Business owners: Think carefully about fringe benefits related to smartphones
You’d be hard-pressed to find many employees these days who don’t use a smartphone for work. In turn, business owners may consider providing a fringe benefit related to those phones or their usage. For example, you might give your employees a phone. If you do, business use of it may be treated as a nontaxable fringe benefit so long as the phone is provided “primarily for noncompensatory business purposes.” It can’t be a substitute for compensation or a way to draw job applicants or boost morale. The IRS has indicated that it will analyze reimbursement of employees’ expenses for business use of their own phones similarly, though specific conditions must be met. Contact us for more info.
What businesses can expect from a green lease
With continuing concerns about climate change, many business owners are looking for ways to lessen their companies’ negative environmental impact. One move to consider, quite literally, is relocating to a commercial property with a “green lease.” These arrangements generally use financial incentives and detailed provisions to promote sustainable property management and energy usage. Potential business benefits include winning over customers, investors and job candidates who prioritize sustainability. Certain improvements may even boost employee productivity. Naturally, the costs of relocating and expenses related to the lease still must make sense for your business. Contact us for help.
Evaluate whether a Health Savings Account is beneficial to you
A Health Savings Account offers a tax-favored way for eligible individuals (or their employers) to set aside funds to meet medical needs. Among the tax benefits: 1) contributions are deductible within limits; 2) earnings in the HSA aren’t taxed; 3) contributions an employer makes aren’t taxed; and 4) distributions to pay qualified expenses aren’t taxed. An eligible employee must be covered by a high deductible health plan (HDHP). For 2023, an HDHP has an annual deductible of at least $1,500 for self-only coverage or $3,000 for family coverage (for 2024, $1,600 and $3,200). For 2023, an individual can contribute $3,850 ($7,750 for a family). For 2024, these amounts will be $4,150 and $8,300.
It’s important to understand how taxes factor into M&A transactions
If your company is merging with or acquiring another business, it’s important to understand how the transaction will be taxed. For tax purposes, a transaction can basically be structured in two ways: stock (or ownership interest) sale or asset sale. For tax and nontax reasons, buyers usually prefer to purchase assets, while sellers generally prefer stock sales. Keep in mind that other areas, such as employee benefits, can cause unexpected tax issues when merging with or acquiring a business. Buying or selling a business may be the biggest deal you’ll ever make, so seek professional tax advice as you negotiate. After a deal is done, it may be too late to get the best tax results. Contact us.
4 best practices for effective strategic planning meetings
At some companies, an excessive number of meetings can become a problem. However, there’s one kind of meeting that business owners and their leadership teams should never scrimp on: strategic planning. Regularly scheduled strategic planning meetings are critical for establishing, reviewing and, if necessary, adjusting your company’s short- and long-term objectives. Here are four best practices: 1) Set a firm agenda focused solely on strategic planning. 2) As needed, lay down rules for attendance, decorum and dispute resolution. 3) Name a facilitator or consider engaging a professional one. 4) Keep minutes of every meeting to preserve good ideas and curtail miscommunications.
Investment swings: What’s the tax impact?
Have your investments fluctuated wildly this year? You may have already recognized gains and losses. But nothing is decided tax-wise until all the gains and losses from 2023 trades are tallied up at year end. If you’ve had swings in the value of a tax-favored 401(k), traditional IRA, Roth IRA or SEP, there are no current taxes. These changes affect the account value but have no tax impact until you take withdrawals. At that point, your account balance(s) will affect your taxes. (Qualified Roth withdrawals after age 59½ are tax-free.) With taxable accounts, the cumulative gains and losses from trades during the year are what matter. Unrealized gains and losses don’t affect your tax bill.
Spouse-run businesses face special tax issues
Do you and your spouse operate a profitable unincorporated small business? If so, you face some challenging tax issues. For example, an unincorporated spousal business is generally classified as a partnership for federal income tax purposes. That means you must file an annual partnership tax return. And both spouses must be issued Schedule K-1s, which allocate the taxable income, deductions and credits between the two of you. With your joint tax return, you must also pay self-employment (SE) tax on your share of the net SE income passed through to you by your partnership. Your spouse must do the same, which may result in a big SE tax bill. Contact us to help identify tax-saving strategies.
Look carefully at three critical factors of succession planning
Succession planning is an important task for every business owner. Three critical factors related to planning for the future of your company are: 1) The involvement of your family; decide whether you’ll transfer the business to a child or other relative and how you’ll prepare that person. 2) The market for your business; if you’ll likely sell your company, you’ll need to get a good idea of precisely who would be the optimal candidate(s) to buy it. 3) The structure of the transfer or sale; whether you decide to give ownership to a family successor or sell the business to an outside person or entity, you’ll need to find a legally secure, tax-savvy manner to do so. Contact us for help.
Could your business benefit from interim financial reporting?
When many business owners see the term “financial reporting,” they think of their year-end financial statements. But engaging in other types of financial reporting more frequently can be helpful. Just how much more often you should engage in such “interim” financial reporting will depend on factors such as company size, industry and operational complexity. Nevertheless, monthly, quarterly and midyear financial reports can provide insight into trends and trouble before the situation spirals out of control. When reviewing interim reports, it’s important to recognize that internal accounting practices may cause certain anomalies that can be corrected by year end. Contact us for help.
Update on depreciating business assets
The amounts for depreciating business assets change every year due to inflation adjustments. Due to high inflation, the 2023 adjustments were big. For qualifying assets placed in service in tax years beginning in 2023, the maximum Section 179 deduction is $1.16 million. If your business puts in service more than $2.89 million of qualified assets, the maximum Sec. 179 deduction begins to phase out. Eligible assets include equipment, computer hardware and peripherals, vehicles and commercially available software. Also, for qualified assets placed in service in 2023, the first-year bonus depreciation percentage has dropped to 80% (from 100% in 2022). Other rules apply. Questions? Contact us.