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Gunnip News & Notes

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Gunnip News & Notes

  1. Take a careful look at what’s changed within the tax law since the beginning of the year  
    Opportunities and pitfalls within recent changes of tax laws impact each taxpayer’s unique situation and should not be overlooked especially during the year-end 2016.
  2. Review Data & Prior Year Returns 
    Take a look at losses or other carryovers, estimated tax installments, and items that were unusual. Conversations about next year should include review of any plans for significant purchases or dispositions, as well as any possible life changes.
  3. Investments
    Taxpayers holding investments in the form of securities, real estate, collectibles, or other assets, have an op­portunity to reduce their overall tax bill by some strategic buying and sell­ing (or like-kind exchanging). The ordinary income tax rates, the capital gain rates, the net investment income tax rate, and the alternative minimum tax (AMT), all play a role.
  4. Income Caps on Benefits
    Monitoring adjusted gross income (AGI) can provide a number of tax benefits. Some of the tax benefits that get phased out depending upon the taxpayer’s AGI level include: Itemized deductions, Personal exemptions, Medical Savings account adjustments, education credits, student loan interest deduction, and Maximum Roth IRA contributions.
  5. PATH Act Extenders
    The Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted immediately before the start of 2016, permanently extended many tax incentives that were previously temporary. Some were modified in the process and others were extended for up to five years.
  6. Life events
    Life events such as marriage, birth or adoption of a child, a new job or the loss of a job, and retirement, all impact year-end tax planning. Take a look into the future and consider any possible events that could trigger significant income, losses or deductions.
  7. Retirement strategies
    Take a look at a number of different provisions in anticipation of retirement. Many of these provisions have opportunities and deadlines associated with the concept of taxable year. These include contributions to employer plans, strategic use of IRAs and timing Roth IRA conversions and reconversions to maximize your retirement.
  8. Affordable Care Act compliance
    The Affordable Care Act (ACA) imposes new requirements on individu­als. Year-end planning for individuals with regards to the ACA may be valuable, particularly with health-related expenditures.
  9. Acceleration or delay
    Taxpayers using the cash method basis of accounting can defer or accelerate income using a variety of strategies such as sell appreciated assets, receive bonuses before January, sell outstanding installment contracts, redeem U.S. Savings Bonds, accelerate debt forgiveness income and avoid mandatory like-kind exchange treatment.

    A cash basis taxpayer generally deducts an expense in the year it is paid, although prepayment of an expense gener­ally will not accelerate a deduction. There are exceptions, including those made in connection with January mortgage payment in December, tuition prepayments and estimated state taxes.
  10. A New Administration
    When the new Administration moves into Washington in January 2017, it is inevitable that changes will follow. How these changes will impact upon your long-term tax situation remains to be developed. Looking toward the future, you should not lose sight of the short term tax dollars to be saved immediately through 2016 year-end strategies. 

Please feel free to call our offices if you have any questions about how year-end tax planning might help you save taxes. Our tax laws operate largely within the confines of “the taxable year.” Once 2016 is over, tax savings that are specific to 2016 may be gone forever.



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According to a survey by a U.S. national bank, 78% of couples who talk at least once a week about finances are happy or extremely happy with their partners. If making time for the "money talk" could improve your relationship, why not establish a habit of discussing finances and setting financial goals? Contact us for suggestions about how to get started.Happy couple on a bench

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Invoice with PAID blodly stamped, Wilmington Delaware accountantTurning receivables into cash is among the most important things a business must do. Of course, it’s easier said than done. Here are five ways to speed up collections:

1. Streamline the billing process. You can’t collect what you don’t bill. Invoice customers promptly — as soon as the product ships, if possible. Or, if your company provides services, track billable hours daily and bill monthly — or as often as permitted under the customer’s contract. Implementing an electronic payment system, or upgrading your existing one, may accelerate invoicing and enable faster receipt of receivables.

2. Reward early birds and penalize procrastinators. Enticing customers to pay before the due date may require early-bird discounts, such as a small percentage off bills or value-added perks for those who pay on time or improve their payment histories. Conversely, you might consider assessing fees on past-due payments. However, many companies decide to waive late charges as an act of goodwill when customers immediately resolve outstanding balances.

