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Your Government at Work

Author: Keith Huggett

Well, it's the end of 2014 and our government has decided favorably on extending certain tax breaks for this year.  In a manner similar to the American Taxpayer Relief Act of 2012,  Congress and President Obama have passed Tax Increase Prevention Act of 2014  to extend several tax credits through the end of December 2014.  So what does this mean for you and your business?

For Individuals:

• The ability to make qualified charitable gifts directly from an IRA and exclude the IRA withdrawal from income.You must be at least 70½ years old at the time of the gift, the gift must go directly to the charity from the IRA trustee, the gift counts towards your Required Minimum Distribution for the year of the gift and the maximum gift allowed is $100,000 per year.  

• You can deduct state and local sales taxes rather than state and local income taxes.  This provision is particularly important for those taxpayers living in the seven states that don’t currently assess an income tax.

• Teachers can deduct up to $250 in unreimbursed classroom expenses.

  Individuals can claim an above-the-line deduction for tuition and fees for qualified higher education expenses.

• The above-the-line deduction for couples with a modified AGI of $130,ooo or less and  $2,000 for couples between $130,000 and $160,000.  For single taxpayers, the breakpoints are $65,000 and $80,000.  

• Qualified Mortgage Debt- up to $2 million dollars (married filing jointly) or $1 million for married filing separately, can be excluded from income.

For businesses:

• You can claim credits for expenses related to research & development activities, for providing low-income housing structures and for businesses that employ active duty service members.

• If you have hired certain members of targeted groups, you can claim the Work Opportunity tax credit, which is equal to 40% of a portion of the first-year wages paid.

• If you purchased any qualified assets, the accelerated depreciation deduction, allows your companies to deduct 50% of the cost of a qualified asset in the year it is acquired.

• The exclusion of 100% of the gain on qualified small business stock is extended to include stock acquired in 2014 and held for more than five years.  This exclusion is scheduled to revert to 50% for qualified stock acquired after 2014.

For a complete listing of the credits, extenders, and deductions available, please take a look at the Tax Increase Prevention Act of 2014. If you have any questions regarding how these tax extenders will affect either you or your business, please contact us.  Our tax planning specialists are able to illustrate the changes in the tax code and how it will affect you.

Give Yourself a Last Minute Gift: Year End Tax Planning

Author: Keith Huggett

It’s the most wonderful time of the year—and for many of us, it is also one of the busiest. While adding one more thing to your to-do list—like year-end tax planning—may induce a feeling of overload, it really is one task you shouldn’t skip, because it can give you the gift of a lower tax bill next April.

Here are a few tips to help you end 2014 with the good feeling of knowing that you are in good shape for the coming tax season.

Act now to accelerate deductions and manage your income for the current year. Depending on what your income level is this year, you may want to defer some income (through investments or other tax-deferral vehicles) if you think it will help keep you from reaching a higher tax bracket or if your income will be near the thresholds for the additional Medicare tax ($250,000 if married and filing jointly; $200,000 if single; and $125,000 if married and filing separately). On the deduction side, you may be able to accelerate your state and local income tax payments, real estate taxes, interest payments, or business investments, so think about paying these obligations before next year is here so you can claim the deduction on your 2014 tax return.

Keep up with estimated tax payments. Having the dates for estimated tax payments on your calendar is important—including the fourth 2014 estimated tax payment due this January 15. By calculating this payment and the first one due for 2015 (April 15 next year) you will have a preliminary idea of what your tax liabilities will be, giving you an idea of how much you'll need to set aside to make these payments.

 

Check your withholding and estimated tax payments now while you have time to fix a problem. If you’re in danger of an underpayment penalty based on the calculations you made above, try to make up the shortfall now instead of waiting until your next tax payment. If you need assistance handling delinquent taxes or other tax issues, contact our firm for professional guidance.  

