Now’s a great time to purge old tax records


Whether you filed your 2016 tax return by the April 18 deadline or you filed for an extension, you may be overwhelmed by the amount of documentation involved. While you need to hold on to all of your 2016 tax records for now, it’s a great time to take a look at your records for previous tax years to see what you can purge.

Consider the statute of limitations

At minimum, keep tax records for as long as the IRS has the ability to audit your return or assess additional taxes, which generally is three years after you file your return. This means you likely can shred and toss — or electronically purge — most records related to tax returns for 2013 and earlier years (2012 and earlier if you filed for an extension for 2013).

In some cases, the statute of limitations extends beyond three years. If you understate your adjusted gross income by more than 25%, for example, the limitations period jumps to six years. And there is no statute of limitations if you fail to file a tax return or file a fraudulent one.

Keep some documents longer

You’ll need to hang on to certain records beyond the statute of limitations:

Tax returns. Keep them forever, so you can prove to the IRS that you actually filed.

W-2 forms. Consider holding them until you begin receiving Social Security benefits. Why? In case a question arises regarding your work record or earnings for a particular year.

Records related to real estate or investments. Keep these as long as you own the asset, plus three years after you sell it and report the sale on your tax return (or six years if you’re concerned about the six-year statute of limitations).

This is only a sampling of retention guidelines for tax-related documents. If you have questions about other documents, please contact us.

© 2017

Enhance benefits’ perceived value with strong communication

Providing a strong package of benefits is a competitive imperative in today’s business world. Like many employers, you’ve probably worked hard to put together a solid menu of offerings to your staff. Unfortunately, many employees don’t perceive the full value of the benefits they receive.

Why is this important? An underwhelming perception of value could cause good employees to move on to “greener” pastures. It could also inhibit better job candidates from seeking employment at your company. Perhaps worst of all, if employees don’t fully value their benefits, they might not fully use them — which means you’re wasting dollars and effort on procuring and maintaining a strong package.

Targeting life stage

Among the most successful communication strategies for promoting benefits’ value is often the least commonly used. That is, target the life stage of your employees.

For example, an employee who’s just entering the workforce in his or her twenties will have a much different view of a 401(k) plan than someone nearing retirement. A younger employee will also likely view health care benefits differently. Employers who tailor their communications to the recipient’s generation can improve their success rate at getting workers to understand their benefits.

Covering all bases

There are many other strategies to consider as well. For starters, create a year-round benefits communication program that features clear, concise language and graphics. Many employers discuss benefits with their workforces only during open enrollment periods.

Also, gather feedback to determine employees’ informational needs. You may learn that you have to start communicating in multiple languages, for instance. You might also be able to identify staff members who are particularly knowledgeable about benefits. These employees could serve as word-of-mouth champions of your package who can effectively explain things to others.

Identifying sound strategies

Given the cost and effort you put into choosing, developing and offering benefits to your employees, the payoff could be much better. We can help you ensure you’re getting the most bang for your benefits buck.

© 2017

Turning next year’s tax refund into cash in your pocket now


Each year, millions of taxpayers claim an income tax refund. To be sure, receiving a payment from the IRS for a few thousand dollars can be a pleasant influx of cash. But it means you were essentially giving the government an interest-free loan for close to a year, which isn’t the best use of your money.

Fortunately, there is a way to begin collecting your 2017 refund now: You can review the amounts you’re having withheld and/or what estimated tax payments you’re making, and adjust them to keep more money in your pocket during the year.

Reasons to modify amounts

It’s particularly important to check your withholding and/or estimated tax payments if:

  • You received an especially large 2016 refund,
  • You’ve gotten married or divorced or added a dependent,
  • You’ve purchased a home,
  • You’ve started or lost a job, or
  • Your investment income has changed significantly.

Even if you haven’t encountered any major life changes during the past year, changes in the tax law may affect withholding levels, making it worthwhile to double-check your withholding or estimated tax payments.

