Financial Moves for the End of 2017

Tax Planning

tax planning

I don’t know about you but I am not sad to see 2017 go! It has been a crazy year of political drama, fake news, and crazy natural disasters.  In fact there is still debris from Hurricane Irma in my neighborhood!  The good news is there is still time left to make some financial moves to finish off the year strong.  Here’s a list of things to do to wind down 2017.

For small businesses

1. Get your bookkeeping up-to-date for the year. If you fell behind, now is the time to catch up.  There is no way to make any last minute moves unless you know where you stand at this point.

Once you know what your net profits for the year are looking like you can decide what to do.  Want to show more income for 2017 than 2018?  Try to get some extra income in December. Some ideas for this are running a year end or holiday special promotion, or asking clients to prepay for next year now at a discount. You can also keep expenses down by holding off on making purchases until January. Think the new tax reform will mean lower taxes in 2018? Slow down your collection efforts for the rest of the year and start up again in January. Stock up on supplies or make major purchases (see 4. below) before the year is over.

2. Make sure you have W-9 forms for all of your contractors. All copies of the 1099-MISC forms for 2017 are due January 31, 2018!  Make sure you have all of this information now so you are ready to hand over that information to your CPA in the beginning of January. You need to file 1099-MISC forms for any individual, partnership, and certain LLCs that you paid over $600 to in 2017. You also need to give 1099-MISC forms to any lawyers that you paid in 2017, and possibly your landlord too.

1099-MISC filing has become a hot button issue for the IRS. Every audit I have handled in the last year looked at the 1099-MISC filings.  They issue penalties for slip ups. The 2018 penalties for not filing correct information is:

 

Up to 30 days late – $50 per return/$187,500 max

31 days late through August 1 – $100 per return/$536,000 max

After August 1 or Not At All – $260 per return/$1,072,500 max

Intentional Disregard – $530 per return/No limitation

 

On top of these penalties the IRS can also disallow the deduction, resulting in additional taxes owed!

3. Make major purchases. If you’ve been contemplating buying a car, new computer, or other big equipment for your business, now is the time. You can take advantage of accelerated depreciation and get a full deduction for the entire cost, even though you purchase it in December!

Here is how to get a huge deduction for a car purchase.  Use the “Hummer Tax Loophole,” or Section 179 deduction. Section 179 lets you deduct up to $510,00 in 2017 in fixed assets (vehicles, computers, furniture, etc.).  There are special rules in place for autos, but if you by a NEW car in December and document that it is 100% for business you can deduct $11,160. Document your mileage with by keeping a log or using a mileage tracking app.

4. Check your payroll. S-corporation owners must run payroll.  This is a big “red flag” for the IRS when you don’t.  If you have a lot of cash maybe run yourself a bonus payroll. This is good if you need to show a higher salary on a W-2 or increase your Social Security contributions. This is also a great way to pay in additional tax if you missed your quarterly estimated payments – and avoid penalties.

While on the subject of payroll – S-corporation owners need to make sure their health insurance premiums are included in Box 1 of their W-2.  Contact your payroll company to make sure it is correct. If you skip this step your business cannot deduct the expense of the health insurance and you cannot use the self-employed health insurance deduction on your personal return!

5. Set up or make a contribution to your retirement account. Retirement contributions will reduce your tax bill and set you up for financial success for the future.  Examples of these kinds of accounts are a SEP, simple IRA, or 401(k). They each have different rules such as participation and contribution limits, so choose wisely!

6. Write off business gifts.  This is especially useful during the holidays. Just keep in mind only up to $25 can be written off.

Sometimes gifts can also be considered “meals and entertainment” – think show or game tickets.  Meals and entertainment can only be deducted 50%.  Here is one instance where the IRS is kind and let’s you use whichever classification is more beneficial to you!

7. Make your s-election.  If you are an LLC or a c-corporation and have been meaning to become an s-corporation, now is the time to file Form 2553 Election by a Small Business Corporation. You can have the election go into effect for January 2018.

 

For Individuals

1. Check your withholding.  Did you under-withhold in your payroll this year to have more cash in your paycheck?  Ask your CPA to do a tax projection for you to see if you are going to owe additional taxes. You can make estimated payments or pay in April when you file, but you could have some penalties to deal with.

2. Did you skip some of your estimated payments during the year?  You should send them in ASAP to limit your penalties.  The good news is you have until January 15, 2018 for the fourth quarter estimated payment due date.

3. Double up on real estate tax deductions. There might be a lot of changes to various itemized deductions with the proposed tax reform. If you are concerned that you might not be able to take advantage of your deductions such as real estate taxes, you can take advantage of them in 2017 by paying them before December 31. It’s an extra bonus if you paid 2016’s real estate taxes in 2017 as well.

4. Make your fourth quarter state income tax estimated payment in December 2017 instead of January 2018.  This will allow you to deduct all of your state income tax payments in 2017 in case the deduction isn’t available anymore in 2018.

5. Be charitable. Now is a great time for charitable giving.  Make sure you give to a legitimate 501(c)(3) organization. Make sure you keep documentation of the gift. If you give more than $250 to a charity they are required to give you a written acknowledgement.  

Items other than cash can be donated as well.  Organizations will take cars, boats, stock, and other assets. If your donation property is worth over $5,000 you will need to get an appraisal.

6. Use your Flexible Spending Account funds.  FSA funds are “use it or lose it,” so make sure you drain those accounts by December 31.  Some employers give a grade period until March 15, but this is optional.

7. Max out your 401k.  If you haven’t contributed all year or just want to put away more money you can put an oversized amount into your 401k with the last few payrolls.  You might also be able to contribute from your year-end bonus (talk to HR).

