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September 2023 Client Profile

The Taylor brothers have enjoyed the good fortune of seeing their family heating and cooling business grow steadily. But that growth has sparked concerns about being liable for alternative minimum tax (AMT) in 2023.

Small businesses that qualify for small-business corporation status avoid the AMT’s potential liability and the administrative burden of calculating the tax. The Taylors can use the following gross-receipts test to see if their business qualifies. A small-business corporation is defined as having a three-year average annual gross receipts not exceeding $5 million for its first tax year and not having three-year average annual gross receipts exceeding $7.5 million for any later year.

More simply, the Taylors don’t need to worry about being liable for AMT as long as their business’s average gross receipts for all three tax-year periods ending before the current tax year are $7.5 million or less. For additional details or questions, they should contact their professional advisor.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.

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Employee Benefits: Eliminate Coverage Gaps

With new hires, you want to be confident that they will become loyal, productive, and valuable long-time employees. One way to achieve this goal is to have a well-thought-out employee benefit program that serves your needs. To see if your program has gaps you may want to consider what competitors offer and what employees look for.

According to a recent study*, business owners are offering benefits at the highest rates since 2008. What benefits are owners ramping up? The percentage of employers offering comprehensive health insurance, health savings accounts, wellness solutions, and employee assistance programs (EAPs) increased from 2022 to 2023. As for qualified retirement plans, the popularity of 401(k) and Simple IRA plans increased among employers, while other plans were offered at about the same rate as last year. For supplementary key employee benefits, both disability income insurance and deferred compensation dropped in popularity among employers while other benefits remained steady.

Still, affordability remains businesses’ top priority where benefits are concerned, ahead of attracting and retaining qualified employees and staff productivity. Your goal in reviewing your benefits program should be working with your professional advisor to achieve quality benefits at a reasonable cost to your business.

On that note, some of the “benefits” employees are looking for can be provided at little or no cost. Another study** found that most workers judge whether a job is good by the pay, boss, health and retirement benefits, vacation time, friendliness of co-workers, whether they’re helping people or society, remote work options, and opportunities for advancement. Pay was the top consideration at 45% of employees, followed by a good boss at 14%. People ages 27 to 34 are more likely to say promotion opportunities and advancement are important than older employees. And they place less emphasis on health insurance, retirement, and vacation benefits.

* 2023 Report on Employer Firms: Findings from the 2022 Small Business Credit Survey
** Washington Post-Ipso Poll, 2023

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September 2023 Client Line Newsletter

Employee Benefits: Eliminate Coverage Gaps – a well thought-out employee benefit program will help you retain employees.

September 2023 Client Profile

A Checklist for Selling Your Business – what’s next after you decide to sell your business.

September 2023 Question and Answer

Higher 2024 HSA and HDHP Limits – good news for you and your employees.

Don’t Overlook Your Digital Estate Assets – your digital presence should be a part of your estate plan.

Improve Your Credit Scores – simple guidance on how you may be able to improve your credit score.

Business Takes On Financial Challenges – a look at the percentage of businesses that have experienced financial challenges.

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Cost of College

Average tuition and fees of degree-granting institutions for first-time, full time undergraduate students, by level and control of institution. Academic years 2010-11 and 2020-21.

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Substaintiating Noncash Charitable Donations

Noncash charitable deductions allow taxpayers to deduct the fair market value of donated items on their tax returns. These steps can help ensure your charitable deductions are adequately substantiated and accepted by the IRS.

RECEIPTS EVERY TIME

Regardless of the value, you should have a receipt from the charity for any noncash donation. This document should include the charity’s name, the date and location of the contribution, and a reasonably detailed description of the donated property. Consider taking photos of donated items to document their condition.

HIGHER VALUE ITEMS

If the value of your noncash donations is over $500 for the tax year, you must also include IRS Form 8283 with your tax return. For each item or group of similar items valued over $500, you must provide additional details including when you acquired the item and its original cost.

GET AN APPRAISAL

If you’re donating an item or a group of similar items worth more than $5,000, you’ll generally need a qualified appraisal of the item’s fair market value, and you must also complete Section B of Form 8283. There are exceptions for publicly traded securities, vehicles, and intellectual property.

