tax planning Archives -

Let’s Talk About Year-End Tax Planning

In the fall of every year, accountants all over the country start talking to clients about year-end tax planning. Despite all the talk, many business owners and individuals turn a blind eye to the subject. Yes, it is “extra work”. Yes, it takes money and time that could be spent selling products, fixing something, or doing some other operational task. Yes, it is a choice you can make to avoid it. However, a little bit of tax planning can help you make better decisions for your business and personal life. Best of all, it can save you money by minimalizing your future tax obligations.

Tax planning is a fairly simple concept. What we are talking about is examining your personal and business performance, understanding and leveraging the tax code (particularly those items that have changed in the last year), and making decisions about payments, purchases, and investments that take full advantage of the federal tax code.

To begin the process, whether you are doing the planning yourself or sitting with your accounting professional or financial planner, it is essential to have your books and records up to date. Why? Because a review of your actual expenses and a comparison of your profit, loss, expenses, and inventory as well as personnel costs is essential to make intelligent decisions about your year-end plans. You will want to examine your spending, cash flow, and retirement contributions, and of course, look at the prior year’s numbers to determine how your business has grown or contracted.

Determine Your Current Financial Situation

With your books up to date, you can arrive at a fairly accurate projection of where you stand this year. Now you are ready to determine what your initial tax obligation will be considering the current tax rates and then look at your tax withholdings to date. Is there a shortfall? Paying down on your obligation before the end of the year—particularly if you are more than 10% deficient—will help you avoid penalties. However, before you write that check, consider all deductions that might bring you closer to compliance.

Deductions

In our planning process, we will also examine all deductions that might be available to your business, especially items that you may have overlooked in the past. Timing is on your side concerning deductions. If you have had a fairly successful year, this might be the opportunity to move a little extra cash into things like your retirement savings or investing in new equipment to grow your business, or help the company become more efficient. It is not unheard of to even prepay the first quarter taxes.

In addition, you will want to take advantage of the following deductions on your personal taxes:

- Certain retirement plan savings
- Medical and healthcare premiums not paid by the company
- Uniforms that are required for work
- Interest on your student loan
- Taxes on your family home
- Interest on your home mortgage
- Losses on investments
- For teachers, any supplies purchased by you for your classroom
- Charity donations.

Business Deduction Opportunities

After the pandemic years of tax legislation that has been, arguably, kind to businesses, 2022 has been a quiet legislative year, except for the CHIPS Act designed to bolster the production of domestic microchips manufacturing, as well as the Inflation Reduction Act. Both acts will have little or no impact on small businesses, and provisions on the IRA, aimed at creating an alternative minimum tax for large corporations (particularly multinationals) don’t impact income until next year.

Tax planning for the owners of small businesses, therefore, should concentrate on the following areas:

- Last minute 179 deduction investments. If you’ve been holding off buying a new service vehicle, or a new piece of equipment for the business, buying that item now provides an opportunity to write down the entire cost of the vehicle this year.If you have had a successful year, this deduction has the potential to offset considerable tax obligations, making the new equipment purchase a true bargain that will enhance the productivity of your operations for years.
- Bonus or not to bonus? Your accountant can help you plan if removing money from the company in December is better than waiting until next year. It’s all about taxes and cash flow. Finding that balance will make the most of your balance sheet.
- Prepay Expenses. Sometimes it makes sense to prepay some deductible expenses now to build up larger deductions this year. Again, your accountant can advise which move makes the most sense for your situation.
- 401(k) plan payments, IRAs, and other retirement incentives should be maximized whenever possible, especially opportunities to roll to a Roth IRA, which will yield tax-free benefits at the time of withdrawal.
- Employee matching of 401(k) and bonuses paid to retirement plans. With greater pressure being placed on employers to help employees develop retirement savings, a successful year is a great opportunity to help employees build their savings with bonus 401(k) entries.
- Avoid penalties by reviewing tax pre-payments now. If you have increased your revenue but not increased your quarterly filings, you may find that you are deficient with the IRS. Making a payment before the year’s end will ensure that surprise underpayment penalties don’t rain on your parade come April.

