As we head toward gift-giving season, you may be considering giving cash or securities to your loved ones. Taxpayers can transfer amounts free of gift taxes to their children or others each year through the use of the annual federal gift tax exclusion. For 2019, the exclusion is $15,000 to each person. If you’re married, gifts made during a year can be treated as split between you and your spouse. By “gift-splitting,” up to $30,000 a year can be transferred to each person by a married couple, because two annual exclusions are available. If you give appreciated assets to loved ones in lower tax brackets, they may be able to pay a 0% long-term capital gains tax rate. Contact us with questions.

What’s the purpose of a corporation? For the last 50 years, the answer was “to maximize shareholder value.” But, on August 19, CEOs of 181 leading U.S. businesses, including Amazon, Apple, General Motors and Walmart, pledged to broaden the scope. Beyond shareholder value Putting shareholders first was the doctrine of University of Chicago economist Milton Friedman. In 1970, he famously wrote that “the social responsibility of business is to increase its profits.” While this mindset has enriched large shareholders, it’s also had negative consequences, including pay disparities between executives and frontline workers, layoffs and pollution. Last year, Chairman of the Business Roundtable Jamie Dimon launched a project to update its principles. The new version of its Principles of Corporate Governance looks beyond delivering value to shareholders. It also recognizes the importance of: Investing in employees through training and education, as well as providing fair compensation and benefits, Fostering diversity, inclusion,...[ Read More ]

Nonprofit trade associations, or 501(c)(6) organizations, exist to promote their members’ common interests and improve business conditions or “one or more lines of interest.” Whether the association is a local chamber of commerce, a real estate board or a large professional group, associations’ tax-exempt status is contingent on their sponsoring certain types of activities — and avoiding others. When they fail to do so, the IRS may take action. Misinterpreting terms Typically, associations get into trouble when they interpret terms such as “promote common interests” and “improve business conditions” too broadly. For example, they might provide customized sales training for only some of their members. But associations don’t qualify for tax-exempt status if they exist only to perform services for individual members. Another potential violation is engaging in business that’s normally carried out on a for-profit basis. And groups that are primarily social or that exist to promote a hobby...[ Read More ]

Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2019. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements. October 15 If a calendar-year C corporation that filed an automatic six-month extension: File a 2018 income tax return (Form 1120) and pay any tax, interest and penalties due. Make contributions for 2018 to certain employer-sponsored retirement plans. October 31 Report income tax withholding and FICA taxes for third quarter 2019 (Form 941) and pay any tax due. (See exception below under “November 12.”) November 12 Report income tax withholding and FICA taxes for third quarter 2019 (Form 941), if you deposited on time (and in full) all of the associated taxes due. December 16 If...[ Read More ]

More than half of recent college graduates plan to start a business someday, according to the results of a survey published in August by the American Institute of Certified Public Accountants (AICPA). Unfortunately, the AICPA estimates that only half of new businesses survive the five-year mark, and only about one in three reach the 10-year mark. What can you do to improve your start-up’s odds of success? Comprehensive, realistic budgets can help entrepreneurs navigate the challenges that lie ahead. 3 financial statements Many businesses base their budgets on the prior year’s financial results. But start-ups lack historical financial statements, which can make budgeting difficult. In your first year of operation, it’s helpful to create an annual budget that forecasts all three financial statements on a monthly basis: 1. The income statement. Start your annual budget by estimating how much you expect to sell each month. Then estimate direct costs (such as...[ Read More ]

Have staffers complained because their expense reimbursements are taxed? An accountable plan can address the issue. Here’s how accountable plans work and how they benefit employers and employees. Be reasonable Under an accountable plan, reimbursement payments to employees will be free from federal income and employment taxes and aren’t subject to withholding from workers’ paychecks. Additionally, your organization benefits because the reimbursements aren’t subject to the employer’s portion of federal employment taxes. The IRS stipulates that all expenses covered in an accountable plan have a business connection and be “reasonable.” Additionally, employers can’t reimburse employees more than what they paid for any business expense. And employees must account to you for their expenses and, if an expense allowance was provided, return any excess allowance within a reasonable time period. An expense generally qualifies as a tax-free reimbursement if it could otherwise qualify as a business deduction for the employee. For...[ Read More ]

Tax planning is a juggling act for business owners. You have to keep your eye on your company’s income and expenses and applicable tax breaks (especially if you own a pass-through entity). But you also must look out for your own financial future. For example, you need to develop an exit strategy so that taxes don’t trip you up when you retire or leave the business for some other reason. An exit strategy is a plan for passing on responsibility for running the company, transferring ownership and extracting your money from the business. Buy-sell agreement When a business has more than one owner, a buy-sell agreement can be a powerful tool. The agreement controls what happens to the business when a specified event occurs, such as an owner’s retirement, disability or death. Among other benefits, a well-drafted agreement: Provides a ready market for the departing owner’s shares, Prescribes a method...[ Read More ]

To err is human, but some errors are more consequential — and harder to fix — than others. Most not-for-profit organizations can’t afford to lose precious financial resources, so you need to do whatever possible to minimize accounting and tax mistakes. Get started by considering the following five questions: Have we formally documented our accounting processes? All aspects of managing your nonprofit’s money should be reflected in a detailed, written accounting manual. This should include how to accept and deposit donations and pay bills. How much do we rely on our accounting software? These days, accounting software is essential to most nonprofits’ daily functioning. But even with the assistance of technology, mistakes happen. Your staff should always double-check entries and reconcile bank accounts to ensure that transactions entered into accounting software are complete and accurate. Do we consistently report unrelated business income (UBI)? IRS officials have cited “failing to consider...[ Read More ]

Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2019. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements. July 31 Report income tax withholding and FICA taxes for the second quarter of 2019 (Form 941) and pay any tax due. (See the exception below, under “August 12.”) File a 2018 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension. August 12 Report income tax withholding and FICA taxes for the second quarter of 2019 (Form 941), if you deposited on time and in full all of the associated taxes due. September 16 If a calendar-year C corporation, pay the third installment of 2019 estimated income taxes. If a calendar-year S...[ Read More ]

The flat 21% federal income tax rate for C corporations under the Tax Cuts and Jobs Act (TCJA) has been great news for these entities and their owners. But some fundamental tax truths for C corporations largely remain the same: C corporations are subject to double taxation. Double taxation occurs when corporate income is taxed once at the corporate level and again at the shareholder level as dividends are paid out. The cost of double taxation, however, is now generally less because of the 21% corporate rate. And double taxation isn’t a problem when a C corporation needs to retain all its earnings to finance growth and capital investments. Because all the earnings stay “inside” the corporation, no dividends are paid to shareholders, and, therefore, there’s no double taxation. Double taxation also isn’t an issue when a C corporation’s taxable income levels are low. This can often be achieved by paying...[ Read More ]