SBG CONSULTING, INC. &
BOOKKEEPING MATTERS, LLC
Fall 2017 Table of Contents:
Tax Implications of Crowdfunding…. 2-3
Summer Fun…. 4
Health Savings Account…. 5
Sara’s Corner…. 6
Client Spotlight…. 7
Halloween Happenings…. 8
Calendars…. 8-9
Reporting Reminders…. 10
Sbgcpafirm.com Bookkeepingmatterslv.com
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Crowdfunding websites such as Kickstarter, GoFundMe, Indiegogo, and Lending Club have
become increasingly popular for both individual fundraising and small business owners
looking for start-up capital or funding for creative ventures. The upside is that it’s often
possible to raise the cash you need, but the downside is that the IRS might consider that
money taxable income. Here’s what you need to know.
WHAT IS CROWDFUNDING?
Crowdfunding is the practice of funding a project by gathering contributions online from a
large group of backers. Initially used by musicians, filmmakers, and other creative types to
raise small sums of money for projects that were unlikely to turn a profit, now it is used to fund
a variety of projects, events, and products–and has even become an alternative to venture
capital for some.
ARE FUNDS I RECEIVE TAXABLE?
All income you receive, regardless of the source, is considered taxable income in the eyes of
the IRS–and that includes crowdfunding dollars.
Say you develop a prototype for a product that looks promising. You run a Kickstarter
campaign to raise additional funding, setting a goal of $15,000 and offer a small gift in the
form of a t-shirt, cup with a logo or a bumper sticker to your donors.
Your campaign is more successful than you anticipated it would be and you raise $35,000–
more than twice your goal. Let’s look at how the IRS might view your crowdfunding campaign:
Taxable sale. Because you offered something (a gift or reward) in return for a payment
pledge it is considered a sale. As such, it may be subject to sales and use tax.
Taxable income. Since you raised $35,000, that amount is considered taxable income. But
even if you only raised $15,000 and offered no gift, the $15,000 is still considered taxable
income and should be reported as such on your tax return–even though you did not receive a
Form 1099-K from a third party payment processor (more about this below).
Generally, crowdfunding revenues are included in income as long as they are not:
Income offset by business expenses. You may not owe taxes however, if your
crowdfunding campaign is deemed a trade or active business (not a hobby) in that your
business expenses might offset your tax liability.
Tax Implications of Crowdfunding
• Loans that must be repaid;
• Capital contributed to an entity in exchange for an equity interest in the entity; or
• Gifts made out of detached generosity and without any “quid pro quo.” However, a
voluntary transfer without a “quid pro quo” isn’t necessarily a gift for federal income
tax purposes.
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Camerocpa.com
Crowdfunding Continued
Factors affecting which expenses could be deductible against crowdfunding income include
whether the business is a start-up and which accounting method you use (cash vs. accrual) for
your funds. For example, if your business is a startup you may qualify for additional tax benefits
such as deducting startup costs or applying part or all of the research and development credit
against payroll tax liability instead of income tax liability.
Timing of the crowdfunding campaign, receipt of funds, and when expenses are incurred also
affect whether business expenses will offset taxable income in a given tax year. For instance, if
your crowdfunding campaign ends in October but the project is delayed until January of the
following year it is likely that there will be few business expenses to offset the income received
from the crowdfunding campaign since most expenses are incurred during or after project
completion. As such, you would not be able to offset any income from funds raised during your
crowdfunding campaign in one tax year with business expenses incurred the following tax year.
Non-Taxable Gift. If money is donated or pledged without receiving something in return, it may
be considered a “gift,” and the recipient does not pay any tax. Up to $14,000 per year per
recipient may be given by the “gift giver.”
HOW DO I REPORT FUNDS ON MY TAX RETURN?
Companies that issue third party payment transactions (e.g. Amazon if you use Kickstarter or
PayPal if you use Indiegogo) are required to report payments that exceed a threshold amount of
$20,000 and 200 transactions to the IRS using Form 1099-K, Payment Card and Third Party
Network Transactions.
