Post Election IRC Section 2704 Update
Certain energy-efficient home improvements can cut your energy bills and save you money at tax time; however, these energy-related tax credits expire at the end of 2016. Here are some key facts that you should know about home energy tax credits:
There are a number of end of year tax planning strategies that businesses can use to reduce their tax burden for 2016. Here are a few of them:
Tax planning strategies for individuals this year include postponing income and accelerating deductions, as well as careful consideration of timing related investments, charitable gifts, and retirement planning.
IRC Section 2704 Update
As discussed in last month’s newsletter, proposed changes by the IRS to Section 2704 of the Internal Revenue Code would increase taxes for many family businesses. The proposed regulation would effectively eliminate valuation discounts when transferring or gifting ownership interests to family members. As currently written, the regulation would impose a de facto 25 to 50 percent “stealth” tax increase on each transfer or gift, and severely hamper many of these businesses.
When you decide to start a business, one of the most important decisions you'll need to make is choosing the right business entity. It's a decision that impacts many things--from the amount of taxes you pay to how much paperwork you have to deal with and what type of personal liability you face.
Cash flow is the lifeblood of any small business. Some business experts even say that a healthy cash flow is more important than your business's ability to deliver its goods and services.
Numerous reports of scammers sending fraudulent CP2000 Notices for tax-year 2015 have been received by the IRS, resulting in an investigation by the Treasury Inspector General for Tax Administration.
CHANGES TO IRC 2704
Since 1990, IRC Section 2704 of the tax code has allowed the use of discounts when determining the fair market value of an ownership interest transfer in a privately held company (in particular, Family Limited Partnerships or Limited Partnerships). Typical discounts include the lack of control discount and the lack of marketability discount. Currently, these discounts are applied to the fair market value of an ownership interest from the viewpoint of a “willing seller” and “willing buyer,” both of whom would consider the valuation impact of:
As most of you make your way home from the shore or prepare your last barbecue of the summer, be sure to count your expenses and keep your banks on high alert.
Whether you're self-employed or an employee, if you use a car for business, you get the benefit of tax deductions.
Tax planning is the process of looking at various tax options to determine when, whether, and how to conduct business transactions to reduce or eliminate tax liability.
Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund. It presents challenges to individuals, businesses, organizations and government agencies, including the IRS.
PREPARING YOUR BUSINESS FOR EXIT (OR GROWTH)
Last month’s newsletter touched on the Discovery Phase of planning for a business transition, which consists of getting a grasp on the nature of your current situation and what you want to immediately do about it. The next phase of the process is the Preparation Stage. In this stage, business owners will move beyond iterative action plans and focus on strategic personal and financial planning, and then focus on business improvements, including de-risking the business. The final stage of the process is the Decision Stage. At this point, the business owner has a clearer understanding and can make a sound personal and financial decision of whether to exit (or grow) the business.
If you are having trouble paying your debts, it is important to take action sooner rather than later. Doing nothing leads to much larger problems in the future, whether it's a bad credit record or bankruptcy resulting in the loss of assets and even your home. If you're in financial trouble, then here are some steps to take to avoid financial ruin in the future.
If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. However, if the property fits into one of the categories discussed here, the amount of your deduction must be decreased. As with many aspects of tax law, the rules are quite complex. If you're considering a charitable contribution of property, here's what you need to know:
One of the biggest hurdles you'll face in running your own business is staying on top of your numerous obligations to federal, state, and local tax agencies. Tax codes seem to be in a constant state of flux and increasingly complicated.
EXTERNAL BUSINESS TRANSITIONS – The Discovery Phase
In general, an external business transition (or sale) is structured as either a transfer to a charitable trust or a sale to a third party. As we have outlined over the past few months, it is important to make preparations before selling any business. Having a plan will ensure that the business owner has enough information to make a sound financial decision and maximize value, minimize risk, and maintain control of the business. According to the Exit Planning Institute the planning process has three phases: the Discovery Phase, the Preparation Phase, and the Decision Phase. This month's newsletter focuses on the Discovery Phase.
You may be tempted to forget about your taxes once you've filed your tax return, but did you know that if you start your tax planning now, you may be able to avoid a tax surprise when you file next year?
What if there were a tool that helped you create crystal-clear plans, provided you with continual feedback about how well your plan was working, and that told you exactly what's working and what isn't?
Selling your Business
There are many reasons to sell a business. Maybe you're in ill health or ready to retire. Or you're tired of working all the time and now that the business is profitable you're ready to cash in. Whatever the reason, selling a small to medium sized business is a complex venture and many business owners are not aware of the tax consequences.
As we touched on previously, there are a variety of methods under two business transition strategies:
- Transfer the business to family
- Transfer to co-owners
- Sell the business to your employees
- Transfer the business to a charitable trust
- Sell your business and retire
- Sell a percentage to a private group and continue
- Go public
As the driving force in today's economy, small businesses benefit from numerous tax breaks in the tax code. One of these, the Qualified Small Business Stock (QSBS), was just made permanent, thanks to the passage of the PATH Act (Protecting Americans from Tax Hikes Act of 2015). If you're a small business investor, here's what you need to know about this often overlooked tax break.
