1. FINANCIAL EXECUTIVES INTERNATIONAL
SMALL BUSINESS TAXATION
MAY 18, 2017
Presented by: Mark Zeiden – Managing Director, CPA, JD
Kirby Johnson - Senior manager, CPA, MBA

2. How to Never Pay Taxes!

4. TOPICS ENTITY SELECTION GENERAL DEDUCTIONS AUTO EXPENSE
HOME OFFICE EXPENSE
RETIREMENT PLANS
Q & A

5. ENTITY SELECTION

6. ENTITY OPTIONS Sole Proprietor/Schedule C
Income & expenses reported on Form 1040, Schedule C
Net income taxed as ordinary income (i.e. like wages)
Net income is subject to Self Employment Tax (i.e. FICA & Medicare)
Limited Liability Company (“LLC”) – Taxed as Partnership
Established through Colorado Secretary of State
Treated as disregarded entity – no separate tax filing required
Taxed and reported as Sole Proprietor

7. Entity Options (cont.) LLC – Taxed as S Corporation
Income & Expenses Reported on IRS Form 1120S
Net Income taxed as ordinary income
Net Income is NOT subject to Self Employment Tax but…
Reasonable Salary expectation
Corporation – Taxed as C Corporation (can Elect to be Taxed as S Corp)
Income & Expenses reported on IRS Form 1120
“Compressed” tax rates
Earnings distributions treated as dividends – double taxation

8. GENERAL DEDUCTIONS

9. GENERAL DEDUCTIONS Auto Expense Rent or Home Office Employee Salaries
Utilities
Advertising/Marketing
Travel
Meals & Entertainment – deduction limited to 50%
Professional Fees
Business Licenses, Permit Fees & Membership Dues (not country club)
Supplies & Equipment
Accountant & Attorney Fees

10. GENERAL DEDUCTIONS (cont.)
Educational Expenses
Repairs & Maintenance
Interest
Software
Parking
Business Publications
Postage
Gifts – deduction limited to $25/recipient

11. AUTO EXPENSE

13. MILEAGE VS. ACTUAL EXPENSE
53.5 Cents/Mile for 2017
Business Mileage Only
Does not include commuting
Need a log
Old Fashioned “Calendar”
Apps: MileIQ (Android, iOS); TripLog (Android, iOS); Mileage Expense Log (iOS)
Actual Expenses
Depreciation
Interest
Lease Payments
Repairs & Maintenance
Registration Fees
Insurance
Subject to business use percentage

14. HOME OFFICE EXPENSE

16. SAFE HARBOR VS. ACTUAL EXPENSE
Both
Office Space must be a “designated area” – not the kitchen table
Used on a regular & exclusive basis
Must be for benefit of the company vs. convenience for you
Safe Harbor: $5/Sq. Ft. (max. $1,500)
Actual Expenses based on proportion of office space to total square feet
Depreciation (subject to recapture upon sale)
Interest
Rent
Repairs & Maintenance
Property Tax
Insurance
Utilities

17. RETIREMENT PLANS

18. TWO MOST COMMON OPTIONS
Simplified Employee Pension (“SEP”)
Schedule C/LLC Disregarded Entity
20% of Net Income
S Corp
25% of Compensation
Can be established up to filing date of return including extension (i.e. still available for 2016 if return has been extended)
Single Person 401(k) Plans
Employee Deferral - $18,000 (+$6,000 Catch up if over 50)
Employer Match/Profit Share – 20% or 25%
Allows for Roth Contributions – Employee Deferral Only AGI
Must be established by year end (i.e. too late for 2016)
Owner & Spouse only
Both
Maximum Annual Contribution - $54,000
Compensation Limit - $270,000
Must include all employees

20. QUESTIONS?