In the quest to reduce your tax bill, year end planning can only go so far. Tax-saving strategies take time to implement, so review your options now. Here are three strategies that can be more effective if you begin executing them midyear:
1. Consider your bracket
The top income tax rate is 39.6% for taxpayers with taxable income over $418,400 (singles), $444,550 (heads of households) and $470,700 (married filing jointly; half that amount for married filing separately). If you expect this year’s income to be near the threshold , consider strategies for reducing your taxable income and staying out of the top bracket. For example, you could take steps to defer income and accelerate deductible expenses. (This strategy can save tax even if you’re not at risk for the 39.6% bracket or you can’t avoid the bracket.)
You could also shift income to family members in lower tax brackets by giving them income-producing assets.… Read more
Information is power. And regularly supplying information to your not-for-profit’s board of directors is the key to the board properly fulfilling its duties. This doesn’t mean you have to share every internal email or phone message. Board members should, however, receive and understand information that will help them work together and better serve your organization.
Three types of information are important to share with your board:
1. Financial. To fulfill their fiduciary duties, the board must receive copies of your Form 990, and the board president or treasurer should review and approve it before it’s filed. The board also must get the results of any audit you’ve conducted, salary information for key staff, monthly and quarterly financial reports showing income and expenses, and proof of directors and officers insurance, if your organization provides it.
2. Strategic. This includes reports on your nonprofit’s work, such as:
• How programs are being carried out,
• Program usage statistics,
• Progress on event timelines, and
Tax reform has been a major topic of discussion in Washington, but it’s still unclear exactly what such legislation will include and whether it will be signed into law this year. However, the last major tax legislation that was signed into law — back in December of 2015 — still has a significant impact on tax planning for businesses. Let’s look at three midyear tax strategies inspired by the Protecting Americans from Tax Hikes (PATH) Act:
1. Buy equipment. The PATH Act preserved both the generous limits for the Section 179 expensing election and the availability of bonus depreciation. These breaks generally apply to qualified fixed assets, including equipment or machinery, placed in service during the year. For 2017, the maximum Sec. 179 deduction is $510,000, subject to a $2,030,000 phaseout threshold. Without the PATH Act, the 2017 limits would have been $25,000 and $200,000, respectively. Higher limits are now permanent and subject to inflation indexing.… Read more
On June 30, 2017, Gov. Kasich signed Am. Sub. H.B. 49, Ohio’s biennial budget bill, into law. There are some favorable municipal business tax provisions within the Bill. For details see http://bit.ly/2uPIToC
… Read more
It’s common for a business to own not only typical business assets, such as equipment, inventory and furnishings, but also the building where the business operates — and possibly other real estate as well. There can, however, be negative consequences when a business’s real estate is included in its general corporate assets. By holding real estate in a separate entity, owners can save tax and enjoy other benefits, too.
Capturing tax savings
Many businesses operate as C corporations so they can buy and hold real estate just as they do equipment, inventory and other assets. The expenses of owning the property are treated as ordinary expenses on the company’s income statement. However, 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 when a distribution is made. As a result, putting real estate in a C corporation can be a costly mistake.… Read more
What’s the most costly type of white collar crime? On average, a company is likely to lose more money from a scheme in which the financial statements are falsified or manipulated than from any other type of occupational fraud incident. The costs frequently include more than just the loss of assets — victimized companies also may suffer lost shareholder value, lower employee morale, premature tax liabilities and reputational damage. Let’s take a closer look at what’s at stake when employees “cook the books.”
Low frequency, high cost
The Report to the Nations on Occupational Fraud and Abuse published in 2016 by the Association of Certified Fraud Examiners (ACFE) found that less than 10% of the fraud schemes in its survey involved financial statement fraud. However, those cases clocked the greatest financial effect, with a median loss of $975,000. Compare that amount to the median losses for asset misappropriation ($125,000) and corruption ($200,000).… Read more
It’s a smaller business world after all. With the ease and popularity of e-commerce, as well as the incredible efficiency of many supply chains, companies of all sorts are finding it easier than ever to widen their markets. Doing so has become so much more feasible that many businesses quickly find themselves crossing state lines.
But therein lies a risk: Operating in another state means possibly being subject to taxation in that state. The resulting liability can, in some cases, inhibit profitability. But sometimes it can produce tax savings.
Do you have “nexus”?
Essentially, “nexus” means a business presence in a given state that’s substantial enough to trigger that state’s tax rules and obligations.
Precisely what activates nexus in a given state depends on that state’s chosen criteria. Triggers can vary but common criteria include:
- Employing workers in the state,
- Owning (or, in some cases even leasing) property there,
- Marketing your products or services in the state,
- Maintaining a substantial amount of inventory there, and
- Using a local telephone number.
… Read more
If your employees incur work-related travel expenses, you can better attract and retain the best talent by reimbursing these expenses. But to secure tax-advantaged treatment for your business and your employees, it’s critical to comply with IRS rules.
Reasons to reimburse
While unreimbursed work-related travel expenses generally are deductible on a taxpayer’s individual tax return (subject to a 50% limit for meals and entertainment) as a miscellaneous itemized deduction, many employees won’t be able to benefit from the deduction. Why?
It’s likely that some of your employees don’t itemize. Even those who do may not have enough miscellaneous itemized expenses to exceed the 2% of adjusted gross income floor. And only expenses in excess of the floor can actually be deducted.
On the other hand, reimbursements can provide tax benefits to both your business and the employee. Your business can deduct the reimbursements (also subject to a 50% limit for meals and entertainment), and they’re excluded from the employee’s taxable income — provided that the expenses are legitimate business expenses and the reimbursements comply with IRS rules.… Read more
The AICPA recently issued new Trust Services Principles (TSP Section 100) in April 2016 which supersedes the previous version issued in 2014. The most significant changes to the TSP include the following:
Restructures and creates a new set of privacy criteria that is incorporated as part of the common criteria method of assessment and reporting. As such, privacy principles is now consolidated into a more concise set of additional criteria for privacy that is to be reported as part of the common criteria report instead of a separate report for Generally Accepted Private Principles.
Revised Appendix B, “Illustration of Risks and Controls for Sample Entity” to include additional privacy criteria and examples of risks that may prevent the privacy criteria from being met as well as controls designed to address those risks.
Modified criteria CC3.1 and CC3.2 to specifically require the need to address potential threats including those arising from the use of vendors and other third parties providing goods and services.… Read more