Edom & Co. CPAs Accounting and Finance Blog

How Does Schedule 1‑A Impact Taxpayers

Fri, 24 Apr 2026 04:10:07 GMT

What You Need to Know About the New IRS Schedule 1-A!

This new form, called Schedule 1‑A, was introduced by the IRS beginning with the 2025 tax year. Although it is a new addition to the filing process, its purpose is straightforward. Give Taxpayers an easier way to claim several deductions that can meaningfully reduce taxable income. These deductions apply from 2025 through 2028 and are especially relevant for workers who earn tips or overtime, individuals paying interest on certain car loans, and Taxpayers who are 65 or older.

One of the most notable changes involves workers who earn tips. Under Schedule 1‑A, Taxpayers can deduct up to $25,000 of qualified tips each year. To qualify, the tips must come from a job that is not considered a Specified Service Trade or Business (which includes fields like health, law, accounting, actuarial science, performing arts, consulting, athletics, or financial services), and the occupation must have been one where tipping was already common before the end of 2024.

For example, a restaurant server who earns $18,000 in tips during 2025 would be able to deduct the full amount, since restaurant service meets the IRS requirements. This deduction is designed to give tipped workers a meaningful reduction in taxable income, especially in Industries where tips make up a large portion of earnings. The form also introduces a deduction for qualified overtime compensation. Workers can deduct up to $12,500 of overtime premiums, or up to $25,000 if they are Married Filing Jointly (MFJ). The overtime must be paid under the Fair Labor Standards Act or clearly identified on a W‑2 or 1099. If it isn’t listed separately, the IRS allows Taxpayers to calculate the amount using approved methods. For example, if a warehouse employee earns $9,000 in overtime premiums during the year, that full amount can be deducted as long as it’s properly documented. This deduction is especially helpful for workers in Industries where overtime is a regular part of the job.

Another deduction available on Schedule 1‑A relates to interest paid on certain car loans. Taxpayers can deduct up to $10,000 of interest paid on a new vehicle, but the vehicle must meet specific criteria. It must be newly purchased, assembled in the United States, have at least two wheels, weigh less than 14,000 pounds, and be used primarily for personal transportation. For instance, if someone buys a new U.S.-assembled SUV and pays $4,200 in interest during the year, they can deduct that entire amount. This deduction does not apply to used vehicles or vehicles assembled outside the United States.

Finally, Schedule 1‑A includes an enhanced deduction for Seniors. Taxpayers who are 65 or older can deduct up to $6,000, or up to $12,000 if both Spouses on a joint return are 65 or older. The IRS considers a Taxpayer to reach age 65 on the day before their birthday. This means someone born on January 10, 1960, is treated as 65 on January 9, 2025, and qualifies for the deduction for that tax year. This additional deduction is intended to provide extra support for older Taxpayers who may be transitioning into retirement.

All of these deductions are combined and reported on Form 1040, line 13b. While they do not reduce adjusted gross income, they do reduce taxable income, which can lower a Taxpayer’s overall tax bill. Schedule 1‑A will be used for tax years 2025 through 2028, with the first filings having occurred during the most recent tax season that ended in mid-April 2026.

Contact us today for more information or a free consultation!

Turning New Tax Incentives into Growth Opportunities

Wed, 17 Dec 2025 06:29:30 GMT

How Can SMEs Turn New Tax Incentives into Growth Opportunities?

For Small and Medium-sized Enterprises (SMEs), every tax incentive counts, as it has the ability to boost reinvestment capacity and improve Cash Flow. The Government has restructured the SMEs tax framework to encourage innovation and stimulate healthy business growth.

This blog highlights the tax incentives available for SMEs. Additionally, exploring how to partner with Edom & Co. CPAs for outsourcing accounts and tax preparation services will help maximize growth opportunities by leveraging every possible tax incentive.

What is the Role of Tax Incentives for SMEs?

The Government offers tax incentives as tools to reduce the tax related financial burden on SMEs while encouraging innovation, investments, and creating employment opportunities. Well structured tax incentives can:

Promote innovation through research and development (R&D) credits
Promote innovation via startup exemptions
Encourage the formalization of SMEs to provide market opportunities
Stimulate local manufacturing and exports for better economic growth
Increases to Cash Flow and reinvestment capacity

SMEs can leverage these tax incentives by coupling them with professional advisory and management consulting services from Edom & Co. CPAs. We help SMEs utilize tax incentives to accelerate growth.

What are the Key Types of Tax Incentives Available for SMEs?

The Government and financial authorities encourage SMEs to reinvest their savings into expansion. Here are some of the most powerful tax incentives offered:

Corporate Tax Reduction for Small Businesses

SMEs can effectively reduce the burden of corporate tax by leveraging:

Qualified business income (QBI) deductions,
Small business credits
State incentives

Reduced effective corporate tax rates (from a typical 21%) help SMEs reinvest in technology upgrades and expansion, (Small S-Corps and C-Corps).

Startup and Innovation Incentives

Startups and early stage ventures unlock access to several financial benefits, such as:

Deductions on Research & Development expenses
Deferral or exclusion of capital gains tax under specific conditions

These incentives encourage entrepreneurship, technological innovation, technical upgrades, and scalability.

Investment Interest Expense Deduction

SMEs investing in plant, machinery, or green energy projects can claim higher depreciation or investment interest expense deductions. This tax incentive boosts SMEs' capital productivity and sustainability.

Tax Benefits for Exports and Manufacturing

SMEs in manufacturing and exports can procure and upgrade manufacturing equipment. They get various tax incentives, like:

Foreign Derived Intangible Income (FDII) Deduction (C-Corps Only)
Export tax credits
Depreciation allowances

Additionally, grants and financing programs from the Export Import Bank of the United States (EXIM) provide funding support for expanding into international markets. Several federal and state level tax incentives support the global competitiveness of SMEs.

How Do Tax Incentives Drive Business Growth?

SMEs need a strategic approach to turn tax incentives into growth opportunities, maximizing their impact with limited resources. Some significant benefits include:

Additional working capital through tax incentives reinvested for expansion, hiring to grow human capital, technology upgrades to existing infrastructure, and process improvements for optimal productivity
Improved Cash Flow fosters better credit ratings, investor confidence, and brings financial stability
With R&D incentives, SMEs can modify and diversify products, thereby encouraging innovation
Overall cost reduction improves competitiveness, as SMEs can enhance processing flexibility and plan expansions into new markets

How Does Outsourcing Help SMEs Maximize Tax Incentives?

SMEs can outsource accounting and tax preparation services to unlock all available tax incentives, while remaining compliant with the regulations of federal and state financial authorities.

Expert Tax Strategy and Compliance

Our experienced Accounting and Tax Professionals ensure that you don't miss out on any tax incentives. They identify all applicable deductions, exemptions, and credits.

Scalable Growth Support

We ensure that your tax structure and compliance evolve in tandem with your SME's growth and development. We demonstrate the ability to hedge against future financial and legal hurdles.

Real Time Advisory and Management Consulting Services

Our Accounting and Tax experts provide ongoing support to help you plan your investments, manage your Cash Flow, and deduct interest paid on money borrowed to purchase taxable investments (for example, interest on a margin loan used to buy stock).

