Choosing between an LLC and an S-Corporation is one of the most important early decisions a small business owner will make. The structure you pick affects your taxes, payroll requirements, ability to deduct expenses, and even whether the IRS views your activity as a business or a hobby.

Since 2009, we’ve helped thousands of Georgia entrepreneurs choose the right entity — and the truth is simpler than most people think:

If your business earns at least $25,000 in annual profit, it’s usually time to consider switching from a standard LLC to an S-Corp.

This article breaks down the basics in plain English, including a full tax comparison using a $100,000 example.

1. LLC Taxation Basics (Default Schedule C)

When you form an LLC, the IRS treats you as a sole proprietor unless you elect otherwise. That means:

• You report income on Schedule C
• You pay income tax on your profit
• You pay self-employment tax on the entire profit

Self-employment tax (SE tax) covers Social Security and Medicare:

• 12.4% Social Security (up to the annual limit)
• 2.9% Medicare
• + 0.9% Additional Medicare Tax for high earners

Total base SE tax rate: 15.3%

2. S-Corp Taxation Basics

An S-Corporation allows you to split your income into two parts:

• W-2 salary – subject to payroll taxes
• Owner distributions (K-1) – not subject to self-employment tax

This structure exists for one reason: to prevent business owners from paying Social Security and Medicare taxes on more income than necessary — as long as the salary is “reasonable.”

3. The Recommended Profit Threshold: $25,000

We tell Georgia small business owners this:

If your business earns at least $25,000 in annual profit, it’s time to consider an S-Corp.

Below that amount, the administrative cost and payroll requirements usually aren’t worth it.
Above that amount, tax savings typically outweigh the costs.

4. $100,000 Example: LLC vs S-Corp (Advanced, Accurate Breakdown)

Let’s compare a business owner earning $100,000 in profit under two scenarios:

Scenario 1: LLC (Schedule C Sole Proprietor)

• Business profit: $100,000
• Self-employment tax (15.3%): $15,300
• Additional Medicare Tax (if applicable): small increase above thresholds

Total SE tax: $15,300+

And remember — this is in addition to income tax.

Scenario 2: S-Corp (with a $25,000 Salary and $75,000 Distribution)

Let’s assume the owner pays:

• $25,000 W-2 payroll (reasonable for many small service businesses)
• $75,000 distribution

Payroll taxes apply only to the salary portion.

Payroll Tax Breakdown:

• Employee Social Security (6.2% of $25k): $1,550
• Employer Social Security (6.2% of $25k): $1,550
• Employee Medicare (1.45% of $25k): $362.50
• Employer Medicare (1.45% of $25k): $362.50

Total payroll taxes: $3,825

Compared to $15,300+ as an LLC, that’s a tax savings of:

≈ $11,475 per year in SE tax savings

Income tax is generally the same in both structures, but the savings on payroll taxes is where the S-Corp advantage shows up.

This is why the $25,000 profit threshold matters — the savings usually outweigh the administrative cost.

5. What an S-Corp Requires (Most People Overlook This)

Electing S-Corp status does come with extra compliance requirements.
You must complete:

Quarterly Payroll Filings

• 941 quarterly payroll tax returns
• State withholding filings (Georgia DOL + DOR)
• Employer unemployment filings

Annual Filings

• W-2 + W-3 for the owner
• 1099-NECs if required
• 940 annual unemployment return
• 1120-S business tax return
• Schedule K-1 for the owner

These are not optional.
The IRS takes S-Corp compliance seriously.

6. A Note About the “Hobby Loss Rule” (Schedule C Risk)

LLCs taxed as sole proprietorships face the Hobby Loss Rule if they show losses too often.

The IRS expects a legitimate business to show a profit in at least:

3 out of 5 years

S-Corps can still be scrutinized, but the IRS tends to treat them as more formal operations — especially when payroll is properly handled.

7. Summary: When to Choose LLC vs S-Corp

If your profit is above $25,000, S-Corp status almost always deserves a closer look.

Thinking About Electing S-Corp Status?

If you want to see exactly how much you’d save by switching to an S-Corp, we can run the numbers and handle the entire setup for you.
Get a personalized entity recommendation for your business →
Contact Shurek Accounting & Tax

Disclaimer: This article provides general educational content about taxes and accounting. It is not tax, legal, or financial advice. Every situation is unique.
Need help choosing the right structure? →
Contact Shurek Accounting & Tax

Depreciation is one of the most powerful tax tools available to real estate investors. It reduces taxable income, improves cash flow, and opens the door to advanced tax strategies. But after advising investors since 2009 — from single-property landlords to multi-entity portfolio owners — we see one pattern repeatedly:

Most rental property owners are not using depreciation to its fullest potential, and many are missing out on five and six-figure deductions.

This guide breaks depreciation down in plain English and explains how bonus depreciation, the 2025 legislative changes, and cost segregation create major opportunities for Georgia and nationwide rental investors.

