Tax Planning: Did You Know?

As we gear up for another tax planning season, the following are a few insights on some frequently unknown or misunderstood tax topics:

S Corp Distributions must be pro rata. This means, if one owner takes a distribution, all owners must take a distribution equivalent to their ownership percentage.

Work Opportunity Tax Credit (WOTC) is a huge opportunity that many are still not aware of. It is a Federal tax credit available to employers that hire individuals from certain targeted groups. HORNE Payroll’s onboarding platform automatically tracks WOTC information. Interested in earning tax credits for something you’re probably already doing? Reach out to us today!

Vehicles have unique depreciation rules depending on whether it is over/under 6,000 lbs. Be sure to provide the vehicle’s make and model to your accountant so they can determine the proper write-off and tax treatment.

Bonus Depreciation on Qualified Improvement Property (QIP) was addressed in the CARES Act. The long-awaited technical correction was fixed, allowing QIP to be depreciated over 15 years and making it eligible for 100% bonus depreciation. The CARES Act also further defined QIP, saying the taxpayer must make the improvement. As a result, purchased leasehold improvements (LHI) do not qualify for bonus or section 179 and are depreciated over 39 years. Click here to learn more.

Business Entity Structure has far-reaching legal and tax implications. Be sure you are informed of the main types (Sole Proprietorship, S Corp, Partnership, C Corp), and consult both your attorney and accountant before making your selection. As your business matures, consider changing corporate structure to take advantage of tax benefits.

HORNE can help with all these topics and more. Reach out to us today!