May 3, 2017
Tax and Health-Care Reform Back in the Spotlight
Republican efforts to repeal and replace the Affordable Care Act (ACA) failed in late March. In the immediate aftermath, it appeared that health-care reform efforts would be set aside in favor of advancing a tax reform agenda.1 Then, in a one-two punch that surprised many, the White House called for a vote on a revised repeal-and-replace health-care plan and announced the broad outline of a new tax reform plan.2 It would be a mistake to consider the two completely separate efforts, because in some ways they are actually closely connected.
White House announces new tax proposals in broad terms
The tax reform plan announced by the White House includes reducing the current seven tax brackets to just three: 10%, 25%, and 35%. It proposes doubling the standard deduction amount and eliminating both the alternative minimum tax (AMT) and the federal estate tax. The plan would preserve existing deductions for home mortgage interest and charitable donations, but would eliminate most other deductions, including the ability to deduct state and local taxes.3 Essentially, this was a "stake in the sand" to establish a starting point for negotiations with Congress. Details must be determined, and changes are likely as discussions progress.
Tax provisions also a part of health-care reform
The ACA contains significant tax provisions, including the 3.8% net investment income tax and the 0.9% Medicare payroll surtax, which both target high-income individuals. The initial repeal-and-replacement effort would have eliminated or modified many ACA tax provisions — that's almost certain to be true for a revised plan as well. And any health-care reform package is likely to balance lost tax revenue with reductions or limits to subsidies and Medicaid outlays. If the ACA tax provisions are not addressed in a health-care reform package, they're likely to be included as part of the tax reform discussion, increasing the scope and complexity of the tax debate. In fact, the White House tax reform announcement specifically called for repeal of the 3.8% net investment income tax.4
Further complicating the issue, Republican legislators — who lack 60 votes in the Senate to overcome a Democratic filibuster — plan to use a process called budget reconciliation to pass both health and tax reform legislation with a simple majority vote. Under budget reconciliation rules, any reform measure must not increase the federal deficit beyond a 10-year period. This restriction means that unless tax cuts are offset by revenue savings elsewhere (e.g., spending cuts or reduced deductions), they must expire after 10 years.
1) See for example Nick Timiraos and Richard Rubin, "GOP Shifts Focus to Next Target: Tax Code Revamp," Wall Street Journal, March 25, 2017
2) John T. Bennett, "White House: Final Health Care Deal Unlikely This Week," Roll Call, April 26, 2017, and Briefing by Steven Mnuchin, Secretary of Commerce, and Gary Cohn, Director of the National Economic Council, April 26, 2017, whitehouse.gov
3,4) Briefing by Steven Mnuchin, Secretary of Commerce, and Gary Cohn, Director of the National Economic Council, April 26, 2017, whitehouse.gov
April 30, 2017
Just because you’re a small business owner doesn’t mean you have to perform every job your business needs forever! And as experience tells us, most entrepreneurs dread the monotony of accounting. So, maybe you’ve finally decided your time and money is better spent on what you excel at, and that you should leave the number crunching for someone else. The question is, who should that someone else be – a CPA or a bookkeeper?
The question may seem daunting, but it’s not nearly as complicated as it sounds. The decision basically boils down to how complex the accounting needs to be. Bookkeepers are best used for simple accounting functions like day-day transactions, run payroll, make payments for business expenses, send out invoices and collect payments, as well as monitor bank account activity. Some bookkeepers will even prepare financial statements for internal business use. With that said, it’s important to know your bookkeeper’s background, as an education in accounting is not required in order to call oneself a bookkeeper.
But when the going gets really rough, we recommend turning to a CPA for help. CPAs can help businesses obtain loans, file a tax return and help with tax planning, as well as offer general strategic financial advice. Obtaining a CPA is a rigorous process which requires passing multiple exams on tax, regulation, financial reporting, audit, economics, and ethics, but it’s still important to do a thorough background check before you spend the money on a CPA.
What all of this means, is that you must divide to conquer. CPAs are expensive, so it’s best to use their services for truly difficult accounting issues. We recommend hiring a bookkeeper who can manage the day-day finances of your business and who can work well with a CPA when needed, or look for professional bookkeeping firms who can lend a hand.
April 18, 2017
Whether you choose to do your taxes yourself, or have a tax professional sift through the mess for you, it’s vital to be aware of changes in the tax codes. Understanding these changes will help you make decisions which result in growth for your business and avoid dangerous pitfalls which sink all of your hard work.
This could be the final year of “bonus deprecation”
Bonus deprecation is a rule which allows businesses to deduct 50% of the deprecation value of certain equipment and software purchases made in the first year. It’s anticipated that the allowed percentage will fall in the coming years.
Filing deadlines have changed
Deadlines for several different kinds of businesses have changed. C-corporations which use IRS form 1120 need to file their taxes by April 15th. S-corporations who use form 1120-S now need to file by March 15th, as do partnerships that use form 1120. Not filing on time is one of the biggest mistakes entrepreneurs make, which often lead to huge penalties from the IRS.