The Bottom Line: Turning Policy into Progress

The blog explains how tax incentives are more than just financial perks. SMEs need expert guidance to identify, obtain, and make practical, tax incentives that drive business growth, innovation, technology upgrades, and sustainability. SMEs can achieve better Cash Flow, improved profitability, and enhanced reinvestment capabilities by leveraging the Tax Cuts and Jobs Act (TCJA) and The One Big Beautiful Bill (OBBB) Act of 2025.

Contracting advisory and management consultancy services from Edom & Co. CPAs can assist SMEs in turning tax incentives into tangible growth opportunities. Let our expert professionals assess your financial health, review your General Ledger(s), and tax related decisions enacted prior so we ensure you don't miss out on any new tax incentives.

How Does AI Analyze Financial Data and Why Do Businesses Still Need Human CFOs?

Tue, 11 Nov 2025 13:05:46 GMT

How Does AI Analyze Financial Data and Why Do Businesses Still Need Human CFOs?

Artificial intelligence (AI) is transforming financial analysis at an unprecedented rate. AI tools are helping businesses make faster, better, data driven decisions through automated bookkeeping and predictive analysis.

With this in mind, AI cannot replace human judgment and ethical decision making all together, although AI does have the ability to crunch numbers at lightning speed. At Edom & Co. CPAs, we combine innovative technology, AI innovation along with expert insights to deliver comprehensive financial accounting advisory services .

We also offer business formation services, empowering our clients to adopt modern AI powered financial analysis and make data driven decisions, to ultimately ensure compliance.

Let's discuss how the modern CFO's role is evolving (not disappearing), while AI transforms financial analysis.

How Does AI Analyze Financial Data?

Traditional accountancy depended heavily on human data entry and human analysis. Today, Artificial Intelligence automates most of the financial operations with higher speed and accuracy. AI has transformed financial data collection and analysis. It helps make better decisions through actionable insights.

Let's dive deeper into how this all comes together:

Automation in Data Collection

While manual data entry is a hassle in traditional accounting, AI driven systems automate the process by collecting accounting information from almost every possible source: the ledger, bank records, ERP systems, tax statements, and customer/vendor invoices. Preparing clean and organized books can be expedited in ways not seen or available a decade ago.

Financial Monitoring in Real Time

Modern, machine learning based financial software provides real time financial dashboards that display cash flow, expense analytical trends, and profit metrics very quickly. AI reduces delays in financial reporting while displaying an ability to detect anomalies, such as unusual financial transactions.

Risk Management & Fraud Detection

AI driven systems can identify irregularities in general ledger accounts. They can quickly identify duplicated invoices and unusual spend patterns, as well as flag them in real time. AI can be an excellent ally in identifying financial misrepresentations and fraud.

Strategic Planning Through Scenario Modeling

AI doesn't only report what is happening, it can also help Fractional CFOs predict what may happen next. Fractional CFOs can leverage scenario modeling to predict a 'what if' scenario: What if inflation rises by 5.5%? What if sales dip by 12%?

Fractional CFOs can analyze thousands of probabilities and gain data backed insights for strategic planning, providing better foresight in alignment of a Client’s vision and milestones.

Predictive Financial Analysis

AI not only informs us about what is happening, but also helps Fractional CFOs anticipate future trends by leveraging historical data. It can predict future trends, including expenses, market fluctuations, and revenue growth. Fractional CFOs can leverage AI-driven predictive analysis in planning budgets, identifying potential risks, and guiding strategic growth.

By adopting AI driven financial analysis tools, Fractional CFOs and other accounting professionals can skip repetitive tasks and spend more time on interpreting results, adding value to strategic growth.

Why Do Businesses Still Need Human CFOs?

Notably, technology can support decisions; however, it cannot make them independently and intelligently on its own. AI cannot replace the human experience, the ethical judgments, and the context that a human brings to the table.

Let's explore this “Why” some more.

Strategic Vision

In scenarios such as launching new ventures or restructuring existing ones, accounting professionals can translate financial data into actionable business items. With our financial accounting advisory services, we can combine human vision with technology driven solutions to develop well thought out, long-term growth opportunities.

Ethics & Regulations

AI operates according to programmed patterns and sometimes struggles to handle the grey areas in finance that require an understanding of compliance and ethical decision making.

Accounting professionals can grasp financial regulations, anticipate probable changes in tax laws, and apply Generally Accepted Accounting Principles (GAAP) accordingly. Edom & Co. CPAs' business formation services can provide oversight to ensure your business remains compliant from day one.

Prompt Judgment & Emotional Intelligence

Fractional CFOs can understand the motivations behind business decisions that affect financial outcomes, such as market sentiment, employee morale, and investor confidence. However, although AI can interpret 'patterns', it cannot transcribe the 'intent'.

Leadership & Crisis Management

Fractional CFOs and CPAs are profound leaders who inspire trust and provide stability amidst and after uncertain phases or crises. Algorithms may not have the ability to satisfy a worried Board of Directors or reconstruct investor confidence after a crisis.

How Can We Help Businesses Adapt to AI-Powered Finance?

Edom & Co. CPAs guides its clients through the process:

We analyze repetitive human financial processes that AI can automate
We integrate AI-driven financial analysis tools with the clients' ERP and tax systems to enhance their financial operations
We work closely with our clients' financial teams to train and upskill them, and help them make informed decisions

We help our clients set up a robust financial system that effectively leverages both AI and human intelligence.

Conclusion

At Edom & Co. CPAs , our approach to professional financial accounting and advisory services relies on collaboration - innovative, AI driven automation for precision and speed, combined with human intelligence for strategy. Our business formation services ensure that your business has a suitable structure to support future ready financial systems.

Let us help you navigate confidently in the evolving world of finance, where technology informs decisions while seasoned professionals make them happen.

Be sure to check out our Instagram and Facebook posts explaining the Dangers of relying on AI for Financial Strategy.

Contact us today for Business Advisory, Accounting, Tax and Payroll Management Services!

Small and Mid-Sized Entities Using Research & Development Tax Credits

Fri, 24 Oct 2025 12:26:34 GMT

How Can Companies Claim R&D Tax Credits?

In an innovation driven world, businesses prioritize investing in research and development. Along with the innovative culture they encourage, these businesses can also receive powerful incentives in the form of R&D tax credits.

Edom & Co. CPAs offer the best tax preparation services to help you efficiently identify, claim, and maximize R&D credits. Similarly, through our business formation services, we help entrepreneurs choose the most suitable business structure to optimize tax benefits.

This blog post takes you through the meaning, eligibility, and benefits of R&D tax credits and explains how we help you make the most of them.

What are R&D Tax Credits?

The R&D tax credits are the US Government backed incentives to companies developing and improving products, processes, or software solutions. The US Government initiated these incentives to encourage and boost innovation.

These incentives have now been made available to various sectors, including technology, manufacturing, pharmaceuticals, and agriculture.

Businesses can claim the R&D tax credits against income tax, thereby reducing their tax liabilities. Startups and SMEs can also benefit from R&D tax credits, as they can carry forward unused credits or claim a refund for them.