1. What Depreciation Really Means for Rental Properties

The IRS allows you to deduct the cost of a rental property over time based on its “useful life.” For residential real estate, that’s:

• 27.5 years (MACRS straight-line depreciation)

Only the building depreciates — land does not. That means you must allocate your purchase price correctly between land and improvements.

Example:

• Purchase price: $400,000
• Land value (25%): $100,000
• Depreciable basis: $300,000

This basis produces about $10,909 per year in straight-line depreciation.

But that’s only step one. The real power begins when you accelerate depreciation.

2. The MACRS Depreciation System (The Foundation)

Residential rentals follow the MACRS system, which uses:

• 27.5-year useful life
• Mid-month convention
• Straight-line deduction each year

If all you ever use is straight-line depreciation, you’re leaving money on the table — especially in years when you need deductions the most.

3. Bonus Depreciation: The Game-Changer

Bonus depreciation allows you to immediately deduct a large percentage of certain property components in the first year. But here’s the key:

You cannot apply bonus depreciation to the building itself — only to components identified through cost segregation.

Bonus depreciation applies to:

• 5-year property (carpets, appliances, fixtures)
• 7-year property (cabinets, certain interior elements)
• 15-year property (driveways, fencing, landscaping)
• Qualified Improvement Property (QIP)

These assets typically represent 20–35% of a property’s value — but you only unlock them with a cost segregation study.

4. Bonus Depreciation Percentages (2018–2029)

The bonus depreciation rates have changed significantly. Here are the correct percentages investors need to know:

This means 2025 is a rare “split” year — with a huge opportunity window beginning January 20th when full bonus depreciation returns for qualifying property.

5. Cost Segregation: The Key That Unlocks 100% Bonus Depreciation

A cost segregation study breaks down a rental property into separate components with shorter useful lives (5, 7, or 15 years). These assets qualify for bonus depreciation — allowing for massive first-year deductions.

In our practice, cost seg is especially effective for:

• Short-term rentals (STRs)
• High-income W-2 earners with STR material participation
• REPS (Real Estate Professional Status) investors
• Investors acquiring multiple properties in one year

Example from a real Georgia investor:

Purchase price: $475,000
First-year deduction after cost seg + bonus depreciation: $128,000+

This kind of acceleration is transformative — especially when used strategically.

6. Georgia’s Treatment of Depreciation

Georgia generally conforms to federal depreciation rules, meaning:

• Straight-line MACRS depreciation applies
• Cost segregation is allowed
• Bonus depreciation is allowed

However, Georgia may differ during:

• Income allocation for multi-state investors
• Depreciation recapture when selling

Many out-of-state investors with Georgia rentals overlook this and underpay state taxes unintentionally.

7. Depreciation Recapture (The Part Investors Hate)

When you sell a rental property, the IRS requires you to “recapture” depreciation at up to 25%. Many investors fear using bonus depreciation because of this rule — but when used strategically, recapture can be minimized or fully deferred.

Strategies that reduce or eliminate recapture include:

• 1031 exchanges
• Timing sales in low-income years
• Offsetting recapture with new bonus depreciation
• REPS qualification

The key is planning early — not waiting until the year of sale.

8. When Bonus Depreciation Makes the Biggest Impact

Based on real data from our rental clients, bonus depreciation provides the strongest ROI when:

• You operate short-term rentals and materially participate
• You qualify for REPS or are planning to qualify
• You earn $200K–$500K+ in W-2 income and want to offset STR income
• You’re scaling your rental portfolio
• You are refinancing or repositioning a property
• You are making major renovations (QIP qualifies!)

9. When You Should Avoid or Limit Bonus Depreciation

Bonus depreciation is powerful, but not ideal in every situation. Consider caution if:

• You plan to sell the property within 2–3 years
• You already have large suspended passive losses
• You expect dramatically higher income in future years
• You want smoother deductions over time rather than a large spike

A strategic CPA will model your next 3–5 years before choosing the optimal approach.

10. When to Contact a CPA for Depreciation Strategy

You should talk to a CPA immediately if:

• You purchased a new rental property this year
• You are considering a cost segregation study
• You want to take advantage of 2025’s restored 100% bonus depreciation
• You’re planning to sell a rental soon
• You operate STRs and want to offset W-2 income legally
• You aren’t sure if your depreciation schedule was set up correctly

Depreciation is one area where a small mistake can cost you tens of thousands of dollars — or more.

Want to Maximize Depreciation on Your Rental Properties?

If you’re looking to unlock bigger deductions through cost segregation, bonus depreciation, or strategic planning, we can help you do it the right way.
Get a personalized depreciation plan for your rentals →
Contact Shurek Accounting & Tax

Disclaimer: This article provides general educational content about taxes and accounting. It is not tax, legal, or financial advice. Every situation is unique.
Need expert guidance based on your portfolio? →
Contact Shurek Accounting & Tax

High-income W-2 employees—especially those earning $150K, $250K, or even $500K+—often feel like they have the fewest tax planning options. Unlike business owners, you can’t take business deductions, write off equipment, or shift income across entities.

