Smart business people learn to delegate work

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As a business owner or manager, you may think that if you want things done “the right way,” you have to do them yourself. But that isn’t always the best approach at work, even if you firmly believe you’re the best person for the job. There simply isn’t enough time in the day – not if you have a business to run.

Like it or not, you must learn how to delegate work to subordinates. Here are some helpful hints.

* Get organized. Start by deciding which tasks to delegate and which employees will be assigned responsibilities. The workload doesn’t have to be etched in stone, but you should develop a game plan for subdividing jobs.

* Focus on self-starters. You will need to rely on people who can think for themselves. Don’t rely on employees who you anticipate will be constantly seeking your guidance. If you have to show someone what to do every step of the way, it defeats the entire purpose.

* Give workers authority to act independently and make decisions on the fly. Don’t hinder the process by requiring employees to obtain your approval on every decision. This will only turn into a variation of doing things the same old way.

* Monitor work progress. This aspect must be handled with sensitivity. You’ll want to keep an eye on employees, but you can’t keep looking over their shoulders either. Find the proper balance.

* Analyze the results to determine if the work met your expectations. If it didn’t, offer constructive criticism for improvements. Make this a learning experience for both of you.

As you become more comfortable delegating work, you can continue to loosen the reins. When you spend less time on routine matters, you’ll have more time to devote to growing your business profits.

Watch out for aggressive phone scams again this tax season

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The Treasury Inspector General for Taxpayer Administration (TIGTA) is warning taxpayers about one particular category of tax scams that has proven to be very widespread, very aggressive, and very relentless. Callers claim to be IRS employees, and they tell their intended victims that they owe taxes that must be paid immediately using a prepaid debit card or wire transfer. The fake IRS agents threaten those who refuse to pay with arrest, deportation, or loss of a business or driver’s license. The scammers have been operating in every state in the country.

Here are some practices used by the scammers that taxpayers should watch out for:

* Use of automated robocall machine.

* Caller gives fake IRS badge numbers.

* Caller knows last four digits of victim’s social security number.

* Caller ID is changed to appear as if the IRS is the caller.

* A fake IRS e-mail is sent supporting the scammer’s claims.

* Follow-up calls are made claiming to be from the police department or motor vehicle licensing office, with caller ID again supporting the claim.

If you receive one of these fake calls, complete the “IRS Impersonation Scam Form” on TIGTA’s website, or call TIGTA at 800-366-4484.

Want to lower your 2013 tax bill? The time for action is running out. Read more.

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Want to lower your 2013 tax bill? The time for action is running out, so consider these tax-savers now.

* You can choose to deduct sales taxes instead of local and state income taxes. If you’re planning big ticket purchases (like a car or a boat), buy before year-end to beef up your deductible amount of sales tax.

* If you’re a teacher, don’t overlook the deduction for up to $250 for classroom supplies you purchase in 2013.

* Consider prepaying college tuition you’ll owe for the first semester of 2014. This year you can deduct up to $4,000 for higher education expenses. Income limits apply.

* Max out your retirement plan contributions. You can set aside $5,500 in an IRA ($6,500 if you’re 50 or older), $12,000 in a SIMPLE ($14,500 if you’re 50 or older), or $17,500 in a 401(k) plan ($23,000 if you’re 50 or older).

* Establish a pension plan for your small business. You may qualify for a tax credit of up to $500 in each of the plan’s first three years.

* Need equipment for your business? Buy and place it in service by year-end to qualify for up to $500,000 of first-year expensing or 50% bonus depreciation.

* Review your investments and make your year-end sell decisions, whether to rebalance your portfolio at the lowest tax cost or to offset gains and losses.

* If you’re charity-minded, consider giving appreciated stock that you’ve owned for over a year. You can generally deduct the fair market value and pay no capital gains tax on the appreciation.

* Another charitable possibility for those over 70½: Make a direct donation of up to $100,000 from your IRA to a charity. The donation counts as part of your required minimum distribution but isn’t included in your taxable income.

* Install energy-saving improvements (such as insulation, doors, and windows) in your home, and you might qualify for a tax credit of up to $500.

These possibilities for cutting your taxes are just the starting point. Contact us now for a review of your 2013 tax situation and tax-saving suggestions that will work best in your individual circumstances.

Great Tips – find one that you can implement today!

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Summer is a good time to do business entertaining. Meet the rules and you can deduct 50% of the cost.

If you and your spouse work, the cost of sending your children to a summer day camp may qualify for the child care credit.

Combine business and pleasure on a trip this summer and you can deduct the travel costs and other business-related costs.

The number of days you use your vacation home affects the tax deductions you can take on the property.

If your boat or recreation vehicle has sleeping space, a bathroom, and cooking facilities, it might qualify for tax deductions as a second home.

Before you accelerate payments on your home mortgage, consider other uses for that cash. Do you have other higher interest rate loans?

Document money transactions between you and your company (salary, rental payments, loans) as you would with an outsider.

