Tag: tax planning

When Should You Start Social Security Benefits?

Jared Faltys

Specializes in financial planning, business tax planning, investment advisory services

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Before deciding to collect Social Security benefits, consider these tips to help you make an informed decision.

TIMING MATTERS

If you plan to continue working while receiving benefits, there are limits on how much you can earn each year between age 62 and full retirement age and still collect all your benefits However, once you reach full retirement age, your earnings do not affect your benefits, but they may be taxable as income.

And if you don’t need the income now, you may decide to wait beyond full retirement age to receive additional retirement credits. Or you can choose early retirement and invest your benefits elsewhere.

HEALTH INSURANCE

If you stop working, not only will you lose your paycheck, but you may also lose employer-provided health insurance. Although exceptions exist, most people will not be covered by Medicare until they reach age 65.

Your employer should be able to tell you if you will have health insurance benefits after you retire or if you are eligible for temporary continuation of health coverage. If your spouse is employed, you may be able to switch to their company’s health insurance.

ADDITIONAL BENEFITS

If you qualify for benefits as a widow, widower, or surviving divorced spouse, you may choose to apply for survivor’s benefits now and delay your retirement benefit until later.

If you delay receiving your retirement benefit until your full retirement age or later, your retirement benefit will be larger.

EXPECTATIONS

Consider your family history and lifestyle when thinking about your life expectancy. You may need extra money in later years if you come from a family with long life expectancies. This is particularly important as you could potentially outlive your retirement savings, especially any investments with limits on how long they are paid.

Your life expectancy affects your retirement planning decisions. Knowing this helps you determine whether you should start receiving reduced benefits at age 62 or wait until age 70 to receive a higher payment.

source:https://e.clientlinenewsletter.com/mcmillcpasandadvisors

Tax Deductible Start-Up Costs

Andrew Steffensmeier

Specializes in small business preparation and planning, investment advisory services, business tax planning services

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You’ll incur numerous costs to get your new business venture off the ground. But are all of them tax deductible? You may be surprised.

GETTING STARTED

Tax deductible business start-up costs include those incurred while creating an active trade or business and/or investigating the creation or acquisition of an active trade or business.

Start-up cost examples include:

  • Market surveys
  • Advertising for the opening of a business
  • Deposits on utilities or leased property
  • Website development

There are also organizational costs. These include expenses for organizing your company, state incorporation fees, and attorney fees to help with any of these tasks.

IRS WEIGHS IN

It’s important to separate these two expense groups. Generally, the IRS considers business start-up costs as capital expenses because they are used for a long time, rather than within the first year of doing business. So, you can’t designate all these costs as expenses to your business in the first year.

Business start-up costs are intangible assets (no physical form), so they must be amortized (spread out over 15 years, for example), beginning with the year your business begins.

THE FIRST YEAR IS UNIQUE

You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs in the first year you are in business. But each $5,000 deduction is reduced dollar-for-dollar by the amount that your total start-up or organizational costs exceed $50,000. For example, if you incurred $53,000 of start-up or organizational costs in the first year, you could only deduct $2,000 in the first year ($5,000 – $3,000).

Keep organized records of all expenses you pay while starting your business for your tax professional.

source:https://e.clientlinenewsletter.com/mcmillcpasandadvisors

Taxes in Retirement

Nancy Brozek

Specializes in construction accounting, business tax planning, investment advisory services

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With Social Security benefit payments increasing nearly 9% this year, you may need to rethink your retirement tax planning.

INCOME MATTERS

If you started working part-time to offset some of the recent price inflation, this increase in your Social Security payments might make some or more of it subject to federal income taxes. If you file as an individual and your combined income is between $25,000 and $34,000, up to half of your benefit may be subject to income taxes. Social Security defines combined income as your adjusted gross income, plus nontaxable interest, plus one-half of your Social Security benefit.

CONSIDER A REDUCTION

With the possibility of being in a higher tax bracket this year, due to increased Social Security benefits, consider cutting back on withdrawals from your qualified retirement plans. If you can avoid taking more than your required minimum distribution (RMD) in 2023, you might be able to limit your tax liability.

If you need more than your RMD, consider pulling funds from a taxable brokerage account where you’ll pay the lower long-term capital gains rates if you held investments for more than a year.

Also consider qualified withdrawals from a Roth IRA, a Roth 401(k), or a health savings account (HSA), which would not be subject to federal income tax and wouldn’t have an impact on how your Social Security benefit is taxed.

