To Deduct Business Losses, You May Have to Prove “Material Participation”

July 19, 2016 by Yeo & Yeo

You can only deduct losses from an S corporation, partnership or LLC if you “materially participate” in the business. If you don’t, your losses are generally “passive” and can only be used to offset income from other passive activities. Any excess passive loss is suspended and must be carried forward to future years.

Material participation is determined based on the time you spend in a business activity. For most business owners, the issue rarely arises — you probably spend more than 40 hours working on your enterprise. However, there are situations when the IRS questions participation.

Several tests

To materially participate, you...

Read More

Three Mutual Fund Tax Hazards to Watch Out For

July 13, 2016 by Yeo & Yeo

Investing in mutual funds is an easy way to diversify a portfolio, which is one reason why they’re commonly found in retirement plans such as IRAs and 401(k)s. But if you hold such funds in taxable accounts, or are considering such investments, beware of these three tax hazards:

  1. High turnover rates. Mutual funds with high turnover rates can create income that’s taxed at ordinary-income rates. Choosing funds that provide primarily long-term gains can save you more tax dollars because of the lower long-term rates.
  2. ...

    Read More

Awards of RSUs Can Provide Tax Deferral Opportunity

July 12, 2016 by Yeo & Yeo

Executives and other key employees are often compensated with more than just salary, fringe benefits and bonuses: They may also be awarded stock-based compensation, such as restricted stock or stock options. Another form that’s becoming more common is restricted stock units (RSUs). If RSUs are part of your compensation package, be sure you understand the tax consequences — and a valuable tax deferral opportunity.

RSUs vs. restricted stock

RSUs are contractual rights to receive stock (or its cash value) after the award has vested. Unlike restricted stock, RSUs aren’t eligible for the Section 83(b) election that can allow ordinary income to be...

Read More

Michigan Manufacturers Must Certify and Pay Essential Services Assessment No Later Than August 15

July 11, 2016 by Yeo & Yeo

The next step in the State of Michigan's Personal Property Tax reform process was recently released by the Department of Treasury. Eligible Manufacturing Personal Property (EMPP) claimants now need to certify and pay the Essential Services Assessment (ESA) no later than August 15, 2016.

The electronic ESA Statement is currently available through Michigan Treasury Online (MTO)
for claimants who filed and received the exemption by February 22, 2016, and for those Form 5278 filings processed during the second filing window which ended May 31, 2016.

This ESA Statement is only available online and will not be mailed to the claimant. To receive the EMPP exemption for...

Read More

The Four Cornerstones of Internal Controls

July 8, 2016 by Yeo & Yeo

Employees of most small to mid-size businesses are seen as part of the family, and business owners could never imagine that their family would steal from them. In fact, employees pose the greatest fraud threat in today’s economy. In its 2016 Report to the Nations on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners states that 49% of employee fraud is committed by someone with over five years’ tenure. These employees are often the most trusted, yet the frauds they commit average over $225,000 in losses.

A business cannot grow to new heights without a strong foundation and, in order to have a strong foundation, it is necessary for a business to have thorough ...

Read More

There’s Still Time For Homeowners to Save with Green Tax Credits

July 7, 2016 by Yeo & Yeo

The income tax credit for certain energy-efficient home improvements and equipment purchases was extended through 2016 by the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act). So, you still have time to save both energy and taxes by making these eco-friendly investments.

What qualifies

The credit is for expenses related to your principal residence. It equals 10% of certain qualified improvement expenses plus 100% of certain other qualified equipment expenses, subject to a maximum overall credit of $500, which is reduced by any credits claimed in earlier years. (Because of this reduction, many people who previously claimed...

Read More