If you have self-employment income, consider setting up a “solo” 401(k) or a Simplified Employee Pension (SEP).

Your smart phone may contain more personal financial information than your desk top computer. Protect it from criminals who “phish.”

Start saving early. Save 10% from every dollar. Those who start at age 25 have nearly double the $ at age 65 over those starting age 35.

$500 per month invested for 40 years ($240,000) will accumulate to $760,000 at 5%. Don’t wait to start saving.

It is common for those who earn $50,000 per year to spend it all. Sadly, most of those who earn $100,000 also spend it all.

Do you think you can’t save 10% of current earnings? Suppose you lost your job and the new job paid 10% less. Start saving 10% NOW.

Borrowing from your company retirement plan will have no tax consequences if set up properly and repaid on time.

Don’t buy or start a business outside your area of expertise. Many a family inheritance has been wasted while learning a business.

If you are planning to sell business or investment property and acquire another, consider a tax-deferred exchange. No current tax bill.

If you donate a vehicle worth over $5,000 to charity, an independent appraisal is required by the IRS.

Don’t decide on either a lump sum or a retirement annuity until you have explored all the options in light of your financial condition.

A job change can change your taxes

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Planning to change employers this year? As you look forward to starting your new job, you’re probably not thinking about taxes. But actions you take now can have an impact next April – and beyond.

Here are three tax-smart tips:   * Roll your retirement plan. You may be tempted to cash out the balance in your employer-sponsored plan, such as a 401(k). But remember that distributions from these plans are generally taxable.

Instead, ask your plan administrator to make a direct rollover to your IRA or another qualified plan. If you’re under age 59½, this decision also avoids the additional 10% penalty on early distributions. Bonus: Your retirement money will continue to grow tax-deferred.

* Adjust your withholding. Assess your overall tax situation before you complete Form W-4 for your new employer. Did you receive severance pay, unemployment compensation, or other taxable income? You might need to increase your withholding to avoid an unexpected tax bill when you file your return.

* Keep track of your job-related expenses. Unreimbursed employment agency fees, résumé preparation costs, and certain travel expenses can be claimed as itemized deductions.

Are you moving at least 50 miles to your new job? You may be able to reduce your income even if you don’t itemize. Eligible moving expenses are an above-the-line deduction.

More tax issues to consider when you change jobs include stock options, employment-related educational expenses, and the sale of your home. Give us a call. We’ll be happy to help you implement tax-saving strategies.

Taxes and your child’s summer job

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With the school year over, your teenager might be taking a summer job. If so, you both may have questions about taxes. Here are some of the common concerns.

If your child chooses a typical wage-paying job, he or she will soon be confronted with the task of calculating withholding allowances on Form W-4. Claiming zero allowances and thereby withholding the maximum amount is the safest option, but it might also unnecessarily tie up hard-earned cash until this year’s tax return is filed. However, claiming too many allowances, especially if the child holds multiple part-time jobs, might cause underwithholding. For help figuring the right number, try the withholding calculator at www.irs.gov. (Look under “Filing Information for Individuals.”)

If your child decides to mow lawns or perform other tasks and be his own boss, there are a few more tax issues to consider. Such activity will likely generate taxable income, on which federal and state income taxes might be due. If net earnings are $400 or more, self-employment taxes will also be owed. These taxes can often be paid at the time that the child files a 2013 tax return, but if the income is substantial enough, estimated tax deposits might be necessary.

Being self-employed also means keeping detailed records of income and business expenses. Encourage your teen to purchase a simple low-cost ledger book to help organize the records. And when tracking income, remind the child that tips received are not just tokens of gratitude – they are considered taxable income by the IRS.

Summer jobs can provide tax breaks for some parents. Business owners can hire their own children and deduct the wages paid to them, effectively shifting income from the parent’s higher income bracket to the child’s lower bracket. What’s more, if operating as a sole proprietor, you do not have to pay FICA taxes if your teen is under age 18 nor pay federal unemployment taxes if the child is under age 21. Just remember, the wages you pay your child must be appropriate for the services actually rendered.

Looking for a little icing on the summer employment cake? When your child receives earned income, he or she can also qualify for a Roth IRA. The lower of $5,500 or the child’s annual earned income can be contributed to a Roth by the teen, parent, or someone else.

Summer employment can be your teen’s first exposure to the real world. Help them make it a tax-smart experience. If you have questions about taxes and summer jobs, give us a call.

 

Many tax deadlines fall on April 15

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April 15, 2013, is a major tax day, with the following IRS deadlines falling on that date:

* Individual income tax returns for 2012 are due.

* 2012 partnership returns are due.

* 2012 annual gift tax returns are due.

* Deadline for making 2012 IRA contributions.

* First installment of 2013 individual estimated tax is due.

* Deadline for amending 2009 individual tax returns.

* Deadline for original filing of a 2009 individual income tax return to claim a tax refund for that year.

Contact our office if you need details or assistance with any tax filing.