This year’s cost of living adjustment can help you keep up with higher prices. And in the short run, managing your withdrawals may help you smooth out the tax bumps during a period of high inflation.

Figuring out withdrawals from retirement and brokerage accounts can be complicated, so it may help to work with an advisor. But even if you do it yourself, try to withdraw from your Roth and HSA accounts last, allowing those assets to grow tax-free longer. Withdrawals from all three types of accounts in the same year can help manage combined taxable income.

source: https://e.clientlinenewsletter.com/mcmillcpasandadvisors

Get Ready for Tax Time

Lynndsy Beckmann

Specializes in small business preparation and planning, investment advisory services, QuickBooks consulting

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The new year means it’s time to make your resolutions. But it also means another tax season is here. Take time in January to get organized to make tax filing smooth for you and your tax professional.

ORGANIZE YOUR FORMS

You’ll receive the bulk of your tax forms by January 31. But if you believe you’re missing one, contact the appropriate company to request a copy.

BUNDLE IT UP

Along with tax forms, you’ll want to get other financial documents and information together before meeting with your tax professional. Consider if you have:

  • Business financial statements
  • Names, dates of birth, and Social Security numbers for any new dependents
  • Educational expenses
  • Child care
  • Gifts received or given
  • Retirement plan contributions
  • Severance pay
  • Foreign assets
  • Rental income
  • Medical expenses
  • Estimated payments in 2022

Most tax professionals will provide you with their tax organizer that will walk you through all tax areas that may apply to you, so you don’t overlook anything.

source: https://e.clientlinenewsletter.com/mcmillcpasandadvisors

4 Ways Tax Advisors Help You Save Money

Clint Weeder

Specializes in business tax planning, investment advisory services, business valuations

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No one likes thinking about tax season. Between the paperwork and the payment of your hard-earned money, it’s no wonder that many people put off tax filing until the last moment. While it may feel that delaying the inevitable will save you time, it certainly won’t save you money. In fact, if you’re among the many Americans who struggle to make sense of complicated tax codes, it may actually cost you a significant amount.

For this reason, and many others detailed below, a tax advisor is a worthy investment. As noted in Forbes, “you don’t have to be a fortune 500 company or a multi-millionaire to take advantage of tax planning and the serious tax savings entailed.”

Of course, diving into the tax planning world can be easier said than done – especially when you’re juggling multiple sources of income or many personal assets. A tax advisor could be the perfect solution, so here’s everything you need to know. 

What is a Tax Advisor? 

It is a truth universally acknowledged that taxes are complicated. Between legal jargon, endless forms, and multiple sources of income throughout the year, navigating the filing process without amassing fines and errors can feel impossible. Fortunately, just like other complicated areas of studies, the financial industry is filled with experts who have devoted their careers to mastering the art of saving money. If you choose to hire a tax advisor, you’ll add to your team a person who is passionate about your financial goals. They’ll also have the know-how to help you achieve them!

Specifically, a tax advisor is highly trained in tax accounting and law. While they’re often trained as accountants, a relationship with a tax advisor differs slightly from that with a traditional CPA. While a standard accountant typically helps with a single project or tax season, tax advisors become invested in your long-term goals. They’ll create plans and ensure that each step of the way, you’re saving as much money as possible. 

For some, a tax advisor may just be dismissed as another expense, however, the investment you make in a financial expert will quickly pay off in the savings you accrue. 

How Can a Tax Advisor Help You Save Money?

1. Strategize how to minimize the taxes you owe

The entire job of a tax advisor rests heavily on their knowledge of current laws and regulations. This means you can trust that they’ll approach your case with the most relevant information. With the help of a tax advisor, you won’t have to worry about overpaying due to a lack of awareness about new exemptions or qualifications for your business or assets. 

At its core, the field of tax advising exists to help clients like you pay the least amount of tax possible, with the least risk possible, within the bounds of the legal tax code. 

2. Receive advising year-round, not just end-of-year

It never hurts to have a CPA examine your finances as tax season approaches, or you wrap up a financial quarter. Many turn to financial advising at the end of the year, as the time of resolutions is around the corner and everyone wants to feel like their financial future is in check. 

With a tax advisor, however, you don’t have to wait for a yearly checkpoint to justify a check-in. Once you make the decision to partner with a financial professional, they will familiarize themselves with your case and be ready to offer advice whenever you need it. You don’t have to wait for a financial crisis to receive financial solutions from someone who cares about your situation.

