1. TAX TIPS FOR ADVISING SMALL BUSINESS OWNERS Kitrina Wright, CPA FA Bean Counters, LLC

2. Background  Co-Founder – FA Bean Counters  Founder – Wright Accounting Group, LLC  Previous lives:  Big Firm  Mid Firm  Government Auditor  Opera Singer

3. Agenda  Business Entity Options & Taxation for your Small Business Clients  Clearing up the Gray Areas in Accounting & Bookkeeping  Client Identity Theft & The IRS

4. Business Entity Types 1040 – Schedule C 1040 - Sch C/Single Member 1065/Multi-Member 1120S/Taxed as S-Corp 1120S Sole ProprietorLLCS-Corp Tax Return Filed OwnerMemberShareholder Owner Draw Member Draw (Guaranteed Payments – Partnerships) Shareholder Distribution And Wages Yes (Except LLC/SCorp) No (SS/Med paid on Wages) What Are Owners Called? How do you get money out? Owner Must Take Payroll? No (Except LLC/SCorp) Yes Is Net Income Subject to Self-Employment Tax?

5. Accounting Gray Areas  What is an Expense?  Ordinary – Common and accepted in your trade or business.  Necessary – Helpful and appropriate for your business.  How do you Substantiate an Expense?  Amount of the expense  Time and Place  Business Purpose  Business Relationship of People Involved

6. Accounting Gray Areas  Meals & Entertainment Limitations  50% Limitations  Applies to Employers, Employees, Self-Employed Persons & Clients  Travel away from home on business  Entertaining Clients  Attending a Business Function  Lavish/Extravagant Expenses  Face Value Limitation

7. Accounting Gray Areas  Meals & Entertainment Exceptions  100% Deductible Meal Expenses  Company Picnics & Holiday Parties  Coffee/Snacks at office  Promotional Food  Working Lunch/Late  100% Deductible Entertainment Expenses?

8. Accounting Gray Areas  Meals & Entertainment Exceptions  Club Dues & Membership Fees You cannot deduct dues for any club organized for business, pleasure, recreation, or social purpose.  Country Club  Golf and Athletic Clubs  Airline Clubs  Hotel Clubs IRS Publication 463

9. Accounting Gray Areas  Meals & Entertainment Exceptions  Client Gifts  $25 Limit  To each person per year  Married Couples  Children of clients  Flowers  Gift Baskets  Gift Cards

10. Accounting Gray Areas  Cell Phone  No New IRS Guidelines  “Old Rule”  IRS Code 2011-93 (Sept 14, 2011)  Reasonable Basis for Deduction

11. Accounting Gray Areas  Home Office (Form 8829)  Exclusivity  Calculation  Deductible Expenses  Real Estate Taxes  Mortgage Interest  Rent  Utilities  Insurance  Repairs  Depreciation  Simplified Method for Home Office  300 sq ft limitation  $5.00/sq ft  Based upon months used  Limited to Income/Does not rollover

12. Accounting Gray Areas  Automobile  Standard Deduction (54.0 cents/mile)  Actual Expenses  Mileage Logs  Advertising  IRS Publication 463

13. Client Identity Theft and the IRS  Publication 5027  Client Facing.pdf  www.IRS.gov/UAC/taxpayer-guide-to-identity-theft  File Police Report  File an FTC Complaint  Contact the Credit Bureaus  File Form 14039 (Identity Theft Affidavit)  Paper File Tax Return

14. Contact Information Kitrina Wright, CPA Kitrina@FABeanCounters.com @KitrinaCPA www.FABeanCounters.com @FABeanCounters

15. Taxation of Various Entity Types