Lack of diversification makes for risky business

Lack of diversification makes for risky business

Is your business adequately diversified? Relying on too few customers, vendors, or key employees can leave you open to risks that can be catastrophic. Here's what to consider.

Customers. Do you depend on just a few customers for the majority of your sales? What will happen to your business if your largest customer requests a major price reduction, starts buying from your competitor, or is bought out? Even if your company sells to many customers, you aren't adequately diversified if most of them are in the same industry. This is known as concentration risk. Reduce it by targeting customers in different industries.

Vendors. How many suppliers do you rely on for the smooth operation of your business? Do you have a backup option if a key vendor raises prices, can't provide enough product, or goes out of business?

Employees. Do you count on the skills and reliability of one key second-in-command person? What would happen if that individual suffered a family emergency and had to leave unexpectedly? Sharing information and allocating responsibilities among employees can keep the work flowing.

When your business is new, diversification may be difficult. But putting a plan in place to reduce your vulnerability to manageable risks is essential for your long-term success. Contact us for tips and suggestions.

Teach your children this vital skill

Teach your children this vital skill

Financial literacy is a vital skill in today's world. Will your children be able to handle their finances when they became adults? Here are tips to help ensure the answer is yes.

Shave spending. Take the weekly allowance to the next level by helping your child develop a budget. Review the results to reinforce good habits.

Stress savings. Even young children can grasp the power of compound interest. A simple example is asking your child to put a dollar in a piggy bank. Offer to pay five percent interest if the money is still there in a week or a month. Make the same offer at the end of the first time period, and pay "interest on the interest" as well.

Introduce investments. Create a portfolio, either real or paper, consisting of shares of one or more stocks or mutual funds. Make a game of charting the investment's progress on a regular basis.

Cover credit. Take on the role of lender and let your child request an advance on a weekly allowance. Charge interest.

Talk taxes. Use word search or crossword puzzles to teach tax terminology. Consider creating a "Family Economy" game using examples from your own budget.

Lessons in financial responsibility can benefit your children now and in the future. Get them started on the right path.

Smart review tactics lead to long-term business success

Smart review tactics lead to long-term business success

As a business owner, monitoring operations and dealing with everyday problems no doubt takes up the bulk of your day. But carving out time for a comprehensive review can benefit your business. Here are key areas to consider.

Insurance coverage. Automatic renewal may appear to be a time-saver. But you might be missing out on necessary updates and the opportunity to revise your coverage. Sit down with your insurance agent and discuss your business operations, focusing on risks from new ventures or changes in laws. Make sure you have suitable liability coverage.

Tax strategy. A month after you file your tax return, make an appointment with your tax advisor. Go over your return together and identify opportunities for tax savings. Question everything, starting with whether you're using the right form of business entity. Ask about recent changes in the tax code and how they might benefit your business. Make your advisor a partner in your business strategy.

Succession planning. Have a specific plan for each key managerial position, including yours. Will you promote from within or recruit externally in the case of an unexpected vacancy? Which managers can be cross-trained to keep your business operating during the short-term absence of another employee?

Banking relationships. Schedule a meeting with your controller or chief financial officer to go over your cash balances and banking relationships. Then both of you meet with your banker. Address service concerns or problems that arose during the year. Look for ways to reduce idle cash, boost interest earned, and improve cash flows.

Personal estate planning. Your company is likely a significant part of your estate. A good estate plan is essential if you hope to pass it on to your heirs. But your company, your personal circumstances, and the tax laws are continually changing. Make sure your plans are current.

Contact us for more suggestions. We can assist you in securing your business's long-term success.

Use taxes to reduce your tax

Use taxes to reduce your tax

Are you planning to itemize on your 2015 federal income tax return? If so, you can claim a deduction for taxes paid. According to IRS statistics, taxes are the most frequently claimed itemized deduction, as well as the largest. But what kind of taxes can you deduct on your personal return?

State and local income taxes or general sales tax. You can choose whichever gives you the most benefit.

Real estate taxes. Deductions include taxes you pay on your home or other real property you own (including property owned in a foreign country). Remember to check closing statements when you buy or sell property. You can claim the portion of current real estate taxes you're responsible for. However, if you agree to pay delinquent taxes the seller owed at the time of closing, that expense is considered part of your basis in the property.

Personal property taxes. These taxes are imposed annually on the value of property other than real estate. Certain motor vehicle registration fees fit this description.

Foreign income taxes. Caution: Instead of deducting these taxes, you have the option of taking a credit, which will reduce your tax bill dollar-for-dollar and may offer more benefit.

Federal estate tax. If you inherit certain assets and are required to report the income from those assets on your personal return, you may be able to deduct a portion of the federal estate tax paid.

