Take a look at stock options as a recruitment tool
Is your business struggling to fill its open positions? Many companies use equity-based compensation to attract, retain and motivate executives and other key employees. Stock options confer the right to buy a certain number of shares at a fixed price for a specified time. They come in two flavors: 1) Incentive stock options, which offer attractive tax advantages for employees, but they must comply with strict rules and offer no deduction for employers. 2) Nonqualified stock options, which offer more flexibility, don’t expose recipients to the alternative minimum tax and do generate a deduction for employers. Contact us for help reviewing the pros and cons of either type of stock option.
Choosing a retirement plan for your small business
Most growing small businesses reach a point when it’s time to offer employees a retirement plan. Perhaps the most well-known plan type is the 401(k), which is available to any size company. Contributions to a traditional 401(k) are made pretax, reducing taxable income, but distributions are taxable. Another option: a Simplified Employee Pension (SEP) plan, which is also available to any size business. SEP plans are funded entirely by the employer, though you can decide annually whether to contribute. Small businesses (those with 100 or fewer employees) may want to consider looking into a Savings Incentive Match Plan for Employees (SIMPLE) IRA. Contact us for more info about possible plans.
Intangible assets: How must the costs incurred be capitalized?
These days, most businesses have some intangible assets such as patents, trademarks, customer lists and leases. The tax treatment of these assets is complex. IRS regulations generally require the capitalization of costs to acquire or create an intangible asset, as well as take other actions involving intangibles. Capitalized costs can’t be deducted in the year paid or incurred. If they’re deductible, they must be ratably deducted over the life of the asset (or, for some assets, over periods specified by the tax code or under regulations). However, capitalization generally isn’t required for costs not exceeding $5,000 and for certain other amounts. Contact us with any questions.
Year-end giving to charity or loved ones
The holiday season is here and many people plan to donate to their favorite charities before the end of the year. In 2022, in order to receive a charitable donation write-off, you must itemize deductions on your tax return. What if you want to give gifts of investments? Don’t give away stock in taxable accounts that is currently worth less than what you paid for it. Instead, sell the shares and claim the loss on your tax return. Then, give the proceeds from the sale to charity. Plus, if you itemize, you can claim a full tax-saving charitable deduction. Contact us if you have questions about taxes and any gifts you want to make.
Is your business closing? Here are your final tax responsibilities
If your business is closing down, we’re here to assist you in any way we can, including taking care of various tax obligations. A business must file a final income tax return and some other related forms for the year it closes. If you have employees, you must pay them final wages and compensation owed, make final federal tax deposits and report employment taxes. Failure to withhold or deposit employee income, Social Security and Medicare taxes can result in personal liability for what’s known as the Trust Fund Recovery Penalty. You must cancel your Employer Identification Number and close your IRS business account. There may be other responsibilities. Contact us with any questions.
Like every business, a start-up needs a sensible budget
Per the U.S. Census Bureau, more than 430,000 new business applications for tax identification numbers were submitted in October 2022. One thing that every new company needs, along with a business plan, is a sensible budget. For the first year of operation, entrepreneurs can create one by forecasting the monthly numbers that will likely be reflected in the three basic parts of their financial statements: the income statement, balance sheet and statement of cash flows. By forecasting these statements every month, based on industry benchmarks and market-based research, you can identify when cash shortfalls, as well as seasonal peaks and troughs, are likely to occur. Contact us for help.
How savings bonds are taxed
If you own savings bonds, you may wonder: How is the interest taxed? EE bonds don’t pay interest currently. Instead, accrued interest is reflected in their redemption value. (But owners can elect to have interest taxed annually.) Series I savings bond interest is based on inflation. Series I bond owners may either: 1) Defer reporting the increase in the redemption (interest) to the year of final maturity, redemption or other disposition (whichever is earlier) or 2) elect to report the increase each year as it accrues. Savings bond interest isn’t subject to state income tax. And using the money for higher education may keep you from paying federal tax on the interest. Questions? Contact us.
Computer software costs: How does your business deduct them?
Most businesses buy or lease computer software to use in their operations. Or perhaps your business develops computer software for your use or sells it to others. In any of these situations, you should be aware of the complex rules that apply to determine the tax treatment of the expenses involved. The rules depend on whether the software is purchased, leased or developed by your business. For example, you must deduct amounts you pay to rent leased software in the tax year they’re paid, if you’re a cash-method taxpayer, or the tax year for which the rentals are accrued, if you’re an accrual-method taxpayer. We can assist you in applying the tax rules for computer software costs.
How should your marketing strategy change next year?
The U.S. economy has changed significantly this year. Your marketing strategy for 2023 should promote a business that’s nimbly adjusted to the playing field and can still offer customers great value. A good place to start is with your audience. Consider each prospect, customer or targeted group as an investment. Estimate your net profit after subtracting production, sales and customer service costs. Another key factor is pricing. Inflation has increased expenses for many companies, but you’ve still got to think about whether and how much to raise your own prices in response, and how to communicate price adjustments to customers. Contact us for help evaluating costs and setting price points.
2023 limits for businesses that have HSAs — or want to establish them
No one needs to remind business owners that the cost of employee health care benefits keeps going up. One way to provide some of these benefits is through an employer-sponsored Health Savings Account (HSA). For eligible individuals, HSAs offer a tax-advantaged way to set aside funds (or have their employers do so) to meet future medical needs. To be eligible, an individual must be covered by a “high deductible health plan.” For 2023, a “high deductible health plan” will be one with an annual deductible of at least $1,500 for self-only coverage, or at least $3,000 for family coverage. An HSA provides a number of tax benefits for your business and its employees. Contact us with questions.