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Blog

Make sure repairs to tangible property were actually repairs before you deduct the cost

Repairs businesses made to tangible property (such as buildings, machinery, equipment or vehicles) last year generally can be immediately expensed and fully deducted on 2017 income tax returns. But costs incurred last year to improve such property must be depreciated over a period of years, providing a much smaller 2017 deduction. Distinguishing between repairs and improvements can be difficult. Fortunately, some IRS safe harbors can help.  READ MORE +

Feeling lucky? How to find a pot of gold in your financials

Every business experiences occasional cash shortages. But, if you’re lucky, you may find a hidden pot of gold in your balance sheet using the cash gap. This metric is a function of the timing difference between when companies order materials and pay suppliers and when they receive payment from their customers. By focusing on three balance sheet accounts (inventory, receivables and payables) you can generate extra cash and lower financing costs. Contact us for help calculating your company’s cash gap and using it to manage working capital more efficiently.  READ MORE +

How to classify shareholder advances

Classifying shareholder advances is one of the gray areas in financial reporting. When deciding whether to report advances as debt or equity, ask yourself the following questions: Does management intend to repay the loan? Can the company realistically repay it? Have market-rate terms been negotiated and followed? And how is the transaction classified for tax purposes? Shareholder advances present financial reporting challenges. We can help you address those challenges and adequately disclose these transactions in your financial statement footnotes.  READ MORE +

What is job cost reporting?

Does your company do contract work? If so, consider using job cost reporting to improve financial efficiency and profits. This management accounting tool can benefit many businesses, from homebuilders and architects to contract manufacturers and auto body shops. An effective system starts with smart estimates and forethought to properly code, allocate and compare expenses throughout the life of the project. As your business grows, we can help you rely less on gut instinct and more on solid facts from an effective job costing system.  READ MORE +

Tax credit for hiring from certain “target groups” can provide substantial tax savings

If you hired from certain “target groups” in 2017 and obtained proper certification, you can claim the Work Opportunity tax credit (WOTC) on your 2017 return. Also keep the WOTC in mind in your 2018 hiring. Despite its proposed elimination, the credit survived the final version of the Tax Cuts and Jobs Act that was signed into law in December. Examples of target groups include qualified veterans, the long-term unemployed, ex-felons and certain government assistance recipients. The credit ranges from $2,400 to $9,600 per hire.  READ MORE +

For-profit vs. not-for-profit: Compare and contrast financial reporting goals

What are your financial reporting goals? For-profit companies strive to maximize profits and grow assets. But most nonprofits are satisfied when their revenue covers operating costs. New accounting rules go into effect in 2018 that will change how nonprofits classify items and expand their disclosure requirements. Regardless of whether an organization operates for profit or not, it’s essential to produce timely financial statements that stakeholders can trust.  READ MORE +

Small business owners: A SEP may give you one last 2017 tax and retirement saving opportunity

Business owners: A Simplified Employee Pension (SEP) may give you one last 2017 tax and retirement saving opportunity. You can establish a SEP IRA for 2017 and make 2017 contributions as late as the 2018 due date (including extensions) of your income tax return. Contributions are discretionary and may be as large as $54,000 for 2017. Generally, other types of retirement plans must have been established by Dec. 31, 2017, for 2017 contributions to be made (though many also allow 2017 contributions in 2018). Additional rules and limits apply. Contact us for details.  READ MORE +

Fixed vs. variable costs: How to compute breakeven

What’s your breakeven point? This metric can be useful when budgeting, investing in new equipment, launching a new product or analyzing the effects of a cost reduction plan. It’s easy to calculate using information from the income statement: breakeven = fixed expenses / [1 – (variable expenses / sales)]. Fixed expenses remain relatively unchanged with changes in your sales; variable costs ebb and flow based on your sales volume.  READ MORE +

Claiming bonus depreciation on your 2017 tax return may be particularly beneficial

Bonus depreciation allows businesses to offset the costs of investing in equipment and other qualified assets more quickly. Claiming bonus depreciation on your 2017 tax return may be particularly beneficial. Why? Deductions save more tax when rates are higher, and most businesses’ tax rates will go down in 2018 under the Tax Cuts and Jobs Act. How much can you save? The break allows additional first-year depreciation of 50% or 100% for 2017, depending on when the asset was acquired and placed in service.  READ MORE +

2 tax credits just for small businesses may reduce your 2017 and 2018 tax bills

Providing employee benefits can help businesses attract and retain the best workers. But the cost can be out of reach for some small businesses. Two tax credits can help make benefits more affordable for eligible small employers: 1) a credit equal to as much as 50% of health coverage premiums paid, and 2) a credit of up to $500 for creating a retirement plan.  READ MORE +

Unlock hidden cash from your balance sheet

Need to unlock some cash? Consider targeting your working capital. That is, collect receivables faster, minimize inventory and defer payments to suppliers. These strategies require finesse; you don’t want to compromise relationships with customers and suppliers. But the benefits are often worth the risks. By cutting the “fat” from these accounts, you can generate cash to maintain your company’s competitive edge and keep it in good standing with stakeholders. For more ideas on how to manage balance sheet items more efficiently, contact us.  READ MORE +

Meals, entertainment and transportation may cost businesses more under the TCJA

The Tax Cuts and Jobs Act (TCJA) curtails business deductions for meals, entertainment and transportation. Under the TCJA, deductions for business-related entertainment expenses, once 50% deductible, are disallowed. Meal expenses related to business travel are still 50% deductible, but the 50% rule now also applies to meals provided on an employer’s premises for its convenience. The TCJA also eliminates employer deductions for providing employee transportation fringe benefits, such as parking allowances and mass transit passes.  READ MORE +

Footnote disclosures are critical to transparent financial reporting

Do you read the fine print in financial statement footnotes? It’s often worth the effort. Comprehensive disclosures contain a wealth of valuable information and can reveal hidden risk factors, such as unreported or contingent liabilities, related-party transactions, accounting changes (including justification and impact) and significant events that could have an adverse effect on future performance. Contact us to discuss concerns that arise when reviewing your company’s footnotes or the disclosures made by publicly traded competitors and potential M&A targets.  READ MORE +