But after working with thousands of Georgia professionals since 2009—from Emory physicians and Delta executives to Atlanta tech leaders—we can tell you this:

High-income W-2 earners absolutely have tax strategies available. Most people just aren’t using them.

If you earn a strong W-2 income, here are the most effective ways to reduce taxes without playing games with the IRS.

1. Maximize Employer Retirement Plans (The Foundation)

This is the simplest and most overlooked strategy—especially among high earners who assume it “won’t move the needle.” It absolutely does.

For 2025, you can contribute:

• $23,000 to a 401(k)
• + $7,500 catch-up if age 50+

Many Georgia employers also offer a Roth 401(k) or after-tax 401(k) option that sets the stage for advanced strategies.

2. Use the Mega Backdoor Roth (If Your Employer Allows It)

If your employer allows after-tax contributions and in-plan Roth conversions, you may be able to contribute up to:

$69,000 per year (or $76,500 if age 50+)

This is one of the most powerful wealth-building strategies available to high-income employees—yet only a small percentage take advantage of it.

We see this often with Atlanta tech companies, hospitals, universities, and corporate employers with strong benefits packages.

3. Leverage Health Savings Accounts (HSA)

If you’re on a high-deductible health plan, HSAs are a triple-tax-advantaged powerhouse:

• Contributions reduce taxable income
• Growth is tax-free
• Withdrawals for medical expenses are tax-free

High-income families often use HSAs as a secondary retirement account because unused funds roll over indefinitely.

4. Take Advantage of Dependent Care FSA (If You Have Children)

A Dependent Care FSA allows you to pay childcare expenses with pre-tax dollars. This is especially valuable for:

• High-income dual-earning couples
• Families with daycare, after-school care, or nanny expenses

If you’re not using every available employer benefit, you’re likely leaving money on the table.

5. Max Out Backdoor Roth Contributions

Direct Roth IRA contributions phase out for high-income taxpayers.
But you can still get money into a Roth via the backdoor Roth strategy:

1. Contribute to a nondeductible traditional IRA
2. Convert it to a Roth IRA

This is legal, IRS-approved, and extremely effective for high earners.

Important: If you have existing traditional IRA balances, you must consider the pro-rata rule. This is where a CPA helps avoid tax traps.

6. Tax-Loss Harvesting for Executives & Investors

If you invest heavily in taxable brokerage accounts, tax-loss harvesting can offset:

• Capital gains
• Up to $3,000 of ordinary income annually

For high-income earners with vested RSUs, bonuses, or big market years, harvesting losses is highly effective.

7. Use Charitable Giving to Reduce Taxable Income

If you itemize, charitable planning offers significant benefits:

• Donate appreciated stock (avoid capital gains tax)
• Use donor-advised funds (DAF)
• Bunch deductions into alternating years

This strategy is especially popular with executives who receive large year-end bonuses or RSU vesting cycles.

8. Reduce Georgia Tax by Taking Advantage of GA-Specific Opportunities

Depending on income and situation, Georgia offers several options:

• 529 plan contributions (state tax deduction)
• Qualified education spending benefits
• Georgia Film Tax Credit investments (for high-income investors)

These add meaningful state tax savings on top of federal strategies.

9. Review Your Withholding Annually

High-income earners often owe underpayment penalties because bonuses, commissions, and RSU vestings aren’t withheld at the ideal rate.

A withholding review takes 15 minutes and usually prevents:

• CP2000 notices
• Underpayment penalties
• Nasty April surprises

10. Consider Strategic Entity Planning (Rare but Allowed)

Even though you’re a W-2 employee, certain high earners can legally shift income by:

• Launching a side consulting business
• Managing investments or rentals under an LLC
• Capturing legitimate business deductions

We evaluate these on a case-by-case basis—done wrong it’s risky; done right it can be extremely effective.

When High-Income W-2 Earners Should Contact a CPA

We strongly recommend tax planning if any of the following apply:

• You earn over $150K as a single filer or $250K jointly
• Your equity compensation is growing
• Your bonuses are unpredictable
• You invest heavily in taxable accounts
• You expect major life changes (marriage, home purchase, kids)
• Your tax bill keeps increasing even though your salary hasn’t

Want Smarter Tax Planning for Your W-2 Income?

If you’re earning a high income, your tax plan should match your financial level—not the generic advice most W-2 employees receive.
Get personalized, year-round tax planning from a Georgia CPA who works with executives, professionals, and multi-six-figure earners →
Contact Shurek Accounting & Tax

Disclaimer: This article provides general educational content about taxes and accounting. It is not tax, legal, or financial advice. Every situation is unique.
Need personalized help building a tax strategy? →
Contact Shurek Accounting & Tax

Whether you hit a jackpot at Harrah’s Cherokee, won a fantasy sports payout, or picked up a lucky Georgia scratch-off, gambling income is fully taxable — and must be reported correctly on your federal and Georgia tax return.

