Wednesday, December 31, 2014

Review your credit policies

Review your credit policies


There are many ways to make your business more profitable, and sound credit policies are high on the list. The current slowdown in the economy is a good reason to reexamine your company's policies. Keep the following items in mind as you review your policies.

* Don't be so eager to sign on new customers that you neglect to check out their credit history. Take the time to check references, and obtain a credit report to see how they've handled other financial transactions.

* Establish collection policies and follow up promptly on delinquent accounts. The more overdue accounts become, the more likely they are to become uncollectable. That cuts into your profits.

* Calculate what it costs to carry credit for your customers. For example, if your business generates $1,000 per day in credit sales, and it takes you an average of 60 days to collect, your cost of providing credit to your customers is $3,000 per year. This example assumes you can borrow money at 5% interest. By speeding up the average collection to 30 days, you cut your carrying costs by half.

* To speed collections, invoice customers when you ship the goods; don't wait until the end of the month. Make sure your invoice clearly shows your payment terms, including penalties for late payment and the discount, if any, for prompt payment.

* Be aware of the payment cycles for your industry. For example, if contractors typically pay their bills by the 10th of the month, make sure your invoices arrive in plenty of time for them to process your payment.



Call us if you'd like to review your credit policies.

Monday, December 29, 2014

Does your business make use of your financial statements

Does your business make use of your financial statements


Many small business owners pay too little attention to their financial statements. This is due in part to not understanding just what the statements have to offer. In fact, many may not be able to tell you the difference between a Balance Sheet and an Income Statement.

Think of them this way. The Balance Sheet is like a still picture. It shows where your company is at on a specific date, at month-end, or at year-end. It is a listing of your assets and debts on a given date. So Balance Sheets that are a year apart show your financial position at the end of year one versus the end of year two. Showing how you got from position one to position two is the job of the Income Statement.

Suppose I took a photo of you sitting behind your desk on December 31, 2013. And on December 31, 2014, I took a photo of you sitting on the other side of your desk. We know for a fact that you have moved from one side to the other. What we don't know is how you got there. Did you just jump over the desk or did you run all the way around the building to do it? The Income Statement tells us how you did it. It shows how many sales and how much expense was involved to accomplish the move.

To see why a third kind of financial statement called a Funds Flow Statement is useful, follow this case. A printer has started a new printing business. He invested $20,000 of his own cash and borrowed $50,000 from the bank to buy new equipment. After a year of operation, he has managed to pay off the bank loan. He now owns the equipment free and clear. When he is told his net profit is $50,000, he can't believe it. He might tell you that he took nothing out of the business and lived off his wife's wages for the year. And since there is no cash in the bank, just where is the profit? The Funds Flow Statement will show the income as a "source of funds" and the increase in equipment is an "application of funds." The Funds Statement is even more useful when you have several assets to which funds can be applied and several sources of funds such as bank loans, vendor payable s, and business profit or loss.


Don't be afraid to ask your accountant questions about your financial statements. The more questions you get answered, the more useful you will find your financial statements. Accounting is sort of a foreign language. Learn to speak a little of it.

Thursday, December 25, 2014

Age matters in the world of taxes

Age matters in the world of taxes

Are you aware of the numerous age-related provisions in the IRS code? They are probably more plentiful and significant than you thought. Here are a few examples of the age-related tax rules that could affect you and your dependents.

* At birth up to age 19 and even 24: dependency deduction. Parents can claim a dependency exemption for a child under 19 or for full-time students under the age of 24.

* Under 13: child care credit. This provision gives parents a tax credit for dependent care expenses.

* Under 17: child tax credit. If parental adjusted gross income is below a threshold level, parents can claim a child tax credit of $1,000.

* At 50: retirement contributions. The government allows extra "catch up" contributions to retirement savings. This is a helpful provision to encourage savings.

* Before age 59½: early withdrawal penalty. Withdrawals from IRAs and qualified retirement plans, with some exceptions, are assessed a 10% penalty tax.

* At 65: increased standard deduction. Uncle Sam grants a higher standard deduction, but there's no additional tax benefit if the taxpayer itemizes deductions.

* At 70½: mandated IRA withdrawals. The IRS requires minimum distributions from a taxpayer's IRA beginning at this age (doesn't apply to Roth IRAs). This starts to limit tax-deferral benefits.


