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Hot-Off-The Press | Helpful | Money Saving Tips
Starting and running a successful business can be challenging even for the experienced. Its typical for a business owner to get overwhelmed by all the tasks required to meet the growing needs of their business. For this very reason we have provided a free resources page to combat some of this confusion and guide our clients to a more profitable future.
Accounting & Bookkeeping
Bringing You The Answers
Business Billing Statement DIY
Business Billing Statement
Your Idaho business billing statement should include your name, mailing address, phone number, fax number, email address and also:
- Payment due date. You must specify a date or a time in relation to when you do your billing. If you indicate a payment due date, you must include the closing date of the billing period.
- Early payment discount. If you want to encourage the payment to be made at the time the product or service is purchased, you can offer a discount of 5% or more. You can also offer a discount if the payment is made earlier than the bill requires.
- Down payment. This allows a business to get money for a product or service before it is delivered.
- Installment payment details. IF you have worked it out with the customer before the purchase that it will be on an installment plan, be sure to number the statements and the balance remains.
- Finance charge. If you told the customer that late payments are subject to a finance charge, specify the percentage. If you do asses a finance charge, make sure it does not exceed the current state laws specified amount.
Cash Accounting Explained
Cash Accounting Facts
All Idaho businesses must choose between two accounting methods, cash or accrual.
The cash method (also called “cash basis”) does not mean all your transactions are in cash. Cash method refers to how you record your sales and purchases, and how you post your records. The word cash in cash method refers to all forms of payment (checks, money orders, credit cards, debit cards, electronic transactions). Not just currency.
Under the cash method, income is recorded when the money is received, and expenses are recorded with paint, with a few exceptions below.
Under single entry bookkeeping, only one entry is made, either to income or to expenditure. Single entry bookkeeping keeps the paperwork to a minimum while still providing you with the basic information to manage your business and prepare tax returns.
There are two disadvantages to this simple bookkeeping system for your Idaho company. Single entry bookkeeping will provide a record for your income and expenditures but will not automatically provide a complete record of inventory on hand, equipment, outstanding loans, or other assets and liabilities
The other drawback to single entry bookkeeping is the lack of a built in double check of arithmetical accuracy. These disadvantages are partly offset by the additional assets records that the equipment and inventory ledgers provide, a by the total columns in the ledgers that provide a partial math double check.
The alternative to single entry bookkeeping for your Idaho business, is the well-known and elaborate system called double entry bookkeeping entry, a complete recordkeeping system that posts multiple accounts with every entry, that provides cross checks and automatic balancing of the books, and the transforms bookkeeping from a part time nuisance into a full-time occupation.
In double entry bookkeeping, ever traction requires two separate entries, a debit and a credit. These terms originated in double entry bookkeeping, along with the expression balancing the books: total debits must equal total credits for the books to be “in balance.”
Double entry bookkeeping is a science. It is the perfected bookkeeping system, and it requires a full semester in college to master. Simplicity is our goal. I find that most small Idaho businesses are better off without the refinements and the headaches of a double entry system.
Most hand posted a spreadsheet ledger are single entry ledgers, easy to set up, easy to use. Accounting software such as QuickBooks is double entry, but because the software does all the posting automatically, most users have no need to understand double entry bookkeeping.
How to Categorize Business Supplies
Categorize Business Supplies Correctly
Putting your business supplies in the right category will save you money in taxes. Business supplies category refers to industrial supplies. Do not include manufacturing supplies or supplies that are part of inventory.
Such supplies are part of “cost of goods sold. Office supplies should be included under “office expenses,”
- Building supplies
- Equipment and tools that wear out within a year
- Replacement filters and similar consumables
QuickBooks Backup & Restore
Backup QuickBooks & Restore
Running an Idaho or WA business is hard enough without the constant stress that QuickBooks commonly causes owners. Here are the 6 steps to restoring the QuickBooks program that has probably crashed on you at least a handful of times in your life.
Financial data on your QuickBooks may be some of the most important information you own. It contains your payroll, expenses; payables, customer information, receivables and income, sales and Idaho state tax information.
When an issue occurs, the last thing you want to do is to hire an expensive date recovery service. Do not wait for a major problem to strike before you implement your own backup strategy.
With proper procedures and planning, you can save yourself and your company a complete meltdown.
How to Backup and Restore a Company File in QuickBooks
- Open QuickBooks. Select “File” and “Save Copy or Backup” from the menu.
- Click the radial button beside “Backup Copy.” Click the “Next” button.
