No Employees Paid Over $1 Million? Tax on Excess Compensation Could Still Apply.

The 21% tax on compensation over $1 million could apply to more organizations than one would think. This tax applies not only to compensation over $1 million but also to excess parachute payments. And those parachute payments need not even be over a million dollars to be subject to the tax. It could also apply with respect to volunteers or low wage employees.

Clarification, provided in the recently published proposed regulations [Reg-122345-18], helps explain how this could be true and provides exceptions which give some relief in these situations.

About the Tax

First, the tax is imposed on remuneration over $1 million paid by an applicable tax-exempt organization (ATEO) or its related organizations to a covered employee.

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Federal Research Credit: Could Your Business Save on Taxes?

Is your business involved in creating intellectual property or process and product improvement? If so, you or your business may qualify for federal research credit cash incentives.

What is the Credit Based On?

The federal research credit is a wage-based program, which you can calculate by identifying the wages paid to employees who perform qualified research activities. Amounts paid to outside consultants are also included in the credit at 65% of each qualifying dollar spent. In some cases, supplies that are consumed in the research process can also be included in the calculation. Multiple methods of calculating the federal research credit may be available.

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An introduction to the federal income tax issues associated with conversion features

By Dan Wright, CPA

Many start-up companies use convertible debt as a way to attract short-term investment. Convertible debt has appeal to investors because it can provide enhanced risk protection, while at the same time allowing for participation in the appreciation of the company as the value of the stock increases. It has appeal for start-up ventures because the cost of issuing convertible debt may be lower, and it can result in access to funding in a shorter time frame than issuing an additional round of equity.

Understanding the federal income tax consequences to the holder and the issuer can be daunting,

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