Making a change

You can modify your withholding at any time during the year, or even several times within a year. To do so, you simply submit a new Form W-4 to your employer. Changes typically will go into effect several weeks after the new Form W-4 is submitted. For estimated tax payments, you can make adjustments each time quarterly payments are due.

While reducing withholdings or estimated tax payments will, indeed, put more money in your pocket now, you also need to be careful that you don’t reduce them too much. If you don’t pay enough tax during the year, you could end up owing interest and penalties when you file your return, even if you pay your outstanding tax liability by the April 2018 deadline.

If you’d like help determining what your withholding or estimated tax payments should be for the rest of the year, please contact us.

© 2017

New HRA offers small employers an attractive, tax-advantaged health care option

In December, Congress passed the 21st Century Cures Act. The long and complex bill covers a broad range of health care topics, but of particular interest to some businesses should be the Health Reimbursement Arrangement (HRA) provision. Specifically, qualified small employers can now use HRAs to reimburse employees who purchase individual insurance coverage, rather than providing employees with costly group health plans.

The need for HRA relief

Employers can use HRAs to reimburse their workers’ medical expenses, including health insurance premiums, up to a certain amount each year. The reimbursements are excludable from employees’ taxable income, and untapped amounts can be rolled over to future years. HRAs generally have been considered to be group health plans for tax purposes.

But the Affordable Care Act (ACA) prohibits group health plans from imposing annual or lifetime benefits limits and requires such plans to provide certain preventive services without any cost-sharing by employees. And according to previous IRS guidance, “standalone HRAs” — those not tied to an existing group health plan — didn’t comply with these rules, even if the HRAs were used to purchase health insurance coverage that did comply. Businesses that provided the HRAs were subject to fines of $100 per day for each affected employee.

The IRS position was troublesome for smaller businesses that struggled to pay for traditional group health plans or to administer their own self-insurance plans. The changes in the Cures Act give these employers a third option for providing one of the benefits most valued by today’s employees.

The QSEHRA

Under the Cures Act, certain small employers can maintain general purpose, standalone HRAs that aren’t “group health plans” for most purposes under the Internal Revenue Code, Employee Retirement Income Security Act and Public Health Service Act.

More specifically, the legislation allows employers that aren’t “applicable large employers” under the ACA to provide a Qualified Small Employer HRA (QSEHRA) if they don’t offer a group health plan to any of their employees. Annual benefits under a QSEHRA:

• Can’t exceed an indexed maximum of $4,950 per year ($10,000 if family members are covered),
• Must be employer-funded (no salary reductions), and
• Can be used for only IRC Section 213(d) medical care.

QSEHRA benefits must be offered on the same terms to all “eligible employees” (certain individuals can be disregarded) and may be excluded from income only if the recipient has minimum essential coverage. There is a notice requirement and employees’ permitted benefits must be reported on Form W-2.

If you’re interested in exploring the QSEHRA option for your business, contact us for further details.

© 2017

THERE’S STILL TIME TO SET UP A RETIREMENT PLAN FOR 2016

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Saving for retirement can be tough if you’re putting most of your money and time into operating a small business. However, many retirement plans aren’t difficult to set up and it’s important to start saving so you can enjoy a comfortable future. So if you haven’t already set up a tax-advantaged plan, consider doing so this year. Note: If you have employees, they generally must be allowed to participate in the plan, provided they meet the qualification requirements. Here are three options: 1. Profit-sharing plan. This is a defined contribution plan that allows discretionary employer contributions and flexibility in plan design. You can make deductible 2016 contributions as late as the due date of your 2016 tax return, including extensions — provided your plan exists on Dec. 31, 2016. For 2016, the maximum contribution is $53,000, or $59,000 if you are age 50 or older. 2. Simplified Employee Pension (SEP). This is also a defined contribution plan that provides benefits similar to those of a profit-sharing plan. But you can establish a SEP in 2017 and still make deductible 2016 contributions as late as the due date of your 2016 income tax return, including extensions. In addition, a SEP is easy to administer. For 2016, the maximum SEP contribution is $53,000. 3. Defined benefit plan. This plan sets a future pension benefit and then actuarially calculates the contributions needed to attain that benefit. The maximum annual benefit for 2016 is generally $210,000 or 100% of average earned income for the highest three consecutive years, if less. Because it’s actuarially driven, the contribution needed to attain the projected future annual benefit may exceed the maximum contributions allowed by other plans, depending on your age and the desired benefit. You can make deductible 2016 defined benefit plan contributions until your return due date, provided your plan exists on Dec. 31, 2016. Contact us if you want more information about setting up the best retirement plan in your situation.