Your 2017 tax return may be your last chance to take the “manufacturers’ deduction”

While many provisions of the Tax Cuts and Jobs Act (TCJA) will save businesses tax, one break it eliminates is the Section 199 deduction. Often referred to as the “manufacturers’ deduction,” this potentially valuable break, when available, can also be claimed by eligible construction, engineering, architecture, computer software production and agricultural processing businesses. Under the TCJA, 2017 is the last tax year noncorporate taxpayers can take the deduction (2018 for C corps.).  READ MORE +

How financial statements can be used to value private businesses

How much is your business worth? The answer lies in your financial statements. The balance sheet serves as the basis for the cost approach, though adjustments may be needed to align the book values of assets and liabilities with their fair market values. Likewise, the income statement and statement of cash flows can be used to derive value from 1) discounting techniques under the income approach, and 2) pricing multiples under the market approach.  READ MORE +

New tax law gives pass-through businesses a valuable deduction

Owners of “pass-through” businesses may see some major (albeit temporary) relief under the Tax Cuts and Jobs Act (TCJA) in the form of a new deduction for a portion of qualified business income (QBI). For tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026, owners of entities such as sole proprietorships, partnerships, S corporations and LLCs generally can deduct 20% of QBI, subject to restrictions that can apply at higher income levels. More rules and limits apply; careful planning will be necessary to gain maximum benefit. Contact us for details.  READ MORE +

The TCJA temporarily expands bonus depreciation

The Tax Cuts and Jobs Act (TCJA) significantly enhances bonus depreciation. You might even be able to benefit when you file your 2017 tax return. Generally, for qualified property placed in service between Sept. 28, 2017, and Dec. 31, 2022, the first-year bonus depreciation percentage increases to 100%. In addition, the 100% deduction is allowed for not just new but also used qualifying property. The new law also allows 100% bonus depreciation for qualified film, television and live theatrical productions. Contact us for more information.  READ MORE +

Tax Cuts and Jobs Act: Key provisions affecting businesses

The recently passed Tax Cuts and Jobs Act includes a multitude of provisions that will have a major impact on businesses. For example, it creates a flat corporate rate of 21% and temporarily provides a new 20% qualified business income deduction for owners of flow-through entities (such as partnerships and S corporations) and sole proprietorships. It also enhances some breaks, but it limits or eliminates many others. The changes generally apply to tax years beginning after December 31, 2017. Contact us for more details and to discuss the impact on your business.  READ MORE +

This year’s company holiday party is probably tax deductible, but next year’s may not be

A business’s holiday party costs can reduce its taxes, but maybe not after 2017. For 2017, businesses are generally limited to deducting 50% of allowable meal and entertainment (M&E) expenses, but certain expenses, such as a holiday party for employees, can qualify for a 100% deduction. However, the M&E deduction for employee parties (and for many other M&E expenses) will likely be eliminated beginning in 2018 under the Tax Cuts and Jobs Act.  READ MORE +

How to Conduct a year-end risk assessment

Do you know your company’s strengths, weaknesses, opportunities and threats? SWOT analysis isn’t just for auditors. It can also be a powerful management tool. Typically presented as a matrix, SWOT analysis provides a logical framework for understanding how a business runs. It tells how you’re performing and predicts what outside forces could impact cash flow. We can help you brainstorm ways to leverage strengths and opportunities and offset weaknesses and threats. This insight can be valuable when evaluating 2017 financial results and planning for the future.  READ MORE +

Reduce your 2017 tax bill by buying business assets

Sec. 179 expensing allows businesses an immediate deduction for the cost of eligible asset purchases (up to certain limits), rather than depreciating them over a number of years. Another depreciation break for assets that qualify is 50% first-year bonus depreciation. To enjoy these breaks on your 2017 tax return, you generally must acquire and place assets in service by Dec. 31. But tax reform could enhance these breaks, so keep an eye on legislative developments as you plan your asset purchases.  READ MORE +

How to prepare WIP reports for long-term contracts

Work-in-progress (WIP) reports can be a powerful management tool to help improve profits on long-term projects. Monitoring WIP reports regularly can help you identify problems. For example, you may discover over- or under-billing and profit fade before these problems spiral out of control, allowing you to take corrective action. But WIP reports are only as reliable as the information they’re based on. We can help you understand how to create these reports, what key information to include and how to decipher any unfamiliar accounting terminology.  READ MORE +

Update your estate plan to reflect your second marriage

If you’re in a second marriage, or planning another trip down the aisle, it’s vital to review your estate plan and update your will, trusts and beneficiary designations to name your current spouse where desired. If you have minor-aged children from a previous marriage, consider establishing a trust that directs a trustee of your choosing to manage its assets and control distributions to or on behalf of your children. Doing so can provide peace of mind that the assets will be managed and distributed per your wishes.  READ MORE +

The write stuff: A letter of instructions

The centerpiece of your estate plan is a will or living trust. Such a document determines who gets what, where, when and how. Another document to consider including is a “letter of instructions” to your heirs. It has no legal authority but can provide valuable guidance to them. A letter of instructions is more than just a listing of assets and their locations. Typically, it will include other items of a personal nature, such as funeral arrangements and people and organizations to be notified upon your death.  READ MORE +

Research credit can offset a small business’s payroll taxes

A qualified small business (QSB) eligible for the research tax credit can elect to use up to $250,000 of the credit to reduce its payroll tax bill instead of its income tax bill. Generally, a QSB has gross receipts of less than $5 million for the current tax year and hasn’t existed for more than five tax years. To qualify for the credit, a business’s research activities must meet a four-factor test. Expenses that may qualify include research-related wages and supplies, plus 65% of contracted research expenses.  READ MORE +

4 questions to guide your prospective financial statements

CPAs don’t just offer assurance services on historical financial results. They can also prepare prospective financial statements that predict how the company will perform in the future. Asking these four fundamental questions can help you make more accurate assumptions: 1) How far into the future do you want to plan? 2) How steady is your demand? 3) How much data do you have? 4) How do you fill your orders? We can help you answer these questions using the forecasting practices that make sense for your business.  READ MORE +

