addition, farming income is reported on Schedule F, profit or loss from farming. Rental property income and expense is reported on either Schedule E or Schedule C. Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer. If you and your spouse each materially participate as the only members of a jointly owned and operated real estate business and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. 

With the induction of the 2018 Tax Cuts and Jobs Act, more nuances were introduced into the US tax code that are beyond the scope of this article, but KES Design Group is a phone call or email away should you need guidance.

Finally, the forms below are reported to the IRS as well, if applicable:

  • Form 4562 – reports information about company assets, including any automobile expenses and depreciation and amortization deductions
  • Form 8829 – reports home office expenses

Limited Liability Company (LLC)

Limited Liability Companies (LLC’s) are incorporated on a state level and can be single-member or multi-member organizations. Single member LLC’s are treated as sole proprietorships by default and would file applicable tax forms for sole proprietorships. Multi-member LLC’s are treated as partnerships by default. We’ll cover partnerships below. Additionally, an LLC can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. You may have heard business owners or tax professionals reference corporation election as a “check the box” election because the classification is done simply by checking a box on a form. In conclusion, LLC’s can be taxed every which way, so this may explain why you may have gotten the answer “it depends” when asking how LLC’s are taxed.

Partnerships

A partnership exists when two or more people or organizations join in a trade or business. A partnership is responsible for filing an annual information return to report the results of operations and does not pay income tax. Partnerships are considered “pass-through” entities because they pass their income and expenses to their partners. Partnerships are required to file Schedule K-1, Form 1065. In turn, each partner will receive a Schedule K-1 from the partnership, which reports their share of profit or loss to report on their individual tax return.

Corporations

C-Corporations

A C-corporation is recognized as a separate taxpaying entity for federal income tax purposes. C-corporations are subject to double taxation; once when filing taxes on net profits or losses and again when the corporation’s shareholders are taxed on distributions or dividends they receive from the corporation. C-corporations are responsible for filing Form 1120, U.S. Corporation Income Tax Return.

S-Corporations

S corporations are corporations that elect to become pass-through entities and pass the results of operations to their shareholders for federal tax purposes. Shareholders of S corporations are taxed at their individual income tax rates. This allows S corporations to avoid double taxation on income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

To qualify for S corporation status, the corporation must meet specific requirements, which are beyond the scope of this article. The corporation must submit Form 2553 Election by a Small Business Corporation in order to become an S corporation and must file Form 1120-S, U.S. Income Tax Return for an S Corporation with the IRS annually.

Payroll Taxes

If your organization has employees, payroll taxes must be filed with the IRS  and federal income tax must be withheld for both the employer’s and employee’s share of social security and Medicare taxes. There are two deposit schedules: monthly and semi-weekly. A determination of which deposit schedule is appropriate must be made before the beginning of each calendar year.

The forms below will be required to be filed with the IRS depending on your tax situation:

  • 940, Employer’s Annual Federal Unemployment (FUTA) Tax return
  • 941, Employer’s Quarterly Federal Tax Return
  • 943, Employer’s Annual Federal Tax Return for Agricultural Employees (for farm employees)
  • 944, Employer’s Annual Federal Tax Return

Google Plus is Marked for Death

Google Plus is Dying
Google Plus
June 28, 2011 – April 2, 2019

Google plus is shutting its eDoors April 2, 2019 due to low usage and maintenance challenges according to a Google issued document. Google has provided a way to download data from Google Plus and if your company is a G Suite customer, Google Plus for your G Suite account should remain active. The full report from Google is below.

“In December 2018, we announced our decision to shut down Google+ for consumers in April 2019 due to low usage and challenges involved in maintaining a successful product that meets consumers’ expectations. We want to thank you for being part of Google+ and provide next steps, including how to download your photos and other content.

On April 2nd, your Google+ account and any Google+ pages you created will be shut down and we will begin deleting content from consumer Google+ accounts. Photos and videos from Google+ in your Album Archive and your Google+ pages will also be deleted. You can download and save your content, just make sure to do so before April. Note that photos and videos backed up in Google Photos will not be deleted.

The process of deleting content from consumer Google+ accounts, Google+ Pages, and Album Archive will take a few months, and content may remain through this time. For example, users may still see parts of their Google+ account via activity log and some consumer Google+ content may remain visible to G Suite users until consumer Google+ is deleted.

As early as February 4th, you will no longer be able to create new Google+ profiles, pages, communities or events. See the full FAQ for more details and updates leading up to the shutdown.

