Archive for Kazim Qasim

Commonly Overlooked Tax Deductions

Kazim Qasim - Overlooked Tax Deductions

Taxpayers know that there are tax deductions out there to be utilized to reduce the taxes paid on your income.  Most are aware of the common deductions, but there are many deductions that simply get overlooked by most taxpayers.

Gifts to charity is a good place to start.  Most taxpayers know that when you give a gift of money or items to a qualified charity, you can deduct the value of this gift, with proper documentation.  One common item that gets missed is the miles that you drove or out-of-pocket expenses you paid for the charities benefit.

Most taxpayers also consider mortgage interest.  Though less taxpayers are claiming the interest on their mortgage (due to no longer taking itemized deductions with the increase in the standard deduction), mortgage interest still remains a large deduction.  An additional deduction that is sometimes missed are the points associated with refinancing your mortgage.  Additionally, when you pay-off or refinance a mortgage that has points still remaining, you can deduct those points in full.  Be aware that using the same lender for another mortgage often means that the remaining points simply get rolled into the new mortgage and are therefore not deductible.

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Cash Versus Accrual Under The Tax Cuts And Jobs Act

Cash Versus Accrual Under The Tax Cuts And Jobs Act

The Tax Cuts and Jobs Act of 2017 has led to changes in the way companies choose to be taxed.  Prior to the tax reform, many businesses were required to use the accrual method of accounting.  But with the change in tax law, businesses with $25 million or less in annual revenue over the prior three years can use the cash method.  More businesses are choosing the cash method of accounting instead of the previous accrual method, but what is the difference between cash and accrual methods of accounting?

Every business must make a decision on how and when to record income and expenses.  Making the choice between the cash and accrual methods is about the timing of when revenue and expenses are recognized and reported.  On their most basic levels, cash accounting is a recording of the transaction when the money actually changes hands, while in accrual accounting the transaction is recorded when it is earned or established.  Cash is immediate and accrual is anticipated.

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Raising Money Through Crowdfunding And Taxation

Kazim Qasim - Crowdfunding

In recent years, raising money online through third-party backers, or crowdfunding, has grown in popularity.  Originally utilized mostly by musicians, filmmakers and for other creative endeavors, it has now become a more widespread method of raising money for a trip, medical expense, or startup, and is often a quicker and easier alternative than conventional fundraising.  Often the creator of a campaign puts little thought to the tax ramifications before launching and collecting the funds.  With this increase in utilization, the business of its taxation has become an increasing question.  While Congress and the IRS have not addressed crowdfunding income specifically, applying standard tax principles and common sense may help when talking through the issues surrounding taxable crowdfunding income and deciding how to report and pay taxes on it.

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An Important Transportation Decision: Lease Or Buy A Vehicle

Kazim Qasim- Lease Or Buy Vehicle

Vehicle purchases are one of the largest expenses for most families. With an increase in people choosing to lease instead of buy, what are the differences?  As with most decisions in life, taxes should only be one of the considerations.   A few of the non-tax considerations on buying or leasing a business vehicle: number of miles you drive each year, how long you keep a car, how much do you want to spend on your monthly payments?

You may be able to deduct your lease payment, prorated according to how much you use the car for business. For example, if your lease payment is $300 a month and you drive your car for business 50 percent of the time, you can deduct $150 a month as a business expense.  There’s one catch though.  If the car exceeds a certain value, you must subtract an “income inclusion” amount from your deduction. This is an additional amount of income you may have to report if you lease a vehicle or other property for business purposes.  You must report the inclusion amount if the fair market value of the leased asset exceeds a certain threshold ($50,000 for a vehicle first leased in 2018).  The inclusion amount differs depending on how long you’ve leased your car.  Leasing offers tax advantages for self-employed people who drive for work, especially for more expensive cars.

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Tax Credit And Changes To Family And Medical Leave

Kazim Qasim - Family And Medical

In 1993, then President Bill Clinton sought to find a support system to aid the rapid growth in the workforce, which was increasingly made up of women with families.  The Family and Medical Leave Act (FMLA) was passed “to balance the demands of the workplace with the needs of families.”  This Act allowed both women and men to participate in work, but also protect them if a medical need arose.  Under this Federal Act, employers with fifty of more employees were required to provide up to twelve weeks to attend to serious health conditions of the employee, a parent, spouse or child.  It also provided for pregnancy and care of a newborn, adopted child or foster child.

In order to qualify, the employee needed to have worked in the business for at least twelve month and worked at least 1,250 hours over the past twelve months. (In 2008, different requirements and time periods were given to active duty families.  This leave was unpaid leave, and merely protected the employee’s right to benefits during the leave and return to their job or one of equal level, compensation and benefits.  Note that highly compensated employees have more limited rights when it comes to FMLA. Read more

What Qualifies As A Business Deduction?

Kazim Qasim- What Qualifies As A Business Deduction

You had a great idea and now you’ve put it in motion as a business.  And while income recognition is easy to determine, qualified business deductions can be a bit harder.  So… what are the most common tax deductions for small businesses?

Any materials you utilize for marketing your business and the cost of developing these can be deductible.  This can be advertisements in print or media, brochures, branded promo items, events or trade shows. Non-branded gift cannot be deducted.

Business insurance that is intended to protect your business as well as medical insurance that is paid by the business for its employees.  Auto related insurance falls under a different set of guidelines.  A portion of your vehicle expense can be taken related to the business use of the vehicle, unless standard mileage is taken instead.

Depreciation and Section 179 expenses on capitalized business assets such as computers, office furniture, tools and equipment, and the like.  Leasehold improvements and other real estate related capital expenses cannot be taken under Section 179.  Special depreciation rules have been approved by the IRS in certain years that speed up depreciation life in qualified assets.