Awareness of how the tax code affects you and your family at different ages is important. For tax planning assistance through the various phases of life, give our office a call.

Tuesday, December 23, 2014

How to tell you have credit card problems

How to tell you have credit card problems.


If you're living beyond your means, you could be courting financial disaster. Here are some indicators that you need to get your credit card usage under control.

* Your income's dwindling but your credit card balances keep growing. Lost your job but can't seem to reign in those charge cards? Don't be surprised when the bill collectors come calling.

* You pay only minimum balances. Still paying off last year's Valentine's Day dinner? Bad spending habits?

* You practice the credit card shuffle. You take out a cash advance on one credit card to pay off another, then apply for another card when the first comes due. Practiced regularly, shuffling credit cards is a losing game. At some point you need enough income to cover your expenses. Eventually, the house of credit comes tumbling down.

* You're working overtime to cover expenses. Say you work for an airplane manufacturer that's building a new line of jets. To increase production, the company asks you to work longer hours. Bigger paychecks become routine and the cash starts flowing. So you take out installment loans to buy a new car or boat or house on the beach. But what happens when the production line slows down and the overtime pay dries up? The car payments, boat payments, and second home payments keep chugging along. And suddenly you're struggling to make the payments.

* You routinely charge everyday expenses. Do you use credit cards to pay for groceries, gas, and fast food? Unless you're disciplined and pay off the charges every month, your credit card balances can grow exponentially.

* The utility company calls. When the local water company threatens to discontinue service because you're behind on the payments, it may be time to seek financial help.

* You're refused credit. These days, even people with good credit may find it hard to obtain loans. But if your credit score is in the don't-call-us-we'll-call-you category, you may have a debt problem.

The best time to seek professional advice is well before your financial boat capsizes. If you'd like help, give us a call.

Thursday, December 18, 2014

IRS issues "nanny tax" reminder

IRS issues "nanny tax" reminder

The IRS reminds taxpayers not to overlook their responsibilities under the "nanny tax."


If you employed a housekeeper, nanny, gardener, or other household worker in 2014, you may have payroll tax obligations, commonly called the nanny tax. These payroll taxes apply if you paid a household worker $1,900 or more in 2014. Federal unemployment taxes apply if you paid more than $1,000 to all domestic employees in any quarter. Your filing obligations must be met by February 2, 2015. It's not always easy to tell whether a given worker comes under the nanny tax rules. For more details or filing assistance, contact our office.

Tuesday, December 16, 2014

Is your business using part-time workers?

Is your business using part-time workers?

Recent job statistics indicate that more employers are using part-timers to deal with variations in workload and for short-term projects. Here are a few tips your business will find useful if you hire part-time workers.

* Communicate clearly with the part-timer. Explain the person's duties, the hours and benefits, and the individual to whom the part-timer will report.

* Tell your full-time staff why you're hiring the part-timer. Make it clear what that person will and won't be expected to do.

* Provide introductory training for the part-time worker. Assign someone the new person can turn to with everyday questions.

* Monitor the part-timer's progress. Provide feedback on performance and recognition for doing a good job.


Pay attention to these points if you want hiring part-time workers to be a good choice for your company.

Thursday, December 11, 2014

You may have a deduction for moving expenses

You may have a deduction for moving expenses


If you moved in 2014 because of a new job location, you may be entitled to a tax deduction for your moving expenses. To qualify for a tax deduction, your new job location must be fifty miles further from your old home than the distance from your old home to your old job. In other words, if your commute would be increased by fifty miles or more from your old house, you have met the distance test.


In addition to the distance test, you must meet a length-of-employment and commencement-of-work test. During the twelve months following the move, you must have been employed full time for at least 39 weeks. Self-employed people have slightly different rules. The work test is waived if you have certain family or job misfortunes.

Tuesday, December 9, 2014

Women and Retirement

Women and retirement

Women need to save more for their retirement than men do. Statistics show that women live longer than men, but earn less than men during their working years (which are often fewer due to time taken off for child rearing). According to the Census Bureau, 57% of the population over age 65 are women, and 70% of older people living in poverty are women.

Friday, December 5, 2014

Consider a Roth for retirement savings

Consider a Roth for retirement savings

Using a Roth IRA for retirement savings means you won't get an upfront tax deduction for contributions. But withdrawals in retirement are completely tax-free provided you meet the age and time requirements. Also, you don't have to start taking minimum distributions at age 70½ as you do with other plans.


