Is a business valuation useful? Yes!

For many business owners, a business appraisal or "valuation" can furnish vital planning information and help mitigate risk. Consider the following:

* Establishing a verifiable value for your business can show whether assets have appreciated at a reasonable rate. If not, the firm's strategy may need to be adjusted.

* Business valuations furnish documentation to support new financing. Lenders need strong evidence that their loans are properly secured, and a business appraisal can supply that evidence. An independent evaluation of business assets also may encourage lenders to offer favorable interest rates.

* If you decide to sell the business, a valuation can help you establish a reasonable selling price. Without a detailed and defensible appraisal, owners sometimes entertain unreasonably low offers. On the other hand, a valuation can keep owners from overpricing the firm and thus discouraging potential buyers.

* What happens if one owner dies or otherwise leaves his or her share of the business to others? In some cases, litigation follows. To ensure that the remaining owners' interests are protected, the business needs to be appraised beforehand.

* A valuation can also support proper estate planning. If the estate is audited, the IRS is more likely to accept valuations that include a clear and reasoned appraisal. In fact, if discounts are adequately supported by an appraisal, estate taxes may be reduced.

* Business appraisals are also useful when it's time to figure capital gains. For example, if you inherit a business from your father and decide to sell it, the business can be valued as of the date of your father's death. A good appraisal can help establish a supportable value for the business and may result in lower capital gains taxes.

For assistance with valuing your business, contact our office.

Planning can save your vacation home tax deductions

You can enjoy a vacation home and cut your taxes - with some careful planning and a little discipline.

The IRS rules can be complex and potentially restrictive, so a word of caution is in order as you plan the use of your vacation home.

Owners of vacation homes often rent out the property when they're not using it themselves. Renting out your vacation home may or may not make sense for you. The principal variables are the number of days you rent the property, the number of days of personal use, your individual tax situation, and your personal wishes for the use of your vacation home.

* Rent for 14 days or less and a simple tax break is available. If you rent your vacation home for 14 days or less, all of the rental income is tax-free. This attractive tax benefit can help provide cash for your mortgage and other expenses.

* Rent for more than 14 days and your tax planning and personal life become more complex. If you rent your vacation home for more than 14 days, all your rental income is reportable. Whether you treat the income and expenses as a second residence or as rental property depends on the personal use of your vacation home relative to the time the home is rented out. This test is made annually and determines the nature of deductions, loss carryovers, and the tax treatment if the vacation home is sold.

Please call us to guide you through the IRS rules to find the rental strategy that meets your financial goals, yet ensures the personal enjoyment of your vacation home.

Consider a disciplined investment strategy

In today's rabbit-fast world, it pays to remember that the tortoise won the race. For investors, dollar-cost averaging - a slow and steady investment plan - can be a winning strategy.

With dollar-cost averaging, you invest a set amount of money on a regular basis, typically in a mutual fund. The idea of investing a fixed dollar amount at regular intervals is simple, but the benefits add up. Here are some advantages offered by dollar-cost averaging:

* Lower average cost. An investing schedule based on a fixed dollar amount lets you buy more shares when prices are low and fewer shares when prices are high. This averaging effect makes the per-share cost of your investment lower than the average market price per share for the same time period.

* Expanded investment options. Coming up with the minimum that some mutual funds typically require to open an account can be difficult. But many funds will waive the minimum initial investment if you sign up for an automatic monthly investment plan.

* Decreased market timing risk. Committing to a plan of dollar-cost averaging takes the guesswork out of when to invest. Once you've decided how much to invest and how often, you make purchases regardless of the direction of the market.

* Disciplined investment. Fixed, automatic payments on a regular schedule provide an easy yet disciplined way to finance your investment goals. Because the amount you invest stays constant, you can more easily budget for it.

Dollar-cost averaging is a disciplined investment strategy. It doesn't eliminate the need to review your investments periodically to make sure that they still meet your expectations and your risk tolerance.

Measured and consistent investing offers long-term benefits. And, like the tortoise, your portfolio can end up the winner.

Nonprofit organizations may have tax obligations

If you're an officer or on the board of a community organization, you may wonder about the tax requirements that apply to your group. Generally, an organization will not owe taxes if two things are true:

* It has registered as an exempt nonprofit organization with the IRS, and

* It has no business income from activities unrelated to its exempt purpose.

Registration is quite straightforward. The IRS grants exempt status to groups organized for charitable or mutual benefit purposes. You must submit your application within the first 15 months of the group's existence. The package consists of an application form, a copy of your Articles of Incorporation or similar document, and a user fee. Some groups, such as churches or those with annual receipts of less than $5,000, don't even have to register to be considered exempt.

More questions arise on the definition of unrelated business income. Generally, you will owe tax on income from any trade or business that is not substantially related to the organization's exempt purpose. Fortunately, the definitions are quite favorable in this area. The business really has to be quite distinct from the primary purpose of the organization before income becomes taxable. For example, a charity doesn't pay tax if it runs a thrift shop and uses the proceeds for its charitable work. Generally, rents from leasing out real property, interest income, and dividends are not subject to tax.