- Select “Local Backup.” Click “Options.”
- Choose the “Browse” button. Select where to save your backup from the pane in the “Browse for Folder” window. Click “OK.”
- Click “OK” in the “Backup Options” window. Choose “Next.”
- Select “Save it Now” from the “Save Copy or Backup” window. Type a file name for the backup in the area next to “File Name” Click “Save.”
Business Entity Structures
Getting it Right The First Time
C-Corporation Fringe Benefits
Idaho C-Corporation Fringe Benefits
The C-Corporation allows owner/shareholder-employees to receive the most amount of tax-free fringe benefits out of all business entities.
C-Corporations are allowed to offer their owner/shareholder-employees a plethora of fringe benefits. These benefits are considered business expenses and not taxable income. As long as the plan is nondiscriminatory, the reimbursements are not taxable to the employees.
When ready to form these types of fringe benefits, a nondiscriminatory plan will be spelled out in the Bylaws. If you are afraid of offering too much to your non-owner/shareholder-employees, then you can include a more difficult to obtain fringe benefit requirement.
No Two-Percent Rule
C-Corporations do no limit tax-free fringe benefits its owner/shareholder-employees for those who own more 2% like an S-Corporation. A C-Corporation receives full deductions for the cost of employees’ (including owner-employees) health insurance, group term life insurance of up to $50,000 per employee, and even long-term care premiums without regard to aged based limitations.
If one has a small corporation and a lot of medical expenses that aren’t covered by insurance, the corporation can establish a plan that treats all expenses as tax deductible. Fringe benefits such as employer-provided vehicles and public transportation passes are also deductible.
Common types of fringe benefits:
- Health insurance premiums
- Long-term-care and disability insurance premiums
- Medical reimbursement plan
- Education Assistance
- Company-owned cars or other vehicles
- Moving and Housing Benefits
- Retirement plans
- Memberships in fitness clubs
- And many more….
Idaho & WA C-Corporation Summary
C-Corporation General Summary
An Idaho & WA C-Corporation can have huge advantages to pass-through entities as to greater fringe benefits. As employees, owner-employees of a C-Corporation qualify for certain employee fringe benefits.
Example: Health insurance can be wholly tax-free to C-Corporation owner-employees (through full deduction by the C-Corporation and full tax exemption for the owner-employee).
Another advantage of the C-Corporation is that they are less likely to be subject to passive loss deduction limitations. These limit the opportunity to deduct losses from activities the taxpayer doesn’t “materially participate” in, against income from investments or other businesses.
Idaho C-Corporation Facts
- A corporation is a legal and separate entity from its owners. Because it’s a legal entity, it can be taxed, sued, enter into contracts and borrow money.
- The owners are known as shareholders.
- The shareholders elect a board of directors to manage the company.
- The corporation has a life of its own and does not dissolve when ownership changes.
- C-Corporations can be owned by one or more shareholders.
- The C-Corporation allows owner/shareholder-employees to receive the most amount of tax-free fringe benefits out of all business entities.
- C-Corporations can issue multiple classes of stock with an unlimited number of shares.
- Any entity, including individuals, LLCs, and other S and C-Corporations, can be a shareholder. C-Corporations have the least number of rules relating to ownership of shares.
- C-Corps can easily transition from a closely held corporation to a thriving stock on publicly traded markets.
- C-Corporations can retain earnings for future growth after the 21% corporate taxes are paid.
- Distributed profits are paid out to owners/shareholders through a dividend (1099-DIV) form.
Idaho & WA LLC & PLLC Summary
LLC & PLLC Summary
An Idaho & WA Limited Liability Company, or LLC, offers many of the same advantages of a corporation. The LLC provides the limited liability of a corporation while allowing more flexibility in managing the business and organization. This allows the member to avoid the more rigid rules of a C-corporations.
Like shareholders of a corporation, all LLC owners are protected from personal liability for business debts and claims. This means that if the business itself can’t pay a creditor, they cannot legally come after any LLC member’s house, car, or other personal possessions as long as the LLC’s renewal is filed annually, and you maintain an updated operating agreement.
An LLC does not pay any income tax itself. It’s described as a pass-through entity that allows profits and losses to flow through to the tax returns of the individual members. All profits, wages or draws will be subject to both income taxes and self-employment taxes annually.
LLC & PLLC Facts:
- Like a corporation, the LLC’s owners have limited personal liability for the debts and actions of the LLC.
- An LLC is a Pass-through Entity for federal tax purposes.
- Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities.
