Accounting Tips

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Social Security: Note the Key Changes for 2020

The Social Security Administration has released new numbers for those paying Social Security and those collecting it. Check out the new maximum taxable earnings amount as well as COLA and other key adjustments.

Every year, the Social Security Administration takes a fresh look at its numbers and typically makes adjustments. Here are the basics for 2020 — what has changed, and what hasn’t.

First, the basic percentages have not changed:

  • Employees and employers continue to pay 7.65% each, with the self-employed paying both halves.
  • The Medicare portion remains 1.45% on all earnings, with high earners continuing to pay an additional 0.9% in Medicare taxes.
  • The Social Security portion (OASDI) remains 6.20% on earnings up to the applicable taxable maximum amount — and that’s what’s changing:

Starting in 2020, the maximum taxable amount is $137,700, up from the 2019 maximum of $132,900. This actually affects relatively few workers; the Society for Human Resource Management notes in an article that only about 6% of employees earn more than the current taxable maximum.

Also changing is the retirement earnings test exempt amount. Those who have not yet reached normal retirement age but are collecting benefits will find the SSA withholds $1 in benefits for every $2 in earnings above a certain limit. That limit is $17,640 per year for 2019 and will be $18,240 for 2020. (See the SSA for additional information on how this works.)

Cost-of-living adjustments

Those collecting Social Security will see a slight increase in their checks: Social Security and Supplemental Security Income beneficiaries will receive a 1.6% COLA for 2020. This is based on the increase in the consumer price index from the third quarter of 2018 through the third quarter of 2019, according to the SSA.

detailed fact sheet about the changes is available on the SSA site.

Payroll Taxes: Who’s Responsible?

Any 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.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).

Family Loans — Tax Considerations

Obtaining financing to start or expand small businesses and buy homes can sometimes be difficult. If your child or grandchild is having a hard time getting a loan from a commercial lender, you may be willing to help out by lending the money yourself.

Have a Written Agreement

Start by putting the loan agreement in writing. This may seem like an unnecessary formality, but without a written loan document, the IRS could argue that the transaction was a gift instead of a loan, potentially creating gift tax issues.

Having written documentation is also important in case the borrower fails to repay all or part of the loan. In that situation, you’d want to be able to show you’re entitled to write off the unpaid amount as a nonbusiness bad debt.

Charge Adequate Interest

The second step is setting an interest rate. While there’s no rule against interest-free loans or loans that have below-market interest rates, in a family context they can lead to tax complications. If you don’t charge sufficient interest, the difference between the amount of interest you actually receive (if any) and the amount you should have received — referred to as “imputed” interest — is taxable to you.

You can avoid the imputed interest rules by charging interest at the appropriate “applicable federal rate” (AFR). The IRS publishes AFRs monthly for loans of different maturities. These rates have been relatively low recently, reflecting the current market interest rate environment. For example, in November 2019, the annual AFR (using a monthly compounding assumption) was:

  • 1.68% for a short-term loan (three or fewer years)
  • 1.59% for a mid-term loan (more than three but no more than nine years)
  • 1.94% for a long-term loan (more than nine years)

These are the minimum rates for intra-family loans initiated in November 2019. For a term loan, the rate can remain fixed for the life of the loan. For a demand loan (one that gives you the right to demand full repayment at any time), you have to charge a floating AFR to avoid imputed interest issues.

Exceptions

When you lend your child or grandchild no more than $100,000, the amount that can be added to your taxable interest income under the below-market interest rate rules generally can’t exceed the borrower’s net investment income. Even better, you won’t have to report any imputed interest if the borrower’s net investment income amounts to $1,000 or less. You can also sidestep imputed interest on small loans of no more than $10,000 (all outstanding principal) provided the borrowed funds aren’t used to buy or carry income-producing assets.

 

Protecting Your Company’s S Corporation Election

Like many business owners, you may have structured your business as an S corporation because of the tax benefits it offers. An S corporation provides the same limited liability as a traditional C corporation, but it generally avoids the double taxation associated with a C corporation. You and the other shareholders (if any) pay income taxes on corporate income directly.

