A reminder. As a former in-house counsel for an international software company, I can advise you on business transactions! In fact, I am working on two business sales even as we speak.
Much of what I said about withholding applies as well to quarterly estimated taxes, which the IRS requires from self-employed business owners. If you are a sole business owner or a partner or LLC or S corporation owner, suggest that you get a forecast of your tax liability. Some of the biggest questions regarding Tax Reform concern the taxation of businesses, particularly pass-through entities. For example, many small businesses are “pass-throughs” and will be enjoying a 20% deduction from their business income. Read more
There are other traps for the unwary business.
DON’T make your spouse an officer!
TRUST FUND PENALTY. Before you make a spouse or friend an officer of your company, beware of the “100% penalty.” Even though your business is a corporation or LLC’s and offers some liability protection if an employee pays to pay payroll taxes but pays other creditors that employee can become personally responsible for a portion of those taxes under tax code Section 6672(a). Whether he is responsible is a question of fact but the IRS will assume that an officer is responsible. Ireland v. United States, No. 2:17-cv-02014-CAS-ARGx (C.D. Cal. Apr. 3, 2018)]
No W-2’s for LLC owners. The IRS has announced that if you own 100% of an LLC that is reported as a sole proprietor on Schedule C, then you may not treat yourself as an employee of the LLC and issue yourself a W-2. The LLC and you are considered one.
The IRS audit rate continues to drop, to 0.6 last year but the Service examined between 1% and 2.1% of business reporting over $25,000 of gross receipts. See What You Don’t Know About IRS Audits