FBN’s Charles Payne, Heritage Capital President Paul Schatz, Tea Party News Network News Director Scottie Nell Hughes, small business expert Susan Solovic, retail analyst Hitha Herzog and Penn Financial Group founder Matt McCall on the shifting demographics in the job market.
More women are starting their own businesses only to find a different kind of pay gap. Small business expert Susan Solovic joins Tanya Rivero on Lunch Break.
FBN’s Charles Payne on the state of the economy.
Small business expert Susan Solovic and Credit.com Director of Consumer Education Gerri Detweiler on lenders using social media to research potential borrowers.
Now that the holidays are over and you have (hopefully) recovered from your New Year’s hangover, it is time to start thinking about:
- getting your taxes in order for 2013; and
- planning for your 2014 tax bill.
First, the bad news: 2013 is over. It is simply too late to change anything that happened on or before December 31, 2013. Whatever happened (or didn’t happen) on or before that date, you are stuck with its tax consequences, for better or worse.
The good news is that there’s still a lot you can do (legally) to manage your 2013 tax bill and get ready for 2014. Here are some tips:
Watch your checks. If someone paid you for work you did in 2013 and the check arrived in the mail – or if you received payment via PayPal — on or before December 31, you are required to report that as income for 2013, not 2014. Any checks or PayPal payments you receive now should be booked as 2014 income.
Did you set up a business entity in 2013? If you set up a corporation or limited liability company (LLC) for your business on or before December 31, 2013, you will be required to file the appropriate tax form this spring even though the business didn’t make any money. For single member LLCs, that’s Schedule C on your Form 1040. For partnerships and multimember LLCs, that’s Form 1065. For corporations and S corporations, that’s Form 1120 or 1120-S (due March 15, NOT April 15).
The good news is that if you incurred expenses in setting up the business, those can be claimed as deductions on your 2013 tax return. If the loss is big enough, it may be able to offset other income you had last year from your day job and other sources.
Have you set up a retirement plan? Here’s some really good news. Even though the books are closed for 2013, you can still make contributions to your retirement plan (a Simplified Employee Pension or SEP, an individual retirement account, or a “solo” 401K) right up until April 15 and take the deduction on your 2013 return. Even better, you can set up a retirement plan now, make a contribution to it before April 15, and take the deduction on your 2013 tax return. Still even better, if you “go on extension” with your 2013 tax return, you can make the contribution up until October 15 (September 15 for corporations) and still take the deduction on your 2013 tax return.
The only bad news: if you “go on extension” and tell the IRS you plan to make a contribution before October 15, you sure as Heck better make the payment on time to avoid penalties, interest and a possible audit.
Time for 1099s, W-2s and K-1s. If you paid an individual or single member LLC more than $600 for services performed during 2013, you have until January 31 to send them IRS Form W-2 (if they were employees), 1099 (if they were independent contractors), or K-1 (if they were shareholders, partners or fellow members of an LLC). You cannot download an electronic form for these; you must still use the paper form and send a “carbon copy” to the IRS when mailing the original to the person you paid.
If the Form is not postmarked by January 31, you will have to pay a penalty to the IRS of $50 for each Form that is late. Also, many people file their tax returns early, and they will hate it – I mean, really hate it – if they have to amend their 2013 returns to reflect a Form you sent them after the deadline.
Calculate Your Monthly Escrow for Estimated Taxes. If you pay estimated taxes, now is the time to crunch the numbers and “fine tune” the amount you put into escrow each month to make sure there’s enough cash on hand to make the quarterly payments.
Start Planning for 2014. Now that you’ve got 2013 under control, start planning for 2014 taxes. There are three major 2014 changes in the tax laws you need to know about:
Medicare Surtax. Self-employed people who make more than $200,000 (for an individual) or $250,000 (for a couple) will be assessed an additional 0.9% for Medicare in 2014, on top of the existing 1.45% Medicare payroll tax and a 3.8% Medicare tax on unearned income (such as dividends, interest, capital gains and rental income).
Medical Expense Restrictions. Taxpayers under the age of 65 who itemize their medical expense deductions will only be able to do so in 2014 if those expenses exceed 10% of their adjusted gross income (AGI); previously the “cap” was 7.5% of AGI.
Obamacare Penalty. If you are not currently participating in a qualified or “Grandfathered” health care plan, you will have to pay a file of $95 or 1% of your income, whichever is higher, in 2014.
Cliff Ennico (firstname.lastname@example.org) is a syndicated columnist, author and host of the PBS television series ‘Money Hunt’. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com. COPYRIGHT 2014 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC.
Unlike last year, tax planning for 2013 is not hampered by uncertainties over alooming fiscal cliff. Unfortunately, there is always some uncertainty and a few expiring provisions to warrant special attention by taxpayers.
Managing income taxes at year end involves techniques designed to address three issues:
• Accelerating or deferring income: If a taxpayer expects to be in the same or a lower tax bracket next year, it’s best to defer as much income as possible until after the yearend.
