20% Tax Deduction for Small Biz owners!!!

Small business owner?? 

Good News for 2018!

Section 199A of the new tax code lets you claim a deduction against your IRS 1040 taxable income of 20%These new rules can really put big money in your pocket. But there is a lot of fine print, limitations, rules, and no, you will not be able to file for this deduction on a post card.  Sorry.

 1.    Do you qualify for the new 20% write-off? You’re in luck if you operate your business as a sole proprietorship, partnership, or S corporation. To qualify for the deduction you need taxable income below a certain dollar ceiling. Lets discuss specifics for your small business.

2.    What is “qualified business income”? Qualified business income refers to the  net of qualified items of income, gain, deduction, and loss, from your qualified trades or businesses. The definition in neither simple nor easy. Some significant limitations apply so I strongly suggest we talk.

3.    What if you exceed the income limits? There are ways you can benefit even if the IRS thinks you’re earning too much.

2017 Year End Tax Tips!

Tax Tips 2017!

I hope this note finds you well. As 2017 draws to a close, I wanted to send out some end of year tax tips, along with some articles that may be of interest.

Big changes in store for 2018, with, in the final analysis, some winners and some losers.

For a excellent article on some of the sweeping tax changes that will be in place for 2018, see this article-

https://www.thebalance.com/trump-s-tax-plan-how-it-affects-you-4113968

 

2017 YE Tax Planning Tips

1)      To deduct your property tax payments on your 2017 taxes, try to pay them in 2017, even though some may not be  due until 2018. In addition, the deduction for many State and local taxes is capped at $10,000 for 2018, and the deduction for our personal exemptions is eliminated, so take them in 2017 while you still can!

 

2)      If you cannot make a deductible IRA contribution in 2017, consider a nondeductible IRA and convert to ROTH if you don’t have a separate IRA. Never pay tax on that money again. There is some fine print on this one, so be sure to review it with me first.

 

3)      If your itemized deductions are less than your increased standard deduction will be for 2018, consider making your 2018 charitable giving in 2017.

4)    Capital Loss Harvesting. If you have a net capital gain in your investments this year, consider selling some investments that would generate a loss before year end. Doing so could reduce the amount net gains exposed to Capital Gain taxes. Remember, if you sell stock to realize these losses, you’re prohibited from purchasing substantially similar stock, or you risk losing the recognition of the loss under the wash sale rules.

5)      The difference between death and taxes is that death doesn’t get worse every time congress meets-Will Rodgers

6)      Social Security wage base is raised to $128,400 for 2018. If you have W2 income in excess of this amount, FICA taxes won’t be withheld for amounts earned over the wage base in 2018. As usual there is no cap on the 1.45% medicare tax application.

7)      FAST ACT legislation- If you owe over $50,000 to the IRS your passport could be revoked or not issued.

8)      Declutter your life by donating household items and clothing to charity and taking the fair value as a deduction for 2016.

9)      Make sure you are on your way to maximizing your Retirement Plan contributions to your 401k, IRA or deferred pension plan.

10)   Flexible spending accounts, also called flex plans, are fringe benefits which many companies offer that let employees steer part of their pay into a special account which can then be tapped to pay child care or medical bills. The advantage is that money that goes into the account avoids both income and Social Security taxes. The catch is the notorious “use it or lose it” rule. You have to decide at the beginning of the year how much to contribute to the plan and, if you don’t use it all by the end of the year, you forfeit the excess. With year-end approaching, check to see if your employer has adopted a grace period permitted by the IRS, allowing employees to spend 2017 set-aside money as late as March 15, 2018. If not, you can do what employees have always done and make a last-minute trip to the drug store, dentist or optometrist to use up the funds in your account.

 

Four Steps to Lower Taxes for the Self-employed

When you are self-employed, your business profits are taxed to you at federal rates as high as 39.6%. Add self-employment taxes, which in 2016 will amount to 15.3% of the first $118,500 of your net self-employment earnings plus2.9% of any earnings over that amount. Then there’s an additional 0.9% Medicare surtax on earnings in excess of $200,000 ($250,000 if married filing jointly). At tax rates like these, it pays to take steps to reduce your tax burden.

Step One: Deduct Business Expenses

Be sure you have an organized system for recording your expenses. To be deductible, a business expense must be “ordinary” (common and accepted in your trade or business) and “necessary” (helpful and appropriate for your trade or business). Since personal expenses are generally not deductible, it’s smart to have a separate business bank account and use a separate credit card for business purchases.

Step Two: Deduct Health Insurance Premiums

You may qualify to deduct premiums paid for medical, dental, and qualified long-term care insurance coverage for you, your spouse, and your dependents.* The coverage may include children who haven’t reached age 27 by the end of the year, even if you don’t claim them as dependents on your tax return.

 

Unlike health insurance premiums paid for employees, the self-employed health insurance deduction won’t save you self-employment taxes. However, it will lower your taxable income. You must meet certain requirements to qualify for the deduction.

