Monthly Archives: October 2014

Tax Advantage for Business Income

business incomeTiming business income and expenses to your tax advantage.

 

Typically, it’s better to defer tax. Here are two timing strategies that can help businesses do this:

  1. Defer income to next year. If your business uses the cash method of accounting, you can defer billing for your products or services. Or, if you use the accrual method, you can delay shipping products or delivering services.
  2. Accelerate deductible expenses into the current year. If you’re a cash-basis taxpayer, you may make a state estimated tax payment before Dec. 31, so you can deduct it this year rather than next. Both cash- and accrual-basis taxpayers can charge expenses on a credit card and deduct them in the year charged, regardless of when the credit card bill is paid.

But if you think you’ll be in a higher tax bracket next year, consider taking the opposite approach by  accelerating income and deferring deductible expenses.  This will increase your tax bill this year but can save you tax over the two-year period.

These are only some of the nuances to consider.  Please contact us to discuss what timing strategies will work to your tax advantage, based on your specific situation.

If you have questions about timing business income and expenses or would like assistance in determining how to make the most of your timing, Ciuni & Panichi can help you start planning now.  For more information, or on tax reporting requirements, please contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com.
You may also be interested in:
Internal Controls for Business Owners to Use Today
Audit Your Retirement Plan Before the Government Does

© 2014

Affordable Care Act Fee Deadline Approaching

Affordable Care Act – Action required by November 15th

By Jeffrey R. Spencer, CPA, Principal, Ciuni & Panichi, Inc.

ACAThe Affordable Care Act imposes a $63 fee per enrollee on insured and self-insured health plans.  Employers with self-insured health plans must report certain information to the Department of Health and Human Services by November 15, 2014.  Here is what you need to do now.

The Affordable Care Act (ACA) requires a fee to be paid by health insurance issuers and by self-insured group health plans to fund the Transitional Reinsurance Program (TRP).  The TRP financially assists insurance companies that cover high-risk individuals.  Insurers and sponsors of self-insured group health plans must report the number of covered individuals under the plan to the Department of Health and Human Services (HHS) in order to determine the per-enrollee fee.  For fully insured plans, the insurance company will typically collect the TRP fee through premium rates.  Self-insured plans fund and remit the TRP fee themselves.

The TRP fee is based on the average number of covered lives (employees, spouses, and dependents) for the first nine months of the calendar year.  The IRS has proposed three methods for determining the average number of covered lives: 1) Actual count method, 2) Snapshot method, and 3) Form 5500 method.  Since the TRP fee is $63 per covered life for 2014, it is important to analyze which method results in the lowest fee.  The fee may be paid from plan assets as a permissible plan expense under ERISA.

HHS allows the payment of the TRP fee in two installments.  For 2014, the first installment of $52.50 per enrollee is due by January 15, 2015, and the second installment of $10.50 per enrollee is due by November 15, 2015.  Self-insured employers must register on www.Pay.gov to complete the TRP fee submission process.  Pay.gov is a web-based application where forms may be retrieved and online payments to government agencies can be submitted.  All payment information and scheduling of payment dates for the TRP fee will be handled using this site.
To begin the process, plans must register and submit their number of covered lives to HHS via Pay.gov by November 15, 2014.  Within 30 days, HHS will notify the plan of its required TRP fee.

It is important to note certain types of health coverage are excluded from the TRP fee, including:

  • Coverage that is not major medical (e.g., standalone vision and dental, health savings accounts, Part D prescription drug benefits, etc.)
  • Supplemental coverage (e.g., HRA)
  • Secondary coverage (e.g., Medicare)

Please contact Jeff Spencer at 216-831-7171 or jspencer@cp-advisors.com for more information on this topic or on other Affordabe Care Act issues.

Jeff Spencer is a Tax Principal at Ciuni & Panichi, Inc., and he is the head of the employee benefits tax services group.

You may also be interested in:

Retirement Plan Audit

Internal Controls for Business Owners to Use Today

Appreciated Stock and Tax Benefits

You can gain tax benefits by donating stock

charityIs there appreciated stock in your portfolio that you would like to sell?  Unsure about paying more on your tax return?  Then making a charitable contribution instead might save you money, if you donate it to charity rather than making a cash gift.