Gambling on Hollywood: Will Nevada’s Film Tax Credit Help or Hurt Our Economy?

Beginning in 2014, Nevada will offer a new incentive to entice film productions into the Silver State: a tax credit worth up to 19 percent of a film’s total production costs. With $20 million earmarked for these incentives, Nevada is making a big gamble. Will it pay off, with successful productions boosting the economy while increasing appreciation for our state’s natural beauty? Or will the credit – as it has in some other states – cost more than it brings in?

Incentive Fever

With California as a next-door neighbor, over the years Nevada has often been the starring backdrop for feature films. However, the entertainment industry has been hard-hit by the economic downturn; production companies have started looking not just at the visual aspect of a location, but of its financial viability. As a result, states offering incentives have been bringing in the bacon, while Nevada has seen its industry income decrease by 43 percent since 2001.

 

A striking example of the intense competition for Hollywood bucks can be seen in New York, a state whose reputation is partly written on film. NY offered an incentive of 5 to 10 percent – but a few years ago, neighboring states decided they wanted a piece of the Big Apple’s pie. Massachusetts and Connecticut put up tax credits of 25 to 30 percent, and within one year, New York had lost a staggering $750,000,000 in revenue. The state immediately boosted its own credit up to 30 percent, and regained its income plus 19,000 jobs.

Meanwhile in the West, every state but Nevada has created its own film tax credit, grabbing up the movie money while leaving us high and dry. That’s a significant concern for a state badly in need of economic diversification, not to mention an image makeover. In 2009, Las Vegas visitor volume had dropped 7 percent – until “The Hangover” was released and visitor numbers jumped right back up to normal. Since then, the only film to feature Nevada was “The Muppets” – which styled Reno as a backwater burg for a washed-up Fozzie Bear.

What’s In the Film Tax Credit

The Nevada Motion Picture Jobs Creation Act allocates $20 million from 2014 through 2023, and will accept applications through 2017. Qualifying projects include films, TV series, Web series and even video games. To earn the credit, a project must have a budget of at least $500,000, and spend 60 percent of that in Nevada. The most a single project can write off is $6 million.

That’s a lot of dough, and some have speculated that, thanks to Nevada’s low taxes, the credits awarded will greatly exceed films’ actual tax liability. “The film-tax credit is essentially a financial bribe from Silver State taxpayers,” claims the Nevada Business Magazine.

The counter-argument is that these projects bring in much more benefit than cost. Another “Hangover” could only add to Nevada’s cultural revitalization, and a big film project could employ communities that are still waiting for a jobs rebound. But are these benefits enough to justify the $20 million price tag?

A Risky Bet?

This summer, as Nevada was signing its film-tax credit into law, Connecticut announced a two-year moratorium on projects that could draw from its own coffers. Yes, the state that was stealing business from New York has suddenly put the brakes on film spending. Were its generous incentives costing more than they were worth?

Louisiana and Ohio have both discovered that film-tax credits are losing taxpayers money – in Ohio, the loss may be as much as 79 cents on the dollar. Meanwhile, North Carolina reported a gain of only 55 to 70 new jobs. “The film credit created 290 to 350 fewer jobs than would have been created through an across-the-board tax reduction of the same magnitude,” legislative fiscal staff reported.