Step Three: Deduct Retirement Plan Contributions

Funding a retirement plan can also save you significant tax dollars. Within limits, plan contributions will be tax deductible.** Several types of plans may be suitable for you as a self-employed taxpayer, including a simplified employee pension (SEP) plan, a savings incentive match plan (SIMPLE), or a solo (individual) 401(k) plan. Each plan has specific features and requirements that you will want to weigh carefully before making a choice.

Step Four: Engage in Proactive Tax Planning

Don’t be reactive, plan to reduce your tax bill. This starts early in the year by spending some time reviewing your situation with a knowledgable Tax Advisor

Don’t deal with tax issues on your own. Call us right now to find out how we can provide you with the answers you need.

* Dollar limits apply to the deduction for long-term care insurance premiums.

 

** Although deductible for income-tax purposes, contributions to your own retirement plan account do not reduce earnings subject to self-employment taxes.

Guidelines to Use Your Vacation as a Tax Right Off

How would you like Uncle Sam to pay for part of your vacation? Sound unlikely? If you combine your vacation with a business trip, you may be able to deduct some of your expenses. Pay attention to the rules, though. Expenses must meet certain requirements before they’re tax deductible.

General Guidelines

As long as your primary reason for making the trip is business, you generally can deduct the cost of your transportation to and from your destination. You’ll generally be able to deduct food (within limits) and lodging costs only for the days you actually spend on business.

Bring the Family

You can bring your family along, too. While you can’t deduct their food, lodging, or airfare, you can write off your own expenses, including the single-occupancy rate for lodging on days when you’re conducting business. If you and your family travel by car, you can also deduct the full cost of transportation. Just be sure to keep detailed records.

Is an S Corporation Loss Deductible?

Business owners aren’t in business to lose money. So there’s not much to like about a nonprofitable year. For a shareholder in an S corporation, however, a down year can have an upside — the corporate loss may give rise to a personal tax deduction.

Standing between an S shareholder and the loss deduction is a tricky tax computation known as “adjusted basis.” Under the tax law, a shareholder’s loss deduction is limited to the shareholder’s adjusted basis in his/her corporate stock and in any debt the company owes the shareholder.

What is adjusted basis, anyway? Essentially, it’s a figure that tracks the shareholder’s investment in the company for tax purposes. The basis number changes every year to account for any money flowing between the company and the shareholder — distributions, capital contributions, loans, and loan repayments — as well as for the shareholder’s allocated share of corporate income or loss.

If a net operating loss is anticipated for the year, S shareholders should find out whether they will have enough basis to benefit from the projected loss deduction. If not, it may be possible to increase basis by making a contribution to capital or by loaning the company money before year-end. When you give us a call today, our tax professionals can offer guidance so that the transaction will pass IRS muster.

Taxes- What will really happen in 2017?

Here is a url to a good article in Forbes regarding sweeping tax reforms that will most probably occur in 2017.

http://www.forbes.com/sites/deanzerbe/2016/11/15/trump-and-taxes-whats-going-to-happen/#431225a54e63

Taking a Moment to Look Back Over the Past Year – What Worked, What Didn’t

Busy is good. Most small business owners would rather things were too hectic than too slow. As the year winds down, though, let your staff handle the busy-ness while you look at the business — where you are, what you’ve accomplished in 2016 and where you’re headed in the new year and beyond.

 

Your bottom line

 

The quickest way to figure out where you are is to check your bottom line. Are you making money? Are profits better or worse than they were last year at this time? Are you meeting your expectations? If not, why not?

 

Your business plan

 

Change is inevitable. And businesses have a way of outgrowing their business plans. But if you don’t have a current plan, you don’t have a way of measuring your progress. So if you’ve been “off road” without a plan for a while, it’s time to formalize a plan that reflects past growth and sets new goals for the next several years.

 

Your competition

 

The more you know about your competition, the better. Who are they? How are they different? How are they the same? Where do you overlap each other? Understanding their business model will help you prepare strategically for possible changes in the marketplace.

 

Your secret weapon

 

Your work force is your secret weapon, especially if you’re in a competitive market. Dedicated, well-trained employees providing top-notch customer service can help put you out front of even the largest competitor. A rich, competitive benefits package will help you attract — and retain — a high-caliber work force. Health insurance and retirement plans are highly valued benefits. You can offer a variety of other benefits to suit your employees’ needs and your budget. Ask your financial professional for information.

 

Your future

 

Do you have a formal succession plan? Are you grooming someone to take over? A well-trained successor could help in the successful — and profitable — transfer of your business. And you can use life insurance to prefund all or part of the sale.

 

Don’t get left behind. Contact us today to discover how we can help you keep your business on the right track. Don’t wait, give us a call today.

 

A Christmas Present from Congress!!

 

 

Protecting Americans from Tax Hikes Act of 2015

Permanent Extenders Package!

This week, Congress delivered a present to Taxpayers in the form of a permanent extenders package.  The Protecting Americans from Tax Hikes Act of 2015 passed in the House and is expected to be passed in the Senate.  President Obama has expressed support of the package and is expected to sign it into law.

