mrice

What is the Basis for Gifted Property?

September 10, 2013 by mrice

Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.

What is the Basis for Gifted Property?

Buying and selling property can be complicated for a number of reasons. One important consideration when selling real property is whether or not the sale will incur capital gains taxes. Capital gains tax is the tax which is levied by the federal government when the sale of real property results in a gain, or profit, to the seller. The capital gains tax rate depends on the income bracket of the seller and is also subject to change from time to time. In order to know what you will owe in capital gains taxes, you must know what basis to use in your calculations. If the property was gifted, you are typically required to use the donor’s basis when calculating the amount of gain realized by the sale.
As a general rule, capital gains taxes are computed by determining the basis of the property and then subtracting that from the sales price. The basis is usually the price that you originally paid for the property, although there are some adjustments that can be made to that figure. For example, if you purchased real property 20 years ago for $50,000 and recently sold it for $170,000 then your basis would be $50,000 and your gain would be $120,000. Capital gains taxes would then be figured on the $120,000 gain.
If the property was gifted to you, your basis will be the same as the donor’s adjusted basis at the time the property was gifted to you. If the donor paid any gift taxes as a result of the gift, your basis may be increased as a result. If, however, the fair market value at the time of the gift is less than the donor’s basis, then your basis will be the fair market value at the time of the gift. Because this can often result in a substantial capital gains tax obligation for the receiver of the gifted property, leaving the property as an inheritance should be considered when applicable. When property is received as an inheritance, the basis is the fair market value on the date the property is valued after the death of the decedent which is typically much higher than the decedent’s basis would have been had he or she gifted the property to you.

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TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.

How to Minimize the Possibility of a Wrongful Termination Lawsuit

September 3, 2013 by mrice

Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.

How to Minimize the Possibility of a Wrongful Termination Lawsuit

As a small business owner, a wrongful termination lawsuit can quickly drain capital reserves, even if you ultimately win the lawsuit. Litigation costs along could bankrupt a fledgling business. As is often the case, the best defense is a strong offense. While there is no sure fire way to prevent the possibility of a wrongful termination lawsuit, there are steps you can take to prevent a previous employee from filing one, or at least be prepared in the event one is filed.
The term “wrongful termination” is a broad term. A statutory claim for wrongful termination can be made on the basis of one of the many federal or state anti-discrimination statutes. An employee who was employed pursuant to an employment contract can allege that the termination was in violation of the terms of the contract. Additionally, a somewhat vague “termination against public policy” argument is sometimes asserted as the basis of a wrongful termination lawsuit. Regardless of the basis of a potential wrongful termination lawsuit, taking steps before a lawsuit is even contemplated is your best defense.
Read, understand, and implement an anti-discrimination policy. Federal anti-discrimination statutes are much broader than most employers realize. Consult with your attorney if necessary to make sure that you are in compliance.
Don’t turn your “at-will” employee into a contract employee unwittingly. Most states are “at-will” states, meaning that, in theory, you do not need a reason to terminate an employee’s employment. Contracts, however, can be implied and verbal as well as express and written. Be certain that you do not verbally imply a contract between you and your employees if that is not your intention.
Negotiate a separation agreement when possible instead of an outright termination. If the employee agrees to the “separation” from employment, then it is not a “termination” for purposes of a future wrongful termination lawsuit.
Draft a well-written section in your employee handbook regarding the “at-will” nature of employment as well as a section outlining your compliance with all state and federal anti-discrimination laws. Your disciplinary procedures should also be explained at length in your employee handbook.
Document all disciplinary action taken against all employees. Allow the employee to review the summary of action taken and ask them to sign the summary. Keep these in the employee’s personnel file. Keep all personnel files at least as long as the applicable federal and state statute of limitations for wrongful termination lawsuits.
Give your employee a concrete reason for the termination. Conversely, do not offer any information to third parties regarding the reason the employee was terminated unless absolutely necessary and, even then, only if it can be easily and adequately substantiated.