A common issue we see with Georgia filers is misunderstanding how gambling winnings and losses work. The rules are strict, documentation is essential, and the IRS receives more data than most taxpayers realize.

This guide explains exactly how to report gambling wins and losses the right way — without triggering an IRS or Georgia notice.

What Counts as Gambling Income?

Gambling income includes more than just casino payouts. The IRS defines it broadly, including:

• Casino wins (slots, table games, poker)
• Georgia Lottery prizes
• Sports betting (online or in-person)
• Fantasy sports payouts
• Bingo, keno, raffles, and office pools
• Sweepstakes, giveaways, and online gaming platforms

If you won it — it’s taxable.

You may receive a Form W-2G for larger wins, but even without one, you must report all winnings.

How Gambling Winnings Are Taxed

Federal Tax Rules

All gambling winnings are reported as income on your federal tax return under “Other Income.” Some wins trigger automatic withholding:

• Slot or bingo wins over $1,200
• Keno wins over $1,500
• Any gambling win over $5,000 → 24% withholding

Georgia Tax Rules

Georgia follows federal law. Winnings are included in your Georgia taxable income — regardless of where the gambling occurred.

That means:

• If you win in North Carolina → Georgia still taxes it
• If another state withheld tax → you may get a credit
• If no W-2G was issued → you still must report it

How Gambling Losses Work

This is the area where taxpayers make the most mistakes.

You may deduct losses — but only if:

• You itemize your deductions (Schedule A)
• You have documentation
• Your losses do NOT exceed your winnings

Example:

• $7,000 in winnings
• $5,000 in losses

You report:

• $7,000 as income
• $5,000 as an itemized deduction

You cannot use gambling losses to create more deductions than your gambling income.

Documentation Required for Losses

The IRS requires proof. In many audits we’ve handled, the biggest problem is lack of documentation.

A proper gambling log should include:

• Date and location
• Type of gambling
• Amounts won and lost
• Supporting documents such as receipts or statements

Acceptable evidence includes:

• Casino win/loss statements
• Sportsbook account statements
• W-2G forms
• Lottery ticket stubs
• Bank statements showing buy-ins and payouts

Without documentation, losses are often denied.

Common Mistakes We See

• Not reporting winnings because no W-2G was issued
• Trying to deduct losses while using the standard deduction
• Reporting net winnings instead of gross winnings
• Overlooking betting platform year-end summaries
• Mismatched state reporting for multistate gamblers

These errors commonly lead to IRS CP2000 notices.

When To Call a Tax Professional

You should reach out if:

• You received a W-2G or 1099 and aren’t sure how to report it
• You want to deduct losses but don’t itemize
• You received a CP2000 notice
• You gambled in multiple states
• You use several online sportsbooks or fantasy platforms

High-income filers in Georgia — especially in metro Atlanta — often face mismatches because their platforms issue corrections after the IRS has already received preliminary figures.

Need Help Reporting Gambling Income Correctly?

Whether you had a big win or just want to avoid IRS issues, proper reporting matters.
Work with a Georgia CPA who understands federal rules, state rules, and multi-platform reporting →
Contact Shurek Accounting & Tax

Disclaimer: This article provides general educational content about taxes and accounting. It is not tax, legal, or financial advice. Every situation is unique.
Need personalized assistance? →
Contact Shurek Accounting & Tax

If you’ve received a Georgia Department of Revenue (DOR) notice, you’re not alone. In our firm, one of the most common emails we get year-round is:

“I just got a letter from the Georgia DOR—am I in trouble?”

A common issue we see with Georgia LLC owners and everyday W-2 earners is assuming every DOR notice equals an audit. In reality, most letters are simple corrections, income mismatches, or requests for verification.

Let’s walk through what these notices actually mean, why you may have received one, and—most importantly—how to resolve them correctly and on time.

Why Georgia DOR Sends Notices

The Georgia DOR sends notices for dozens of reasons, but nearly all fall into these categories:

1. Georgia Adjusted Your Tax Return

This is the most common type of notice. It usually happens because:

• A W-2 or 1099 was missing
• A brokerage issued corrected income
• Georgia disallowed itemized deductions
• An IRS change required a state recalculation

2. Your Refund Is Under Review or On Hold

Georgia aggressively screens refunds for fraud. Identity verification letters are extremely common and usually not a sign of wrongdoing.

3. Georgia Shows No Record of Your Filed Return

This can happen if a return was rejected electronically or if paper filings were delayed or lost in processing.

