Help when needed: Apply the research credit against payroll taxes
- ByPolk & Associates
- Jun, 08, 2022
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If your small business or start-up is planning to claim the research tax credit, here’s an option. Subject to limits, you can elect to apply all or some of research tax credits that you earn against payroll taxes instead of your income tax. Many new businesses, even if they have some cash flow, or even net positive cash flow and/or a book profit, pay no income taxes and won’t for some time. Thus, there’s no amount against which business credits, including the research credit, can be applied. On the other hand, a wage-paying business, even a new one, has payroll tax liabilities. The payroll tax election is an opportunity to get immediate use out of the research credits that a business earns.
Is it a good time for a Roth conversion?
- ByPolk & Associates
- Jun, 01, 2022
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The stock market downturn has caused the value of some retirement accounts to decrease. But if you have a traditional IRA, a downturn may provide a valuable opportunity: It may allow you to convert to a Roth IRA at a lower tax cost. Roth IRA qualified withdrawals are tax free and you don’t have to begin taking RMDs after you reach age 72. But if you convert to a Roth, you’ll owe income tax on the converted amount. If your traditional IRA has lost value due to a market downturn, converting to a Roth now will minimize the tax, and you’ll avoid tax on future appreciation. Interested? Contact us to see whether a conversion is right for you.
Calculating corporate estimated tax
- ByPolk & Associates
- Jun, 01, 2022
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The next quarterly estimated tax payment deadline is June 15 for individuals and businesses so it’s a good time to review the rules for computing corporate federal estimated payments. You want your business to pay the minimum amount of estimated taxes without triggering the penalty for underpayment of estimated tax. The required installment of estimated tax that a corporation must pay to avoid a penalty is the lowest amount determined under each of these four methods: The current year method, the preceding year method, the annualized income method or the seasonal income method. Contact us to determine which method is best for your corporation.
Dodge the tumult with a buy-sell agreement
- ByPolk & Associates
- Jun, 01, 2022
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A business with multiple owners can be thrown into tumult if one of the owners decides to leave, gets divorced, becomes disabled or dies. For this reason, such companies should strongly consider implementing a buy-sell agreement. This is a legal document that spells out how an owner’s share will be valued and transferred following a “triggering event.” Generally, buy-sell agreements are structured as either: 1) cross-purchase, under which the remaining owners buy the departing owner’s shares, or 2) redemption, under which the business entity itself buys the shares. It’s important to understand the tax impact of both options. Contact us for help creating or reviewing a buy-sell agreement.