Small Business Financials

You probably know that claiming income tax deductions reduces your taxable income. But did you know that not all deductions are created equal? Maybe you’ve heard the term “above the line” thrown around in tax conversations. Above-the-line deductions are actually adjustments to your taxable income — they are subtracted from your income before your adjusted gross income (AGI) is calculated for tax purposes. However, the number of above-the-line deductions you take directly affects the amount and type of “below-the-line” deductions for which you’re eligible. Below-the-line deductions, more commonly known as itemized deductions, include any deduction reported beneath the line for AGI calculation on your tax return. While both deductions ultimately reduce your taxable income, some can have a more favorable impact on your tax bill than others. In most cases, above-the-line deductions are the better choice. Here’s why. 1. You can take above-the-line deductions even if you don’t itemize ...

The IRS will receive an extra $80 billion in funding over the next decade thanks to the Inflation Reduction Act . Understandably, this announcement has caused some apprehension among taxpayers. Does this new funding mean your risk of an audit will go up this tax season? Let’s look at the facts. We’ll also review how you can help protect yourself from an audit (just in case). How will the IRS use the new funding? The additional funding promised to the Internal Revenue Service will be distributed over the next 10 years. Here’s how the IRS has said it will utilize the extra money: Specialized tax enforcement teams focused on auditing large corporations, complex partnerships, and high-net-worth earners (those earning $400,000 or more) Enhanced IT systems to modernize its outdated technology and better keep pace with the agency’s increased responsibilities and challenges More tax service employees dedicated to providing better and faster customer support for taxpayers The age...

Updated Sept. 12, 2022 At the end of August 2022, President Biden revealed that borrowers could get up to $10,000 of their federal student loans forgiven. If you received a Pell Grant, a federal grant designed to provide student aid to those from low-income households, you could have up to $20,000 of your federal student loans forgiven. Biden’s student loan forgiveness plan was a welcome announcement for many borrowers struggling with student loan repayment. But with this announcement came a barrage of questions — the taxability of student loan cancellation among them. Will I owe federal income tax on student loan forgiveness? Under usual circumstances, the IRS treats discharged debt as taxable income. However, thanks to the American Rescue Plan of 2021, student debt forgiveness will not be taxed at the federal level through 2025. This means you will not owe federal income tax on any discharged student loans in 2022. Will I owe any state income tax on discharged student loans? ...

If you are self-employed and work at home — even just part-time — you may claim a tax deduction for expenses related to your home office. Alas, if you’re an employee who has been working from home due to the COVID-19 pandemic, that amazing home office deduction you’ve heard so much about does not apply. I started working from home due to the pandemic. Can I deduct my home office expenses? Unfortunately, the answer to that question is no. There is no tax deduction available for traditional employees (those who work for an employer as a full-time or part-time employee) to deduct the expenses related to their home office. The home office deduction you’re likely familiar with is only available to self-employed people. Many companies have provided home office stipends or financial support of some capacity for their employees throughout the pandemic while mandating they work from home. If your company has not offered to cover any of your new home office expenses, our recommendation is ...

Establishing good business credit is one of the most important things you can do as a new small business owner. But how do you get the ball rolling? Here are some tips that can help you build a good credit rating for your business. What is business credit? Let’s start off with the basics. Just like your personal credit score, your business credit score is a number that helps lenders predict how likely you are to pay a loan back on time. Your business credit history is a good indicator of how reliable your business is financially, and a good score will make it easier to obtain financing. Why is it important to have good business credit? You’ll want a good business credit history to help you qualify for financing. Without business credit, you may find it more difficult to secure new vendors or business loans. Having good business credit will also help you qualify for lower interest rates, which can save you quite a bit of money in the long run. A good credit score will show pote...