Retirement savings opportunity for the self-employed

Did you know that if you’re self-employed you may be able to set up a retirement plan that allows you to contribute much more than you can contribute to an IRA or even an employer-sponsored 401(k)? There’s still time to set up such a plan for 2017, and it generally isn’t hard to do. Among your options are a profit sharing plan, a Simplified Employee Pension (SEP) plan and a defined benefit plan. Whether you’re a “full-time” independent contractor or you’re employed but earn some self-employment income on the side, contact us to learn more about your options.  READ MORE +

How to maximize deductions for business real estate

Currently, a valuable income tax deduction related to business real estate is for depreciation. But the depreciation period for such property is long, and land itself isn’t depreciable. To maximize your deductions, first segregate personal property from buildings; depreciation deductions for personal property generally can be taken more quickly. Next, carve out depreciable land improvements from land. Examples include landscaping, roads, and even grading and clearing.  READ MORE +

A dynasty trust keeps on giving long into the future

A dynasty trust can protect your wealth from gift, estate and generation-skipping transfer (GST) taxes and help you leave a lasting legacy. Contributions to the trust are considered taxable gifts, but you can minimize taxes by applying your gift and GST tax exemptions. Trust assets can grow and compound indefinitely. The trust makes distributions to future descendants according to criteria you establish. So long as your beneficiaries don’t gain control over the trust, the undistributed assets will bypass their taxable estates.  READ MORE +

2 ACA taxes that may apply to your exec comp

Tax planning for executive compensation such as restricted stock, stock options and nonqualified deferred comp is generally more complex than for salaries, bonuses and traditional employee benefits, especially if you could be subject to the additional 0.9% Medicare tax or the 3.8% net investment income tax. These taxes apply when certain income exceeds the applicable threshold: $250,000 for married filing jointly, $125,000 for married filing separately, and $200,000 for other taxpayers. If you’re concerned about how your exec comp will be taxed, contact us.  READ MORE +

How do your accounting estimates measure up?

Businesses today face unprecedented uncertainty. So, management’s historical means of making accounting estimates may no longer suffice. Allowances for doubtful accounts, goodwill impairment, uncertain tax positions and other estimates involve a level of measurement uncertainty. And highly uncertain outcomes can lead to unintentional errors or intentional misstatement. With audit season just around the corner, let’s discuss your use of accounting estimates in today’s volatile markets. We can help you facilitate audit fieldwork and minimize audit adjustments.  READ MORE +

Accelerate your retirement savings with a cash balance plan

A cash balance plan can turbocharge a business owner’s retirement savings. In 2017, employer contributions and employee deferrals to defined contribution plans like 401(k)s are limited to $54,000 ($60,000 for employees age 50 or older). Nondiscrimination rules that prevent a plan from favoring highly compensated employees can further reduce contributions to an owner’s account. But cash balance plans are instead subject to a cap on annual benefit payouts in retirement, and contributions may be as high as necessary to fund those benefits.  READ MORE +

Timing strategies could become more powerful in 2017, depending on what happens with tax reform

Typically, it’s better for businesses to defer tax by deferring income to the next year and accelerating deductible expenses into the current year. These strategies could be particularly powerful if tax legislation is signed into law reflecting the “Unified Framework for Fixing Our Broken Tax Code” released by President Trump and congressional Republicans on Sept. 27. Among other things, the framework calls for reduced tax rates for corporations and flow-through entities as well as the elimination of many business deductions. Contact us for more information.  READ MORE +

Investors: Beware of the wash sale rule

If you’ve cashed in some big gains this year, consider looking for unrealized losses in your portfolio and selling those investments before year end to offset your gains. This can reduce your 2017 tax liability. But beware of the wash sale rule. It prevents you from taking a loss on a security if you buy a substantially identical security within 30 days before or after you sell the security creating the loss. You can recognize the loss only when you sell the replacement security. Contact us to learn more about the ins and outs of saving taxes on your investments.  READ MORE +

How effectively do you manage risk?

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) recently updated its enterprise risk management (ERM) framework. The update includes five components: 1) governance and culture, 2) strategy and objective setting, 3) performance, 4) review and revision, and 5) information, communication and reporting. Effective ERM encompasses more than taking an inventory of your risks; it should be an entitywide process for proactively managing risk. Contact us for help adopting cost-effective ERM practices to help make your business more resilient.  READ MORE +

Should your business use per diem rates for travel reimbursement?

If business-travel expenses are properly accounted for, reimbursements are generally tax-free to the employee and deductible by the employer. But keeping track of actual costs can be a headache. With per diem rates, employees don’t have to keep receipts; they just document the travel’s time, place and business purpose. The employer simply pays the employee the per diem for the travel destination and deducts it. Rates include lodging, meals and incidental expenses but not transportation. Updated travel per diem rates go into effect Oct. 1. Contact us for details.  READ MORE +

Tax planning critical when buying a business

To improve the odds of a successful acquisition, it’s important to devote resources to tax planning before your deal closes. For example, discuss whether and how much each party can deduct their transaction costs and how much in local, state and federal tax obligations the parties will owe upon signing the deal. And if you and your seller use different tax processing software or follow different accounting methods, you need to choose between them as soon as feasible. We can help you ensure you plan properly and minimize any potentially negative tax consequences.  READ MORE +

Larger deduction might be available to businesses providing meals to their employees

When a business provides meals to its employees, generally its tax deduction is limited to 50%. But there are exceptions. One is if the meals qualify as a de minimis fringe benefit. A recent U.S. Tax Court ruling could ultimately mean that more employer-provided meals will be 100% deductible under this exception. The court found that the Boston Bruins hockey team’s pregame meals to players and personnel at out-of-town hotels qualified as a de minimis fringe benefit. But the facts of this case are specific and restrictive. Contact us to learn more.  READ MORE +

Supplement your financial statements with timely flash reports

GAAP financial statements can take weeks or months to prepare. If you want more timely information, consider daily or weekly “flash reports” that provide a simplified snapshot of key financial figures. Flash reports help management proactively identify and respond to problems and weaknesses. But these reports might not always be 100% accurate, and some items might ebb and flow throughout the billing cycle. So, exercise caution when sharing these reports with stakeholders. We can help customize an effective flash report based on what matters most in your industry.  READ MORE +

Have you properly funded your revocable trust?