4. Sales Tax, Payroll, or Withholding Issues

Georgia is strict about business compliance. Common triggers include:

• Missing sales tax filings
• Missing “zero returns”
• Withholding mismatch with employer filings
• Incorrect filing frequency

5. Audit Selection

Georgia audits tend to focus on:

• Sales tax
• Withholding
• Multi-state income allocation
• S-Corp owner compensation

What To Do When You Receive a Georgia DOR Notice

Step 1 — Identify the Notice Type

Look for codes such as ADJ, ASMT, VE, AUD, or DLQ. These tell you the category and urgency.

Step 2 — Compare the Notice to Your Filed Return

Cross-check income, withholding, itemized deductions, filing status, and any Georgia adjustments. Many errors come from simple mismatches.

Step 3 — Verify Your Income Documents

Late or corrected 1099s/W-2s are the number one cause of Georgia mismatch letters.

Step 4 — Respond Before the Deadline

Georgia typically gives you 30 days. Missing that deadline can trigger penalties or enforced assessments.

Step 5 — Request Penalty Relief If Needed

Georgia offers reasonable cause relief and occasional first-time penalty abatement.

Step 6 — File an Appeal If You Disagree

Georgia allows administrative reviews, informal conferences, and formal appeals. Professional help is recommended here.

Common Georgia DOR Scenarios

Missing Sales Tax Zero Return

Georgia penalizes missing returns even when no sales occurred.

Refund Frozen for Identity Verification

These are extremely common and typically resolved quickly once verified.

Withholding Mismatch

Employer filings often mismatch payroll reports, causing unexpected notices.

Multi-State Workers or Movers

Georgia frequently flags residents who moved during the year or worked remotely for out-of-state employers.

When To Contact a Professional

You should reach out immediately if you receive:

• A Notice of Proposed Assessment
• An audit or field audit letter
• A refund hold lasting more than 45 days
• A lien or levy warning
• A collections notice

Frequently Asked Questions

Does a Georgia DOR notice mean I’m being audited?

No. Most notices are informational or corrective—not audits.

How long do I have to respond?

Usually 30 days. The deadline is printed on your notice.

Can Georgia take my refund?

Yes—Georgia can offset your refund for past-due taxes or debts.

What if I disagree with the notice?

You can file a protest or request administrative review.

Why did I get a sales tax notice with no sales?

Georgia requires zero returns for sales tax accounts.

Key Takeaways

• DOR notices don’t always mean trouble—but they should never be ignored.
• Most issues come from mismatches or missing filings.
• Georgia is strict on sales tax and withholding compliance.
• Penalty relief is often possible if addressed quickly.

Need Help Responding to a Georgia DOR Letter?

If you’ve received a Georgia DOR notice and you’re unsure how to respond, we can help.
Get clear, timely guidance from a Georgia-based CPA →
Contact Shurek Accounting & Tax

Disclaimer: This article provides general educational content about taxes and accounting. It is not tax, legal, or financial advice. Every situation is unique.
Need personalized help? →
Contact Shurek Accounting & Tax

Current Mileage Rates for 2024:

For the 2024 tax year, you can claim the following per-mile deductions:

• Business travel: 67 cents per mile (increased from 65.5 cents in 2023)
• Medical appointments or moving (active military only): 21 cents per mile
• Charitable activities: 14 cents per mile

These rates apply whether you drive a gas-powered vehicle, diesel, hybrid, or fully electric car.

Business Mileage Examples:

Georgia business owners can deduct miles driven for:

• Client meetings and site visits
• Travel between multiple work locations
• Trips to pick up supplies or make deliveries
• Attending professional conferences or training
• Bank runs and business errands

Charitable and Medical Miles:

The charitable rate applies when you volunteer and drive your personal vehicle for qualified nonprofit organizations. Medical miles cover trips to doctors, hospitals, pharmacies, or medical treatments.

Important Considerations:

You have two options for claiming vehicle expenses: the standard mileage rate or actual expense method. Most taxpayers choose the standard rate for its simplicity. However, you must elect the standard mileage method in the first year you use the vehicle for business to maintain flexibility in future years.

Note that W-2 employees generally cannot deduct unreimbursed mileage under current tax law, and moving expense deductions are limited to active-duty military personnel with permanent change of station orders.

There are many perks to being self-employed, and retirement plan options are one of them. While you won’t benefit from an employer’s matching contributions, you can save much more for retirement as a self-employed individual than with a traditional employer plan. The right retirement plan can allow those who are self-employed to build a significant retirement nest egg.

Two of the most beneficial retirement plans if you are self-employed are the SEP IRA and Solo 401(k). Here is a little about how each plan works, some benefits, and how much you can expect to put away for your retirement.

SEP IRA

Self-employed people can make tax-deductible contributions to a Simplified Employee Pension Individual Retirement Account (SEP IRA) for themselves and their employees. These plans provide you with both personal and business tax benefits.

Since a SEP IRA is a tax-deferred investment vehicle, you don’t pay taxes on your money until you make a withdrawal, usually in retirement. As a business owner, you can deduct a percentage of your contributions to employee plans, but you can also deduct a percentage of your contributions to your own plan.