- There is no maximum number of members.
- Idaho & WA permits “single member” LLCs, i.e., those having only one owner.
Idaho & WA LLC Tax Status
LLC Tax Status Changes
The IRS does not have a separate taxation category for LLCs. This allows the LLC members to elect at their own discretion a form of taxation that makes the most sense for their business.
While your taxes will change, the facts, ownership, and management structure will not.
For example, if you elect to have your LLC taxed as an S or C-Corporation, you will not have shares of stock to sell or be qualified for an IPO. To receive the full benefits of a Corporation, you must formally convert your entire LLC.
Taxation choices include:
- Sole Proprietorship (single-member)
- Partnerships (two or more members)
- S-Corporation (single or multi-member)
- C-Corporation (single or multi-member)
LLC Tax Election Changes
If you are an LLC being taxed as a Sole Proprietor, or a Partnership, then yes you can opt to elect an S-Corporation or C-Corporation later down the road as you grow.
However, if your LLC has already selected to be taxed as a Corporation, then a switch to a Sole Proprietor, or a Partnership would trigger the liquidation of your company’s assets which is a taxable event. This could also be a red flag to the IRS who may believe that you are making the conversion for tax related reasons.
Idaho & WA General Partnership
General Partnership Summary
An Idaho & WA general partnership is a type of business organization in which two or more partners are co-owners of a business. A partnership is much like having two sole proprietors coming together under one name to operate. A general partnership requires an EIN (federal identification number) to be used in the place of the owners’ social security numbers.
The partners will be taxed for business income as individuals, as it is a pass-through to each person’s own social security number and tax return. In addition, an operations agreement with ownership details will stave off future issues and legal disputes between partners. The operating agreement paired with the EIN will also allow the GP to open up a business checking and savings account.
- Individuals pay their own income tax at their own tax rate
- Flexible management style
- No required minutes and meetings
- There is only limited liability protection with an LLP (limited liability partnership)
(LP) Limited Partnership
An Idaho & or WA Limited Partnership has at least one owner who is a “General” partner. This general partner makes business decisions and takes full responsibility for all business debts. The “Limited” partner invest money and has minimal control over the daily operations but is not held liable for business debts.
PLLC Professional List
Professional Limited Liability Company
The purpose for states creating PLLCs is for regulation and safety. Both a PLLC and an LLC offer the same liability protection to their members. The only difference is that some states require licensed professionals to form PLLCs and they’re not allowed to form LLCs. In most cases, a PLLC will have stricter requirements and are governed more closely.
- Landscape Architecture
- Public Accountancy
- Occupational Therapy
- Physical Therapy
- Professional Geology
- Social work
- Veterinary Medicine
- And No Others.
Payroll, Employees & 1099
Employee vs. Independent Contractor IRS Test
Employee vs. Independent Contractor IRS Test
The IRS considers three major factors to decide whether your Idaho workers are employees or independent contractors:
- Behavioral Control – Who controls how the work is completed, which tools to use, where to purchase supplies.
- Financial Control – Does your worker have a significant investment in the work, and do they perform similar work for other Idaho customers?
- Relationship of the Parties – What language do you use in your contracts, and does your relationship continue beyond the completion of each work project?
The IRS does not rely on any single factor, and each decision depends on the facts of each case.
Penalties for Misclassification:
Misclassifying. If the IRS determines you are misclassifying your workers and not paying payroll taxes, you will face penalties, back taxes and interest.
Safe Harbor. If you have been proven guilty of misclassifying employees, you may be able to escape back taxes, penalties, and interest if you can prove you had a “reasonable basis” for treating the workers as independent contractors.
Voluntary Compliance Settlement Program (VCSP). Through the VCSP, you can pay a fee to reclassify your workers as employees – and avoid IRS audits, interest, and penalties.
Idaho Payroll Information
Looking for Idaho state tax information? Here is some very important information regarding Idaho Income Taxes, withholding and where to submit reports and payments.
State Unemployment Insurance
Idaho businesses must report quarterly wages and contributions on Form TAX026 and Form TAX020 by last day of month following end of quarter.
- Minimum wage – The Federal minimum wage rate applies.
New Hire Reporting
Idaho employers must report hiring, rehiring, and return to work within 20 days on Form W-4.
Idaho Department of Labor
New Hire Reporting
317 Main Street
Boise, ID 83735-0610
Phone: (800) 627-3880
Fax: (208) 332-7411
Fax: (208) 332-7412
Remit Withholding for Child Support
Idaho employers must withhold and report child support.
