Posted on

Developing an Employee Handbook

Having an employee handbook makes it easy for you to communicate rules and responsibilities to employees, so there’s no question about what’s expected of them – or you, as a small business owner.

WHAT TO INCLUDE

A good employee handbook defines your unique workplace rules and practices and should be written clearly and in a voice that reflects your vision and the culture you’ve built.

WHERE TO START

If you’re starting from scratch, begin with your company’s culture and values. Consider how to create a value system that motivates employees to do their best and stay long-term.

Keep in mind the labor laws in your state. For example, many states have passed “leave laws” that govern how employers must handle certain types of leave, whether that’s sick leave or jury duty.

Once you have a draft of your handbook, it’s best to have an employment attorney review it. Once finalized, distribute the handbook to all employees and have them sign a form acknowledging receipt.

Posted on

Digitizing Tax Records

You don’t need to keep your tax documents and receipts in boxes or files. Free up space in your home or office by scanning them.

BOOST PRODUCTIVITY

Electronic records can efficiently be searched by using keywords. But paper documents that are misplaced or misfiled could take hours of rifling through boxes, folders, or cabinets. Organize your electronic files in a similar way you would paper files so they’re easier for you to find.

PROTECTION PLUS

Digital documents are better protected against the elements. Fires and floods can destroy papers and ink can fade over time. But these risks can be mitigated with proper electronic document storage.

STAY UPDATED

Electronic documents can be digitally date-stamped. This ensures you’re using the most current version. You can track edits to digital records, monitor who’s viewing them, and restrict access to sensitive information.

YOU HAVE OPTIONS

You can use a high-quality external hard drive to store your documents at your home or office. And there’s cloud storage that gives you access anywhere you have an internet connection. But no online service is 100% secure. Regardless of the storage option you choose, after you scan your documents, be sure to shred them.

Posted on

Year-End Tax Moves

There’s still time for last-minute tax savings if you act before January 1.

DEFER INCOME TO 2023

Some tax thresholds for 2023 will see larger than usual increases due to 2022’s inflation. (See Q&A article for more information on how inflation impacts your tax bill.) The 2023 standard deduction will increase significantly. If you don’t itemize deductions, consider deferring some of your 2022 income into 2023 to take advantage of a larger standard deduction. While it might not be possible to put off your wages, you may be able to delay an expected year-end bonus until 2023.

TAKE RMDs ON TIME

If you reach age 72 in 2022, this is the first year you must take minimum distributions (RMD) from most of your tax-deferred retirement accounts. RMDs must be taken by December 31 each year. But if it’s your first year taking RMDs, you have a grace period until April 1, 2023, to take your first distribution. Failing to withdraw the required minimum amount each year comes with hefty penalties.

There is an alternative if you don’t need the funds. Instead, you can make a qualified charitable distribution (QCD). Have your account custodian distribute the money directly to your specified charity to avoid tax consequences on your personal tax return.

SPEND ALL YOUR FUNDS

Remember to use all the funds you have in your flexible spending account before the end of the year. If your plan is structured as “use it or lose it,” any unused balance is forfeited, and your employer keeps the money. But some programs allow a short rollover period. If you’re unsure, ask your human resources officer, so you don’t lose out.

Posted on

December 2022 Client Profile

Vince owns a construction company, and during the holidays, he lets employees volunteer at their favorite charity and pays them for their time. Can he deduct these employee payments from his business tax return?

Although Vince is serving his community by encouraging his staff to contribute their time or skills to charity, the payment he makes to his employees doesn’t qualify as a charitable deduction. Instead, he should pay his employees if they volunteer during regular working hours, which would be recorded as payroll expenses.

However, if he incurs direct, non-payroll expenses on behalf of his employees’ volunteer efforts, he generally can deduct those as a charitable contribution. For example, if he supplies building materials for his employees to serve with Habitat for Humanity building homes, the construction materials he provides will be tax deductible. He needs to keep receipts for all donated materials and may need a written acknowledgment for amounts over $250.

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

Posted on

The 2022 Inflation Reduction Act

Learn about the key tax provisions of the 2022 Inflation Reduction Act (Act) signed into law by the President on August 16, 2022, most of which become effective in the new year.

GREEN CARS

Several green energy tax provisions are included in the Act. Effective as of 08/16/22, only electric vehicles with parts assembled in North America qualify for the $7,500 clean vehicle credit. That means some brands of vehicles immediately lose credit eligibility because they are built abroad. The vehicle identification number will trace whether an automobile is assembled in North America.

The clean car credit was available on the first 200,000 units sold prior to the Act. But as of January 1, 2023, the cap will be lifted, and those models will qualify if bought after 2022.