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What are Consumer Operated Health Plans (CO-OPs) and How Do they Benefit Small Businesses?

August 26, 2013 by mrice

What are Consumer Operated Health Plans (CO-OPs) and How Do they Benefit Small Businesses?

Traditionally, freelance workers and small business owners have been unable to afford the high costs of health insurance. The investment was simply too high to justify the potential reward. However, as part of the health care Affordable Care Act, there are several new CO-OP (Consumer Operated and Oriented) plans being created to help generate competitive pricing among insurers and pass savings along to consumers.
What are Consumer Operate and Oriented Health Plans?
More commonly referred to as CO-OPs, these health plans have a single primary purpose, according to The Commonwealth Fund, to promote the long-term health and well-being of their customers as affordably as possible. The federal government is investing heavily in these startups in hopes of providing creative solutions to the healthcare problems throughout the country. They are investing by providing funding to help these programs get started and by also exempting them from paying federal taxes.
How Do CO-OPs Help Small Businesses?
Many small business owners want to offer benefits to their employees. They know it’s necessary in order to compete for talented employees. However, the high costs of health insurance for employees have always made the gesture impractical in the past. CO-OPs are private nonprofit health insurance companies. The fact that they aren’t “for profit” agencies means they are able to offer options traditional insurers, who have investors and boards to answer to, cannot. It helps keep the prices lower while offering more innovative and creative treatment options to the insured.
When Will CO-OP Health Insurance be Available?
HealthAffairs Health Policy Brief explains that, “Starting in October 2013, people without access to coverage through an employer, Medicaid, or the Children’s Health Insurance Program will be able to purchase health plans through health insurance exchanges for coverage taking effect in 2014.” The brief goes on to say that while the initial law required funding for at least one CO-OP in all each of the fifty states, budgetary restraints have limited the number to the 24 CO-OPs that have already been created – for the time being.
There are many benefits to gain as a small business owner, or even a freelancer, or contract worker, for considering the benefits of a CO-OP health plan. Aside from the fact this law requires insurance coverage beginning in 2014, the peace of mind of having insurance coverage is a huge weight off the shoulders of small business owners everywhere.
To learn more about Consumer Operated Health Plans and how they can benefit your small business, we encourage you to speak to us.

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Health Insurance Tax Credit For Small Business

August 26, 2013 by mrice

Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.

Health Insurance Tax Credit for Small Business

Small businesses have traditionally been unable to offer health insurance benefits to employees. The primary culprit preventing small businesses from offering this particular benefit was the high costs involved in doing so. The Affordable Care Act, however, has made a few changes that make offering insurance to employees a more affordable option — even for the smallest of businesses. Health Insurance CO-OPs, the Small Business Health Options Program (SHOP), are health insurance tax credits are just some of the changes which are opening the health insurance doors that have been closed to small business owners in the past. What’s So Powerful About the Combination?
Health Care CO-OPs and tax credits, by themselves, would still not be enough to make offering employer insurance feasible for many small businesses. The combination, however, of affordable insurance alternatives such as CO-OPs with tax credits, makes the situation more tenable for small businesses that operate at marginal profits in order to stay afloat as it is. What Businesses are Eligible for Health Insurance Tax Credits?
There are several requirements that must be met in order for employers to be eligible to receive tax credits for offering health insurance. According to Aetna, these conditions include:

Cannot employ more than 25 full-time equivalent employees in a taxable year
Employer must cover a minimum of 50 percent of the coverage cost for employees
Average annual wages cannot exceed $50,000
Qualifying agreement must be maintained