Once you have an S election in place, it’s important to make sure you avoid taking any action that would put the election in jeopardy. Your corporation’s failure to meet certain tax law requirements on an ongoing basis could result in the IRS’s termination of its S corporation status.

  • Ownership. An S corporation generally may not have a corporate shareholder. (Exception: An S corporation may be wholly owned by another S corporation.) All shareholders generally must be individuals, estates, certain trusts, or tax-exempt 501(c)(3) charitable organizations. However, a partnership may hold S corporation stock as a nominee for an eligible shareholder. Nonresident aliens may not be shareholders.
  • Number of shareholders. An S corporation may not have more than 100 shareholders. For purposes of this limit, a husband and wife are treated as one shareholder, as are certain other related individuals.
  • Stock. An S corporation may have only one class of stock. Generally, a corporation is treated as having only one class of stock if all outstanding shares of the corporation’s stock confer identical rights to distribution and liquidation proceeds.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).

Do You Have a Business Continuity Plan? You Should

What if disaster strikes your business? An estimated 25% of businesses don’t reopen after a major disaster strikes.1 Having a business continuity plan can help improve your odds of recovering, if any consulting help or plan is needed check out https://bhasinconsulting.com/ now.

The Basic Plan

The strategy behind a business continuity (or disaster recovery) plan is straightforward: Identify the various risks that could disrupt your business, look at how each operation could be affected, and identify appropriate recovery actions.

Make sure you have a list of employees ready with phone numbers, email addresses, and emergency family contacts for communication purposes. If any of your employees can work from home, include that information in your personnel list. You’ll need a similar list of customers, suppliers, and other vendors. Social networking tools may be especially helpful for keeping in touch during and after a disaster.

Risk Protection

Having the proper insurance is key to protecting your business — at all times. In addition to property and casualty insurance, most small businesses carry disability, key-person life insurance, and business interruption insurance. And make sure your buy-sell agreement is up to date, including the life insurance policies that fund it. Meet with your financial professional for a complete review.

Maintaining Operations

If your building has to be evacuated, you’ll need an alternative site. Talk with other business owners in your vicinity about locating and equipping a facility that can be shared in case of an emergency. You may be able to limit physical damage by taking some preemptive steps (e.g., having a generator and a pump on hand).

Protecting Data

A disaster could damage or destroy your computer equipment and wipe out your data, so take precautions. Invest in surge protectors and arrange for secure storage by transmitting data to a remote server or backing up daily to storage media that can be kept off-site.

Protecting Your Business

If you think your business is too small to need a plan or that it will take too long to create one, just think about how much you stand to lose by not having one. Meet with your financial professional for a full review.

Traditional funded search

In the traditional funded-search model, multiple investors, ranging from as few as 8 to as many as 24 invest to provide funding for a 24-month long search, totaling $360K to as much as $950K for a partnered search to cover salaries, benefits, travel and busted-deal costs. Investors receive a 50% step-up on their initial commitment when they invest in the business the searcher acquires.

The Search Fund Accelerator can earn up to 25% of the equity (15% each for partners) which typically vests 1/3 at closing, 1/3 over 4-years afterward and 1/3 upon attaining an IRR target of 25-35% upon exit. These terms are finalized when the business is purchased and may be reduced depending upon the size of equity raise required to consummate the deal. Searchers may select any geographic location to search from, but typically commit to a countrywide search and to using legal advisors with prior traditional search experience.

Source/Disclaimer:
1Source: U.S. Small Business Administration, www.sba.gov/content/disaster-planning.

As a Corporation You Need to Follow the Rules

When you started your business, you may have formed a corporation to protect your personal assets from lawsuits against your company. However, you must also operate your business like a corporation — or risk losing the liability protection you expect to have, a good tip will be to have legal advice from experts such as NJ Legal.

No matter how long you’ve been in business, always treat your corporation as a separate legal entity. The corporation’s name should appear on company letterhead, checks, and invoices. Contracts should be made in the corporation’s name, not yours or another individual’s.