If your estate plan includes a revocable trust (also known as a “living trust”), it’s critical to ensure that the trust is properly funded. Revocable trusts offer significant benefits, including asset management (in the event you become incapacitated) and probate avoidance. But these benefits aren’t available if you don’t fund the trust. To do so, transfer ownership of assets to the trust. Don’t forget to transfer newly acquired assets to the trust to ensure they enjoy its benefits. Also be aware that certain assets shouldn’t be moved to the trust, such as IRAs.  READ MORE +

Yes, you can undo a Roth IRA conversion

If you convert a traditional IRA to a Roth but discover you’d be better off if you hadn’t converted, it’s possible to undo it. This may be beneficial if the conversion pushes you into a higher tax bracket, you expect your tax rate to go down or the account value has declined. Generally, if you extend your tax return, you have until Oct. 15 of the following year to undo a conversion. (For 2016 returns, the deadline is Oct. 16.) It may make sense to undo the conversion and then redo it. We can provide details on the rules and help you assess your options.  READ MORE +

Could captive insurance reduce health care costs and save your business taxes?

Could a captive insurance company reduce health care costs and save your business taxes? A captive generally is wholly owned and controlled by the employer, like forming your own insurance company. You can customize coverage and charge premiums that more accurately reflect your loss exposure. And you can participate in the captive’s underwriting profits and investment income. Premiums paid to the captive are tax-deductible, and the captive can deduct most of its loss reserves. Contact us to learn more about the tax treatment and other pros and cons.  READ MORE +

Credit loss standard: The new CECL model

A new accounting standard on credit losses goes into effect in 2020 for public companies and 2021 for private ones. It replaces the existing “incurred loss” model that financial institutions use now with a new “current expected credit loss” model. By focusing on forward-looking information, the new model will result in earlier recognition of losses and better meet the needs of financial statement users who, leading up to the global financial crisis, were making independent estimates of institutions’ expected credit losses. We can help you apply the new guidance.  READ MORE +

Put your audit in reverse to save sales and use tax

A reverse audit can help your business find sales and use tax overpayments so you can seek refunds. States may exempt, for example, equipment and utilities used in manufacturing, and custom software, computers and peripherals used for research and development. Unless you’re diligent, you may be missing out on some exemptions to which you’re entitled. A reverse audit can allow you to not only reap tax refunds now for missed exemptions but also update your compliance systems to help ensure you don’t overpay in the future. Contact us to learn more.  READ MORE +

Close-up on cutoffs for reporting revenues and expenses

Timing is critical in financial reporting. Under the accrual basis of accounting, the end of the accounting period serves as a “cutoff” for when companies recognize revenues and expenses. However, some companies may be tempted to play timing games to boost financial results or lower taxes. As you adopt new principles-based guidance on reporting contract revenues, expect auditors to pay more attention to accounting cutoffs. Contact us for help complying with the rules and minimizing audit adjustments next audit season.  READ MORE +

Will Congress revive expired tax breaks?

Most of the talk about possible tax legislation has focused on wide-sweeping tax reform and taxes under the Affordable Care Act. But another question is whether Congress will extend through 2017 some valuable breaks for individuals that the 2015 PATH Act extended only through 2016. One is the above-the-line deduction for higher education tuition and related expenses. Another is the mortgage insurance premium deduction. And then there’s the exclusion from gross income for mortgage loan forgiveness. Contact us for more information. We’ll keep you up to date.  READ MORE +

ESOPs offer businesses tax and other benefits

An employee stock ownership plan (ESOP) is a qualified retirement plan that invests in the business’s own stock and offers valuable tax benefits. The business’s contributions are typically tax-deductible. Dividends paid on ESOP stock passed through to employees or used to repay an ESOP loan, and dividends voluntarily reinvested by employees in company stock in the ESOP, may also be deductible. And shareholders might be able to sell stock to the ESOP and defer federal income taxes on any gains from the sale. Much depends on entity type. Contact us to learn more.  READ MORE +

Does your business have too much cash?

For business owners, an excess of cash may sound like a nice problem to have. But companies that hoard money often do themselves more harm than good. Bank accounts usually generate returns that are much below the interest rates businesses pay on their debts, such as mortgages and credit lines, making carrying cash costly. There are many ways to reinvest a cash surplus to earn a higher return. For instance, you could repay those debts, invest in marketable securities, or even acquire a competitor (or its assets). We can help you identify your optimal cash balance.  READ MORE +

Nonqualified stock options demand tax planning attention

If you work for a corporation, you might receive nonqualified stock options (NQSOs). If the stock appreciates beyond your exercise price, you can buy shares at a price below what they’re trading for. NQSOs create compensation income taxed at ordinary-income rates on the “bargain element” (the difference between the stock’s fair market value and the exercise price) when exercised, regardless of whether the stock is held or immediately sold. You may need to make estimated tax payments or increase withholding to cover the tax. Have questions about NQSOs? Contact us.  READ MORE +

Look beyond EBITDA

EBITDA (earnings before interest, taxes, depreciation and amortization) gained popularity as a leveraged buyout tool in the 1980s. Today, it’s one of the most quoted performance metrics in the “management discussion and analysis” section of public companies’ financials. But EBITDA can be misleading, because 1) the term isn’t defined by formal guidance, and 2) it fails to consider changes in working capital, income taxes, principal repayments and capital expenditures. Never rely on EBITDA alone: Consult with us to perform a comprehensive financial analysis.  READ MORE +

All fringe benefits aren’t created equal for tax purposes

All fringe benefits aren’t created equal for tax purposes. Generally: Taxable benefits (cash bonus, personal use of company vehicle) are subject to income and employment taxes. Nontaxable benefits (working-condition and de minimis fringe benefits, work-related travel expenses, health plan premiums) aren’t subject to any taxes. Partially taxable benefits (public transportation subsidies) are excluded up to a certain dollar limit. Tax-deferred benefits (retirement plans) aren’t taxed when received but are taxed later. Additional rules apply. Contact us for details.  READ MORE +

