Tax Law

Business disaster recovery plan essentials

Posted on Nov 15, 2017

Irish writer Oscar Wilde advised us to “expect the unexpected.” He would have made a good disaster planner. Small businesses are the most impacted because they do not usually have a formal disaster recovery plan. As a result, 40 to 60 percent of small businesses close permanently after a disaster, according to Liberty Mutual Insurance. Don’t be a part of that statistic. Now is a great time to review your business’ disaster recovery plan, or to make one if you don’t have one. By focusing on some of the most critical elements of a disaster plan, you can avoid being overwhelmed by the challenge. Set your roster The first step in your disaster plan should be to determine what skill sets you will need in a disaster, and who should be part of the team. The size of your team will vary, but could include IT, HR and operations personnel. Determine who your backups are and what outside resources and personnel you can use. Assess your risk You need to understand your risks before you address them. Consider your physical locations and determine the hazards unique to your region – floods, hurricanes, tornados, earthquakes, etc. Focus on the events most likely to occur, but also save some time to consider outside possibilities. Create your plan Determine and rank the most critical functions and processes for your business. Next, determine how these could be affected by the risks you’ve identified. You should end up with two lists: your most important business factors, and those most at risk. Now you are ready to create a recovery plan that focuses on critical business functions and applies them to the various types of possible business interruption. Your plan should: Consider offsite backups and vendors to help assist with implementing a data storage backup plan. Assess where you store the critical information upon which each of your business functions rely. Establish alternative or remote work arrangements for employees, including their physical, logistical and data needs. Create an annual review of your insurance policies. Evaluate the worth of business interruption coverage within your property and casualty insurance. You may wish to offset some of the potential loss of both business income and recovery expenses within these policies. Consider any opportunities for tax relief from losses sustained as a result of a disaster. Have a plan to keep detailed records and build the appropriate supplier team to help determine the best approach for your business. Make sure you plan for a variety of losses. This can be loss of electricity, a fatal crash of your business systems or material damage to inventory and production capacity. Communicate Document your plan so it is clear, accessible and easy to implement. Share it with everyone on your disaster roster so they know who is responsible for what and how they should act. Review and test your plan at least annually with your roster, and distribute any changes to keep everyone informed. With luck, you will never need to use your business disaster recovery plan. Although we can never prevent disasters, we can do our best to reduce the impact they have on business operations. 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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Updated deadlines for Harvey, Irma and Maria victims

Posted on Nov 3, 2017

The IRS has postponed various tax deadlines for individuals and businesses in Florida, Georgia, Puerto Rico and the U.S. Virgin Islands, as well as in parts of Texas. They will have until Jan. 31, 2018 to file and pay the affected returns and taxes. The new deadline applies to business extensions that ran out Sept. 15 and quarterly estimated tax payments due Sept. 15 and Jan. 16, 2018. Quarterly payroll and excise tax returns due on Oct. 31, as well as 2016 calendar-year tax-exempt organization extensions due Nov. 15 are also included. 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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Debt forgiveness and taxes

Posted on Oct 26, 2017

Did you know that any amount of canceled debt is typically taxed as ordinary income? If you receive debt forgiveness for home, car or student loans, or credit card interest and debt, you may create a tax liability. There are some exceptions, like when debt is forgiven as part of a Chapter 11 bankruptcy, or when a person’s total debt is more than the value of the assets he or she owns. 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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BUSINESS TAX: TIME TO CONSIDER SECTION 179?

Posted on Oct 25, 2017

Section 179 expensing can be a very powerful tax-planning tool for small- and medium-sized businesses acquiring capital assets. While it doesn’t change the amount of depreciation you can take over the life of capital purchase, it can change the timing by allowing you to deduct your purchase in the first year you place it in service. How does Section 179 work? Generally, when you purchase a piece of equipment for your business — say a $10,000 computer system — you can’t deduct the entire cost in the year it was purchased. It must take the expense by depreciating the cost over several years. Section 179 allows you to deduct the cost of the $10,000 computer in the year it was purchased and placed in service. You can deduct the expense of up to $510,000 of qualified property. The $510,000 deduction begins phasing out dollar for dollar if $2.03 million or more of qualified property is purchased during the year (meaning it phases out completely after you’ve purchased $2.54 million in business capital assets). What is qualified property? Qualified property includes things like tangible personal property, computer software and qualified real property (e.g., interior building costs for nonresidential buildings). Section 179 doesn’t apply to property acquired for use in a rental property if it’s not your trade or business but simply an investment. Some vehicles qualify for Section 179 expensing, within limits. (The limits were brought about when some business owners bought expensive Hummers and expensed the cost in a single year.) If you are considering your options for depreciating your business assets under Section 179, here are important details to remember: Section 179 allows deducting the expense of up to $510,000 of qualified business purchases. A Section 179 deduction cannot create a loss for the business. A Section 179 deduction must be for business use. If an asset is not entirely used for business, the allowance is reduced. If you sell a Section 179 asset prior to the full depreciation period, you will have to record any sales proceeds as taxable income. Many states limit the use of this federal shifting of depreciation. Taking Section 179 for capital purchases can be useful, but it’s not for everyone. Using Section 179 for an immediate tax break means it’ll no longer be available for future years. Consider this as you manage your business’s tax obligation. 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 hit the standard deduction threshold

Posted on Oct 24, 2017

Have you hit your standard deduction threshold yet? If not, you still have a few options to help create a lower tax bill for the 2017 tax season. One way is to donate stock you’ve held for more than a year to a charity. You can also consider prepaying next year’s donation in the current year. Another option is to pay your taxes prior to year-end. We can help you find the best option for your situation. 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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