This strategy can help such entities improve cash flows during critical growth stages.

What are the Eligibility Criteria to Qualify for R&D Tax Credits?

There has been a misconception that R&D tax credits are only accessible to large corporations. However, any company engaged in systematic innovation can benefit from R&D tax credits.

Let's take a look at the qualifying activities:

Development and enhancement of products, prototypes, and software systems
Experiments with new manufacturing processes
Developing processes to overcome technical and scientific uncertainties in production
Developing technology driven solutions to improve efficiency or reduce costs

Edom & Co. CPAs offer reliable tax preparation services by conducting a thorough technical and financial review to identify qualifying projects. We help our clients assess, document, calculate, and file R&D tax credits, ensuring that you don't miss any legitimate claim.

What are the Benefits of R&D Credits to Technology Companies?

The R&D tax credits offer various benefits that positively impact the profitability and growth of any small or mid-size Tech company:

Minimized Tax Liability

Businesses can achieve substantial annual savings by offsetting a portion of their research and development (R&D) spending against their corporate tax liability.

Encouraging Innovation Culture

R&D tax credits can work as a key driver for sustained growth. You can foster a long-term innovative mindset within the workforce and excel in your market and industry.

Improved Cash Flow

Startups and early stage organizations that are not yet profitable can also claim a tax deduction for their qualifying research and development activities. The facility provides much needed funding for continuous innovation.

Strengthen Future Investments

Organizations can reinvest the R&D tax credits to expand their research teams, improve operational efficiency, and upgrade technology for a better tomorrow.

What is the Role of Business Formation Services in Maximizing R&D Credits?

Notably, your business formation structure influences your eligibility for R&D tax credits and also the amount you can claim under this Government backed incentive. A well structured business ensures compliance and facilitates smoother access to incentives, such as the R&D tax credits.

Edom & Co. CPAs offers business formation services to help entrepreneurs and aspiring startup owners choose an appropriate business structure to optimize tax efficiency and effectiveness.

We may assist you in forming an LLC, a partnership, or a corporation. We align your business goals with current Government norms to help you achieve short-term savings and long-term growth.

Why Should Tech Companies Choose Edom & Co. CPAs As Their Tax Preparation Partner?

We assist our clients in acquiring R&D tax credits as follows:

We leverage our expertise in eligibility assessment, technical evaluation, financial analysis, claim preparation, and R&D tax credits filing
Additionally, we offer post claim support to meet the technical expectations of concerned authorities and ensure your tech company remains audit-ready
Our expert team of Accounting and Tax specialists is well versed in regulatory shifts. We help you identify and categorize detailed technical evidence and project records
Our team assists you with electronic filing of R&D tax credits, including all the qualifying expenses, such as cloud computing, data licenses, and AI-driven research

Conclusion

The blog post guides you through various aspects of R&D tax credits, helping you understand why partnering with great tax preparation services can be crucial for Technology companies.

The blog also provides brief information about our business formation services, helping you select a suitable business structure that allows you to claim R&D tax credits and enhance your overall tax efficiency.

Contact us today for more information or a free consultation!

What is the One Big Beautiful Bill, and How Can SMEs Benefit from 100% Bonus Depreciation?

Mon, 13 Oct 2025 09:22:42 GMT

What is the One Big Beautiful Bill, and How Can SMEs benefit from 100% Bonus Depreciation?

The 'One Big Beautiful Bill' (OBBBA) has been positively influencing US tax reforms. Especially, the 100% bonus depreciation for qualified assets has become an excellent opportunity for SMEs (small to medium enterprises) in many ways.

This blog explains what it is, how SMEs can benefit from this bill, and how our Client Advisory Services practice can help them maximize its benefits.

What is the One Big Beautiful Bill?

United States (US) President, Donald Trump, signed the 'One Big Beautiful Bill' (OBBBA) into law on July 4, 2025, the US Independence Holiday. This bill brings a significant overhaul to some important US tax rules. The permanent restoration of 100% bonus depreciation is one of the key changes introduced by this bill. This bill reverses the earlier scheduled phaseout.

Earlier, the bonus depreciation was in a gradually declining order, with 80% in 2023 and 60% in 2024, and so on. Now, the OBBBA removes the phaseout and makes the full expenditure of qualifying assets a permanent part of the tax code. This permanent tax code applies to properties that have a recovery period of 20 years or less.

The law also increases the Section 179 tax deduction limit to $2.5 million, with a phaseout starting at $4 million. There have been other key changes, including:

Enhanced deduction rules for research and development (R&D) spending.
Permanent extension of the Qualified Business Income (QBI) deduction (set at 20% for pass-through entities).

What are some Big Benefits of 100% Bonus Depreciation for SMEs?

Improved Cash Flow with Immediate Tax Relief

SMEs can deduct the cost of assets (placed in service) in the same year, instead of depreciating the asset's cost over several years. Therefore, SMEs can now report lower taxable income and enjoy the freedom to invest more in business growth.

Investments in Technology, Capital, and Growth Incentivized

Buying equipment, computers, software, and machinery to generate future revenue and increase efficiency is made more practical for SMEs since 100% bonus depreciation compensates the procurement. The tax reform helps SMEs accelerate their modernization plans and aspirations.

Synchronization with Section 179 Tax Deduction

Section 179 remains a viable tool for SMEs to make smaller purchases that don't qualify or are beyond phaseout limits. SMEs can combine the benefits of expanded Section 179 tax deductions along with the OBBBA for more flexibility and optimum tax savings.

Enhanced Certainty for Planning

As the OBBBA makes the tax benefits permanent, SMEs no longer need to worry about temporary tax breaks that may expire or change frequently. Therefore, SMEs don't need to fear abrupt changes in tax rules and can properly build capital budgets and investment strategies.

How Can SMEs Implement This?

Step 1: Identify Qualifying Assets

Tangible property assets acquired after January 19, 2025, and placed in service thereafter, with a recovery period of up to 20 years, qualify for 100% bonus depreciation. This criterion includes computers, off-the-shelf software, equipment, machinery, and some capital improvements.

Step 2: Prioritize Timing and Coordination

It is crucial to determine when to put an asset into service, as this impacts its eligibility. SMEs can work with Client Advisory Services that map their acquisition schedules to avoid cutoffs and elect transitional treatment as necessary.

Step 3: Proper Cost Segregation

A well-executed cost segregation study can separate a building's components into shorter useful life and qualify for bonus depreciation and/or Section 179. The study helps SMEs utilize these two tools cleverly for tax savings.

Why Edom & Co. CPAs Are Your Right Partners?

Opting for our business tax preparation services can be a crucial strategic decision for SMEs as we help them:

Categorize and document the assets to keep our clients audit-ready, while maximizing tax savings.
Model multiple future tax scenarios to determine the optimal timing for asset procurement.
Plan and achieve tax savings by utilizing Section 179, the OBBBA, or by combining both.
Assist SMEs in investing into assets wisely, rather than procuring unnecessary capital allocations for tax deductions.

Frequently Asked Questions (FAQs)

What assets qualify for 100% bonus depreciation under OBBBA?

The OBBBA allows for the deduction of tangible assets, including machinery, equipment, furniture, computing equipment, and off-the-shelf software, with a 100% bonus depreciation.