Wednesday, December 3, 2014

Retiring from income taxes?

Retiring from income taxes?

Full retirement doesn't end your income tax obligations. You'll owe income taxes on withdrawals from a traditional IRA or 401(k) plan, and you'll owe taxes on investment income outside your retirement plans (interest, dividends, capital gains, etc.). Also, if your income exceeds a threshold amount, you could owe taxes on your social security benefits.

Monday, December 1, 2014

Retirement and taxes

Retirement and taxes



If you continue working past age 70, you can still add to a 401(k) or Roth IRA, but not to a traditional IRA. At age 70½, you must start withdrawing from a traditional IRA, and unless you're still working, from a 401(k) plan. There is no age requirement for starting withdrawals from a Roth IRA.

                                                    

Friday, November 28, 2014

Update your beneficiary designations

Update your beneficiary designations

Who have you designated as beneficiaries for your insurance policies and retirement accounts? If you can't remember, you're not alone. But it's worth checking. If you make the wrong decision, it could affect who inherits those assets. In some cases, it could also change the taxes your beneficiaries will pay and the value they'll receive. Here are some key facts about beneficiary designations.
 
*   When you designate a beneficiary for an account, you are naming the person you want to inherit that account.

*   Your designation determines who will inherit the assets in the account, regardless of what your will might say. Generally, the assets will bypass probate and go straight to the person or institution you named.

*   You can designate a person or group of persons, a charity, a trust, or your estate. You may also want to designate a secondary or backup beneficiary in case the primary is no longer living.

Why are they important?

*   It's important to keep beneficiary designations up to date because they determine who will inherit the assets in your accounts. Changing your will won't change the beneficiaries.

*   There can be tax implications too. With a traditional IRA, your choice of beneficiary can affect how quickly withdrawals must be made and taxes paid. That can change the value of the IRA to your beneficiary.

How do I update them?

*   First, find copies of all your current designations. Contact your insurance company and plan trustees if you can't locate the documents.

*   Review them and decide what changes you'd like to make. Make an appointment to go over the changes with your tax or estate planning advisor.

*   Send your updated designations to the account trustees. Make sure you receive confirmations and keep copies in your records.

Wednesday, November 26, 2014

Self-employeds get tax breaks

Self-employeds get tax breaks


When it comes to taxes, being self-employed has some advantages. Whether you work for yourself on a full-time basis or just do a little moonlighting on the side, the government has provided you with a variety of attractive tax breaks.
 
* Save for retirement. When you're self-employed, you're allowed to set up a retirement plan for your business. Remember, contributing to a retirement plan is one of the best tax shelters available to you during your working years.

Take a look at the SIMPLE IRA, SEP IRA, or Solo 401(k), and determine which plan works best for you.

* Hire your kids. If your business is unincorporated, employing your child under the age of 18 might make sense. That's because your child's earnings are exempt from social security, Medicare, and federal unemployment taxes. This year, your son or daughter can earn as much as $6,200 and owe no income taxes. You get to deduct the wages paid as a business expense.

* Deduct health insurance. Are you paying your own medical or dental insurance? How about long-term care insurance? As a self-employed individual, you may be able to deduct 100% of the cost of these premiums as an "above the line" deduction, subject to certain restrictions.

* Take business-use deductions. Self-employed individuals can also deduct "mixed-use" items directly against their business income. Use your car for business and you can deduct 56¢ per business mile driven. The business-use portion of your computer purchases, Internet access, and wireless phone bills is also allowable. And if you meet the strict requirements, claiming the home office deduction makes a portion of your home expenses tax-deductible.

Please give us a call to find out more about the tax breaks available to self-employed individuals.

Monday, November 24, 2014

Could you benefit from cost segregation?

Could you benefit from cost segregation?

Almost any taxpayer who owns commercial real estate can reduce his or her current income tax bill by using cost segregation. Just how much you save in taxes will depend on several variables. The greater the cost of your property, the greater the potential for current tax savings.

Any building that was constructed, purchased, or remodeled since 1987 may be eligible for cost segregation. Retroactive tax deductions are available on older buildings without the need to file amended tax returns.

