business

Simplified Small Business Accounting Policy

Cindy Yu, Managing Partner of CPG, CINDIE Professional Group , , , ,

© 2025 Prepared by Xinyi Cindy Yu, CPA CFP MBA as a draft and starter for clients.

Simplified Small Business Accounting Policy

Effective Date: __________________[Insert Date]
Applies to: _____________________[Your Company Name]

1.  Purpose

This policy defines the accounting treatment for fixed assets, low-cost purchases, and employee fringe benefits, ensuring IRS compliance and maximizing available tax deductions and incentives.

** This policy needs to be updated each year with latest tax law requirements.

2.  Capitalization & Expense Policy

2.1 Capitalization Threshold

Assets costing $2,500 or more per unit will be capitalized and depreciated under IRS MACRS guidelines.

2.2 De Minimis Safe Harbor

Under Reg. §1.263(a)-1(f), items costing $2,500 or less per item/invoice will be expensed.
Applicable items: laptops, mobile devices, tools, furniture, software, etc.

2.3 Section 179 Expensing (2025)

  • Deduction limit: $1,220,000
  • Applies to tangible property used >50% for business
  • Limited by taxable income and phase-out thresholds

2.4 Bonus Depreciation (2025)

  • 60% immediate deduction for qualified assets
  • Remaining basis depreciated via MACRS
  • Automatically applied unless opted out

3.  Repairs & Maintenance

Routine maintenance costs that do not improve or extend asset life will be fully deductible as incurred.

4.  401(k) Safe Harbor & Profit Sharing Plan

The company may sponsor a qualified 401(k) plan with optional Safe Harbor and profit-sharing provisions.

4.1 Safe Harbor Contributions

  • Option 1: 3% non-elective to all eligible employees
  • Option 2: Match 100% of first 3% + 50% of next 2% deferred
  • Contributions are 100% vested immediately

4.2 Employee Deferral Limits (2025)

  • Up to $23,000 (under age 50)
  • Plus $7,500 catch-up for age 50+

4.3 Profit Sharing

  • Up to 25% of compensation (limit: $345,000)
  • Combined total (employee + employer) capped at:
    • $69,000 (or $76,500 with catch-up)

4.4 Vesting & Administration

  • Safe Harbor: fully vested
  • Profit sharing: may follow a graded schedule
  • Administered per IRS and ERISA rules with annual compliance testing

5. Employee Fringe Benefits

The company may offer tax-qualified fringe benefits, deductible by the company and often tax-free to employees.

5.1 Educational Assistance (IRC §127)

  • Up to $5,250/year per employee
  • Covers tuition, books, fees (not meals or lodging)
  • Requires a written plan

5.2 Job-Related Training

  • Fully deductible if it maintains/improves job skills
  • Examples: seminars, CPA/CPE, software courses
  • Must not qualify employee for a new trade or profession

5.3 Health & Fitness (IRC §132, §106)

  • Onsite gym: deductible and tax-free
  • Offsite memberships: generally not deductible unless included in a medical or taxable fringe program

5.4 Meals & Entertainment (IRC §274)

  • Meals for employer convenience:
    • 50% deductible (100% if de minimis or for company events)
  • Entertainment: not deductible

5.5 Commuter Benefits (IRC §132(f))

  • Monthly exclusion (2025):
    • $315 for parking
    • $315 for transit
  • Must be part of a qualified transportation plan

5.6.  Summary of Fringe Benefit Limits (2025)

Benefit TypeAnnual LimitDeductible?Tax-Free to Employee?
Educational Assistance$5,250✅ Yes✅ Yes
Job-Related TrainingNo limit✅ Yes✅ Yes
Onsite GymN/A (facility cost)✅ Yes✅ Yes
Offsite GymN/A⚠️ No*⚠️ No (unless taxable)
Transit / Parking$315/month ($3,780/year)✅ Yes✅ Yes
Meals (on premises)N/A✅ 50–100%✅ Sometimes

5.7. Documentation Requirements

To support deductions and IRS compliance, the company will maintain:

  • Receipts and vendor invoices
  • Proof of employee participation in eligible programs
  • Written plan documents (education, commuter benefits, etc.)
  • Payroll records for fringe benefit reporting (W-2 where applicable)

5.. Annual Election & Compliance

  • Each year, the company’s accountant or tax preparer will:
    – Elect De Minimis Safe Harbor with the federal tax return
    – File Form 4562 for Section 179 and depreciation schedules
    – Track all fringe benefits provided to employees
    – Ensure W-2 reporting for any taxable fringe benefits

6. Home Office Reimbursement Policy

The company may reimburse employees or owners for the business use of a home office, provided the space meets IRS criteria and reimbursement is made under an accountable plan.

6.1 IRS Qualification Criteria

– The space must be used **regularly and exclusively** for business.

– It must be the **principal place of business** or used to meet clients or perform administrative functions.

– A dedicated room or clearly defined portion of a room may qualify.

6.2 Reimbursement Methods

– The company may reimburse based on:

• The **Simplified Method**: $5 per square foot, up to 300 sq ft ($1,500/year max), or

• The **Actual Expense Method**: Based on the business-use percentage of eligible home expenses (e.g., rent, mortgage interest, utilities, insurance, repairs).

– Reimbursement is only allowed under an **accountable plan** with supporting documentation.

6.3 Documentation Requirements

– Employees/owners must submit:

• A written request with square footage or percentage used

• Utility bills, rent/mortgage statements, and other substantiating documents

• A signed declaration that the space is used exclusively and regularly for business

– Reimbursements will be excluded from employee income if properly documented.

7. Overall Documentation and Compliance

To support deductions and IRS compliance, the company will maintain:

  • Receipts and vendor invoices
  • Documentation for fringe benefits and reimbursements
  • Proof of employee participation in eligible programs
  • Written plan documents (education, commuter benefits, etc.)
  • Payroll records for fringe benefit reporting (W-2 where applicable) etc

Each year, the company’s tax preparer will:

  • Elect the De Minimis Safe Harbor on the tax return
  • File Form 4562 for Section 179 depreciation
  • Track and report applicable fringe benefits
  • Ensure proper W-2 reporting where required etc.

 

Acknowledgment

Approved By: ____________________
Title: ___________________________
Date: ___________________________

NY/NYC PTE Election, Benefits and Timing

Cindy Yu, Managing Partner of CPG, CINDIE Professional Group , , , ,

New York State (NYS) and New York City (NYC) have implemented optional Pass-Through Entity Taxes (PTET) to help S corporations and other pass-through entities mitigate the federal $10,000 cap on state and local tax (SALT) deductions. By electing to pay taxes at the entity level, these businesses can provide their owners with a federal deduction for state and local taxes that would otherwise be limited.

New York State PTET:

  • Eligibility: Available to partnerships and New York S corporations for tax years beginning on or after January 1, 2021.
  • Benefits: Electing entities pay income tax at the entity level, allowing individual partners or shareholders to claim a PTET credit on their NYS personal income tax returns. This structure effectively bypasses the federal SALT deduction cap, enabling full deduction of state taxes at the federal level.

New York City PTET:

  • Eligibility: Available to city partnerships and city resident New York S corporations for tax years beginning on or after January 1, 2022.
  • Benefits: Similar to the state-level PTET, the NYC PTET allows electing entities to pay city taxes at the entity level. Shareholders who are NYC residents can then claim a credit against their NYC personal income tax liability, reducing their taxable income federally and circumventing the SALT deduction cap.

Considerations:

  • Election Process: The PTET election must be made annually and is irrevocable for that tax year once made. tax.ny.gov
  • Nonresident Implications: Nonresident partners or shareholders do not benefit from the NYC PTET, as the credit applies only to NYC residents.
  • Federal Deduction: By paying taxes at the entity level, the business can deduct these taxes federally, effectively working around the $10,000 SALT cap imposed on individual taxpayers. nysscpa.org

Electing into the NYS and NYC PTET can provide significant tax benefits by allowing S corporations to fully deduct state and local taxes at the federal level, thereby reducing overall tax liability.