The IRS has a special computation to determine the maximum deduction you can take on your business taxes for contributions to your own SEP IRA. It can help to have an accountant who can walk you through the IRS contributions guidelines so you don’t exceed IRS contribution limits.

As for SEP IRA contribution limits, you can contribute the lesser of the following for 20221:

• $61,000

• Up to 25% of your earnings

Catch-up contributions for those 50+ years of age are not permitted with a SEP IRA as with other retirement plans.

Something to note if you have employees, you are required to contribute the same percentage to eligible employees’ SEP IRAs as you are your own. So if you are contributing 10% of your own annual compensation, you must also contribute 10% to each employee based on their compensation.

Traditional vs. Self-Directed SEP IRA

With a traditional SEP IRA, you can invest in stocks, bonds, and mutual funds. If you also want to invest in alternative assets, such as real estate, collectibles, and cryptocurrency, you typically will need a Self-Directed SEP IRA. The investment diversity available in a Self-Directed SEP IRA can help better protect your retirement assets. Additionally, if you want control over selecting and managing your IRA investments, you’ll want a Self-Directed SEP IRA.

Solo 401(k)

A Solo 401(k), also referred to as a One-Participant 401(k), has the same requirements and rules as any other 401(k) plan. But for the self-employed, you can put more away into a Solo 401(k) than you can with a company-sponsored plan. As a self-employed business owner, you can contribute to yourself both as an employer and an employee. However, determining how much you’re allowed to contribute gets a bit tricky.

Like any 401(k), a Solo 401(k) has contribution limits. For 2022, the maximum you can contribute to yourself as an employee and employer is as follows2:

• Employee contribution: Up to $20,500 in 2022

• Employer contribution: Up to 25% of your company’s profits

The most anyone can contribute is a combined total of $61,000. Those aged 50 and older can make catch-up contributions up to an additional $6,500, so $66,500 total. However, not everyone qualifies to contribute the maximum. An IRS calculation based on your earned income determines your individual contribution limit. An accountant can help calculate your contribution limits based on IRS guidelines or determine the steps to take if contribution limits are exceeded.

With a Solo 401(k), you can invest in almost any asset class, and you can opt for a traditional or Roth Solo 401(k) depending on whether you want to contribute before or after-tax dollars. However, as an employer, you cannot deduct 401(k) contributions on your business taxes as you can with a SEP IRA.

Retirement Plans for the Self-Employed and Taxes

Whether you choose a SEP IRA or a Solo 401(k) to save for your retirement, you must ensure you follow IRS contribution and tax rules. Shurek Accounting & Tax. can help calculate your contribution limits to either type of account based on IRS guidelines and assist you if contribution limits have been exceeded. They can also ensure you get your full deduction on your business taxes if you contribute to a SEP IRA.

As a final note, even if you contribute to a retirement plan as a self-employed person, you can still contribute to a personal Roth or traditional IRA. Having a personal IRA is just one more way to reduce taxes now or later, depending on your IRA type.

1 SEP Contribution Limits, (including grandfathered SARSEPs)
2 One-Participant 401(k) Plans

Other sources:
SEP IRA vs Self Directed IRA: Which is better?
Best retirement plans for the self-employed

Do you owe a debt to the Internal Revenue Service (IRS)? You’re not alone. The most recent statistics suggest that well over 11 million Americans are in the same boat you are.

Nonetheless, owing money to the IRS can be intimidating. After all, most lenders have strict limitations on how they can collect their money and what they can do if collections become difficult, but the IRS isn’t like most lenders.

The IRS can garnish your wages without filing a judgment against you. It can also charge you with tax evasion — a felony that carries a penalty of up to five years in prison and $100,000 in fines. But even the government has its limitations, including the IRS 10-year statute of limitations.

The IRS Can Collect Debt for Only 10 Years

The IRS statute of limitation on collections means that the most powerful collections agency in the world can collect debts from you only for a period of 10 years. After the 10-year window closes, collection efforts must cease, and the agency must write the debt off, which means you’re free and clear.

That is, if you want to take the risk of waiting 10 years to handle your debt. The fact is that you have other options. Two of the most common options for dealing with tax debt include:

• Installment agreements: You can contact the IRS to come up with an installment agreement. The agreement allows you to make affordable monthly payments to chip away at your debt.

• Offers in compromise: If there’s no way you’ll be able to pay your IRS debt in full, or if doing so would result in financial hardship, you may qualify for an offer in compromise. Under the offer-in-compromise program, the IRS may agree to waive a percentage of the amount you owe. You can pay the remaining amount in monthly installments or as a lump sum. The key is making an offer that’s in line with the highest amount of money the IRS would be able to collect in a reasonable amount of time.

When Does the 10-Year Clock Start?

When you hear about the IRS 10-year statute of limitations, it’s easy to fall for the misconception that the clock starts as soon as you earn the money or report your income to the agency.