IRS simplifies procedure for obtaining extension to make portability election

The IRS has eased portability election rules. Portability allows a surviving spouse to use the deceased spouse’s unused estate tax exemption (currently $5.49 million). Previously, if a deceased spouse’s estate failed to make a timely portability election, the only recourse was to request a private letter ruling. Rev. Proc. 2017-34 grants an automatic extension for taxpayers not otherwise required to file an estate tax return, provided they file a return making the election on or before the later of the second anniversary of the deceased’s death or January 2, 2018.  READ MORE +

Summer is a good time to start your 2017 tax planning and organize your tax records

If you start planning now, you may avoid a tax surprise next April. For example, if you experience a life change (e.g., marriage or birth of a child), you may need to adjust your tax withholding by filing a new Form W-4 with your employer. Summer is also a good time to organize your tax records. Put your 2016 return and supporting records together in a safe but accessible place, such as a home safe or bank safe deposit box. And make tax time easier next year by putting records you’ll need (donation and out-of-pocket medical expense receipts, etc.) in one place.  READ MORE +

Respecting auditor independence

Independence is a critical part of an auditor’s ethical requirements. When assessing auditor independence, we consider whether an assignment 1) creates a mutual or conflicting interest, 2) puts the auditor in a position of auditing his or her own work, 3) results in the auditor acting as a member of management or an employee of its audit client, or 4) positions the auditor as an advocate of a client. If any of these conditions are met, auditor independence may be compromised. We can help public and private companies address auditor independence issues.  READ MORE +

Keep real estate separate from your business’s corporate assets to save tax

Many businesses operate as C corporations so they can buy and hold real estate just as they do equipment, inventory and other assets. But this can be a costly mistake: If the real estate is sold, any profit is subject to double taxation, first at the corporate level and then at the owner’s individual level on distributions. If real estate is held instead in a pass-through entity, such as a limited liability company (LLC), and then leased to the corporation, profit on a sale of the property is taxed only once, at the individual level. Contact us for details.  READ MORE +

Why business owners should regularly upgrade their accounting software

Years ago, all a business owner needed was a big, leather-bound ledger on the desk. These days, regularly upgraded accounting software is a must. Why? As a system ages, bad data can build up and adversely affect financial reporting. Ever heard the term “garbage in, garbage out”? It’s true. In addition, by regularly upgrading your accounting software, you may be able to identify better ways to manage expenses and handle internal controls. Let our firm help you set a budget for regular upgrades and choose the products that best suit your company’s needs.  READ MORE +

Seasonal business? Optimize your operating cycle

Cash flow fluctuations are intense for seasonal businesses. If your company defines itself as such, try to optimize your operating cycle. Look carefully at the beginning, middle and end of your cycle, identifying your strategic selling window. Try to stockpile cash received at cycle’s end, and then use those reserves to finance the next cycle. If you need a line of credit, compile a comprehensive loan package. Above all, draft a formal business plan, use financial projections and set budgets. Contact us for help with your distinctive challenges.  READ MORE +

Pro forma compilations look at how an alternative course of action would have affected financials

Ever wonder how your company’s historical financial statements might differ if you’d taken an alternate course of action? For example, how much would earnings have increased (or decreased) if you’d merged with another business or discontinued a product line? New guidance went into effect on May 1, 2017, that clarifies what a pro forma compilation is and what’s expected from clients who hire CPAs to perform these nontraditional engagements. We understand the new guidance and have updated our practices. Contact us for help compiling your pro formas.  READ MORE +

You don’t have to take business insurance costs sitting down

Insurance is a risk management imperative for businesses. But owners don’t have to take high coverage costs sitting down. Stay on top of facilities maintenance and constantly strive to improve worker safety. For example, have an electrician ensure circuits aren’t close to overloading, and regularly test all fire prevention systems. Check high-traffic areas for slip-and-fall risks and eliminate clutter. You might even want to request an OSHA courtesy inspection. We can assess your insurance costs and help you identify opportunities for savings.  READ MORE +

Pay attention to the details when selling investments

If you don’t pay attention to the details, the tax consequences of selling an investment may be different from what you expect. For example, if you bought the same security at different times and prices and want to sell high-tax-basis shares to reduce gain or increase a loss to offset other gains, be sure to identify which block of shares is being sold. At year end, keep in mind that the trade date, not the settlement date, of publicly traded securities determines the year you recognize the gain or loss. Questions about tax planning for investments? Contact us!  READ MORE +

Dot the “i’s” and cross the “t’s” on loans between your business and its owners

Treating transfers of money between a closely held business and its owners as loans can provide tax advantages. But the IRS looks closely at such transactions, so it’s critical to establish that the transaction is truly a loan by 1) executing a promissory note, 2) charging a reasonable rate of interest, 3) establishing and following a fixed repayment schedule, 4) securing the loan using appropriate collateral, 5) treating the transaction as a loan in the company’s books, and 6) making reasonable efforts to collect in case of default. Contact us for more details.  READ MORE +

Timeliness counts in financial reporting

If you procrastinate closing your books and delivering year-end financial statements, lenders and investors may think the worst. Late financials give the impression that 1) you’re hiding weak performance, 2) management is inept or doesn’t care about financial reporting, or 3) you’re more likely to be a victim of fraud. Timely financial statements are a must for fostering goodwill with outside stakeholders. We can help you stay focused, work through complex reporting issues and communicate weaker-than-expected financial results in a positive, professional manner.  READ MORE +

Videotaping your will signing may not produce the desired outcome

Some people make video recordings of their will signings in an effort to create evidence that they possess the requisite testamentary capacity. For some, this strategy may help stave off a will contest. However, unless the person signing the will delivers a flawless performance, a challenger will pounce on the slightest hesitation as “proof” that the person lacked testamentary capacity. An alternative strategy is to have a doctor examine you and attest to your capacity immediately before the signing. Contact us for other estate planning strategies.  READ MORE +

Choosing the best way to reimburse employee travel expenses

Reimbursing employee travel expenses can provide tax benefits to both your business and the employee. Your business can deduct the reimbursements (subject to a 50% limit for meals and entertainment), and they’re excluded from the employee’s taxable income. But the expenses must be legitimate and the reimbursements must comply with IRS rules, generally by using either the per diem method or an accountable plan. Whether you have questions about which reimbursement option is right for your business or the additional rules and limits that apply to each, contact us.  READ MORE +

A family bank professionalizes intrafamily lending

Intrafamily loans can provide your family financial assistance without triggering unwanted gift taxes, as long as they’re properly structured. A family bank is a family-owned, family-funded entity designed for the sole purpose of making intrafamily loans. By “professionalizing” family lending activities, a family bank can preserve the tax-saving power of intrafamily loans while minimizing negative consequences. Avoid family resentment by building a strong governance structure that promotes transparency. Contact us to learn more about intrafamily lending.  READ MORE +

Could stronger governance benefit your business?

