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What a DBA is not!

DBA Much?

A recent client asked us about the pros and cons of registering fictitious name aka DBA in New York.
As a startup attorney, I know other small businesses must have the same question but none have time for leisure reading. Here’s a quick snippet to remember:
  1. A DBA is not a legal entity, and has a very limited function. A DBA won’t protect your personal assets in a lawsuit; that’s a job best suited to LLCs, S-Corp, etc.
  2. A DBA could be sued if your fictitious name is confused with another company’s, possibly violating that party’s Intellectual Property (IP) rights!
  3. A DBA is not a business–it’s mission, vision, values, and people.
You can deduct the cost of legal fees and registration costs when tax time comes around.

 

Kwame

 

Depreciation for dummies…really smart small business, freelancer dummies

Depreciation, pimp my assets!

In sum, the Man (Amerika) has this concept called depreciation, which allows businesses to depreciate—or gradually deduct the cost of —assets such as equipment, fixtures, furniture, etc., that will last more than one year. Learn more here, via Turbotax. 

Depreciation’s always been a good deal for capital intensive businesses large and small. The old rules provided a 50% bonus depreciation for qualified assets acquired, but these assets had to be purchased new, not used.  Still, a pretty good deal, especially when talking real estate and vehicles.

Depreciation: A good deal for some.

For example, you’d get to lower your taxable income by thousands every year by using your building or car for business.  Wage earners/W2s got a few breadcrumbs,, but they were always limited; however, since the Tax Cuts and Jobs Act of 2017, businesses got a huge windfall, and have even MORE reason to “acquire” assets and wage earners get almost NO breaks for doing essentially the same thing. No arguing the morality, just spitting facts.  So, here’s what you need to know:

Bonus Depreciation, A better deal for fewer

Under the new rules, YOU, you really smart small business dummy, can take 100% bonus “expensing” of qualified assets that are new or used., acquired and placed in service after September 27, 2017. The percentage of bonus depreciation phases down in 2023 to 80%, 2024 to 60%, 2025 to 40%, and 2026 to 20%. After 2026 there is no further bonus depreciation. This bonus “expensing” should not be confused with expensing under Code Section 179 which has entirely separate rules,

A few more resources

https://www.irs.gov/pub/irs-pdf/p946.pdf

https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act

 

***Disclaimer** This response was prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. Attorney advertising. If you have any more questions, reach out to the team at ScotchPalm.com—fearlessly connecting the dots for entrepreneurs.

 

Tax Reform Snippets for small business owners and self-employed

1099s, Unite!

Is the new tax law good for freelancers and independent contractors? Well, it depends. Over a few posts, I”ll highlight a few amazing wins for 1099s.

Here’s one example where it’s pretty amazing to get paid without a W-2.

20% Qualified Business Income Expense

Isaac is a freelance journalist who earned $26K from his articles being published.  Since he’s single, no kids, he’ll save about $625 bucks on his 2018 taxes because he may deduct up to 20% of qualified business income.  This applies to income from a partnership, s-corp or sole proprietorship for a tax year.

There are a few limitations, so check with a hotshot tax advisor who specializes in small businesses. And if you’re a DIYer, here’s a useful resource, courtesy of TurboTax.

Cheers,

 

Kwame

***Disclaimer** This response was prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. Attorney advertising. If you have any more questions, reach out to the team at ScotchPalm.com—fearlessly connecting the dots for entrepreneurs.

 

For employees, this one tax change could lower their paycheck

If You’re a W2 Employee, This One Tax Change Could Mean Real Pain 

 

New tax bill wiped out Unreimbursed Expense Deduction

One benefit employees have lost under the new tax law is an employee’s ability to deduct unreimbursed expenses related to their job.  So it might not kill you, but will lower your take-home pay. The deduction for unreimbursed employee expenses was among the qualified 2-percent miscellaneous itemized deductions that were eliminated by the Tax Cuts and Jobs Act (TCJA) passed in Winter 2017.

 

This affects employee’s ability to do those little (or big) things

This is a huge a blow for employees who had relied on it to deduct unreimbursed expenses like work-related travel, meals, entertainment, gifts, lodging, tools, supplies, professional dues, licensing fees, work clothes and work-related education.

Employee Tips

  • Seek the Win-win #:  If you are an employee who has used this tax deduction, here are some tips to minimize your loss:
    • Determine the impact. Review your past tax records to help estimate how much you expect to pay in unreimbursed work expenses and what the tax deduction was worth to you.
    • Talk to your employer. Your boss might not even know that the loss of this deduction is a hardship, so explain how you will be affected.
    • Push the win-win. Ask your employer to consider reimbursing you for your work-related expenses directly. Your employer can probably deduct those expenses from their business return without increasing your taxable income. This will save them tax dollars when compared with the cost of raising your pay in order to indirectly compensate you for your unreimbursed expenses.

Employer Tips

Review your vision, mission, and values, and talk to your employees about their unreimbursed expenses in light of the tax law changes. If you aligns with your values to reimburse them for qualified business expenses, check with your bookkeeper/accountant.  Make sure your reporting adheres to IRS accountable plan rules so that your reimbursements are deductible as a business expense and do not add to your employees’ incomes.

 

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