Take control of holiday spending

Take control of holiday spending

Exchanging gifts, entertaining family and friends, and extending goodwill to others are the activities that make holidays joyful. But sometimes the enjoyment is followed by financial headaches. January's bank statements and credit card bills bring the unhappy realization that you lost control of your finances.

How can you prevent this financial hangover? Start with a budget. Estimate the cost of what you plan to purchase. Include gifts, holiday decorations, entertaining, and special events. If the total cost is manageable, stick to your budget as you shop.

But what if the cost grows – and grows some more? There's no need to resort to miserly behavior to trim that out-of-control gift list. One option is to draw names of family members and give one nice gift to each person, rather than multiple small gifts to everyone. Elderly relatives might appreciate "gift certificates" that can be redeemed for your help with home or garden chores. Other cost-saving ideas: make or bake gifts instead of buying them; give combined gifts from parents and children instead of individual gifts; agree on a spending limit with close friends.

While you no doubt want to splurge on the kids during this time of year, don't feel you have to give your children every gift they ask for. When they make their list, have them prioritize the things they really want. At the store, take a lesson from your own childhood, when your favorite gifts were simple toys that encouraged you to use your imagination.

Remember, too, the holidays are more than gift-receiving time. Create a family tradition of choosing and wrapping a present for those less fortunate. Encourage your children to make gifts for family and friends. Arrange family outings and fun activities so the holidays become a series of enjoyable events.

An emphasis on holiday experiences in place of shopping extravaganzas will let you enjoy the season more – both this month and next, when the bills come due.

Do you know who you're giving to?

Do you know who you're giving to?

Many charities use your donations wisely. Unfortunately, others spend too much of your contribution on fundraising and administrative expenses. Some even misrepresent themselves and solicit your money for phony causes. In today's world, investigating a charity before you make a donation is wise. Here's a checklist of precautions.

● Request written documentation about the charity's mission and how your contribution will be spent. Ask for proof that your donation is tax deductible. If a charity is reluctant to provide information, think twice about making a gift.

● When you receive a phone solicitation, the caller must provide his or her name, the name of the person or entity on whose behalf the call is being made, and a telephone number or address at which that person or entity can be contacted. If a caller refuses to give you this information, hang up. Report the call to local authorities to help protect others.

● Be wary about giving your credit card number over the phone. Instead, consider mailing your contribution once you've verified that the charity is legitimate and that it represents a cause you'd like to support.

● Just because an organization gives you a receipt for your records doesn't mean the organization is tax-exempt or that your contribution is tax-deductible. To find out if an organization is exempt from federal income tax and how much of your contributions to it are tax deductible, visit the IRS website at https://apps.irs.gov/app/eos.

Asking the right questions and obtaining information from and about a charity is the only way you can be sure your contribution will be used to benefit the causes and people you want to support. If we can help you sort the legitimate from the fake, give us a call.

Give a gift that will last a lifetime

Give a gift that will last a lifetime

Financial gifts can bestow benefits for many years to come. Here are options to consider.

 

● Fund an IRA. Give your children or grandchildren an early start on a comfortable retirement. For 2015, you can contribute the lower of $5,500 or the earned income of the child to an IRA.

● Fund a 529 education account. Contributions to a Section 529 college savings plan grow tax-free and withdrawals are tax-free when used to pay qualified education expenses of the account beneficiary.

● Fund a Coverdell education savings account. You can contribute up to $2,000 annually to a Coverdell. These IRA-like accounts grow tax-free, though the total amount of your gift may be limited, depending on your income.

● Fund a custodial account. Want to encourage an interest in saving and investing? Buy shares in a mutual fund and combine the gift with a book on investing. Your child can watch the investment grow over time and enjoy dividend payouts too. Modest amounts of investment income can be tax-free to children, although the kiddie tax may apply at higher levels.

Call us to review the tax issues related to these financial gifts.

Take time to review the health of your business

Take time to review the health of your business

As an owner and/or manager, you probably spend a lot of time monitoring business operations and dealing with everyday problems. But a longer-term approach is also useful. Just as an annual checkup from your physician helps monitor and manage your personal health, an annual checkup can do the same for your business.

Here are tips to get started.

1. Insurance coverage. Instead of automatically writing a check to renew insurance policies when they come due, sit down with your agent. Review your business operations, focusing on any changes. Discuss types of risk that could arise. Ask about new developments in business insurance. Use your agent's expertise to identify risk areas and suggest suitable coverage.

2. Tax strategy. Consider adjusting taxable earnings for the year, perhaps by accelerating expenses or delaying income at year-end. If your business reports on the cash basis, you could boost 2015 deductions by declaring and paying bonuses in December rather than in early January. Deferred invoicing or early purchases can also reduce your 2015 tax bill.