New Mexico, on the other hand – location for the massively popular TV series “Breaking Bad” – is reporting earnings of $1.50 for every dollar spent. Projects like “Breaking Bad” create name recognition and a positive image, as well as long-term job opportunities and the accompanying economic boost. Could Nevada experience a similar uptick? We are about to find out.

Overall, the expenditure is risky, but it appears to be an economically-driven necessity. If Nevada wants to compete for Hollywood dollars, we’ll need to play the game. If we don’t, New Mexico and other Western states will soon have the market cornered, and Nevada’s link to the entertainment industry might disappear entirely.

There is no argument that Nevada is late to the film-tax incentive party: 42 states have similar programs, and film incentive fever has been raging since the early 2000s. At this late date, our state’s decision to offer the credit seems more like jumping on the bandwagon out of necessity, than taking a risk that could bring in huge profits. Whether this move helps or hurts our economy may be a moot point: in the long term, reinvigorating Nevada’s relationship with the entertainment industry may be a smart investment, not a risky gamble.

Dyson Sues Samsung: Patent Infringement Problem Here’s Some Advice

Recently Dyson, which makes vacuum cleaners, sued Samsung, claiming that Samsung’s new line of vacuum cleaners uses technology that is copyrighted by Dyson. This has been a troublesome year for Samsung, as Apple won a patent ruling against Samsung in August, banning U.S. imports that infringe two Apple patents.

 

 

From a consumer’s standpoint, when does enforcing a patent become too much? It makes fiscal sense for a company like Dyson or Apple to sue Samsung for patent infringement, but will patent enforcement make new technology fewer and farther between?

Companies should not be able to “steal” ideas; but it would be superb if companies could improve upon an existing technology without fear of reprisal, especially if they were able to provide a royalty or some sort of benefit to the originating company?

Both of these lawsuits prove that when you have an idea, you should complete the research to ensure that idea does not already exist; otherwise you can find yourself facing a lawsuit.

Business people can be hard pressed to protect ideas themselves; most patents are for physical items. The following are some tips to ensure your idea stays within your hands.

  1. Patents. One of the top ways to get your idea protected is to file a patent; but your idea needs to be fairly detailed before you’re able to file a patent on it. You cannot file a patent on a general idea, such as a flying car; you need to have specific details on how that car will work, what type of engine it will have, what the materials are made out of. Keep in mind, as well, that patents cost money, and depending on the type of patent, can from hundreds to thousands of dollars. They also come with continuing payments in the form of filing and maintenance fees,  on top of the upfront payment.
  2. NDAs. Non-disclosure agreements are an excellent way to protect your idea. By getting employees and potential vendors to sign this agreement, they are legally bound to keep your idea a secret. If they fail to do so, they can be sued for disclosing the information.
  3. Mine! Mark any paperwork with your idea as “confidential,” “trademarked,” or “copyright 2013” – even if you don’t plan on filing for trademarks or copyrights. These labels show that you consider the idea as your own, and that you do not want anyone else copying it. This might be enough to deter someone wishing to steal your idea.

Ideas are the genesis of any company, and are extremely important to becoming a successful entrepreneur. Ensuring that no one steals your idea is not only to make sure you get the credit, but also to cut down on competition. If you have an idea that improves upon an existing technology or product, and you are serious about marketing it, the best solution would be to go to a lawyer to investigate if that technology has already been thought of. Good luck in your brainstorming!

Newspaper Advertising: Will We Ever See the End of Newsprint?

Recently, the Washington Post  announced its impending sale to Amazon founder, Jeff Bezos, for $250-million – in cash.

This is a good thing—isn’t it?

It means that a corporate giant like Amazon sees the value in the newspaper industry. It means that the Washington Post, at least, has a future in the electronic marketplace. It means that Amazon will more than likely be making new strides into the “art” of newspaper advertising; but does it mean that the actual physical paper will continue?