Now is the time to apply for health care tax exemptions. If you do not have health insurance, the Affordable Care Act mandates that you must pay the "shared responsibility payment" with your federal taxes. Exemptions are available, however, the process to qualify for one (which must be approved by the Health Insurance Marketplace) can take several weeks. Now is the time to apply.

Maximize “above-the-line” deductions. Above-the-line deductions are valuable because you deduct them before you calculate your Annual Gross Income or AGI. They are allowed in full and make it less likely that your other tax benefits will be limited. Common above-the-line deductions include traditional IRA and health savings account (HSA) contributions, moving expenses, self-employed health insurance costs and alimony payments.

Make the most of retirement account tax savings. In addition to any 401(k) contributions you may make if you are employed, depending on your income, you may want to make contributions to other retirement accounts—or start one if you haven’t already. Traditional retirement accounts like an individual retirement account (IRA) still offer some of the best tax savings. Contributions reduce taxable income at the time that you make them, and you don’t pay taxes until you take the money out at retirement. The 2014 contribution limits for an IRA are $5,500 ($6,500 for those 50 years of age and older). If you have questions about your investment strategy and tax savings contact us for assistance.

With just a few weeks left in 2014, now is the ideal time to look at your current financial situation and plan for the future, in addition to starting to get your tax documentation in order. If you have any questions, please contact us—we are happy to help you.

Reap the Rewards

Author: Keith Huggett

For some employees, the satisfaction of doing a great job is a reward in and of itself. However, for many companies, implementing a rewards program for employees is necessary in order to maintain employee morale and productivity. While investing time and money to develop and implement an employee incentive program may seem like an inefficient use of resources that detracts from your bottom line, if you look at the big picture, quite the opposite is true.

The cost of unhappy workers to a business can be extremely high. A recent Gallup survey estimates that this kind of unhappiness is costing employers $300 billion annually due to decreased productivity, including more sick days and lackluster operational results. To help you avoid these negative effects, here are a few points to keep in mind when creating a rewards program for your business.

Rewards should appeal to your employees—not just your company leadership. Creating a work environment that boosts happiness, productivity, and morale requires more than a few free doughnuts every now and then. It requires genuine recognition, meaningful feedback, training, and support. However, these things will only improve employee morale so much—after you’ve recognized the efforts and output of your employees, you’ll need to start building an effective rewards program. Doing so will show your employees that there is a system in place that encourages their engagement and productivity with tangible and intangible incentives they value.

Your rewards programs should be customized and tailored to your unique company. Incentives that work for one company might not necessarily work for another, so it’s important that you create a program that fits your company culture and reflects your employees’ interests. For example, if your organization is very health-minded, offering rewards that include a lot of unhealthy foods are not likely to be appealing. Instead, you may want to offer rewards such as free fitness facility memberships or branded company workout gear. In addition to tangible rewards for special achievements, you can also offer employees additional vacation days and the reward of peer recognition by publicly announcing in person or in a company publication the details of their accomplishments.

A key component of any rewards program is measurement. Keeping track of employee progress and who has received rewards is important not only so you know who has performed well, but also because it can actually motivate other staff members to up their game to reap the rewards being offered as well. Leaderboards, periodic email updates, and sharing staff achievements via social media or newsletters can be powerful ways to quantify and publicize the progress or your internal rewards program.

Implementing a solid employee rewards program not only encourages and motivates employees, it can also pay huge dividends in terms of improving productivity, your bottom line, and employee advocacy. If you’re considering offering rewards to your employees, you may also want to involve them in the process of shaping and implementing your incentive program—another easy way to show that you value your employees’ contributions to your company.

Should you have any questions regarding this please contact us.  The Tax Office, Inc., is here to help you grow your business.

It's That Time Again!