To pass an IRS audit for these deductions, you will want to use a cost-segregation specialist. This will usually be a construction engineer who can perform a detailed engineering study of all the building components (walls, ceilings, floors, plumbing, electric, telecommunications, heating and cooling systems, etc.) and assign the appropriate value to each. Those elements that qualify for five, seven, or fifteen year write off will provide the property owner with greater depreciation deductions and hence lower taxes in the early years.

The downside may be the cost to do the study versus the accelerated cash flow and possible penalties from the IRS for those who use cost segregation too aggressively.

The main elements of a proper cost segregation study are:

*        Conducted by someone with valid credentials as to experience and expertise.

*        A detailed description of the proper methodology.

*        Complete and proper documentation.

*        A full listing of all property that qualifies for shorter write off periods.

A properly conducted cost segregation study can provide a property owner with cash today that he or she would not otherwise get for several years.

An initial consultation with a cost segregation specialist can help you determine if your property is a candidate for a full blown study.


Friday, November 21, 2014

Supreme Court denies bankruptcy protection for inherited IRAs

Supreme Court denies bankruptcy protection for inherited IRAs

Your retirement funds are protected from creditors even if you file for bankruptcy, with only a few limitations. This protection extends to funds in all government-qualified pension plans, including IRAs (traditional and Roth), 401(k)s, 403(b)s, Keoghs, profit sharing, money purchase, and defined benefit plans. A recent U.S. Supreme Court decision has held, however, that an inherited IRA is not a "retirement fund" and therefore doesn't qualify for bankruptcy protection.

An inherited IRA is a traditional or Roth IRA that a deceased owner has bequeathed to a beneficiary. It differs from a "true" retirement account in three ways:

1.                  The beneficiary is not allowed to contribute additional retirement funds to the inherited IRA.

2.                  The beneficiary, regardless of age, may withdraw funds from an inherited IRA in any amount and at any time without penalty.

3.                  The beneficiary, regardless of age, is required to take annual minimum distributions from any inherited IRA.

Based on the above characteristics, the Court unanimously concluded that with respect to beneficiaries, inherited IRAs are "not funds objectively set aside for one's retirement" and instead constitute a "pot of money that can be used freely for current consumption."

Although the Court didn't specifically address it, there is a possible option available if (and only if) the beneficiary is the spouse of the decedent. Spouses are permitted to roll over funds from inherited IRAs into their own IRAs, which would presumably bring those funds back under bankruptcy protection. The funds would, however, become subject to the rules that apply to non-inherited IRAs, such as penalties for withdrawals before age 59½.


Certain other strategies may be available if you have inherited or are likely to inherit an IRA and you are interested in possible bankruptcy protection. Call us for an appointment to discuss your options.


Wednesday, November 19, 2014

Tax Tip for November 2014

Tax Tip for November 2014

Consider a health savings account (HSA). Investing in an HSA gives you a current-year tax deduction while providing a savings account to use to pay out-of-pocket medical expenses currently or in the future. An HSA is not a "use-it-or-lose-it" plan. Any funds in the plan at year-end can be used in future years. And be aware that you can fully fund your HSA up to April 15 of the following year.

Monday, November 17, 2014

Investors should be aware of inversions

Investors should be aware of inversions


Some U.S. companies are using corporate inversions to reduce their taxes. Investors in companies that do an inversion may find that their own taxes are increased.

When the U.S. company becomes the subsidiary of the foreign company, it issues replacement shares. Typically, the new shares are equal to the former shares but no cash is involved. As a shareholder, you're required to recognize a gain on the exchange of stock even though your ownership position remains the same. The gain is the amount by which the value of the stock on the inversion date exceeds your basis.

Investors should also be aware that inversions can affect the amount of capital gain reported to you by mutual funds you own if companies in the fund's portfolio choose to invert.

Though not all mergers will create taxable income, keeping an eye on your portfolio can prevent tax bill shock when you file your 2014 federal income tax return.


Friday, November 14, 2014

Regulations try to curb corporate inversions

Regulations try to curb corporate inversions

The IRS and the Treasury recently issued regulations intended to curb the growing use of "corporate inversions." Here's how an inversion typically works: A U.S. company acquires a foreign company in the same business with the intent of changing the corporation's headquarters to the foreign country in order to enjoy that country's lower tax rate. The new rules put more restrictions on inversions in order to make them less attractive to businesses.

