Tax Tip: Foreign Bank Accounts
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.
Tax Tip: Deductible Meals
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 In tax year 2023, the 100% deduction is no longer applicable.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.
Tax Tip: Do you know the difference between having a business or a hobby?
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.
Tax Tip: What should you do if you receive an unexpected check from the IRS?
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.