Divorcing couples should understand these 4 tax issues
When a couple is going through a divorce, taxes are probably not foremost on their minds. But without proper planning, some people find divorce to be even more taxing. Several concerns should be addressed to ensure that taxes are kept to a minimum. For example, if you sell your principal residence or one spouse remains living there while the other moves out, you want to make sure you’ll be able to avoid tax on up to $500,000 of gain. You also must decide how to file your return for the year (single, married filing jointly, married filing separately or head of household). There are other issues you may have to deal with. We can help you work through them.
How robotic technology will disrupt the manufacturing industry
Robotics technology has the potential to disrupt industries across all sectors – but its impact on the manufacturing industry will be transformative. Not only can robots increase productivity, efficiency and profit margins but adopting this tech for good will be a key way for the manufacturing industry to transition to a more sustainable future.
5 questions about real estate for manufacturing
When it comes to making post-COVID-19 decisions about real estate, manufacturers are in a tricky position.
Inventory management is especially important this year
This year, most companies’ financial statements will reflect the impact of the COVID-19 pandemic on sales and expenses. Be sure to look at inventory management as well. Carrying too much inventory can reflect poorly on a business as the value of surplus items drops throughout the year. Refine your inventory processes and trim excess items. If yours is a more service-oriented business, apply a similar approach. Check into whether you’re “overstocking” on services that aren’t contributing to profitability. Be prepared to make tough decisions about customers to whom you provide services that aren’t profitable anymore. Contact us for help.
New business? It’s a good time to start a retirement plan
If you recently launched a business, you may want to set up a tax-favored retirement plan for yourself and your employees. There are several types of qualified plans that are eligible for these tax advantages: A current deduction from income to the employer for plan contributions, tax-free buildup of the value of plan investments, and the deferral of income (augmented by investment earnings) to employees until funds are distributed. The two basic types of plans are defined benefit pensions and defined contribution plans, such as 401(k) plans. There are also SEPs and SIMPLEs, which are easy to set up and maintain. Contact us to discuss the types of retirement plans available to you.
Buying and selling mutual fund shares: Avoid these tax pitfalls
If you invest in mutual funds, there are potential pitfalls involved in buying and selling shares. For example, you may already have made taxable “sales” of part of your mutual fund without knowing it. One way this can happen is if your mutual fund allows you to write checks against your fund investment. If you write a check against your mutual fund account, you’ve made a partial sale of your interest in the fund (except for funds such as money market funds, for which share value remains constant). Thus, you may have taxable gain (or a deductible loss) when you write a check. And each such sale is a separate transaction that must be reported on your tax return. Contact us with questions.
The 2021 “Social Security wage base” is increasing
If your small business is planning for payroll next year, be aware that the “Social Security wage base” is increasing. The Social Security Administration recently announced that the maximum earnings subject to Social Security tax will increase from $137,700 in 2020 to $142,800 in 2021. Wages and self-employment income above this threshold aren’t subject to Social Security tax. For 2021, an employer must withhold: 6.2% Social Security tax on the first $142,800 of employee wages, plus 1.45% Medicare tax. In addition, there’s a 0.9% additional Medicare tax on all employee wages in excess of $200,000. Contact us with questions. We can keep you in compliance with payroll laws and regulations.
What tax records can you throw away?
Oct. 15 is the deadline for individual taxpayers who extended their 2019 tax returns. If you’re finally done filing last year’s return, you might wonder: Which tax records can you toss once you’re done? Now is a good time to go through old tax records and see what you can discard. A common rule of thumb is to keep tax records for at least six years from filing, after which the IRS generally no longer can audit your return or assess additional taxes, even if your income was understated. But hang on to certain records longer including the tax returns themselves, W-2 forms and records related to real estate, investments and retirement accounts.
Reviewing your disaster plan in a tumultuous year
The sudden impact of the COVID-19 pandemic in March forced every business owner, ready or not, to execute his or her disaster response plan. How did yours do? Now’s a good time to review it while the experience is fresh in your mind. Identify all distinctive threats (including, now, a pandemic) related to your industry, size, location(s), and products or services. Look back at whether and how your business was able to communicate in the initial months of the crisis. Which methods were most and least effective? Is new technology needed? Commit to revisiting your plan at least annually as well as to keeping your staff fully aware of it. Contact us for assistance and further information.
Understanding the passive activity loss rules
The passive activity loss rules affect business ventures you’re engaged in or might engage in. If the ventures are passive activities, the passive activity loss rules prevent you from deducting expenses that are generated by them in excess of their income. You can’t deduct the excess expenses (losses) against earned income or against other nonpassive income. Nonpassive income for this purpose includes interest, dividends, annuities, royalties, gains and losses from most property dispositions, and income from certain oil and gas property interests. There are different rules for rental activities. Contact us if you’d like to discuss how these rules apply to your business.