Opting for our Client Advisory Services will enable SMEs to reap these benefits. Edom & Co. CPAs can connect clients with providers of in-depth cost segregation studies that help identify and qualify a building’s components and/or improvements.

When should SMEs place an asset in service to qualify?

Notably, the assets procured after January 19, 2025, and placed in service thereafter can qualify for 100% bonus depreciation. Assets acquired before this date may be eligible for partial bonus depreciation.

Can an SME use both 100% bonus depreciation and Section 179 in the same year?

Yes, it is possible. You can use the Section 179 tax deduction as permissible by law if you have assets that do not qualify for bonus depreciation (and/or surpass the Section 179 limit). Through our business tax preparation services, we help SMEs maximize these benefits together for optimum upfront tax deductions and savings.

How can one know whether to accelerate deductions or spread them over time?

We analyze the strategic impact of accelerating or spreading tax deductions, weighing your current and future taxable income against the risk of losing deductions entirely. Edom & Co. CPAs provides customized forecasting models, empowering you to make informed, data-driven decisions that can maximize tax savings.

A Step-by-Step Guide to Business Formation in the US

Mon, 22 Sep 2025 14:00:04 GMT

A Step-by-Step Guide to Business Formation in the US

Congratulations! As you have decided to start your business in the US, are you familiar with the legal and procedural aspects of business formation? Working with a reputable business formation service Company will bring extensive experience and reputable expertise to your side.

This blog clarifies the technical jargon surrounding the business formation process. It provides a concise and clear outline of the steps it takes to form a business in the US. Let's dive in.

The Most Significant Steps for Business Formation in the US

Starting a business in the US can be exciting. Although it may feel overwhelming, breaking down the formation process into planning, launching, and managing can help you realize that it is manageable.

Figuring out your business idea, target market, funding, and operations are all aspects that comprise the planning phase. Registering your business by choosing a unique name and marketing your brand are included in the launching stage. Lastly, ensuring compliance with business laws and tax related compliance are a part of the ongoing management stage.

Now, let's discuss with a step-by-step approach. With this guide, you can plan and carry out actionable steps in the execution of your company formation process:

1. Market Research

The first step is to understand the market and your target audience for the products and services you plan to offer. This crucial planning step helps you assess the practical market requirements and identify target areas where you can offer products or services to grow your brand.

2. Work Out Your Business Idea

Arrive at a clear conclusion regarding the business you wish to establish based on an extensive market research. Determining the nature, shape, and initial size of your business will help you execute the next steps in the business formation process effectively.

3. Compose Your Business Plan

The next step is to document your business plan properly. You should be ready with a strategic roadmap outlining the nature of your business, your value proposition, how you plan to operate, manage finances, and follow realistic growth strategies.

4. Pick Your Business Name

Settle on a unique name that no other business has taken. The business name should include the appropriate entity designator (such as 'LLP'). The name will become the identity of your business, therefore choose wisely.

5. Choose an Appropriate Business Structure

Consider your liability protection, taxation, and capitalization requirements. These aspects help you determine the most suitable legal structure of your business. LLC is a good option as it offers pass-through taxation, while Corporations bring a great deal of ease in capital raising.

At Edom & Co. CPAs, we advise our clients to choose the ideal business structure tailored to their specific business goals and milestones they aim to achieve. Be sure to consult with us if you are at this stage of the business life cycle.

6. Registration with a State

Consider the fees for company formation, business laws regarding privacy, and the overall ease of business formation when choosing an appropriate state to register your business. Notably, various states offer varied benefits. Therefore, research to determine which option is best suited to your business goals and preferences.

We advise and assist in the process of registering your business with the desired state. Our professionals are experienced in the required documentation and procedures to register your business properly.

7. Obtain Your Employer Identification Number

Apply for your EIN after you submit state specific documents (Articles of Organization for LLCs and Articles of Incorporation for Corporations). Stay legally compliant and safeguard your financial interest by understanding taxation requirements and related reporting procedures.

Obtain your tax ID number (EIN), which serves as the social security number of your business. The Internal Revenue Service (IRS) is the essential US federal authority issuing an EIN to all businesses. You need an EIN for tax filing, hiring employees, and operating your business's bank account.

Our experts are familiar with the process of acquiring an EIN (whether for a single member or a multi member business entity). You can rely on Edom & Co. CPAs for assistance in the timely obtainment of an EIN.

8. Obtain Licenses and Permits

Research and learn about the necessary licenses and permits required by local, state, and federal authorities based on the nature of your business. Obtaining these documents promptly will guarantee smoother operations in the long run. Licenses and permits may vary depending on your sector. Since there isn't a ‘one-size-fits-all’ formula, researching and obtaining the proper licenses and permits becomes a critical step in the early stages of the business life cycle.

9. Open a Business Bank Account

You will need to open a bank account for any US based business, in order to help you keep your personal and business finances separate. Many banks offer business checking and credit account options. Some banks may require physical presence in the US, but there are a few fintech providers offering digital onboarding options.

10. Maintain Compliance

Along with hiring suitable employees, managing financial operations, and marketing your brand, staying up-to-date with legal compliance is also very important. Prioritize business insurance, tax planning and filing, and timely license/permit renewals for seamless operations.

Why Work with Us

Edom & Co. CPAs has been a trusted name in Business Formation and Development Services for many years. With our team of experienced professionals across various geographies, we ensure the timely completion of your business formation process. We have the expertise to secure the necessary documentation and execute the required steps for your US business establishment, freeing you to focus on core growth and activities.

Key Takeaways

This blog outlines the key steps involved in forming a business in the US. We hope it helps you in executing the process and making informed decisions at the right time. Collaborate with Edom & Co. CPAs, your trusted partner for business formation services, to ensure the timely completion of the formation process while electing the most suitable business structure, according to your goals and aspirations.

Frequently Asked Questions (FAQs)

Q 1: How long does the business formation process take in the US?

It may take anywhere from a few days to a few weeks to form a business in the US. The duration largely depends on state specific rules and the volume of applications.

Q 2: Is a registered agent mandatory for business formation?

Yes. Every business in the US must have a registered agent with a physical address in the state of formation. Working with reputable business formation services is, therefore, paramount.

Q 3: Do I need to stay in the US to register my business there?

No. Nonresidents can form a business in the US and obtain an EIN.

Q 4: Which state in the US is best for registering a business?

Different US states offer different benefits. For the vast majority of small businesses, the simplest and often most cost effective solution is to register your business in your home state (the state where you shall physically operate or reside). For Start-Ups seeking venture capital, and large corporations, Delaware is preferable due to the key advantage of Delaware's highly developed and flexible corporate laws (especially for C-Corporations).

Contact us today for Business Advisory, Accounting, Tax and Payroll Management Services!

Top 5 Common Tax Filing Mistakes and How to Avoid Them

Wed, 17 Sep 2025 10:46:46 GMT

Top 5 Common Tax Filing Mistakes and How to Avoid Them

The entire tax filing process involves ever changing rules and regulations. It remains a source of stress for many.