Wednesday, November 12, 2014

IRS commissioner reveals major concerns

IRS commissioner reveals major concerns

IRS Commissioner John Koskinen recently discussed the major concerns the IRS has as it readies itself for the upcoming tax filing season. The proliferation of tax scams is a big concern with millions of taxpayers already having been taken in by scammers impersonating IRS agents. According to Koskinen, these scammers make threatening phone calls, trying to intimidate victims into providing personal financial information that can be used to steal identities.

A second area of concern is the IRS's involvement in handling the premium tax credits under the Affordable Care Act. Some taxpayers who were given advances on the credits based on income estimates may find that they may be receiving smaller refunds or owing the IRS money after filing their 2014 tax returns.

Monday, November 10, 2014

Review your 2014 deductions

Review your 2014 deductions

Some itemized deductions are limited by a percentage of your gross income. An example is miscellaneous deductions. These provide a benefit only if your total outlay for costs such as investment fees and unreimbursed employee business expenses exceed 2% of your adjusted gross income.

If you consistently lose out on these deductions, check now to determine if pulling some of January's expenses into December will help.


Keep an eye on your exposure to the alternative minimum tax whenever you plan a strategy for making the most of deductions. Some expenses aren't deductible under those rules.

Thursday, November 6, 2014

Don't forget to take your RMD

Don't forget to take your RMD

Did you celebrate your 70½th birthday in 2014? Do you have a traditional or rollover IRA? If both answers are yes, the deadline for taking the initial required minimum distribution from your retirement account is April 1, 2015.

Required minimum distributions are the smallest amount you can withdraw from your account to avoid penalties, and your 70½th birthday is the triggering start date. That's defined as six months after your 70th birthday.

As an example, if your actual birthday was in July 2014, you'll turn 70½ in January 2015. That means you don't have to take a minimum distribution for 2014. Instead, you're required to take your first minimum distribution no later than April 1, 2016. After the first distribution, you must complete each annual withdrawal by December 31.


Note that you may want to take your initial distribution by December 31 (instead of the following April) to avoid two withdrawals in a single year.

Tuesday, November 4, 2014

IRS Cuts audit rates in face of budget cuts

IRS Cuts audit rates in face of budget cuts

The IRS is facing budget cuts that will result in fewer audits and other enforcement activities. The IRS reports that it will do 140,000 fewer correspondence audits in 2014 than it did in 2013. The individual audit rate for 2014 is expected to drop to 0.80%, a decline from the 0.96% rate in 2013. That translates to one audit for every 120 tax returns filed in 2014. The audit rates for partnerships, S corporations, and corporations are falling as well.

Thursday, October 30, 2014

Pay attention to the IRS rules for charitable deductions

Pay attention to the IRS rules for charitable deductions

As the year draws to a close, you may decide to donate cash or property to one or more worthy causes. Besides the satisfaction of helping others, there's another reward for your benevolence: a tax deduction on your 2014 return. But the IRS recommends that you keep the following points in mind:

1.                  You may only deduct contributions made to a legitimate tax-exempt charitable organization.
2.                  Charitable contributions reduce your taxes only if you itemize your deductions.
3.                  To claim an itemized deduction, you're required to have support for all cash contributions, no matter the amount. A bank statement, a copy of the cancelled check, or a credit card record will usually suffice for donations under $250.
4.                  In the case of payroll donations, your pay stub or W-2 can back up your deduction.
5.                  For donations of $250 or more, a statement from the charity is required, giving the charity's name, the date, the amount of your donation, and the value of goods and services received for the donation, if any.
6.                  The substantiation rules for non-cash donations differ depending on the type of property and its value.
7.                  You'll need a "contemporaneous" written acknowledgment from the charity for donations of $250 or more. As a general rule, "contemporaneous" means you must receive the acknowledgment before you file your return or before the due date of your return, whichever is earlier.

8.                  Typically, you may deduct the fair market value of gifts of property owned longer than one year. Any appreciation in value remains untaxed.
9.           You can secure deductions late in the year by donating to charity by credit card. As long as the charge is posted in December, you can deduct it on your 2014 return, even if you don't pay the credit card bill until 2015.

If you have questions about documentation for your charitable donations, contact our office.

