Selling mutual fund shares: What are the tax implications?
For tax purposes, the rules involved in selling mutual fund shares can be complex. If you sell appreciated fund shares that you’ve owned for more than one year, the profit will be a long-term capital gain. The top federal income tax rate will be 20% and you may also owe the 3.8% net investment income tax. One challenge is that certain mutual fund transactions are treated as sales even though they might not seem like it. For example, many funds provide check-writing privileges. Each time you write a check on your fund account, you’re selling shares. Another problem may arise in determining your basis for shares sold. We can explain in greater detail how the rules apply in your situation.
AI for small to midsize businesses isn’t going away
Artificial intelligence (AI) has risen to great prominence in certain industries. But it hasn’t reached every small to midsize business yet. This will likely change as the technology becomes less expensive and more widely available. AI generally refers to using computers to perform complex tasks typically thought to require human intelligence, such as image perception, voice recognition and problem-solving. Just a few ways that AI could help your company include: 1) expediting the hiring process by soliciting and screening candidates, 2) more efficiently and effectively communicating with customers and prospects, and 3) strengthening your cybersecurity systems. Contact us for more info.
Taking the opposite approach: Ways your business can accelerate taxable income and defer deductions
Businesses typically want to delay taxable income into future years and accelerate deductions into the current year. But sometimes they want to do the opposite. One reason might be tax law changes that raise tax rates. Another reason may be because you expect your pass-through entity to pay taxes at higher rates in the future. There are ways to accelerate income into the current year and delay deductions into later years. For example, sell appreciated assets that have capital gains in this year, rather than waiting until a future year. Or depreciate assets over a number of years rather than claiming big first-year Section 179 deductions or bonus depreciation deductions. Contact us for help.
ERISA and EAPs: What’s the deal?
Many businesses are trying to help workers cope with challenges such as substance dependence, financial and legal woes, and mental health. Among the options considered is an employee assistance program (EAP). A common question is: Are these programs subject to ERISA? Generally, an arrangement is an ERISA welfare benefit plan if it’s a plan, fund or program established or maintained to provide ERISA-listed benefits, which include medical services. So, generally, an EAP providing mental health counseling (including help with substance abuse) will probably be subject to ERISA. You’ll need to also assess potential compliance issues under the ACA and HIPAA. Contact us for more info.
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.