You’ve spent years building your company and now are ready to move on to something else, whether launching a new business, taking advantage of another career opportunity or retiring. Whatever your plans, you want to get the return from your business that you’ve earned from all of the time and money you’ve put into it. That means not only getting a good price but also minimizing the tax hit on the proceeds. One option that can help you defer tax and perhaps even reduce it is an installment sale. Tax benefits With an installment sale, you don’t receive a lump sum payment when the deal closes. Instead, you receive installment payments over a period of time, spreading the gain over a number of years. This generally defers tax, because you pay most of the tax liability as you receive the payments. Usually, tax deferral is beneficial, but it could be especially beneficial if it would allow you to stay under the thresholds for triggering the 3.8% net investment income tax (NIIT) or the 20% long-term capital gains rate. For 2018, taxpayers with modified adjusted gross income (MAGI) over $200,000 per year ($250,000 for married filing jointly and $125,000 for married […] Details
Some of your medical expenses may be tax deductible, but only if you itemize deductions and you have enough expenses to exceed the applicable floor for deductibility. With proper planning, you may be able to time controllable medical expenses to your tax advantage. The Tax Cuts and Jobs Act (TCJA) could make bunching such expenses into 2018 beneficial for some taxpayers. At the same time, certain taxpayers who’ve benefitted from the deduction in previous years might no longer benefit because of the TCJA’s increase to the standard deduction. The changes Various limits apply to most tax deductions, and one type of limit is a “floor,” which means expenses are deductible only to the extent that they exceed that floor (typically a specific percentage of your income). One example is the medical expense deduction. Because it can be difficult to exceed the floor, a common strategy is to “bunch” deductible medical expenses into a particular year where possible. The TCJA reduced the floor for the medical expense deduction for 2017 and 2018 from 10% to 7.5%. So, it might be beneficial to bunch deductible medical expenses into 2018. Medical expenses that aren’t reimbursable by insurance or paid through a tax-advantaged account […] Details
Every year, when baseball season finally ends, a most valuable player (MVP) is named in each league. Not everyone agrees on the choice; in fact, it’s something fans love to argue about. But eventually the two players receive their awards and their names go into the record books. Can you name your organization’s MVPs? (You probably have far more than one or two.) A common assumption is that the highest-paid person in each department is the most valuable. But this isn’t always the case. Identifying your true MVPs can help you make optimal employment decisions ranging from hiring to retention to compensation. Identifying the highly skilled One insightful framework for taking a fresh look at your workforce is the Lepak & Snell model. It’s a four-quadrant, skills-based paradigm dividing employees by value of skills particular to your organization and the skills’ uniqueness in the labor market. Each employee’s skills will fall into one of four quadrants: • High value, high uniqueness • High value, low uniqueness • Low value, high uniqueness • Low value, low uniqueness. Assess where your employees’ skills fall on the value spectrum based on criteria most pertinent to your mission, such as the ability to: • […] Details
Do you prepare internal financial statements for your board of directors on a monthly, quarterly or other periodic basis? Later, at year end, do your auditors always propose adjustments? What’s going on? Most likely, the differences are due to cash basis vs. accrual basis financial statements, as well as reasonable estimates proposed by your auditors during the year-end audit. Simplicity of cash Under cash basis accounting, you recognize income when you receive payments and you recognize expenses when you pay them. The cash “ins” and “outs” are totaled by your accounting software to produce the internal financial statements and trial balance you use to prepare periodic statements. Cash basis financial statements are useful because they’re quick and easy to prepare and they can alert you to any immediate cash flow problems. The simplicity of this accounting method comes at a price, however: Accounts receivable (income you’re owed but haven’t yet received, such as pledges) and accounts payable and accrued expenses (expenses you’ve incurred but haven’t yet paid) don’t exist. Value of accruals With accrual accounting, accounts receivable, accounts payable and other accrued expenses are recognized, allowing your financial statements to be a truer picture of your organization at any point […] Details
Many people choose to pass assets to the next generation during life, whether to reduce the size of their taxable estate, to help out family members or simply to see their loved ones enjoy the gifts. If you’re considering lifetime gifts, be aware that which assets you give can produce substantially different tax consequences. Multiple types of taxes Federal gift and estate taxes generally apply at a rate of 40% to transfers in excess of your available gift and estate tax exemption. Under the Tax Cuts and Jobs Act, the exemption has approximately doubled through 2025. For 2018, it’s $11.18 million (twice that for married couples with proper estate planning strategies in place). Even if your estate isn’t large enough for gift and estate taxes to currently be a concern, there are income tax consequences to consider. Plus, the gift and estate tax exemption is scheduled to drop back to an inflation-adjusted $5 million in 2026. Minimizing estate tax If your estate is large enough that estate tax is a concern, consider gifting property with the greatest future appreciation potential. You’ll remove that future appreciation from your taxable estate. If estate tax isn’t a concern, your family may be better […] Details
Tyler, Simms & St. Sauveur, CPAs, P.C.
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