Idaho Child Support Receipting Services
P.O. Box 70008
Boise, Idaho 83707-0108
Toll free: (800)356-9868
Fax: (855) 349-2408
Payroll Form & Employee Applications
Call our office to recieve Payroll Forms & Employee Application by email 208.415-1850.
Form I-9 (Declares your employee is legal to work in the US)
W-4 (Employees information, exemptions, dependents & tax withholdings)
Being Successful From Home
Idaho Home-Based Business 13 Vital Facts
Idaho Home-Based Business 13 Vital Facts
Below are 13 facts that you must prepare for before opening the doors on your new Idaho home based business.
13 Important Facts
- Idaho Business license and or special license: To get information about licensing on your new business contact your county clerk’s office. If you rent your home or apartment, check your lease agreement or covenants to be 100% certain a home-based business is allowed. In many lease agreements landlords can charge fines in the event you are operating a business from the property. If this language is in there, ask your landlord if there is any way you can amend or come to a different agreement.
- Beware of your HOA: Be sure to also check your HOA rules concerning home-based businesses.
- Idaho Codes & Ordinances: The new Idaho home-based business must comply with local health, safety, and fire codes and with city and county ordinances: If you live inside city limits, you may be required to conduct all business activities inside the home, not in a yard, garage, or outbuilding. You will need to call the city for the up-to-date information.
- Idaho Food Preparation: Food sold must be prepared in a commercial kitchen, or in a home kitchen that has been approved with special features. You must call your city and state health department for current information.
- Idaho Child Care: If you are starting an Idaho home-based child care service, a license is needed from your city clerk’s office or from Idaho Department of Health and Welfare.
- Product/Service Restrictions: Certain products cannot be legally manufactured or grown in a Idaho home-based business. These include potentially explosive items, drugs, poisons, and much more.
- Service Restrictions: Some services, including those involving adults-only activities, may violate a city or county ordinance are prohibited in an Idaho home-based business.
- Animals: Businesses involving animals are subject to additional regulations and licensing requirements and are not typically allowed in a residential area. You must contact the city for current information.
- Employees: Your city or county regulates the number of employees an Idaho home-based business can have and the number of vehicles they can park at the home or on a public street. State and federal employment-related posters must be displayed. You must also have workers
- Signage: Most Idaho communities heavily regulate the size and type of signage allowed, if any, in a residential area.
- Insurance: All businesses need insurance, regardless of location. Check first with your homeowner’s insurance agent or an insurance agent who writes policies for small businesses.
- Security: Idaho home-based businesses have security issues to really think through. This includes allowing strangers into the home, protecting mail, computer security, and personal safety issues. Checks and financial information can be protected by using a mail. While other things like personal safety could be protected by renting a share-space office or conference room as needed to meet clients.
- Business Telephone: The best way to setup your home-based business phone line, is by purchasing a forward number that doesn’t change regardless of where you forward it to. They are low cost and prove to be the most professional out of all other options.
Multi-Business Home Office Deduction
Home Office with More Than One Idaho Business
The Idaho & WA home office deduction produces good tax savings by turning personal house expenses into Idaho business deductions.
Additionally, it enables you to deduct big vehicle expenses by eliminating nondeductible commuting mileage.
- To qualify for the Idaho home-office deduction, you must use the office exclusively for the business or businesses.
Your ability to qualify for the office-in-the-home deduction is straightforward if you have no spouse and only one business.
If you have more than one business, make sure each business:
- Qualifies on its own merits for the home-office deduction.
- If you are married, all uses of the same office by the spouses must be deductible uses, or the office fails the exclusive-use test.
If one spouse uses one half of the room, and the other spouse uses the other half of the room, then each spouse is responsible only for his or her use of that half.
Benefits of Starting an Online Business
Why You Should Consider Starting an Online Business
Starting an online business has so many upsides that its hard to even find one drawback. The days of starting a business by renting an expensive facility, hiring an erroneous number of employees and spending a lifetime worth of savings in startup expenditures is going away.
If your online business becomes so big that you need extra space, then you can invest in a larger home for yourself. After you have experienced working for your lease payment, you can appreciate the concept of working from your home.
In fact, you can put your home into an LLC and have your online business make payments. You can take those payments and use them to care for and maintain the property as a business. At the end you have you have transferred wealth to yourself instead of some office space landlord.