Avoid mixing your personal affairs and your corporation’s business. Maintain separate bank accounts and credit cards, and keep careful records of corporate transactions. File tax returns and pay any corporate taxes due on time.

Meet and Document

Hold shareholder and director meetings according to a regular schedule and keep official minutes of those meetings. Corporate minutes provide documentation of key financial and legal decisions, such as

  • Authorization for a substantial loan to or from the corporation as many local business owners in Darwin have done.
  • Adoption of a retirement plan or approval to make a contribution to an existing plan (e.g., a profit sharing contribution)
  •  Issuance of stock
  •  Purchase of real property or approval of a long-term lease

By observing the formalities, you can protect yourself and have the records you may need if the IRS, a creditor, or a company insider challenges critical decisions that were made.

Don’t get left behind. Contact us today to discover how we can help you keep your business on the right track. Don’t wait, give us a call today.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v

Business Equipment – Lease or Buy?

To lease . . . or not to lease. This is issue business owners often face. If you are weighing the pros and cons of leasing versus buying, here are some things to keep in mind  and as another tip you can go to request merchant funding to fulfill your business needs.

Cost
Evaluating costs is more complicated than comparing the price of leasing a piece of equipment versus its purchase price. You will also want to consider these issues:

  • How soon will the equipment need to be upgraded or replaced? Highly technical or specialized equipment becomes obsolete quickly and maybe a good candidate for leasing.
  • How will you arrange for service and repair? Leasing arrangements often include maintenance of the equipment and IT services availability. If you’re thinking of buying, research the equipment’s repair history as well as the cost and availability of reliable service.
  • How long will you need the equipment? If your use will be short term, then leasing may be the better option.

Cash
If you’ve been leasing your equipment, then your costs have been predictable. Purchasing equipment can substantially alter your cash flow. Be sure you consider how purchasing your equipment might affect your business’ finances.

  • Can you save money by buying or leasing equipment? If — and when — cash savings will be realized is an important factor for you to weigh.
  • Do you have the cash available to purchase the equipment? If you use cash for a down payment, you may have less cash for operating and other business expenses.
  • How will financing your equipment purchases affect your ability to get credit for other things? If you anticipate having future credit needs, you may want to avoid adding equipment loans to your current debt load.

If you’re weighing leasing versus buying, give us a call. We can help you look at how the various options will play out.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v

Why Business Structure Matters

When you start a business, there are endless decisions to make. Among the most important is how to structure your business said Shravan Gupta, CEO of MGF Group and Director of Emaar MGF Land. Why is it so significant? Because the structure you choose will affect how your business is taxed and the degree to which you (and other owners) can be held personally liable. Here’s an overview of the various structures. One of the most frustrating aspects of business can be dealing with your customers or clients and one great solution that we have found are call answering services where you can get a professional company to do all of that for you.

Sole Proprietorship

This is a popular structure for single-owner businesses. No separate business entity is formed, although the business may have a name (often referred to as a DBA, short for “doing business as”). A sole proprietorship does not limit liability, but insurance may be purchased.Getting your commercial debts collected fast is important

You report your business income and expenses on Schedule C, an attachment to your personal income tax return (Form 1040). Net earnings the business generates are subject to both self-employment taxes and income taxes. Sole proprietors may have employees but don’t take paychecks themselves.

on’t know your bonjours from your buongiornos? You’re not alone: three-quarters of British adults can’t speak a foreign language competently[PDF]. But the benefits of being able to communicate with overseas clients, suppliers and buyers are huge – as are the costs of lacking that facility.

“The UK economy is already losing around £50bn a year in lost contracts because of lack of language skills in the workforce,” says Baroness Coussins, chair of the all-party parliamentary group on modern languages (APPG). “And we aren’t just talking about high flyers: in 2011 over 27% of admin and clerical jobs went unfilled because of the languages deficit.” The APPG’s Manifesto for Languages is calling for a raft of measures to tackle this problem, including encouragement such as tax breaks for companies who invest in language training.