3. Help build wealth management plans

When you typically turn to an accountant, you might simply be worried about making it through tax season without pulling your hair out. While we can certainly appreciate living in the moment, investing thought into your financial future can lead to large pay-offs. When a tax advisor becomes familiar with your financial situation and personal goals, they can help you to design and execute wealth management plans. 

These plans are incredibly useful in ensuring that your hard-earned money is used and passed on in the way that you want it to be. You’ll be able to enjoy the money you’ve worked for more when you feel confident in its management and longevity. A financial professional will take your largest goals and translate them into doable and documented plans. 

4. Bring protection and prosperity to your business

If you own a small business, you’re even more familiar with how complicated tax season can be. The last thing you need to be worried about is tax fines or losses as a result of improper financial planning. Your personal tax advisor can also help you manage outside assets, such as your business. Beyond filing income and keeping track of expenses, your advisor can use their know-how to offer input on how to manage your business effectively and lower routine expenses. 

Beyond that, the headache of payroll management will be relieved when you have another financial brain on your team. With each of these steps, you can rest assured that the tax advisor you bring into your life will be invested in your personal success and business outcomes. As opposed to a one-off contractor, these individuals will delight in your successes and see the business grow alongside you. 

McMill CPAs & Advisors

If you’re ready to take control of your financial future and conquer tax season in Norfolk, Nebraska, contact McMill CPAs & Advisors today. Our team of wealth management and tax planning professionals is ready to add you to our list of success stories. Our heart is in our community, and we take pride in helping families and small businesses thrive through smart financial preparation. 

You don’t need to wait until tax season or the end of the year to give yourself a financial refresh. Bring a McMill advisor on your team and start growing your financial confidence and success! 

A Complete 10-Step Year-End Tax Planning Checklist for Your Small Business

Lynndsy Beckmann

Specializes in small business preparation and planning, investment advisory services, QuickBooks consulting

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The approaching year-end signals the time to start preparing for tax season. Tax preparation and planning allow small businesses to stay ahead of the demands of tax season. For many of these businesses, year-end tax planning may be overwhelming and challenging, tempting you to procrastinate on the work that needs to be done. However, doing so would be detrimental to your success.  

Sitting down with your trusted bookkeeper or accountant will help you begin to adequately plan for tax season so you can reduce your tax liability. The following 10-step year-end tax planning checklist will help you set your small business up for success come tax season. When you need trustworthy tax preparation assistance throughout Northeast Nebraska, our team of CPAs at McMill is one call away.

1. Set Your Deadline

Before the new year arrives, you have the period from October to December to make the necessary adjustments in preparation for tax season. Establishing a timeline should prompt you to set aside time to fully prepare before the tax period arrives. It also allows you to check and recheck any problematic areas in your record-keeping, as well as review your tax planning strategies.

2. Pull Together Financial Records

Over the course of the past year, you will have compiled some relevant documentation needed to successfully complete your taxes. These documents include your income statement, which summarizes the revenue and expenses, and the balance sheet, which records your assets, liabilities, and equity. Other records may include payroll documents, bank statements, asset schedules, and inventory records.

These documents give a snapshot of your financial health throughout the year. If you’ve been keeping accurate and consistent records, it shouldn’t be too difficult to gather these statements. Don’t fret if you haven’t started yet, as you still have until December 31 to be well-armed for the coming tax period.

3. Reconcile Loan Balances to Your Balance Sheet

This adds to the total amount of liabilities that will reflect at year-end. You can request a statement from the bank showing the year-end balance to compare it to your records to ensure they match. ​​

Balance sheet reconciliation is crucial for you as a small business owner to ensure your finances are in order. It can help you:

  • Identify potential fraudulent activity
  • Catch accounting errors before it’s too late
  • Monitor transactions and ensure they are recorded properly

4. Separate Any Personal Expenses Paid From Business Accounts

The general rule of thumb is to keep personal and business transactions separate. Consistently take stock of any personal expenses that may be mixed with business expenses. This ensures you have an accurate record of allowable deductions, which reduces taxable income.

It’s also imperative you don’t lose your business records at any time. Always keep a backup of your QuickBooks accounts in a record-keeping system in case of a computer crash or any unforeseen event.