Upsides of an Online Business:
- Super low overhead
- No expensive lease or extravagant lease terms
- Minimal space required
- Can provide services or products or both
- Can take payments online without the expense of a card processing machine
- Require less business insurance
- No additional office space furniture, phone, internet bills, water machine, coffee machine, signs, paid parking, excessive office supplies, janitorial service, Cam on lease etc.
- Swings in sales have less of an impact due to low overhead
- More time can go into marketing, customer support and product care
- Less or no staff needed
- Business is open to the world, not limited to drive by traffic
- Can reach customers through email, blog or updates to social media
Over-Looked Tax Deductions
Changed Entertainment Deductions
Tax Reform Destroys Entertainment Deductions for Businesses
With the newest tax reform, lawmakers simply killed Idaho & WA business deductions for directly related and associated entertainment.
Now, in what was thought to be a business-friendly tax reform package, you find that lawmakers exterminated most business entertainment deductions. You can no longer deduct entertainment even if its sole purpose was to generate new clients and new business.
The tax reform prohibition against deductible entertainment is true regardless of your business discussion, negotiation, business meeting, or other bona fide transaction.
Here’s a short list of what is no longer deductible:
- Business meals with clients or prospects
- Tickets to sports games—football, baseball, basketball, soccer, etc.
Tax Deductions Using Section 179 Expensing
Business Tax Deductions Using Section 179 Expensing
Section 179 authorizes an Idaho & WA business tax-deduction benefit. It is essentially an ultra-fast form of Depreciation.
Under Section 179 you can to elect to treat the entire cost, up to certain limits, of “section 179 property” as a deductible expense in the year you place that property in service.
- Use IRS Form 4562, “Depreciation and Amortization,” to make the election.
Section 179 Property
Most Tangible Property and off-the-shelf computer software for use in your business, can qualify for Section 179 expensing.
- other than buildings and their structural components
Dollar Limits and Phaseouts
In any given Tax Year, the total Section 179 deduction cannot exceed a specified maximum amount. Also, that maximum amount is reduced (“phased out”) to the extent that the total amount of Section 179 property you place in service during that tax year exceeds a specified phase-out threshold.
These dollar limits and phaseout thresholds have varied in recent years because of economic stimulus legislation.
Can’t Produce a Tax Loss
Your Section 179 deduction cannot exceed your Taxable Income from your business or businesses, but the unused amount can generally be carried over to later years.
You must use the property more than 50 percent for business throughout the property’s entire “recovery period” to prevent recapture.
Tax Deductions for Amazon Sellers
Tax Deductions for Amazon Sellers
Many Amazon sellers do not realize that they are actually running an online business. Then they get to tax time, and owe more than they should due to ill preparations. Here is a great list to help you plan for tax time, by using these deductions to reduce taxable income.
Possible Tax Deductions for Amazon Sellers:
- Inventory (COGS – Costs of Goods Sold)
- Payment processing fees
- Idaho Home office and respectable bills
- Employees, hired workers in Idaho
- Vehicle mileage for Idaho business purposes
- Idaho Licensing, insurance etc.
- Cell phone for Idaho business purposes
- Computer, printer etc.
- Office supplies and furniture
- Scales, measurement device
- Professional services (tax prep, legal etc.)
- Amazon Fees
- Shipping Supplies (labels, boxes, tape, etc.)
- New training courses, books, webinar etc.
Maximize Your Travel Expense Deductions
Make Your Tax Home Official
To maximize deductions concerning your Idaho or WA business travel expenses, you must travel away from your tax home. This sounds strange to people that have lived in one house for a very long time, but for many today living on the road, this is a huge tax problem.
The idea is simple: if you do not have a tax home, then you are not actually traveling. If the IRS finds no tax home, they can reduce your travel deductions at their discretion.
You must have an official home where pay rent/mortgage or own and have regular bills regardless of whether you are there or off traveling for your Idaho business. In addition, you should usually return to this location after your work is finished. Also, you should have your mail sent to this location, and keep your driver’s license current with the same address.
These things will help you make claim to your tax home, and receive the maximum amount of travel deductions.
Dog-Related Tax Deductions for Pet Owners
Dog-Related Tax Deductions for Pet Owners
Unfortunately, the IRS doesn’t see our dogs as dependents even though dog owners may not share the same opinion. However, there are some dog-related tax saving expenses you might not be aware of in Idaho.
Dog Moving Idaho Deductions:
If you moved during the tax year, it might be possible to deduct your moving expenses, specifically related to moving your dog. Save the receipts!
