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Are You Up-to-Date on the Tax Rules Affecting Your 2016 Return?

12/28/2016

 
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Here’s a quick review of some of the rules you can expect to encounter when you get ready to prepare your 2016 federal income tax return.

Income Tax Tates

For 2016, ordinary federal income tax rates range from 10% to 35% unless your taxable income exceeds $415,050 when you’re single or $466,950 if you’re married filing jointly.

​The rate on income above those amounts is 39.6%.
© Cammeraydave | Dreamstime.com - Taxes 1040 Tax Return Form Photo
Tax Breaks That Are Now Permanent

Three tax breaks you’ll be able to take on your 2016 return, and on future returns:
  1. The optional deduction for state and local sales tax in lieu of state and local income tax
  2. The $250 deduction for classroom supplies if you’re an educator
  3. IRA-to-charity transfers of up to $100,000 when you’re 70½ or older

Itemized Deductions and Personal Exemption Phase-Outs

For 2016, itemized deductions and personal exemptions are limited when you file as single and your adjusted gross income (AGI) is above $259,400. The limitation begins with AGI above $311,300 for married couples filing jointly.

Alternative Minimum Tax

​The exemption amount for 2016 is $53,900 for singles and $83,800 for married filing jointly.

Capital Gains and Dividends

Long-term gains are generally taxed at 15%. The rate is zero percent if you’re in the 10% and 15% ordinary income brackets, and 20% when you’re in the 39.6% ordinary income bracket.

Affordable Care Act Surtaxes

You’ll pay a Medicare surtax of 0.9% on wages and self-employment income exceeding $200,000 when you’re single and $250,000 when you’re married filing jointly.

For unearned income, you’ll pay the 3.8% net investment income tax when you’re single and your modified AGI exceeds $200,000. If you’re married filing jointly, the net investment income tax is imposed when your modified AGI exceeds $250,000.

If you have questions about your 2016 tax return, please call your CPA or tax advisor for assistance with understanding how these rules may affect your situation.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.

Start the New Year with a 2017 Profit Plan

12/19/2016

 
​Are you ready for 2017 to be even better than 2016?  If so, take a few minutes to reflect on the three questions below and take action to set your 2017 profit plan.  
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Question 1:  What were the three best business things about 2016?
 
No need to re-invent the wheel. If you knocked it out of the park in 2016, can you wash, rinse and repeat these tasks in 2017?
 
If you are having trouble thinking of three things, here are some hints: 
  • What apps saved you time and money?
  • Did you make some good hires?
  • Did you let go of a bad hire or two? 
  • Was there a marketing campaign that really worked?
  • Were there any events you went to that generated great ideas?
  • Did you add or remove products and/or services?
  • Did you buy new equipment or open a new location?
 
Summarize the three best things that happened in your business for 2016 and think about how you can repeat them to enhance your 2017.  

Question 2:  What were the three worst business things about 2016?
 
While we do not want to dwell too much on our failures, we do want to learn from them.  Think about the three things that are causing you to lose time, money or gain stress, and decide if you can make changes for 2017.  
​
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​Question 3:  What vision do you have for your business in 2017?
 
At the end of 2017, what has to have happened in order for you to have a successful year?   Think in terms of metrics as well as intangibles, such as peace of mind and happiness. 
 
Once you know your destination, the fun is in creating a roadmap to get you there.  

Your 2017 Profit Plan

If your vision includes financial goals, then creating a profit plan is one way to measure your progress throughout 2017.  Start by deciding how much profit you want to make in 2017. 

From there, you can compute your revenue goal and make a plan. Then you can add expenses to complete the budget. 

Here is an example: Let us say you want to make $50,000 in profit for 2017.  You can do that in a number of ways:  
​
  1. Generate $500,000 in revenue and $450,000 in expenses.
  2. Generate $2 million in revenue and $1,950,000 in expenses. 
  3. Generate $150,000 in revenue and $100,000 in expenses. 
  4. And so forth. 
 
From your profit number, you can create a revenue plan. This plan should include how many items you need to sell, like this:

Product/Service
Widget A
Part B
​Service C
No. of Units
3,000
100
​700
Price Per Unit
$200
$2,000
​$1,000
Revenue
$600,000
$200,000
​$700,000
Total Revenue:  $1,500,000

​Once you have your revenue plan, you can fill in your estimated expenses. 
 
You might be thinking that this sure sounds a lot like making a budget. And it is. But it is far more fun to work on something called a profit plan than it is a budget. And if you need us to do the number-crunching part, please feel free to reach out any time. 
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.