3. Customer survey. Track customer satisfaction with an online survey. Focus on questions that reveal how well your company performs in areas such as prompt service, staff responsiveness, and understanding of customers' problems. Ask your customers for insight on potential new products or services, and let them know how much you value their business.

4. Marketing review. Are your current methods and channels working well, or are you simply doing what you've always done?

5. Succession planning. Do you have a specific plan for each key managerial position, including yourself? Are you prepared for a short-term absence or a permanent vacancy? Your plan might point out the necessity of promoting from within or recruiting externally.

6. Banking relationships. Meet with your banker. Ask about new products or services that could help your company. Address service concerns or problems that occurred during the year. Look for ways to reduce idle cash, boost interest earned, and improve cash flows.

An annual business checkup can help you evaluate current performance, better manage and execute future operations, and provide a plan for keeping your business on track. If you need assistance, give us a call.

Get a head start on your Form 1099 reporting

Get a head start on your Form 1099 reporting

No matter what type of business you operate, January is busy. You're trying to get your business off to a good start in the new year, you're closing the books on last year, and you have to complete payroll and 1099 forms by month-end. Why not make time this month to get a head start on at least one of those chores?

You can lay the groundwork now for a common information return known as "Form 1099-MISC, Miscellaneous Income." You use Form 1099-MISC to report payments to non-employees. The list of payments includes fees to independent contractors for services, such as consulting, web designing, accounting, and legal. Generally, you don't need to report amounts you pay to corporations, but there are exceptions. For example, you must report payments to all law firms, whether the firm is incorporated or not.

Here's the information you need to start assembling to complete Form 1099-MISC: the name and address of vendors you paid in the course of your business, the taxpayer identification number of each vendor, and verification of corporate status. The best way to collect this information is to use "Form W-9, Request for Taxpayer Identification Number (TIN) and Certification." Send a copy to all vendors and ask them to complete and return the form to you. When you get the form back, keep it with your records. The IRS doesn't need a copy.

In order to save time in the future, establish a policy to request Form W-9 from a new vendor whenever you sign a contract.

Contact our office if you need more information.

Poor recordkeeping means lost deductions

Poor recordkeeping means lost deductions

What's worse than keeping records? Losing tax deductions because you didn't keep records. Tax court cases routinely deal with "unsubstantiated" expenses – business costs that taxpayers claim but cannot prove – and taxpayers routinely lose. Every legitimate and supported deduction can save you tax dollars. As the end of the year approaches, take time to make sure your records are in order. Don't want to deal with reams of paper? Software programs and apps can ease the burden. Give us a call for suggestions on how to improve your recordkeeping

Check unclaimed property lists for missing money

Check unclaimed property lists for missing money

Discovering unexpected money is always a pleasant event and generally even more so this time of year. You don't need to dig between the couch cushions to find it. According to the National Association of Unclaimed Property Administrators (NAUPA), state governments have $41.7 billion in unclaimed property on their books. While it may sound like a scam, you could have a legitimate claim to money such as abandoned bank accounts and utility security deposits that you forgot to collect when you moved. You can claim the funds at no cost. Start by checking http://www.MissingMoney.com, a website officially endorsed by the NAUPA

Did you pay domestic employees in 2015?

Did you pay domestic employees in 2015?

Nannies, housekeepers, caregivers – the people who make your home life easier – are your employees, and you're required to comply with income and payroll tax rules. For 2015, you'll need to withhold social security and Medicare taxes when you pay your worker $1,900 or more during the year. You'll also need to provide year-end tax forms and wage statements and file a special schedule with your personal federal income tax return. Contact us for details

Be aware of 2016 payroll rates

Be aware of 2016 payroll rates

The Social Security Administration announced the 2016 wage base for computing the amount of payroll tax will be $118,500, the same as 2015. The wage base is the maximum amount of wages subject to the social security portion of the payroll tax you may know as "FICA." The total FICA rate is composed of two parts and the rates for both remain the same for 2016. The social security tax portion is 6.2% of an employee's wages on amounts up to $118,500. The basic Medicare portion is 1.45% of an employee's wages, no matter the amount. Note that employers must also withhold an additional 0.9% Medicare tax on wages over $200,000.

Will your employees stay after the holidays?

Will your employees stay after the holidays?

A survey of employees and human resources professionals showed that what employees want and what the professionals think they want may not be the same. According to the survey, one in three employees is looking for a new job. Reasons include salary levels and lack of a clear career path. If employee retention is a problem at your company, perhaps you're not aligning your business interests with that of your employees. What to do? Start by asking employees what motivates them. The survey showed employees are willing to share – if you ask the right questions.

Plan for changes to social security options

Plan for changes to social security options 

A recent law eliminated two social security "loopholes," but you may still be able to benefit in some circumstances. The option to apply for social security when you reach full retirement age and restrict your claim to spousal benefits will only be available if you're age 62 by December 31, 2015. The option to voluntarily suspend your benefits in order to receive them later when they would be higher will only be available until April 2016.