Author: Jenny Shilling

December is here and time is passing quickly. Sooner than you know it, April 15th will be here. Now is the time to start organizing your tax information. Here are some tips to ease the process:

• What is your filing status? Did you marry or divorce? Has the stork dropped off any bundles of joy this year? Any big change to your life can dramatically change your filing status.
• Receipts! If you made any significant donations to charity you will need to have documentation. Did you engage in any business travel or entertainment? The IRS requires documentation to back up any deductions in this area. Your smartphone can help you keep track of your receipts.
• How did you file last year? Did you have your taxes prepared by a qualified tax professional or did you file them on your own. While using a qualified tax preparer may cost you a it in the short run, they are up to date on tax changes and can save you more in the end.
• Tax payments - when taxes are due in April you certainly don't want to be accruing penalties and interest. To make tax payments easier start setting money aside from your paychecks. This way when April gets here you will be prepared.

Should you have any questions regarding preparing your taxes or any other tax matter, please contact us. For more information on our services please visit our tax preparation and planning webpages.

What Deciscion will Congress Make?

Author: Jenny Shilling

At the end of 2013 many tax breaks expired. It is now up to Congress to decide which ones, if any, they are going to modify, extend, retroactively extend, or if they are going to leave things alone.  While most people think businesses are the most impacted, changes in the tax code can also affect the individual taxpayer. Here are some of the most popular tax breaks for individual taxpayers that expired in 2013:

Deducting State & Local Taxes - In 2013 you had the option of claiming an itemized deduction for general state and local sales tax instead of claiming an itemized deduction for state and local income taxes.

IRA Charitable Donations -  If you reached age 70 1/2 by the end of December, 2013 you had the ability to make donation sof up to $100,000 directly out of your IRA.  These donations counted as your required minimum distributions for your IRA.

Forgiven Principal Residence Mortgage Debt - Normally cancelled debts count as taxable cancellation of debt income. A temporary provision allowed up to $2 million of canceled debt income frim principal residence acquisition debt that was cancelled between 2000 and 2013 to be treated as a tax free item.

Energy Efficient Home Improvements - In 2013 you were able to claim a credit of up to $500 for very specific energy saving improvements made to your primary home.

Higher Education Tuition - In 2013 you could deduct up to $4000 dependent upon your tax bracket, for qualifying higher education tuition and related fees.

It is possible that these expired federal provision will be retroactively reinstated. However, there is no way of knowing what decision will be made by Congress. The tax planning specialists at The Tax Office, Inc., are closely monitoring the situation and will advise you once Congress makes a decision. Contact us today should you have any questions.

What You Need To Know About Tax Planning

Author: Keith Huggett

You're now somewhere in your mid twenties to thirties. Your career is taking shape, you may be considering purchasing a home. You may even be starting a side business or starting to invest. As you begin to bring in more earnings, you may find that you are paying out more in taxes. It's important to be prepared for this, so plan ahead!

• Automobile Expenses - When you are travelling for business, you can take the standard mileage deduction in most cases (as a self-employed person or as an employee), when you drive to the doctor, during a deductible move, or when you’re volunteering for a charitable organization. The standard deduction for use of a car in 2014 is 56 cents per mile for business miles, 23.5 cents per mile for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.  You will need to keep a mileage log with the date, distance driven and purpose of the trip.
• Bad Debts - As your wealth grows you may encounter people or businesses wanting to borrow from you. If you can’t get them to repay, you had an actual debt, and if you made efforts to collect, you may be able to deduct the bad debt as a short-term capital loss.
• Capital Gains & Losses - Plan ahead before you sell! If you’re selling any capital asset at a gain, pay attention to the minimum holding period for a long-term capital gain if possible. If you sell an asset one year or less after you purchase it, you have a short-term gain. Hang on until “more than” one year; for example, one year and one day, and it’s a long-term gain.
• Exemptions for Dependents -Every child you claim as a dependent reduces your 2014 taxable income by $3,950. You’ll get that full-year exemption, even if your child is born on New Year’s Eve. Don’t forget to claim qualifying foster children, a child who lives with you but is away at school, and in some cases a child you support who lives with the child’s other parent, and possibly your parents who you support, or nonrelatives who live with you.
• Retirement Planning -If your employer has a retirement plan, be sure to sign up for it as soon as you qualify.You should contribute an amount equal to the amount your employer will match.
• Interest -The deduction for home mortgage interest is a powerful incentive to buy a home.You can deduct interest on up to $1,000,000 total acquisition debt on your main and secondary home.
• Job Hunting -Looking for a new job can be expensive, especially if you pay agency fees or you travel to interview for a job. If your total miscellaneous itemized deductions, including job-hunting expenses, exceed 2% of your adjusted gross income, you may qualify for deductions.
• Buying or Selling a House - The sale of a residence is not usually a taxable event. If you and your spouse have lived in the residence for more than two out of the last five years you may qualify for the $250,000 exemption ($500,000 if married filing jointly).
• Home Office Deductions - If you qualify, you deduct $5 per square foot for up to 300 square feet, for a maximum simplified home office deduction of $1,500.
• Self Employment Income -Whether you make some freelance income on the side, or you’ve left the corporate world completely and are running your own show, you may be self-employed in the eyes of the IRS. If so, you’ll pay self-employment tax, at 15.3% of your net income, on your income tax return. On the bright side, you should be able to take business deductions such as computer expenses, vehicles, home office, etc.
  
