Posts Tagged "small business"

Factor new limits on deductions into your tax planning

Posted on Sep 17, 2013

As you begin your year-end tax planning review, keep in mind the return of the limitation on itemized deductions and personal exemptions for higher-income taxpayers. When you’re married filing jointly and your adjusted gross income is more than $300,000, the amount you can claim for these two items is reduced. The threshold is $250,000 if you file as a single. 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 the McLean and Tysons Corner, VA. Gilliland & Associates specializes 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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“Basis” is important to an S corporation

Posted on Aug 27, 2013

Losses can be hard to take – so if you think your S corporation will show a loss for 2013, now’s the time to plan to make sure you’ll get the full tax benefit. The Problem. The amount of the business loss you can deduct on your individual income tax return is limited to your basis in your S corporation stock and certain corporate debt. This is true even though the loss reported to you on Schedule K-1 is greater than your basis. Here’s how it works. Typically, stock basis in an S corporation begins with the capital contribution you make to get the company started. (When you receive stock as a gift, an inheritance, or in place of compensation, your initial basis is calculated differently.) At the end of each taxable year, your stock basis is adjusted to reflect the business’s operating results. Taxable income increases your basis, while losses reduce it. Basis is also increased by capital you put into your company and reduced by amounts you withdraw, such as distributions. After your stock basis reaches zero, you may be able to deduct additional losses, up to the extent of your debt basis. That’s the basis you have in loans you make to your company. Once your stock and debt basis are both reduced to zero, losses incurred are suspended, which means you get no current tax benefit. However, you can generally take suspended losses in future years, when you again have basis. The Solution. You can increase your basis – and your ability to take losses – by adding capital or making loans to your business. Please call to discuss how basis affects your individual income tax return. We can guide you through the rules to optimize available...

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Avoid growing pains in your business

Posted on Jul 30, 2013

One way to kill your business is to grow it too fast. Many profitable small businesses have expanded at the wrong time and at the wrong level of increased costs. The result is that they never again make a profit. How does this happen? A given amount of building, equipment, employees, and the associated maintenance, insurance, and taxes will allow your business to operate at a certain maximum sales volume. If you want to grow, say double or triple your current sales, you will need more of all the above items. When you commit to that new larger building with more equipment and employees, you have increased your “breakeven point” (the level of sales you need at which you make your first dollar of profit). Take this example. Assume that you are a local carpet store. You occupy a 4,000 square foot building. You have a fairly fixed amount of inventory, equipment, and employees. Let’s say you are doing $1 million in sales, your gross profit is $300,000, and your fixed costs (building, etc.) are $250,000 with a net profit of $50,000. Since you have an established local customer base, you are convinced that a shop three times this size would make you even more money. Here is what to look out for. Let’s assume that your new 12,000 square foot building and associated higher expenses have raised your fixed costs to $650,000. If you double your sales to $2 million, your gross profit will be $600,000. That leaves you $50,000 in the hole for the year. You would need sales of $2.3 million to get back to the same net profit you had before you tripled your floor space. Before you go down a permanent road of no return, play a few games of “what if.” 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 the McLean and Tysons Corner, VA. Gilliland & Associates specializes 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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Have you considered a SIMPLE plan for your business?

Posted on Sep 28, 2012

Many sole proprietors and small business owners agree on the following two issues: they pay too much in taxes and they have difficulty attracting and retaining good employees. One way to address both of these issues is to have your business sponsor a retirement savings plan. If you’re self-employed or own a small business and don’t currently have a retirement plan in place, consider setting up a SIMPLE plan. SIMPLEs (Savings Incentive Match Plans for Employees) are available in two forms – SIMPLE IRAs and SIMPLE 401(k)s. SIMPLE plans are generally available only to small businesses that don’t maintain any other retirement plan. If your business has more than 100 employees, you won’t be eligible for a SIMPLE. Most businesses will find the IRA version preferable to the 401(k) form of SIMPLE. Here’s how SIMPLE IRAs work. Eligible employees (including yourself) can elect to have a portion of their earnings withheld each pay period, limited to $11,500 in annual deferrals ($14,000 for those aged 50 or older). The employees then direct how the deferrals will be invested within their own SIMPLE IRAs. Amounts withheld for the SIMPLE IRA reduce the employee’s taxable income and grow tax-deferred. The costs to set up and administer a SIMPLE IRA are minimal. However, as the employer, you’re required to make contributions into your employees’ SIMPLE IRAs on their behalf. You have the option of contributing either 2% of the wages of every eligible employee or making matching contributions up to 3% of the wages of those employees who participate in the plan. Generally, the deadline for businesses to establish a SIMPLE plan for 2012 is October 1, 2012. To find out more about SIMPLE plans, give us a...

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The IRS targets worker classification

Posted on Apr 22, 2011

If you have people working for your business, you may have to decide how to classify them. Are they employees or independent contractors? Classifying your workers as independent contractors generally saves you money. That’s because you avoid paying employment taxes and benefits on their behalf. In most instances, however, very few of your workers actually qualify as independent contractors. If the IRS determines that you misclassified your employees as contractors, you could end up paying back all of the employment taxes and benefits that should have been paid over the years. Depending on the size of your workforce, the cost to you could be substantial, potentially bankrupting your business. How can you ensure that you properly classify your workers? Start with the factors listed by the IRS to determine a worker’s classification. If you maintain control over your workers through hiring, training and supervision, scheduling the work to be done, and by providing them with tools and materials, your workers are most likely your employees. The same holds true if you pay your workers a set salary or an hourly wage and have the right to let them go at any time. As a general rule, if you only have the right to control or direct the result of the work and not the means and methods of accomplishing the result, the individual may qualify as an independent contractor. If your business employs independent contractors, take steps to protect yourself and your business. Be consistent with how you classify your workers, and follow how other businesses in your industry classify their workers. And don’t forget to send a Form 1099-MISC to contractors who earn $600 or more from you during the year. The proper classification of workers has become a priority issue for the IRS. Make sure that your workers are classified correctly. For assistance, give us a...

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