Monday, October 27, 2014

Four tips for organizing your finances

Four tips for organizing your finances

In our busy lives, it's sometimes tough to corral our financial records. Bills, paycheck stubs, tax returns, and bank statements can disappear into dusty attic corners and bulging desk drawers. Important insurance policies can hide out beneath bins of holiday ornaments and electrical supplies. Mortgage documents can sneak into old books or ensconce themselves in nooks and crannies throughout the house.

Take the time now to coax those papers out of hiding. Here are four suggestions for getting organized.

1.                  Find a system that works for you. Many people use a computer program such as Intuit's Quicken or Microsoft's Money to track everyday spending and bank accounts. Others use pencil, paper, and a shoebox. Some people use hanging file folders, labeled for various expenses and accounts; others scan documents into a computer; others use storage bins. The key is to use whatever system makes sense to you and helps you maintain your finances with a reasonable amount of effort.
2.                  Dedicate a space and a time. To ensure that bills are paid on time, bank statements are reconciled, and important documents are properly filed, set aside a specific location in your home for financial tasks. It may be a place where you keep a computer or filing cabinets or shoeboxes. Once that area's set aside, pick a time each week (or each day, if you're really zealous) to pay bills, enter financial information into check registers, and organize documents.
3.                  Keep the important stuff in a safe. Don't leave your only copies of wills, tax returns, stock certificates, or emergency contacts in a pile on the desk. Such documents should be tucked away in a safe deposit box or home safe. Ask your attorney or financial advisor to store the signed copy of your will in a secure location.
4.                  Don't keep documents forever. Many papers (such as regular household bills) can be shredded soon after receipt. Other documents, such as those supporting the cost of investments and real estate, should be retained longer for tax purposes. A good general rule for tax returns (and documents that support the returns) is seven years. When it's time to discard those old pieces of paper, fire up the shredder.

If you'd like additional guidance in organizing your finances, give us a call.

Thursday, October 23, 2014

Don't lose out on the 2014 gift tax exclusion

Don't lose out on the 2014 gift tax exclusion


Time is running out for making 2014 tax-free gifts. You have only a few more months to use your annual gift tax exclusion for this year, or it's gone forever.

Each year you can make gifts up to a certain dollar limit to an unlimited number of people, free of any gift tax. For 2014, the dollar limit per recipient is $14,000. These gifts do not reduce your lifetime exemption from gift and estate taxes.

Why would you want to make annual tax-free gifts? There are a number of possible reasons. Tax-free gifts are often used in estate planning as a way of steadily reducing the value of a taxable estate during the owner's lifetime. Another strategy is to transfer income-producing assets to children or other family members who are in a lower tax bracket. If done carefully to avoid the "kiddie tax," the result can be a lower overall tax bill for the family unit.

If you fail to use this year's exclusion, it is not carried over to future years. To qualify as a 2014 gift, the transaction must be completed by December 31, 2014. If you are writing a check as a 2014 gift, do so in time for the recipient to deposit it before year-end.


Check with us if you would like more information about making tax-free gifts in your situation.

Monday, October 20, 2014

Avoid these six mistakes in selling your business

Avoid these six mistakes in selling your business

Most entrepreneurs eventually think about selling their businesses, whether as a prelude to retirement or to pursue other activities. In doing so, they often underestimate the effort required for a satisfactory outcome and overestimate the value and salability of their enterprises. If you're contemplating selling, here are some common mistakes to avoid

1. Overestimating the value of your business.
Your price should be based on the fair market value of the business in its current form. Buyers won't care about the work you've put into building your business or your unique vision for its future.

2. Failing to account for the nature and make-up of your business.
The values of most businesses proceed from a mixture of variables. If your business includes significant equipment, real estate, intellectual property, or other such assets, their values should be separately established before being factored into the overall price. If you're selling a service or professional firm, much of its value may depend on the experience and skills of your managers and employees. In such a case, the price may vary according to the expected retention of key individuals.
3. Failing to base your sale price upon independent appraisals.
Even if you think you know the value of your business, you should obtain two or more outside appraisals from professionals familiar with your industry. If the appraisals conflict with your opinion, they'll provide a much-needed reality check. If they confirm your opinion, they'll become a useful sales tool.
4. Not hiring a professional business broker to handle the sale.
Owners are often too personally invested (and/or eager to sell) to effectively negotiate sales of their businesses. A broker familiar with your type of business will know what issues are important to buyers and what characteristics to emphasize or de-emphasize, without becoming emotionally involved.
5. Neglecting to work with the buyer to ensure a smooth transition.
Nobody likes being thrust into unfamiliar circumstances without preparation. Notifying your managers, employees, and customers in advance and doing all you can to allay their concerns will serve your own best interests, as well as being the honorable thing to do. Discontent on the part of any of the affected parties could result in conflicts, reduced revenue for the buyer, withheld sale payments, and litigation
6. Being unwilling to help finance the sale.
If you're unwilling to take back a note, your sale price is limited to the buyer's cash and ability to obtain outside financing. At best this could limit the number of potential buyers, and at worst it could limit your sale proceeds. (Conversely, if you finance too much of the sale price, you'll increase the risk of default.)