If you’re a Google+ Community owner or moderator, you may download and save your data for your Google+ Community. Starting early March 2019, additional data will be available for download, including author, body, and photos for every community post in a public community. Learn more

If you sign in to sites and apps using the Google+ Sign-in button, these buttons will stop working in the coming weeks but in some cases may be replaced by a Google Sign-in button. You’ll still be able to sign in with your Google Account wherever you see Google Sign-in buttons. Learn more

If you’ve used Google+ for comments on your own or other sites, this feature will be removed from Blogger by February 4th and other sites by March 7th. All your Google+ comments on all sites will be deleted starting April 2, 2019. Learn more

If you’re a G Suite customer, Google+ for your G Suite account should remain active. Contact your G Suite administrator for more details. You can also expect a new look and new features soon. Learn more

If you’re a developer using Google+ APIs or Google+ Sign-in, click here to see how this will impact you.

From all of us on the Google+ team, thank you for making Google+ such a special place. We are grateful for the talented group of artists, community builders, and thought leaders who made Google+ their home. It would not have been the same without your passion and dedication.” (Google February 8, 2019 https://support.google.com/plus/answer/9195133)

Federal Tax Court is Closed For Business

US Tax Court

The United States Tax Court shut down operations on Friday, December 28, 2018, at 11:59 p.m. and will remain closed until further notice.  If someone is representing you in your case, you should contact your representative for more information. Visit the Tax Court’s website for updates. 

The Tax Court website indicates that mail sent to the court through the U.S.  Postal Service or through designated private delivery services may have been returned undelivered.  If a document you sent to the Tax Court was returned to you, contact your representative or visit the Tax Court’s website for instruction.

Certain trial sessions were canceled and some were not. For more information, be certain to visit the Tax Court’s website for more information. Taxes will continue to accrue on taxes being disputed in any pending Tax Court Cases, however, the IRS is continuing to process payments during the shutdown. 

Going Paperless

Document Management

As I was searching online for a solution to help organize client documents, I stumbled upon something that seems a little wonderful. I found an app called FileThis that helps people go paperless. They even have a free solution! As an accountant, this app will allow me to streamline the process my clients go through to retrieve the documents I need in order to complete bookkeeping and income tax projects. Coupled with my client portal, I think I am on to something here!

FileThis fetches financial statements, bills, healthcare EOBs, and other documents from banks, insurance policies, retirement funds, credit card and utility companies, just to mention a few. Your documents are automatically uploaded to the cloud storage provider of your choice, including to FileThis cloud storage or directly to your personal PC. A basic non business membership will allow you to connect up to six service providers to the app. The app allows you to link your account to the following cloud storage providers:

  • FileThis Cloud
  • Evernote
  • SmartVault
  • Amazon Cloud Drive
  • Google Drive
  • Personal
  • AboutOne
  • Box
  • Your Personal Computer

FileThis will check for new documents and automatically upload them once a week with their Forever Free plan and daily with their Ultimate plan. The Ultimate plan will cost you $5 a month.

I like this product and see how it can easily be used to gather documents to give to your accountant, to collect documents for tax time, or simply to help manage your documents relating to your personal finances. Check out the plans below and why not try it out. It won’t cost a thing.

FOREVER FREE Premium Ultimate
Free $2 Per Month $5 Per Month
Runs once a week Runs once a week Runs daily
500MB of Storage on FileThis Cloud 1GB of Storage on FileThis Cloud 10 GB of Storage on FileThis Cloud

Oh, and by the way, you have the option of simply storing the files with the cloud storage providers mentioned above and bypassing the file storage limits. As for the pro accounts, I can’t say that I can personally justify the costs ($49 – $499 per month) associated with the product for small businesses like mine. Nevertheless, did I mention that the basic plan is free?

Money & Power

Money & Power
Money and Power Header

KES Design Group, an accounting firm located in Cleveland, OH has officially launched their blog, Money & Power! Enjoy your visit and browse through articles written to provide entrepreneurs and business owners information about starting and running a successful business.

This blog was born out of the idea that knowledge is power and hopefully, we can pass on some of our knowledge to you and help to cultivate a powerful world!

Sort through the business topics and read insightful business articles that touch on subjects like business financing, acquiring business grants, resources for minority owned businesses and more.

Share your experiences and expertise with us or just join the discussion.

Kelli Owens

President & CFO