benefits

Selling Your Business? Defer — and Possibly Reduce — Tax with an Installment Sale

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 […]

By |November 6th, 2018|business, liability, tax, tax implications, tax planning|0 Comments

529 Plans Offer Two Tax-Advantaged Education Funding Options

Section 529 plans are a popular education-funding tool because of tax and other benefits. Two types are available: 1) prepaid tuition plans, and 2) savings plans. And one of these plans got even better under the Tax Cuts and Jobs Act (TCJA).

Enjoy valuable benefits

529 plans provide a tax-advantaged way to help pay for qualifying education expenses. First and foremost, although contributions aren’t deductible for federal purposes, plan assets can grow tax-deferred. In addition, some states offer tax incentives for contributing in the form of deductions or credits.

But that’s not all. 529 plans also usually offer high contribution limits. And there are no income limits for contributing.

Lock in current tuition rates

With a 529 prepaid tuition plan, if your contract is for four years of tuition, tuition is guaranteed regardless of its cost at the time the beneficiary actually attends the school. This can provide substantial […]

By |October 12th, 2018|child, education credit, expensing, New Tax Laws, savings|0 Comments

Tax-Free Fringe Benefits Help Small Businesses and Their Employees

In today’s tightening job market, to attract and retain the best employees, small businesses need to offer not only competitive pay, but also appealing fringe benefits. Benefits that are tax-free are especially attractive to employees. Let’s take a quick look at some popular options.

Insurance

Businesses can provide their employees with various types of insurance on a tax-free basis. Here are some of the most common:

Health insurance. If you maintain a health care plan for employees, coverage under the plan isn’t taxable to them. Employee contributions are excluded from income if pretax coverage is elected under a cafeteria plan. Otherwise, such amounts are included in their wages, but may be deductible on a limited basis as an itemized deduction.

Disability insurance. Your premium payments aren’t included in employees’ income, nor are your contributions to a trust providing disability benefits. Employees’ premium payments (or […]

Do You Know the ABCs of HSAs, FSAs and HRAs?

There continues to be much uncertainty about the Affordable Care Act and how such uncertainty will impact health care costs. So it’s critical to leverage all tax-advantaged ways to fund these expenses, including HSAs, FSAs and HRAs. Here’s how to make sense of this alphabet soup of health care accounts.

HSAs

If you’re covered by a qualified high-deductible health plan (HDHP), you can contribute pretax income to an employer-sponsored Health Savings Account — or make deductible contributions to an HSA you set up yourself — up to $3,450 for self-only coverage and $6,900 for family coverage for 2018. Plus, if you’re age 55 or older, you may contribute an additional $1,000.

You own the account, which can bear interest or be invested, growing tax-deferred similar to an IRA. Withdrawals for qualified medical expenses are tax-free, and you can carry over a balance from year to year.

FSAs

Regardless of […]

By |June 26th, 2018|affordable care act, Health care, hsa|0 Comments

Fringe Benefits – Transportation Updates

In years prior to the recently passed Tax Cuts and Jobs Act, Congress encouraged “green”efforts to protect the environment by giving employees tax breaks for carpooling and using mass transit. For employees, the TCJA doesn’t take away the tax-favored status of these commuting benefits (other than bicycle commuting) or the option to pay for them with pre-tax dollars. Instead, starting January 1, 2018 businesses can no longer take a deduction for transportation fringe benefits (including employee parking). This means for both profit and non-profit businesses, the cost of providing these benefits is generally increased by the corporate tax rate (21% as of January 1, 2018).

This poses a dilemma for employers. Either they continue to provide these transportation fringe benefits despite the loss of the business deduction or they discontinue making these benefits available. This will cause businesses to take a careful look at the tax impact/ cost of transportation benefits against the value to their employees (and in turn, the importance of attracting and retaining talent by offering these benefits). It is also possible that local ordinances may have an impact as well:

San Francisco, California. Businesses with a location in San Francisco (including nonprofit […]

By |March 1st, 2018|deduction, New Tax Laws|0 Comments

More Info on ACA Repeal and Replacement

House Republicans have unveiled a repeal and replacement plan for the Affordable Care Act (ACA). The GOP’s American Health Care Act (ACHA) would eliminate most of the ACA’s taxes, including penalties connected with individual and employer mandates, the net investment income (NII) tax and the Additional Medicare tax. Left in place, although delayed, would be the excise tax on high dollar health plans. Also left in place, would be a number of non-tax provisions related to scope of coverage, benefits and children- including allowing dependents to continue to stay on their parents’ plan until the age of 26, prohibiting health insurers from denying coverage or raising rates to patients based on pre-existing conditions, and forbidding life-time limits on insurance coverage.

The House GOP plan has been rejected by Democrats. Some Republicans have said the plan does not go far enough in repealing all of the ACA. As March moves forward, a vote on the house floor is eventually expected.

To read the impact of the ACA changes, new age-based credits, repeal of NII tax, expanded HSA and other topics, click the link for a detailed read from CCH and Wolters Kluwer. CCH Tax Briefing – ACA Repeal […]

By |March 14th, 2017|affordable care act, Health care|0 Comments

File and Suspend Method of Claiming Social Security Benefits to Be Eliminated

The Bipartisan Budget Act of 2015 (H.R. 1314—the Act), signed by President Obama on 11/2/15, eliminates the file and suspend method, a popular strategy used by married couples to maximize their lifetime Social Security benefits. Under this approach, a higher earning spouse claims benefits at his full retirement age (currently age 66) but suspends the benefits until a later date (e.g., at age 70 or sooner, if desired), allowing the Social Security credits to continue to grow. The lower earning spouse claims benefits based on the higher earning spouse’s earning record, which are more than the benefits based on his or her own earnings record. In a provision labeled “closure of unintended loopholes,” the Act effectively eliminates this opportunity for claims filed after 4/30/16 (180 days after enactment). [ Note: Those who’ve been using this method or other eligible individuals who file to claim benefits under this method within the next 180 days should not be affected.]

By |December 2nd, 2015|social security|0 Comments

12 Planning Tips for Social Security Benefits

Article originally written by Theodore J. Sarenski, CPA/PFS on Nov 04, 2014, posted to AICPA

Helping clients plan for Social Security benefits may involve a lot of information gathering and research, but doing so could save them a heap of headaches and a lot of money. Here are 12 planning tips that stand out to me as potential opportunities. These can provide great relief and keep your clients out of the danger zone.

  1. If a person is past their full retirement age (age 66) and is submitting the initial application for Social Security retirement benefits, be sure to claim the allowed six months of retroactive benefits. One important question to consider is if your clients should start full retirement age at age 66 or wait until age 70. Life expectancy data shows that a person who retires at age 66 will live until 86.2, and a person who retires at age 70 will live until he or she is 87. With this in mind, I suggest waiting until age 70 to begin receiving benefits. Keep in mind there is an exception; the break-even point is age 81, so if your family history shows that most members do […]
By |November 6th, 2014|retirement, social security|0 Comments