There are a host of options to maximize your income, minimize your tax obligations and make the most of a successful year. Tax planning is the way to ensure you are in the best position possible to have a happy new year, from a cash-flow perspective, at least.

If this sounds like a great idea, please feel free to contact our offices for more information or to set up an appointment with one of our professionals.

What Outsourcing Can Do for Your Real Estate Accounting

The real estate business has been tough this year. From last year’s roller coaster ride of 2% interest rates and tight inventory causing crazy, over-list-price cash offers to today’s 6-plus percent mortgages with far fewer buyers and even fewer sellers, it’s been exhausting. But for real estate businesses like yours, the key to success is understanding and planning for the business cycles that make this industry both exhilarating and sometimes frustrating. To be successful in the long haul, you need sound business practices, and that is where good financial accounting systems are most critical.

They say that one of the most important keys to success is in managing cash flow. You can’t manage cash flow without reliable bookkeeping. Most real estate firms are first and foremost sales operations. So owners and managers need to be as close to 100% focused on sales. It harkens back to the old classic movie Glen Garry, Glen Ross’ famous line, “Always be closing.” While that is essentially true, in reality, owners are also running a business operation like any other, so they must find reliable infrastructure they can depend upon to make their working hours as hands-free as possible to dedicate as much time as possible managing a never-ending cycle of finding inventory, attracting buyers, and managing closings.

That is why outsourcing your accounting services process makes the most sense. In an outsourced scenario, you don’t need to hire staff or worry about software upgrades or training. If you hire the right business partner, your outsourced provider will have properly trained professionals who use the most up-to-date software. Instead of paying for expensive office space and salaries, a reliable monthly payment takes care of the overhead. Plus, you are assured that entries are made on time, deposits are properly logged, and any reporting you require is delivered when you need it. Your chart of accounts can be established professionally too, so when you review entries they make sense, are not duplicated or confusing, and help you to build financial reporting which all parties—including lenders—will be satisfied that you are running a professional operation.

Do you operate a real estate management company? Then you understand how important it is to have solid accounting systems in place to reconcile common area maintenance expenses as well as mortgages and interest payments. Your accounting professionals are also relied upon to keep track of agent commissions, rental payments and pre-payments, taxes, and more.

With all the administration involved, an outsourced accounting service can deliver your firm the maximum amount of efficiency without the hassle of hiring, training, and vacations, as well as the insurance costs of staffing. Best of all, an outsourced accounting service can grow or shrink as your business changes, so growth spurts or downsize issues are minimalized. Your outsourced provider can adapt to your changing needs as the industry demands.

If the idea of outsourcing your real estate business accounting sounds like an interesting idea, and you want to learn more, we encourage you to contact us for a no-obligation consultation by clicking here.

Is Your Healthcare Practice Fiscally Healthy?

Just because your practice is busy doesn’t mean you are running a financially sound business. We routinely speak to healthcare practices experiencing poor performance despite reporting packed patient appointment calendars. However, if you don’t accurately track your cash flow, record your expenses on time, or have good systems in place for billing and collections, your practice might be heading for the red.

Of course, as a medical practice, care facility, or clinic, medical professionals must serve many masters in the payment chain, so if accounting, billing, and collections systems are inadequate, things can go haywire in a short time. Besides billing patients, healthcare organizations must have systems in place for handling multiple insurance platforms, which, as everyone knows, can range from capitation programs, where the insurer provides a set dollar per month with overages left to the patient, per diem rates (a set fee per day) or a schedule based on the procedure. And then there are Medicare and Medicaid patients who rely on yet another set of rules. Needless to say, if cash flow is an issue, billing software performance is certainly the best first place to examine. That’s because errors or unchecked issues with any of your stakeholders—patients, payor organizations, or the government—could be starving your practice of income.

To keep a healthy practice, your accounting professional should be providing you with information that is the key to building a successful practice. For example:

- Providing oversight that invoicing and accounts payables are timely and correct.
- Helping you to develop an annual budget, and measuring both expense and revenue against budget
- Design and produce accounting reports required to measure various performance indicators
- Develop ways to track your reimbursements
- Develop budget allocations from your annual budget plan
- Develop financial reporting to track performance, comply with any loans or bank covenants, and aid in future planning.