While some worry about the legalities, others are concerned about numbers or missing crucial information. Regardless, the smallest mishap can lead to the biggest concerns. This can include fines for incomplete or inaccurate returns, audits, missed refunds, and more.

Well, that is where professional tax filing services like ours are impactful. Let us look into some common tax filing mistakes and how to avoid them.

What are the most common tax filing mistakes? How to avoid them?

When preparing and filing your taxes, you cannot afford mistakes. Though unintentional, it can cause significant concerns downstream.

Some of the most common mistakes to pay attention to and avoid are:

A. Incomplete and inaccurate records

Lack or mismanagement of records increases the chances of mistakes in audits and tax filings. For this reason businesses end up understating or overstating their tax responsibilities. Ultimately, this leads to varied significant consequences. Thus, keeping track of income and expenses and having all financial records up to date is essential.

How to prevent this?

To prevent this, you can:

Keep track of receipts, bank statements, and invoices in a way that makes them easily accessible.
Hire a bookkeeper, invest in a good accounting software, or reliable tax preparation services .
Establish a backup system for all financial data to secure it from theft or system failure.
Record and maintain all transactions consistently and accurately.
Keep an eye on your account(s) regularly to get ahead of discrepancies in the early stages or life cycle of your business.

B. Combining personal and business expenses

Putting together your business and personal expenses isn't a great idea. This can lead to inaccurate tax deductions, raising alerts from the taxing authorities. This action ultimately leads to penalties. Not only this, but comingling personal and business expenses pierces your corporate veil, meaning that the court can disregard the separate identity of your business, holding you liable for legal issues, business debts, and other corporate actions.

Therefore, it is best to have separate business credit accounts and checking accounts for all Company expenses to ensure easy tracking and accurate records.

How to prevent it?

To prevent this, you can:

Provide accurate and clear financial records or reports.
Maintain separate credit cards and checking accounts for professional and personal use.
Claim tax deductions only on legal business activities.
Do not use business funds for personal use or vice versa.

C. Claiming excessive or wrong ITC

Trying to claim excessive or wrong ITC (Input Tax Credit) without accurate and complete documents can attract unnecessary penalties and audits. Thus, it is essential to make sure all the claims have relevant and authorised tax invoices and meet General Goods and Services Tax (GST) conditions.

How to prevent this?

To prevent this, you can:

Claim ITC for personal expenses and not business expenses.
Make sure every ITC is supported by relevant GST invoices.
Do not claim input tax credit on blocked purchases or commodities without uploading invoice support.
Keep a regular check on the ITC claims to ensure accuracy and compliance.
Cross check ITC claims against filed returns to avoid discrepancies.
Track ITC using GST compliant accounting or financial management software.

D. Missing available credits & deductions

Many often miss tax credits and eligible deductions. Ultimately, ending up with higher tax payments. Thus, keeping a regular check on expenses and staying informed about necessary benefits is crucial to save taxes and plan your finances in a better way.

How to prevent this?

To prevent this, you can:

Keep a record of all the documents supporting tax claims during audits or filing.
Consult professional tax advisors such as Edom & Co. CPAs to understand deductions relevant to your case.
Record all Company expenses, including research & development, software purchases, business travel, and training in detail.
Stay updated on available credits and deductions by reading up on current tax laws.

E. Misidentification of employees as contractors

Many businesses often label their employees as contractors. However, that is not the best decision to reduce your tax obligations. This action can backfire both financially and legally. Therefore, understanding and adhering to appropriate classification is crucial for fair employment practices and compliance.

How to prevent this?

To prevent this, you can:

Define worker contracts, responsibilities, and roles clearly.
Acknowledge the legal differences between independent contractors and employees.
Assess factors such as payment terms, work control, and provision of benefits or tools.
Consult a professional tax advisor or HR specialist to understand proper classification.
Follow checklists or guidelines provided by taxing authorities.

Frequently Asked Questions

1. What is the deadline to file a tax return in the United States?

According to the IRS (Internal Revenue Service), US citizens must file their tax return before April 15 every year. It is important to note that if the due date falls on a weekend, i.e., Saturday or Sunday, and on legal holidays, the date is automatically delayed to the next business date.

2. What happens if I miss the tax filing due date?

If you miss filing your tax return before or on the due date, the IRS can charge interest and late filing or payment penalties.

3. Should I hire a professional or file taxes myself?

The decision to hire a professional or file taxes yourself depends on several factors, including the overall tax situation and your comfort level with the tax filing process.

If your tax return is not complicated and you are confident about the entire process, feel free to file it yourself. However, if this is not the case and the process appears to be complex, it is best to hire professionals such as Edom & Co. CPAs .

Conclusion

Tax filing is no rocket science. However, it requires careful consideration of many factors to avoid unnecessary penalties and delays. Staying organised and updated with all the information will ensure a smooth filing process and maximum refunds.

Contact us today for Business Advisory, Accounting, Tax and Payroll Management Services!

How Proper Accounting Can Help Your Business Save on Taxes

Mon, 15 Sep 2025 00:02:14 GMT

How Proper Accounting Can Help Your Business Save on Taxes

Entrepreneurs and C-suite executives are very busy making numerous decisions all the time. Whether it is handling daily operations, meeting sales targets, or strategizing for long-term business growth, these decisions keep you occupied. In this chaos, taxes may feel overwhelming.

However, proper accrual or cash basis accounting is a powerful tool beyond simple bookkeeping. It helps you reduce tax burdens and save considerably. Collaborating with professional accounting services can be a smart move to ensure a stress-free, more profitable, and compliant business.

The right systems in place and expert guidance can turn tax season from a burden into an excellent opportunity for tax savings. Let's reveal the most significant advantages of partnering with a professional accounting service provider such as Edom & Co. CPAs for your business.

Benefits of Prompt Accounting for Your Business

Assigning the responsibility of bookkeeping, financial reporting, and filing tax returns to accounting experts brings many benefits to your business.

Proper Tax Planning

Professional accounting services go beyond recording transactions and paying taxes on time. We perform well-thought-out financial mapping for your business. It is about enabling clients to make informed decisions at the right time to impact their tax liability positively while fueling business growth.

Choosing Appropriate Business Structure

Your business structure directly impacts your tax liability, as different entities need to file distinct and/or various tax returns. For this reason, determining your business structure is crucial for compliance and tax savings.

Reputable business formation and development services work closely with clients as their partners in success. We recommend the most suitable business structure based on the nature of our clients' businesses, their goals, and planned milestones.

Transparent and Up-to-Date Financial Records

Accounting experts utilize modern digital and AI tools, as well as accounting software solutions, to record financial transactions, document relevant information, and perform necessary calculations.

Maintaining accounts with utmost transparency helps you prevent errors, penalties, and unnecessary audits. Our accounting experts maintain adequate and valid records to support all tax deductions.

Tracking and Categorizing Expenses

Are all expenses for various purposes treated equally for tax purposes? The answer is No! Experienced accountants analyze and categorize expenses properly.

We ensure that the deductible expenses, such as office supplies, travel, and business utilities, are claimed at the right time. That way, accounting experts continuously strive to minimize the client's tax liability.

Timing Matters

The timing of expenses, revenue recognition, large purchases, or investments well before the end of the financial year is the aspects that matter significantly in determining taxable income.