These minimum reporting thresholds apply only to payments settled through a third-party
network; there is no threshold for payment card transactions.
Form 1099-K includes the gross amount of all reportable payment transactions and is sent to the
taxpayer by January 31 if payments were received during the prior calendar year. Include the
amount found on your Form 1099-K when figuring your income on your tax return, generally,
Schedule C, Profit or Loss from Business for most small business owners.
DON’T GET CAUGHT SHORT.
If you’re thinking of using crowdfunding to raise money for your small business startup or for a
personal cause, consult a tax and accounting professional first.
Don’t make the mistake of using all of your crowdfunding dollars on your project and then
discovering you owe tax and have no money with which to pay it.
SUMMER FUN!
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Amber had an excellent time exploring the Pacific
Northwest with her mom and aunt on their twelve
hundred mile girls only motorcycle ride. A highlight
of the trip was the picturesque town of
Leavenworth, Washington.
Say hello to the newest
member of the Hill
family—Charlotte! She
was a welcome visitor to
our office this summer,
and we all enjoyed her
sweet puppy face.
Chrystee and her
family visited the
Natural Bridge Caverns
near San Antonio,
Texas.
The Hills celebrated
Grammy’s 100th
birthday in Taos,
New Mexico.
Sara and Chrystee took some time to
enjoy their friends. Cheers, ladies!
Jennifer had a great time going to her
old stomping grounds in Southern
California to visit friends. The weather
was wonderful and there was a lot of
traffic. On the last day of her trip she
went to the concert to end all
concerts…U2’s Joshua Tree tour at the
Rose Bowl in Pasadena,
California!! There were over 60,000
fans there at the sold-out concert
which was opened by The Lumineers.
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Health Savings Account (HSA)
The health savings account (HSA) is just one of many possible health plans that you can use. I’m writing about the HSA here to alert you to some of its benefits for you personally, or for you and your employees, if you implement an HSA plan in your business.
Here’s a very tight summary of how the HSA works:
1. Deduct the health insurance cost. To enable the HSA, your health insurance must be a high-deductible health insurance policy. Sole proprietors, partners, and S corporation owners can qualify to deduct this high-deductible insurance on page 1 of Form 1040. (The page 1 Form 1040 deduction does not suffer the 10 percent haircut that applies to itemized medical deductions.) Also, you generally can deduct the cost of this insurance without having to cover the employees, too. 2. Deduct the HSA contribution. For 2017, you can make a deductible HSA contribution of up to $3,400 if you have qualifying self-only coverage or up to $6,750 if you have qualifying family coverage (anything other than self-only coverage). The deduction for the contribution is above the line, so it does not suffer from phaseouts and it’s deductible whether you itemize or not. And, as with the insurance, you likely could set this up for yourself without having to cover your employees. 3. Tax-deferred earnings. The monies accumulated in your HSA grow and compound tax deferred (even tax-free if you withdraw correctly). 4. Tax-free withdrawals. Withdrawals from your HSA are tax-free when you use the monies to pay for qualified medical expenses. You can’t pay your high-deductible premiums with HSA funds. But once you reach Medicare age, you can use the withdrawals for Medicare premiums in addition to other qualified medical expenses. If the HSA still has a balance when you die, your surviving spouse can take over the account tax-free and treat it as his or her own, as long as you have named your spouse as the beneficiary of the account. 5. Retirement withdrawals. You can make your HSA work like a traditional IRA after reaching Medicare age. To make this happen, you just withdraw funds from the HSA and don’t use them for medical expenses. This triggers the federal income tax but no penalties. (However, the use of the accumulated funds for Medicare premiums and other medical expenses means tax-free use—we like this a lot better than taxable use.)
One final point: you don’t lose the HSA contribution privilege just because you happen to be a high earner. We would be happy to discuss the HSA and other health plans with you at any time.
