Money Management

Stay prepared to sell your business

Posted on Apr 18, 2018

If you enjoy running your own business, selling it may be the furthest thing from your mind. But the reality is that eventually an opportunity to sell will come, whether due to your own life changes or a perfect buyer walking in the door. Planning, often years in advance of the sale date, is necessary to get the most value for the love, sweat and tears you’ve invested. Here are some tips to stay prepared: Assemble a great team. Selling a business is a complex process, especially as you grow larger. You’re likely to need three kinds of professionals to help: an accountant, to help review and produce clean and easy-to-understand financial statements; a lawyer, to create the necessary legal documents and help you negotiate terms; and a trusted business broker, to evaluate the worth of your business and find buyers. Develop your exit strategy. With the help of your advisory team, create a clear picture of what selling your business might look like. Outline the risks and opportunities that could affect the valuation of your business. Planning out an ideal scenario as well as a plan B will help you avoid getting backed into a corner and selling at a discount. Clean up your financials. As you get closer to selling, go over your business financial statements as well as your tax returns from the last three years. A broker will like to present a clear and compelling financial picture to a client, and that will include a year-to-date financial report. Have a plan to improve sales. The worst time to sell is when sales are declining, even if it’s just a temporary or seasonal dip. Part of your planning should include some tactics to boost your sales and cash flow, such as increasing marketing and promotion, liquidating bloated inventories or collecting on accounts receivables. Be prepared to evaluate buyers. Be prepared to take a calm approach to any offers you get. You don’t want to jump at the first offer, and many offers that seem too good to be true often are. Lack of solid financing is often an issue, so work with your business broker to find buyers who have been prequalified by a lender. Have your after-sale plan down. Often a buyer will want to include a clause that the previous owner stay on awhile as an advisor. Make sure that the advisory period lined out in the contract isn’t longer than is comfortable for you. Finally, work with your accountant on a tax-efficient plan for the proceeds of your sale. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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What’s the average tax refund check?

Posted on Apr 13, 2018

The IRS returned more than $323 billion in tax refunds to taxpayers last year. If you plan on getting a refund this year, have you thought about what you’ll do with it? Whether you plan on paying off credit card debt or using it for home improvements, give us a call to learn about possible tax benefits. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter....

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Putting your tax refund into a retirement account?

Posted on Mar 26, 2018

If you plan on having the IRS deposit your tax refund into one or more individual retirement accounts (IRAs), most of the hard part is already done: You’ve already decided that you want to save the money instead of spending it on new patio furniture or a trip to Jamaica. Still, you’re not in the clear yet. Here are a handful of possible obstacles that might mess up your tax refund on its way through the direct deposit process: Wrong account number. If you accidentally use the wrong account number and it belongs to another customer, that mistake could take weeks or even months to correct. The IRS maintains that correct input of financial information on the tax return is the taxpayer’s responsibility, so make sure you check and recheck the account numbers you are using for your refund. Manual revisions. If the IRS gets your tax return and finds that the routing numbers have been manually revised, your direct deposit request has a higher chance of being rejected. You may get an old-fashioned refund check in the mail. Wrong type of account. It’s up to you to verify that your financial institution will accept direct deposits into an IRA. Some banks, for example, will reject direct deposits to anything other than a savings account. Refund adjustments. Sometimes the IRS corrects a taxpayer’s math or makes other adjustments that can affect the refund amount. In some cases, these adjustments may result in a direct deposit that exceeds the allowable IRA contribution amount. If so, you could be stuck with a penalty for excess contributions. Putting your tax refund into an IRA can be a great idea, but remember: Double-check your return and be aware of the rules your bank or credit union has about IRA direct deposits. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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Get ready to save more in 2018

Posted on Nov 29, 2017

You can save more for retirement next year using tax-advantaged accounts, thanks to a boost in the maximum 401(k) contribution rate by the IRS. The maximum rate increases by $500 to $18,500, which is the first increase in three years. Those aged 50 or older can still contribute an additional $6,000 on top of that amount. This is good news, because a 401(k) is one of most potent tools in your retirement arsenal. It offers many benefits over other forms of saving, including: Tax-deferred growth. Pre-tax income of $18,500 invested over 30 years with 6 percent annual cumulative interest will grow to $111,901.92. That’s compared with $67,588.76 of the same amount of income invested after being taxed at the highest rate. While you’ll owe tax on 401(k) withdrawals after retirement, you may be able to manage your 401(k) withdrawals to fall into a lower income bracket. Roth option. You may opt to make your contributions to a 401(k) as a Roth investment, meaning you invest post-tax income, but you can withdraw from your Roth tax-free during retirement. A mix of traditional and Roth accounts will give you flexibility to manage your income tax rate during retirement. Company match. Many companies offer to match the first few percentage points of their employees contributions to a 401(k). Even if you can’t max out your contribution, you should try to invest up to your company’s match limit. Otherwise, you’re just leaving money on the table. While 401(k)s have great utility, they come with a few downsides. Any withdrawals made before age 59 1/2 are assessed a 10 percent penalty fee, in addition to being taxed as regular income during the year they are withdrawn. Any investments in 401(k)s also are limited to a few choices set by your employer’s retirement plan, so a limited number of conventional investment options in mutual funds is one of the trade-offs of using a 401(k). Social Security also gets a boost in 2018 The federal retirement safety net system, Social Security also gets a boost during 2018. The average estimated monthly benefit paid to retirees in 2018 will be $1,404 in 2018, up from $1,377 in 2017. The maximum amount of wages subject to Social Security taxes rises to $128,700 in 2018, up $1,500. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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The Equifax breach and you: be proactive