• Accelerating or deferring deductions: If a taxpayer’s overall tax rate is the same in both years, accelerating deductions achieves tax savings this year rather than waiting for those tax savings to materialize next year.
• Take advantage of tax provisions scheduled to expire at the end of 2013. There are several temporary tax provisions which can only be used this year.
Tax planning begins by projecting income and deductions for the year to determine your tax bracket and income thresholds that trigger higher and/or additional taxes, or limits the effectiveness of deductions. One of the impacts ofthe American Taxpayer Relief Act of 2012 (ATRA12)is the reintroduction of the Pease limitation, which can greatly limit itemized deductions. Once a taxpayer knows what his or her income taxes will look like, it’s time to evaluate which techniques will help the most.
Strategies to accelerate or defer income:
• Adjust your elective deferral plans at work: Taxpayers who participate in 401(k), 403(b), most 457 plans, or in the Thrift Savings Plan can defer up to $17,500 this year. Taxpayers age 50 and older can defer up to $23,000.
• Harvest capital gains or losses: Long-term capital gains are taxed at 0 percent for taxpayers in the 15 percent bracket. Capital losses can be used to offset capital gains and reduce other income up to $3,000.
• Use the IRA. Taxpayers age 59 ½ and older can accelerate IRA distributions in 2013. Contributions may be deductible depending on your income level and whether you’re covered by a retirement plan through work. Taxpayers under age 59½ can convert traditional IRAs to Roth IRAs to accelerate income.
• Health-care assistance: People with health savings accounts – available with some high-deductible health insurance policies — can save up to $3,250 tax-deferred for an individual and $6,450 for a family.Those who are55 and older can save an additional $1,000. Flex spending contribution limits are capped at $2,500 this year.
Strategies to accelerate or defer deductions:
• Medical expenses: The Affordable Care Act (ACA) raises the income threshold this year to 10 percent of adjusted gross income for taxpayers under age 65. The threshold remains at 7.5 percent for those 65 and older. Taxpayers may need to prepare or defer medical bills to lump expenses in a single year to get the deduction.
• Gifts to charities: Use a donor advised fund (DAF) to maximize the tax savings from charitable giving. A DAF makes gifting appreciated securities easier. The DAF can be funded in tax years when the deduction will have the most impact. Distribution to charities can be made at any time without tax consideration.
• Qualified Charitable Distribution: This year only, taxpayers age 70½ or older can choose to direct up to $100,000 of their IRA-required minimum distribution to charity. By doing so, the distribution does not show up as taxable income, which can lower taxation of Social Security benefits and help reduce other threshold levels to further minimize taxes.
ATRA12 extended—but did not make permanent—several tax incentives for individuals.Taxpayers should consider whether they can benefit from these incentives this year and plan accordingly. The following provisions are set to expire on Dec. 31 unless extended again:
• State and local sales taxes deduction. Taxpayer can choose between deducting state and local income taxes or the sales taxes they’ve paid through the year.
• Deduction for teacher expenses. Eligible educators can deduct up to $250 of any unreimbursed expenses.
• Deduction of mortgage insurance premiums. Payments of Private Mortgage Insurance premiums can be treated as deductible home mortgage interest in 2013.
• Discharge of principal residence indebtedness. This can be excluded from gross income this year.
• Qualified Charitable Distribution. Taxpayers can make tax-free charitable donations from their required IRA distributions.
2013 is certainly an exciting year for tax planning. Start now in order to minimize your tax bill in April.
About Rick Rodgers: Certified Financial Planner® Rick Rodgers is president of Rodgers & Associates, “The Retirement Specialists,” in Lancaster, Pa., and author of “The New Three-Legged Stool: A Tax Efficient Approach to Retirement Planning.” He’s a Certified Retirement Counselor and member of the National Association of Personal Financial Advisers. Rodgers has been featured on national radio and TV shows, including “FOX Business News” and “The 700 Club,” and is available to speak at conferences and corporate events (www.RodgersSpeaks.com).
Most small business owners launch their companies because they are really good at delivering a particular product or service and they love doing it. Sadly, the majority aren’t equally as talented at managing the financial aspects of their businesses. Building a successful business requires more financial management than adding up your sales, subtracting the expenses and hoping there’s a little left over.
By developing a process to measure performance and key financial indicators, you’ll be better equipped to evaluate your success. Every decision you make costs your company money. When you drill down into the finances of your business and start measuring your performance, you may discover your business model is in desperate need of revamping. As the old saying goes, you can’t manage what you can’t measure.
In addition to your income and expenses, you should consider among other things, the cost of your company’s lead generation, the length of your sales process, the average size of a sale, the average sale per employee, and the net profit per sale for each product or service you sell. With this detail, you can determine the most profitable areas of your business as well as those that are costing you more than they’re worth.
Every industry is different and there are hundreds more measurements to consider. The bottom line is that it’s important to establish these measurements early on in your business so you can build your success on a strong financial foundation.
What do you measure in your business? Do you review metrics regularly with your team?