5. Compile Business Expenses

Business expenses can be treated as tax write-offs if they contribute to your business preservation. Keeping these expenses stored in one place, such as a cabinet of manual files or a software program like QuickBooks, will make year-end tax planning less hectic. 

Expense records will include costs related to mileage, out-of-pocket expenses, meal reimbursement, utilities, advertising, and rent. The IRS categorizes most business costs as deductible. There are also proposed tax breaks specifically for small businesses that will go a long way to minimize your tax burden.

6. Take Advantage of Depreciation for Asset Purchases

Assets in a business such as furniture, vehicles, computers, and office machinery attract depreciation, which reduces their value over their useful life. Depreciation is an annual allowable deduction that can be offset against the business income. 

Figuring out the depreciation of an asset can be confusing, but working with your accountant will help ease the process. You must have receipts indicating the purchase of the assets. This includes the purchase agreements for all major purchases. Typically, businesses use the straight-line method or accelerated method to calculate depreciation yearly. There’s also Section 179 and bonus depreciation which allows businesses to calculate a one-time depreciation against the total cost of a qualified asset in the year of purchase.

7. Note Ownership Changes

Sometimes a business can change ownership, which can include bringing in an additional partner or buying out a partner’s share. Any change will affect the equity, which reveals the value of the capital accounts of all owners.

If there’s any change, it’s important to notify the tax preparer. The IRS readily provides guidelines on such a matter including relevant information returns for small businesses to be ready for the tax season.

8. Summarize Estimated Tax Payments

Small businesses are among those required to make estimated tax payments per quarter.  Estimated tax payments are useful in reducing the tax liability when it’s time to file income taxes.  Provide your tax preparer a listing of your estimated payments and date paid so they can be properly accounted for to reduce your overall tax liability. 

9. Summarize Year-to-Date Investment Activity

As the current fiscal year comes to an end, you need to take time to monitor the progress of any investment activity to take advantage of tax planning opportunities. This also involves keeping track of investment activities from the start of the year to date and taking note of any tax deductions. This includes investment accounts such as IRA and 529 plans.

529 plans are not tax-deductible against federal taxes, but some states allow state deductions. It’s also important to be up to date with any employment taxes. 

10. Meet With Your CPA

As your business winds down its current year’s activities, your tax planning strategy must be in place. A CPA has the experience to summarize all the important business activities and processes to ensure you will be ready for the tax period. If you think you still need more time, the CPA can help to determine if you can obtain an extension.

Conclusion

This checklist should help make your tax preparation easy and boost your business’ bottom line. However, tax planning needs to be a continuous process throughout the year to minimize stress and workload as tax season approaches. Hiring a CPA will further reduce time spent on tax preparation so you can focus your energy on your business. As a small business owner in Northeast Nebraska, we know that you’re wearing many hats and tax planning is an extra burden. With our team of qualified tax professionals, we will assist you in implementing the necessary year-end tax planning checklist as the tax deadline looms. Do not hesitate to contact us today.

How Will the Proposed Biden Tax Plan Affect Nebraska Business Owners?

Andrew Steffensmeier

Specializes in small business preparation and planning, investment advisory services, business tax planning services

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As a small business owner, you have spent countless days worrying about your business as you grow it from the ground up. You’ve also likely faced the devastating effects of COVID-19 for almost two years now. 

As you focus your time and energy on growing your revenues, growing a team, and working on your personal goals, the current proposed Biden tax plan may be far from your mind. 

However, the plan is a response to the damaging effects of the pandemic, particularly on families and small businesses. The key purpose of the plan is to impose high taxes on wealthy individuals and large firms to level the playing field for small businesses. It’s also a form of poverty reduction program which may benefit your family. 

Admittedly, the proposed changes can be tough to navigate, especially as a small business owner. Here at McMill CPAs & Advisors, we’re here to help small business owners throughout Northeast Nebraska understand exactly how the proposed changes could impact them.

What’s Included in the Proposed Biden Tax Plan? 

Biden’s proposed tax plan entails tax proposals under the American Jobs Plan and the American Families Plan. In addition, the administration is involved in making changes to individual taxes that affect income-earning individuals. 

The American Jobs Plan 

This is a proposal by President Biden put forward on March 31, 2021, aiming to allocate $2.3 trillion towards the country’s physical infrastructure and job opportunities for the next 8 years. The effect is an increase in taxes on corporate profits involving a higher corporate income tax.