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August 2023 Question and Answer

QUESTION:

What’s the difference between high-yield savings and money market accounts?

ANSWER:

High-yield savings and money market accounts offer higher interest rates compared to traditional savings accounts.

A high-yield savings account is best for funds you don’t need to access frequently. There might be limits on the number of transactions allowed per month. You can find this account at banks.

Money market accounts often come with check-writing privileges and debit cards, offering more liquidity. However, they may require higher minimum balances to avoid fees and some money market investments are not FDIC insured.

These accounts are a good place to park cash or an emergency fund. Place long-term investments in vehicles that generally offer higher rates of return. Wherever you put your money, check the financial health of the institution.

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Creating a PTO Policy

Creating a Paid Time Off (PTO) policy is essential to a company’s benefits package. As an employer, you have the flexibility to design a policy that suits your business and meets the needs of your employees.

LEGALLY SPEAKING

Ensure your policy adheres to applicable laws. Some states mandate specific types of paid leave, such as sick leave.

CHOOSE TYPES

Decide the types of leave to include, such as vacation, personal days, and sick leave. Some companies opt for a “bank” system where all kinds of leave are lumped together, giving employees more flexibility.

DEFINITIONS MATTER

Your policy should define how PTO is accrued. Is it based on hours worked or a set amount per year? Will unused PTO roll over to the next year? You must also outline how PTO requests should be made and approved, ensuring fairness and transparency.

COMMUNICATION

Finally, communicate the policy to your employees. A well-structured PTO policy can enhance employee satisfaction, productivity, and retention. Review and adjust the policy periodically to keep it relevant and effective.

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Documents Required for a Business Sale

While preparing to sell your business you’ll need to create these key documents for any potential buyer.

FINANCIAL RECORDS

These include income statements, balance sheets, and cash flow statements for the past three to five years. Additionally, you’ll need tax returns and bank statements.

BUSINESS PLAN

The business plan provides an overview of the business, its strategies, and its market position.

LIST OF ASSETS

This document details all physical assets including equipment, inventory, real estate, and intangible assets such as patents, copyrights, and trademarks. Include purchase date, cost, and current value.

LEASES AND CONTRACTS

Copies of all current leases for premises, equipment, and vehicles and contracts with suppliers, customers, and employees should be compiled.

LEGAL DOCUMENTS

This includes the articles of incorporation for corporations or articles of organization for LLCs, partnership agreements, and any licenses and permits required to operate the business.

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August 2023 Client Profile

Paula received a voicemail from an IRS employee asking for a call back on a toll-free number. She is current on her tax filing requirements and doesn’t owe any back taxes. So, she’s confused about why the IRS would contact her.

Paula is justified in being concerned. The IRS does not initiate contact with taxpayers by phone, email, text messages, or social media channels. Official IRS correspondence is sent through the US Postal Service. The letter provides detailed information regarding tax issues such as notices about discrepancies, bills for unpaid taxes, or requests for additional information.

Sometimes, the IRS may call taxpayers, but this is not common and usually follows an initial letter. During these calls, representatives never demand immediate payment or ask for credit card information over the phone.

Paula should call the IRS directly at 1-800-829-1040, not on the number left in the voicemail.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.

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New FAFSA Rules

The Free Application for Federal Student Aid (FAFSA) was revised to streamline the application process and alter eligibility formulas.

WHAT’S NEW

The changes took effect in July for the 2024-25 academic year and include a shift from the Expected Family Contribution to the new Student Aid Index (SAI) and a reduction in the number of application questions from 100 to roughly 40.

HIGHER COSTS

Some families could pay more tuition, particularly households earning under $70,000 with multiple children in college, as the sibling discount is removed under the new aid calculation formula.

OTHER CHANGES

Financial aid eligibility will change based on the family’s financial circumstances, where they attend college, and how many siblings are also in college.

The SAI will also influence students’ Pell Grant eligibility and the amount of additional institutional aid that schools can provide. Grants do not have to be repaid, unlike loans.

And for divorced families, the parent who needs to complete the FAFSA changes from the custodial parent to the one who provides the most financial support.