Election Timing Requirements:

As of February 2025, the deadline for electing into the New York State (NYS) Pass-Through Entity Tax (PTET) for the 2025 tax year is March 15, 2025. This election must be made annually through the entity’s Business Online Services account. tax.ny.gov

However, there is proposed legislation under consideration that aims to extend the PTET election deadline to September 15 of the tax year. If enacted, this change would provide entities with additional time to assess their financial positions before making the election. taxnews.ey.com

It’s important to note that, as of now, this extension has not been finalized. Therefore, entities should plan to make their PTET election by the current deadline of March 15, 2025.

For the New York City (NYC) PTET, the election process and deadlines align with those of the NYS PTET. Eligible entities must opt in by March 15, 2025, through their Business Online Services account. tax.ny.gov

Given the potential for legislative changes, it’s advisable to consult with a tax professional or regularly check the New York State Department of Taxation and Finance website for the most current information regarding PTET election deadlines.

IRS Audit Triggers IRS 审计

Cindy Yu, Managing Partner of CPG, CINDIE Professional Group , , , ,

You may contact Us if you receive an IRS audit letter:
Main Address: 200 Centennial Avenue, Suite 106, Piscataway, NJ 08854
Florida office: 14767 Lattice Ct, Jacksonville FL3226
Phone: (732) 896-0272 Email: cpa@cindiellc.com

What Triggers an IRS Audit? The IRS uses sophisticated computer algorithms to decide on which returns to audit. If your return looks strange, your chances of being audited go way up. Here are some reasons the IRS might audit you:

  1. Taking Large Deductions – Returns with extremely large deductions in relation to income are more likely to be audited. For example, if your tax return shows that you earn $25,000, you are more likely to be audited if you claim $20,000 in deductions than if you claim $2,000.
  2. Claiming Certain Kinds of Deductions – Certain types of deductions have long been thought to be hot buttons for the IRS, especially auto, travel, and meal expenses. Casualty losses and bad debt deductions might also increase your audit chances.
  3. Claiming a Business Loss – Businesses that show losses are more likely to be audited, especially if the losses are recurring. The IRS might suspect that you must be making more money than you’re reporting—otherwise, why would you stay in business? Most likely to be audited are taxpayers reporting small business losses.
  4. Claiming Deductions That Don’t Make Sense – Deductions that seem odd or out of character could increase your audit chances, like a plumber who deducts the cost of foreign travel might raise a few eyebrows at the IRS.
  5. Not Reporting All of Your Income – The IRS also goes to great lengths to ensure you report all of your income. Its computers match the information on W-2s and 1099-NEC forms with the income amount reported on tax returns using Social Security and other identifying numbers. If the IRS finds discrepancies, it will probably start asking questions.
  6. Having Evidence of Intent to Mislead or Being Sloppy With Your Return
    Filing a tax return with missing schedules or not providing all the information asked for on the forms can increase your chances of being audited. Similarly, a sloppy return, especially with math mistakes, increases your chances of an audit. Also, using round numbers—for example, $6,000 for business advertising costs or $4,000 for transportation expenses—indicates that you’re estimating, not using records to report amounts.
  7. Being a Higher Earner – If you make over $500,000 per year, your audit likelihood is greater than the likelihood for the general population. As shown in the chart above, 0.7% of filers who earned between $500,000 and $1,000,000 were audited. So, Can I Get Away With Cheating on My Taxes? Even if you earn far less than $500,000, don’t think that you can easily get away with cheating on your taxes. (See “Are Increased IRS Audits Coming?” below.)
  8. Having Self-Employment Income – The IRS tends to be suspicious of people in business for themselves. Depending on their income, sole proprietors are up to five times more likely to be audited than wage earners.
  9. Having Foreign Accounts – Keeping money or other assets in foreign banks or other financial accounts increases audit chances.
  10. Owning Digital Assets – Having digital assets, including cryptocurrency, such as Bitcoin, might increase your chances of an audit. IRS Form 1040 asks whether you received, sold, exchanged, or otherwise disposed of a digital asset during the year. If you say “yes,” your answer increases your audit chances.
  11. Claiming Too Many Charitable Deductions – Claiming $20,000 in charitable deductions on your $50,000 salary will probably make the IRS suspicious. And if you don’t have documentation to back up your charitable deductions, don’t deduct them.