Expiring Tax Provisions

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I thought you might find this quick listing of selected expired/expiring tax provisions useful. As you know, Congress could pass legislation at any time extending or revising any or all of these provisions.

* SOCIAL SECURITY TAXES. Employee’s share will increase
to 6.2% after 2012, up from 4.2%.

* INCOME TAX RATES. 2012 rates of 10%, 15%, 25%, 28%,
33%, and 35% will change to 15%, 28%, 31%, 36% and
39.6% for 2013.

* CAPITAL GAINS. Maximum long-term rate will increase
from 15% to 20% after 2012.

* DIVIDENDS. Top 15% rate will be eliminated; dividends
will be taxed as ordinary income with a top rate of
39.6%.

* CHILD TAX CREDIT. Current $1,000 credit per qualifying
child will be reduced to $500 after 2012.

* AMT. Exemption amounts for 2012 are $33,750 for
singles, $45,000 for couples, down from 2011 “patched”
amounts of $48,450 for singles and $74,450 for couples.

* ESTATE TAX. Top 2013 rate will increase to 55% (up
from 35%); exclusion amount will be reduced to
$1,000,000 (down from 2012 amount of $5,120,000).

* DEDUCTIONS & EXEMPTIONS. After 2012, higher-income
taxpayers will again lose a portion of itemized
deductions and personal exemptions.

* DEPRECIATION. Section 179 expensing limit will be
reduced to $25,000, with a total qualifying property
limit of $200,000, down from 2012 levels of $139,000
and $560,000 respectively. 50% bonus depreciation
will expire.

* EDUCATION. Education savings account contribution
limit will be $500, down from 2012 limit of $2,000.
Expanded American Opportunity Credit will expire and
be replaced by prior Hope Credit.

* TAX EXTENDERS. Tax breaks that expired after 2011:
Teachers’ classroom expense deduction, state and local
sales tax deduction, tax-free charitable IRA
distributions for those70 ? and older, higher
education tuition deduction, business R&D credit,
15-year depreciation for leasehold improvements and
restaurant property.

The uncertainty in the tax rules makes the approaching tax filing season more challenging than usual.

The alternative minimum tax: Will it affect you?

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In your tax planning, don’t overlook how your tax-saving strategies might be affected by the alternative minimum tax.

 * What is the alternative minimum tax?

Enacted back in 1969, the alternative minimum tax (AMT) was designed to make sure that high-income taxpayers pay a minimum amount of taxes, even if they have sufficient deductions and credits to reduce their federal income tax liability to zero.

The AMT is like a flat tax. You get a lower tax rate in exchange for losing most deductions.

To calculate the AMT, start with regular taxable income, which includes all your familiar deductions and exemptions. Then make certain adjustments and add back certain “preferences” to arrive at your AMT income. Preferences include personal exemptions, state and local taxes, certain interest on home-equity loans, and miscellaneous itemized deductions.

After adding back the preferences, you’re entitled to an exemption amount, though the exemption phases out at higher income levels. The exemption for 2012 is $33,750 for singles and $45,000 for married couples filing a joint return.

You then calculate your AMT by applying a tax rate of 26% to the first $175,000 of AMT taxable income, and 28% to any additional amounts. Finally, you compare your AMT to your regular tax and pay whichever is greater.

* Who is affected by the AMT?

Congress created the AMT to ensure that wealthier taxpayers, who often have the kinds of income and deductions that qualify for preferential tax treatment, would pay at least a minimum amount of tax. Congress also wrote exemptions into the law, so that middle-income taxpayers wouldn’t be subject to the AMT.

Unfortunately, these exemptions were not indexed for inflation. As incomes have continued to rise, more and more people have found that they need to calculate their tax bill twice — once under regular tax rules, and again under the AMT.

Though Congress has expressed a desire to eliminate the AMT, it is still in effect. Every year thousands of middle-income taxpayers find themselves subject to the alternative minimum tax.

 * Will the AMT affect you?

Do you need to concern yourself with the AMT? You do if you have a lot of dependents or if you claim substantial itemized deductions. You may also be subject to the AMT if you realized hefty capital gains during the year or exercised incentive stock options. Claiming certain tax credits might trigger the AMT as well. And if you are an owner of rental real estate or a capital intensive business, you need to be aware that the amount of depreciation allowed under the AMT is limited.

Don’t forget the AMT in your tax planning. You may be one of those middle-income taxpayers who is now subject to this tax. For details or planning assistance, contact our office.

Changes scheduled for flexible spending accounts

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Flexible spending accounts (FSAs) are popular with employees because they permit the use of pretax dollars for payment of medical expenses and dependent care costs.

If you use an FSA, be aware that changes are scheduled beginning next year. As part of the health care reform law passed in 2010, there will be a dollar limit on the amount that can be set aside for medical expenses. Effective for plan years starting in 2013, the maximum set-aside for medical expenses will be $2,500.

The limit on what can be set aside for dependent care costs will not change; it remains at $5,000.

Keep an eye on any upcoming legislation that could change these rules again.