Guard Dogs & Security in Idaho:
Guard dogs can be a legitimate tax deduction if special circumstances deem it necessary to have the additional protection in Idaho. This would include the cost of caring for the dog, but not the dog itself. And, you can only deduct a percentage based on how much time the dog spends guarding. A good reason could be to protect your Idaho business during closed hours.
Idaho Dog Rescues/Shelters:
The cost to adopt a dog is not deductible. However, any donations made in excess of regular adoption fees are.
You can include in medical expenses the costs of buying, training, and maintaining a guide dog or other service animal in Idaho. This deduction requires medical necessity and documentation, in the event of an IRS audit. There are a few great online companies that will certify your dog as a service pet for under $300.
Fostering Dogs in Idaho:
The place you are fostering from must be an approved charity recognized by the IRS with the 501(c)(3) designation as a Not-for-Profit organization. Fostering expenses eligible for deduction are food, medicines, veterinary bills, crates, garbage bags, and anything necessary to properly care for the dog. Even a portion of your utilities can be considered expenses if a specific area of your home is only used for the care of the animals and nothing else.
Bigger Vehicle Deduction for Businesses
Tax Reform Allows Bigger Vehicle Deductions
The new tax reform has increased the luxury auto depreciation limits on Idaho business cars. The old luxury limits were unrealistic, unfair, and discriminatory against any car that cost more than $15,800.
- The new limits are a big improvement.
If you bought a car in 2017 and paid more than $15,800, you were driving a luxury car that lawmakers punished you for by putting a lid on your depreciation.
For example, say in 2017 you bought a $40,000 car and drove it 100 percent for business. Your maximum depreciation deductions for the first five years would total only $15,060. To fully depreciate this car under the old rules would have taken 19 years.
Under the new tax reform what is considered “luxury automobile limits” has changed. The new amount is now $40,000, which can be fully depreciated in six years.
Under the new law, the annual limits are
- Year 1: $10,000
- Year 2: $16,000
- Year 3: $9,600
- Year 4 and each succeeding year: $5,760
Heavy Weight Vehicles
Before 2018, many Idaho businesses were buying vehicles with gross vehicle weight ratings (GVWRs) greater than 6,000 pounds to escape the luxury limit of roughly $15,000.
Even today, SUVs, crossover vehicles, and pickup trucks can avoid the automobile luxury limits and even qualify for immediate write-offs of the full business cost using bonus depreciation or Section 179 expensing.
- Cars don’t qualify for unlimited bonus depreciation or any added benefits from Section 179 expensing.
Now with more realistic luxury auto limits, there’s far less need to buy the bigger, heavier SUV or crossover vehicle. With a car costing $50,000 or less, you realize 71.2 percent of your total vehicle depreciation deductions in the first three years.
Vehicle Tax Strategies for Idaho Businesses
Vehicle Tax Strategies for Idaho Businesses
As the end of the year approaches, your vehicle may be able to provide you with big tax savings for your business. Just keep in mind that all actions must be completed before midnight on December 31.
Sell Your Child’s or Spouse’s Car
If you gave your old business vehicle to your child or spouse to use, then consider selling it before the end of the year. Your old Idaho business vehicle could have a big tax loss embedded in it, in which case your strategy is easy. Take the vehicle and sell it to a third party before December 31st so that you have a tax-deductible loss this year.
Replace Your Vehicle
If you’re considering replacing your Idaho or WA business vehicle, then how you should proceed depends on whether it would sell for a gain or loss.
If the sale would result in a gain (i.e., the fair market value is greater than your undepreciated basis), it’s better to trade in the car for a different one so that it’s considered a tax-deferred Section 1031 exchange. This will allow you to avoid the taxes on the gain if you sell the vehicle.
If you prefer to sell the vehicle outright, you should engage a Section 1031 exchange intermediary in order to do so (rather than trade it in) and then buy a replacement vehicle. The exchange intermediary charges a fee and does the paperwork that makes this happen, resulting in no taxable gain this year.
If the sale would result in a loss, then you should sell the vehicle, so you can benefit from this tax-deductible loss in the current tax year.
Put Your Personal Vehicle in Business Service
Now that lawmakers have reinstated bonus depreciation, you can use this as an effective strategy to get a big deduction. If you or your spouse owns a vehicle that you purchased new and never deducted for tax purposes, you can convert that personal car to business use to take advantage of bonus depreciation.
As long as you make the conversion by December 31, you get a deduction for bonus depreciation, which can be as much as half the fair market value on the date of conversion, depending on the vehicle.
