Factor in taxes if you’re relocating to another state in retirement
Are you considering a move to another state when you retire? While you’re thinking about how many square feet you’ll need in a new home, don’t forget to factor in state and local taxes. It may seem like a state with no income tax is a smart choice, but you also have to consider property and sales taxes, as well as any state estate tax. If you make a move to a new state and want to escape taxes in the state you came from, it’s important to establish legal domicile in the new location. How? Take steps such as changing your mailing address, registering to vote and getting a driver’s license in the new state. We can answer any questions you have and file any required tax returns.
Would you like to establish a Health Savings Account for your small business?
With the increasing cost of employee health care benefits, your business may be interested in establishing an employer-sponsored Health Savings Account (HSA). For eligible individuals, HSAs offer a tax-advantaged way to set aside funds (or have their employers do so) to meet future medical needs. To be eligible, an individual must be covered by a “high deductible health plan.” For 2021, a “high deductible health plan” is one with an annual deductible of at least $1,400 for self-only coverage, or at least $2,800 for family coverage. (These amounts will remain the same for 2022.) An HSA provides a number of tax benefits for your business and its employees. Contact us if you have questions.
What business owners should know about stop-loss insurance
Many businesses opt for a self-insured (self-funded) health care plan rather than a fully insured one. Although stop-loss insurance isn’t required for self-insured plans, companies often find it beneficial. Why? It protects the business against catastrophic claims that greatly exceed the amount budgeted to cover costs. Stop-loss insurance doesn’t directly pay participants’ benefits; it reimburses the company for certain claims properly paid by the health care plan above a stated amount. Therefore, it’s critical to line up the coverage terms. We can help you determine whether stop-loss insurance is right for your business or whether your current policy is cost-effective.
Protect your business with a cybersecurity assessment
The convenience and analytical power of today’s cloud-based business technology is breathtaking, but it creates a tempting target for hackers. A cybersecurity assessment can help ensure that your company is protecting itself. A properly conducted assessment involves taking inventory of hardware and software, identifying potential vulnerabilities, and implementing internal controls and other protections. It can also help you develop an incident response plan to mitigate the damage in the event of a breach. There are various free frameworks for conducting a self-assessment but, if you’re particularly concerned, you could engage a qualified consultant to conduct a customized assessment.
Thinking about participating in your employer’s 401(k) plan? Here’s how it works
Interested in participating in a 401(k) plan offered by your employer? Under a 401(k), you have the option of setting aside a certain amount of your wages in a qualified retirement plan. By making this election, you’ll reduce your gross income, and defer tax on the amount until the cash (adjusted by earnings) is distributed to you. It will either be distributed from the plan or from an IRA or other plan that you roll your proceeds into after leaving your job. Your elective contributions are subject to annual IRS limits. For 2021, the maximum amount permitted is $19,500. If you’re age 50 or older, you can make additional “catch-up” contributions. For 2021, that extra amount is $6,500.
Employers: The Social Security wage base is increasing in 2022
The Social Security Administration recently announced that the wage base for computing Social Security tax will increase to $147,000 for 2022 (up from $142,800 for 2021). Wages and self-employment income above this threshold aren’t subject to Social Security tax. The Federal Insurance Contributions Act imposes two taxes on employers, employees and self-employed workers. One is for Social Security tax, and the other for Medicare tax. There’s a maximum amount of compensation subject to the Social Security tax, but no maximum for Medicare tax. For 2022, the FICA tax rate for employers is 7.65% — 6.2% for Social Security and 1.45% for Medicare (the same as in 2021).
Engaging in customer-focused strategic planning
For small to midsize businesses, focusing strategic planning on customers may be the most direct route to a better bottom line. First, pick a period (perhaps one, three or five years) and calculate the profitability contribution level of each major customer or customer unit. Next, divide customers or customer units into three groups: 1) an A group of the most profitable buyers, 2) a B group of positive contributors, and 3) a C group of unprofitable customers. Finally, develop a customer-focused strategic plan that nurtures relationships with the A group, increases the potential of the B group, and potentially starts moving on from members of the C group. Contact us for help.
You may owe “nanny tax” even if you don’t have a nanny
Have you heard of the “nanny tax?” Even if you don’t employ a nanny, it may apply to you. Hiring a house cleaner or other household employee (who isn’t an independent contractor) may make you liable for federal income tax, Social Security and Medicare (FICA) tax and federal unemployment tax. You may also have state tax obligations. In 2021, you must withhold and pay FICA taxes if your worker earns cash wages of $2,300 or more ($2,400 in 2022). You pay household worker obligations by increasing your quarterly estimated tax payments or increasing withholding from wages, rather than making a lump-sum payment. Employment taxes are then reported on your tax return. Questions? Contact us.
Get your piece of the depreciation pie now with a cost segregation study
If your business is depreciating over a 30-year period the entire cost of constructing the building that houses your operation, you should consider a cost segregation study. It might allow you to accelerate depreciation deductions on certain items, which can reduce taxes and boost cash flow. Under current law, the potential benefits are now even better than they were in the past due to enhancements to certain depreciation tax breaks. You may even be able to get the benefit of speedier depreciation for items that were incorrectly claimed. Cost segregation studies can yield substantial benefits, but they’re not right for all businesses. Contact us to find out whether this would be worthwhile.
4 ways to refine your cash flow forecasting
For business owners, being able to accurately forecast cash flow is a mission critical activity. Fortunately, there are ways to refine your approach. First, track your peak sales and production times over as long a period as possible. Know your busy season! Also, engage in careful accounting to anticipate and capture every expense and incoming payment. Note the timing of cash inflows and outflows as well. Keep a careful eye on additional funding sources, such as a line of credit or federally funded small business loan (if you qualify). Above all, stay on top of collections and always be on the lookout for ways to run leaner. Contact us for help with cash-flow forecasting.