Charitable contributions are generally allowed as part of an individual’s itemized deductions on his or her income tax return, while a business expense deduction generally isn’t allowable for a contribution made to a charitable organization.
However, the IRS recently issued proposed regulations saying that if a taxpayer’s trade or business makes a contribution to a charitable organization with a reasonable expectation of financial return commensurate with the payment amount, the contribution could constitute an allowable deduction for trade or business expenses, rather than a charitable contribution deduction.
Example: Joe, who is a sole proprietor and a dealer in musical instruments, contributes $500 to a nearby church with the understanding that, as a result of the contribution, he will have an advertisement in the church’s concert program. The advertisement includes his business URL from which he sells musical instruments. Joe reasonably believes the advertisement will attract customers; therefore, Joe can treat the $500 payment as an ordinary and necessary business expense.
If no business benefit is derived or if the contribution is excessive for the amount of business benefit, then the payment will be treated as a charitable contribution by the business owner and deducted on the owner’s individual 1040 return, provided the owner is itemizing deductions. If the business is a partnership or an S corporation, a partner’s or a shareholder’s prorated share of the contribution will be passed through to the individual partner or shareholder on Schedule K-1, which also reports his or her share of income, deductions, and credits from the business entity.
Making charitable contributions from a business entity has another negative side. Starting in 2018, most business entities (but not C corporations) enjoy a new tax deduction that is generally equal to 20% of the business’s qualified business income (QBI) and is passed through to the business owners for them to deduct on their personal 1040 returns. Basically, QBI is the business’s profit with certain adjustments. One adjustment that reduces the QBI is charitable contributions made at the business level. This is true even when the charitable contributions aren’t deductible and are passed through to the business owners.
It makes far more sense for self-employed individuals to make contributions personally and for partnerships and S corporations to distribute the amount of the intended contribution through to the partners or stockholders, so that they can make the charitable contribution personally, in order to avoid reducing the QBI, which will reduce the 20% deduction.
Long story short, there is no benefit in making charitable contributions from a business; in fact, doing so can have a detrimental tax effect.
If you have questions related to how this might impact you or your business, please give our office a call.
IRS Free File. Use 
Withholding Calculator. Did you get a larger refund or owe more tax than you expected the last time you filed taxes? If so, you may want to change the amount of tax withheld from your paycheck. The 
Qualifying Expenses. You can include most medical and dental costs that you paid for yourself, your spouse and your dependents including:
Travel Costs Count. You may be able to deduct travel costs related to medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical travel. The rate is 19 cents per mile for 2015.
Initially, the first thing you’ll want to do is to consider an organization’s overall corporate goals and objectives. The overall strategic plan should detail an organization’s current and desired profitability, product capabilities, market positioning, sales and distribution channels. Having clarity on your broader plan will help assure that strategic objectives are achieved through mergers or acquisitions. Your overall strategic business plan should be the foundation for all M&A initiatives.
After the first initiatives are completed, you will next want to determine the enterprise value of the organization and identify potential sources for funding a planned transaction, which may include cash, equity, or debt. There are a variety of methodologies for determining valuation and the ultimate cost of a transaction. This is where a professional financial consulting firm can be worth its weight in gold. Understanding if your target business’ value is best based on a multiplier of EBITDA, Discounted Cash Flow, Multiple of Annual Recurring Revenue, etc. is essential to negotiating the best acquisition price or merger valuation.
The finalizing of a deal doesn’t mean the process is over. In fact, it may just be the beginning. The care and planning put into integrating an acquired company into the acquiring or surviving organization is often the key to determining the ultimate success or failure of M&A transactions. The benefits of integration may not be immediately apparent, and could potentially take up to a year or longer to be realized.
President Trump’s tax plan published in November 2016 was vague. This was preceded by a House Republican plan in June 2016. Both the President’s and the GOP plans attempted to reduce individual tax brackets into three main brackets. The top bracket was targeted at 33% for federal purposes. This is 6.9% lower than the current highest federal rate of 39.6%.
Both President Trump and the GOP have discussed a specific tax rate on “pass through” income. Under President Trump’s proposal, there is a proposed 25% tax rate on “pass-through income”. Business income was broadly defined as income earned by small businesses, including sole proprietorships and other pass-through businesses (partnerships, limited liability companies and S corporations). Paul said that “reasonable compensation would probably be at the forefront of discussion as it pertains to this carve out.”
The fact that President Trump, Speaker of the House Paul Ryan and Senate Majority Leader Mitch McConnell have all put tax reform at or near the top of their priority list is very encouraging for our clients. The fact that this is not a split House or Senate suggests it may actually come to fruition. However, new tax reform will not come without its challenges, as evidenced by the recent Democratic Party push back on Cabinet nominees and executive orders.
In early February, after the GOP leaders’ Congressional retreat, they indicated they wanted a repeal of the ACA by March or April 2017. Speaker Ryan said that Republicans would tackle tax reform in the spring of 2017. Paul observed, “It seems that there has been more talk about focusing on repealing the ACA than there has been about tax reform, at least of late.”
Accurate and Easy. 
Faster Refunds. In most cases, e-file prevents mistakes and helps people get their refund faster. The quickest way to get a refund is to combine e-file with direct deposit into a bank account. The IRS issues more than nine out of 10 refunds in less than 21 days – however, some returns need further review and take longer. Candy noted, “E-filing gives you the ability to track the timeliness of filing your tax return and make getting your refunds much quicker.”
Payment Options. If taxpayers owe taxes, they can e-file early and set up an automatic payment on any day until the April 18 deadline. They can pay electronically from their bank account with 
Some types of income are not taxable except under certain conditions, including:
Some people who receive Social Security must pay federal income taxes on their benefits. A portion of Social Security benefits is taxed if income above a “base amount” (based on filing status) is received in addition to Social Security Benefits (IRS Sec. 86). However, no one pays federal income taxes on more than 85% of their Social Security benefits. Social security benefits are not subject to California income tax.
Taxes. Security. Together. The IRS, the states and the tax industry need your help. We can’t fight identity theft alone. 
Don’t Fall for Scams. Criminals often try to impersonate your bank, your credit card company,even the IRS in order to steal your personal data. Learn to recognize and avoid those fake emails and texts. Also, the IRS will not call you threatening a lawsuit, arrest or to demand an immediate tax payment. Normal correspondence is a letter in the mail. Beware of threatening phone calls from someone claiming to be from the IRS. In her years with the IRS, Johnson has seen repeated mail and refund fraud, and “even a client’s movers stealing their filing cabinet with all their personal information.”
Combating ID Theft. In 2015, the IRS stopped 1.4 million confirmed ID theft returns and protected $8.7 billion. In the past couple of years, more than 2,000 people have been convicted of filing fraudulent ID theft returns. Johnson noted that WNDE has protocols in place to secure its clients’ information, whether it be from sending encrypted emails to WNDE’s IT security systems sophistication. She said, “We really view protecting our client’s personal information as priority number one.”