In addition, like any other business, the accounting staff and outside professionals work together to develop proper bookkeeping records, payroll requirements (including the assurance that adequate withholding and retirement deposits are made in a timely manner) and that your time and billing systems are tracking payables and receivables.

If any of your current systems are limited in their ability to deliver required reporting, or are simply out of date for today’s efficiency and patient security needs, it may be time to consider a formal system review. In this way, you can also see what competitive products are available that have features to enable the practice to keep pace with the automated needs of today’s practice. Even simple upgrades like patient portals and online payment options might facilitate improved customer experience while at the same time delivering improved cash flow and reduced appointment no-shows.

It is always a smart idea to sit with your accountant at least once a year (but twice a year or even quarterly might be more beneficial, depending on your unique situation) to discuss planning, review performance, and determine steps and best practices for the business. This includes tax planning and staffing needs, as well as large purchase planning.

If you feel that your practice is not getting the oversight you feel is required to build a healthier business, you may want to reach out to our team for a no-obligation conversation about your issues, goals, and aspirations for success. We look forward to your inquiry.

Building a better Accounting System for Your Construction Business

There is something very special about having a construction business. Every day, you have the chance to create a new world in a very real way. Turning concepts into structures that will withstand decades of traffic, people, or perhaps inventory requires skill, training, and vision. It also requires the ability to keep track of thousands of budget items, purchases, and sub-contractors. Many contractors who do exceptional work have fallen prey to flawed accounting systems that failed to help them manage costs, cash flow, and the capital needs of their vulnerable businesses.

Your accounting system is like the plumbing of a building—it keeps the circulation of cash and expenses flowing properly to allow your business to keep moving forward. Cash makes things happen; your accounting system makes sure that cash does the right thing at the right time.

Nobody goes into the construction business because they like the accounting side of things. Yet, as an owner, you understand that an accounting system (and the people who manage it) must be as meticulous as the tools you use to create and restore. Pardon the pun, but dull and rusty just do not cut it. That is why outsourcing your accounting services can make sense for your growing construction business.

Why Outsource?

When we build an organization, there is a natural, albeit old fashion, tendency to want to hire and create teams that are “yours” to oversee as you see fit. However, outsourcing your accounting function provides several inherent benefits to your business. First, you don’t need to hassle with the endless hiring and training of personnel, which, in all fairness, as a construction expert, accounting may not be your first language. Without the people, you have less worry about bonuses, vacations, insurance, compliances, etc. that go along with the people side of running any business. And, fewer people means more room in your physical operations for other things, like equipment, storage, or other critical staff.

An outsourced service does not go on vacation. More importantly, the outsourced firm will hire and train the best people, folks who work on the most recent software every day, and have the experience to know and understand the nuances of your construction business, too.

Outsourcing lets you manage costs, too. And if your business grows, your outsourced resource can grow or shrink to deliver whatever you need.

You also will find that an outsourced service has the motivation to be timely, accurate and responsive to your inquiries. That includes building a professionally-developed chart of accounts to create reports that make sense while providing insights to help you better understand the health of your business—as well as where adjustments might need to be made—to make improvements.

Making the transition to outsourcing is not as difficult as you may think. While you may have resistance from existing internal personnel, we often find employees are relieved to know that they can be rechanneled to perform other work while the accounting task is transferred into trusting hands.

From controlling costs and managing cash flow to improved communications and better reporting, an outsourced accounting service may be just what your business construction business needs to run more financially efficiently, while at the same time permitting you to devote more time working on other, more pressing matters.

If outsourcing seems like an interesting idea for your construction business, we encourage you to reach out to us for a no-obligation consultation about how our outsourcing solutions might make sense for your operations. We think you will be surprised to learn how easy and cost-effective the transition can be.

5 Business Deductions for Trucking Taxes

Nobody enjoys paying taxes. As a trucking operation, taxes are a major cost of doing business. Between fuel, tolls, and taxes on tires, parts, and of course Federal income tax, your company has plenty of reasons to keep a sharp eye on how to mitigate your tax obligations.

