Certain passive losses can offset ordinary income. Commonly referred to as Passive Activity Losses  Do I Qualify for the Passive Real Estate Losses? Taxpayers with passive income from rental real estate assets and whose total income is below IRS adjusted gross income limitations. 2022 Passive Real Estate Losses Details Passive real estate losses (from investments) can help offset passive and nonpassive income for taxpayers with less than $150,000 taxable income (MFJ) or $75,000 (MFS). If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that’s disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income. The maximum special allowance is: • $25,000 for single individuals and married individuals filing a joint return for the tax year. • $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year. • $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. Benefits Allows you to use passive real estate losses against active income Considerations All passive income must be offset by prior suspended losses and current year losses before reducing ordinary income Assumptions When Taking the Passive Real Estate Losses Actively participated in the activity Not a real estate professional Property is not treated as a vacation rental property. You are not married filing separate and lived with your spouse at any time during the year. Requirements to Claim the Passive Real Estate Losses Owns rental passive rental real estate Business Entities That Can Claim the Passive Real Estate Losses Schedule E Farm Rental

Using compensation optimization, business owners can determine if they would benefit from an entity change by considering their total “compensation” needs and how to best distribute that compensation across various types of income. Commonly referred to as business owner compensation. Do I Qualify for the Compensation Optimization? Using compensation optimization, you can determine whether changing business entities would have tax benefits for your company, yourself and your total compensation. 2022 Compensation Optimization Details Compensation optimization is the process of reviewing your total “compensation” needs and determining whether changing business entities would help better distribute the compensation across various types of income. Certain entity types will have owner or shareholder compensation requirements that are dictated by the facts and circumstances of the business and what the taxpayer's personal income needs are currently. Schedule C: Owners are generally free to take cash out of the business at their discretion without further tax consequences and are not required to pay themselves a salary via payroll. Partnership: Partners are generally free to take distributions of their share of partnership profits without further tax consequences. Partners cannot pay themselves salaries via payroll, but they can provide for “guaranteed payments,” which are distributions that are not determined by the partnership’s income or their proportionate share. S corporations: Distributions paid out of an S corporation are not subject to self-employment tax. As a result, Congress added the requirement that owners who work for the corporation pay themselves “reasonable compensation” via payroll, subjecting those wages to payroll taxes at both the company and individual levels. C corporations: Dividends are not subject to self-employment or payroll taxes. However, they are also not deductible from the taxable income of the corporation. On the other hand, salaries paid to shareholder-employees are subject to payroll taxes, but they are deductible in calculating the corporation’s taxable income. C corporation owners must take a “reasonable salary” to avoid large deductions. Benefits Can increase your tax savings. Can increase entity tax savings. Considerations Entity change may be costly. If electing to change from an S corporation, will be limited for three years from electing that status again. Assumptions When Taking the Compensation Optimization None noted. Requirements to Claim the Compensation Optimization Generally, no compensation amounts are required with a Schedule C or partnership. If the partnership makes (or would make if elected) guaranteed payments to the partner for services to the partnership, those payment amounts should be included. An S corporation is required to pay an owner-employee reasonable compensation in the form of W-2 wages, and the salary amount will be needed for current S corporations. Taxpayers looking to compare their current entity to an S corporation will need to include an amount of W-2 wages that would be paid to the owner-employee if the business took that form. A C corporation will typically pay an owner-employee a salary (W-2 wages). As salary cannot be excessive, it is also highly likely that a C corporation will pay dividends to shareholders, even those who receive a salary. A user should enter total dividends paid out as ordinary dividends and then also indicate what portion of those dividends are qualified dividends. Business Entities That Can Claim the Compensation Optimization Schedule C S Corporation C Corporation Partnership