3. Take a multifaceted approach. A variety of strategies, rather than a single phone call demanding payment, can yield better results. Courtesy calls may allow you to more quickly discover discrepancies (such as wrong addresses) and settle disputes. Payment plans can help distressed customers catch up on overdue accounts. And promissory notes can help prevent future billing disagreements.

4. Minimize risky business. Before conducting business with anyone, review a prospective customer’s payment history, references and credit score to assess ability to pay. Poor credit shouldn’t necessarily stop you from providing products or services to a customer. But be prepared to alter your typical payment terms when dealing with high-risk buyers.

5. Look for outside help. If late payments become a serious concern, third parties can offer assistance. Turning over particularly bad debts to a reputable collection agency allows you to distance yourself from the matter and focus on business. And let it not go unsaid that our CPA firm can review your financial statements and collection procedures to help you set specific, achievable goals in getting paid faster.

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Gifting Company StockEveryone needs a solid estate plan to distribute assets according to their wishes and benefit their heirs. But this necessity is especially keen for business owners, many of whom have spent years working hard to build up the values of their companies.

If you can relate to this statement, one effective way to reduce estate taxes is to limit the amount of appreciation in your estate — and your company may provide just the ticket for doing so.

Why appreciation?

You’ll save the most in estate taxes by giving away assets with the highest probability of future appreciation. Why? Because gifting these assets today will keep future appreciation on those assets out of your taxable estate. Thus, there may be no better gift than your company stock, which could be the most rapidly appreciating asset you own.

For example, assume your business is worth $5 million today but is likely to be worth $15 million in several years. By giving away some of the stock today, you’ll keep a substantial portion of the future appreciation out of your taxable estate.

What are the limits?

Naturally, there are limits to how much you can give without tax consequences. Each individual is entitled to give as much as $14,000 per year per recipient without incurring any gift tax or using any of his or her $5.45 million lifetime gift, estate or generation-skipping transfer tax exemption amount.

Also be aware that, because you’re giving away company stock, the IRS may challenge the value you place on the gift and try to increase it substantially. The agency is required to make any challenges to a gift tax return within the normal three-year statute of limitations — even when no tax is payable with the return. But the statute of limitations applies only if certain disclosures are made on the gift tax return. Generally, for gifts of stock that isn’t publicly traded, a professional business valuation is highly recommended.

Who can help?

If the idea of giving away portions of your business to reduce estate tax exposure intrigues you, please contact us. We can help you fully assess the feasibility of this strategy as it pertains to your specific situation.

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Two puzzle pieces fitting together one with a light bulb the other a dollar signMany companies reach a point in their development where they have to make an important decision: Innovate themselves or acquire a competitor? Of course, it isn’t always an either/or decision. Nonetheless, business owners should consider the pluses and minuses of both approaches.

Innovating to grow

Innovation is a broad term that encompasses many strategies — all of which are intended to help the company achieve goals such as boosting profits, improving cash flow, or diversifying products or services. Common strategies are:

  • Research and development of new products,
  • New market penetration via geographic expansion or enhanced product/service offerings, and
  • Increased productivity resulting from internal improvements or enhancements.

Each strategy takes time, effort and capital. Understandably, business leaders can be hesitant to devote such vital resources to innovation initiatives and risk decreases in productivity and profitability.

Combining companies

For companies that don’t want to bet the farm on internal development, acquisitions can be appealing. If you’re looking to expand a product line, for example, it might be more time- and cost-effective to buy a competitor that already offers the goods you want.

Your acquisition target has already done the hard work — including funding, testing and creating the product or service and building a client base. By buying this competitor, you may incur less risk than you would by investing your own capital and building the product from scratch. The same holds true for geographic expansion and productivity improvements.

But business combinations come with their own risks. To fully benefit from any acquisition, your company needs to “stick the landing” — efficiently integrate operations and retain divisions and employees capable of ensuring that innovations continue to pay off. For many buyers, that’s a tall order.

Considering your options

In an ideal world, companies would devote resources to innovation and also make the occasional acquisition to bolster their standing in particular markets. But most companies don’t have the luxury to do both simultaneously. Please contact us for help examining the risks and potential rewards associated with each option.