In 2010, the maximum tax credit was 35 percent. That number will change to a maximum of 50 percent in 2014. However, extremely small businesses with 10 or fewer full-time employees and average annual wages lower than $25,000 stand to benefit most from the small business tax credit says the Small Business Administration. The goal, of course, is to provide the greatest support and assistance to low and moderate income workers.
The IRS also points out that if you did not owe taxes during the year, you are eligible to carry the credit forward or back to other tax years. Information Worthy of Note
The National Federation of Independent Business, NFIB, points out that there are several limitations business owners need to be aware of with the health care tax credit. First of all, business must pay at least fifty percent of the health insurance premiums for their employees in order to qualify for the tax credit.
Second, most businesses that do receive the tax credit will not be awarded the maximum amount. Not only are small business owners excluded from the tax credit (and exclusion in the calculations of wages), but also the owners’ family members including children, foster children, siblings, step siblings, spouses, certain cousins, and in-laws.
Because figuring tax credits and understanding benefits such as these is so complex, the NFIB also highly recommends that business owners consult with their accountants before determining their best courses of action.

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WHAT IS THE MARRIAGE PENALTY?

June 30, 2013 by mrice

Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.

What is the Marriage Penalty?

If you are recently married, you’ll have to contend with a few more issues besides your spouse’s snoring. You’ll also have to deal with new tax issues while spending your days and nights being blissful in eternal love.
First, you’ll have to make a decision concerning how to file your taxes, as you’ll have a choice between “married filing separately” or “married filing jointly”.
Combining two spousal income often equates to a higher household taxable income, than it obviously would have if you remained single. In a number of cases, this means more taxes you’ll have to pay, in part, due to the “marriage penalty tax”.
The marriage penalty affects couples living in the United States and refers to the increased taxes required to be paid by some married couples. In general, the marriage penalty tax is imposed on couple who have approximately the same salaries, or otherwise have roughly the same amount of taxable income, and file one return under the “marriage filing jointly” tax filing option.
Whenever both working spouses have to pay a higher combine, or “joint” tax rate on the identical income than they would be paying had they each been single, that’s generally when the marriage penalty kicks in.
However, the good news is that not all marriage couples have to contend with the marriage penalty tax. Some married couples actually pay less as a couple than they would as single. Generally speaking, this happens when these spouses earn disparate incomes, such as a doctor and a social worker.

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USE A DIVERSIFIED APPROACH TO MARKET YOUR BUSINESS!

June 21, 2013 by mrice

Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.

Use a Diversified Approach to Market Your Business.

Before the rise of social media, most businesses used the same marketing techniques to promote their products and services. However, now that consumers have so many different outlets for entertainment, a one-size-fits-all approach to marketing is no longer as effective as it once was. In today’s world, consumers can find entertainment on television, online, on their smartphones and through alternative networks, such as Netflix and Hulu. For this reason, it’s very important for businesses to diversify their marketing efforts so that they can reach consumers through multiple mediums.
About Diversified Marketing
Diversified marketing involves using various marketing outlets to promote your company and build relationships with as many consumers as possible. With this marketing technique, you will not only increase the number of consumers you reach, but you will also increase the amount of communication each consumer receives from your company. For example, if a consumer’s primary entertainment outlets are the internet, Hulu and television, you can remind the consumer of your business’s existence through all three outlets. Implementing a Diversified Approach
Although diversified marketing requires more time and attention than a traditional, television or radio- only marketing approach, it isn’t much more expensive. Incorporating online and mobile marketing into your campaigns doesn’t require much investment, and most of the platforms are user-friendly and easy to understand.
To get the most out of diversified marketing, businesses should include as many outlets as possible in every marketing campaign. Acceptable outlets include television, radio, social media, text and multimedia messages, email, blogs and review websites. However, it’s important to remember that most marketing campaigns will need to be optimized for each of the outlets you choose. For example, if you create an advertisement for Facebook, it won’t typically work on Twitter, since Twitter limits the amount of content you can post at one time.
Marketing Tips
When your business implements diversified marketing, you must be careful not to oversell to consumers. Today’s consumers don’t want to be bombarded with overt advertisements, especially from multiple sources. In fact, using a campaign that overwhelms consumers in this way can actually be harmful to your business. Instead, you should try to offer consumers content that is useful and informative. For example, if your business focuses on the food industry, you can remind consumers of your existence by offering cooking tips. You can also encourage customers to make purchases by offering coupons, give-aways and other promotions.

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