Stock market investors: Year-end tax strategies to consider
Year-end is a good time to plan to save taxes by structuring your capital gains and losses. Consider some possibilities. For example, suppose you lost money this year on some stock and have other stock that has appreciated. Consider selling appreciated assets before Dec. 31 (if you think the value has peaked) and offset gains with losses. Long-term capital losses offset long-term capital gains before they offset short-term gains. Similarly, short-term capital losses offset short-term capital gains before they offset long-term gains. You may generally use up to $3,000 of capital losses in excess of total capital gains as a deduction against ordinary income in computing adjusted gross income.
Helping your employees make the most of email
For many people, email has become an afterthought. This can cause problems for businesses in lost productivity, lower morale and even unhappy customers. Here are some email management tips to address with staff: 1) Set up project-specific folders to stay better organized. 2) Regularly check junk email folders and adjust the filters so legitimate messages aren’t missed. 3) Encourage employees to unsubscribe from e-newsletters and other messages they’re no longer reading. 4) Refine distribution lists to better target recipients; delete obsolete lists. 5) Establish specified times during the workday to check email. 6) Consider company policies for how quickly employees should respond to emails.
How are court awards and out-of-court settlements taxed?
Awards and settlements are paid for many reasons. For example, a person could receive payments for personal injury or discrimination. By law, individuals can exclude from gross income damages that are received on account of personal physical injury or physical sickness. For purposes of this exclusion, emotional distress isn’t considered physical injury or sickness. So, for example, an award under state law that’s meant to compensate for emotional distress caused by age discrimination would have to be included in gross income. However, if you require medical care for treating the consequences of emotional distress, the amount of damages not exceeding those expenses would be excludable.
The tax implications of owning a corporate aircraft
If your business is successful and you do a lot of business travel, you may have considered buying a corporate aircraft. There are tax and non-tax implications for aircraft ownership. In most cases, if your company buys a plane used only for business, the company can deduct its entire cost in the year that it’s placed into service. The aircraft is ineligible for this immediate write-off when: 1) neither the 100% bonus depreciation rules nor the Section 179 small business expensing rules apply or 2) the taxpayer has elected out of 100% bonus depreciation and hasn’t made the election to apply Sec. 179 expensing. Other rules and limits apply in certain situations. Contact us to learn more.
Could an FLP fit into your succession plan?
Succession planning is critical for business owners. From a tax perspective, the optimal time to start transferring ownership to the next generation is long before retirement. Creating a family limited partnership (FLP) can allow you to gradually transfer ownership while you continue to run the business. To establish one, you transfer ownership interests to a partnership in exchange for both general and limited interests. You retain the general partnership interest, so you stay in charge of your company, while children or other beneficiaries become limited partners. FLPs offer both estate planning and tax-planning benefits, but the IRS scrutinizes them. Contact us for more information.
Use change management to brighten your company’s future
Businesses have had to grapple with many changes over the last couple years, with more likely in store in 2022. When a company implements change, the process is rarely easy. Some employees might think it compromises their job security or status. Others could distrust the motives behind the change, a particularly dangerous mindset. Meanwhile, you and your leadership team may quickly grow frustrated and tighten enforcement of new rules. But doing so often reduces productivity, worsens morale and increases turnover. To change successfully, learn about change management. It can help you communicate more effectively and provide employees with the support needed to change successfully.
With year-end approaching, 3 ideas that may help cut your tax bill
You may still have time to trim your 2021 federal tax liability by taking certain steps. For example, contribute the maximum to your retirement plans, including traditional IRAs and SEP plans. Another idea: If you make your Jan. 2022 mortgage payment in December, you can deduct the interest portion on your 2021 tax return (assuming you itemize deductions on your tax return). You can also “harvest” any investment losses by Dec. 31. If you have more losses than gains, you generally can apply up to $3,000 of the excess to reduce your ordinary income. Any remaining losses are carried forward to future tax years. Contact us if you want to discuss ways to minimize your 2021 tax liability.
Small businesses: There still may be time to cut your 2021 taxes
Don’t let the holiday rush keep you from considering some important steps to reduce the 2021 tax liability of your small business. You have time to execute a few strategies. For example, are you thinking about purchasing new or used heavy vehicles, heavy equipment, machinery or office equipment early in the new year? Buy them now and place them in service by Dec. 31, and you can deduct 100% of the cost as bonus depreciation. Or you can charge recurring expenses normally paid early in the year on your credit card before Jan. 1. That way, you can claim the deduction for 2021 even though you don’t pay the bill until 2022. Contact us with any questions.
IRS announces adjustments to key retirement plan limits
In Notice 2021-61, the IRS recently announced 2022 cost-of-living adjustments to dollar limits and thresholds for qualified retirement plans. Businesses that offer a qualified plan, such as a 401(k), should take careful note. For example, the annual limit on elective deferrals will increase from $19,500 to $20,500 for 401(k), 403(b) and 457 plans, as well as for SARSEPs. And the annual limit on compensation that can be taken into account for contributions and deductions will increase from $290,000 to $305,000. However, the annual limit on catch-up contributions for those age 50 and over will remain the same at $6,500. We can provide further information on the adjusted amounts.
New digital asset reporting requirements will be imposed in coming years
The Infrastructure Investment and Jobs Act was signed into law on Nov. 15, 2021. It includes new reporting requirements that will generally apply to digital asset transactions starting in 2023. Cryptocurrency exchanges will be required to perform intermediary Form 1099 reporting for crypto transactions. The law expands the definition of brokers who must furnish Forms 1099-B to include businesses that are responsible for regularly providing any service accomplishing transfers of digital assets on behalf of another person. The law will also require businesses to report any digital asset transaction of $10,000 or more to the IRS, including the identity of the persons involved.