Tag Archives: Taxes

Borrowed for your home downpayment? You may miss out on the interest deduction!

It is not uncommon for individuals to loan money to relatives to help them buy a home.  In these situations, it is also not uncommon for a loan to be undocumented or documented by an unsecured note, with the unintended result that the home buyer can’t claim a tax deduction for the interest paid to their helpful relative. 

 

If it involves real estate, it’s always a good idea to make sure everything is well documented, particularly when it involves close family, and you want a tax deduction.

 

Call us and we talk about whether this affects you.

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

Saving for your Kids Education? Read this!

We all would like to put money aside for our kids educations. Here are some nice techniques that can save you a little in taxes too…

 

Qualified Tuition Programs, commonly referred to as Section 529 plans (named after the section of the IRS Code that created them), are plans established to help families save and pay for college in a tax-advantaged way and are available to everyone, regardless of income. These state-sponsored plans allow you to gift large sums of money for a family member’s college education, while you maintain control of the funds. The earnings from these accounts grow tax-deferred and are tax-free if used to pay for qualified higher education expenses. 529 plans can be used as an estate-planning tool as well, providing a means to transfer large amounts of money without gift tax. With all these tax benefits, 529 plans are excellent vehicles for college funding.

 

Tax Benefits: There is no federal tax deduction for making a contribution, but taxes on the earnings within a 529 plan are not only tax-deferred while they are held in the account, but are tax-free when withdrawn to pay for qualified education expenses. This allows you to accumulate money for college at a much faster rate than you can with an account where you have to pay tax on the investment gains and earnings.  

 

How Much Can Be Contributed? Unlike the Coverdell Education Savings Accounts that limit the annual contribution to $2,000, Section 529 plans allow you to put away larger amounts of money. There are no income or age limitations for the Section 529 plans. The maximum amount that can be contributed per beneficiary is based on the projected cost of a college education and will vary between state plans. Some states base their maximums on an in-state, four-year education, while others base theirs on the costs of the most expensive schools in the U.S., including graduate studies. Most have limits in excess of $200,000. Generally, once an account reaches the plan-imposed cap, additional contributions cannot be made, but that doesn’t prevent the account from continuing to grow through investment earnings and growth.

 

How Much Should You Contribute? Although there is no contribution limit other than the plan’s limit based on the cost of the education, there are some gift tax limitations that may influence the amount of your contribution. Contributions to Section 529 plans are considered completed gifts and are subject to the gift tax rules. Under these rules, individuals can annually give away (gift) money to another individual, only up to an annual limit (double for a married couple), without triggering gift taxes or reducing their lifetime gifts and inheritance exclusions. The gift exclusion amount is inflation adjusted. For 2014, the gift tax exclusion is $14,000 per recipient.

 

Five-Year Option: Where contributions to a qualified tuition program exceed the annual gift exclusion amount, a donor may elect to take certain contributions to a Qualified Tuition Program (QTP) into account spread over a five-year period in determining the amount of gifts made during the calendar year. The provision applies only for contributions of up to five times the annual exclusion amount available in the calendar year of the contribution. Any excess may not be taken into account ratably and is treated as a taxable gift in the calendar year of the contribution. Thus, for 2014 an individual could contribute up to $70,000 (five times the 2014 annual exclusion amount), while a married couple could contribute twice that amount ($140,000) to the same individual. The gift would reduce the donor’s estate by the full amount of the gift by the end of the five-year period. Should the donor die before the five-year period elapses, any amount in excess of the allowable annual exclusions would revert back to the donor’s estate. Note: A gift tax return must be filed for the year of the contribution if it exceeds the annual gift tax exclusion and to claim this special exemption.

 

Don’t Overlook Additional Contribution Opportunities During The Five-Year Period: If in any year after the first year of the five-year period the annual exclusion amount is increased, the donor may make an additional contribution in any one or more of the four remaining years up to the difference between the exclusion amount as increased and the original exclusion amount for the year or years in which the original contribution was made.  

 

If you need assistance evaluating the benefits of a Section 529 plan or even figuring out how you can somehow integrate it with your business, give us a call.

 

If you found this article useful, please do not keep this a secret. Share it with a friend.

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

Seriously, you want to look at taxes for 2014 now!

This sounds crazy, but it’s really not a bad idea to start thinking about your 2014 taxes, the one due in 2015.

 

We know that you’re probably just over thinking about your 2013 income taxes. It may seem odd to start thinking about 2014 taxes just now, but actually, this is the ideal time to start planning and making business decisions, keeping their tax implications always in the back of your mind.

As you look at the data that will be entered in your 2013 tax forms, you’re likely to come across some expenses that you might have handled differently, or some income that should have been deferred. If you begin your planning process for 2014 while 2013 is still in the works, you can start making smarter, more tax-advantageous business decisions now, instead of late in the year when everyone is rushing to take actions necessary to lower their tax obligation.