Each year, the IRS mails millions of notices and letters to taxpayers for a variety of reasons. If you receive correspondence from the IRS here's what to do:
If you're thinking about hiring new employees this year, you won't want to miss out on these tax breaks.
Transitioning a family-owned business is not something that happens overnight. Succession planning, if done correctly, really never stops. According to Peter G. Christman, author of The Master Plan, Exit Strategy for Successful Business Owners, there are number of potential ways to transition your business:
If you pay for work-related expenses out of your own pocket, you may be able to deduct those costs. In most cases, you can claim allowable expenses if you itemize on IRS Schedule A, Itemized Deductions. You can deduct the amount that is more than two percent of your adjusted gross income. Here are five other facts you should know:
You may not know about the Alternative Minimum Tax (AMT) because you've never had to pay it before. However, your income may have changed and you may be required to pay it when you file your 2016 tax return next year. The AMT is an income tax imposed at nearly a flat rate on an adjusted amount of taxable income above a certain threshold. If you have a higher income, you may be subject to the AMT.
Looking to save money on your taxes this year? It's never too early to start planning ahead using these proven tax planning strategies.
Liquidation As An Exit Strategy
Selling a company is often the most obvious exit strategy choice, but buyers can be hard to come by and may not be on your timetable. If this is the case, liquidation may be the only viable option. Liquidation is defined as the conversion of assets to cash by selling them to a user and/or consumer. This can mean inventory, as well as equipment and even intellectual property and intangible assets, such as brand names.
If you are a self-employed, you normally carry on a trade or business. Sole proprietors and independent contractors are two types of self-employment. If this applies to you, there are a few basic things you should know about how your income affects your federal tax return. If you're self-employed, here are six important tax tips you should know about:
Are you wondering if there's a hard and fast rule about what income is taxable and what income is not taxable? The quick answer is that all income is taxable unless the law specifically excludes it. But as you might have guessed, there's more to it than that.
The Affordable Care Act contains two provisions that may affect your tax return this year: the individual shared responsibility provision and the premium tax credit. Here's what you should know:
File and Suspend
Up until now, if a married couple had one spouse at full retirement age (66 or older), file and suspend allowed the other spouse to enjoy short-and long-term benefits. But after April 29, 2016, this will no longer be the case. After this date, if a spouse suspends his or her benefits, benefits for everyone involved – including the other spouse or qualifying dependent – will be suspended, too. Thus, a filer must take benefits and abstain from delayed retirement credits for the other person to also receive benefits.
Valuation is Crucial to Succession Planning
Business owners spend a lifetime building their businesses. And when it comes to succession, they face the difficult decision of whether to sell, close, or pass down the business to family members. Passing down the business involves several complicated issues, such as how to logically divide the family business, allocate value, and tackle complex tax issues.
It's important to use the right filing status when you file your tax return because the filing status you choose can affect the amount of tax you owe for the year. It may even determine if you must file a tax return. Keep in mind that your marital status on Dec. 31 is your status for the whole year. Sometimes more than one filing status may apply to you. If that happens, choose the one that allows you to pay the least amount of tax.
Compiled annually by the IRS, the "Dirty Dozen" is a list of common scams taxpayers may encounter in the coming months. While many of these scams peak during the tax filing season, they may be encountered at any time during the year. Here is this year's list:
Confused about which credits and deductions you can claim on your 2015 tax return? You're not alone. Here are six tax breaks that you won't want to overlook.
By Albert A. Lazo, MBA, CVA
A Roth IRA is an individual retirement plan that with certain exceptions, is similar to a traditional IRA and subject to the rules that apply to a traditional IRA. For example, to be considered a Roth IRA, the account or annuity must be designated as a Roth IRA when it is opened. A deemed IRA can be a Roth IRA, but neither a SEP IRA nor a SIMPLE IRA can be designated as a Roth IRA.
Social security benefits include monthly retirement, survivor, and disability benefits. If you received Social security benefits in 2015, you should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount.
When it comes to creating a budget, it's essential to estimate your spending as realistically as possible. Here are three budget-related errors commonly made by small businesses and some tips for avoiding them.
By Albert A. Lazo, MBA, CVA
If you are over 45 and own a business, you need a business valuation. As a business owner, the value of your business is a major factor in your retirement game plan. There are three main exit strategies:
By Kellie McShane-Harris
This will be my 16th tax season working in both a small and mid-size accounting firm. Ten years ago, I would receive calls a few times a year from clients asking about a phone call they received from the IRS. I would advise them that it most likely was a scam because the IRS won't call you; rather they will send you a notice. In recent years, the techniques used for scams have changed and as a result, the frequency of clients receiving them has increased.