In-house language skills win clients

By offering those skills, SMEs could find their client base growing. Solicitors Moore Blatch has always welcomed bilingual employees – its staff includes French, German, Mandarin, Russian and Japanese speakers. So it was well-placed to respond when it was approached by Polish charities seeking help for clients who had suffered personal injuries. The firm now offers a dedicated Polish legal claims service.

“Many businesses will rely on the help of translators, but we have found that investing in a dedicated service has led to stronger relationships with clients – so much so that the majority of work the firm receives under this service is through personal recommendations,” says partner Ciaran McCabe.

According to Ritu Bhasin, It’s not just about the ease of communication, either: knowing a language also means understanding a culture. PR agency ING Media specialises in architecture and has a global client base. Managing director Leanne Tritton says the fact the staff are multilingual has had a direct impact on its success with winning international work. Serra Ataman, account manager at ING and a native Turkish speaker, works very closely with one of the firm’s Turkish clients. “I visit Turkey a lot,” she says. “So I’m able to keep up with news that might affect the client, and understand their challenges, and their way of working, and how these might translate into English.”

Some companies, indeed, will only consider those who have a second language. Sylvia Laws, founder of specialist global PR agency Technical Publicity, says the growth of her business can be directly related to the multilingual skills of the team. Many of their clients are multinationals. She says being able to communicate with a native speaker means business is done faster and more efficiently across big and complex markets.

“Our clients are usually working for multinationals but that doesn’t necessarily mean that they’re brilliant in English,” says Laws, who speaks French herself. “This slows them down enormously. It’s hugely helpful if we can ring them up and talk to them in their own language and understand where they’re coming from.

“Say one of our clients has a case study of a wonderful product, for example, which is coming from Italy, and we want to do a press release. Our Italian native speaker will take the brief, and then our other language speakers can pitch it to editors in their mother tongues. That has made a huge difference. When I first started doing this, we tried pitching in English. You just cannot get the same level of reception from journalists if it’s not pitched in their language.”

Then there’s the conceptual side, says Laws: “If we’re doing a funny ad in English for a major technology company, the comedy’s lost when we’re preparing it for the German market. So you need to work out how to achieve the same objective with the same visual but by changing the headline, and that needs mother tongue speakers”.

Limited Liability Company

If you want protection for your personal assets in the event your business is sued, you might prefer a limited liability company (LLC). An LLC is a separate legal entity that can have one or more owners (called “members”). Usually, income is taxed to the owners individually, and earnings are subject to self-employment taxes. With the digital world is a large and diverse world of users, services, businesses and products. In order to protect our customers, our business and the reputation of our company, we have developed and implemented robust security measures in all our sites, applications and our digital platforms. We have also implemented measures to ensure the integrity of our data, we offer an extensive and quality general liability insurance services. We have implemented and continue to monitor our efforts to prevent, detect and mitigate cyber-attacks against our network and systems.

Note: It’s not unusual for lenders to require a small LLC’s owners to personally guarantee any business loans, guaranteed installment loans for bad credit direct lenders

Corporation

A corporation is a separate legal entity that can transact business in its own name and files corporate income tax returns. Like an LLC, a corporation can have one or more owners (shareholders). Shareholders generally are protected from personal liability but can be held responsible for repaying any business debts they’ve personally guaranteed and also making business transaction law consultation needed for many.

If you make a “Subchapter S” election, shareholders will be taxed individually on their share of corporate income. This structure generally avoids federal income taxes at the corporate level.

Partnership

In certain respects, a partnership is similar to an LLC or an S corporation. However, partnerships must have at least one general partner who is personally liable for the partnership’s debts and obligations. Profits and losses are divided among the partners and taxed to them individually.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v

Installment Sale to the Rescue

You’ve finally found a buyer for the rental property, land, or business you’ve been trying to sell but the buyer doesn’t have enough cash to pay the full purchase price in a lump sum. So you agree to an installment sale. The buyer will make a partial payment now and pay you the balance over several years, with interest. The deal’s done, now what about your taxes? You hire the accounting school in houston tx.