Posted on Nov 2, 2017

Earlier this year, hackers were able to breach the security of Equifax, one of the three national credit reporting agencies. More than 143 million Americans – nearly half the entire country – were exposed to the attack, and may have had their personal information stolen (including names and birthdates, and Social Security and driver’s license numbers). Equifax is still determining exactly whose data has been exposed. While you wait to find out, it’s worth taking a few proactive steps to make sure your info isn’t misused by hackers. 1. Start checking. Visit Equifax’s website at www.equifaxsecurity2017.com and enter your last name and last six digits of your Social Security number. The site will tell you whether it’s likely or not your data has been exposed, and put you on a list to get more information. You can also sign up for a year’s worth of free credit monitoring. 2. Watch your statements. Start checking your credit card statements, and pay special attention to cards you don’t use often. The initial reports from the breach were that hackers may have been making charges on underused cards. 3. Check your credit reports. You can look for suspicious items on your reports, such as new accounts being opened in your name, at all three credit report agencies: Equifax, Experian and TransUnion. Free annual reports are available at www.annualcreditreport.com. You may want to stagger your use of the reports to one from each agency every four months. More frequent checks will cost you a small fee. 4. Freeze your credit. If you suspect you may become a victim of identity theft, you can place a credit freeze on your profile at each of the three credit reporting agencies. This stops new accounts from being opened in your name. Note that you’ll have to unfreeze your accounts if you want to apply for new loans or make your credit accessible for things such as job applications. 5. File your taxes early. One of the most common ways identity thieves use your information is to try to claim a tax refund with your data. This was the most common scam in 2016, according to the Better Business Bureau. If you file your tax return as early as possible, you shut down this opportunity for any would-be thieves. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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HOW TO FIX YOUR OVERFUNDED ACCOUNT

Posted on Oct 26, 2017

Is socking away large sums in a tax-deferred retirement account ever a bad idea? It is when you exceed the annual IRS limits. And intentional or not, the penalties can be painful. Here’s how overfunding occurs and what steps to take to fix the problem. When do overfunding situations occur? Overfunding retirement accounts happens more than you may realize. It can be the result of a job change that causes you to participate in the two different employer retirement plans. Sometimes people forget they made IRA contributions early in the year and do it again later. Others forget that the IRA limit is the total of all accounts, not per account. The rules are complicated. Traditional IRAs can’t be contributed to after age 70½, while Roth IRA contributions are subject to income limits. Plus all contributions are predicated on having earned income. IRAs The annual Roth and Traditional IRA contribution limit is $5,500 ($6,500 if age 50 or older). If you surpass this amount, you pay a 6 percent penalty on the overpayment every year until it’s corrected, plus a potential 10 percent penalty on the investment income attributed to the overfunded amount. The fix: If the overfunding is discovered before the filing deadline (plus extensions), you can withdraw the excess and any income earned on the contribution to avoid the 6 percent penalty. You will potentially owe 10 percent on the earnings of the excess contributions if you’re under age 59½. You can apply the withdrawn contribution to the next year. If your issue is due to age (70½ or older for a Traditional IRA) or income limit (for a Roth IRA), consider recharacterizing your contribution from one IRA type to another. 401(k)s The rules for correcting an overfunded 401(k) are a little more rigid. You have until April 15 to return the funds, period. The nature of the penalty is also different. The excess amount is taxable in the year of the overfunding, plus taxable again when withdrawn. So, you pay tax twice on the same amount. And in certain cases, overfunding a 401(k) could cause it to lose its qualified status. The fix: If you suspect an overpayment situation, contact your employer as soon as possible. Adjust your contribution amount before the end of the year and try to get the problem resolved that way. No matter the cause, if you are in doubt about how to handle excess contributions, give us a call. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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