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Dashboard for your businessWould you drive a car without a functional dashboard? Perhaps once a month someone could tell you how fast you were going and how much fuel you had left. Sound good? Probably not. Yet this is how many business owners run their companies.

The good news is there’s a solution. With the right software and some help from our firm, you can regularly receive dashboard reports that provide a one- or two-page summary of key business performance metrics in a concise, visual format.

Good looking info

Similar to a car’s control panel, dashboard reports provide business owners and managers with timely, relevant input to make quick but informed decisions. Everything in a dashboard report can typically be found elsewhere in the company’s financial reporting systems, just in a less user-friendly format.

Believe it or not, the concept of dashboard reports has been around since at least the 1990s, when they originally gained popularity. But now, thanks to 21st century technology, these reports are even easier to generate and distribute. Many companies offer them to ownership and management via an internal website or weekly e-mail blasts.

The right metrics

The critical question to ask when creating a dashboard report is: Which metrics should we include? The right answer depends on, among other things, current economic conditions, your industry and the specifics of your business operations. Nonetheless, most dashboard reports include financial ratios such as:

  • Gross margin [(revenues – cost of sales) / revenues],
  • Current ratio (current assets / current liabilities), and
  • Total asset turnover (sales / total assets).

From there, industry-specific performance metrics are typically added. For example, a warehouse might report daily shipments or inventory turnover, not just total asset turnover. Or a retailer might provide sales graphs that highlight product mixes, sales rep performance, daily units sold and variances over the same week’s sales from the previous year.

Here to help

The purpose of dashboard reports is to quickly identify trends that require corrective actions. Just remember that they’re no replacement for sound, well-maintained financial statements. Please contact us for help with both.

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College Students Don't Fall for the Federal Student Tax ScamAs you settle into your fall semester routine, both the FBI and the IRS want you to be alert for calls from scammers. The calls may spoof a legitimate number on your caller ID, and appear to come from an actual government agency, including the FBI or IRS. The caller will demand immediate payment of delinquent taxes, such as the non-existent "Federal Student Tax," or student loans, dues, or parking tickets. If you receive one of these calls, disconnect. Legitimate government agencies will not ask you for immediate payment, nor request credit or debit card information over the telephone. 

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Thank you to all our employees for voting in the News Journal's Top Work Place survey this summer. We are honored to be listed 5th in the small business category with a special award in the Ethics category and the highest ranking CPA firm - for the 9th year in a row.  

To see the full article, please visit Delaware Online


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Form 1120S Tax Return for S CorpsAn S corporation is a pass-through entity that is treated very much like a partnership for federal income tax purposes. As a result, all income is passed through to shareholders and taxed at their individual tax rates. However, unlike a C corporation, an S corporation’s income is taxable to the shareholders when it is earned whether or not the corporation distributes the income. Because an S corporation has a unique tax structure that directly impacts shareholders, it is important for to understand the S corporation distribution and loss limitations, as well as how and when items of income and expense are taxed, before developing an overall tax plan.

In addition, some S corporation income and expense items are subject to special rules and separate identification for tax purposes. Examples of separately stated items that could affect a shareholder’s tax liability include charitable contributions, capital gains, Sec. 179 expense deductions, foreign taxes, and net income or loss related to rental real estate activities.

These items, as well as income and losses, are passed through to the shareholder on a pro rata basis, which means that the amount passed through to each shareholder is dependent upon that shareholder’s stock ownership percentage. However, a shareholder’s portion of the losses and deductions may only be used to offset income from other sources to the extent that the total does not exceed the basis of the shareholder’s stock and the basis of any debt owed to the shareholder by the corporation. The S corporation losses and deductions are also subject to the passive-activity rules.

Other key points to consider when developing a comprehensive tax strategy include:

  •  the availability of the Code Sec. 179 deduction at the corporate and shareholder level;
  • reporting requirements for the domestic production activities deduction;
  • the tax treatment of fringe benefits;
  • below-market loans between shareholders and S corporations; and
  • IRS scrutiny of distributions to shareholders who have not received compensation.

We can assist you in identifying and maximizing the potential tax savings. Please call our office at your earliest convenience to arrange an appointment.


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Experience is the Difference®