Our accounting experts understand the consequences and help you make smart financial decisions, thereby reducing overall tax liability.

Deductions for Retirement Savings

Businesses contribute to employees' retirement savings plans, such as a Simple Employee Pension Plan (SEP) or a 401(k) plan.

Businesses also help their employees lead a dignified retired life through these savings. At the same time, these expenses can bring tax benefits. Our account associates help companies claim these benefits.

Proper Employee Classification

Payroll management is another crucial aspect of accounting. Classifying employees and contractors is essential for ensuring compliance and making accurate tax payments.

As professional tax and accounting experts, we are aware of these and other related regulations. We maintain accurate payroll records, ensuring proper employee classification in order to file deductions and contributions in a timely manner.

Research on Tax Credits and Incentives

Federal and State Governments in various parts of the country encourage entrepreneurship by boosting the startup ecosystem, supporting research and development initiatives, promoting sustainability, employing skilled and unskilled labor, and providing retirement savings, among other measures.

As your trusted accounting partners, we are well-versed in these technical details. We categorize relevant expenses and help you claim related tax benefits. That way, we allow your business to contribute to the economic development of your community.

Timely Submission of Tax Returns

Filing tax returns, considering your business structure, activities, and government norms, can be tricky. Our professional accounting experts ensure that our clients never miss a tax deadline. Delayed tax submissions can result in penalties and interest.

We establish a proper workflow for accurate financial recording, expense categorization, and compliance with regulatory requirements of enforcement authorities. You can rest assured about the timely filing of tax returns in an error free manner.

Staying Prepared for Tax Audits and Inspections

Our professionals are familiar with the intricacies and technicalities of tax laws and governing authorities in various parts of the country.

Accurate accounting creates a shield with a well organized accounting system. With an error free workflow and bookkeeping in place, you can stay ever ready for tax audits and inspections.

Wrapping Up

The blog discusses various aspects of accounting excellence, a pressing need for many businesses to comply with tax regulations while fueling business growth. At Edom & Co . CPAs , we ensure compliance and provide actionable insights to help our clients reduce their tax liability and foster business growth through our suite of Client Advisory Services.

Choose us as your Tax and Accounting partners for accurate financial records and significant tax savings. We strive to have our clients remain compliant and audit ready.

Frequently Asked Questions (FAQs)

Q 1: What does an accounting service provider do?

Accounting service provider assists businesses with accounting partially or entirely, depending on the client's needs and requirements. Professional accountants help their clients with bookkeeping, tax filing, financial reporting and analysis, forecasting and more.

Q 2: Why is filing tax returns complex?

Filing tax returns is complex due to intricate and frequently changing tax laws, government policy updates for social and economic development, and is thus complicated to navigate without expert assistance.

Q 3: How does business structure matter for taxation?

Taxation norms are different for different business structures (sole proprietorship, partnership, corporation, and LLP). Your business structure determines the Income Tax Return Forms your entity will need to file regularly.

Q 4: How do accounting services help businesses stay productive?

Professional accounting services, such as Edom & Co. CPAs, manage Accounting and Tax related burden. Thus, businesses can rely on us and concentrate on their core activities and competencies.

Contact us today for Business Advisory, Accounting, Tax and Payroll Management Services!

Emerging Construction Firms and Companies

Mon, 25 Aug 2025 05:04:29 GMT

Our Guide For Emerging Construction Firms Supported By Data-Driven Growth

Edom & Co. CPAs offers more than just compliance services. We provide a clear, data-driven path to growth and profitability. Our goal is to empower emerging Construction firms with the financial clarity needed to make smarter business decisions.

An Integrated & Evolving Platform

We bring together essential financial functions, including Accounting , Payroll, Job Costing, Reporting, and Bill Payments into a single, configurable solution. This integrated approach ensures your financial and operational data are unified, reducing delays and providing real time visibility into your Cash Flow and Project performance.

We specialize in helping companies strategically migrate from simple systems like QuickBooks to more advanced, multi entity solutions that evolve with your business. This investment in a unified system eliminates the gaps that often lead to cost overruns and inaccurate future estimates.

Solving Common Industry Challenges

Our solutions are specifically designed to address the unique pressures facing the Construction industry. We provide a measurable impact by solving for:

Cash Flow & Visibility: We eliminate bottlenecks and provide consolidated dashboards that give managers a clear, real time view of project finances, ensuring you have the data to meet critical deadlines.
Operational Inefficiency: Our AI powered tools automate tasks like invoice matching and approvals, freeing up your team and reducing the manual errors that eat into profit margins.
Accurate Profitability: We precisely track income and expenses for each project, generating actionable recommendations to help you meet profitability goals.
Revenue Recognition: Our expertise helps you properly structure fixed-price contracts or long term projects to ensure revenue is recognized in alignment with work completed.

By consolidating your financial systems with our Firm or with a single provider, we provide you with the business intelligence needed to take action, improve operational efficiency, and drive long term growth in a competitive economic landscape.

Contact us today for Business Advisory, Accounting, Tax and Payroll Management Services!

Airbnb Arbitrage, Gen Z, and Taxes

Fri, 25 Jul 2025 17:57:02 GMT

What You Should Know Before Turning Rentals Into Revenue

Short-term rentals have exploded in popularity, and not just among travelers. For many in the Gen Z age demographic, they are becoming a go to side hustle. Whether it is to generate passive income or to escape the 9 to 5 hustle and bustle, more young adults are stepping into the short-term rental space in a big way.

Fun fact: Some individuals in this demographic are not even buying properties; they are leasing them. This strategy, called Airbnb arbitrage, involves renting properties from landlords and re-renting them on platforms such as Airbnb, VRBO, or Booking.com at a markup. It is legal in many states when done with transparency and within the bounds of local ordinances. This new strategy is developing quite an online following.

Although the overall concept may sound simple and prove lucrative, the tax side of the business is anything but clear-cut. If you are renting out property, owned or not, you are effectively running a business. This means you will need to be familiar with applicable tax rules, reporting requirements, and compliance risks. There are areas our Firm has expertise in and may guide, lead and implement on behalf of your business.

Here is what you should know before following the lead of Social Media’s Airbnb business experts.

What Is Airbnb Arbitrage?

Airbnb arbitrage is the practice of signing a long-term lease on a rental property and listing it on short-term rental platforms for a profit. It is attractive because it 1) requires no property ownership, 2) has relatively low startup costs (mostly furnishings and deposits), and 3)can generate significant cash flow if implemented correctly.

The landscape of short-term rentals is rapidly evolving, with digital entrepreneurs demonstrating remarkable success without traditional property ownership. Consider the case of Hailie Anderson, a 21-year-old TikTok personality, who has reportedly achieved monthly earnings of up to $180,000 by effectively managing dozens of listings across multiple cities. Her innovative approach, common among those excelling in this niche, extends beyond property management. Anderson further diversifies her income through selling online coaching programs, sharing valuable templates, and educating aspiring entrepreneurs on replicating similar business models.