Once it's registered, an exempt organization will have to file an annual information return on Form 990 or 990-EZ unless its yearly gross receipts do not exceed $50,000. Those exempt organizations with receipts of $50,000 or less must still file an annual return electronically on Form 990-N. Just as with a tax return, there are penalties for filing Form 990 or 990-EZ late or failing to file. There is no penalty on an organization that is required to file Form 990-N but fails to do so; however, if an organizations fails to file an annual return for three consecutive years, its exempt status is revoked.

Generally, the filing deadline is the 15th day of the fifth month after the organization's year-end. For 2013 returns, the deadline for calendar-year organizations is May 15, 2014. For assistance with this or any of your tax filings, contact our office.

Tips on how to save more for retirement

Need to save more for retirement? 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.

* Figure out how much money you need for retirement. The number of years you have before retirement will help determine how much you will need to invest each month to reach your financial goal.

* Be realistic. Make sure that your savings goal is realistic. If your goal works out to 10% to 15% of your monthly income, it should be achievable. But you may need to cut expenses to free up savings.

*Pay yourself first. Try to 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.

*Track expenses. 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.

*Take control. 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.

The key to having enough money for a comfortable retirement is to become a serious saver. Start saving early, commit to saving regularly, and save as much as you can. No one ever retired regretting that they had accumulated too large a retirement fund.

How important are good tax records?

Tax records should be kept year-round, not hastily assembled just for your annual tax appointment. Without tax records, you can lose valuable deductions by forgetting to list expenses on your return or having unsubstantiated items disallowed if you're audited.

Generally returns can be audited up to three years after filing. However, if income is underreported by more than 25%, the Internal Revenue Service can collect underpaid taxes up to six years later. In other words, you need good records to verify what you report on your tax return, and you should hang on to those records for seven years.

Health insurance credit increases for 2014

You may not have taken the health insurance premium credit for your small business in past years. (It's been available since 2010.) But you might want to consider taking it this year. For 2014, the credit increases from 35% to 50%. When you qualify, you can use the credit to offset your income tax liability by up to 50% of the cost of the health insurance premiums you pay for your employees.

For details on eligibility requirements, contact our office.

New limit on IRA rollovers

For years, the IRS interpreted the IRA rules to allow taxpayers to do one rollover per year in each IRA he or she owned. In doing a rollover, the taxpayer is not taxed on the funds taken from the IRA so long as the funds are redeposited into an IRA within 60 days of the withdrawal.

A recent court ruling stated that the rollover limit should be applied on an aggregate basis, meaning that only one rollover per year is allowed for all IRAs owned by the taxpayer, not one for each. The change becomes effective January 1, 2015.

Contact us for assistance before planning any IRA rollover to be sure you don't end up with a tax surprise.

Your tax refund could be offset by debts

If you have unpaid obligations, such as overdue child support, state income tax, or student loans, part or all of your 2013 income tax refund may be redirected to pay the debt. The Treasury Department's Bureau of Fiscal Service runs the offset program, and it is this agency that will send you a notice if an offset occurs. The notice will list the original refund and offset amounts, plus the name and contact information of the agency that received the payment. For more details or assistance, contact our office.

Prepare, prepare, prepare if you want to get your bank loan

Getting a bank loan for your business may be more difficult than usual in today's troubled economy. However, if you give your bank a thorough, organized, and well-supported loan proposal, you'll increase your chances of getting the money your business needs.

* Apply early. Applying early shows that you're planning, not reacting. Also, if you wait until the last minute, you're likely to leave out necessary information.

* Prepare a loan proposal. Many small businesses, especially first-time borrowers, fail to prepare a formal loan proposal. This is a mistake. The loan proposal, together with cover letter and supporting documentation, gives you a chance to explain your request clearly and thoroughly.

* Give the bank what it needs to know. Be prepared to present detailed, well-supported answers to the following questions: How much money do you need? For what purpose? How long do you need it? How will you repay it? What collateral are you willing to put up, and how much is it worth?

* Include all essential documents. With respect to your business, you'll probably need at least the last three annual financial reports and tax returns, the most recent interim report, and a recent aging schedule for accounts receivable. You may also have to provide personal information, including a current personal financial statement and your last three tax returns. For business equipment and real estate, you may have to provide a recent appraisal.

* Give bad news as well as good. Your personal character is the most important nonfinancial part of your loan proposal. Increase your credibility by revealing your financial skeletons, if any, ahead of time.

If you do your homework and prepare thoroughly, you're more likely to obtain the money you need. Contact us for assistance in preparing your loan proposal.

Have you checked your withholding lately?

Did you receive a large tax refund or owe a large balance due on your 2013 income tax filing? If so, it may be time for you to check your withholding. Changing your withholding is as simple as filing a new Form W-4 with your employer.

The smart taxpayer will calculate withholding to be as close to the actual amount 2014 tax liability will end up being. That will prevent you from being penalized for underpayment and from giving the IRS interest-free use of your money for a year.

 Keep these general rules in mind. You won't face an underpayment penalty if you pay for 2014, through withholding or quarterly estimated payments, at least 100% of your 2013 tax liability (110% if your adjusted gross income for 2013 is over $150,000), or if you pay at least 90% of what you'll owe for 2014.