  
• Zero Tax Refund -With proactive tax planning, and the help of The Tax Office,Inc., you can have just the right amount of tax withheld and make the best estimate for your quarterly tax payments, if necessary.That way, you have neither a big tax bill nor a windfall when you file your tax return.

Get Into the Back-to-School MindSet

Author: Keith Huggett

The Back-to-school season is always an exciting time. You can feel it in the air…a time of new beginnings and opportunities. And while the kids are enjoying reconnecting with friends and teachers and the thrill of new school clothes, business owners can adopt their own form of back-to-school spirit to revitalize excitement around their business. Here are a few tips to help you get into this mindset…

• Establish new goals. If it’s all about new beginnings, then new business goals are in order. Successful business owners are always looking for ways to improve and face change with a positive attitude, so make it a point to set new goals for your business as you re-energize.
• Continue your education. As business owners, you are life-long learners…because there is always something new to learn. Enroll in an online class, register for informative webcasts, or get involved in other events that serve to advance your business education. By sharpening your skills, you will ultimately grow your business.
• Expand your network. Like the kids reconnecting with friends, you can take this time to reconnect with your community—both on the personal and business side. Join in on community projects and make a visit to your local Chamber of Commerce. You never know where you might pick up a new customer or referral source.
• Plan your next break. It can be very cathartic to plan a getaway…away from the busy life of the business owner. Identify a period when you can carve out some “me time,” even if it is a ways out. Then make sure you actually get away. Days off, even if only a few, can do wonders for reducing business stress.

You are now armed with some strategies to get into a “back-to-school” mindset and re-energize your business. You’d be surprised at the positive changes that can come from it.  Contact our office if you would like to discuss re-energizing your business.

Take a Proactive Approach Before Next Tax Season

Author: Keith Huggett

While you may still be thinking about the last few weeks of summer thinking that it’s too early to start preparing your business for tax season, you may want to reconsider putting your tax planning on hold—after all, the peak of the tax preparation period is just a few short months away.

While it is wise to engage in tax planning strategically and consistently throughout the year, if you haven’t done that this year, then now is the time to be proactive and get organized—especially if your business has fallen behind on any tax payments.

Here are a few tips to help you put yourself in the best position possible when it comes to filing your business taxes next year:

Make a plan to pay back taxes. If you have fallen behind on any of your business tax payments, start today to right the situation by creating a plan to avoid further penalties by making payments. Accounting professionals are usually well-versed in IRS problem resolution—including those involving non-payment of taxes, so don’t be afraid to speak up and ask for help to create a plan that your business can afford.  

Be proactive about payroll taxes. If your business is behind on payroll taxes, consider discussing with our firm the possibility of using an IRS installment plan to get back on track. If your business owes less than $25,000 in combined tax, penalties and interest, and has filed all required returns, this may be an option.

