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A property rendition form is a document that allows property owners to report the value of their property to the appraisal district. It is important to fill out this form accurately and timely because it can affect the amount of property taxes you pay.

In this blog post, we will try to explain what a property rendition form is, why you need to file it, what property you need to report and what happens if you don’t.

What Is A Property Rendition Form?

A property rendition form is a form that you submit to the appraisal district to declare the value of your business personal property as of January 1st of each year. The appraisal district is the local government agency that determines the value of all properties in your county for tax purposes.

The property rendition form allows you to provide information about your property. The appraisal district uses this information to estimate the market value of your property, which is the amount that a willing buyer would pay for it in an open market.

What Property You Need To Report

The property you need to report is tangible business personal property:

• tangible means it has a physical form; you are not required to report items that do not have a physical form such as goodwill, accounts receivable, custom computer software, cash, etc.,
• business means that you use the items for production of income or for business purposes,
• personal property refers to any other property that is not real property (real property means buildings, lands, any other items attached to land); property that is movable without damage to itself or the associated real property; examples: equipment, furniture, vehicles, inventory, etc.

Why Do You Need To File A Property Rendition Form?

. If your business personal property has $2,500 or more in value, it is important to file the property rendition for several reasons:

• it can help you lower your property taxes; you can file a property rendition form to present your own evidence of its value instead of having the appraisal district set the fair market value of your property; this can help you reduce your taxable value and lower your tax bill,
• it can help you avoid penalties and interest; if you fail to file a property rendition form on time you may be subject to a penalty of 10% of the total taxes imposed; there is an additional penalty of 50% of the taxes imposed if the court determines that someone filed a false statement or altered records.

If you are a religious or a charitable organization the state does not require you to render exempt property.

What Information You Need To Report

The appraisal district usually mails you the property rendition form in January or February each year. You can also download it from their website or request it by phone or email. The form asks for general information about the business and business owner(s) and then specific information about the property such as property description by type, property address, quantity, historical cost when new and year of acquisition or market value and owner name.

What Happens If You Don’t File A Property Rendition Form?

You need to file the form with the appraisal district usually by April 15th of each year, but check with your district for the specific due date for that district. You can file the form by: mail, deliver in person, fax, email or submit it online on the county’s website. We recommend you keep a copy of the form for your records.

If you don’t file a property rendition form by the due date, the appraisal district will assign a value to your property based on their own data and methods. This value may be higher or lower than what you think your property is worth. Plus, you may be subject to penalties.

In conclusion, filing a property rendition form is an important step to ensure that you pay your fair share of property taxes.

In addition, if you need help with your business tax and accounting, we are here to help. We serve small businesses and real estate investors. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

When you start a business, you need to choose a business structure. This choice determines the income tax return form you will file. Common business structures include sole proprietorship, partnership, corporation (C or S) and limited liability company (LLC). Each state may have different rules for ownership, liability, taxes, and filing requirements for each structure.

Your business structure affects your daily operations, taxes, and personal asset risk. You should choose a structure that offers the best balance of legal protections and benefits for you. We recommend you advise with both an attorney and a CPA before registering your company with the state.

Some Common Business Structures

Partnership

Two or more people can easily own a business together in partnerships. Partnerships suit businesses with multiple owners, professional groups like attorneys, or groups testing a business idea before forming a more formal business. With a partnership, the profits and the losses flow to the personal tax returns of the partners. The partners receive from the partnership a K-1 form every year with all the information they need to report their share of the partnership’s activity. Depending on the type of partnership, some partners may be subject to self-employment tax, that’s why it is important to advice with your accountant and determine if this is a suitable option for you.

Sole proprietorship

A sole proprietorship is very simple to set up because basically you do business under your own name. In order to protect your Social Security number, we advise you apply for an EIN to use for your sole proprietorship. In addition, you can also obtain a “doing business as” name. The disadvantage is that you do not have liability protection because you’re personally responsible for the business’s debts and obligations. Another disadvantage is that you are subject to self-employment tax on all your profits. That is why we recommend once your business becomes profitable on a consistent basis to advise with a CPA to see what other options are available to you to save on taxes.

S Corporations

An S corporation requires electing this status by filing IRS Form 2553. It is a pass-through entity that reports its profits on the owners’ personal tax returns. It can only have up to 100 shareholders, and these shareholders must be U.S. citizens or residents. In addition, this tax classification avoids the double taxation of regular C Corporations and can provide savings on the self-employment tax in some situations.

C Corporations

A C Corporation is a separate legal entity from its owners. It can earn profits, pay taxes and be legally liable. Unlike the flow through business structures mentioned above, C Corporations pay tax on their profits. C corporations have the disadvantage that they encounter double taxation:

• once, when the company makes a profit, the C corporation has to pay income tax,
• then, when dividends are paid to the shareholders, the shareholders pay dividend tax on their personal tax returns.

Other disadvantages are that they cost more to form and require more recordkeeping, operational processes, and reporting.

Limited Liability Company

An LLC is like a chameleon. It provides protection from personal liability in most cases and it is very versatile because an LLC can be treated for tax purposes as: a disregarded entity, a partnership, an S corporation or a C corporation.

We advise you to choose wisely. You can change your business structure later, but there might be restrictions and there might be unintended tax consequences associated with the change.

If you are interested in starting a new business, we recommend you to choose our “New Business Formation Consulting” service. We can help you determine what is the best tax classification for your new business and advise you on what is the most tax efficient way to setup your new business entity for federal tax purposes. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

 

If you are an employer who operates a large food or beverage establishment, you may need to file Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips. This form is used to report the total amount of tips received by your employees, the amount of tips you paid to them, and the amount of tips you allocated to them if they did not report enough.