Every company has at least one owner, but not every company has strong governance. This is the set of rules and practices by which a business is directed and controlled. Strengthening it can help ensure productivity, reduce legal risks and ease ownership transitions. Begin by looking at your business structure. Corporations must take certain actions, but other entities can voluntarily take governance steps such as defining executive authority and formalizing compensation agreements. Please contact our firm for help with your company’s specific governance needs.  READ MORE +

A “back door” Roth IRA can benefit higher-income taxpayers

Could you benefit from opening the “back door” to a Roth IRA? Roth IRAs allow tax-free distributions; the tradeoff is that contributions aren’t deductible. But income-based phaseouts may reduce or eliminate your ability to contribute. If so and you don’t already have a traditional IRA, a “back door” Roth IRA might be for you: You set up a traditional IRA, make nondeductible contributions to it and convert it to a Roth. The only tax due will be on any growth in the account between the time you made the contribution and the conversion date. Contact us for details.  READ MORE +

Business owners: When it comes to IRS audits, be prepared

As a business owner, you likely are concerned about being audited by the IRS. Audits can occur randomly, but some tax return items may raise red flags with the IRS, such as major inconsistencies between previous years’ filings and the most current one, profit margins or expenses markedly different from those of similar businesses, and unusually high deductions. If the IRS selects you for an audit, we can help you understand what the IRS is disputing, gather the needed documents and information, and respond to the auditor’s inquiries expediently and effectively.  READ MORE +

Real estate investor vs. professional: Why it matters

Income and losses from investment real estate or rental property are passive by definition, unless you’re a real estate professional. Why does this matter? Passive income may be subject to the 3.8% net investment income tax, and passive losses generally are deductible only against passive income, with the excess carried forward. To qualify as a pro, you must annually perform: 1) more than 50% of your personal services in real property trades or businesses in which you materially participate, and 2) more than 750 hours in these businesses. Contact us for details.  READ MORE +

Prepaid funeral plans may not provide peace of mind

The typical funeral now costs $8,000 to $10,000. To relieve their families of the burden of planning a funeral, many people plan their own and pay for them in advance. Unfortunately, prepaid funeral plans are fraught with potential traps. Before you agree to a prepaid plan, the Federal Trade Commission recommends asking what happens to the money you’ve prepaid, what happens to the interest income on prepayments placed in a trust account and whether you’re protected if the funeral provider goes out of business. Contact us for other ideas on funding funeral costs.  READ MORE +

Want to help your child (or grandchild) buy a home? Don’t wait!

Want to help your child (or grandchild) buy a home? Don’t wait! Mortgage interest rates are still quite low, but they likely will increase as the Fed continues to raise rates. If the child is eligible for the 0% long-term capital gains rate, here’s a tax-smart strategy: Instead of giving cash to help fund a down payment, give long-term appreciated assets such as stock or mutual fund shares. The child can sell the assets tax-free, and you can save the taxes you’d owe if you sold the assets yourself. Contact us for other tax-smart ways to help a child buy a home.  READ MORE +

3 hot spots to look for your successor

Picking someone to lead your company after you is a daunting task. Keep an open mind and assume nothing. For example, a family member may seem the obvious choice. But he or she must really want the job and be qualified. Maybe a current employee is the better choice, but start grooming him or her early and monitor readiness carefully. Alternatively, you might need to find an external candidate. To do so, consider networking, targeted ads and even an executive search firm. Overwhelmed? Don’t be; we can help you create an effective succession plan.  READ MORE +

Use pro formas to plot your route to success

If running a business is like going on a road trip, then a full set of pro forma financials is your road map or GPS app. Projected balance sheets, income statements and cash flow statements tell investors and lenders 1) where you are, 2) where you want to go, 3) when you’re likely to experience cash flow or capacity shortages, and 4) when you hope to arrive. Moreover, the statement of assumptions explains how you’ll achieve your goals. We can help you prepare pro forma financials, compare expected to actual results and adjust your assumptions as needed.  READ MORE +

Get more from your association’s program budget

Is your not-for-profit association offering enough (or the right) programs to keep members active and engaged? New programs require time, effort and money, so when you commit to developing one you want to get the biggest bang for your buck. Start by gathering information through focus groups, surveys and informal conversations about issues your membership is facing. Note gaps between your current program offerings and members’ wants and needs. Don’t spin member feedback to match what you think your organization needs. Contact us for more tips.  READ MORE +

Enhance benefits’ perceived value with strong communication

If employees don’t value their benefits, they might not fully use them. And, for the employer, this could mean wasted dollars spent on a strong but unappreciated benefits package, plus the possible loss of good employees who depart for “better” benefits. To boost perceived value, create a year-round communication program to promote your benefits package. Consider targeting various life stages to better appeal to employees. And gather feedback to determine employees’ informational needs. Contact our firm for more tips on maximizing the value of your benefits.  READ MORE +

Navigating the New Markets Tax Credit Program

There is a government sponsored program that helps investors do well by doing good; that is earn tax credits for investing in low-income communities across America. But this opportunity comes with a catch: the need to navigate a complex series of tax filing, compliance and investment qualification requirements. The New Markets Tax Credit Program's goal is to spark revitalization of low-income and overwise impoverished areas in the United States.  READ MORE +

Look at your employees with cybersecurity in mind

No business should rely on luck to avoid a cyberattack. One area to consider is your employees. You might assume that only an outsider would, say, steal sensitive data or disable your website. But these crimes are often inadvertently caused or intentionally committed by employees. Train managers to review job applications with cybersecurity in mind. Also, clearly state your cybersecurity policies in your employment handbook, so all employees know your guard is up. Although most workers are honest, all it takes is one mistake or bad apple to cause a disaster.  READ MORE +