什么会触发 IRS 审计？
IRS 使用复杂的计算机算法来决定审计哪些申报表。如果您的申报表看起来很奇怪，您被审计的可能性就会大大增加。以下是 IRS 可能对您进行审计的 11 个原因。

  • 扣除大额 – 扣除额与收入相关的金额非常大的纳税申报表更有可能被审计。例如，如果您的纳税申报表显示您的收入为 25,000 美元，那么如果您申报扣除额为 20,000 美元，那么您被审计的可能性要高于申报扣除额为 2,000 美元的情况。
  • 申报某些类型的扣除额 – 长期以来，某些类型的扣除额一直被认为是 IRS 的热门话题，尤其是汽车、旅行和餐费。意外损失和坏账扣除额也可能增加您的审计机会。
  • 申报企业亏损 – 显示亏损的企业更有可能被审计，尤其是如果亏损是经常性的。IRS 可能会怀疑您赚的钱一定比您申报的要多——否则，您为什么要继续经营下去？最有可能被审计的是申报小企业亏损的纳税人。
  • 申报不合理的扣除额 – 看起来奇怪或不合常理的扣除额可能会增加您被审计的机会，例如，扣除国外旅行费用的水管工可能会引起国税局的怀疑。
  • 不报告您的全部收入 – 国税局也会不遗余力地确保您报告所有收入。其计算机会将 W-2 和 1099-NEC 表格上的信息与使用社会保障和其他识别号码的纳税申报单上报告的收入金额进行匹配。如果国税局发现差异，它可能会开始提出质疑。
  • 有证据表明有意误导或申报表草率
    提交缺少时间表的纳税申报表或未提供表格上要求的所有信息可能会增加您被审计的机会。同样，草率的申报表（尤其是有数学错误）会增加您被审计的机会。此外，使用整数（例如，商业广告费用为 6,000 美元或交通费用为 4,000 美元）表明您正在估算，而不是使用记录来报告金额。
  • 收入较高 – 如果您每年的收入超过 500,000 美元，那么您被审计的可能性就大于一般人群。如上图所示，收入在 500,000 美元至 1,000,000 美元之间的纳税人中有 0.7% 被审计过。那么，我能逃税吗？即使您的收入远低于 500,000 美元，也不要认为您可以轻易逃税。（请参阅下面的“国税局审计是否会增加？”。）
  • 拥有自营职业收入 – 国税局倾向于怀疑为自己做生意的人。根据他们的收入，独资经营者被审计的可能性比工薪阶层高出五倍。
  • 拥有外国账户 – 在外国银行或其他金融账户中存钱或其他资产会增加被审计的机会。
  • 拥有数字资产 – 拥有数字资产（包括比特币等加密货币）可能会增加被审计的机会。IRS 表格 1040 会询问您是否在一年内收到、出售、交换或以其他方式处置了数字资产。如果您回答“是”，您的答案会增加被审计的机会。
  • 申报过多慈善扣除 – 在您的 50,000 美元薪水中申报 20,000 美元的慈善扣除可能会引起 IRS 的怀疑。如果您没有文件支持您的慈善扣除，请不要扣除。

Credit to source: https://www.nolo.com/legal-encyclopedia/irs-tax-audits-

BOI Reporting Due in 2024 (Small Business)

Cindy Yu, Managing Partner of CPG, CINDIE Professional Group , , , ,

小企业受益人所有权信息合规报告 2024年底前到期

For any questions, please contact: cpa@cindiellc.com 732-896-0272 https://cindiellc.com/form/

This new rule mainly targets small businesses. Starting in 2024, newly established corporations, limited liability companies (LLCs), limited partnerships, and other entities filing formation documents with a state’s Secretary of State’s office (or similar government agency) must submit a report to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) detailing the entity’s “beneficial owners.” Entities existing before January 1, 2024, have until January 1, 2025, to comply with this requirement. This is called BOI reporting, or Beneficial Owner Information Reporting.