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The Tax Reform Impact On Meals, Entertainment, And Automobile Parking

Kazim Qasim - Meals Ands Entertainment Deductions

If you’ve formed certain habits related to how you handle meals, entertainment, transportation, and parking as it relates to your business and taxes, the time to change those habits has come.

As this report notes, tax reform law commonly referred to as H.R. 1 Tax Cuts and Jobs Act of 2017 has changed the deductibility of certain meals, entertainment and transportation expenses. Before 2018, a taxpayer could deduct 50 percent of business meals and entertainment and 100 percent of meals provided through an in-house cafeteria or meals provided for the convenience of the employer (i.e., also known as a de minimis fringe benefit).

Not so anymore.

Under the new law, effective January 1, 2018, entertainment is no longer deductible and meals provided through an in-house cafeteria or for the convenience of the employer are subject to the 50 percent limitation.

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1031 Exchange Overview

Kazim Qasim - 1031 Exchange

It used to be that the term “Section 1031 Exchange” or even “Like-Kind Exchange” was uncommon except in certain circles.  But as the idea of tax strategies have reached more and more taxpayers coupled with the housing market’s fluctuation in recent years, 1031s have become increasingly commonplace.

So, what is a 1031 Exchange?  In its broadest terms, a 1031 Exchange is the trade of one investment property for another.  When most people think of trading one property for another, we think in terms of selling one property, paying any applicable taxes and then buying a new property in a separate transaction.  With the 1031, this is not the case.  If your transaction meets the 1031 requirements, you will have limited to no tax due at the time of the exchange.  In other words, you are changing your investment without cashing out or recognizing capital gains.  This is a good strategy for someone that wants to remain an investor but may no longer have an interest in their current property portfolio.  As there is no limit on the number of times you can perform a 1031 exchange, the investment you originally had will continue to grow tax deferred until such time as you eventually sell.  This can provide time to create a sound plan and tax strategy for paying the long-term capital gain rate at the time of sale.

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Taxation Of E-Commerce And Impact On Small Businesses

Kazim Qasim - ECommerce And Sales & Use Tax

As the holidays near, more and more shoppers are turning to online methods of procuring that special gift.  And it makes complete sense.  The world of e-commerce opens the buyer up to products that may be unavailable in the local area, and it’s often cost-efficient.  With this massive turn in consumer spending, tax systems are struggling to keep up.  By now most taxpayers have heard of the South Dakota v. Wayfair ruling that overturned the 1992 Quillcase and now imposes sales taxes on retailers with no physical presence in the state, as long as they have a clear connection to state consumers and certain threshold of sales.  With this, smaller brick and mortar shops may start to see an increase in their sales again.  It will also help local state and municipalities by bringing in more revenue through the taxation.

It is not great news for businesses that rely on e-commerce sales, however.  Smaller businesses will feel the impact of Wayfair far more than larger companies like Amazon and  These large-scale businesses have been anticipating and preparing for these changes for years.  In fact, many of them have already been collecting and submitting sales tax with the assumption that this is where the nation was headed.  It is the smaller companies that merely dabble in online or across-border sales, that need to bring themselves up to speed on the new regulations and how it will affect them.  Likewise, new start-ups that plan to rely on e-commerce need to understand where they will owe taxes, and how much tax they will pay in each state in each year.  Small retailers should brace themselves for state and local tax collectors, as well as auditors, to start scrutinizing their operations looking for any missed taxation opportunities.

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Tax Issues Facing Small Business In 2018

Kazim Qasim - Small Business Planning 2018

Small business ownership is a good way to take more control of your time and put more money in your pocket.  But what is the true cost of small business ownership?  Surprisingly, many small business owners are faced with many challenges that may leave them with less time and less money than when they were earning a living working for someone else.

One of the most common mistakes that small business owners make is made within the first few weeks of starting up their business.  Choosing the wrong entity and/or business structure can severely hurt a small business trying to get on its feet.  While each state is different, the common types of business structures are:  sole proprietorship, partnership, limited liability company, and corporation (C and S are the most common).  It is important to understand who the structuring of your business will affect your tax situation, how you raise money, the paperwork that is needed to be field, as well as your own personal liability requirements.

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The Alternative Minimum Tax And Alternative Minimum Tax Credit

Kazim Qasim-Alternative Minimum Tax Credit

Most of us have heard of the term Alternative Minimum Tax, Alt Min Tax, or AMT.  But what is it?  Alternative Minimum Tax is a tax system that parallels the standard tax systems and adds an additional level of taxation to baseline income tax for certain individuals, corporations, estates and trust.  Traditional tax is adjusted for certain items and computed differently for AMT.  Some of these items are depreciation, medical expenses, state taxes, certain mortgage interest, real estate and personal property taxes.  AMT was first introduced in 1969 when Congressed determined that a portion of the population with high incomes, roughly one-hundred-fifty-five million taxpayers, were able to utilize tax deductions and other tax breaks to the point where they were paying almost nothing in taxes.  The Reagan Administration created what we currently know as Alternative Minimum Tax that included more widespread exemptions and deductions while eliminating some of the investment deductions that only applied to the very wealthy.

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Purchasing A Home After Tax Reform – Home Buyers May Come Out Ahead

Kazim Qasim - Nov

Before the Tax Cuts and Jobs Act of 2017 bill was passed, buying a home was a big incentive to taxpayers looking to reduce their annual taxes.  While some states do have a benefit calculation on rental costs, and home office users can add rental costs to their expenses, for most taxpayers the tax breaks received on the real estate taxes and mortgage interest you pay through homeownership were far more beneficial than renting.  In addition, building equity in your home for possible use later was a nice added bonus.  With the changes put in place by the TCJA, taxpayers are starting to wonder if homeownership is a valuable as it once was.

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