Section 179 has changes as well
Section 179 of the tax code allows businesses to deduct $500,000 from purchases that do not cost more than $2 million. There are some requirements to use this deduction, such as using the equipment the same year it is purchased, as well as being used for business purposes at least 50% of the time.
As you can see, and most likely already know, handling your business’s taxes is no easy feat. But a clear picture of this landscape is a necessary evil in order to gain an understanding of your financial obligations and to become aware of any needs for loans. If it ever becomes too much and you want a helping hand, we’re always here to offer our guidance.
March 30, 2017
Unfortunately, not everyone gets expert advice before they begin their business venture. Some mistakes may just cost you time and money (which of course no one wants to lose any of!), while others may spell the end of your business venture.
1. Be process-orientated
In order to save time, it is imperative to develop systems which can be used for handling customers and various tasks. Chances are if you do something once, you’ll have to do it again.
2. A foundation is more important than a pretty exterior
While having an eye-popping website and a recognizable brand are important attributes of a business, none of it will matter if you don’t understand what your business does for people and can actually achieve it!
3. Understand taxes and finances, or hire someone who does
When someone else is paying you, keeping track of your spending is pretty simple. However, when you’re on your own, no one is going to make sure you are spending your money appropriately. This is why we advise getting help, especially with taxes, in order to free up money from places you didn’t even know were possible.
4. Don’t be cheap and take shortcuts
In many cases where business owners try to save money, they end up having to spend far more later. Spend money on the right things at the right time!
5. Just because you build it, doesn’t mean they’ll come
You may offer vital services or make the coolest product, but if no one knows it exists, then none of it matters! This is where strategic marketing comes into play.
If you want to avoid these fatal mistakes which regularly plague entrepreneurs, we highly recommend a brief phone call with us. Even just five minutes could be the difference between your business sinking or swimming.
March 23, 2017
Tax season sends shivers down the spines of most people, but it doesn’t have to be that way! Using some little known tricks, CPAs and their clients alike can very easily save big money when filing their reports.
1. Job Search Expenses Tax Deduction
Did you know that you can deduct some of your job search related expenses? If you’re looking for a job in the same field you’ve been working in (so dreamers who quit their jobs for Hollywood are out of luck) are eligible for certain deductions like travel expenses for interviews, among many others.
2. Home Renovation Tax Deduction
Want to renovate your home without tightening your belt? Then you’ll want to know how many home renovations can actually qualify for tax write-offs. From taking advantage of tax energy credits to implementing home improvements which count as medical expenses to using your mortgage for renovations, there are a myriad of ways in which you can spruce up your home while saving money at the same time.
3. Tax Preparation Fees Deduction
While tax preparation fees are an allowed deduction, it’s extremely important to note that in order to be eligible for it, you must have all your deductions itemized and the sum of your miscellaneous expenses must exceed 2%. This is where the pros can come in handy!
4. Jury Duty Pay Tax Deduction
Standard expenses like vehicle mileage, phone usage, and meals (up to $100, so don’t take this as an opportunity to dine at Ruth’s Chris!) can all be deducted from your taxes. Keep track of your spending next time you’re bored at jury duty. Just don’t let your accounting keep you from paying attention to the trial!
5. Penalty of Early Withdrawal Tax Deduction
This tip saves money in a very different way than the others on this list. If you use money from your IRA before the age of 59 ½, you’ll be slapped by the IRS with a 10% penalty which cannot be deducted. So it’s vital to consult with a financial advisor before making any rash decisions.
Not all of these tips and tricks will apply to everyone, but even being aware of just one of them can save a ton of money. Maybe instead of giving up your hard earned cash to Uncle Sam, this year you’ll be able to use it for the things you actually need!
February 7, 2017
Don’t Let Taxes Disrupt Your Retirement Plans!
January 30, 2017
Get More Back On Your Tax Return!
- Every return prepared by a CPA – reduces your taxes and minimize risk
- We File All Individual & Business Returns
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- Investment, Retirement, Estate & Tax Planning
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January 14, 2017
5 Tax Season Tips For 2016 Tax Returns
Smart tax planning is knowing all the available deductions so you don’t miss out on saving tax dollars. Increase your tax returns with these tax savings tips for your 2016 tax returns.
- Maximize your employer 401(K) match. Your employer may match part of your own contributions with their employer match percentage. This is free money from your employer for 401(K) retirement. This may also put you in a lower tax bracket, when you file your taxes and you may get more money back.
- Don’t forget to make your yearly traditional IRA contribution. You can still make your 2016 contribution up to April 15, 2017. Contributing to an IRA may help you receive more tax dollars back. It also helps to build your savings for retirement.