Luckily, the IRS tax code provides at least a few deduction opportunities that could end up saving your trucking business big dollars. Here is a quick list of five business deductions that can save you on your taxes this year:

1. Medical Expenses and premiums

If you are not covered by a spouse’s employer and your company is covering your medical expenses, these costs, including your insurance premiums, may be deductible.

2. Technology

These days every business, including trucking, relies on technology to conduct business and stay ahead of a fast-changing business environment. The good news is things like cell phones, GPS devices, laptops, printers, and software are probably deductible. So are expenses related to your office; even those small things like copying, postage, pens, paper, etc. are supplies that you may deduct–even envelopes and business cards—that appear to be small expenses until you add up these costs over the course of a year.

3. Membership Dues and Fees

If you belong to an association, did you know that those dues are deductible? So are fees you might pay related to dispatching, as well as the cost of your CDL license. Subscriptions to publications related to your business are also deductible.

4. Uniforms and Equipment

As small business, you can deduct special uniforms or work clothes. But that’s not all. You can also deduct the cost you incur for items related to doing your job, including things like equipment blankets, chains, and tools, as well as locks or straps used to perform your work.

5. Road Expenses

From meals and business travel expenses to the fuel you buy related to your trucking business may be deductible expenses.

A Word About the Section 179 Deduction

We would be remiss if we didn’t mention the opportunity you have as a small business to take advantage or the Section 179 Deduction. The tax code offers this unique deduction for businesses as an incentive to invest in new equipment. The 179 Deduction was designed specifically for small business. It offers a small business to take accelerated deduction of up to $1.08 million in depreciation on up to $2.7 million in purchases in a single calendar year. That means you can deduct the full purchase (or lease) price of equipment—including most business vehicles like cargo vans—in the year purchased. It can be used for machinery, like presses, packaging equipment, or even software investments or support equipment fork lifts. And yes, most over the road tractor trailers should qualify for the deduction. There are special rules for vehicles over 6,000 pounds. You can read more about depreciation deduction on the IRS document referenced here.

With all of these opportunities to save money on your taxes, you would more than likely find that doing your own Federal and State Taxes, as well as your required quarterly tax filings, might be a bit much to handle yourself. To ensure you get the maximum deductions possible, feel free to reach out to our office for a no-obligation consultation about your unique situation.

10 Questions to Ask a Retirement Planning Consultant

Ask a twenty-something about their retirement goals, and they will probably laugh at you. Unfortunately, many people don’t think about retirement savings until way later in life, if ever. The sad fact is, according to the US Census information, 60% of unmarried Americans have no retirement savings, while 35% of married couples have not saved for retirement. The reason, according to website Motley Fool ranges from not earning enough money, to having other priorities or simply being to young to feel it is a priority.

The painful truth is, every dollar you save in your twenties will vastly help you reach your retirement goals in the future, simply by applying the rules of investment savings. Look at it this way, at 10% growth, your initial investment would double in just 7 years.

Another way to guestimate your investment growth is to use the Rule of 72. This shortcut for calculating how long it will take for an investment to double assumes that growth compounds annually. To figure your investment growth, simply divide 72 by your expected annual rate of return. Whatever that number is, will represent how many years it will take to double your money.

So, if you have not yet started, but are interested in beginning some savings for your eventual retirement, you will want to find a financial planning consultant to help you develop a path that works best for you and your specific life path.

As you search the web for the right person, we thought it might be useful to share a few thoughts on how to select the right financial consultant for you. These ten questions are not the be-all and end-all, but they will help guide you to an informed decision.

1. How will you determine what I need for retirement?

A good consultant is first a good listener. You want to judge the person you select to entrust your savings with someone who has listened to your desires and does what they say they will do. Your needs are unique, so don’t be swayed by a cookie-cutter program.