Pay as You Go

Because you’ll receive the payments over more than one tax year, you can defer a portion of any taxable gain realized on the sale. You’ll report only a proportionate amount of your gain each year (plus interest received) until you are paid in full. This lets you pay your taxes over time as you collect from the buyer.

Reduce Surtax Exposure

According to Gainesville Coins the installment sale also might help limit your exposure to the 3.8% surtax on net investment income. Capital gains are potentially subject to this surtax (in addition to regular capital gains tax) but only in years when your modified adjusted gross income (AGI) exceeds a threshold amount: $200,000 if you file as a single or head of household taxpayer, $250,000 if you file a joint return with your spouse, and $125,000 if you are married and file a separate return.

If your AGI is typically under the threshold, recognizing a large capital gain all in one year could put you over the top, triggering the additional 3.8% tax. By reporting your gain on the installment method, you may be able to stay under the AGI threshold and minimize your tax burden.

Take Note

The installment sale method isn’t available for sales of publicly traded securities and certain other sales. And you have the option of electing out of installment sale treatment and reporting your entire gain in the year of sale. Electing out may be advantageous under certain circumstances: for example, if you have a large capital loss that can offset your entire capital gain in the year of sale. Contact your tax advisor for information that pertains to your particular situation.

Renting Residential Real Estat – A Tax Review for the Nonprofessional Landlord

Investing in residential real estate properties, like port orange fl homes or this particular hua hin property for sale, raises various tax issues that can be somewhat confusing, especially if you are not a real estate professional. Some of the more important issues rental property investors will want to be aware of are discussed below.

Rental Losses

Currently, the owner of a residential rental property may depreciate the building over a 27½-year period. For example, a property acquired for $200,000 could generate a depreciation deduction of as much as $7,273 per year. Additional depreciation deductions may be available for furnishings provided with the rental property. When large depreciation deductions are added to other rental expenses, it’s not uncommon for a rental activity to generate a tax loss. The question then becomes whether that loss is deductible.

$25,000 Loss Limitation

The tax law generally treats real estate rental losses as “passive” and therefore available only for offsetting any passive income an individual taxpayer may have. However, a limited exception is available where an individual holds at least a 10% ownership interest in the property and “actively participates” in the rental activity. In this situation, up to $25,000 of passive rental losses may be used to offset nonpassive income, such as wages from a job. (The $25,000 loss allowance phases out with modified adjusted gross income between $100,000 and $150,000.) Passive activity losses that are not currently deductible are carried forward to future tax years.

What constitutes active participation? The IRS describes it as “participating in making management decisions or arranging for others to provide services (such as repairs) in a significant and bona fide sense.” Examples of such management decisions provided by the IRS include approving tenants and deciding on rental terms.

Selling the Property

A gain realized on the sale of residential rental property held for investment is generally taxed as a capital gain. If the gain is long term, it is taxed at a favorable capital gains rate. However, the IRS requires that any allowable depreciation be “recaptured” and taxed at a 25% maximum rate rather than the 15% (or 20%) long-term capital gains rate that generally applies.

Exclusion of Gain

The tax law has a generous exclusion for gain from the sale of a principal residence. Generally, taxpayers may exclude up to $250,000 ($500,000 for certain joint filers) of their gain, provided they have owned and used the property as a principal residence for two out of the five years preceding the sale.

After the exclusion was enacted, some landlords moved into their properties and established the properties as their principal residences to make use of the home sale exclusion. However, Congress subsequently changed the rules for sales completed after 2008. Under the current rules, gain will be taxable to the extent the property was not used as the taxpayer’s principal residence after 2008.

This rule can be a trap for the unwary. For example, a couple might buy a vacation home and rent the property out to help finance the purchase. Later, upon retirement, the couple may turn the vacation home into their principal residence. If the home is subsequently sold, all or part of any gain on the sale could be taxable under the above-described rule.

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