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.

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 The money you contribute to a retirement account can reduce your taxable income and grow tax-free until withdrawn.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.

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.

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.

Use the 80-20 rule to increase your business profits

Use the 80-20 rule to increase your business profits

How well do you know your customers? Which ones are the most profitable? Which ones take most of your time? It's worth taking the time to find out. If your business is like most, the 80-20 rule applies. That is, 80% of your profits come from 20% of your customers.

If you can identify that top 20%, you can work hard to make sure this group remains satisfied customers. Sometimes all it takes is an appreciative phone call or a little special attention. Also, by understanding what makes this group profitable, you can work to bring other customers into that category.

Keep in mind that it's not always profits alone that make a good customer. Other factors, such as frequency of orders, reliability of the business, speed of payment, and joy to deal with are important too. Ask your accounting staff and your sales staff. You'll soon come up with a list of top customers.

There's another way in which the 80-20 rule applies to your business. Very likely, 80% of your problems and complaints come from 20% or fewer of your customers. If you identify those problem customers, you can change the way you do business with them to reduce the problems. Consider changing your pricing for those customers so that at least you're being paid for the extra time and effort they require. Sometimes the only solution is to tell these customers that you no longer wish to do business with them.

The bottom line is that understanding your customers better can only help your business. Contact us if you need help analyzing your customer profitability.

There are tax breaks when you do charitable work

There are tax breaks when you do charitable work

If you do volunteer work for a charitable organization and have not kept track of your out-of-pocket expenses, you might be passing up an excellent opportunity to lower your tax bill. To qualify, your unreimbursed expenses must relate directly to the charity, and you must itemize your deductions on your tax return. Here is a brief rundown of some possible deductions.

* Volunteers may deduct the cost of phone calls, postage stamps, supplies, and other out-of-pocket costs incurred in their volunteer work. For volunteers who are required to wear a uniform, the cost of buying and cleaning uniforms is deductible if they are unsuitable for everyday wear.

* The cost of your time, no matter how valuable it may be, is not deductible. That's true even if you would normally be paid for the type of service you contribute. For instance, accountants who perform free consulting for charities can't deduct what they would normally charge for their services.

* Using your car in connection with volunteer work can earn you a deduction. The standard mileage rate for volunteers who use their own cars is 14 cents per mile. Alternatively, you may deduct your actual unreimbursed expenses for gas and oil - but not maintenance, depreciation, or insurance. Either way you choose, related parking fees and tolls are deductible as well.

* If you travel overnight for charitable purposes, your expenses are deductible as long as they are reasonable in amount and not connected with personal activities or any element of recreation.

* Special rules apply to conventions. Travel and other out-of-pocket expenses related to attendance at a convention for volunteers are deductible only if you have been chosen as a delegate to represent the organization.

Finally, just remember that it is up to you, the volunteer, to substantiate your deductions. If you take these deductions, you should be prepared to show the IRS the connection between the costs claimed and the charitable work performed.

Switching funds can bring a tax surprise

Switching funds can bring a tax surprise

Many mutual fund companies allow you to switch funds without a penalty or commission, as long as you stay within their family of funds. There's a catch though. Unless the funds are in a tax-deferred retirement account, you could owe income tax each time you make a switch. When you move money between funds, the IRS considers it a sale. You've sold shares in the first fund, then reinvested the proceeds in the second. As a result, you'll owe income tax on any gain.

You should consider switching funds when it makes economic sense to do so. Just don't forget that Uncle Sam may have his hand out at tax time.  To discuss the tax implications before making a switch, give us a call.

Have you paid enough for 2014

Have you paid enough for 2014?

The deadline for the third quarterly payment of 2014 estimated taxes is September 15. That's a good date to do a quick review of the taxes you've paid so far for 2014, whether you pay in quarterly installments, through withholding, or both. If necessary, you can beef up your quarterly payment or adjust your income tax withholding for the remainder of the year. Be aware that withheld taxes are considered paid in equal amounts during the year, regardless of when the tax is withheld. An adjustment now to withholding or quarterly estimates can help prevent underpayment penalties for 2014.

IRS issues another warning

Another strong warning from the IRS is alerting taxpayers to phone scams that have already resulted in 90,000 complaints and the theft of millions of dollars. Here's how the typical scam works: The caller claims to be from the IRS and, using hostile and abusive language, demands immediate payment of taxes by a prepaid debit card or wire transfer. The IRS reminds taxpayers it will never contact you by phone about owed taxes; the first contact will be by mail. It will never ask for credit, debit, or prepaid card information in a phone call, and it will never request immediate payment over the phone.

Driving for Charity

Driving for charity

If you drive your car on behalf of a charitable organization and there is no element of personal pleasure, recreation, or vacation involved, you may take a tax deduction for either your actual vehicle expenses or the standard mileage rate of 14 cents a mile, plus parking fees and tolls.

Parents need to do estate planning

Parents need to do estate planning

For a parent, estate planning is especially important. The first priority is to make sure your children are protected in the event that something happens to you. Your estate plan should appoint guardians for your minor children, as well as provide for their financial well-being.

Use Summer earnings for an IRA

Use summer earnings for an IRA

If your children have earnings from summer or after-school jobs, encourage them to open IRA accounts. The additional years of tax-free compounding can produce huge additional savings by the time your children reach retirement age.