IRS Announces 401(k) Contribution Limit Increases for 2020
The Internal Revenue Service today announced that employees in 401(k) plans will be able to contribute up to $19,500 next year. The IRS announced this and other changes in Notice 2019-59 (PDF), posted today on IRS.gov. This guidance provides cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020. Highlights […]
Is multicloud computing right for your business?
Cloud computing is now commonplace, but new derivatives continue to emerge. Under the “multicloud” approach, companies distribute data and computing needs among several providers. Doing so can maximize scalability (increasing or decreasing functionality as needed), improve performance and open a wider menu of options. But there are risks. Some businesses unintentionally engage in multicloud computing when different departments start using public clouds on their own, threatening security. Managing multiple clouds can also be complex and leveraging each provider’s features can be difficult. Finally, you must consider the total cost of ownership. Contact us for help.
You may be ABLE to save for a disabled family member with a tax-advantaged account
There’s a tax-advantaged way for people to save for the needs of family members with disabilities, without having them lose eligibility for government benefits to which they’re entitled. It’s done though an ABLE account, which is a tax-free account that can be used for disability-related expenses. ABLE accounts can be created by eligible individuals to support themselves, by family members to support their dependents, or by guardians. Contributions up to the annual gift-tax exclusion amount, currently $15,000, can be made to an account each year. If the beneficiary works, he or she can also contribute some income to their ABLE account. Contact us if you’d like more details.
Small businesses: Stay clear of a severe payroll tax penalty
Managing payroll is a laborious task for small businesses. But it’s critical to withhold the right amount of taxes from employees and pay them over to the federal government on time. If you don’t, you could be hit with the Trust Fund Recovery Penalty, also known as the 100% penalty. It applies to the Social Security and income taxes required to be withheld by a business from its employees’ wages. It’s called the 100% penalty because people liable or responsible for the taxes can be personally penalized 100% of the taxes due. Absolutely no failure to withhold and no “borrowing” from withheld amounts should ever be allowed in your business. Contact us for more information.
A shadow board could shed light on your company’s best future
Many businesses are still run by older boards of directors (and management teams) that, while rich in experience, might not stay closely attuned to the latest demographic-driven developments pertinent to the company. For this reason, some businesses are establishing “shadow” boards composed of younger, nonexecutive employees who are on the front lines of changing tastes and lifestyles. A shadow board can learn from the actual board or management team while keeping senior leadership abreast of the latest trends, concerns and tech. It can also weigh in on potential changes to employee benefits and help the business retain those who serve on the board. Contact us for more info.
IRA charitable donations are an alternative to taxable required distributions
Are you charitably minded and have a significant amount of money in an IRA? If you’re age 70-1/2 or older, and don’t need the money from required minimum distributions, you may benefit by giving these amounts to charity. A popular way to transfer IRA assets to charity is through a tax provision that allows IRA owners who are 70-1/2 or older to give up to $100,000 per year of their IRA distributions to charity. These distributions are called qualified charitable distributions, or QCDs. The money given to charity counts toward the donor’s required minimum distributions (RMDs) but doesn’t increase the donor’s adjusted gross income or generate a tax bill. Contact us for more information.
Thinking about converting from a C corporation to an S corporation?
The right entity choice can make a difference in the taxes you owe for your business. Although S corporations can provide substantial tax advantages over C corporations in some situations, there are potential tax problems you should assess before deciding to convert from C to S status. One of the issues to consider is last-in, first-out (LIFO) inventory. A C corporation that uses LIFO inventory must pay tax on the benefits it derived by using LIFO if it converts to an S corporation. Other issues to understand are the built-in gains tax, passive income tax and unused net operating losses. We can explain how these factors will affect your company and develop strategies to minimize taxes.
At the very least, update the financials in your business plan
If your company’s size, shape and objectives don’t change all that much, you may not need to rewrite your business plan every year. But the one section you should always revise is your financials. Lenders, investors and others need these numbers to add up and contain realistic projections in today’s dollars. For example, when projecting the income statement, you need to make accurate assumptions about variable and fixed costs. Balance sheet items (receivables, inventory, payables and so on) should generally grow in tandem with revenues. Will they? We can help you review your financials, arrive at reasonable assumptions, and express your objectives and projections clearly.
Selling securities by year end? Avoid the wash sale rule
If you’re planning to sell assets at a loss to offset gains that have been realized during the year, it’s important to be aware of the “wash sale” rule. Under this rule, if you sell stock or securities for a loss and buy substantially identical stock or securities back within the 30-day period before or after the sale date, the loss can’t be claimed for tax purposes. The rule is designed to prevent taxpayers from using the tax benefit of a loss without parting with ownership in a significant way. Note that the rule applies to a 30-day period before or after the sale date to prevent “buying the stock back” before it’s even sold. Contact us if you have any questions.
Accelerate depreciation deductions with a cost segregation study
Is your business depreciating over 30 years the entire cost of constructing the building that houses your operation? If so, consider a cost segregation study. It may allow you to accelerate depreciation deductions on certain items, thereby reducing taxes and boosting cash flow. And under current law, the potential benefits are now even greater than they were a few years ago 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 every business. To find out whether this would be worthwhile, contact us.