The key to retirement security is picking the right plan for your business
If you’re a small business owner, you may want to set up a retirement plan for yourself and any employees. Several types of plans are eligible for tax advantages, including 401(k)s, Simplified Employee Pension (SEP) plans and SIMPLE IRAs. For 2019, the maximum amount you can contribute to a 401(k) and exclude from income is $19,000, plus a $6,000 “catch-up” amount for those age 50 or older. For a SEP plan, the 2019 maximum amount is 25% of compensation or $56,000. And for a SIMPLE IRA, the maximum 2019 amount is $13,000, plus $3,000 if you’re age 50 or older. These are only some of the options that may be available to your business. We can help find the best choice for your situation.
The next estimated tax deadline is September 16: Do you have to make a payment?
If you’re self-employed and don’t have paycheck withholding, you probably have to make estimated tax payments. These payments must be sent to the IRS on a quarterly basis. The 3rd 2019 estimated tax payment deadline for individuals is Monday, Sept. 16. Even if you do have some withholding from paychecks or other payments, you may still have to make estimated payments if you receive income such as Social Security, prizes, rent, interest and dividends. Generally, taxpayers send four equal installments. But people who earn income unevenly during the year (for example, from a seasonal business) may be able to send smaller payments. Contact us if you have questions about the estimated tax rules.
Some business owners can’t participate in their own companies’ HRAs
Many companies now offer Health Reimbursement Arrangements (HRAs) in conjunction with high-deductible health plans. If you’re a business owner, you might assume that, after putting in the time and effort to set up an HRA, you could participate in it. But this may not be the case. Owners who are “self-employed individuals” under Internal Revenue Code Section 401(c) aren’t allowed to participate in an HRA on a tax-favored basis. Ineligible owners include partners, sole proprietors and more-than-2% shareholders in an S corporation. A Health Savings Account (HSA) might be a better option. Contact our firm for help choosing health care benefits that suit you and your employees.
Expenses that teachers can and can’t deduct on their tax returns
As teachers head back to school, they often pay expenses for which they don’t receive reimbursement. Fortunately, they may be able to deduct some of them on their tax returns. You don’t have to itemize your deductions to claim this “above-the-line” tax break. For 2019, educators can deduct up to $250 of eligible expenses that weren’t reimbursed. Eligible expenses include books, supplies, computer equipment, software, other classroom materials, and professional development courses. To be eligible, taxpayers must be kindergarten through grade 12 teachers, instructors, counselors, principals or aides. They must also work at least 900 hours a school year in an elementary or secondary school.
The tax implications of a company car
The use of a company car is a valuable fringe benefit for business owners and key employees. This perk results in tax deductions for the employer and tax breaks for the owners and employees using the cars. (And of course, they get the nontax benefits of driving the cars!) For tax deduction purposes, a business will treat the car much the same way it would any other business asset. Providing an auto for an owner or key employee comes with complications and paperwork. Personal use will have to be tracked and valued under the fringe benefit tax rules and treated as income. We can help you stay in compliance with the rules and explain more about this prized perk.
4 tough questions to ask about your sales department
Companies with underperforming sales departments may stay afloat for a while, but the loss of one big customer or arrival of a tough new competitor could put them under. To ensure your sales staff is contributing to business growth, you’ve got to ask some tough questions. Do your salespeople communicate customers’ needs to the company? If not, you could be losing touch with your market. Does the sales department handle complaints promptly and satisfactorily? Doing so is critical these days, when people share everything on social media. Does your sales staff work well with other departments? Your whole company needs to work as a team. Contact us for more info.
Taking distributions from your traditional IRA
If you’re like many people, you’ve worked hard to accumulate a large nest egg in your traditional IRA (or a SEP-IRA). It’s critical to carefully plan for withdrawals. For example, if you need to take money out of your traditional IRA before age 59-1/2, the distribution will generally be taxable. In addition, distributions before age 59-1/2 may be subject to a 10% penalty tax. (However, several exceptions may allow you to avoid the penalty tax but not the regular income tax.) And once you reach age 70-1/2, distributions from a traditional IRA must begin. If you don’t withdraw the minimum amount each year, you may have to pay a 50% penalty tax on what should have been taken but wasn’t.
“Innocent spouses” may get relief from tax liability
When a married couple files a joint tax return, each spouse is liable for the full amount of tax on the couple’s combined income. Therefore, the IRS can come after either spouse to collect the entire tax, not just the part that’s attributed to that spouse. This includes any tax deficiency that the IRS assesses after an audit, as well as any penalties and interest. In some cases, spouses are eligible for “innocent spouse relief.” Generally, these spouses were unaware of a tax understatement that was attributable to the other spouse. If you’re interested in trying to obtain relief, paperwork must be filed and deadlines must be met. Contact us. We can assist you with the details.
What to do if your business receives a “no-match” letter
In recent months, many businesses and employers have received “no-match” letters from the Social Security Administration (SSA). These letters alert employers if employees’ names and Social Security numbers (SSNs) don’t match the data reported on W-2 forms, which are given to employees and filed with the IRS. If you receive a no-match letter, check to see if your information matches the name and SSN on the employee’s Social Security card. If the information matches, ask him or her to check with the local Social Security office to resolve the issue. If you have questions, contact us or check out these frequently asked questions from the SSA: https://bit.ly/2Yv87M6
Dashboard software helps you keep your eyes on the prize
Business owners are urged to identify the most important key performance indicators (KPIs) for their companies. Once you’ve done so, a natural question is: Now what? A “business dashboard” is a type of software that allows you to create a customized view of your chosen KPIs in the form of pie charts, bar graphs and other graphic elements. When shopping for such a solution, look for one that supports your KPIs; offers a visually pleasing, one-screen view of the data; and updates itself in real time. Be wary of vendors that over-promise “otherworldly” knowledge of your industry or try to upsell you on bells and whistles. We can help you set a budget and compare prices.