Gen Z and the Rise of the Rental Hustle

The idea of “own nothing, control everything” has gained attention. From Austin to Salt Lake City to Nashville, Gen Z entrepreneurs are finding creative ways to enter the Real Estate space without buying property. Social media has played a key role, turning Real Estate management into both a business and a personal brand. However, there is another side to this successful business venture. Local laws are changing, scrutiny is increasing, and many of these operations are subject to federal, state, and local tax obligations. If you are considering entering this market, whether as a property owner or an arbitrage host, understanding your related tax responsibilities is paramount.

Tax Essentials for Vacation and Short-Term Rentals

1. Know the IRS Rules for Rental vs. Personal Use

Even if you don’t own the property, if you’re subleasing legally and generating income, the IRS treats you like a business operator.

14-day rule : If a property is rented for fewer than 15 days per year and used personally for more than 14 days, income is not reportable, but this rarely applies to full-time Airbnb hosts.
If you’re running an Airbnb business, even through arbitrage, you must report all rental income and track your operating expenses accordingly.

2. Report Earnings on Schedule E

Most hosts will report rental activity on Schedule E (Form 1040). This includes:

Rent collected via Airbnb, VRBO, Booking.com, and direct payments processors (ex, Venmo, Zelle, etc.)
Income reported on Form 1099-K, issued for $2,500 in gross payments for 2025 and $20,000, along with 200 transactions for 2026.

Accounting Tip : Arbitrage hosts often receive dozens of small payments. Keep clean records of every transaction, especially those outside your point of sale systems and payment processor platforms.

3. Deductible Expenses (Even If You Don’t Own the Property)

Rental operators can deduct many business related expenses, such as:

Rent you pay to the landlord
Cleaning and property management services
Utilities and Wi-Fi
Furnishings, linens, and household supplies
Insurance (if required by the lease)
Platform fees and marketing costs

If you're subleasing with permission, your lease agreement should explicitly allow for short-term rentals. It is also advisable to create a legal business entity, such as an LLC, to manage your risk and simplify the related accounting and tax requirements.

4. Depreciation Rules Don’t Apply the Same Way

If you own the property, the IRS requires you to depreciate it over 27.5 years. However, if you are leasing the property, you generally can't claim depreciation on the building itself. You can effectively depreciate furnishings and appliances you purchase for the unit, typically over a period of 5 or 7 years.

Unsure of what qualifies? Contact us today and we will help you determine which assets are depreciable in your setup.

5. Local Taxes and Legal Risks

Many cities and states impose occupancy or lodging taxes on short-term rentals. Some require hosts to:

Register with local housing authorities
Collect and remit lodging taxes
Abide by restrictions (e.g., minimum stay requirements, maximum number of listings)

And the rules are tightening. For example. New York City has essentially banned most full apartment Airbnb rentals unless guest stays are longer than 30 days. In Barcelona, the Government plans to ban all short-term rentals by 2028 in order to ease its housing crisis. Failure to comply with local laws can lead to heavy fines, canceled listings, or even criminal charges, as was the case of one New York host sentenced for fraudulent arbitrage.

Is It Worth It?

For many Gen Z hosts, arbitrage is a gateway to entrepreneurship. It requires hustle, negotiating with landlords, furnishing and marketing properties, managing cleanings, and responding to guests. The best part, it can also offer flexibility and substantial income potential. Please understand, it is not passive. It is not risk-free. It is not as simple as it looks on social media or TikTok. It is not a “get-rich-quick scheme or easy money,” Anderson admits. “But if I can help 700 people not work a 9-to-5, why not?” Running a successful arbitrage business means acting in the capacity of a business owner. This includes staying on top of taxes, licenses, leases, and changing local ordinances.

Final Thoughts

Airbnb arbitrage has created opportunities for a new generation of real estate entrepreneurs, many without access to traditional paths to ownership. It is a creative, flexible business model, but it also comes with real responsibilities. If you're managing properties, leased or owned, on short-term rental platforms, be sure to keep detailed records of income and expenses, understand applicable business deductions, and file the correct tax forms in order to stay compliant with federal and local regulations.

Contact us today for Business Advisory, Accounting, Tax and Payroll Management Services!

Do you have a Registered Agent?

Thu, 17 Jul 2025 17:54:35 GMT

Essential Insights for New Business Owners and Entities

What Is a Registered Agent?

A Registered Agent (RA) is a person or company officially designated to receive legal documents on behalf of your LLC or Corporation. This includes lawsuits, government notices, and important tax documents. Every state in the U.S. requires every business entity to name a Registered Agent when the company is formed or incorporated.

Due to an LLC or Corporation not being a real person, it cannot be served with legal paperwork unless someone is appointed to receive it. The designated recipient is the Registered Agent.

Why Your Business Needs One

Outside of being a smart business strategy:

1. Stay Compliant and Avoid Legal Trouble

The Registered Agent ensures you never miss critical legal notices. If you don’t respond to a lawsuit, you risk a default judgment, meaning you could lose the case before you even know it was filed. The RA’s job is to notify the Company’s management and/or ownership group right away when important correspondents are received.

2. Protect Your Privacy

If you serve as your own Registered Agent, your home or office address becomes public record. Hiring a professional Registered Agent keeps your personal address private and off the internet.

3. Maintain Professionalism

A Registered Agent ensures that your business is always reachable for official matters, even if you are on vacation, moving offices, or changing phone numbers.

Can You Be Your Own Registered Agent?

Yes, if you live in the same state where your business is registered, you can be your own Registered Agent. Although, there are many business owners who prefer to hire a professional Registered Agent or RA service to keep things running smoothly and reduce personal exposure.

How Much Does It Cost?

Typically, a Registered Agent service may cost between $100 and $300 per year, a small price for peace of mind, privacy, and legal protection.

Contact us today for Business Advisory, Accounting, Tax and Payroll Management Services!

7 Keys to Roth IRA

Thu, 15 May 2025 15:02:07 GMT

How to build your Individual Retirement Account

If you have not opened a Roth IRA account yet, here are seven reasons as to why you should open up one as soon as possible.

Roth IRAs are not only good for building your own tax free bucket of income, but from a generational wealth building perspective, it’s a great way to pass down tax free income and avoid some of the probate fees that can arise on estates.

Investing in your family and your future with an IRA is like putting gold coins worth great value into your personal piggy bank!

7 Keys to Roth IRA Benefits

1. Roth IRA's provide tax free growth for investments inside the account and once withdrawn at retirement age, the income is tax free. This is impactful as tax rates are expected to rise in the future. Having a tax free pool of income will only benefit your family and your business in the future.

2. You must have earned income to contribute to a Roth IRA. Passive income alone won't qualify you. There is an income limit as well, once you reach the limit you can no longer make direct contributions. These limits are a) Single - $165,000 b) Married Filing Jointly - $246,000 c) Married Filing Separately - $10,000. Form 8606 must also be filed with your Tax Return if you make a distribution from a traditional, traditional SEP, or traditional SIMPLE IRA, and it is subsequently converted to a Roth, Roth SEP, or Roth SIMPLE IRA.

3. For low income taxpayers, contributions to a Roth IRA can potentially qualify you for the Saver's Credit. This Credit is available to taxpayers that have income limits that fall below a) Single - $38,250, b) Head of Household - $57,375 c) Married Filing Jointly - $76,500.

