• Skip to content
  • Skip to primary sidebar

Header Right

  • Home
  • About
  • Contact

Archives for November 2018

Last Minute Tax Strategies

November 30, 2018 by curcurucpa

Share This:

Although there are only a few weeks left in the year, it’s not too late to implement some planning moves to reduce this year’s taxes.

Save Bunches by Bunching

Beginning in 2018, many taxpayers who used to itemize in prior years will no longer do so because of the substantial increase in the standard deduction.

Example: In 2017, Fred and Wilma have charitable contributions of $5,000, mortgage interest of $12,000, property and property taxes of $6,000 for total itemized deductions of $23,000.  Since their total itemized deductions of $23,000 exceed their $12,700 standard deduction, they will itemize.

In 2018, the standard deduction for a married couple is increased to $24,000.  If they have the same itemized deductions in 2018, they will claim the standard deduction of $24,000 since this exceeds their itemized deductions of $23,000. 

The bunching strategy involves incurring itemized deductions every other year rather than annually.  The benefit of this strategy is more easily explained with an example:

In 2018, Fred and Wilma double their normal charitable contribution of $5,000 and make a $10,000 charitable contribution.  They will not make a charitable contribution in 2019 (they are bunching two years of charitable donations in 2018).  Their itemized deductions are:  $10,000 of charity, $12,000 of mortgage interest, and $6,000 of property taxes for total itemized deductions of $28,000.  Since this exceeds the $24,000 standard deduction, they will itemize.  In 2019, they will take the $24,000 standard deduction.  The total deductions over the two years is $52,000 ($28,000 itemized deduction in 2018 plus $24,000 standard deduction in 2019).  If they continued to make $5,000 charitable contributions per year, then their itemized deductions would always be less than their standard deduction of $24,000 per year. 

The benefit of this strategy is that they deduct $52,000 over two years with the bunching strategy rather than claiming the standard deduction of $24,000 per year (i.e., deducting $48,000 over two years).  The additional $4,000 deducted over two years is roughly a $1,000 reduction in tax.  They will once again bunch their charitable donations in 2020 and skip the donation in 2021.

Combine Bunching with Qualified Charitable Distributions

Taxpayers who have reached age 70½ who own IRAs and are thinking of making a charitable gift should consider making the donation through a qualified charitable IRA distribution—this is a DIRECT transfer from the IRA trustee to the charity.  Such a transfer (not to exceed $100,000 per year) will neither be included in taxable income nor allowed as a deduction.

The benefits of this strategy are:

  • AGI is not increased for purposes of the phaseout of any deduction, exclusion, or tax credit
  • The distribution qualifies as a required minimum distribution
  • It is not subject to the AGI phaseout of charitable contributions
  • the taxpayer does not need to itemize to claim the charitable deduction (which is now more difficult due to the increased standard deduction)

To qualify, the distribution must be a direct transfer from the IRA trustee to the charity.  If a taxpayer first takes an IRA distribution and then contributes it to a charity, the donation will not qualify as a qualified charitable distribution.  It is also important that the taxpayer NOT receive anything in exchange for the contribution from the charity as this could also disqualify qualified charitable distribution treatment.

Make HSA Contributions

If you have a high deductible health insurance policy, you may qualify for deductible contributions to a Health Savings Account.  A deductible above-the-line deduction of $3,450 for individual coverage and $6,900 for family coverage can be made as late as the original due date (generally April 15) of the tax year.  For example, you can deduct an HSA contribution on April 15, 2019 on your 2018 tax return.  If you are age 55 or above, you can contribute an additional $1,000 per year.

Nail Down Investment Losses

If you have paper losses on stocks it may make sense to sell the investments before year end to generate a deductible capital loss.  The same investment can then be re-purchased at least 31 days later.  This way, the taxpayer can realize her investment loss for tax purposes but still retain the same, or approximately the same, investment position.  It is critical to wait at least 31 days before re-purchasing the stock to avoid the wash sale rules.  These rules disallow losses on investments if the same or substantially similar investment is purchased within 30 days of the loss sale.

Capital losses reduce capital gains and can offset up to $3,000 of ordinary income per year.  Excess capital losses are carried forward to future tax years.

Source/Disclaimer:

This communication is not intended to be tax advice and should not be treated as such. You should contact your tax professional to discuss your specific situation.