However, the 10-year clock doesn’t start until the summary record of assessment.

When you file your annual tax return and owe money to the IRS, you’ll eventually receive a bill in response. The IRS lists the record date of assessment on the bill.

So if you have tax debt related to money you earned in 2013, you may not be out of the woods yet. If you want to know exactly when your 10-year clock started but don’t have a bill from the IRS handy, you’ll need to contact the agency and ask for the date of the summary record of assessment on your debt. Collections can take place for up to 10 years from that date.

What Extends the IRS Statute of Limitations?

Taxes can be a complex topic, and what seems straightforward isn’t always as simple as you think. For example, although there is a 10-year statute of limitations on IRS collections, there are a few things that can stop the clock, giving the agency more time to collect a tax debt.

The most common clock-stoppers include:

• Bankruptcy: You can include your tax debt in a bankruptcy filing, but the bankruptcy could result in the IRS being able to extend its statute of limitations in terms of collecting your debt. For example, if you have only two years left on the clock and a bankruptcy court orders you to make small payments over the course of five years, the results of the bankruptcy extend the statute of limitations by three years, giving the IRS more time to collect.

• Offers in compromise: The offer-in-compromise program also hits the brakes on the IRS statute of limitations. Ultimately, if you make an offer, you have to stick to it. For example, if you have two years left on your clock and offer to make small monthly payments for three years, the offer extends the amount of time for which the IRS can collect your debt by one year.

• Appeals: You have the right to appeal decisions the IRS makes, but when you do, the 10-year clock stops during the appellate process and resumes thereafter.

• Extended international stays: When you leave the country for more than six months, the IRS 10-year statute of limitations will pause. The click resumes when you come back to the U.S.

How to Get Your Tax Debt Written Off After 10 Years

The IRS may quit collecting after 10 years, but it’s not the agency’s responsibility to tell you when it stops or provide any associated documentation. However, the IRS must release any liens after 10 years.

One of the best ways to get your hands on a lien release from the IRS is to work with tax professionals who know how to navigate the complexities of the tax code, like the team at Shurek Accounting & Tax.

IRS Debt FAQs

Albert Einstein was a strong proponent of questions and told the people around him to never stop questioning things. He also found it interesting that most people found asking questions to be uncomfortable — especially because he knew that human beings are inquisitive creatures and questions are just part of our nature.

With that said, you should never shy away from asking questions. That’s even more true when it comes to questions about topics like tax debt, which can affect both your financial stability and your freedom. So don’t be shy if you have any questions about taxes. We’ll answer some of the most commonly asked questions about the IRS 10-year statute of limitations, and tax debt in general, below.

Can I Go to Jail If I Don’t Pay My Taxes?

Yes, but it’s highly unlikely. There are more than 11 million people in the U.S. who owe back taxes to the IRS, and while courts convict several hundred people for tax evasion each year, that amounts to less than 1% debtors who go to jail for not paying their taxes, and for good reason.

The IRS ultimately wants to collect the money you owe. The agency knows that if you’re in jail, you can’t work, which means it won’t be able to collect. So the agency does everything in its power to collect its money without jeopardizing your freedom.

Can the IRS Come After Me After 10 Years?

Not in most cases. The 10-year statute of limitations means the IRS cannot collect debts for a period of more than 10 years after the record date of assessment.

However, there’s a caveat to that. There are several qualifying events, such as bankruptcies, offers in compromise, and appeals, that stop the 10-year clock. If one of these events takes place, the IRS will have more than 10 years from the record date of assessment to collect past-due taxes.

Can the IRS Audit Me After 10 Years?

It’s not likely. Most IRS audits look at the last three years of your tax history. If those years are up to par or show only minor, reasonable errors, you’re in the clear; the IRS won’t usually look any further back.

On the other hand, if there are any substantial errors in your last three years of returns, the IRS may decide to look further into your tax history to make sure additional issues didn’t occur, but it still usually won’t go back more than six years.

What Should I Do If I Haven’t Filed Taxes for 10 Years?

If you haven’t filed taxes for 10 years, your best course of action is to contact a tax professional like Shurek Accounting & Tax, explain your situation, and work to clear up the mistake. It may be scary, and you may not know how much money you owe. But your tax pro and the IRS will work with you to come up with a reasonable plan for paying off your past-due taxes and help you avoid more penalties and a potential prison sentence.

Final Thoughts

The IRS is, indeed, the strongest collections agency in the world, and if you live and work in the U.S., the agency collects its cut of your paycheck regularly. However, even the most powerful collections agency in the world has to follow the rules.

If you’ve owed taxes for more than 10 years, one of those rules may be to release the lien and forgive the debt, but passively waiting to reach the 10-year finish line could be a big mistake if you’re not quite there yet.

The COVID-19 pandemic created many challenges for businesses of all sizes. When operations had to be suspended or limited, hundreds of thousands of businesses had to close for good or at least temporarily. The government thus introduced a few tax benefits to help businesses retain employees and stay afloat.