Create a strong system of checks and balances

How do you rate your internal controls? A strong system of internal controls will help a company achieve its strategic and financial goals, in addition to minimizing the risk of fraud. Auditors routinely monitor the three basic control features: 1) physical restrictions, 2) account reconciliation, and 3) job descriptions. Company insiders sometimes lack the experience or objectivity to assess internal controls. But our auditors have seen the best (and worst) internal control systems and can help evaluate whether yours is effective.  READ MORE +

Be aware of the ins and outs of holding joint title to property

Owning assets jointly with children or other heirs is a common estate planning “shortcut.” There are two potential advantages to joint ownership: convenience and probate avoidance. But, it can also create a number of problems, such as unnecessary taxes. Adding a child’s name to the title may be considered an immediate taxable gift of one-half of the property’s value. And when you die, the property’s value then will be included in your taxable estate, though any gift tax paid with the original transfer would be allowed as an offset. Contact us for other drawbacks.  READ MORE +

3 financial statements you should know

What are the three financial statements under U.S. GAAP, and what’s included in each? If you can’t immediately answer these questions, you’re not alone. Many business owners are so focused on building revenue that they don’t have time to regularly monitor the 1) income statement, 2) balance sheet and 3) cash flow statement. But doing so can provide insight into trends that may help you catch potential problems early, and pivot, when needed, to maximize the company’s value. Contact us for a refresher on financial reporting and how to benchmark performance.  READ MORE +

Consider key person insurance as a succession plan safeguard

For many companies, the sudden death of an owner or hard-to-replace employee could spell doom for the business itself. Key person insurance guards against this risk. Your business pays the premiums and, if the insured dies while the policy is in effect, receives the payout. Premiums generally aren’t tax deductible, but death benefits typically aren’t considered taxable income when received. Not every type of business needs this insurance, but it can provide security while you develop a succession plan. We can help you decide whether a key person policy is for you.  READ MORE +

Victims of a disaster, fire or theft may be able to claim a casualty loss deduction

If you suffered damage to your home or personal property last year, you may be able to deduct these “casualty” losses on your 2016 federal income tax return. A casualty is a sudden, unexpected or unusual event, such as a natural disaster, fire, accident, theft or vandalism. The loss is generally the lesser of the amount you paid for the property or the decrease in the property’s fair market value. This amount must be reduced by any insurance or other reimbursement received or anticipated. Additional rules and limits apply. Contact us for more information.  READ MORE +

Direct tuition payments benefit your grandchild and your estate plan

Grandparents often want to help finance their grandchildren’s education. A simple technique is to make tuition payments on behalf of your grandchild. So long as you make the payments directly to the educational institution, they avoid gift and generation-skipping transfer (GST) taxes without using up any of your $5.49 million gift or GST tax exemption or $14,000 annual exclusion. Even if these taxes are repealed, as long as education funding is your goal, this strategy likely won’t have any negative impact. Contact us to learn about all of your funding options.  READ MORE +

Offer plan loans? Be sure to set a reasonable interest rate

Can your company’s retirement plan participants take out loans from their accounts? If so, you must set a “reasonable” interest rate. Neither the IRS nor the DOL provides a set percentage for plan sponsors. The IRS looks to similar local interest rates and what local banks charge for similarly structured loans. Meanwhile, DOL regulations generally define a reasonable rate as equal to commercial lending interest rates under similar circumstances. Need help? We can assist you in reviewing your plan document and loan policy statement to calculate a reasonable rate.  READ MORE +

Who can — and who should — take the American Opportunity credit?

Who can take the American Opportunity credit? If you have a child in college, you may be eligible to claim the credit (up to $2,500) on your 2016 income tax return. If your income is too high, you won’t qualify. But your child might. There’s a potential downside: You’ll have to forgo your dependency exemption for him or her. And the child can’t take the exemption. But the exemption is also subject to a phaseout, so you might lose its benefit anyway. We can help run the numbers and provide more information about qualifying for the American Opportunity credit.  READ MORE +

Make sure the IRS won’t consider your business to be a “hobby”

If you run a business “on the side” and derive most of your income from another source, you may face a risk: Your enterprise might be a hobby in the eyes of the IRS. If so, it will be subject to the hobby loss rules, which means you can’t use a loss from the activity to offset other income. In evaluating whether an activity is a hobby, the IRS looks at various factors. For example, poor record keeping, ongoing lack of profit and minimal effort to make a profit might indicate a hobby. Concerned about the hobby loss rules? We can help evaluate your situation.  READ MORE +

Getting your money’s worth out of a company retreat

Company retreats can be expensive. But when planned properly, they can produce fresh strategic ideas and raise employee morale. To ensure the event’s success, several months ahead of time identify your key retreat objectives. Pick only two or three so you have a better chance of fulfilling these goals. Also, create a detailed, reasonable budget. Set limits for such variable costs as location, accommodations, food, transportation, speakers and entertainment. It’s not easy, but a retreat can be both enjoyable and cost-effective. Please let us know how we can help.  READ MORE +

Divorce necessitates an estate plan review

Going through a divorce? Update your estate plan as soon as possible to avoid unintended outcomes. Unless you wish to provide your former spouse with an inheritance, immediately amend your will and trusts to eliminate him or her as a beneficiary. Also, unless you’re comfortable with your former spouse controlling your wealth, designate someone else as executor or trustee. This is a good idea even if you live in a state where divorce automatically nullifies bequests to an ex-spouse and automatically revokes an appointment of a former spouse as executor or trustee.  READ MORE +

Keep family matters out of the public eye by avoiding probate

Probate is a legal procedure in which a court establishes your will’s validity, determines your estate’s value, resolves creditors’ claims, provides for the payment of taxes and transfers assets to your heirs. Downsides to probate are that it’s time consuming, expensive and public. You can avoid or minimize probate by designating beneficiaries where possible and titling assets in a way that allows them to be transferred directly to your beneficiaries outside your will. Contact us to learn more ways to minimize probate based on your assets.  READ MORE +

