Cost containment: An important health care benefits objective for businesses
Cost containment should be one of the primary objectives of your business’s health care benefits strategy. To succeed at this effort, you’ve got to maintain a deep familiarity with two things: 1) your workforce, and 2) the health benefits marketplace. Rather than relying on vendor-provided materials, actively interact with employees to determine which benefits they truly value and need. Use metrics to analyze benefits utilization and identify gaps where you may be losing money. Consider engaging an outside expert to conduct a return-on-investment study of your plan, as well as to perhaps audit claims payments and pharmacy services to catch mistakes and even fraud. Contact us for help.
Guaranteeing a loan to your corporation? There may be tax implications
Let’s say you decide to, or are asked to, guarantee a loan to your corporation. Before agreeing to act as a guarantor of a debt of your corporation, be aware of the possible tax implications. If the business defaults on the loan, and you make good on the obligation, the payment of principal or interest generally results in either a business or a nonbusiness bad debt deduction. If it’s a business bad debt, it’s deductible against ordinary income. A business bad debt can be either totally or partly worthless. If it’s a nonbusiness bad debt, it’s deductible as a short-term capital loss (subject to certain limitations). A nonbusiness bad debt is deductible only if it’s totally worthless.
The tax consequences of employer-provided life insurance
Employer-provided life insurance is a desirable fringe benefit. However, if group term life insurance is part of your benefits package, and the coverage is higher than $50,000, there may be undesirable income tax implications. The first $50,000 of group term life insurance coverage that your employer provides is excluded from taxable income and doesn’t add anything to your income tax bill. But the employer-paid cost of group term coverage in excess of $50,000 is taxable income to you. It’s included in the taxable wages reported on your Form W-2 (even though you never actually receive it). We can answer questions about group life insurance coverage and whether it’s adding to your tax bill.
Planning ahead for 2024: Should your 401(k) help employees with emergencies?
The SECURE 2.0 law contains a provision that will soon allow eligible employers to provide more help to employees facing emergencies. This will be done though pension-linked emergency savings accounts. Effective for plan years beginning Jan. 1, 2024, a plan sponsor can amend its 401(k), 403(b) or 457(b) plan to offer emergency savings accounts connected to the plan. The accounts can only be offered to participants who aren’t highly compensated. A participant must be allowed to make withdrawals at least once per month. No reason needs to be provided and a participant must not be charged any fees for the first four withdrawals each plan year. Other rules apply. Contact us with questions.
5 tips for more easily obtaining cyberinsurance
Every business should dedicate time and resources to cybersecurity. One way to protect yourself financially is to invest in cyberinsurance. This type of coverage is designed to mitigate losses from incidents such as data breaches, business interruption and network damage. If you decide to buy a policy, here are five tips to help ease the application process: 1) Be detail-oriented when filling out the paperwork. 2) Establish and fortify a comprehensive cybersecurity program. 3) Create and document a disaster recovery plan. 4) Be prepared for an insurer to test your cyberdefenses. 5) Consider a third-party assessment of your systems and users. Contact us for help with this purchase.
Can you deduct student loan interest on your tax return?
The federal student loan “pause” is coming to an end on Aug. 31 after more than three years. If you have student loan debt, you may wonder whether you can deduct the interest you pay on your tax return. The answer may be yes, subject to certain limits. The deduction is phased out if your adjusted gross income exceeds certain levels. The maximum amount of student loan interest you can deduct per year is $2,500. For 2023, the deduction is phased out for single taxpayers with AGI between $75,000 and $90,000 ($155,000 and $185,000 for married couples filing jointly). The interest must be on funds borrowed to cover qualified education costs of the taxpayer, a spouse or dependent.
Receive more than $10,000 in cash at your business? Here’s what you must do
Does your business receive large amounts of cash or cash equivalents? You may be required to report the transactions to the IRS. Each person engaged in a trade or business who receives more than $10,000 in cash in one transaction, or in two or more related transactions, must file Form 8300. Transactions conducted in a 24-hour period are considered related. “Cash equivalents” include cashier’s checks, bank drafts, traveler’s checks and money orders. In addition to filing Form 8300 on paper, e-filing is an option. The form is due 15 days after a transaction. These rules apply to individuals, companies, corporations, partnerships, associations, trusts and estates. Contact us with questions.
Should your business add a PTO buying feature to its cafeteria plan?
With the pandemic behind us and a red-hot summer in full swing, many of your company’s employees may be finally rediscovering the uninhibited joys of vacation. They might be having so much fun that they might highly value being able to buy even more paid time off (PTO) as an employee benefit. Such a thing is possible if your business sponsors a cafeteria plan. A “PTO buying” feature under a cafeteria plan allows employees to prospectively elect, during open enrollment, to buy additional PTO beyond that which they’d otherwise receive. The rules for PTO buying are complex. For example, the feature cannot defer compensation from one plan year to the next. Contact us for more information.
Pocket a tax break for making energy-efficient home improvements
The recent heat wave may have you thinking about making your home more energy efficient. Thanks to a 2022 law, you may be able to benefit from a residential energy tax credit to help defray the cost of energy improvements made on or after Jan. 1, 2023. The credit equals 30% of certain expenses to a home located in the U.S., including: qualified energy efficiency improvements installed during the year, residential energy property expenses and home energy audits. The max annual credit you can claim each year is: $1,200 for energy property and certain home improvements with limits on doors ($250 per door/$500 total), windows ($600 total) and home energy audits ($150). Contact us with questions.
The advantages of using an LLC for your small business
If you operate your small business as a sole proprietorship, you may have thought about forming an LLC to protect your assets. Like corporate shareholders, LLC owners (or members) generally aren’t liable for the debts of the business except to the extent of their investments. So their personal assets are protected from the entity’s creditors. Plus, partnership earnings aren’t subject to an entity-level tax. Instead, they “flow through” to the owners (in proportion to their interests), are reported on the owners’ individual returns and taxed only once. To the extent the income passed through to you is qualified business income, you can claim the pass-through deduction, subject to limitations.