The main tax benefit of “Protecting Americans from Tax Hikes of 2015 (PATH Act) is that it makes permanent several popular tax provisions that otherwise are subject to expiration each year.  Each year Congress would traditionally “play Chicken” to “negotiate” to extend the tax provisions, but would do so at the last minute through a temporary tax extenders package.  Taxpayers routinely faced uncertainty as to whether the provisions would be extended.  The PATH Act will make permanent tax extenders such as the earned income tax credit, the child tax credit, the American opportunity tax credit (for college tuition), the research credit, itemized personal income tax deductions for state and local sales tax, Section 179 expensing, and the subpart F active financing exception.  While not made permanent, the PATH Act also provides for extensions through 2019 of the new markets tax credit, the work opportunity tax credit, and first year bonus depreciation.

The PATH Act will also delay for two years the “Cadillac Tax” that was otherwise set to go into effect in 2018 on certain employer-sponsored health insurance plans.  In addition, any Cadillac tax paid will be deductible against income tax, which is not generally the case for excise taxes such as the Cadillac tax.

What are Asset Protection Services?

What are Asset Protection Services?

What are Asset Protection Services?

Asset protection services exist to help place your assets in a position where they are all but untouchable by those you do not wish to have access to them. In the world you live in, one that’s rich with dangers and potential financial pitfalls, protecting your assets and wealth is more important than you may realize – whether you have a large sum of assets or not.

What Risks Impact Your Assets?
Most people are surprised to learn about the wide range of risks they face when it comes to securing and protecting assets. These risks include:

  • Unemployment
  • Disability
  • Death
  • Age
  • Health
  • Divorce
  • Retirement
  • Layoffs
  • Injury
  • Medical Expenses
  • Litigation
  • Judgments
  • Legal Expenses

The list goes on and on. There are hundreds of risks, large and small, that place your assets at risk every day. That’s why it’s so important to consult with a financial planner or accountant that has experience providing asset protection services.

How Can You Protect Your Assets Through Asset Protection Services?

First and foremost, consider using asset protection services from a professional experienced in protecting wealth and assets. Asset protection services involve a blend of financial planning and insurance using such specialists as CPAs, attorneys, estate planners, insurance experts, financial planners, and/or asset protection specialists.

Careful financial planning is the most important thing you can do to protect your assets now, and in the future. This is putting your head together with a professional who specializes in asset protection services, developing a plan to manage your existing assets, accumulate future assets, minimize risks, and sustain growth over time. Important tools in your arsenal for your goals of financial growth and asset protection include insurance, proper planning, and attention to detail.

Insurance

There are many types of insurance products on the market today. There is insurance coverage that protects your assets themselves. There is also insurance coverage that protects you from liability in the event that someone is injured by or on one of your assets. There’s even insurance to cover liability related to professional services you offer. In other words, there’s a type of insurance for many different contingencies and you should carefully consider which types of insurance serve to best protect your assets today and in the future. Having adequate insurance, however, is an asset protecting contingency that must be covered. Other insurance to consider includes medical insurance, loss of income insurance, life insurance, and disability insurance.

Financial Planning

Financial planning includes components designed to reduce your risks, increase the value of your assets, and sustain growth as time goes by. it involves estate planning, wealth protection, tax minimization strategies, and wealth recommendations to maximize return. It’s important to work with qualified financial planners with specific experience in asset protection services for this critical task.

You want to know that your future is protected and assured. One way to increase that likelihood is by taking steps today to protect your assets and wealth for the long term by considering the use of asset-protection professionals. Life takes unexpected turns all the time. You can rest much easier knowing that you’re covered for most of the contingencies that could ever come your way.

What is Cost Segregation?

What is Cost Segregation

Cost segregation is the process of identifying your assets and classifying those assets correctly for the purpose of paying federal taxes. In this process, personal assets that are mixed with real property assets are separated out, so all assets can be depreciated properly and potentially increase your bottom line.

Cost Segregation Studies
A cost segregation study is performed to determine which assets can be claimed as personal property instead of real property. These items usually include indirect construction costs, non-structural elements of buildings, and exterior land improvements.

By separating these assets, they can be depreciated over a shorter term which will reduce your current income tax liabilities and increase cash flow. This decreased depreciation period is typically between five and fifteen years instead of the twenty-seven and a half to thirty-nine years for non-residential real property.

For example, items such as carpeting, wall paper, parts of the electrical system, and even sidewalks and landscaping all qualify for the shorter depreciation periods.

Eligibility and Advantages of Cost Segregation
To be eligible for cost segregation, a building must have been purchased, remodeled, or constructed since 1987. This method of tax reduction is best used on new construction, but it can be used retroactively on older buildings as well.

Beyond the benefits of reduced tax liability and increased cash flow, a cost segregation study will provide your business with an audit trail of all costs and asset classifications. This will help put to rest any unwanted inquiry from the IRS in its early stages. Finally, during this process, you may identify possible ways to reduce your real estate tax liabilities as well.

While there are some costs associated with performing a cost segregation study, as long as the assets in question are valued over $200K, it’s worth the time and expense to complete the study and categorize these assets correctly.