Know when to sell

Know when to sell

Deciding when to buy a stock is often easier than determining when to sell. As you're reviewing your portfolio at year-end, consider these situations that may indicate the right time to sell.

When there are no tax consequences. If you hold stock in a retirement fund, you may want to reap gains with no tax impact.

To take money off the table. If a stock has had a nice run, you could sell a portion to recoup part of your investment. You can continue to invest in the stock but with locked-in gains.

A shift in fundamentals. Consider selling if the economy changes or an entire industry becomes vulnerable due to negative news.

When you've given up on a stock. If a stock has been declining or flat-lining for an extended period, selling low now can save you from having to sell even lower later on.

To take a contrarian position. If the market has gotten frothy and all the news is optimistic, choosing to harvest your gains could be a wise move.

When cash becomes attractive. A gloomy economic outlook could be reason to increase your cash reserves.

Having a disciplined selling strategy means giving as much thought to the sale of a stock as to the purchase. Contact us. We're here to help.

How social security benefits are taxed

How social security benefits are taxed

Are you wondering if your social security retirement, survivor, and disability benefits will be subject to federal income tax on your 2016 return? Generally, when these benefits are taxed is determined by your "provisional income."

Provisional income (PI) is the product of a formula used for no other purpose than figuring out the taxable percentage of social security benefits. To compute your provisional income, total your adjusted gross income, any tax-exempt interest or similar nontaxable revenue, and one-half of your social security retirement benefits for the year. How much of your benefits are taxed depends on this "base amount."

– Joint filers with PI below $32,000 ($25,000 for single filers) owe no tax on benefits.

– Joint filers with PI between $32,000 and $44,000 ($25,000 and $34,000 for single filers) are taxed on a sliding scale that tops out at 50% of benefits received.

– Joint filers with PI over $44,000 ($34,000 for single filers) are taxed on more than 50% and up to 85% of benefits.

Note that supplemental security income payments (SSI) are not taxable. For answers to questions about your benefits, contact us.

Avoid hiring mistakes in your start-up

Avoid hiring mistakes in your start-up

Staffing errors can spell disaster for your start-up. Here are three to watch out for.

1. Staffing the firm with friends and family. While this strategy may work in some circumstances, hiring pals and relatives often spells trouble. For one thing, friends and family members often expect – even subconsciously – to be treated differently from other employees. A double standard, whether real or perceived, can hurt morale and productivity. As a general rule, focus hiring decisions solely on the needs of your firm and applicant qualifications.

2. Trusting in a handshake. Spell out employee arrangements in writing. This can be as simple as drafting employee offer letters that cover compensation, rights to intellectual property, and bonus arrangements. Employee handbooks are also a good way to spell out the responsibilities of your firm and staff.

3. Bringing in a partner for the wrong reasons. Downside risks of bringing in a partner include surrendering a portion of your company and control over important management decisions to someone else. Before selling part of your company, ask yourself what the partner will contribute besides money. Can you find other ways to fill gaps in your team? Choosing wisely can help you avoid ending up in the business equivalent of divorce court.

For assistance with issues facing your start-up business, give us a call.

Don't include the IRS on your gift list

Don't include the IRS on your gift list

Suppose a relative gives you an expensive painting. Several years later, your relative dies and you decide to sell the painting. Your accountant says you'll owe capital gain tax on the sale, and asks for your basis in order to reduce the amount on which you'll pay tax. What's your answer?

When you sell property received as a gift, the general rule is that your basis is the donor's cost basis. If you sell at a loss, your basis is the lower of the donor's basis or the fair market value on the date you received the gift. These numbers are adjusted in some cases. But without cost records, you have no way of proving the donor's basis and no way of saving yourself tax dollars.

If asking for records of the cost when you receive a gift seems inappropriate, explain why you want to know to help make the conversation less awkward. No one likes to pay unnecessary taxes. Having the same conversation about the cost of valuable gifts you received in prior-years is also worthwhile.

If you're the gift-giver, offer the additional gift of presenting the cost records to the recipient at the same time. Otherwise, you may end up giving an unintended gift to the IRS in the form of unnecessary taxes.