Appreciated publicly traded stock you’ve held for more than a year is long-term capital gains property. If you donate it, you can both avoid the capital gains tax you’d pay if you sold the property and deduct its current fair market value.

Let’s say you donate $10,000 of stock that you paid $4,000 for, your ordinary-income tax rate is 33% and your long-term capital gains rate is 15%. If you sold the stock, you’d pay $900 in tax on the $6,000 gain. If you were also subject to the 3.8% net investment income tax (NIIT), you’d pay another $228 in NIIT. By instead donating the stock to charity, you save $4,428 in federal tax ($1,128 in capital gains tax and NIIT plus $3,300 from the $10,000 income tax deduction). If you donated $10,000 in cash, your federal tax savings would be only $3,300.

If you are charitably inclined or would like to minimize taxes related to your investment portfolio, Ciuni & Panichi, Inc. can help find the strategies that will best achieve your goals.  The tax professionals at Ciuni & Panichi, Inc. can assist you with determining if this option is right for you.  Contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com and see if a donation is right for you.

Mr. Komos is the Partner-in-Charge of the firm’s Tax Department.  He has experience in all facets of taxation for closely held businesses, their owners and key personnel.  His clients are in a wide range of industries, including manufacturing, service, real estate, and construction.
© 2014
You may also be interested in:

Pay Professional Fees Now and Reduce Your Tax Bill

College Tax Breaks Help Save You Money

Tax Liability and the Wash Sale Rule

tax planningBe careful with your tax planning.

Have you gotten some big gains this year? You should consider looking for unrealized losses in your portfolio and possibly selling off those investments before the end of the year to help offset those gains. This can reduce your 2014 tax liability.

Careful tax planning can help, because if you want to minimize the impact on your asset allocation, you must keep in mind the wash sale rule. This rule prevents you from taking a loss on a security if you buy a substantially identical security (or an option to buy such a security) within 30 days before or after you sell the security that created the loss. You can recognize the loss on your taxes only when you sell the replacement security.

Fortunately, there are ways to avoid the wash sale rule and still achieve your tax goals:

You should immediately buy securities of a different company that is in the same industry or shares in a mutual fund that holds securities much like the ones you sold.

  • Wait 31 days to repurchase the same security.
  • Before selling the security, buy additional shares of that security equal to the number you want to sell at a loss and then wait 31 days to sell the original portion.

Do you want more ideas on saving taxes on your investments? The tax professionals at Ciuni & Panichi, Inc. are always ready to help. We have tax-efficient strategies for all your investments. Please contact Jim Komos, CPA, CFPTM at 216-831-7171 or jkomos@cp-advisors.com.

 You might also be interested in:

Combining Business Travel with Vacation Pleasure and Get Tax Benefits

Tax Deduction:  Is My Elderly Parent a Dependent?

 

© 2014

Beware of Alternative Minimum Tax Triggers

Alternative Minimum Tax:  Triggers could boost your tax bill if you’re not careful.

AMTA fundamental tax planning strategy is to accelerate deductible expenses into the current year. This typically will defer, and in some cases permanently reduce your taxes.  But beware of the exceptions.  One is if the additional deductions this year trigger the alternative minimum tax (AMT).  This is a separate tax system that limits some deductions and doesn’t permit others.

 

Here are some deductions that can be AMT triggers:

  • State and local income tax deductions,
  • property tax deductions, and
  • miscellaneous itemized deductions subject to the 2% of adjusted gross income floor, such as investment expenses and unreimbursed employee business expenses.

But deductions aren’t the only things that can trigger the AMT. So can certain income-related items, such as:

  • Incentive stock option exercises,
  • tax-exempt interest on certain private activity bonds, and
  • accelerated depreciation adjustments and related gain or loss differences when assets are sold.

Fortunately, with proper planning, you may be able to avoid the AMT, reduce its impact or even take advantage of its lower maximum rate.  If you’re concerned about any of these triggers or would like to know what else might trigger the AMT, please contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com.  Our tax professionals can help you determine the best strategies for your situation.

You may also be interested in:
Capital Gains Tax – Zero Percent
Some Tax Saving Ideas for Trust Income

© 2014