Selling your business is too important to attempt without professional help. If you're considering selling, call us for an appointment to help formulate your plan.

Wednesday, October 15, 2014

Advance projections released for 2015 tax numbers

Advance projections released for 2015 tax numbers

Each year the IRS is required to make inflation adjustments to hundreds of tax numbers in the tax law. Advance projections of what some of the 2015 numbers will be have recently been published.

The top tax rate of 39.6% is projected to start at income exceeding $413,200 for single taxpayers and $464,850 for married taxpayers. The projected standard deduction is $6,300 for singles and $12,600 for married couples filing jointly. The alternative minimum tax exemption for singles will increase to $53,600 and it will increase to $83,400 for married couples filing jointly. The personal exemption amount for 2015 is projected to increase to $4,000.

Monday, October 13, 2014

Don't make this tax mistake

Don't make this tax mistake


You're probably well aware that interest from municipal bonds is generally not subject to income tax or the 3.8% Medicare surtax. So don't make the mistake of turning tax-free income into taxable income by holding municipal bonds in the wrong kind of account. Municipal bond income in a retirement account will be taxed as ordinary income when you eventually take distributions from the account. Keep bonds in your non-retirement accounts to maintain the nontaxable treatment of the income they generate.

Friday, October 10, 2014

Can you claim an exemption for your college-age student?

Can you claim an exemption for your college-age student?
If your child is a full-time student under age 24, claiming an exemption for him or her on your tax return may depend on your passing the support test. Support includes food, clothing, and educational expenses such as tuition and fees. Your child cannot have provided over one-half the cost of those expenses. If you fail this support test, you can't take a dependency exemption and certain education tax breaks.

Wednesday, October 8, 2014

Make time for a year-end tax review

Make time for a year-end tax review

Take some time to review your tax situation for 2014 while there are still a few months to make tax-cutting adjustments. With more of the Affordable Care Act going into effect for 2014, both individuals and businesses will find that an investment in a year-end review could make a significant difference in their final tax bill.

Monday, October 6, 2014

Important reminder for employers

Important reminder for employers


A reminder to employers: Effective January 1 of this year, you may no longer reimburse employees for their individual health insurance policies or pay the premiums directly to the insurance company on a pre-tax basis. Employers that continue to pay employee's premiums or reimburse their payment must include these amounts in the employee's taxable wages or be subject to substantial penalties. Only if the employer offers a group plan can pre-tax dollars be used for health insurance premiums.

Friday, October 3, 2014

IRS reminds taxpayers about education credits

With schools back in session, the IRS has issued a reminder to taxpayers not to overlook available tax credits for education expenses. Tax credits are applied directly against the income tax you owe. Two available credits: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). The AOTC can be up to $2,500 annually for an eligible student and is 40% refundable. That means you could get money back when the credit exceeds your tax bill. The maximum LLC is $2,000 and is not refundable. You can claim only one type of education credit per student each year.

Wednesday, October 1, 2014

October 15 is final tax deadline

October 15 is final tax deadline

If you requested a six-month extension to file your 2013 income tax return, you face a major deadline on October 15. That's the final date for filing your 2013 return; the IRS generally does not give filing extensions beyond that date.

October 15 is also the deadline for undoing a 2013 conversion of a regular IRA to a Roth IRA. If you did a conversion to a Roth last year, you can switch it back to a regular IRA without penalty if you do so by October 15.

Need details or filing assistance? Contact our office.

Monday, September 29, 2014

Adopt a Simple retirement plan for 2014

Businesses that want to adopt a SIMPLE retirement plan for 2014 generally have until October 1 to do so.

Don't incorporate your business without first checking the long-range tax and non-tax considerations. Call us for details.