 

As always, if there is anything I can do to help please feel free to reach out!

 

Contractors vs. Employees

contractors vs. employees

recite-contractor vs employee

When companies are hiring there is often a question of whether they are bringing on contractors or employees. Sometimes it is easy to figure out, like when you use an outsourcing company or a subcontractor. Other times it can be more difficult to determine, such as hiring a remote employee or a sales representative.

The IRS asks some questions when determining if someone is a contractor or an employee:

  1. Does the company control what the worker does and how the worker does his job? For example, do you tell the worker he has to work from 9-5, or can he work whenever is convenient to him?
  2. Are the business aspects of the worker’s cob controlled by the company? This can include how you pay the worker, if you reimburse expenses, if you supply tools, etc.
  3. Are there written contracts or employee-type benefits? This can include pension plans, insurance, vacation pay, etc.

There are consequences for miscategorizing employees as contractors. If you are paying workers as contractors when they should be employees, you can be responsible for payroll taxes. Late fees and penalties for missed payroll taxes can be very steep, and the IRS takes this very seriously.

There is no set rule for answering the contractor vs. employee question. Consider the entire relationship, make sure you consider the degree of control involved (what will be done and how it will be done), and make sure you document the decision in case the IRS questions you.

If you have questions about contractors vs. employees or payroll issues, please contact me.

Tweet it! Consider control when determining if workers are contractors vs. employees. Read more: bit.ly/1o9O5rz @BetteHochberger

Femfessionals Adds New Board Members and Community Ambassadors | South Florida Citybizlist

I am thrilled to be part of this fabulous group of professional women in Femfessionals Fort Lauderdale!

See the announcement in the CityBizList South Florida.

Femfessionals Adds New Board Members and Community Ambassadors | South Florida Citybizlist.

About Femfessionals and FemCity Ft. Lauderdale
Femfessionals connects ambitious professional women through “connection lunches,” original workshops, social media and www.femfessionals.com, creating individual communities within cities (FemCities) around the world. A Femfessional is a savvy business woman characterized as positive, open-minded, driven, professional, ambitious and desirous of forming strong strategic connections to benefit each other personally and professionally, and to the benefit of her community. Not only is she motivated to succeed, she is passionate about the success of others around her. For more information about Femfessionals, visit www.femfessionals.com For more information about FemCity Ft. Lauderdale, visit www.facebook.com/FemCityFtLaudy or @LauderFEMS on Twitter. – See more at: http://southflorida.citybizlist.com/article/femfessionals-adds-new-board-members-and-community-ambassadors#sthash.hLW2RzZB.dpuf

Simplified Home Office Deduction New for 2013 Filing Season

simplified home office deduction

There is a simplified home office deduction new for the 2013.  This is a great thing for those work-at-home types.  To calculate the deduction you take the square footage of the home office and multiply it by $5 per square foot, with a maximum deduction of $1,500.  If you use the simplified method you don’t even need to file that extra form anymore- it goes right on the Schedule C, line 30 (see it here).

Here’s the catch- in some cases the traditional method of calculating the home office deduction will result in a bigger deduction.  This could happen if you have a lot of direct expenses, such as paying for repairs and maintenance specifically to your home office.  That means that you might still want to go through the whole long, complex calculation anyway.  Check with your CPA to see what is your best bet.

recite-home office deduction

Tweet it!  The simplified home office deduction is easy to calculate but it’s capped at $1,500. @BetteHochberger

Taking Moving Expenses as Tax Deductions

With the economy as it is these days people might find themselves moving to find work.  It is possible for these expenses to be tax deductible.  Here is a guide as to how.

A Case of Two Tests

There are two tests that determine if your moving expenses are deductible- distance and time.

  1. The distance test – your new work must be at least 50 miles father from your old home than your old job was from your old home; OR if you have no previous workplace or have been out of work or working part-time for a substantial amount of time your new job must be at least 50 miles from your old home.
  2. The time test – Employees must work full-time for at least 39 weeks during the first 12 months immediately following your relocation.  You do not need to work for the same employer for all 39 weeks and the weeks do not need to be in a row.  Self-employed people must work full time at least 39 weeks during the first 12 months and a total of at least 78 weeks during the first 24 months immediate following your relocation.

You also need to make sure that your move is within 1 year from the date you first report to work for the new job.  So if you move to a new area hoping to find work, hope you find it before 1 year passes!

Are We There Yet?

Haven’t met the time test by the time you need to file your return?  You can still take the deduction for the tax year in which you moved if you think you will satisfy the time test during the following tax year.   If you don’t take the moving deduction for the tax year in which you moved and meet the time test during the following tax year, you can go back an amend your tax return to take the deduction.  You must take the deduction on the tax return of the same year in which you moved.

What if you take the deduction for the tax year in which you move but then don’t end up meeting the time test?  You have two options.  Either take the amount of the deduction as “other income” the following tax year or amend the tax return on which you claimed the deduction to remove it.

What Moving Expenses Can Be Deducted?

You can deduction the cost of moving your household goods and personal effects and travel including lodging.  Some expenses might include:

  • Costs of connecting or disconnecting utilities.
  • Cost of shipping your car and pets.
  • Costs to store and insure your stuff within any period of 30 consecutive days after the day your things are moved from your former home and before they reach your new home.

There are many items that CANNOT be deducted, including the costs of meals while moving.  You also CANNOT take a deduction for any expense that was reimbursed by your employer.

Forms

Moving expenses are deducted by filing Form 3903.  You can find a copy of the form here. The deductible expenses are reported on Form 1040 (line 26 on 2011) and a copy of Form 3903 is filed with your return.