S Corp Check Up: Review Your Basis Before Year End

12/14/2016

 
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Losses can be hard to take. If you think your S Corporation will show a loss for 2016, now is the time to plan to make sure you will get the full tax benefit.

The Problem

The amount of the business loss you can deduct on your individual income tax return is limited to your basis in your S Corporation stock and certain corporate debt.

This is true even if the loss reported to you on Schedule K-1 is greater than your basis.
How Basis Works

​
Typically, stock basis in an S Corporation begins with the capital contribution you make to get the company started. Note that when you receive stock as a gift, an inheritance, or in place of compensation, your initial basis is calculated differently.

At the end of each taxable year, your stock basis is adjusted to reflect your business’s operating results. Taxable income increases your basis, while losses reduce it. Basis is also increased by capital you put into your company and reduced by amounts you withdraw, such as distributions.

After your stock basis reaches zero, you may be able to deduct additional losses, up to the extent of your debt basis. That is the basis you have in loans you make to your company.

However, once your stock and debt basis are both reduced to zero, losses incurred are suspended, which means you get no current tax benefit. You can generally take suspended losses in future years, when you again have basis.

The Solution

You can increase your basis – and your ability to take losses – by adding capital or making loans to your business.

Make the time to discuss how basis affects your individual income tax return with your CPA or tax advisor. They can guide you through the rules.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.

Five Steps to Enhance Your Marketing in 2017

12/7/2016

 
​​If it has been a while since you adopted new marketing methods, it might be time, especially if you want to attract younger customers. 

​To assist with understanding the possibilities, below we will review the following five areas:
  • Video
  • Social Media
  • Content Marketing
  • Mobile and Wearables
  • Marketing Automation and Integration
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© Bradcalkins | Dreamstime.com - Marketing Photo

Read More

    Author

    Successfully meeting the challenges inherent to new and smaller businesses provides me with a special type of satisfaction. 

    Supporting businesses that have the potential to become amazing – from both the perspective of owners and team members as well as their clients – is what I enjoy. 

    I hope to use this blog to provide information specific to businesses that are growing from small beginnings into exceptional companies.

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  • Home
  • Why Us?
    • Reviews
    • Open Positions
  • Client Services
  • Resources
    • Save on QBO Subscriptions!
    • Tax Refund Status
    • Gusto Year End Checklist
    • Videos >
      • Business Taxes >
        • 2019 Business Tax Highlights
        • 7 Ways Small Business Can Save On Tax
        • Taxes for S-Corp Owners
        • The IRS Loves Businesses
      • Personal Taxes >
        • 2019 Tax Highlights
        • Five Yearly Tax Essentials
        • 4 Common Tax Surprises
        • Retirement Can Be Taxing
        • Advance Child Tax Credit Reconciliation - 2022
        • Make the Most of Your Donations
        • Five Great Tax Secrets
        • Renting Your Property Tax Free
        • Ideas to Audit-Proof Your Tax Return
      • The Tax Cuts & Jobs Act >
        • The Tax Cuts & Jobs Act: What You Need to Do Now
        • The Tax Cuts & Jobs Act: Are Itemized Deductions A Thing of the Past?
        • The Tax Cuts & Jobs Act: The New Child Care Tax Credit
      • Tax Topics >
        • Tax Season is Coming!
        • The New World of Deductions: What Everyone Needs to Know
        • Proving Your Deductions
        • How to Fix a Mistake on Your Tax Return
        • How Long Should I Save It?
        • Tax Credit vs Tax Deduction
        • Understanding Effective Tax Rate
        • Understanding Marginal Tax Rate
      • Life Events >
        • Life Events: A New Birth
        • Life Events: Marriage
        • Life Events: Divorce
    • Articles >
      • Accounting & Bookkeeping >
        • How to Get the Most Out of Your Accounting Fees
        • The 10 Biggest Money Leaks in Your Accounting System
      • Business Factors >
        • IRS Rules for Classifying Workers
        • Checklist for a Healthy Cash Flow
        • 12 Ways to Improve Your Business Profits
        • 10 Step Annual Business Check-Up
      • Tax Topics >
        • Tax Guide for Self-Employeds
        • 15 Things Every Tax Payer Should Know
        • Disaster Casualty Losses
        • Travel & Entertainment Deductions
        • Tax Guide - A Deduction Checklist
        • What You Should Know About Tax Audits
    • Newsletters >
      • Newsletters - Monthly Editions >
        • Newsletter - Monthly Edition
      • Newsletters - Quarterly Editions >
        • Newsletter - 2019 Fall/Winter
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    • How To's >
      • How To - Dext
      • How To - BILL
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