ESOPs offer businesses a variety of potential benefits
Wouldn’t it be great if your employees worked as if they owned the company? An employee stock ownership plan (ESOP) could make this a reality. Under an ESOP, employees take part ownership of the business through a retirement savings arrangement. Among the biggest benefits for employers, along with having an extra-motivated workforce, is that contributions to qualified retirement plans such as ESOPs are typically tax-deductible. The company can also benefit from a clearer path to a smooth succession. There are some risks, however, including complexity of setup and administration, and a strain on cash flow in some situations. Please contact us to discuss further.
5 key points about bonus depreciation
You’re probably aware of the 100% bonus depreciation tax break that’s available for a wide variety of qualifying property. There are some important points to be aware of when it comes to this powerful tax-saving tool. For example, bonus depreciation is available for new and most used property. And it’s scheduled to phase out. Under current law, 100% bonus depreciation will generally be phased out in steps. An 80% rate will apply to property placed in service in 2023, 60% in 2024, 40% in 2025, and 20% in 2026, and a 0% rate will apply in 2027 and later years. Asset depreciation can be a complex area of tax law. Contact us with questions about your situation.
Helping employees understand their health care accounts
For employees to get the full value out of health care accounts such as health FSAs, HRAs and HSAs, they need to know which expenses are eligible for reimbursement or a tax-free distribution. Employers shouldn’t provide tax advice, but you can give participants a heads-up that reimbursement rules vary depending on account type. IRS Publication 502 can be helpful, but it’s written primarily to inform taxpayers of what medical expenses are tax-deductible. You may want to warn employees that various factors affect whether and when a medical expense is reimbursable. These include timing rules, insurance premium restrictions and over-the-counter drug documentation. Contact us for more info.
Will You Have to Pay Tax on Your Social Security Benefits?
If you’re getting close to retirement, you may wonder: Will my Social Security benefits be taxed? It depends on your other income. If you’re taxed, up to 85% of your payments could be hit with federal income tax. If you file a joint tax return and your “provisional income,” plus half your Social Security benefits, isn’t above $32,000 ($25,000 if unmarried), none of your benefits will be taxed. If it falls above those amounts, you must report a certain percentage of your benefits as income. If you know your Social Security benefits will be taxed, you can arrange to have the tax withheld from the payments. Otherwise, you may have to make estimated tax payments. Contact us for more information.
CARES Act made changes to excess business losses
The CARES Act made changes to excess business losses that affect those who hold an interest in a business (or may do so in the future). This includes changes that are retroactive and there may be opportunities to file amended tax returns. The CARES Act made several retroactive corrections to the excess business loss rules as they were originally stated in the 2017 Tax Cuts and Jobs Act. Most importantly, the law clarified that deductions, gross income or gain attributable to employment aren’t taken into account in calculating an excess business loss. This means that excess business losses can’t shelter either net taxable investment income or net taxable employment income.
Take a fresh look at your company’s brand
A strong, discernible brand is important for every business. For this reason, it’s a good idea to regularly take a fresh look at your brand and determine whether tweaks or even a major overhaul may be in order. First, identify the strengths of your business and whether these have evolved over time or changed recently. Some companies have pivoted during the COVID-19 pandemic. Next, determine what personality will draw today’s customers to your business. Review points of contact with customers and consider whether you’re making the right impression. Finally, identify what branding tactics competitors are using and come up with countermeasures. Contact us for assistance.
What happens if an individual can’t pay taxes
While you probably don’t have a problem paying your tax bills, you may wonder: What happens if you (or someone you know) can’t pay taxes on time? It’s important to file a properly prepared return even if full payment can’t be made. Include as large a partial payment as you can. You may be able to get an installment agreement with the IRS or borrow the money to make the payment. In some cases, a payment extension may be available if you can show payment would cause “undue hardship.” Not filing and paying could lead to escalating penalties and having liens assessed against your assets and income. It could also result in seizure and sale of your property. Contact us about your options.
The President’s action to defer payroll taxes: What does it mean for your business?
On August 8, President Trump signed four executive actions, including a Presidential Memorandum to defer the employee’s portion of Social Security taxes for some people. These actions were taken in an effort to offer more relief due to the COVID-19 pandemic. The action only defers the taxes, which means they’ll have to be paid in the future. […]
5 common accounting software mistakes to avoid
No company can afford to operate without the right accounting software. When considering whether to buy a new product or upgrade their current solution, however, business owners often fall prey to some common mistakes. Here are five gaffes to avoid: 1) Relying on generic software when an industry-specific solution may be available, 2) Over- or underspending because of a failure to identify all current accounting needs, 3) Sticking with an outdated product for too long, 4) Ignoring the importance of integration and mobile access, and 5) Not getting critical input from your CPA. We can help you determine your accounting needs, set a feasible budget and choose the right solution.
More parents may owe “nanny tax” this year, due to COVID-19
In the COVID-19 era, many parents are hiring nannies and babysitters because their daycare centers and summer camps have closed. This may result in federal “nanny tax” obligations. Keep in mind that the nanny tax may apply to all household workers, including housekeepers, babysitters, gardeners or others who aren’t independent contractors. If you employ someone […]
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