Watson CPA Group - Knowledgebase

Knowledgebase

Recent Articles
Owner Only 401k Plans in MMLLC Environment
By Jason Watson (Google+) Posted June 2, 2019 What if the structure did not have any employees and only had owners? This changes the rules a bit since now discrimination, or specifically, exclusions are allowed within 401k plan documents. Let’s also go back to our example and say that Fred...
02 Jun, 2019 Views: 0 Comments: 0
Accounting Method
By Jason Watson (Google+) Posted June 2, 2019 Many business owners ask if they should be cash or accrual when selecting the accounting method within their accounting package. Simply put, the accrual-basis method recognizes revenue when earned (not when paid) and recognizes expenses when...
02 Jun, 2019 Views: 0 Comments: 0
Minimize Tax or Maximize Value (Economic Benefit)
By Jason Watson (Google+) Posted June 2, 2019 As mentioned elsewhere in this book, we encourage people to focus on building wealth and if they can save taxes along the way, then that is just icing on the cake. What do we mean here? Often we see business owners who want to minimize their tax...
02 Jun, 2019 Views: 0 Comments: 0
Parent-Child Arrangement (Income Flows “Down”)
By Jason Watson (Google+) Posted June 2, 2019 Another thought along these lines involves a multi-member LLC where you and another non-spouse partner are the members. Later in a later chapter you’ll learn that one of the limitations of an S corporation is that distributions must be made in the...
02 Jun, 2019 Views: 0 Comments: 0
ESOPs and S Corporations
By Jason Watson (Google+) Posted June 2, 2019 What happens when you have an S corporation but want to implement an ESOP? First, what the heck is an ESOP. According to a May 2017 article in the Journal of Accountancy- ESOPs were created by the Employee Retirement Income Security Act of 1974...
02 Jun, 2019 Views: 0 Comments: 0
Another Employee Ownership Situation
By Jason Watson (Google+) Posted June 2, 2019 The Watson CPA Group is currently exploring the poor man’s version of an ESOP where our primary entity is a C corporation which has a robust shareholder agreement for buying and selling of shares. Why do you need a shareholder agreement? If you own...
02 Jun, 2019 Views: 0 Comments: 0
Section 199A Recap
By Jason Watson (Google+) Posted November 23, 2018 Section 199A Comparison Recap Hopefully you are still with us and not in the fetal position sucking your thumb. To hammer these points home, the Section 199A won’t help everyone and the S corporation still has some shine (although perhaps less...
05 May, 2019 Views: 0 Comments: 0
Electing S-Corp Filing Status, Retroactive for 2018
By Jason Watson (Google+) Posted May 5, 2019 Yes, you are able to engage in revisionist history and retro activate your S Corporation election to January 1, 2018, and have your income avoid a large chunk of self-employment taxes. Which year? Good question, and Yes, of course, it depends. First...
05 May, 2019 Views: 0 Comments: 0
S Corp Hard Money Facts, Net Savings
By Jason Watson (Google+) Posted May 5, 2019 Sales pitch alert! The Watson CPA Group specializes in S corporations which have a small number of shareholders, and often just a one-person show. Did you know that 95% of all S Corps have only one shareholder, and 99% of all S Corps have three or...
05 May, 2019 Views: 0 Comments: 0
Watson CPA Group Fee Structure
By Jason Watson (Google+) Posted May 5, 2019 The Watson CPA Group prides itself in being transparent and having a simple fee structure. Most business services and tax returns will fit into the fees described below. Sure, there's always the outlier or the unusual situation, but the following...
05 May, 2019 Views: 0 Comments: 0
S Corp Grind, Operational Hassles
By Jason Watson (Google+) Posted May 5, 2019 You’re probably thinking that running an S Corp adds all kinds of burdens. Not true. When we ask the appropriate questions and recommend an S Corp election, some clients will say, “Sounds like a lot of work.” There are very few additional...
05 May, 2019 Views: 0 Comments: 0
Section 179 and Bonus Depreciation
By Jason Watson (Google+) Posted November 23, 2018 Let’s talk about the Hummer Loophole since that is where most taxpayer confusion comes from. Yes, at some point, long ago, in a galaxy far far away, businesses could buy heavy trucks and deduct them 100%. Was this a loophole of sorts? Yes....