 

Overhaul your Chart of Accounts.

 

The mechanics of doing this are fairly uncomplicated, but changing this critical list – the backbone of your company file – requires solid knowledge of which accounts should be added, deleted or changed. You also need to know which accounts and sub-accounts will have impact on your income taxes. They must be structured accordingly.

 

Devise an effective system for estimated taxes. As you well know, there’s no magic formula for estimating how much income tax you’ll owe until all of your income and expenses have been tallied. We can make this an ongoing task by creating monthly or quarterly financial reports for your business and working from those.

 

If you’re self-employed, you might want to open a low-fee checking account that will serve solely as your tax fund. Because you have no employer to pay a portion of your Social Security and Medicare obligations, it’s critical that you’re putting enough away. Consider putting one-third of your taxable income into that account and see how it goes. You may get a pleasant surprise at tax prep time, or you may have to dip into other savings to be compliant.

 

You can submit federal payments online on the Electronic Federal Tax Payment System site. Check with us to see if your state has an electronic system. Of course, the IRS will also accept a check. 

 

Run reports on everything. And keep running them. We already mentioned that we’re happy to create and analyze your most critical financial reports on a regular basis. You may have tried to understand the Trial Balance, Statement of Cash Flows, etc. in QuickBooks and been puzzled. Don’t feel discouraged if you don’t understand these reports and how they apply to your business. Your accountant can help you with that. 

 

As the 2013 tax season starts to wind down, we love to talk to businesses who already  want to think ahead, so give us a call.

 

If you found this article useful, please do not keep this a secret. Share it with a friend.

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

Let us take on the complicated challenges of small business bookkeeping, payroll, and taxes for one fixed fee. Don’t be a small fish in a big pond. (VIDEO)

NH Small Business Owners Brace Yourself…Let’s talk Taxes in 2014

We have plenty of tax issues and challenges to reducing our taxes coming in 2014, particularly if you are a higher income taxpayer.

 

The following issues are concerns that may impact you and your company’s tax liability in the new year.

  • Small Business Health Insurance Credit – The tax credit to small employers (25 or fewer equivalent full-time employees) that provide an affordable health insurance plan for their employees and supplement at least half the premiums, will increase to 50% of the employer’s contribution in 2014, up from 35% in 2013. For non-profit employers, the credit will be 35% in 2014.

 

  • Net Investment Income Tax – As part of the Patient Protection & Affordable Care Act (the new health care legislation sometimes referred to as “Obamacare”), a new tax kicked in for 2013 and will continue in 2014 and beyond. It is a surtax levied on the net investment income of taxpayers in the higher-income brackets. And although it is perceived as an additional tax on higher-income taxpayers, it can affect even those who normally don’t have higher income if they have a large income from the sale of real estate, certain business assets, stocks, or other investments. This is on top of the 20% long-term capital gain tax rate now in effect for higher-income taxpayers.

 

  • Higher Tax Rates – Prior to the increase in 2013, there were six tax brackets: 10, 15, 25, 28, 33, and 35%. Beginning in 2013 and continuing for future years, a new top rate of 39.6% has been added for higher-income taxpayers.

 

  • Higher Capital Gains Rates – Beginning in 2013 and continuing for future years, the tax rate for long-term capital gains and qualified dividends has been increased to 20% (up from 15%) for taxpayers with incomes exceeding the threshold for their filing status.

 

  • Medical Adjusted Gross Income (AGI) Phase-out – Beginning in 2013 and continuing for future years, a taxpayer’s medical deductions will be reduced by 10% of their AGI, up from the previous 7.5% (but the 7.5% continues to apply to seniors through 2016).

 

  • Possibility of Lower Expensing Deductions – The Sec 179 business expensing allowance for business equipment drops from $500,000 per year to $25,000 in 2014 unless Congress extends the more liberal amount.(1)

 

  • Bonus Depreciation Expires – Beginning in 2014, the 50% bonus depreciation for tangible business assets will expire unless Congress extends it.(1) This also reduces the first-year maximum depreciation deduction for business autos and small trucks.

 

  • Individual Insurance Mandate – Beginning in 2014, the Patient Protection & Affordable Care Act will impose the new requirement that U.S. persons, with certain exceptions, have minimum essential health care insurance, or face a penalty.

 

  • Large Employer Mandatory Insurance Requirement – Originally scheduled to begin in 2014 but delayed until 2015 because the government did not have the reporting mechanisms in place, large employers, generally those with 50 or more full-time equivalent employees in the prior calendar year.