So many human habits occur around the daily newspaper. From reading the funnies on Sundays to enjoying the latest news with a cup of coffee in the morning, reading the newspaper is a time-honored tradition. But is it one that will stay?

More and more newspapers are switching from copy that blackens the fingertips to being accessible at your fingertips, as there are mobile apps for Android and Apple devices, plus of course the Kindle and Kobo. But as new strides are made in technology, does this mean the end of newsprint; or just a new revival?

Take newspaper advertising for example. It is obvious that people are still reading the newspaper, whether it is on a tablet, smart phone or at the kitchen table with their cup of joe. Therefore, advertising in the newspaper is still an excellent way to spend money—especially when you’re smart about it.

QR codes – codes that when scanned with a smart phone or device, bring up a dedicated mobile website – are more and more commonplace. Other apps like Layar, that allow for interactive content to show up over top of the text, are also available. Simply put, newspapers are here to stay; but not necessarily in the form we’re used to.

Advertising is the key to generating a revenue stream, which in turn allows you to post a profit to your bottom line. Ideally you should create an advertising process that is usable on all platforms; from newsprint to TV, from social media to your website. The point is to cross-promote; mention your new website during your radio commercial, make sure to mention “follow us on Facebook” in your newspaper ad. The times of getting away with one single advertising media are definitely gone; most TV commercials now are ignored, or are never seen because of the fast forward button. Radio commercials aren’t the answer either, as many people listen to commercial-free broadcasting or pay-per-month subscriptions.

Newspapers can be an extremely important part of your advertising strategy, but you need to encompass all of the potential revenue markets out there rather than one. Invest in a QR code, or a new technology that allows your customers to quickly get to your website. And while you’re at it—ensure your website is easy to navigate, with good quality content that speaks to readers. Try new things; if you aren’t on social media, definitely start at least a Facebook page.

So yes, newspapers and newsprint is here to stay … but the black fingers, perhaps not.

Are bookkeepers simply bean counters?

Bookkeepers are overlooked and underestimated because many people think that “bookkeeping” is simply entering numbers into accounting software, or in other words—a higher level data entry clerk.

This is entirely untrue.

Bookkeeping services, such as those that Forbush & Associates provides, are much more than that – and is much more valuable. Bookkeeping includes the following services, which we provide and have included a bit of information about.

Real-time accounting

When a business uses quarterly or monthly financial reports to make decisions, they are using data that are weeks, if not months, old. Wouldn’t it be nice to use data from last week, or even yesterday, to base your decisions on? Real-time accounting provides you with the most updated and relevant information.

After-the-fact bookkeeping

Do you need a reliable set of reports that is up to date, easy to read and understand? After-the-fact bookkeeping is what you need. We will consult with you as to exactly what information you need on what scheduled basis, and will contact your team on a regular basis to access all pertinent types of information (such as credit card invoices and deposits).

Payroll services

One of the most tedious tasks of running a business is running payroll. From a small business of only four employees to one of four thousand, the same type of information is needed and deductions handled; time off, taxes included, bonuses, the list goes on. We can handle your payroll, ensuring you have more time to dedicate to the running of your business.

Bank account reconciliation

A reconciliation is a comparison of two different records; with bank account reconciliation, we compare the bank’s record of events with that of your own internal records. This allows us to catch any overcharges, bank fees and other errors, and is an extremely effective way of discovering theft or fraud.

Credit card reconciliation

Credit card reconciliation is the same sort of idea as bank account reconciliation, but in this case we match your credit card invoices against the records of the credit card company. This can weed out mistaken invoices, missed payments or other mistakes.

Cost reporting

Cost reporting is one of the main reports that you need to be able to make important financial decisions for your company. Essentially, cost reporting sets out all the costs and expenses related to one job, project or class; this allows you to decide which is the better course of action for many situations.