- Take the required minimum distributions (RMD) from your retirement if you are 70-½ or older. For people who just turned 70-½ in 2016 take your first RMD before April 1, 2017. If you wait until the next year it may put you in a higher tax bracket.
- Tax-Preferred Education 529 Savings Plan- The 529 plan is a college savings account, which is exempt from taxes. This plan will help pay for high college expenses. Your state may also offer tax benefits for residents in the state. It is only for states that file income tax. Each state has different maximum dollar amount for the 529 savings plan so it’s wise to check the maximum allowance for your state. Learn more about the 529 plan with IRS’s questions and answers page.
- Coverdell Education Savings Accounts. If you qualify for the modified adjusted gross income (MAGI) the amounts deposited are tax-free until distributed. The education savings accounts have a maximum allowance for the total contributions each year. This education savings plan will help higher education expenses, elementary and secondary school expenses.
Retirement Planning For Increasing Your Tax Deductions
Retirement contributions make great tax deductions. Your retirement planning will help you save money on your tax filing. Putting money away for retirement can cut your income tax you owe. Take advantage of these retirement savings tax deductions and watch your retirement money grow. It is also a great time to start and plan your retirement or go over the retirement plans you already have. Big Financial offers tax services that will guide you through your retirement planning in North Royalton & Cleveland Ohio. Don’t wait, take advantage of these retirement savings deductions today!
December 28, 2016
Plan Now For The New Revenue Recognition Standard
The changes required by the new revenue recognition model are quickly looming – but most companies have not started their preparations. Given the new processes your organization may need to implement, the time to begin planning is now.
Plan for New 2017 Tax Return Deadlines
For the 2017 filing season, Congress agreed to change tax return filing and extension deadlines for partnerships, corporate entities, and information return forms. Don’t forget to update your calendar!
Plan Cybersecurity Protection
The average cost of a data breach in 2016 was $7.01 million. While you may not be able to prevent breaches entirely, you may be able to mitigate cybersecurity risks by involving all of your company’s departments.
Consider Strategic Outsourcing
A virtual CFO or controller can assist with financial processes and budgeting, thereby helping you more efficiently run your business. This benefit is just one of many that your company can reap from outsourcing your accounting functions.
Plan for the Unexpected
One-quarter of all small companies hit by a major storm permanently close. Be proactive against unexpected natural occurrences by disaster-proofing your business.
A code of ethics, document retention policy, and whistleblower policy are three governance policies that all companies should put in writing. Some of these policy details may vary depending on the needs of your organization.
Maintain Financial Separation Between Company and Owner
For business owners, keeping personal and company finances separate offers many benefits – including simpler tax preparation and a streamlined IRS audit process. We can advise you regarding 10 “seeds” to plant for financial autonomy.
Contact Us About Your Business, Finance, Accounting or Tax Needs
December 12, 2016
There’s no way to get around some of the challenges that come with being a small business owner. But the proper tools and support can help you navigate the world of debits and credits more smoothly. Here are a few financial challenges you may face and some small business finance tips for managing them.
Small Business Finance Tips
Many small business owners can become overwhelmed by trying to manage their cash flow. Of course, you know you need accurate and timely data to line up the resources to handle crucial transactions – such as payroll – when needed. And the longer you wait to sort out your cash flow, the greater the risk for a mistake or oversight that can potentially damage your financial reputation.
Accurate and timely financial statements are a must because they help you make important decisions and manage your fiscal obligations. They’re also a critical component to getting extra capital through a loan if needed. Unorganized financial records can be a red flag to lenders and may convey the wrong impression about the company’s fiscal health.
Having a modern, often cloud-based, accounting system is a staple of many well-run small businesses. In fact, helpful accounting apps have become quite popular because they integrate into a lot of other services for easier and more efficient use.
For example, if a sale is recorded in one department, a well-integrated accounting app can almost serve as a virtual employee and immediately make the necessary income or balance sheet adjustments to manage the transaction accordingly.
Small businesses should consider utilizing financial/accounting apps offered through their business bank or business credit card to help them keep their finances in check.
A Company Credit Card
Is a company credit card the right choice for your small business?
Naturally, there are pros and cons.
For example, a business credit card such as Ink from Chase helps keep personal and business expenses separate. The card also rewards spending. And those reward points are capital that can be easily re-invested into the business.
Burgeoning businesses can benefit from a business credit card too; this is a great way to establish credit and build financial stability.
Meeting the Financial Challenge
Even the smallest of companies today have access to financial and accounting tools and resources that can rival those of a business twice their size. These technological advances are narrowing the accounting and financing gap for small businesses.
“Small businesses are strapped for time,” said Laura Miller, president of Ink from Chase. “The more we can bring together useful tools, the more we can help them be successful.”
In the absence of a fully-staffed financial department — or even a single dedicated person — a small business owner can rely on the numerous services offered by their financial institute or business cards to help navigate any financial management challenges they may have.
Contact Us About Your Business, Finance, Accounting or Tax Needs