Keeping a king in the castle with a well-maintained cash reserve
They say cash is king. Well, one way to ensure there’s always a king in the castle is to maintain a cash reserve. But what’s the optimal amount? There’s no simple answer. Your bank’s liquidity covenants are a good place to start. To take it further, identify various liquidity metrics and compare them to industry benchmarks. Believe it or not, many companies suffer from hoarding too much cash. Maybe the best way to find the right balance between excessive and insufficient liquidity is to create financial forecasts for the next 12 to 18 months. Contact us for help.
The tax deduction ins and outs of donating artwork to charity
If you collect art, appreciated artwork can make one of the best charitable gifts from a tax perspective. In general, donating appreciated property is doubly beneficial because you can both enjoy a valuable tax deduction and avoid the capital gains taxes you’d owe if you sold the property. The extra benefit from donating artwork comes from the fact that the top long-term capital gains rate for art is 28%, as opposed to 20% for most other appreciated property. To maximize your deduction, plan your gift carefully and follow all the rules. Contact us to learn more.
Be sure your employee travel expense reimbursements will pass muster with the IRS
Does your business reimburse employees’ work-related travel expenses? If you do, you know that it can help attract and retain employees. If you don’t, you may want to start. Changes under the TCJA make such reimbursements even more attractive to employees: Employees are no longer allowed to deduct such expenses. Travel reimbursements also come with tax benefits, but only if you follow a method that passes muster with the IRS. To learn more, contact us. We can help you determine whether you should reimburse such expenses and which method is right for you.
You might save tax if your vacation home qualifies as a rental property
If you own a vacation home and both rent it out and use it personally, classification as a rental property might save tax. Expenses attributable to a rental property aren’t subject to the TCJA’s tightened limits on itemized deductions for property tax and mortgage interest, and losses may be deductible. A rental property generally is one you use for 14 days or less, or under 10% of the days you rent it out, whichever is greater. Adjusting use between now and year end can ensure it’s classified as a rental property. Contact us for details.
2018 Q4 tax calendar: Key deadlines for businesses and other employers
Here are a few key tax-related deadlines for businesses and other employers during Quarter 4 of 2018. OCT. 15: If a calendar-year C corp. that filed an extension, file a 2017 income tax return. OCT. 31: Report income tax withholding and FICA taxes for Q3 2018 (unless eligible for Nov. 13 deadline). DEC. 17: If a calendar-year C corp., pay fourth installment of 2018 estimated income taxes. Contact us for more about the filing requirements and to ensure you’re meeting all applicable deadlines.
Prepare for valuation issues in your buy-sell agreement
When creating or updating your buy-sell agreement, be sure you’re prepared for valuation issues. Some owners have the business valued annually to minimize surprises when a buyout occurs. This is often preferable to using a static valuation formula in the buy-sell, because the value of business interests tends to change along with a company’s fortunes. At minimum, the agreement needs to prescribe valuation protocols to abide by following a triggering event. These include how “value” is defined and who will perform the valuation. Our firm would be happy to help.
How to reduce the tax risk of using independent contractors
Classifying a worker as an independent contractor frees a business from payroll tax liability and responsibility for withholding income taxes and the worker’s share of payroll taxes. But if the IRS reclassifies a worker as an employee, your business could be hit with back taxes, interest and penalties. When assessing worker status, the IRS typically looks at the level of behavioral and financial control the business has over the worker and the relationship of the parties. Fortunately, there are strategies for minimizing your exposure. Contact us to learn more.
Do you need to make an estimated tax payment by September 17?
To avoid interest and penalties, you must make sufficient income tax payments long before your April filing deadline through withholding, estimated tax payments or both. The third 2018 estimated tax payment deadline for individuals is Sept. 17. If you don’t have an employer withholding tax from your pay, you likely need to make estimated tax payments. But even with withholding, such payments can be necessary if you have more than a nominal amount of income from self-employment, investments, alimony, awards, prizes or other sources. Contact us to learn more.
Back-to-school time means a tax break for teachers
When elementary and secondary school teachers are setting up their classrooms for the new school year, it’s common for them to pay for some classroom supplies out of pocket. A special tax break allows these educators to take an above-the-line deduction for up to $250 of these expenses. The deduction is especially important now due to the TCJA’s suspension of miscellaneous itemized deductions subject to the 2% of adjusted gross income floor, which before 2018 could be used for educator expenses. Contact us for details on the educator expense deduction.
Keep it SIMPLE: A tax-advantaged retirement plan solution for small businesses
If your small business doesn’t have a retirement plan and has 100 or fewer employees, consider a SIMPLE IRA. Offering a retirement plan can provide your business with valuable tax deductions for its contributions and help attract and retain employees. As the name implies, a SIMPLE IRA is easy to set up and maintain. Eligible employees can defer up to $12,500 in 2018 (plus a catch-up of up to $3,000 for those age 50 or older). The deadline for setting one up for this year is Oct. 1, 2018. Contact us to learn more about SIMPLE IRAs and other retirement plan options.