Sunday, November 26, 2006

Claiming the Child for 2007? Which taxpayer WILL?

With my “Get Sharp as a Tack on Taxes” seminar coming up this week, I thought that I would post a comment regarding tax basics for the 2007 season. This tip is in regards to who can claim a qualifying child when two taxpayers are trying to claim the dependency exemption.

The IRS has issued guidance for taxpayers that may have a "qualifying child" in common with another taxpayer for purposes of claiming certain tax benefits. A conflict arises when two or more taxpayers wish to claim a dependency exemption, the child care credit, earned income credit, or child tax credit based on the same child. Similarly, a single, divorced, or separated parent may wish to claim the head of household filing status based on providing a home for a qualifying child, or taxpayers may seek to exclude dependent care assistance payments for a qualifying child from their income.

The IRS considers that the determination of who is allowed to claim the qualifying child in each of the above situations applies to all of these situations as a group. Two or more taxpayers may not claim the same child for different purposes on their respective tax returns, with one exception. This exception allows the non-custodial parent to claim the child for purposes of the dependency exemption and the child tax credit only, and permits the custodial parent to claim the child for all other purposes listed above.

For more tips like these and if you are also in the Atlanta area this up coming Wednesday November 29th, stop by the College Park Library for the seminar. Start time is 6PM.

Be there to get more information on keeping your Business N Synergy!

Brian N. Stovall

Sunday, November 19, 2006

Microsoft Office Accounting 2007 is Here

New for 2007 Microsoft has updated their small business accounting software to make a run at the industry leader QuickBooks. The name has changed from “Small Business Accounting” to just “Office Accounting 2007”. There will be two versions offered to the public to meet all the needs of small business owners. The two versions are:

Microsoft® Office Accounting Express 2007 – immediately available as a FREE download. Visit to download a free license.
Microsoft® Office Accounting Professional 2007 – available for purchase through retail or online early next year.

Microsoft Office Accounting Express is similar to QuickBooks Simple Start software in that it is designed for small businesses with one owner and home based businesses. It allows these users to immediately get up and running with a computerized accounting system to replace their shoebox system.

Microsoft Office Accounting Professional 2007 offers additional features to small business owners that will allow them to work more efficiently. Some advancements are the ability to work with different currencies, integration with PayPal/Ebay, and payroll services for those with employees. It also has additional features that allow accountants faster more accurate accounting.

Microsoft Office Accounting Express will be offered as part of the Microsoft Office Professional 2007 suite, and Microsoft Office Accounting Professional 2007 will be offered with Microsoft Office Small Business and Office Ultimate 2007 suites.

For more information on how these two new accounting offerings can make your business work smarter visit these websites:

Keeping Your Business N Synergy

Brian N. Stovall

Sunday, November 12, 2006

S-Corp Owners and Health Insurance

For the majority of business formations, the IRS has provisions that allow the business owner to acquire health insurance in their own name and treat that health insurance as a business expense (Internal Revenue Code 162[1]). But what if the business is operating as an S-Corporation? There is a different tax consequence if the individual is the sole shareholder and sole employee and purchases health insurance in their own name.

According to Internal Revenue Code 1372(a) an S-Corp that pays for health insurance and other fringe benefits for an owner who owns more than 2% of the corporation’s stock (2% shareholder) will be treated as a partnership. Now that the S-Corp is considered a partnership, the rules can get a little tricky. In a partnership health insurance is consider a guaranteed payment (IRC 707(c)) and those payments are deductible and included in the partner’s gross income.

With an S-Corp however, insurance paid by the S-Corp would NOT be deductible by the S-Corporation as a fringe benefit but would be deductible by the S-Corp as compensation to the 2% shareholder. The insurance amounts would be included on the shareholder’s W-2. Certain conditions must be met by the S-Corp for this deduction to be allowed. If the shareholder is eligible to participate in any other health plan whether from another employer and/or spouse’s employer, the deduction is not allowed.

With that said, the S-Corp would have to purchase the health insurance for any deductions to be allowed. But what if the shareholder purchases a health plan in their own name? Since some states do not allow corporations to purchase group health plans with only one participant, many S-Corp owners must purchase health plans on their own. If this occurs, everything stated above does not apply to the situation. The shareholder however, is still able to deduct the health insurance as an itemized deduction which will be subject to the 7.5% AGI (adjusted gross income) limitation.

Next time we will look at additional strategies for S-Corp owners to use to provide themselves with health insurance in particular Health Reimbursement Arrangements (HRA). Until next time keep your Business N Synergy.

Brian N. Stovall

Sunday, November 05, 2006

2007 Small Business Outlook Results Are In!!!

Adminstaff, the nations leading professional employer organization has conducted another survey in late October regarding small business owner’s confidence for the future. Again the year 2007 looks pretty optimistic for small business owners with 70% saying they expect their companies to exceed this year’s growth levels in 2007. The breakdown of small business growth will be reflected in the following ways:

70% plan to add employees
5% expected a drop-off in their workforce
59% expect to see an increase in employee compensation
33% plan to maintain their current compensation levels
64% expect to pay employees overtime
44% plan to increase capital spending

There were also a few challenges noted in the survey that small business owners will have to overcome. The majority of these challenges are the same ones that our larger counterparts must overcome in 2007, including:

Controlling costs
Retaining their best employees
The economic outlook
Increased business competition

As a whole, the small business outlook looks pretty good for the small business owner. It will take a collaborative effort by small business owners, employees, and their advisors to ensure that 2007 is a prosperous year for all. With effective planning now, the small business owner will be able to keep their Business N Synergy in 2007.

Brian N. Stovall