News

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...

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Pro Bono CPA Services for Growing Companies in Michigan

July 1, 2016 by Yeo & Yeo

Yeo & Yeo CPAs & Business Consultants is going into its fourth year of helping to advance Michigan’s growth by nurturing companies through pro bono services under the Pure Michigan Business Connect initiative. This initiative, developed by the Michigan Economic Development Corporation (MEDC), connects early-stage Michigan companies with professionals who will provide legal, accounting and other services at little to no cost.

In January 2013, Yeo & Yeo committed to donate up to a grand total of $250,000 in services to select Pure Michigan Business Connect program participants over a five-year period, 2013 through...

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Unexpected Retirement Plan Disqualification Can Trigger Serious Tax Problems

May 23, 2016 by Yeo & Yeo

It’s not unusual for the IRS to conduct audits of qualified employee benefit plans, including 401(k)s. Plan sponsors are expected to stay in compliance with numerous, frequently changing federal laws and regulations.

For example, have you identified all employees eligible for your 401(k) plan and given them the opportunity to make deferral elections? Are employee contributions limited to the amounts allowed under tax law for the calendar year? Does your 401(k) plan pass nondiscrimination tests? Traditional 401(k) plans must be regularly tested to ensure that the contributions don’t discriminate in favor of highly compensated employees.

If the IRS uncovers compliance errors and...

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ACA Boosts Popularity of Health Savings Accounts

February 10, 2016 by Yeo & Yeo

 The Affordable Care Act (ACA) seems to be making Health Savings Accounts (HSAs) more popular than ever. A recent report issued by Devenir, an HSA industry participant, highlights two key findings:

1. As of June 30, 2015, the number of HSAs climbed 23% from the previous year to 14.5 million, and

2. Account balances jumped 25% to approximately $28.4 billion over the same time period.

In 2010, the Employee Benefit Research Institute reported that there were 5.7 million HSAs with balances totaling $7.7 billion. Clearly, these accounts are becoming more popular.

ACA Effect

Under the ACA, health...

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The New-and-Improved Research Credit is Now Permanent

January 27, 2016 by Yeo & Yeo

The research credit is back — this time for good — and it's better than ever for some small companies. The Protecting Americans from Tax Hikes (PATH) Act of 2015, signed into law by the president on December 18, does much more than extend this credit. Under the PATH Act, the research credit is restored retroactive to January 1, 2015, and has finally been made permanent. The new law also provides two additional tax benefits that take effect in 2016 for certain employers.

What Is the Research Credit?

The research credit was introduced in 1981 to encourage spending on research and experimentation activities by cutting-edge companies. But it was...

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​Reduce taxes on your investments with these year-end strategies

December 4, 2015 by Yeo & Yeo

While tax consequences should never drive investment decisions, it’s critical that they be considered — especially by higher-income taxpayers, who may be facing the 39.6% short-term capital gains rate, the 20% long-term capital gains rate and the 3.8% net investment income tax (NIIT).

Holding on to an investment until you’ve owned it more than one year so the gains qualify for long-term treatment may help substantially cut tax on any gain. Here are some other tax-saving strategies:

  • Use unrealized losses to absorb gains.
  • Avoid wash...

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