Author: Brian Perry

Payroll administration can be challenging for small business owners — and mistakes can create problems for both employers and employees. Incorrect paychecks can frustrate employees and require time and resources to fix. Errors involving tax withholding, deposits, or reporting can also expose your business to interest and penalties. Mistakes can happen even with payroll software or an outside payroll provider. Here are some steps you can take to reduce your risk. Withhold and Deposit Taxes Properly Employers generally must withhold income tax and employees’ share of Social Security and Medicare...

Teachers and other educators often spend their own money on books, supplies, equipment and other classroom needs. For 2026, eligible educators may have two ways to deduct qualifying unreimbursed expenses. One deduction is available whether or not they itemize, and a new deduction under the One Big Beautiful Bill Act (OBBBA) is available to itemizers. The Long-Time Deduction for Nonitemizers and Itemizers Eligible educators can deduct some of their unreimbursed out-of-pocket classroom costs under the educator expense deduction. This is an “above-the-line” deduction, which means you don’t have...

To attract and retain skilled workers, your small business needs to offer more than competitive pay. Your benefits package matters, too — and benefits with favorable tax treatment can be even more valuable to prospective and existing employees. Open enrollment is right around the corner for many businesses. As you review your benefits package for 2027, here are some benefits worth considering. Although the IRS won’t announce the inflation-adjusted amounts for 2027 until later this year, the 2026 figures provide a starting point for planning. In addition, the One Big Beautiful Bill Act (OBBBA)...

Contributing as much as possible to tax-deferred retirement accounts such as traditional 401(k)s and IRAs is a common recommendation. Contributions generally are pretax or deductible, and the power of tax-deferred compounding can help turbocharge growth. But some taxpayers can reach a point where maximizing tax deferral may become counterproductive. Potential Downsides of Tax-Deferred Saving After you’re retired, you’ll no longer be earning a salary or full-time wages. So the assumption generally is that taxpayers will be in a lower federal income tax bracket and pay tax at a lower rate when...

Trading items or services — without exchanging cash — has long been common among small businesses. Today, some use online barter exchanges to facilitate trades. In addition to preserving cash flow, these types of transactions may expand your purchasing power, help you move overstocked inventory, and increase your business’s exposure to new markets. But bartering isn’t tax-free. For tax purposes, bartering is treated the same as being paid in cash. How It Works The fair market value (FMV) of goods you receive in business barter transactions must be reported as taxable income. And if you exchange...

Disability insurance is a valuable benefit provided by many employers. It replaces a portion of the insured person’s income — typically 45% to 65% of pre-disability earnings — after a specified waiting period that starts when the person becomes disabled (as defined by the policy’s terms). Whether you’re just beginning to receive disability benefits or you’re evaluating your long-term financial security, it’s important to understand the tax implications of these benefits. Payment of Premiums Taxability of disability insurance benefits usually hinges on who paid the premiums. If your employer...

Many small businesses start out as sole proprietorships. This structure is simple and inexpensive to establish and maintain — and it gives the owner direct access to profits without having to take formal distributions. But it also makes your taxes more complicated than when you were a W-2 employee. Here are some federal tax issues to consider if your business operates as a sole proprietorship. Reporting Income and Expenses You’ll report income and expenses from your business activities on Schedule C of your personal return (Form 1040). The net income will be taxable to you regardless of whether...

A higher education is expensive, and many parents spend years saving up. Others haven’t had the financial bandwidth to save or have hit unexpected financial roadblocks along the way. Regardless of your situation, current tax breaks may be available to you (or to your children or even their grandparents) once your child begins attending college or other post-secondary school. Here are some tax tips. Claim Tax Credits If you have one or more children in college — or graduate school — you might be eligible for valuable tax credits. Remember, credits reduce your tax liability dollar-for-dollar,...

Mutual funds offer an easy way to invest in a diversified portfolio compared to buying individual stocks and bonds. But the tax treatment of mutual funds isn’t so simple. How Are Mutual Funds Taxed? If you sell appreciated mutual fund shares, the resulting profit will be taxable. If you’ve held the shares for one year or less, you have a short-term gain subject to your marginal ordinary-income rate, which might be as high as 37%. If you’ve held the shares for more than one year, your lower long-term capital gains rate applies. The maximum federal long-term gains rate is 20%. But most taxpayers...

Small business owners must answer an important question: Should we use the cash or accrual accounting method for federal income tax purposes? Larger entities are required to use the accrual method. But certain small businesses can elect to use the cash method. You may want to consider this option if it will help lower your taxes. However, it’s not right (or even available) for every situation. Does Your Business Qualify for the Cash Method? Under Internal Revenue Code Section 448(c), your business may be eligible for the cash accounting method if it had average annual gross receipts that don’t...

Start-ups must choose a legal entity for their business activities. The type of entity you select affects how the business is taxed and who may be held personally liable for its debts and obligations, among other things. Two popular options — assuming you’re going into business with one or more other people — are S corporations and multimember LLCs treated as partnerships for tax purposes. Both are pass-through entities, meaning tax items pass through to the individual owners and are reported on their personal federal income tax returns. And both offer liability protection. But there are subtle...