 

  • Simplified Home Office Deduction – Effective for tax years beginning in 2013 and continuing for 2014 and beyond, taxpayers can elect a simplified deduction for the business use of the taxpayer’s home. The deduction is $5 per square foot with a maximum square footage of 300. Thus, the maximum deduction is $1,500 per year. Eligibility qualifications are the same whether the simplified or regular deduction is claimed.

 

  • Increased Payroll and Self-Employment Tax – As part of the new health care legislation, higher-income taxpayers are faced with an additional 0.9% health insurance (HI) tax. Starting in 2013, and continuing for future years, this surtax is imposed upon wage earners and self-employed taxpayers whose wage and self-employment income exceeds $250,000 for married taxpayers filing jointly ($125,000 if filing separately) and $200,000 for all others.

 

  • Pease Limitations – The Pease limitation on itemized deductions that was reinstated in 2013 will continue for 2014. The Pease limitation phases out certain itemized deductions for higher-income taxpayers.

 

  • Phase-out of Exemptions – The phase-out of exemptions for higher-income taxpayers that was reinstated in 2013 continues for 2014.

 

  • Longer Depreciation Life for Leasehold and Restaurant Property – The current 15-year depreciable life will increase to 39 years in 2014.(1).

 

  • Qualified Small Business Stock Gain Exclusion – Beginning for qualified small business stock issued in 2014, the gain exclusion drops from 100% to 50%

 

  • Qualified Real Property Expensing – Congress temporarily permitted the use of the Sec 179 expensing deduction to write off certain leasehold improvements, and restaurant and retail property improvements. Without Congressional intervention, this provision will no longer be available in 2014.

 

(1) Congress, a few years back, engaged in brinkmanship with last-minute tax changes. Normally, they have managed to finalize tax law by year’s end. However, for 2013, they adjourned without addressing the issue of extending many tax breaks that were set to expire at the end of 2013. It is not known if these tax provisions will be extended or not.

 

If you found this article useful, please do not keep this a secret. Share it with a friend.

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

Obamacare, oh my….New changes in Medical Tax Deductions

Beginning this tax year, 2014, the only medical expenses that you can deduct are those in excess of 10% of your adjusted gross income (AGI), up from the previous 7.5% AGI limitation. The limitation remains at 7.5% for taxpayers age 65 and over through 2016, unless they are subject to the alternative minimum tax, in which case it is 10% for them as well. For joint return filers not subject to the AMT, if either spouse is age 65 or older, the 7.5% of AGI limitation applies to their joint medical expenses.

 

If you don’t itemize your deductions or are nowhere near exceeding the AGI limitation, you need not concern yourself with this deduction. On the other hand, if you do itemize and think you might meet the AGI limitation, then it may be worth your time to summarize your medical expenses for the year. Use the following checklist to help you accumulate your deductible medical expenses. The list is by no means all-inclusive, and some of the deductions listed may have additional restrictions not included here. 

 

  •  Ambulance
  •  Artificial Limb
  • Artificial Teeth
  • Birth Control Pills
  •  Braille Books and Magazines
  •  Abortion, Legal
  •  Acupuncture
  •  Alcoholism Treatment
  •  Chiropractor
  •  Christian Science Practitioner
  •  Contact Lenses
  •  Crutches
  •  Dental Treatment
  •  Drug Addiction Treatment
  •  Drugs (Prescription)
  •  Eyeglasses
  •  Fertility Enhancement
  •  Guide Dog
  •  Hearing Aids
  •  Hospital Services
  •  Impairment-Related Expenses
  •  Insurance Premiums
  •  Laboratory Fees
  •  Laser Eye Surgery
  •  Lead-based Paint Removal
  •  Learning Disability Treatment  Medicare B & D Premiums
  •  Medical Services
  •  Medicines, Prescribed
  •  Mentally Retarded, Special Home for
  •  Nursing Home
  •  Nursing Services
  •  Operations
  •  Optometrist
  •  Organ Donors
  •  Osteopath
  •  Oxygen
  •  Prosthesis
  •  Psychiatric Care
  •  Psychoanalysis
  •  Psychologist
  •  Special Schools and Education
  •  Sterilization
  •  Stop Smoking Programs
  •  Surgery
  •  Therapy
  •  Vasectomy
  •  Weight-loss Program
  •  Wig (Cancer Patient)

 

Remember that just because your insurance will not cover a particular expense does not mean you can not take a tax deduction for it.

 

If you have questions related to your medical tax deductions please us a call.

 

If you found this article useful, please share it with a friend.

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

New IRS Vehicle Mileage Rates out for 2014

It’s not often that we see the price of something go down, but the IRS has determined that it’s now costing us less to operate our cars, and so now we will start getting less to deduct when we use it for business.

 

Beginning on Jan. 1, 2014, the IRS Vehicle mileage rates for the use of a car (also vans, pickups or panel trucks) will be 56 cents per mile for business miles driven.

