What method should you choose?

Attracting and keeping good employees is a goal in any business. One way to make life easier for your employees is to have an easy to use reimbursement plan. Travel, transportation, moving, and educational expenses are common reimbursable expenses. As the employer, you have the option to set up an accountable or nonaccountable reimbursement plan. Under either plan, you can deduct many of the business expenses paid to or for employees. However, the plan you choose can make a big difference to your employees.

Qualified items that are reported under an accountable plan are not included in the employee's wages. Under this plan, you issue a check to the employee, who accounts to you for the expenses and returns the excess advance, if any. You take the deduction for the business expense, but the expense never shows up on the employee's W-2. For a meal expense, the employee must provide you with the time, place, and business purpose. You are allowed to give and deduct the meal per diem amount given to the employee. If the meal per diem is within the federal guidelines, no income is reported on the employee's W-2, even is he or she doesn't spend the entire amount. Keep in mind that you and your relatives are not allowed to use the per diem method.

Under a nonaccountable plan, you grant a certain amount of money to the employee to cover business expenses. The employee's W-2 income includes the expense money. You deduct the expense money as wages paid to the employee. The employee can deduct the allowable business expenses on his or her personal return, subject to a limit. Tax wise, the accountable plan is generally easier and more advantageous for the employee.

Tax Tips Small Business

  • Do You Know How Much Your Business Is Worth?

    Tips for placing a value on your business

    There are several reasons why you should know the value of your business. if you are planning to sell your business, the general rule is that you should sell it for fair market value. In many instances the term "fair market value" is somewhat ambiguous. In the simplest sense, fair market value is what a willing buyer would pay a willing seller, with each party knowing all the pertinent facts.

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Small Business Quick Tip

  • Business Credit Card

    Use your credit card to buy equipment and supplies that you will need in the upcoming year. Charges on your credit card for deductible business expenses are allowed in the year you make the purchase, not in the year the charge is paid. Pay off your credit card after the beginning of the year and avoid finance charges.
Saturday, 25th May 2019
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Tax Tips Personal

  • Charitable Remainder Trusts

    Reduce your estate by gifting property

    There are many ways to contribute to a charitable organization. You can write a check, donate property, or give of your time. If you're planning for retirement, you might want to consider making a gift of a future interest in your property by establishing a charitable remainder unitrust or annuity trust. These trusts allow you to contribute the property and retain an income stream.

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Personal Quick Tip

  • Making Gifts

    Are you planning on making any substantial gifts? Talk to your tax preparer first. Gifts with values exceeding $14,000 must be reported to the IRS.