The employee retention credit (ERC) was included in one piece of relief legislation in March of 2020 — the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It was created so employers would be incentivized to keep their workers on the payroll during the most tumultuous months of the pandemic.

While the ERC program is now technically closed, having ended for most businesses on September 30, 2021, eligible employers may still be able to claim the credit retroactively.

So what is the ERC and who is eligible to take it? This post will walk through all the basics you need to know.

What Is the ERC?

The ERC, first introduced in 2020, is a fully refundable credit that businesses can claim on wages paid to their employees, as long as those wages qualify. Under the CARES Act, employers can claim the credit for 50% of wages paid out between March 13, 2020, and the end of 2020, up to $10,000 for the year per employee.

The Consolidated Appropriations Act altered and extended the program in 2021. Qualifying employers could then claim a credit against 70% of qualified wages, and the limit went up to $10,000 per employee for each quarter, instead of per year, for the first two quarters of 2021.

Then, the American Rescue Plan Act of 2021 further extended the ERC. The credit stayed at 70%, up to $10,000 for each employee per quarter, so an employer could claim a total of $7,000 for each employee in each quarter. This comes to a total credit of up to $21,000 per employee for the year 2021.

The majority of businesses have to adhere to the program end date of September 30, 2021, but the legislation made room for a group of Recovery Startup Businesses, which can claim the ERC through December 31, 2021. These businesses had to have started operating after February 15, 2020, and have average gross receipts of less than a million dollars.

Who Can Claim the ERC?

The ERC is available to most types of employers. While businesses who received a loan from the Payment Protection Program (PPP) weren’t eligible initially, the Consolidated Appropriations Act expanded the program to include those employers.

Organizations have to meet one of these two terms to claim the ERC:

• The business or trade had to fully or partially suspend operations or reduce hours because of a pandemic government order.

• The employer saw a steep decline in gross receipts. To qualify in 2020, gross receipts in a quarter had to be below 50% of gross receipts when compared to the same quarter in 2019. To qualify in 2021, businesses had to see greater than a 20% decline in gross receipts in a quarter, compared to the same quarter in 2019.

In addition, if you weren’t yet in business in 2019, the IRS allows you to use your 2020 gross receipts for the same quarter in your comparisons.

Following the end of the ERC program — which is September 30, 2021, for most businesses — employers get three years to look back and see if any wages since March 12, 2020, are eligible.

An Example of ERC in Action

So what could the ERC actually look like for your business? Let’s walk through an example as a guide: Say your business had to suspend operations for quarter one of 2021. You have five employees, each of which you paid $10,000 in qualified wages during that first quarter. Because the maximum is $10,000 in qualified wages, and you can claim 70% of that, you would be able to get a credit of $35,000. You simply multiply five employees by $7,000.

As you can see, the employee retention credit is a pretty significant tax break, which is especially crucial for employers who dealt with challenges during the pandemic.

Getting Accounting Help for Your Firm

Even if you missed claiming the ERC over the last couple of years, you still may be able to retroactively claim it, back to the beginning of the ERC program. If you’re unsure if you qualify or don’t know how to proceed, talk to a professional about your options.

The team at Shurek Accounting & Tax is here to help. We can help with payroll, bookkeeping, and accounting solutions to help you create a more efficient business overall.

Reach out to our team today to learn more about our services.

CITATIONS:

IRS. “COVID-19-Related Employee Retention Credits: Determining When an Employer is Considered to have a Significant Decline in Gross Receipts and Maximum Amount of an Eligible Employer’s Employee Retention Credit FAQs.” December 27, 2021. https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-determining-when-an-employer-is-considered-to-have-a-significant-decline-in-gross-receipts-and-maximum-amount-of-an-eligible-employers-employee-retention

IRS. “Employee Retention Credit – 2020 vs 2021 Comparison Chart.” May 5, 2022. https://www.irs.gov/newsroom/employee-retention-credit-2020-vs-2021-comparison-chart

Paychex. “The Employee Retention Tax Credit Program Has Closed But Businesses Can Retroactively Claim Credit.” January 19, 2022. https://www.paychex.com/articles/compliance/employee-retention-credit

QuickBooks. “How to calculate the Employee Retention Credit.” April 2, 2021. https://quickbooks.intuit.com/r/taxes/employee-retention-credit-calculator/

Thomson Reuters. “Employee Retention Credit.” January 10, 2022. https://tax.thomsonreuters.com/en/glossary/employee-retention-credit

56 cents per mile driven for business use, down 1.5 cents from the rate for 2020,
16 cents per mile driven for medical, or moving purposes for qualified active duty members of the Armed Forces, down 1 cent from the rate for 2020, and
14 cents per mile driven in service of charitable organizations, the rate is set by statute and remains unchanged from 2020.
The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Notice 2021-02 PDF, contains the optional 2021 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2021 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.