 

The rates decrease one-half cent from the 2013 rates. If you’re reimbursing employees based on the IRS rate, take note of this for the beginning of next year.

If you found this article useful, please do not keep this a secret. Share it with a friend.

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

Taxes and Marijuana, Oh My!

So, Colorado just become another state in 2014 to legalize the sale of pot.

More and more states are legalizing the use of pot. I’ve even had a few people approach me about what might be involved in setting up a legitimate pot growing business in New Hampshire.

For one, it’s against the law in New Hampshire. But the big problem, if you  go and set yourself up in a ‘legitimate’ state, is that it is still against Federal law.

Let me explain why this is a problem for taxes.  Some might assume (what’s the big deal) that I’ll just set up my business  and make sure I pay my taxes..Simple enough?

Here’s the problem. Although you are required to report your income from whatever source, you are NOT entitled to take a single dollar of deduction against that income if the business is illegal.

So, if you had a pot growing business with $300,000 of gross sales, and you had $200,000 of expenses associated with it, you would have to pay taxes on the whole $300,000.

…and now you know…

 

If you found this article useful, please do not keep this a secret. Share it with a friend.

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

How much tax risk can you take? (Video)

CPAsteve discusses the value of asking about tax risk in the Business Financial Confidence process, and how business owners and advisors can benefit from simply knowing the answers. Use our Business Financial Confidence Map to help you find your way.

 

If you found this article useful, please do not keep this a secret. Share it with a friend.

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

How Will Health Care Reform Affect Your Business?

The Affordable Care Act (ACA for short) has left businesses and individuals confused about what the health care reform law contains and how it affects them. Even the accountants are confused!

My challenge in this article is to give you the kindergarten primer, and maybe share one little tidbit you did not know already. So here goes:

1 – Insurance companies have  new requirements. For example, they cannot refuse coverage due to pre-existing conditions, preventive services must be covered with no out-of-pocket costs, young adults can stay on parents’ policies until age 26, and lifetime dollar limits on health benefits are not permitted.

2 – The law mandates health insurance coverage for ALL individuals. If you’re one of the 45 million or so Americans without health insurance, you will need to get coverage for 2014 or pay a penalty of $95 or 1% of your income, whichever is greater. Low-income individuals may qualify for subsidies and/or tax credits to help pay the cost of insurance.

It is my humble opinion that $95 per person is not really enough, at least for 2014, to convince people to buy insurance. So I’m suggesting that if you don’t have insurance now, it could make sense because of SO much confusion in the health care marketplace, to just watch everyone else make fools of themselves.

Tremendous media attention is focused on the health insurance exchanges or “Marketplace” that opened for business on October 1. The media has left many people thinking everyone has to deal with the exchanges. The fact is that if you are covered by Medicare, Medicaid, or an employer-provided plan, you don’t need to do anything.

Many individuals will qualify for federal tax credits which will reduce the premiums they actually pay. Each state’s Marketplace will have a calculator to assist individuals in determining the amount, if any, of their federal tax credit.

3 – For businesses with 50 or more full-time employees, the requirement to provide “affordable, minimum essential coverage” to employees has been delayed for one year and is not required until 2015. Originally, employers had been required to file information returns that reported details about the health insurance they provided, with penalties to apply if the insurance did not meet standards. Companies complained that they needed more time to meet the reporting obligations, and in response the IRS made the reporting requirement optional for 2014. Without the reporting, the IRS could not determine penalties, so the penalties also were postponed for a year.

Bottom line: The IRS is encouraging companies to comply in 2014 even though there are no penalties for failure to do so.

4 – Businesses with fewer than 50 employees are encouraged to provide insurance for their employees, but there are no penalties for failing to do so. A special marketplace will be available for businesses with 50 or fewer employees, allowing them to buy health insurance through the Small Business Health Options Program (SHOP), but the implementation of SHOP has now been delayed a full year, meaning you’ll just need to keep talking with your current insurance broker.

5 – Businesses with fewer than 25 employees that pay at least 50% of the health insurance premiums for their employees may be eligible for a tax credit for as much as 35% of the cost of the premiums. To qualify, the business must employ fewer than 25 full-time people with average wages of less than $50,000. For 2014, the maximum credit increases to 50% of the premiums the company pays, though to qualify for the credit, the insurance must be purchased through SHOP (or a broker authorized to offer SHOP insurance that is in compliance with the Affordable Care act.

6 – Businesses who DO NOT have a group insurance plan set up for their business can no longer use a SECTION 125 employee plan for deducting qualified medical insurance premiums and expenses on a pre-tax bases. This doesn’t affect dental, vision or dependent care expenses allowed in a 125 plan.

Anyway, confusion continues.

 

If you found this article useful, please do not keep this a secret. Share it with a friend.

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.