Welcome, 2016! As the New Year rolls around, it's always a sure bet that there will be changes to current tax law and 2016 is no different. From health savings accounts to retirement contributions and standard deductions, here's a checklist of tax changes to help you plan the year ahead.
Can you point your company in the direction of financial success, step on the gas, and then sit back and wait to arrive at your destination?
Not quite. You can't let your business run on autopilot and expect good results. Any business owner knows you need to make numerous adjustments along the way - decisions about pricing, hiring, investments, and so on.
More than 50 tax provisions, including the tax rate schedules, and other tax changes are adjusted for inflation in 2016. Let's take a look at the ones most likely to affect taxpayers like you.
Dear Clients and Friends:
On Friday December 18, 2015 President Obama signed into law what is officially called the Protecting Americans from Tax Hikes (PATH) Act. This legislation extended and renewed dozens of expired tax deductions, credits and incentives. Following is a brief summary of some of the more important provisions that affect our clients. If you have any questions regarding the information below please call us to discuss further.
1. The Affordable Care Act (or ACA or Obamacare) is law. It’s been through numerous election cycles and two Supreme Court rulings. But for now, if you run a business, you must deal with the fact that the ACA is here to stay at least for the foreseeable future (things could change as a result of the 2016 elections). As a business owner your job is to plan ahead and make decisions that will affect your company and its employees. Most of our clients are not dropping healthcare because of the ACA. But they are making changes. So should you.
Taxpayers born before July 1, 1945, generally must receive payments from their individual retirement arrangements (IRAs) and workplace retirement plans by Dec. 31.
From tax credits and educational expenses to the AMT, many of the tax changes affecting individuals for 2015 were related to the signing of the American Taxpayer Relief Act (ATRA) in 2012--tax provisions that were modified, made permanent, or extended. With that in mind, here's what individuals and families need to know about tax provisions for 2015.
If you're thinking about making a charitable donation during the holiday season this year and want to claim a tax deduction for your gifts, you must itemize your deductions. This is just one of several tax rules that you should know about before you give. Here's what else you need to know:
While the fate of several business-related tax extenders such as Research & Development tax credits, bonus depreciation, and Section 179 expensing that expired at the end of 2014 is uncertain, there are still a number of end of year tax planning strategies businesses can use to reduce their tax burden for 2015.
Tax planning for the year ahead presents similar challenges to last year due to the unknown fate of the numerous tax extenders that expired at the end of 2014.
Income tax is often withheld from wages and other types of income such as pensions, bonuses, commissions and gambling winnings. Ideally, taxpayers should try to match their withholding with their actual tax liability. If not enough tax is withheld, they will owe tax at the end of the year and may have to pay interest and a penalty. If too much tax is withheld, they will lose the use of that money until they get their refund.
You should always keep a copy of your tax return for your records. You may need copies of your filed tax returns for many reasons. For example, they can help you prepare future tax returns. You'll also need them if you have to amend a prior year tax return. You often need them when you apply for a loan to buy a home or to start a business. You may need them if you apply for student financial aid.
When you start a business, a key to your success is to know your tax obligations. You may not only need to know about income tax rules but also about payroll tax rules. Here are five tax tips that can help you get your business off to a good start.
Generally, debt that is forgiven or canceled by a lender is considered taxable income by the IRS and must be included as income on your tax return. Examples include a debt for which you are personally liable such as mortgage debt, credit card debt, and in some instances, student loan debt.
Selecting your business successor is a fundamental objective of planning an exit strategy and requires a careful assessment of what you want from the sale of your business and who can best give it to you.
In most cases, gains from sales are taxable. But did you know that if you sell your home, you may not have to pay taxes? Here are ten facts to keep in mind if you sell your home this year.
You must keep records to prove the amount of any cash and noncash contributions you make during the year. Which records you must keep depends on the amount you contribute and whether they are cash or property contributions. New recordkeeping requirements were established for all contributions made after January 1, 2007.
Got kids? They may have an impact on your tax situation. Here are eight tax credits and deductions that can help lower your tax burden.
Tax planning is the process of looking at various tax options to determine when, whether, and how to conduct business and personal transactions to reduce or eliminate tax liability.
Brinker, Simpson & Company, a full service certified public accounting and business consulting firm, has been making an impact in the business and professional landscape within the Philadelphia region for over 25 years. We focus on client relationships and handling the challenges necessary to help build success; at the same time, we have been making a difference in our local community. The culture embodied by the company is one of sharing our successes, building relationships and giving back to the community that has supported us, to help make it a better place to not only work, but to live, grow and enjoy.
When you work or volunteer at a nonprofit organization, you know the days can be hectic, and nonroutine tasks can sometimes get overlooked. If the annual requirement to file a tax return or notice with the IRS was one of those overlooked tasks, you may receive a letter revoking your organization's federal tax-exempt status.