2. Does it matter what kind of thing I want to invest in? Do I have to choose just stocks?

Some people have a 401(k). Some people have an IRA. There are those who dabble in futures and risky options. Others invest in a home with a rental property, while others meticulously invest in several rental properties, or even their own business. The point is, there are lots of investment opportunities in this country. And, while your collection of comic books might end up thirty years from now to be a good investment, they may not be the retirement nest egg you can rely upon. It’s important to talk these ideas through with a professional who can help you find a good balance to help you achieve your financial goals. This is particularly true if you have specific religious, social or political beliefs that may guide your investment strategy.

3. Should I invest in one really great company?

Back in the 1950’s people retired on the value of their stock portfolio consisting completely of IBM, GM or even the stock of the company they worked all their life. Those days are passed, and the world of investment is far more complex. The chances that your hot tip on the next Google or Tesla might fund your entire retirement is about as sound as betting on the 4^th race at Belmont racetrack. Retirement savings is not about betting on longshots. Your financial advisor will be able to establish an investment portfolio that balances your tolerance for risk and your needs for a certain rate of return. That will likely be a mix of stocks, stock funds, bonds, and maybe other investment types as well. The mix ensures you get the maximum results over your investment horizon while protecting, as best as possible, against the downsides of market cycles.

4. What about taxes?

Taxes are a big concern, because they can require thirty or forty percent of your savings, unless you plan accordingly. Today, there are ways to save for retirement where you pay taxes with today’s dollars and pull them out of your savings account when you retire tax free. It’s important to discuss taxes and tax planning when talking about your retirement savings plans. Over time, your income may change. Your retirement plans may change. You can be certain that rising taxes will also change and impact your plans.

5. What kind of retirement plan should I have? Does it matter?

As we mentioned earlier, there are many kinds of retirement plans. Your employer probably offers a 401(k) plan (or a 403(b) plan if you work for a nonprofit) and that is an excellent start as these plans often have incentives for savers. If your employer offers a percentage or two of matching funds for your savings, why would you turn down an opportunity to earn free money to help you retire? Of course, if your company does not offer a savings plan, you can always open a personal IRA plan, or a ROTH Ira plan. A good advisor will be able to speak to you about all of these options, and what might work best for you.

6. Most of my income goes to bills. How do I save for retirement? How do I get started?

No doubt, it’s a hard battle. Yet, as difficult as it might be when you are young, think of how tough making ends meet will be decades from now when you are ready to retire, or if you are forced into retirement due to a disability? Even a small amount of savings every week will make a difference. If you have $20 or $50 a paycheck automatically removed, chances are you won’t even miss the money after a while. Some advisors say taking the cost of a cup of coffee at a Starbucks every day from your budget and moving it to savings could make you a millionaire in 40 years. The point, of course, is that even small amounts at the beginning will deliver you real savings in a few years. The earlier you start, the better off you will be in retirement.

6. Most of my income goes to bills. How do I save for retirement? How do I get started?

7. Does the economy impact when and how much I should save?

This is an excellent question to ask an advisor. There are so many factors that go into a successful retirement approach. Let your advisor talk to you about how the economy impacts your approach.

8. What experience do you have and why is that important/not important to my needs?

Credentials vary widely. Your advisor may have all of the appropriate licenses, but lack having credentials such as CFP (Certified Financial Planner) or be a CPA. Worry about having someone who holds the proper licenses, but don’t stress the advanced credentials. If you trust the person and see the results they have demonstrated from other clients, you should feel comfortable in building a relationship with them.

9. Is there a way to get insurance to work as an investment, too?

Another great question to ask, and yes, some advisors will help you use insurance products as part of your investment strategy. Everyone should have some sort of insurance at different periods of their life, such as young parents and couples with a mortgaged home. However, annuities are insurance policies that offer the ability to get payments down the road while still providing insurance value.

10. Does my financial consultant need to be in my hometown? Is it legal to use someone from out of state?

While every state requires professionals to be licensed in their jurisdiction, your investment professional does not have to be local. Ask your professional about their qualifications, and, if they reside out of state, learn if they hold licenses to practice in your state.

If you are looking to find a consultant for your retirement savings goals, insurance, or tax savings initiatives, please feel free to contact our offices for a no-cost, no-obligation consultation about your needs.