M&A transactions: Avoid surprises from the IRS
If you’re in the process of a merger or acquisition, it’s important that both parties report the transaction to the IRS in the same way. Otherwise, you could increase your chances of being audited. If a sale involves business assets (as opposed to stock or ownership interests), the buyer and the seller must generally report the purchase price allocations that both use for specific assets. This is done by attaching IRS Form 8594 to each of their federal income tax returns. Both parties use the same allocations. Consider requiring this in your asset purchase agreement at the time of the sale. To lock in the best postacquisition results, consult with us before finalizing any transaction.
Odd word, cool concept: Gamification for businesses
“Gamification” is perhaps an odd word, but it’s a cool concept. The term generally refers to integrating characteristics of game-playing into business-related tasks to increase engagement. Some companies use it with customers. For example, a retailer might award points for purchases to collect and use toward discounts. But many businesses use it internally for training, to improve morale and to better measure progress toward goals. Naturally, gamification has its risks. You don’t want to “force fun” or frustrate employees with unreasonably difficult games. For more information, contact us.
You may have to pay tax on Social Security benefits
If you’re getting close to retirement age, you may be wondering if your Social Security benefits are going to be taxed. The answer depends on your other income. If you’re taxed, up to 85% of your payments will be hit with federal income tax. (There could also be state tax.) If you file a joint tax return and your “provisional income,” plus half your Social Security benefits, isn’t above $32,000 ($25,000 if unmarried), none of your benefits are taxed. If your provisional income is above those amounts, you must report a certain percentage of your benefits as income. Contact us for help with the exact calculations. We can also help you plan to keep taxes as low as possible during retirement.
Bartering: A taxable transaction even if your business exchanges no cash
Small businesses may find it beneficial to barter for goods and services instead of paying cash for them. If your business engages in bartering, be aware that the fair market value of goods that you receive in bartering is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties. Many business owners join barter clubs that facilitate barter exchanges. If you join a barter club, you’ll be asked to provide your Social Security number or employer identification number. You may receive a form reporting barter transactions and you may have to file forms with barter partners and the IRS. Contact us for more information.
Grading the performance of your company’s retirement plan
Imagine giving your retirement plan a report card. Is it a straight-A student or could it use some help after school? Many plan sponsors track common metrics such as benchmarked fees, participation rates and average deferral rates. But don’t stop there. A sometimes-overlooked measure is average account balance size. Knowing your plan’s asset growth rate is also helpful. Ultimately, though, good plan performance isn’t measured by any one element but by aggregating multiple data points to derive an “on track to retire” score. We can help you accomplish this.
If your kids are off to day camp, you may be eligible for a tax break
Now that most schools are out for the summer, you might be sending your children to day camp. The good news: You might be eligible for a tax break for the cost. Day camp is a qualified expense under the child and dependent care credit, which is worth 20% to 35% of qualifying expenses, up to a maximum of $3,000 for one qualifying child and $6,000 for two or more. Note: Sleep-away camp doesn’t qualify. Eligible costs for care must be employment-related. In other words, they must enable you to work or look for work if you’re unemployed. Additional rules apply. Contact us if you have questions about your eligibility for this credit and other tax breaks for parents.
Which entity is most suitable for your new or existing business?
It may seem that the current, flat 21% corporate income tax rate makes C corporation status for your business the best choice. After all, 21% is much lower than the 37% top rate that applies to sole proprietors and pass-through entities (such as partnerships, S corps and LLCs). But C corps can still be subject to double taxation. And pass-through entity owners may be currently eligible for a 20% qualified business income deduction. The best entity type for your business depends on its unique situation and your situation as an owner. Taxes are only one consideration. You may also want the protection from business debts that certain entities provide. Contact us to learn more.
2019 Q3 tax calendar: Key deadlines for businesses and other employers
Here are some key tax-related deadlines for businesses and other employers during Quarter 3 of 2019. JULY 31: Report income tax withholding and FICA taxes for Q2 2019 (unless eligible for an Aug. 12 deadline). File a 2018 calendar-year retirement plan report or request an extension. SEPT. 16: If a calendar-year partnership or S corp. that filed an extension, file a 2018 income tax return. If a calendar-year C corp., pay the third installment of 2019 estimated income taxes. Contact us for more about the filing requirements and to ensure you meet all applicable deadlines.
Is an HSA right for you?
A Health Savings Account (HSA) offers tax-advantaged funding of health care costs. If you have a qualified high-deductible health plan, you can contribute to an HSA sponsored by your employer or set up by you. You own the account, which can bear interest or be invested. It can grow tax-deferred, similar to an IRA. Withdrawals for qualified medical expenses are tax-free, and you can carry over a balance from year to year. So unlike Flexible Spending Accounts (FSAs), undistributed balances in HSAs aren’t forfeited at year end. For 2019, the deductible contribution limits are $3,500 self-only, $7,000 family. Contact us with questions or if you need help setting up an HSA.
Put a number on your midyear performance with the right KPIs
It’s the middle of the calendar year. How are things going? You can answer specifically by choosing and calculating key performance indicators (KPIs). For example, the current ratio indicator helps you assess your cash flow by dividing current assets by current liabilities. But KPIs aren’t limited to widely used ratios. You can make up your own and apply them to any business area. Say your company wants to improve its closing rate on sales leads. A KPI could be to convert 50% of all qualified leads into customers over the next six months. Contact us for more info.