Copyright 2017, Bradford Tax Institute.
This summer was a roller coaster—emotional and stressful and filled with more reminders of how life is short and time flies. Right before the April 15th tax deadline I learned my younger brother had stage 4 kidney cancer, pneumonia, and COPD. He passed away the following month. His last call to me in a voice I didn’t even recognize was, “Sara would you please take my dog?” I wasn’t sure how I was going to manage 3 dogs, but life handed me the answer shortly after that call when my Duchess passed away from cancer too. I found a service that would drive my brother’s dog from Austin, TX to Las Vegas. Meet Atom. He’s a very sweet dog and minds well, but what a spit fire! LOL
If that wasn’t enough, I got an offer from a drummer to buy my house of 23 years. (He wanted the land to build a music studio.) Of course it was smack in the middle of the September 15th deadline. Would you expect anything less from me? Ha ha. Let me just say, if there is ever a next move…I am going on vacation (someone else can move me)! ☺
I am so looking forward to a beautiful fall, the final tax deadline (October 15th),
and booking a vacation soon. Speaking of the final tax deadline, if we do not have all your documents to complete your return, please bring them in sooner rather than later. I have unpacking to do on the weekends and at night! LOL
I hope your summer was filled with vacations, great memories, and much laughter.
Cheers to a beautiful fall,
Sara
Sara’s Corner
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Here is your chance to experience authentic Puerto Rican Food in Las Vegas!
Angel Goitia has been a chef for over 20 years. He specializes in Puerto Rican food
and operated three restaurants in Florida before opening Puerto Rico Express at
1516 S. Las Vegas Blvd in April of 2017. Puerto Rico Express offers tripleta, Cuban,
and steak sandwiches. Specials include steak with onions, shrimp scampi, chicken
fricassee, and roasted pork. For side dishes, you can enjoy Mofongo, tostones,
maduros or empanandillas. Drinks include malta india and jupiña. And don’t
forget dessert—passion fruit pie and a variety of flans. Come enjoy these
delicious offerings and so much more. Angel and Melyssa hope to see you soon!
You can contact Puerto Rico Express at 702-471-1000.
Welcome New Clients!
Robert K. referred by Brian M.
Gianluca P. referred by Jason P.
The biggest compliment we receive is a referral to your family and friends. Thank you for the trust!
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October 2017
Sun Mon Tue Wed Thu Fri Sat
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8 9 10 11 12 13 14
15 16 17 18 19 20 21
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29 30 31
NEVADA DAY OBSERVED
Provide final payroll
adjustments
World Teacher Day
Columbus Day
Quarter 3 payroll tax
returns due
Extended personal
tax returns due
Halloween happenings
October 16-31: Trick or treat stations
STOP by to check out our decorations, say hi, and
grab a treat. FEEL FREE TO BRING YOUR FAMILY!
October 23-27: kids pumpkin carving contest
STOP BY WITH your child & HIS OR HER pumpkin for a
chance to win a 1st, 2nd, or 3rd place prize
October 30: pumpkin carving contest winners
announced
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November 2017
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December 2017
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Closed Closed
Take a picture of your
odometer & email it to us.
Happy
Birthday,
Liz!
Happy
Birthday,
Linda!
World Kindness
Day
Red Planet Day
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SBG CONSULTING, INC. &
BOOKKEEPING MATTERS, LLC
7930 W Sahara Ave.
Las Vegas, NV 89117
702-320-9200
DECEMBER REPORTING REMINDERS!
1. S Corporation shareholders: provide your payroll service with the amount the company paid
for health insurance on your and your family’s behalf. This should be included in Boxes 1
and 14 of the shareholder’s W-2.
2. Have your S Corporation or Partnership reimburse you before December 31st, for the office
in the home and business expenses paid personally.
3. Prepare your vehicle mileage logs so that you can provide us with your total miles, business
miles, commuting miles, and personal miles for 2017.