CPA Answers
Resources / CPA Answers
Practical answers for business owners. Browse tax, accounting and payroll questions by topic; each answer includes an example, records to review and an official source.
All CPA answers
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When does depreciation begin on new manufacturing equipment?
Generally, when the equipment is ready and available for its intended business use. The purchase date, payment date and operational readiness can differ. The deduction also depends on classification and applicable federal and state rules.
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Are all purchases by a Georgia manufacturer exempt from sales tax?
No. Georgia provides exemptions for qualifying manufacturing purchases, but being a manufacturer does not make every purchase exempt. Equipment use, location and the specific exemption requirements matter.
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Which costs belong in manufacturing inventory and cost of goods sold?
Manufacturing costs generally include materials, production labor and allocable factory overhead. Selling and administrative expenses need separate classification. Tax capitalization rules and applicable exceptions must also be considered.
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Can a nonprofit owe income tax on business activities?
Yes. A regularly conducted business that is not substantially related to the exempt purpose may create unrelated business income tax. Exceptions and exclusions can change the result.
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How should a nonprofit track donor-restricted contributions?
Keep records of the donor’s restrictions and track the related use of funds. Distinguish donor restrictions from funds the board has designated internally; they are different classifications.
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Does a tax-exempt nonprofit still have to file an annual return?
Often, yes. The required Form 990-series return or notice depends on the organization’s classification and financial circumstances. Exceptions apply, including for certain churches and church-affiliated organizations.
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Does selling beauty products to a salon make the sale tax-exempt?
No. Business use and resale are different. Products a salon resells may qualify for a documented resale exemption; products it consumes while providing services generally require a different tax treatment.
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How should a beauty supply store document damaged or missing inventory?
Investigate and document the difference before adjusting the books. Record the items, quantities, costs, dates and reason for the adjustment. The tax treatment depends on the inventory method and facts.
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Why do my POS sales differ from my bank deposits or Form 1099-K?
The reports may measure different amounts. POS records show store transactions, bank deposits reflect settlements, and Form 1099-K reports gross payment transactions before certain adjustments.
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Can a wholesaler deduct all inventory purchases immediately?
Do not assume every inventory purchase is immediately deductible. The timing depends on the business’s accounting method and applicable inventory rules. Some qualifying small businesses have alternative methods, but their records must still clearly reflect income.
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Does a wholesaler have to collect sales tax on every sale?
Not necessarily. A qualifying resale transaction may be exempt, but selling to another business does not automatically make a sale exempt. In Georgia, the seller should obtain an appropriate, properly completed exemption certificate and accept it in good faith.
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Can an S Corporation Owner Take Distributions Without Payroll?
An owner who performs substantial services cannot generally replace reasonable wages with distributions to avoid employment taxes. The amount of compensation depends on the work and the business facts.
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What Should a Business Owner Do After Receiving an IRS Notice?
Read the notice number, tax period, issue and response deadline. Compare it with the filed return, payroll report or payment record before agreeing with the proposed amount.
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What Tax Filings Can a Foreign-Owned U.S. Business Have?
The required filings depend on entity classification, ownership, transactions and activity. In addition to income tax returns, certain foreign-owned U.S. corporations and disregarded entities may have Form 5472 information reporting.
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When Does a Business Need to File Taxes in Another State?
A business may need another state’s income, franchise, payroll or sales tax filing when its activities meet that state’s rules. The answer differs by tax type and jurisdiction.
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What Should a Dental or Medical Practice Review With Its CPA?
Review collections, payroll, owner compensation, equipment, financing and entity taxation together. Practice cash deposits alone do not describe the complete financial picture.
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What Tax Records Should a Restaurant Keep for Sales, Tips and Payroll?
Keep point-of-sale reports, payment-processor settlements, bank deposits, sales tax returns, tip reports and payroll records. Reconcile them by period rather than treating bank deposits as gross sales.
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What Is the Georgia Pass-Through Entity Tax Election?
Eligible Georgia S corporations and partnerships can elect to pay certain income tax at the entity level. The election changes how qualifying income and related tax are handled on the entity and owner returns.
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Can an S Corporation Deduct the Owner’s Health Insurance?
Often yes, but a more-than-2% shareholder-employee has special reporting rules. Premiums paid or reimbursed by the S corporation generally enter the shareholder’s Form W-2 and may support an individual self-employed health insurance deduction if requirements are met.
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How Much Salary Should an S Corporation Owner Take?
There is no universal percentage or fixed salary. A shareholder who performs services should receive reasonable compensation for that work before nonwage distributions.
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