This regulation is part of the federal government’s efforts to combat money laundering and tax evasion by scrutinizing shell companies that conceal assets. However, it imposes significant reporting obligations on most businesses. Willful failure to provide or update the required information can result in hefty fines of up to $500 per day until the violation is corrected, or, if criminal charges are pursued, fines up to $10,000 and/or two years imprisonment. These penalties can apply to the beneficial owner, the entity, and/or the person completing the report. Beneficial owners are broadly defined as individuals who directly or indirectly own more than 25% of the entity’s ownership interests or exercise substantial control over the entity (even without ownership interest). This includes many senior officers and key decision-makers (e.g., board members). Given the severe penalties, it is safer to over-report rather than under-report beneficial owners. Entities formed after 2023 must also provide information about the company applicants (those filing the formation/registration papers and those directing the filing). The required information for beneficial owners includes their legal name, residential address, date of birth, and a unique identifier from a non-expired passport, driver’s license, or state identification card. An image of these documents must also be submitted to FinCEN.

23 types of entities are excepted from BOI filing: List

Entities formed before January 1, 2024, must file these reports by January 1, 2025. Entities formed in 2024 have 90 days from formation/registration to file, while those formed after 2024 must file within 30 days.

Any changes in the reported information, such as changes in a beneficial owner’s address or name, a new passport number, or an updated driver’s license, must be reported within 30 days to avoid penalties. It is crucial to discuss who qualifies as a beneficial owner in your business and establish systems to keep this information current. Please contact our office soon to schedule an appointment for further discussion.

For more information, visit: https://www.fincen.gov/boi or Click the FINCEN Facts or Cindie can help and you can file yourself as well https://www.youtube.com/watch?v=GydCvfbKxPw

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从2024年开始，所有新成立的公司、有限责任公司（LLCs）、有限合伙企业以及其他在州务卿办公室（或类似政府机构）提交成立文件的实体，必须向美国财政部金融犯罪执法网络（FinCEN）提交一份报告，提供有关实体“实际受益人”的指定信息。2024年1月1日之前存在的实体必须在2025年1月1日之前提交这些报告。

此规定是联邦政府打击洗钱和逃税的一部分，旨在深入调查那些用于隐藏资金的空壳公司。然而，这将对大多数企业施加繁重的报告义务。故意未能提供或及时更新所需信息可能导致每天高达500美元的罚款，直到违规行为得到纠正，或者在刑事指控下，罚款高达10,000美元和/或两年监禁。这些处罚可以适用于实益所有人、实体和/或完成报告的人员。 实益所有人被广泛定义为直接或间接拥有实体超过25%所有权权益或对实体行使实质控制权的个人（即使他们实际上没有所有权权益）。这包括许多高级管理人员和关键决策者（例如，董事会成员）。鉴于严厉的罚款，宁可过度报告也不要漏报实益所有人。2023年以后成立的实体还必须提供有关公司申请人的信息（实际提交成立/注册文件的人以及主要负责指导或控制文件提交的人）。实益所有人必须提供的信息包括其法定姓名、居住地址、出生日期和非过期护照、驾驶执照或州身份证的唯一标识号。实体还必须向FinCEN提供这些文件的图像。

2024年1月1日之前成立的实体必须在2025年1月1日前提交这些报告。2024年成立的实体有90天的时间自成立/注册之日起提交报告，而2024年之后成立的实体必须在成立/注册后的30天内提交报告。

如果报告的信息发生任何变化，例如实益所有人的地址或姓名变更、新护照号码、更换或更新的驾驶执照，必须在30天内报告这些变化，以避免罚款。请务必尽快讨论谁可能被视为贵公司中的实益所有人，并建立系统以确保这些信息保持最新。请尽快联系我们的办公室安排进一步讨论的预约。

详细中文介绍，请点击美国财政部金融犯罪执法网络BOI说明 自己做? https://www.youtube.com/watch?v=GydCvfbKxPw