Financial statement preparation

Again, one of the more arduous jobs that relates to owning a business is financial statements. Financial statements include the balance sheet and statement of income, amongst others. We are able to produce quarterly and annual financial statements for all sizes of companies.

So there you have it. Bookkeeping and the services related to bookkeeping are extremely handy for any type of business, and some of them are essential. Give Forbush & Associates a call today for help with your bookkeeping needs!

What the Affordable Care Act Means for Your Small Business

Finding accurate information on the Patient Protection and Affordable Care Act of 2010 (ACA) can be cumbersome, especially when you’re already short on time. At Forbush and Associates, we are committed to making sure our clients are up-to-date on new laws that affect their business.

With 2013 half done, we take a look at how the law has and will affect our self-employed and small business clients.

What 2013 Brought

Medicare Assessment on Net Investment Income

Self-employed individuals and small businesses may have noticed a hit on their bank accounts when the new Medicare assessment on net investment income began this year.  In January, a 3.8% tax was placed on all net investment income such as taxable capital gains, rents, dividends, and royalties.

For singles, the interest for those with a Modified Adjusted Gross Income over $200,000 will be taxed. For married joint filers, those with a MAGI over $250,000 will notice the additional tax.  Income not affected by the new tax: wages, unemployment wages, Social Security benefits, operating income from a non-passive business, self-employment income, alimony, and-tax exempt income.

Open Enrollment for Health Insurance Marketplace

In October 2013, individuals and small businesses will be able to participate in the open enrollment in the Health Insurance Marketplace. The Marketplace is designed to ease the burden of finding insurance plans that are within your budget. While more information will be released in October, healthcare.gov provides a good checklist to prepare for the coming changes:

  1. Understand how insurance works.
  2. Learn about different types of insurance.
  3. Set your budget.
  4. Determine when you will start your new coverage.
  5. Get organized.
  6. Develop a list of questions to ask before it is time to choose your health care plan.
  7. Seek help from insurance brokers with whom you already have a relationship.

Self-employed individuals will be able to join open enrollment for the Health Insurance Marketplace. You will be to choose from four different plans that differ by the percentage of costs the health plan covers. Some may be able to qualify for tax credits and subsidies based on a sliding scale.

Let’s talk about 2014.

Next year is perhaps the biggest year for the Affordable Care Act for small businesses. From 2010-2013, the maximum tax credit was 35% for small businesses and 25% for tax-exempt organizations.  On January 1st, 2014, the Small Business Health Care Credit will become effective, meaning an increase to 50% and 35%.

To be eligible, your company must cover at least 50% of single health care coverage. Your company must have fewer than 25 full time employees who earn less than $50,000 per year. This is where it gets a little tricky.

Let’s say you have two part-time employees. According to the ACA, they count as one full time employee.  So if you have 20 part time employees, you will count 10 full time employees.

To determine wages, divide the total you pay in wages by the number of full time employees. Your tax credit may change depending on your final number. For more guidance, the IRS provides a step-by-step guide.

Transitional Reinsurance Program Fees

Designed to help stabilize premiums for coverage, this three-year program will run from 2014 through 2016.  It reimburses insurers in the individual insurance Marketplaces for high claim costs. This reimbursement will be paid by self-insured employers whose plans provide major medical coverage, including retiree programs.

In 2014, HHS estimates that the fees will be $5.25 a month (or $63 for the year) for each individual covered under a health care plan, with the required fee for the following two years to be somewhat lower.

Reporting

We saw that grimace. Unfortunately with new rules comes new paperwork. Employers with self-insured plans must submit reports to the IRS detailing information on each covered individual starting in 2014. These reports must be filed by 2015 and the IRS will be providing more information in the coming months.

While the list of changes the Affordable Care Act grows, we’ve identified several of the changes that may take a little more time and money depending on your situation. As always, feel free to contact us with questions about the law or if you need advice on the best steps to take for you and/or your small business.