The employee retention credit is a fully refundable payroll tax credit that provides relief to certain businesses impacted by COVID-19, as an incentive for businesses to keep employees on their payroll during the pandemic. Commonly referred to as Section 206, payroll tax, ERC and ERTC Do I Qualify for the Employee Retention Credit for 2021? As part of the CARES Act and the Consolidated Appropriations Act, businesses can claim the employee retention credit for wages paid in 2021, if they meet certain requirements. Employee Retention Credit for 2021 Details The employee retention credit (also referred to as the ERC or ERTC) exists as part of the CARES Act and the Relief Act to provide relief to businesses during the COVID-19 pandemic. Section 207 of the Relief Act extended the availability of the tax credit into 2021. How does the Employee Retention Credit work? Q1 and Q2 2021—Businesses can receive a credit of up to 70% of qualified wages, up to a maximum of $7,000 per employee per calendar quarter for a total of $21,000 per calendar year. (Separate rules apply for employers with more than 500 employees.) The credit is claimed against the employer portion of the Social Security (OASDI) tax. To qualify for the credit, the business owner must to prove their business either : Test 1: Was shut down by the government (fully or partially) due to COVID-19. Test 2: Experienced a large drop (20% for ERTC the 2021 credit) in year-over-year gross receipts (i.e., total revenue during the period) when comparing a 2021 quarter with the same quarter in 2019 or an alternative quarter. Q3 2021—Most businesses can receive a credit of up to 70% of qualified wages, up to a maximum of $7,000 per employee per calendar quarter. (Separate rules apply for employers with more than 500 employees.) To be eligible to claim the tax credit, the business must have experienced a full or partial government shutdown or a decline of more than 20% in gross receipts when comparing a 2021 quarter with the same quarter in 2019. Exceptions are available for: Severely financially depressed employers—100% of wages are eligible for the credit if the business experienced a reduction in gross receipts of more than 90% during the third quarter of 2021, compared to the same quarter in 2019. Recovery startup businesses—Businesses that started on or after February 15, 2020, and have annual gross receipts of less than $1M can take a maximum credit of $50,000 in Q3 2021. The credit is claimed against the employer portion of the Medicare (HI) tax. Benefits Reduces payroll tax. Provides a dollar-for-dollar credit. May generate a refund if the amount of the credit is more than certain federal employment taxes the employer owes. Considerations Must be substantiated with proof of a government shutdown, book records and/or tax returns. May conflict with other credits, such as the work opportunity tax credit or the emergency sick leave credit. Wages used to claim the credit can't be deducted from taxable income. Conflicting strategy—Work Opportunity Tax Credit Assumptions When Taking the Employee Retention Credit for 2021 The business owner didn't use the same qualified employee payroll costs to qualify for the ERC as they did for PPP loan forgiveness, the R&D credit, the work opportunity tax credit or other credits. The company was hurt by the COVID-19 pandemic or was a recovery startup business. The business has at least one employee. Requirements to Claim the Employee Retention Credit for 2021 The business must have experienced at least a 20% reduction in gross receipts in 2021 from a corresponding quarter in 2019, had their business fully or partially suspended during at least one quarter in 2021 or be considered a recovery startup business. Conflicting Strategies Work Opportunity Tax Credit Business Entities That Can Claim the Employee Retention Credit for 2021 Schedule C Schedule F S Corporation C Corporation

Reduce your tax liability by hiring your children to work in your business. Commonly referred to as hiring children tax strategy, hiring your children and tax deduction for hiring your children. Do I Qualify for the Hiring Children? If you’re a parent who owns your own business, you have an opportunity to begin the wealth-transfer process and leverage a tax deduction for hiring your children as employees. 2021 Hiring Children Details If you’re a parent who owns your own business, you have an opportunity to begin the wealth-transfer process and leverage a tax deduction for hiring your children as employees. If your business is a sole proprietorship or a spousal partnership , the hiring children tax strategy offers a few benefits to take advantage of: Payments to your children who are under 18 are not subject to social security and Medicare taxes. Payments to your children who are under 21 are not subject to Federal Unemployment Tax Act (FUTA) taxes. All payments are subject to income tax withholding, regardless of the child’s age or the type of business entity. State tax and withholding rules may apply. Children older than 8 are considered able to work in the business and therefore take the standard deduction amount for their efforts. Children 7 years and younger are not considered able to work. Note: Wages paid to your children will be subject to social security, Medicare and FUTA taxes if your business is organized as a corporation (either subchapter S or C) or a partnership that includes individuals in addition to the two spouses. Benefits Reduce taxable income. A child can be paid more than the standard deduction if those funds were put in a retirement account on behalf of the child. Reduce self-employment tax. When the amount paid annually to the child matches the standard deduction available to the child, the child can end up with no taxable income. Considerations Running payroll for each child's labor is required. There are documentation requirements to substantiate the deductions. You’ll need to establish additional bank accounts for your children. Your state's requirements for hiring your child may be more restrictive than Federal labor laws. Conflicting strategy: Family Office Management Company Assumptions When Taking the Hiring Children Children are able to safely perform the job tasks required of them. Children are paid a reasonable wage for their efforts and abilities. Children are 8 years of age or older. Payroll is generated for each child's labor costs. Requirements to Claim the Hiring Children Wages must be based on a market rate of pay and be paid in exchange for legitimate services rendered to the business. W2 forms must be filed for each child that is hired. The employment of children under the age of 18 in any hazardous occupation is prohibited. Business Entities That Can Claim the Hiring Children Schedule C Schedule F S Corporation C Corporation Partnership

Sometimes things happen; and when they do, they typically hit you in large waves. This solution will allow you to take control of your finances and begin fighting back against high interest-bearing credit card debt. The solution to the easy pitfall of paying high interest on your credit card debt is to simply (not pay the interest). The challenges of life already make it difficult to satisfy existing debt obligations. Follow this model and begin fighting back.

Tax deferred retirement plans are recommended by many investment advisors and CPAs. For us, we must ask the question: Are they really that good of an investment vehicle? It is of our opinion that they simply do not provide the value that most people think they do. Let us explain from 3 different perspectives.

Whether you are an established business or you are considering on starting one, it is important that you evaluate the benefits and downsides of electing to be taxed as an S-Corporation. An S-Corporation is not a legal entity, it is simply a tax classification. We have seen many instances where it would make sense for a business to elect the classification – but we have also seen too many instances where businesses were improperly ignoring the rules set forth for S-Corporations. Ignoring the rules poses significant risks. Here are some of the major advantages and disadvantages.