Friday, September 26, 2014

No, you're probably not saving enough

No, you're probably not saving enough

How much money did you save last year? If you didn't save at least 10% of your earnings, you didn't save enough. If your savings in 2013 fell short, the only solution is to take charge of your financial future right now and start saving more money.

Saving money doesn't have to be hard work. In fact, many successful savers have found simple ways to cut spending and increase their savings. Here are some tips to help you get started and stay on track.

* Set goals. To give your savings purpose, set specific financial goals. For example, it's advisable to have an emergency fund of approximately six months' worth of living expenses to cover any cash outlays that may catch you by surprise. Nothing can derail your financial plans faster than a series of mishaps that force you to take drastic financial measures. Other saving goals may include a college savings fund, vacation fund, or a fund for major purchases.

* Treat your savings as your most important monthly bill. Write a check to savings first, or have your savings automatically deducted from your checking account or paycheck.

* Tax-deferred retirement accounts offer a smart way for you to save money for retirement. If your employer offers a 401(k) or SIMPLE retirement plan, contribute the maximum amount allowed. If your employer offers no plan, contribute to an individual retirement account (IRA). The money you contribute to a retirement account can reduce your taxable income and grow tax-free until withdrawn.

* Another way to maximize savings is to track your expenses for a few months. This is a great way to spot unnecessary or wasteful spending; it doesn't take much work to see potential cutbacks.

* When it comes to saving, think "control." For example, control the use of your credit cards. The amount you pay each month in finance charges could go to savings instead. Also, control the use of your ATM card. Get in the habit of giving yourself a regular cash allowance, and try to live with it.

You should be saving at least 10% of your earnings. Seem impossible? If you took a new job at 10% less pay, you would get by. For help in setting financial goals and developing a savings plan, call us.



Wednesday, September 24, 2014

Let the tax man help with child care costs

Let the tax man help with child care costs

Are you a working parent looking for ways to ease the burden of child care expenses? There are several tax-saving strategies available to you.

First, there's the dependent care tax credit, a direct reduction to your tax liability. The amount of the credit depends on the amount of your child care expenses, your adjusted gross income, and how many children you have. The maximum credit is 35% of your costs for child care while you work or go to school, up to a limit of $3,000 for one child and $6,000 for two or more children.

Next, there is the flexible spending account, an arrangement set up by some employers which allows employees to set aside pre-tax dollars to be used for child care expenses. However, you should be careful when establishing this type of account because there is some risk involved. If your dependent care costs for the year are less than your contributions to your account, you could forfeit the unused balance. Also, any tax-free reimbursement from the account reduces your eligible expenses for the dependent care tax credit.

Finally, you may have an employer who is taking advantage of a new business tax credit for providing child care services for employees. Employers who provide such benefits can receive a tax credit of up to $150,000, depending on the actual costs of running the child care center. If you are lucky enough to receive this benefit, your employer will report the total amount of your dependent care benefit on your form W-2. The first $5,000 of this benefit is not taxable, but any benefit over $5,000 per family will be included in taxable wages.

Give us a call if you would like more information about the restrictions and requirements involved with these tax-saving opportunities.

Monday, September 22, 2014

Delay paying taxes with a like-kind exchange

Delay paying taxes with a like-kind exchange


Sitting on a piece of investment property that you would like to sell? By structuring the transaction as a tax-deferred exchange, you can delay paying taxes on the full amount of the gain realized.

Also known as a "like-kind exchange" or a "1031 exchange," these transactions are only available for investment or business assets. Certain types of assets don't qualify for a tax-deferred exchange, including inventory, accounts receivable, stocks and bonds, and your personal residence. Keep in mind, too, that the like-kind exchange rules only defer the tax. Any gain will be recognized upon a taxable disposition of the replacement property.

Specific steps must be followed for a deferred exchange to be successful. Start by finding a qualified intermediary, such as an escrow agent or a title company, to facilitate this transaction. You then have 45 days from the date you relinquish your property to the qualified intermediary to name as many as three possible replacement properties. You must take title to the replacement property within 180 days. The rules state that you must replace real property with real property and personal property with personal property. Replacing an apartment building with commercial space, a strip mall, or even undeveloped land all qualify.


While deferred exchanges can save you a significant amount of taxes, following the specific rules can be tricky. For more information about these tax-advantaged transactions, please give us a call.