Greater Seattle, WA - Cook the Books Without Creating an IRS Tax Problem
While observing stay at home orders in Maple Valley, WA, and the rest of Washington state for that matter, many people are cooking more than they normally would. I wanted to share this tax-saving recipe to help you get through this trying time. I help business owners pay less tax through proactive tax planning and represent taxpayers that come to us with IRS tax problems.
3 ingredients for more tax savings:
Maximize your Business Use of Home Deduction - During your time quarantined at home, you have undoubtedly had the opportunity to reorganize closets, bedrooms, and even that far corner of the garage. Use it to your advantage by designating space for the exclusive use of your business, properly documenting the usage and identification of the space, then capture the complete list of qualifying expenses.
Rent Your Home (to your business) – With large gathering and conference spaces currently unavailable, nor allowed to host events for the foreseeable future, consider using IRC Section 280A(g) to your advantage. This section allows you to rent your primary residence for up to fourteen days and not have to report the income. If using the space for qualified purposes and documenting the rental appropriately, then you may enjoy a business tax deduction, while not having to claim the income personally. Sounds delicious, doesn’t it?
Hire your family – Who knew spending so much time together with family could be a powerful tax planning strategy? Performing services for a business activity should be compensated…reasonably compensated. Instead of just handing out allowance or providing financial gifts to relatives, you may want to consider including them on the payroll and documenting what they are doing to earn the wages. Your business receives the tax deduction, they receive financial support and depending on how your business is organized, you may not have to pay federal payroll taxes for payments made to minor children. Pretty sweet deal.
To learn more legal, tax-saving strategies for business owners, or get help with an IRS tax problem, contact me at (360) 474-5892 or e-mail me at tate@ensigncpa.com.
T.S. Ensign, CPA & Company, Inc.
P.O. Box 956
Ravensdale, WA 98038
(360) 474-5892
Fax (360) 474-5825