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Business Tax Tips


NOTE: DELINQUENT TAXPAYERS---Please go to my individual tax tip page to read about an new law that has passed Congress that may affect you...


A few items to discuss for 2015—

  • Mileage rates for autos are 54 cents per mile for tax year 2016.  

  • 1099's ... I’ll take a minute to discuss 1099’s.  Okay, you don’t have to send one to corporations, and people that rent from you don’t have to send you one.  That’s great.  However, do realize that the penalty for you not doing one to folks that work for you and make over $600 during the year is now $100 per form and some auditors are even disallowing the deduction! The IRS can also make you pay more if they believe the omission is intentional. 
    • Be smart.  Get all of the info from your worker before you give him/her the first check.  
    • Make copies of his/her social security and driver license cards. (Of course, this person must be a legitimate contract laborer, not an employee in disguise.)  
    • Then, at year end, give them a 1099 MISC.  Please be aware that folks like me, lawyers, your landlord (business) and anyone else in the business field that is not incorporated have to get one too, if you paid them over $600 in annual fees!  You can buy 1099MISC's from any office supply store, just fill them out, be sure to send the top pink copy to IRS by Feb 28.  The recipient has to have their copies by Jan 31.  The 1099 is easy to fill out, you just need the amount, name, address, and social security number of the recipient, along with your own business name, etc.  I usually have some extras if you need a few.


You definitely need to read my individual tax tips regarding the 2016 changes.   However, I will mention a few things here—a couple of which are not on the individual tax tip page:

Here are some of the 2013 changes that are still applicable to 2016.

  1. A  2.3 percent tax on medical device makers (pacemakers, prosthetic limbs, stents, and operating tables).  Wonder who will end up paying that tax?  This tax is levied on GROSS sales (not net)!  Some companies are already cutting research and laying off employees.
  2. On your personal 1040, Schedule A-your medical deductions are subject to 10 percent of your adjusted gross income instead of 7.5 unless you are over 65.  Therefore, even fewer people will be able to itemize their medical deductions.
  3. Those of you that have Flexible Spending Accounts have a ceiling of $2,600 for 2016—not much if you are paying for braces or a special-needs child expense.
  4. "Safe Harbor" Office in Home Deduction--Effective beginning in the 2013 tax year, if you have a qualified home office for your business, you can multiply the allowable square footage of your home by a prescribed rate (as of now, 5%), up to 300 square feet.  For example, if you have 300 square feet of office space, your "safe harbor" deduction is $1500 (300 x $5.00) Taking this "safe harbor" deduction is supposed to reduce the audit risk for folks who use this deduction.  You will certainly need to use a tax professional (like MTL, of course) to determine whether this deduction or the actual cost deductions will be of greater benefit to you.
  5. Surtax on Investment Income—this one will probably hit everyone the hardest who have always tried to save money for rainy days.  Well, we’d better get ready for a typhoon because now your investment income is going to be hit hard.  The capital gain rate can be as high as 43.4 percent if you have short term gains and your income is subject to the 3.8 Medicare Contribution Tax. (23.8 if long term gains and subject to the tax).  Also, those of you who have rental properties will see this 3.8 percent Medicare Contribution Tax imposed.  It will be imposed on the lesser of the NET investment (rental) income or the amount by which the individual’s modified adjusted gross income (AGI) exceeds $250K for marrieds filing joint, or $200K for singles.  
  6. Medicare Payroll Tax—Those of you making more than $250K in wages (married filing joint) or $200K (if single) or in self-employment income get to pay an additional .9 percent (added to the current 1.45 percent Medicare tax).  This tax is also not subject to the FICA threshold, so even if you or your spouse makes enough money to get to the FICA threshold, you will still have to pay this particular tax. If your employer has not been withholding this tax, you will have to pay it.

Obamacare may be changing, thanks to President Trump, so please read my individual tax tips section for the latest updates.   Now more than ever, it pays to have someone on your side that can help you get all the deductions for which you are entitled.


 Sources for this article include:

  • John Kartch, FOX news website 
  • James N. Phillips and Timothy C. Smith, writers for Godfrey Kahn S.C.  website
  • D.J. Kilpatrick, Ph.D and Kenneth F. Abramowicz, Ph.D, writers for NATP TAXPRO Journal, Fall, 2013.
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