Having problems keeping employees?

Having problems keeping employees?

Is retention of good employees a priority for your business? Consider conducting "stay" interviews. These meetings between managers and valued employees can provide insight into why your employees like their jobs, which in turn lets you know how to retain the employees. Conducted on a regular basis, generally more than once a year, stay interviews tell employees you're serious about accepting feedback and keeping them on the job.

Complete these retirement plan steps before year-end

Complete these retirement plan steps before year-end

December 31 is the last day you can benefit from certain retirement tax breaks. For example, if you haven't put the maximum amount allowed in your 401(k) – $18,000 in 2016 – increasing your contributions can save you money. If you're over age 50, you can make a catch-up contribution to a 401(k) of an additional $6,000. If you're age 70½ or older, remember to take required minimum distributions from retirement plans to avoid a penalty. For more tips on managing your retirement plans, contact us.

Are you part of the "sharing" economy?

Are you part of the "sharing" economy?

The IRS defines the "sharing" economy as economic activity generated through the use of technology that lets you earn money from your assets, such as a car. Income from these activities, including room rentals and car rides, is taxable, and you may be able to deduct related expenses. Depending on the work you do, special tax rules can apply. Contact us for information about how to report your sharing activity income.

Your suddenly dead mobile phone may be a sign of fraud

Your suddenly dead mobile phone may be a sign of fraud

According to the Federal Trade Commission, in a growing type of fraud known as a "SIM swap" scam, fraudsters take over your mobile account in order to steal your identity. The SIM, or subscriber identity module, card in your phone is the memory chip that stores information identifying the phone to a network. Thieves contact your phone company, claiming to be you, and request activation of a new SIM card with your existing phone number. Your phone goes dead, and the thief can then intercept phone calls and text messages that allow access to financial accounts. As a safeguard, consider adding a password that must be activated before your phone account can be changed.

Clean your financial house for the New Year

Clean your financial house for the New Year

Out with the old, in with the new. No matter whether you apply the expression to changes in attitude or to life adjustments, the end of the year is a great time to assess your household finances and prepare for new opportunities. Here are suggestions.

Review your credit report. Request a free copy of your credit report from each of the three major credit bureaus. If the reports contain errors, get them corrected.

Make or update your home inventory. Go through your house and make a video describing what you see, along with information such as purchase dates, prices, and estimated values. Your home inventory can be vital for getting insurance claims approved in case of disaster.

Calculate your net worth. Your net worth is the value of your assets, including your house, personal property, bank accounts, car, and investments, minus liabilities such as your mortgage, credit card balances, and loans. This is a great yardstick for measuring your household's financial growth (or shrinkage) from year to year.

Increase your savings. If you get a year-end raise, consider contributing a portion of the extra money to your 401(k) plan or other savings account.

Purge financial records. If you're a financial packrat with stacks of old cancelled checks and bank statements that are no longer needed for an IRS audit or your own use, shred them.

Need help? Contact our office.

Do you need to bunch your medical deductions?

Do you need to bunch your medical deductions?

Bunching deductions means timing the payments between years to get the best tax deduction. Since 2016 is the last tax year that taxpayers age 65 or older can use the 7.5% of adjusted gross income (AGI) deduction floor, you may want to consider bunching medical deductions this year. Starting in 2017, the deduction floor for medical expenses for this age group rises to 10% of your AGI. Allowable expenses include long-term care premiums, prescription drugs, mileage or transportation costs, and home improvements that accommodate a disability or medical condition. Nondeductible items include funeral expenses, nutritional supplements, and nonprescription drugs. Contact us for assistance.

S corporation loss for 2016? Check your basis

S corporation loss for 2016? Check your basis

Typically, stock basis in an S corporation begins with the capital contribution you make to get the company started. At the end of each taxable year, your stock basis is adjusted to reflect your business's operating results. After your stock basis reaches zero, you may be able to deduct additional losses, up to the extent of your debt basis. However, once your stock and debt basis are both reduced to zero, losses incurred are suspended, and you get no current tax benefit. Contact us if you're in this situation. We can provide a sol
ution and guide you through the rules.