Update regarding the Michigan Flow Through Entity Tax
Report and Pay FTE Reporting and Making Payments Effective December 21, 2021, PA 135 of 2021 amends the Income Tax Act to create a flow-through entity tax in Michigan, allowing certain flow-through entities to elect to file a return and pay tax on income in Michigan and allows members or owners of the entity to […]
360-degree feedback helps business owners see the big picture
Business owners, are you seeing the big picture when it comes to performance management? One way to widen your perspective is through a 360-degree feedback program. Under such an initiative, performance feedback is gathered from not only supervisors rating employees, but also employees rating supervisors and employees rating each other. When using this approach, various best practices apply. Design a survey with concise and bias-free language. Consider a dual-rating scale with both quantitative and qualitative questions. Gather the largest possible sample size of responses. Last, tell participants how you’ll analyze their input, assuring them that providing feedback will be time well spent.
When inheriting money, be aware of “income in respect of a decedent” issues
Income in respect of a decedent” (IRD) may create a surprise tax bill for those who inherit certain types of property. Fortunately, there may be ways to minimize or even eliminate the IRD tax bite. For the most part, property you inherit isn’t included in your income for tax purposes. Items that are IRD, however, do have to be included in your income, although you may also be entitled to a deduction on account of them. One common IRD item is the decedent’s last paycheck, received after death. Other common IRD items include pension benefits and amounts in a decedent’s IRAs at death. If you inherit IRD property, consult with us for assistance in managing the tax consequences.
Establish a tax-favored retirement plan
If your business doesn’t already have a retirement plan, now might be a good time to establish one. If you’re self-employed and set up a SEP-IRA, you can contribute up to 20% of your self-employment earnings, with a maximum contribution of $61,000 for 2022 (up from $58,000 for 2021). If you’re employed by your own corporation, up to 25% of your salary can be contributed to your account, with a max contribution of $61,000. If you’re in the 32% federal income tax bracket, making a maximum contribution could cut your federal tax bill for 2022 by $19,520 (32% times $61,000). In addition to a SEP, there are other retirement plan options. We can provide information on the best one for you.
Business owners, lean into sales staff retention
Historically, sales departments have always trended toward higher turnover rates. However, by leaning into sales staff retention a little harder, you can hang on to your company’s top sellers. Begin with improvements to your hiring and onboarding processes. Welcome new employees warmly, provide ample training and consider appointing mentors to help them get comfortable. Of course, compensation matters as well. Investigate the feasibility of retention bonuses and financial rewards for maintaining and increasing sales. Also, consider forming a sales leadership team that can contribute to strategic planning. Because they work in the trenches, salespeople often have some great ideas.
Lost your job? Here are the tax aspects of an employee termination
If you’re laid off or terminated, taxes are probably the last thing on your mind. However, there may be tax implications. For example, what’s the best option for amounts you’ve accumulated in a retirement plan sponsored by a former employer? For most, a tax-free rollover to an IRA is the best move. You may continue group health coverage under COBRA. The cost of premiums paid for health insurance is a medical expense, which is deductible if you itemize deductions and your total medical expenses exceed 7.5% of adjusted gross income. Complex situations arise if you have incentive stock options or a “golden parachute payment.” We can help you chart the best tax course during this time.
Does your business barter? Here are some facts you should know
In today’s economy, many small businesses are strapped for cash. They may find it advantageous to barter for goods and services instead of paying cash for them. But if your business engages in bartering, be aware that the fair market value of goods you receive is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties. Some businesses join barter clubs that facilitate barter exchanges. If you join such a club, you’ll be asked to provide your Social Security number or Employer Identification Number. You may receive a form that reports barter transactions. Contact us if you need assistance or would like more information.
5 ways to control your business insurance costs
Every company should carry various forms of business insurance. But that doesn’t mean you should pay unnecessarily high premiums. Here are five ways to control your costs: 1) Regularly review every policy to ensure it’s appropriate to your current circumstances and needs. 2) Shop around for better coverage, as well as for discounts you’re missing out on. 3) Actively manage workers’ compensation insurance, particularly making sure to properly classify employees. 4) Consider increasing your deductibles on certain policies so you can pay a lower premium. 5) Above all, prioritize safety through proper training, vigilance and enforcement. Contact us for help assessing the cost of your insurance.
There still may be time to cut your tax bill with an IRA
If you’re getting ready to file your 2021 tax return, and your tax bill is more than you’d like, there might still be a way to lower it. If you qualify, you can make a deductible contribution to a traditional IRA right up until the April 18, 2022, filing date and benefit from the tax savings on your 2021 return. For 2021, if you’re eligible, you can make a deductible traditional IRA contribution of up to $6,000 ($7,000 if you’re 50 or over). To be eligible, you must meet rules involving your income and whether you (or your spouse) are an active participant in an employer retirement plan. Contact us if you want more information or ask us about it when we prepare your tax return.
The election to apply the research tax credit against payroll taxes
The credit for increasing research activities, often referred to as the research and development credit, is a valuable tax break for eligible businesses. Claiming the credit involves complex calculations, which we can take care of for you. But in addition to the credit itself, be aware that it also has a feature that is especially favorable to certain eligible small businesses. The credit can be used against the employer’s Social Security payroll tax liability. To qualify for the election a taxpayer: 1) must have gross receipts for the election year of less than $5 million and 2) be no more than five years past the period for which it had no receipts (the start-up period). Contact us about whether you can benefit from the payroll tax election and the research tax credit.