05 May, 2019 Views: 0 Comments: 0
Section 199A Specified Service Business Comparison Part 1
By Jason Watson (Google+) Posted May 5, 2019 Same online retailer but compared to an attorney (SSTB). Yuck! Retailer Attorney ln No S S Corp No S S Corp 1 Business Income 250,000 ...
05 May, 2019 Views: 0 Comments: 0
S Corp Section 199A Deduction Examples
By Jason Watson (Google+) Posted May 5, 2019 We are going to walk you through a handful of examples comparing non-S Corp scenarios such as sole proprietorships, single-member LLCs (disregarded entity) and other pass-through environments (partnerships) to those same situations being taxed as an S...
05 May, 2019 Views: 0 Comments: 0
Section 199A Frequently Asked Questions
By Jason Watson (Google+) Posted May 5, 2019 Here are some common questions and answers that have come up during recent consultations with clients. Some of these might be repetitive if you’ve been paying attention. Do I have to create an LLC to get the Section 199A deduction? No. It is...
05 May, 2019 Views: 0 Comments: 0
Qualified Property Anti-Abuse
By Jason Watson (Google+) Posted May 5, 2019 More cops and robbers. If you are finding yourself limited in Section 199A qualified business income deduction because of depreciable assets (2.5% of the unadjusted cost basis right after acquisition is the calculation), you might be inclined to buy...
05 May, 2019 Views: 0 Comments: 0
Section 199A Rental Property Deduction
By Jason Watson (Google+) Posted May 5, 2019 Defining a trade or business is easy for the most part, however certain activities are murky and one of them is rental properties. On one hand an argument that rental property income is already tax advantaged can be made since it is not subject to...
05 May, 2019 Views: 0 Comments: 0
Section 199A Reasonable Compensation
By Jason Watson (Google+) Posted May 5, 2019 When the proposed Section 199A regulations were released in August, the IRS received well over 300 comments. One of the comments concerned itself with the interplay of qualified business income deduction, W-2 wage limitations and S Corp reasonable...
05 May, 2019 Views: 0 Comments: 0
Section 199A Deduction Decision Tree
By Jason Watson (Google+) Posted May 5, 2019 Remember that taxable income is all income for the household, and the following numbers are the “base” numbers for 2018 but indexed annually. Simply put, these numbers represent the top of the 24% marginal tax bracket. Specified Service Trade or...
05 May, 2019 Views: 0 Comments: 0
Services or Property Provided to an SSTB
By Jason Watson (Google+) Posted May 5, 2019 The proposed regulations for Section 199A had a provision where a trade or business that provides more than 80% of its property or services to an SSTB is treated as an SSTB if there is 50% or more common ownership of the trades or businesses. This...
05 May, 2019 Views: 0 Comments: 0
Trade or Business of Performing Services as an Employee
By Jason Watson (Google+) Posted May 5, 2019 The main problem here is a lot of employees might want to convert to an independent contractor status with their former employer so they can qualify for the Section 199A deduction. For example, you make $100,000 as a W-2 employee. This probably costs...
05 May, 2019 Views: 0 Comments: 0
Specified Service Trade or Business (SSTB) Definitions
By Jason Watson (Google+) Posted May 5, 2019 Specified service trades or businesses is the bane of the Section 199A existence in so many ways. Let’s start off with the definitions- Traditional service professions such as doctors, attorneys, accountants, actuaries and consultants. ...
05 May, 2019 Views: 0 Comments: 0
Section 199A Defining Terms
By Jason Watson (Google+) Posted November 23, 2018 Pass-through entities and structures include- Sole proprietorships (no entity, Schedule C). Real estate investors (no entity, Schedule E). Disregarded entities (single-member LLCs). Multi-member LLCs (Form 1065). ...
05 May, 2019 Views: 0 Comments: 0
Section 199A S Corp Considerations
By Jason Watson (Google+) Posted May 5, 2019 Section 199A deduction also known as the Qualified Business Income Deduction (QBID) arises from the Tax Cuts & Jobs Act of 2017. This is a significant tax break for small business owners but there are rules and limits of course. As with any...
05 May, 2019 Views: 0 Comments: 0
Terminating S Corp Election
By Jason Watson (Google+) Posted May 5, 2019 S Corps have relished being the class favorite for all kinds of reasons as stated in this book. However, the original C Corp could be making a comeback based on flawed logic from the Tax Cuts and Jobs Act of 2017. The primary motivation is the...
05 May, 2019 Views: 0 Comments: 0