Do You Have To File Form 8027?

You must file Form 8027 if  you operate a large food or beverage establishment. A large food or beverage establishment means that:

• you normally employ more than 10 employees on a typical business day during the preceding calendar year,
• tipping is customary in your business,
• your business is located in the 50 states or in the District of Columbia.

You may have more than one food or beverage establishment that meets these criteria. In that case, you must file a separate Form 8027 for each establishment.

To find out if you meet the 10 employees test mentioned above, you can use this worksheet. You determine whether you have more than 10 employees based on the average number of hours your employees work on a typical business day. When filling out the worksheet, you need to keep in mind the following points:

• count employees from all your food or beverage operations, even if a single establishment has fewer than 10 employees,
• include all workers at your food or beverage operations, not just those who serve food or drinks,
• do not count employees working at fast food establishments,
• do not apply the 10-employee rule separately to each food or beverage establishment,
• anyone who owns 50% or more of a corporation’s stock is not considered an employee for the 10-employee test; if you need additional information click here.

How To File Form 8027?

You can file Form 8027 electronically or on paper. You must file Form 8027 by February 28 of the year after the calendar year for which you’re filing the return. However, if you’re filing electronically, the deadline extends to March 31. For example, if you are filing Form 8027 for the tax year 2023, the due date is February 29, 2024 (or March 31, 2024 if you file electronically). You can request an extension of time by filling Form 8809. You should file an extension as soon as you realize you’ll need one, but not sooner than January 1, 2024, and no later than February 29, 2024.

Gross Receipts

You must report your establishment’s total income from food and drinks, also known as gross receipts, on Form 8027. These gross receipts help calculate other amounts that you need to report. They include all income from the provision of food or drinks, encompassing cash sales, credit card receipts, charges to a hotel room (without the tips charged to the hotel room), and the retail value of complimentary food or drinks served to customers.

Usually, tips are not included in gross receipts. But, if you have deducted any cash paid to tipped employees from your cash sales, then you need to include those charged tips in your gross receipts.

You can find out all the rules regarding tip income reporting on Form 8027 by going to the IRS website.

Form 8027 is used by the IRS to verify that your employees are reporting their tip income accurately. It is important to file it correctly, completely and on time so that you do not encounter penalties and other IRS complications. Especially that the tip income is subject to federal income tax, social security tax, and Medicare tax. In addition, if your employees do not report all of their tips to you or to the IRS, they too will face penalties and interest.

As an employer you are entitled to tips credit. See our blog about this subject.

Check out our YouTube channel for more interesting subjects.

In the meantime, if you encounter any issues or have any questions, we are here to help you with your accounting, QuickBooks, and tax needs. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

If you use your vehicle for business purposes, you may be eligible to claim a deduction for the expenses related to your business use. However, to do so, you need to keep a contemporaneous auto mileage log book when you claim a business deduction for the business use of your vehicle.

In this blog post, we will explain you the importance of maintaining a contemporaneous mileage log book and how it can help you avoid tax problems.

Mileage Log Book

A mileage log book is essential for substantiating your claim for the business use of your vehicle, as it provides evidence of the amount and nature of your driving.

Under the substantiation requirements, no deduction is allowed unless you, as a taxpayer, substantiate:

• the amount of each expense,
• the mileage for each business use of your vehicle and the total mileage for all use of the vehicle during the tax year,
• the date of each business use of the vehicle, and
• the purpose of each business use.

The IRS requires that you keep a mileage log book if you want to deduct your vehicle expenses using the standard mileage rate or the actual expenses method. The standard mileage rate is a fixed amount per mile that covers the costs of operating your vehicle, such as gas, maintenance, depreciation, and insurance. The actual expenses method allows you to deduct the actual costs of using your vehicle for business, such as gas, repairs, tires, registration fees, and depreciation. However, regardless of which method you choose, you still need to keep a mileage log book to prove your business use.

Fail on Keeping Records

If you fail to keep a mileage log book or if your log book is incomplete or inaccurate, you may face serious consequences from the IRS. The IRS may disallow your deduction for the business use of your vehicle or it may limit it to a lower percentage, which could result in a higher tax bill, penalties and interest. The IRS may also audit your tax return and ask for additional documentation to support your claim.

Therefore, it is important that you maintain a contemporaneous mileage log book that reflects your actual driving habits and business activities. A contemporaneous mileage log book is one that is created at or near the time of each trip, rather than at a later date based on memory or estimates. A contemporaneous mileage log book is more reliable and credible than a reconstructed one, as it reduces the risk of errors and omissions.

Court Case

An example that illustrates the importance of keeping an auto mileage log is the court case Wolpert, T.C. Memo. 2022-070. In this case, the taxpayer traveled for his consulting business and deducted car and truck expenses on his Schedule C, Profit or Loss from Business. The IRS disallowed the $7,528 in car and truck expenses for taxable year 2016 because the taxpayer failed to substantiate the mileage under the substantiation rules mentioned above.

Conclusion

By maintaining a contemporaneous mileage log book, you can ensure that you claim the correct amount of deduction for the business use of your vehicle and avoid any potential problems with the IRS. A mileage log book is not only a tax requirement but also a good business practice that can help you track your expenses and optimize your profitability.

Check here our video about this case. We also have other videos on our YouTube channel that you might find useful.

In the meantime, if you encounter any issues with your taxes or have any questions, we are here to help you with your accounting, QuickBooks, and tax needs. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.