4. The annual contribution limit is $7,000 if you are under 50 years of age, and $8,000 if you are over 50 years of age. This limit is per person, so a married couple could contribute a total of $14,000 in 2025. With the correct investments, doing this for 30 years will make you a tax free millionaire.

5. When you put your money into a Roth account, your money will not be automatically invested in any stock or index fund. You will still need to choose your investment option once the money is in the account to achieve your desired rate of return.

6. If you have money in a Traditional IRA and you rather it went into a Roth IRA, you can initiate a Roth Conversion, which converts the money from the traditional account over to the Roth account. It is important to consider as well that you will pay taxes and fees on the conversion amount as ordinary income. Roth Conversions can be a great strategy during down markets. Smaller portfolios mean smaller tax bill on the conversion. However, for some individuals and entities in higher tax brackets, or those closer to retirement, this may not be as beneficial if there is a drop in future taxable income.

7. Contributions to your Roth IRA can be withdrawn at any time, completely tax free. This is great in the event you need access to capital for whatever reason. Be sure to only take out your contributions and not withdraw any of your gains.

Contact us today for Business Advisory, Accounting, Tax and Payroll Management Services!

The Augusta Rule for Content Creators

Sat, 15 Mar 2025 21:47:14 GMT

Tax Free Rental Income!

The Augusta Rule, also referred to as Section 280A(g) of the IRS tax code, allows homeowners to rent out their property for up to 14 days per year without having to report the rental income on their federal tax return.

This rule can be useful for homeowners who don't want to deal with the ongoing responsibilities of being a landlord but would like to occasionally rent out their property for short-term stays.

We live in an age of Content Creators finding success in establishing businesses that record volume in Sales and Expenses. The Augusta Rule can benefit a Content Creator who has a relationship with a homeowner such as their parents or siblings. In our example, we highlight a case of a Lifestyle Content Creator and parents as the homeowners. Both parents live separately and are homeowners.

The Content Creator approaches her mother and then her father and gives them "X" amount of dollars as a gift, (a business deduction classified as rental expenses for the Content Creator business) and tells each one to enjoy their next vacation using the tax free gift, since it doesn't get reported on the parent's Tax Returns. Content Creator tells mother and father, respectively, she would like to use each of their beautiful homes to shoot content and also host an event for a business associate, when each parent travels on vacation.

Several things occur in this highlighted case:

1. Content Creator is able to deduct the cost of shooting content and hosting events at each of the respective homes,

2. The income is tax-free to the mother as long as the time she was gone from her home, so it can be rented out if it is less than 14 days.

3. The income is tax-free to the father as long as the time he was gone from his home, so it can be rented out, is less than 14 days.

4. The "X" amount of dollars gifted is a deduction due to classification as a rental expense.

The Augusta Rule for Content Creators allows a business owner to save on taxes if carried out effectively. We advise sitting with a Tax Professional or our CPA Firm to further understand how your family and your business can benefit from this tax strategy.

Contact us today for Business Advisory, Accounting, Tax and Payroll Management Services!

Community Property considerations for Married Filing Separately Tax Status

Thu, 16 Jan 2025 15:54:56 GMT

Report half of all community income & all of your separate income on your return

Texas is one of nine states that is a community property jurisdiction. In general, this means that any property acquired by a couple during their marriage (with a few exceptions) is equally owned by both spouses. This can have a profound effect on the dissolution of property during divorce proceedings.

To fulfill the married filing separately requirements, you’ll each report your own income separately. You must attach Form 8958 to your tax form showing how you each figured the amount you’re reporting on the tax return.

Community property is property that you, your spouse, or both acquire:

During your marriage
While you and your spouse are living in a community property state

Separate property is property that you or your spouse:

Owned separately before your marriage
Earned while living in a non-community-property state
Received separately as a gift
Bought with separate funds
Acquired through separate funds

Contact us today for Business Advisory, Accounting, Tax and Payroll Management Services!

How to properly form an LLC to operate Real Estate as principal business activity

Mon, 18 Nov 2024 15:49:39 GMT

One of the most popular structures of holding companies is the Limited Liability Company...read the ABCs below

When you use an LLC for your rental properties, you are protected as a business entity but allowed to claim the income on your tax return. In other words, if you plan to invest in real estate for business purposes, an LLC will protect your other assets should one of your properties come under distress or duress.

A benefit of using an LLC for real estate is that both the rental income and the appreciation value are exempt from tax penalties. Owning a single-member LLC benefits the tax payer because mortgage interest is deductible. An LLC, when it comes to rental properties, may incur more taxable deductions that result in less taxes coming due.

If a tenant decides to sue you as a landlord, forming an LLC for rental property protects your personal assets from a lawsuit. In a dreaded lawsuit situation, your worst-case scenario would be that your rental property is collateral.

Another benefit of the LLC structure is the process of transferring property under different Owner ship is not complicated. Using the LLC as a business structure for your rental properties, you can transfer the shares (through inheritance or as a gift) without having to get a new deed. This means less work on our part, minimizing the required paperwork and fees required in a traditional Real Estate transfer.

To set up an LLC includes paying startup costs. When it comes to financing or getting a mortgage, investors have reported having a harder time getting real estate investment loans due to LLC status versus Individual status.

A) Lender Preferences because lender A may be more willing than lender B to provide the mortgage to your newly formed LLC, therefore our Firm recommends shopping around. B) Personal Guarantee for lending should be considered due to lenders requiring a personal guarantee from the individual borrower and LLC founder, although the property is owned by the LLC. C) It is important to be aware of the governmental loans that cannot be approved for a mortgaged property under an LLC. D) Portfolio loans are a great alternative investment tool for an LLC designed as a Holding Company for Real Estate Rentals, though these types of loans bear a higher cost of borrowing.

Real Estate and Starting a business to hold a portfolio of properties has its risk and rewards. Make sure to perform your due diligence as an Investor and a Business Owner.

Why does Bookkeeping Matter? Read and Find Out!

Mon, 16 Sep 2024 14:56:57 GMT

Financial Management & Smarter Decision Making

Bookkeeping is the process of recording and summarizing all financial transactions of a business. It includes recording all income and expenses, as well as assets and liabilities. Bookkeeping is important for businesses of all sizes, as it helps to track financial performance, identify areas of improvement, and comply with tax laws.

There are two main types of bookkeeping systems: single-entry and double-entry. Single-entry bookkeeping is a simpler system that only records the total amount of money coming in and going out of a business. Double-entry bookkeeping is a more complex system that records all financial transactions in two accounts: a debit account and a credit account.

Bookkeepers use a variety of tools to track financial transactions, including ledgers, journals, and invoices. Ledgers are used to track the overall financial performance of a business, while journals are used to record individual transactions. Receipts, Contracts and Invoices are used to track sales and purchases.

Bookkeepers are responsible for a variety of tasks, including:

Recording financial transactions
Preparing financial statements
Reconciling bank accounts
Filing taxes
Providing financial advice to business owners

Bookkeeping is an important part of running a business. By keeping accurate financial records, businesses can make better decisions about their finances and avoid costly mistakes.

If you have any questions, don't hesitate to reach out to us for a free consultation.