Curcuru & Associates, CPA PLC, offers a variety of tax planning services to both businesses and individuals. Proactive tax planning now can save you money and make tax time a breeze. Call us at 248-538-5331 and request a free initial consultation to learn more.

Filed Under: Personal Tax

Don’t Forget – You are Responsible for Payroll Taxes

November 27, 2018 by byfadmin

Share This:

Michigan CPA FirmAny business with employees must withhold money from its employees’ paychecks for income and employment taxes, including Social Security and Medicare taxes (known as Federal Insurance Contributions Act taxes, or FICA), and forward that money to the government. A business that knowingly or unknowingly fails to remit these withheld taxes in a timely manner will find itself in trouble with the IRS.

The IRS may levy a penalty, known as the trust fund recovery penalty, on individuals classified as “responsible persons.” The penalty is equal to 100% of the unpaid federal income and FICA taxes withheld from employees’ pay.

Who’s a Responsible Person?

Any person who is responsible for collecting, accounting for, and paying over withheld taxes and who willfully fails to remit those taxes to the IRS is a responsible person who can be liable for the trust fund recovery penalty. A company’s officers and employees in charge of accounting functions could fall into this category. However, the IRS will take the facts and circumstances of each individual case into consideration.

The IRS states that a responsible person may be:

  • An officer or an employee of a corporation
  • A member or employee of a partnership
  • A corporate director or shareholder
  • Another person with authority and control over funds to direct their disbursement
  • Another corporation or third-party payer
  • Payroll service providers

The IRS will target any person who has significant influence over whether certain bills or creditors should be paid or is responsible for day-to-day financial management.

Working With the IRS

If your responsibilities make you a “responsible person,” then you must make certain that all payroll taxes are being correctly withheld and remitted in a timely manner. Talk to a tax advisor if you need to know more about the requirements.

Curcuru & Associates, CPA PLC, offers a variety of tax planning services to both businesses and individuals. Proactive tax planning now can save you money and make tax time a breeze. Call us at 248-538-5331 and request a free initial consultation to learn more.

Filed Under: Small Business Tax

Taking on a Larger Competitor and Winning

November 13, 2018 by byfadmin

Share This:

Michigan CPA FirmRunning a small business isn’t easy. You probably wouldn’t have it any other way. The ability to survive and thrive is a source of great pride for small business owners. So when a competitor moves in — especially a big one — it can feel like battle lines have been drawn.

Sharpen Your Edge

Before you do anything, accept the fact that you can’t compete on the same level as a large national chain. But that doesn’t mean you can’t win the battle. Study what the competition does and how they do it. Then use that information to define — and sharpen — your company’s competitive edge.

A large competitor will almost certainly have lower prices and a deeper inventory. But you can connect with customers in ways the competition can’t. You can add value to every customer interaction by being attentive and providing expertise and personalized service.

Perhaps your biggest edge is your size. Being small means you can respond to market trends and customer requests more quickly. You can also change and adapt policies and procedures faster.

Rally the Troops

You have another big advantage; you have an established customer base and you know what they need. Establish a timeline to reach out to your customers directly via snail mail or e-mail (or both) with special offers. If you have a loyalty program, consider doubling rewards for a period of time that overlaps with the competition’s opening.

Look for Advantages

Having a big competitor move in may have some unexpected benefits. The new company validates the need for what your business offers and may do a fair amount of advertising. If your marketing budget allows, this could be a good time to do some strategic advertising of your own.

The competition also may create some unexpected opportunities in the future. The new company will change the dynamics of the marketplace, which may lead you to steer your business in a new direction.

Please call Curcuru & Associates, CPA PLC, at 248-538-5331 about all of our small business accounting services. There is no cost or obligation for the introductory consultation.

Filed Under: Best Business Practices

Primary Sidebar

Search

Archive

  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • June 2020
  • December 2019
  • November 2019
  • October 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • April 2017
  • February 2017
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • June 2016
  • May 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • July 2014
  • June 2014
  • May 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • March 2012
  • February 2012
  • January 2012
  • October 2011
  • June 2011
  • May 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • July 2009
  • June 2009
  • November 2008
  • October 2008
  • September 2008
  • May 2008
  • April 2008
  • March 2008

Category

  • Best Business Practices
  • Business Tax
  • Estate Planning
  • Michigan Tax
  • Personal Tax
  • Restaurants
  • Small Business Tax
  • Uncategorized

Copyright © 2018 · http://curcurucpa.com/blog