FAQs

Rather than opening up a foreign bank account, consider a bank account at a USA Bank that has headquarters in the country where they want to open it. That way it would still be considered a USA Bank and not a “foreign bank” and will not need to report it on the FBAR (Report of Foreign Bank and Financial Accounts). If they end up deciding to open a bank account in a foreign bank, they just need to remember to let us know so that we can report it. Not reporting it has serious penalties under the IRS.

As a result of the Tax Cuts and Jobs Act, business meals purchased from restaurants were 100% deductible during tax years 2021-2022.  In tax year 2023, the 100% deduction is no longer applicable.  Business meals will return to 50% deductibility even if purchased from a restaurant.  There are some exceptions to this rule.  For example, if there is a company-wide party or if the business includes the meals in employee compensation, the meals will be 100% deductible to the business.    Although meals with clients are 50% deductible in 2023, it is important to note that entertaining clients with no business purpose will remain non-deductible. 

The main difference at the end of the day is purpose. A business operates with an intent to make a profit; a hobby is undertaken for pleasure or recreation. To treat your endeavor as a business, good record keeping is imperative: maintain a separate bank account, and keep detailed records. Keep in mind if you receive more than $600 for goods and services, you could receive a 1099, which signals a reporting requirement.

If you receive an unexpected check from the IRS, contact your CPA to discuss it right away.  Occasionally, the IRS will issue a refund in error instead of applying an overpayment to the following tax year.  This error can apply to ANY taxes paid: personal, corporate, payroll, etc. Even when the refund is issued in error, the IRS can assess penalties and interest on the money if the check was deposited or cashed. If you receive any unexpected refunds, reach out to your CPA for assistance.

If you are currently investing or considering an investment in Hedge Funds, it is important to distinguish what kind of fund it is for tax purposes. If you invest in a Trader Fund, the expenses incurred to generate trader income and losses are generally unlimited, ordinary, and reduce gross income. Investor Funds typically buy and sell securities that result in capital gains and losses. It is important to know the guidelines that the IRS uses to differentiate between the two. We can offer information regarding factors that the courts consider when determining trader vs. investor status. This status may change year-to-year, so annual consideration is necessary. In addition, investors need to check with fund advisors regarding the kind of fund offered.