Avoid paying fines related to retirement plans. For businesses sponsoring retirement plans, failure to file Form 5500 for annual reporting can result in fines as high as $15,000, so be sure that you are up-to date on this requirement. If you do have a penalty and were legitimately unaware that you needed to complete this filing, you may be eligible for the U.S. Department of Labor’s program to reduce or eliminate these penalties.

Start organizing your tax records now. Organizing your business tax records now can make filing taxes much easier and faster come tax season. It can also show you exactly where you stand in terms of tax payments and any penalties that you may be facing. Compiling your documentation well ahead of time will reduce your stress and allow you to easily file a complete and accurate return and make any provisions for payment plans or IRS problem resolution. 

If your business has fallen behind on taxes or you are facing tax-related penalties, don’t wait until tax season is here—please contact our office so we can help you prepare and make a plan ahead of time.

Important Considerations Before You File Your Taxes

Author: Keith Huggett

The IRS grants ministers and other clergy a number of tax deductions. While many of them are also available to the laity, a few are specific to a minister's practice, with others of general application but particularly noteworthy for the clergy. Here are the top seven:

1. Parsonage: The parsonage deduction allows clergy members to earn a "housing allowance" that is not subject to any taxes. This can apply to free rent in a church- or synagogue-owned home, or to a cash allowance that you can use for a mortgage payment or rent on your own residence.
2. Charitable donations: If you itemize on Schedule A, you can deduct your charitable donations, including your tithes.
3. Ministry-related travel expenses: As long as these expenses exceed 2 percent of your adjusted-gross income along with other work-related expenses, ministry-related travel expenses are tax deductible if they are not already paid for by the church.
4. Home office expenses: If you maintain a home office either to supplement your office at the church building, or if you work out of your home, you may be eligible to deduct a number of the expenses that you incur in maintaining that work space.
5. IRA and 403(b) contributions: You can exclude the money that you set aside for retirement from liability for taxes.
6. Student loan interest: If you are still paying off your time at the seminary, the IRS will allow you to write off up to $2,500 of interest per year as long as your income is below their limits.
7. SE tax exclusion: If you are self-employed and a member of a religious organization that has a faith-based objection to public insurance, you can opt out of Social Security and Medicare systems as well as opt out of having to pay self-employment tax by filing IRS Form 4361.

These tax deductions for ministers and other clergy can be a godsend. However, if they are claimed improperly, the resulting audit can be a hellacious experience. The professionals at The Tax Office, Inc. can help you to maximize your deductions and stay within the law.

When is the Right Time?

Author: Keith Huggett

There are two key things that business buyers think about, and keeping them in mind will help you make money when you are selling a business: If they see that they can make money buying your business and that they will have to do less work do it, they will pay more. 

Making more money

Most businesses sell at a multiple of their sales or a multiple of their profits. Increasing either will give you a higher selling price. One way to improve profitability is to focus on your expenses. Most businesses have room to cut expenses through great efficiency, rebidding vendor and supplier contracts and the like. If you do not have the time or perspective to do this, consider bringing in an outsider to help you.

While lowering expenses is the low hanging fruit of boosting values, you really need to increase sales when you are selling a business. First of all, increasing sales increases income, which boosts profit. If you do it in conjunction with lowering expenses, you will get a double push. Even more important than generating more income is the ability to show that your business is growing. When buyers look at a business and see growth, they will usually pay a slightly higher multiple since they know that an investment will pay off that much more quickly.

Making ownership easier

While selling a business is hard work, buying one is equally challenging. While preparing for the sale, get your business affairs in order so that the buyer can easily step in and have access to what they need to manage it. At the same time, find ways that you can step away from running the organization. When a buyer sees a business that runs without the seller's active involvement, they know that they can own it without needing to put in an inordinate amount of work. 

The Tax Office Inc. is ready to help if you are selling a business. Our team can help you find efficiencies, organize your books and prepare for a sale. Contact us to get started.