Tax-Saving Tips

April 2024

Transform Your Vacation into Tax-Deductible Business Travel with Polaris Tax & Accounting

Discover the secret to turning your next vacation into a savvy tax-saving opportunity with Polaris Tax & Accounting.

With strategic planning, your journey to any destination can become a fully deductible business expense. From airfare, including first-class options, to luxury hotel stays and cruise adventures, leveraging your travel for business purposes could unlock substantial tax savings tailored to your tax bracket.

Unlocking Deductible Expenses: A Two-Pronged Approach

At Polaris Tax & Accounting, we specialize in maximizing deductions for two main types of travel expenses:

  1. Transportation: When your U.S. trip primarily serves business purposes, you can deduct 100% of your transportation costs. However, personal trips don’t qualify for transportation deductions.
  2. Living Expenses: During your business trip, you can deduct lodging and meal costs on business days but not on personal days.

Mastering Deductibility: Five Essential Guidelines

To ensure your travel expenses qualify for valuable business deductions, follow these five essential guidelines:

  • Profit Motive: Your trip should contribute to your business’s profitability.
  • Overnight Stay: Only trips requiring an overnight stay qualify.
  • “For Only” Test: Evaluate if a rational businessperson would undertake the trip solely for business reasons.
  • Primary Purpose Test: The primary reason for your travel must be business-related, with the majority of your days dedicated to business activities.
  • Record-keeping: Detailed documentation of your trip’s business purpose, expenses, and activities is crucial.

Real-Life Success Stories: Your Blueprint to Deductibility

Join the ranks of countless taxpayers who have successfully deducted their travel expenses by adhering to these principles. Corporate meetings in attractive locations with substantial business discussions and activities have been fully deductible, along with travel aimed at expanding business operations or attending industry-relevant conventions.

Avoiding Common Pitfalls: Your Roadmap to Success

Steer clear of denied deductions by avoiding trips primarily for entertainment or lacking a clear business purpose. Establishing and documenting a legitimate business rationale for your travel is key to unlocking valuable tax benefits.

Take Action with Polaris Tax & Accounting

Before embarking on your next trip, explore how integrating business purposes could unlock significant tax deductions. Whether you’re attending industry seminars or meeting potential clients, these activities could pave the way for substantial travel cost savings through smart tax planning.


Unconstitutional Ruling on BOI Reporting: What Businesses Need to Know

On January 1, 2024, the Corporate Transparency Act (CTA) came into effect, mandating that most smaller corporations, limited liability companies (LLCs), and certain other business entities submit a beneficial ownership information (BOI) report to the U.S. Department of the Treasury Financial Crimes Enforcement Network (FinCEN).

The BOI report serves to identify and provide contact details for individuals who own or control the entity, aiding law enforcement in combating money laundering and illegal activities. Approximately 32 million existing and new businesses fall under this filing requirement, with around 500,000 BOI reports submitted online at the FinCEN website since the start of the year.

However, a significant development occurred on March 1, 2024, when a federal district court in Alabama ruled the Corporate Transparency Act unconstitutional in the case of National Small Business United v. Yellen. This decision, which granted an injunction against enforcing the CTA, directly impacted two plaintiffs: an individual business owner and the National Small Business Association—a 65,000-member nonprofit organization of small business owners.

The ruling has introduced uncertainty among businesses subject to the CTA, known as “reporting companies.” Key points to consider include:

  • If you were not affiliated with the National Small Business Association as of March 1, 2024, this ruling does not immediately affect you. FinCEN still expects all reporting companies to adhere to compliance.
  • The Justice Department, representing the Department of the Treasury, lodged an appeal on March 11, 2024, indicating that the trial court decision is subject to further legal scrutiny.
  • While the ultimate outcome remains uncertain, many legal experts anticipate a reversal of the trial court’s decision based on strong legal grounds.
  • Existing reporting companies established before 2024 have until January 1, 2025, to fulfill their BOI filing requirement, providing an opportunity to await developments in the pending litigation.
  • However, reporting companies formed in 2024 must submit their BOI report within 90 days of filing articles of incorporation, articles of organization, or similar documents with the secretary of state, highlighting the urgency to comply without delay.

Additionally, New York has implemented its own BOI reporting law, specifically targeting LLCs formed in New York or elsewhere but registered to conduct business in New York. Existing LLCs must submit reports to the New York Department of State by January 1, 2025, with newly formed LLCs filing reports alongside their articles or registrations. Similar legislative actions are under consideration in states like California. Stay informed with Polaris Tax & Accounting for updates on these evolving regulations.


Maximize Tax Savings with S Corporation Reasonable Compensation Strategies from Polaris Tax & Accounting

Discover how tax reform is reshaping S corporation compensation practices and impacting your bottom line with Polaris Tax & Accounting.

Tax Reform Insights: Unlocking the 20% Pass-Through Business Income Deduction

From 2018 to 2025, the Tax Cuts and Jobs Act introduces a lucrative 20% deduction on pass-through business income, subject to specific eligibility criteria. This deduction significantly influences entity selection, prompting a crucial decision: should you opt for a sole proprietorship or embrace the advantages of an S corporation?

The Critical Role of Reasonable Compensation

Operating as an S corporation necessitates paying yourself “reasonable compensation.” Failure to comply can lead to severe consequences, including penalties, heightened taxes, and missed deductions.

Navigating the Balancing Act for S Corporation Owners

  • Lowering Salary: While reducing your salary may seem appealing to boost pass-through income and maximize the Section 199A deduction, beware of potential IRS penalties and diminished benefits.
  • Increasing Salary: Conversely, a higher salary escalates payroll taxes and may diminish your Section 199A deduction.

Exploring Unique Scenarios: Zero Salary Strategies

In exceptional cases, opting for a zero salary from your S corporation—where you’re not actively providing services—can optimize pass-through income and amplify the Section 199A deduction. However, meticulous planning is imperative to ensure legal compliance.

Deciphering S Corporation versus Sole Proprietorship Dynamics

Choosing between an S corporation and a sole proprietorship demands a nuanced understanding of various factors, including the Section 199A deduction, payroll taxes, and reasonable compensation requirements. While S corporations offer potential Social Security and Medicare tax savings, sole proprietorships benefit from a simpler tax structure and potentially higher Section 199A deductions under specific circumstances.

Stay Ahead with Polaris Tax & Accounting

At Polaris Tax & Accounting, we empower you with actionable insights to navigate complex tax landscapes and optimize your financial outcomes. Contact us today to embark on a journey towards enhanced tax efficiency and sustainable growth.