Listen and trust: The power of collaborative management

Do you collaborate with your managers or simply issue orders? As your company grows, you’ll likely be better off sharing responsibility for major decisions. To promote collaboration, clearly communicate your strategic objectives. Also, listen to your managers’ ideas and act on the viable ones. Conduct regular performance reviews as well, emphasizing accomplishments and exploring growth opportunities. Provide constructive, ongoing professional and leadership training, too. Let our firm assist you in assessing the profitability impact of your management team.  READ MORE +

When an elderly parent might qualify as your dependent

Are you supporting an elderly parent? You might qualify for the adult-dependent exemption, which allows a deduction of up to $4,050 per adult dependent claimed on your 2016 tax return. For you to qualify, in most cases your parent must have less gross income for the tax year than the exemption amount. Generally Social Security is excluded, but payments from dividends, interest and retirement plans are included. And you must have contributed more than 50% of your parent’s financial support. Contact us for more information on qualifying for this break or others.  READ MORE +

Filing deadline rapidly approaching for flow-through entities

The March 15 federal income tax filing deadline for calendar-year partnerships, S corporations and LLCs treated as partnerships or S corporations for tax purposes is nearly upon us. This deadline is nothing new for S corporation returns, but it’s about a month earlier than previous years for partnership returns. The extension deadline remains at Sept. 15 for both partnership and S corporation returns, but you must file for the extension by March 15. Contact us if you have questions about the filing deadlines that apply to you or avoiding interest and penalties.  READ MORE +

Cooking the books

What’s the most costly type of white collar crime? Falsified or manipulated financial statements generate a median cost of $975,000 — more than any other type of occupational fraud, according to the Association of Certified Fraud Examiners. Examples include concealed liabilities, fictitious revenues, inflated asset valuations, misleading disclosures and timing differences. Losses from financial statement fraud can quickly snowball out of control. We can help identify red flags, ferret out ongoing schemes and deter would-be fraudsters from cooking your books.  READ MORE +

Make health care decisions while you’re healthy

Estate planning isn’t just about what happens to your assets after you die. It’s also about protecting yourself and your loved ones. This includes having a plan for making critical medical decisions in the event you’re unable to make them yourself. And, as with other aspects of your estate plan, the time to act is now, while you’re healthy. If an illness or injury renders you unconscious or otherwise incapacitated, it will be too late.  READ MORE +

Deduct all of the mileage you’re entitled to — but not more

Rather than keeping track of the actual cost of operating a vehicle, employees and self-employed taxpayers can use a standard mileage rate to compute their deduction related to using a vehicle for business. But you might also be able to deduct miles driven for other purposes, including medical, moving and charitable purposes.  READ MORE +

Use an ILIT as a wealth preserver

If you’re concerned about your family’s financial well-being after you’re gone, life insurance can provide peace of mind. Going a step further and setting up an irrevocable life insurance trust (ILIT) to hold the policy offers additional estate planning benefits.Nevertheless, you can design the trust to adapt to changing circumstances and provide that children or grandchildren born after you establish the trust be automatically added as beneficiaries.  READ MORE +

Envision your advisory board before you form it

Many companies reach a point where they could benefit from an advisory board. If you’re about there, you may wonder what your ideal advisory board should look like. First, participants need to have expertise and experience that complement your company’s staff. Second, they should support your long-term strategic goals. Look to assemble a diverse mix of backgrounds, personalities and skills. As your business evolves, you may need to replace some members or change the board’s size. Please contact our firm to discuss the concept of advisory boards further.  READ MORE +

Is your business committed to its cost-control regimen?

Is your business truly committed to its cost-control regimen? Like keeping up an exercise routine, controlling expenses takes not just good intentions but also an ongoing effort. Begin by identifying expenses in every business area. Prime candidates include technology contracts, lease agreements, and utilities and office supplies. Managing such costs shouldn’t be a one-time thing. It must be a strategic decision that starts with ownership and is clearly communicated down the organizational chart. Contact our firm for help with your long-term cost-control plan.  READ MORE +

PTO banks: A smart HR solution for many companies

Many businesses are taking a new approach to paid time off (PTO). Under the “PTO bank” concept, employers merge the traditional components of excused absences (vacation time, sick time, etc.) into one employee-managed account. Many of today’s employees and job candidates view PTO banks as easier and empowering. More efficient administration can reduce the associated costs for employers as well. But, despite the many potential benefits, creating PTO banks may not be the best move for every company. Please contact our firm for help assessing the idea.  READ MORE +

An effective succession plan calls for decisive action

The prospect of leaving your company in the hands of someone else likely brings mixed emotions. You’ve no doubt spent a substantial amount of time and a great degree of effort in getting your enterprise to where it is today. But when it comes to creating and executing a succession plan, decisive action is critical. You’ve got to respect the importance of timeliness — not only for you and your family, but also for your successor and employees. So here are two key questions to answer.  READ MORE +

The Often Complicated Tax Implications of Stock Options

Employee Stock Options are fast becoming a standard component of compensation for many emerging growth sector companies. Stock option plans are a very popular way of attracting and retaining high performing employees for startups, who often lack the cash to offer big salaries and bonuses. These plans give founders the ability to offer stock options to employees, officers, directors, consultants and advisors – in short all the people often needed to get a business up and running. It allows people to buy stock in the company when they exercise the options, and in some cases make loads of money in the process.  READ MORE +

NJ Angel Investor Tax Credit Program

The New Jersey Economic Development Authority (NJEDA) is offering all investors who invest in a qualifying NJ emerging technology business a tax credit through the Angel Investor Tax Credit program. NJEDAThis program was enacted in January of 2013 to help attract investments, and spur job creation / economic growth in New Jersey’s current and next generation of high-skilled, high- paying emerging technology sector.  READ MORE +


How to Employ a Sound Defense Against Tax Liability Risks

Getting an emerging growth company up and running is one of the most exciting and stressful times any entrepreneur can face. It can involve testing the viability of the business model, acquiring paying customers, hiring and managing a new staff, testing the viability of new products or services, finding space for the business and of course starting to raise money.  READ MORE +
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