Healthcare For Self-Employed
Medical Health Options
Health Savings Accounts HSA
Update on Health Savings Accounts (HSAs)
Health savings accounts (HSAs) are now more popular than ever for Idaho & WA businesses.
Here’s is how the HSA works for you:
Deduct the health insurance cost. To enable the HSA, your health insurance must be a high-deductible health insurance policy. Idaho sole proprietors, partners, and S corporation owners can qualify to deduct this high-deductible insurance on page 1 of Form 1040.
Deduct the HSA contribution. You can make a deductible HSA contribution of up to $3,400 if you have qualifying self-only coverage, or up to $6,750 if you have qualifying family coverage.
The deduction for the contribution is above the line, so it does not suffer from phaseouts and it’s deductible whether you itemize or not.
Tax-deferred earnings. The monies accumulated in your HSA grow and compound tax deferred.
Tax-free withdrawals. Withdrawals from your HSA are tax-free when you use the money to pay for qualified medical expenses.
You can’t pay your high-deductible premiums with HSA funds. But once you reach Medicare age, you can use the withdrawals for Medicare premiums in addition to other qualified medical expenses.
Retirement withdrawals. You can make your HSA work like a traditional IRA after reaching Medicare age. To make this happen, you just withdraw funds from the HSA and don’t use them for medical expenses. This triggers the federal income tax but no penalties.
HSA Health Saving Account Benefits
HSA Health Saving Account Benefits
The health savings account (HSA) is just one of many possible health plans that you could use for Idaho & WA business owners and employees.
Here’s how it works:
- Deduct the health insurance cost. To enable the HSA, your health insurance must be a high-deductible health insurance policy. Sole proprietors, partners, and S corporation owners can qualify to deduct this high-deductible insurance on page 1 of Form 1040. (The page 1 Form 1040 deduction does not suffer the 10 percent haircut that applies to itemized medical deductions.) Also, you generally can deduct the cost of this insurance without having to cover the employees, too.
- Deduct the HSA contribution. You can make a deductible HSA contribution of up to $3,400 if you have qualifying self-only coverage or up to $6,750 if you have qualifying family coverage (anything other than self-only coverage). The deduction for the contribution is above the line, so it does not suffer from phaseouts and it’s deductible whether you itemize or not. And, as with the insurance, you likely could set this up for yourself without having to cover your employees.
- Tax-deferred earnings. The monies accumulated in your HSA grow and compound tax deferred (even tax-free if you withdraw correctly).
- Tax-free withdrawals. Withdrawals from your HSA are tax-free when you use the monies to pay for qualified medical expenses. You can’t pay your high-deductible premiums with HSA funds. But once you reach Medicare age, you can use the withdrawals for Medicare premiums in addition to other qualified medical expenses. If the HSA still has a balance when you die, your surviving spouse can take over the account tax-free and treat it as his or her own, as long as you have named your spouse as the beneficiary of the account.
- Retirement withdrawals. You can make your HSA work like a traditional IRA after reaching Medicare age. To make this happen, you just withdraw funds from the HSA and don’t use them for medical expenses. This triggers the federal income tax but no penalties. (However, the use of the accumulated funds for Medicare premiums and other medical expenses means tax-free use—we like this a lot better than taxable use.)
One final point: you don’t lose the HSA contribution privilege just because you happen to be a high earner.
HSA Health Saving Account Benefits Idaho
Choosing the right plan in Idaho means understanding your medical needs, including what healthcare providers and treatments you’ll use, and then figuring out your budget and if you are eligible for cost assistance.
Actuarial value is the average amount a plan will pay for covered services for everyone using the plan, it is not what the plan will pay you specifically. Idaho Premiums and costs not covered by your plan don’t factor into determining actuarial value, only costs insurers’ pay count.
Types of Metal Plans
Each metal plan has a minimum average actuarial value which can be used to tell how good a plan is, what type of subsidies it qualifies you for based on income, and if it provides minimum value.
Idaho Health Insurance: The Plans
Bronze plans split covered expenses 60-40 on average.
Bronze plans are the cheapest plans. All employer plans and non-catastrophic marketplace plans must provide at least the value of a bronze plan.
For a Bronze plan with 60% actuarial the insurer will, on average, pay 60 % of covered health expenses while the policy holder must come up with the other 40%. In other words a plan with 60% actuarial value covers 60% of out-of-pocket costs on average for all policy holders, not just you.
Bronze plans have the most basic benefits and most limited networks of doctors and hospitals. The actuarial value reflects this since that percentage is determined by the average expenses your insurer will have.