Some taxes, such as self-employment taxes, are deductible elsewhere on your return. Other taxes are not deductible at all. Examples include marriage licenses, gift taxes, and Medicare taxes (including the 3.8% net investment income tax). Feel free to contact us if you have questions about the deductibility of a tax you paid during the year, or if you received a refund of a tax you deducted in a prior year. We're here to help.

Be aware of these four IRA rules

Be aware of these four IRA rules

If you have an individual retirement account, you're aware of how complicated the rules can get. Here are four to remember as you prepare your 2015 federal income tax return.

1. Are you searching for one more tax deduction? It's not too late to contribute to your IRA and claim a deduction for 2015. Under current tax rules, you can establish and contribute to your IRA up until April 18, 2016 (April 19 if you live in Maine or Massachusetts). If the IRA is the traditional, tax-deductible kind, you can deduct that contribution on your 2015 federal income tax return. If you're under age 50, the maximum contribution is $5,500. If you were 50 or older by December 31, 2015, you can contribute up to $6,500.

2. You can make a contribution to a traditional IRA and convert it to a Roth later. Although a conversion now will generate taxable income that's re portable on next year's federal tax return, qualifying withdrawals from the Roth will be tax-free when you retire. If your circumstances change, you can choose to "re characterize" your new Roth as a traditional IRA by moving the funds back within a specified period. You also have the opportunity to "reconvert" the funds to a Roth again after a re characterization

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3. If you turned 70½ in 2015, you're now required to take an annual minimum distribution from your IRA (and, unless you're still working, from other retirement plans also). If you chose to delay taking your first distribution last year, April 1, 2016, is an important deadline. That's the last day you have to take your initial distribution or you'll be subject to a 50% penalty on the amount you should have taken.

4. The age of 70½ also lets you benefit from the now-permanent tax break for making charitable contributions from your IRAs. While it's too late to make a contribution for 2015, you can exclude direct transfers of up to $100,000 from your gross income this year. The donation counts as part of your required minimum distribution.

For more tax breaks related to IRAs and other retirement plans, contact our office.

Educate your kids about tax filing

Educate your kids about tax filing

According to a recent survey conducted on behalf of a consumer finance information service, nearly 80% of 18-34 year-olds have concerns about filing income tax returns. Of that group, 34% ask families and friends for advice. Do you know a young adult who is anxious about getting this year's tax return completed correctly? One way you can help ease the stress is by scheduling an appointment for a family tax and financial talk with us. We're here with answers and advice.

Get credit for retirement contributions

Get credit for retirement contributions

Did you make contributions to a traditional or Roth IRA, a myRA, or a SEP or SIMPLE plan in 2015? You may qualify for the Retirement Savings Contributions Credit, more popularly known as the "saver's" credit. If you're eligible, you can apply this federal income tax credit against the tax you owe on your 2015 return. The credit is available even if you take a tax deduction for a traditional IRA contribution, as well as for IRA contributions for last year that you make before the April due date of your return.

Hiring workers can bring tax breaks

Hiring workers can bring tax breaks

 The Work Opportunity Tax Credit, known as WOTC, can reduce your federal income tax liability dollar-for-dollar when you hire certain workers. The credit is available for 2015 if you hired workers from "targeted" groups, such as ex-felons, food stamp recipients, and Supplemental Security Income recipients. Beginning in 2016, you can also claim the credit when you hire individuals who were unemployed for at least 27 consecutive weeks and who received unemployment compensation.

New tax benefits available when claiming the research and development credit

New tax benefits available when claiming the research and development credit.

If you conduct qualified research activities, you may be eligible to claim a federal income tax credit known as the "research and development" credit. This credit is now permanent and may benefit you when you design, develop, and improve business products or processes. Beginning in 2016, the research and development credit can be applied against your alternative minimum tax liability. In some cases, the credit may also be applied against up to $250,000 of payroll taxes.

Which depreciation method is best for your business?

Which depreciation method is best for your business?

When you purchase assets and use them in your business, you have several options for deducting the cost. For example, you may choose to write off the full cost using Section 179, an alternative that lets you expense up to $500,000 of new and used equipment purchases. You can also use "bonus" depreciation to write off up to 50% of the cost of new assets with a life of 20 years or less. In both cases, you apply regular depreciation methods to the remaining value of the assets. The best way may not be a single choice, but rather a combination that optimizes your tax benefit. Contact us for a depreciation review.

One more extension for estate executors

One more extension for estate executors 

A law passed last summer added a new task for estate executors and others who file estate tax returns after July 31, 2015: providing a statement of the value of estate assets to beneficiaries and the IRS. The statement is designed to ensure consistency between the value of the property for estate tax purposes and the basis a beneficiary reports for income taxes. The information is filed on Form 8971, Information Regarding Beneficiaries Acquiring Property From a Decedent. If you're required to complete Form 8971 before March 31, 2016, you do not need to do so until March 31, 2016. (The original due date was February 29, 2016.)