Also, the Act places caps on the prices of vehicles that qualify for the credit and income limits on the taxpayer claiming the credit. Effective after 2022, passenger cars are capped at $55,000, with vans, SUVs, and trucks limited to $80,000. And the buyer’s adjusted gross income (AGI) must be below $150,000 for single ($300,000 for MFJ) to claim the credit.

Finally, the Act allows partial credits for buying a used electric vehicles. Previously, the credit was only available for new car purchases. But there are AGI limits, too ($75,000 for single filers and $150,000 for married filing jointly).

GREEN HOMES

Homeowners can also receive enhanced tax breaks to help make their homes more energy efficient. Starting in 2023, up to 30% of the costs of installing Energy Star-rated doors and windows and upgrading insulation qualify for a tax credit with a total annual cap of $1,200. Previously there was a $500 lifetime credit per taxpayer.

Upgrading your A/C and appliances and completing energy audits can qualify for the credit, too. There are caps on how much you can spend on different types of improvements.

Consult your tax professional.

Posted on

December 2022 Client Line Newsletter

The 2022 Inflation Reduction Act – learn about key provisions.

December 2022 Client Profile

Year-End Tax Moves – last-minute tax savings.

Digitizing Tax Records – scan your tax documents to free up space.

Developing an Employee Handbook – having an employee handbook makes it easy to communicate rules and responsibilities to employees.

December 2002 Question and Answer

When to Switch Accounting Systems – your old bookkeeping system may need an upgrade.

2021 Holiday Spending – Americans spent more on gifts in 2021 than in 2020.

A Popular Tax Law Scheduled to Phase Out for 2023 – the temporary 100% tax deduction for qualified business meals will revert to the old 50% as of January 1, 2023.

Posted on

October 2022 Questions and Answers

QUESTION:

The IRS fined me for making a late tax payment. Can I get them to waive the penalty?

ANSWER:

The IRS may provide relief from a penalty that would otherwise be applicable under its First Time Penalty Abatement policy.

You may qualify for a reduction of your penalty for failing to pay taxes on time if the following are true:

  • You didn’t previously have to file a return, or you have no penalties for the three tax years before the tax year in which you received a penalty.
  • You filed all required returns or requested an extension of time to file later.
  • You have paid, or arranged to pay, any tax due.
Posted on

A Bear Market, a Bull Market

A BEAR MARKET

WHAT IS IT?
When a market index (like the S&P 500) falls 20% or more from its peak.

HOW OFTEN?
On average, a bear market occurs every 56 months.

HOW LONG?
On average, a bear market lasts 9.6 months.

A BULL MARKET

WHAT IS IT?
When the market has risen 20% or more above its near-term lows.

HOW OFTEN?
Bull markets have occurred for 78% of the past 91 years.

HOW LONG?
The average length of a bull market is 3.8 years with the longest being the 11-year run from 2009 to 2020.

Posted on

Maximize Your FSA

With the end of the year approaching, review your health care flexible spending account (FSA) to ensure you get the most out of it.

ROLLING OVER

Check to see if it allows money in your account to be rolled over and used in 2023. Some plans may allow a limited amount, usually no more than $500, to roll over. In comparison, some allow a short grace period of a month or two to use any unspent funds. But some plans have a “use it by December 31 or lose it” clause.

If you’re unsure, ask your human resources department because any money remaining in your account at the end of the designated period is forfeited to your employer.

QUALIFICATIONS

FSA funds can be used for a variety of qualified medical expenses. This includes over-the-counter medication and first-aid supplies. Dental procedures and eye exams are also covered. But remember that you can’t use FSA money for cosmetic procedures, health clubs fees, or prepayment for medical services you’ll receive next year.

Posted on

Small Business Loans

Take the guesswork out of securing a business loan. Whether it’s to fund expansion or purchase equipment, being prepared can speed up the process.

CHECK YOUR SCORES

Unless you own an established company, lenders will check your personal credit score when making business lending decisions. An individual score greater than 700 increases the odds that you will be approved. Business credit scores generally range from 0 to 100. So, the higher, the better.

HAVE A PLAN

Prepare a business plan because lenders will ask what you will do with the loan proceeds to increase your company’s profits. Explain your business strategy and include current and historical financial statements that contain a balance sheet and cash flow statement.

OFFERING SECURITY

Depending on the size of the loan you’re seeking, the lender may ask for collateral or a personal guarantee. The collateral could be equipment, receivables, real estate, or other businesses you own. And the personal guarantee states that you will pay the loan if the company doesn’t.