RogerRossmeisl

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FAQs About the Excess Earnings Method in Business Valuation

RogerRossmeisl

Valuation professionals use various methods to determine the fair market value of a private business or business interest. One of the more debated techniques is the excess earnings method. Here are answers to some common questions about this controversial method. Whats the excess earnings method? The U.S. Department of the Treasury originally developed the excess earnings method in 1920 to estimate value lost by businesses during Prohibition.

CPA 130
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Small Business Alert: Watch Out for the 100% Penalty

RogerRossmeisl

Some tax sins are much worse than others. An example is failing to pay over federal income and employment taxes that have been withheld from employees paychecks. In this situation, the IRS can assess the trust fund recovery penalty, also called the 100% penalty, against any responsible person. Its called the 100% penalty because the entire unpaid federal income and payroll tax amounts can be assessed personally as a penalty against a responsible person, or several responsible persons.

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Deduct a Loss from Making a Personal Loan to a Relative or Friend

RogerRossmeisl

Suppose your adult child or friend needs to borrow money. Maybe its to buy a first home or address a cash flow problem. You may want to help by making a personal loan. Thats a nice thought, but there are tax implications that you should understand and take into account. Get it in writing You want to be able to prove that you intended for the transaction to be a loan rather than an outright gift.

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Are You a Tax-Favored Real Estate Professional?

RogerRossmeisl

For federal income tax purposes, the general rule is that rental real estate losses are passive activity losses (PALs). An individual taxpayer can generally deduct PALs only to the extent of passive income from other sources, if any. For example, if you have positive taxable income from other rental properties, that generally counts as passive income.

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Exploring Business Entities: Is an S Corporation the Right Choice?

RogerRossmeisl

Are you starting a business with partners and deciding on the right entity? An Scorporation might be the best choice for your new venture. One benefit of an Scorporation One major advantage of an Scorporation over a partnership is that shareholders arent personally liable for corporate debts. To ensure this protection, its crucial to: Adequately finance the corporation, Maintain the corporation as a separate entity, and Follow state-required formalities (for example, by filing articles of incorp

CPA 213
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Help Prevent Fraud in Your Family Business

RogerRossmeisl

Statistics on fraud rates in family-run businesses are scant. This is probably because most family enterprises keep incidents of financial malfeasance under wraps and dont involve law enforcement or the courts. Because punishing offenders is critical to preventing future fraud, such secrecy can encourage schemes and raise the risk of large financial losses.

CPA 147
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Maximizing Employee Transportation Fringe Benefits

RogerRossmeisl

There are some nice tax breaks for transportation-related employee fringe benefits. If your employer offers these tax-favored fringes, you should probably take advantage of them by signing up. Heres a quick summary of the current federal tax treatment of transportation-related benefits. Mass transit passes For 2025, employer-provided mass transit passes for train, subway and bus systems are tax-free to a recipient employee up to a monthly limit of $325.