A Bronze plan is a good choice for those who don’t plan on using many medical services. Many low-income Americans may qualify for free or very low-cost Bronze plans. That being said in many cases a Silver plan will provide better value as Bronze plans won’t qualify for Cost Sharing Reduction subsidies (CSR). You will be getting a low premium in exchange for the fact that you will pay more out-of-pocket and have a more narrow network.
More than 50% of all medical costs are incurred by a very few unfortunate people. Since your deductible will be high and all plans have the same maximum limits on the amount you can pay in a year, most of the costs you pay for a Bronze plan will go to the unfortunate people who get cancer or have a bad accident and reach their cost sharing limit.
Silver plans split covered expenses 70-30 on average.
Silver plans are “the marketplace standard” meaning that premium caps are based on the cost of Silver plans. A Silver plan on the marketplace can’t cost more than 9.5% of your income if you make less than 400% of the Federal Poverty Level (FPL) due to Advanced Premium Tax Credits. The less you make, the lower your premium cap is.
Like Bronze Plans, the actual value of Silver plans can range. They simply must have at least a 70% actuarial value.
Silver plans are the only plans eligible for Cost Sharing Reduction subsidies (CSR)
A Silver level plan is a good choice for individuals and families who have access to marketplace subsidies, especially CSR subsidies. If you make below 250% FPL the chances you won’t find your best plan to be a marketplace Silver plan is slim. Go with an HMO when in doubt, you’ll need referrals, but this will be your cheapest option. Like with any other plan, make sure your medical needs are covered in-network.
Gold plans split covered expenses 80-20 on average.
Gold plans cost a little more, but the lower deductibles and better out-of-pocket cost sharing coverage means that families won’t have to worry about health care costs stopping them from their families getting the care they need. Even if your premium is capped you’ll have to pay more to make up the difference if you want a gold plan.
Gold plans are smart for those who don’t get CSR subsidies and need the low deductible and robust networks some gold plans provide.
Platinum plans split covered expenses 90-10 on average.
Platinum plans have the lowest out-of-pocket costs and the highest monthly premiums. This is the right choice for anyone who wants “the best coverage” for them and their family and is a smart buy for those who are sick or who have dependents who are likely to use costly health services. Even if your premium is capped you’ll have to pay more to make up the difference if you want a Platinum plan.
Platinum plans only make sense if your total medical spending will exceed the amount you will pay in premiums or if you need very specific treatments.
Catastrophic coverage is available to some people under 30 and those with hardship exemptions. Catastrophic plans only cover the bare minimum health benefits and has a very limited network. You’ll have high out-of-pocket costs and a high deductible but this type of plan will protect you in a worst case scenario and will ensure that you avoid paying the shared responsibly fee for not having health coverage. If you get a catastrophic plan you should assume most of your medical costs will be out-of-pocket.
NOTE: You can also get covered through Medicaid on the marketplace. As a rule of thumb if you make less than 250% FPL a Silver plan is the way to go, if you make less than 138% and your state expanded Medicaid then you’ll go with Medicaid.
Idaho health insurers don’t have to offer every tier of plan, but within the Idaho health insurance Exchanges, all health insurance companies must offer at least one silver plan and one gold plan to consumers.
Idaho Insurance Exchange: Factors that Affect Rates
ObamaCare does away with pre-existing conditions and gender discrimination so these factors will no longer affect the cost of your insurance. Please be aware location, income, smoking status, family size and age all affect the cost of your health insurance premium. So the cost of their plan will fluctuate from person to person and from family to family. Please keep this in mind when shopping for insurance on the Idaho health insurance exchange.
Choosing a Health Care Plan: How to Calculate the Cost of Health Insurance
To get started you’ll want to figure out what your budget is for health care this year. Affordable health insurance is defined as 8% of your income. Take your income for last year and find out if you can afford to pay 8%, if not find a number that you feel you can pay. Now that you have an idea of what you can afford, it’s time to take a look at the cost calculator from the Kaiser Family Foundation to get an idea of what you will pay on the Idaho health insurance exchange. This will give you an estimate of what you and your family will owe. Keep in mind that health, age and other factors can increase or decrease the cost of your insurance.
How to Get Started Using the Insurance Exchanges
If you live in Idaho, Your Health Idaho is the Health Insurance Marketplace to serve you. Instead of HealthCare. gov, you’ll use the Your Health Idaho website to apply for coverage, compare plans, and enroll. The Idaho health insurance marketplace is only open during open enrollment.
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