The proposed major changes are as follows:

  • C corporations will now be subject to a statutory tax rate increase from 21% to 28%.
  • Companies reporting over $2 billion in net income will be subject to a 15% minimum tax on corporate book income.
  • Multinational corporations will face an increase in taxes from 10.5% to 21%.
  • Removal of special tax treatments for fossil fuel companies.
  • Minimizing tax loopholes that U.S. corporations take advantage of.
  • Reforming the foreign-derived intangible income deduction (FDII) to limit tax breaks enjoyed by corporations and redirecting investments to R&D incentives. 

The breakdown of the plan’s trillions will have an encompassing impact on America’s economy. This includes transport infrastructure ($621 billion), community infrastructure ($689 billion), R&D ($580 billion), and eldercare ($400 billion). 

This is part of Biden’s promotion of his “Build Back Better” program. So, for the next decade, C corporations are expected to brace themselves for an increase in corporate taxes. 

American Families Plan 

This plan is the third proposal which was announced on April 28, 2021, with American families in mind and will cost $1.8 trillion. It covers three aspects; education, health care, and child care. However, this plan targets businesses not operating in the corporate world. It intends to rely on taxes from wealthy individuals. 

The main benefits of the plan will be affordable education, tax credits for workers and families, and job security for families. 

The proposed changes are:

  • The increased individual tax rate on wealthy individuals from 37% to 39.6%.
  • Increase in capital gains tax rate from 20% to 39.6% on families making over $1 million.
  • An imposed net investment income tax on earnings of over $400,000

These changes largely target high-income individuals. However, there is a rise in concern among small businesses. 

Individual Income Tax Proposals

The Biden administration aims at heavily taxing high-income persons through the proposed hike of 39.6% for both capital gains tax and individual income tax rates. Currently, the top tax rate for individuals starts from $523,601 and $628,301 for married taxpayers filing jointly.

However, businesses have shared concerns over how it impacts their operations, including individuals and small businesses. Courtney Titus Brooks, a senior manager at the National Federation of Independent Business points out that small business owners might be constrained in expanding their workforce and operations.

How Does the Plan Affect Nebraska? 

Despite some raised alarm over the Biden tax plan, small businesses are likely bound to benefit. But specifically, how will it impact your business in Nebraska?

In Nebraska, 99.1% of businesses in the entire state are considered small businesses. This means small businesses drive Nebraska’s economy and the expected benefits from the tax plan will further elevate their growth. 

How Might Nebraska Businesses Benefit?

1. The American Jobs Plan gives hope to Nebraska families and small businesses as workers, communities, and infrastructure will be given priority. This is a promising rescue plan to cushion the state from the effects of Covid-19.

Any small business that experienced significant revenue decline and loss of workers due to COVID will be given a new lease of hope as the government will be focusing on taxing the highest-income individuals and C corporations.

2. The hefty proposed taxing of high-income individuals and corporations will help sustain the program and enable small businesses to operate in a stable environment.  This will help you as a small business owner to increase investments in your operations and even hire more workers. In turn, Nebraska’s economy is set to grow.

3. As a small business owner, your business goals are likely tied to your personal finance goals. You may aspire to leave a legacy for your family. Biden promises to protect family-owned businesses and farms from capital gains tax hikes. This bill proposes that no taxes will be paid when your heirs take over the business. With the proposed tax plan, the government wants to elevate families and businesses over the highest-income individuals.

What Does This Mean for Small and Medium-Sized Businesses? 

The proposed tax plan should be viewed as an opportunity for small and medium-sized entities aiming to scale up their businesses. The main promise of the plan is to protect families, workers, and small businesses from tax effects.

One of the advantages is $998 billion in refundable tax credits for low-income to middle-income families. This means more money will trickle to the grassroots level, enabling your businesses to gain leverage over constant market changes. 

Going forward, small and medium-sized businesses should expect significant impacts from the tax proposals. Amid changing legislation, now is the best time to partner with a CPA who can stay on top of these changes and act proactively on your behalf versus reacting to certain changes when it’s too late. 

Conclusion 

The proposed Biden tax plan is bound to cause a wave of impacts on individuals and businesses, including small businesses across the United States. 

If you run a small business in Nebraska, you’re right to have worries over how your business will perform in the next five years. This can cause you to have doubts about managing your business’ income, bills, emergencies, employees, and your retirement plans. 

You are also probably overwhelmed in keeping track of constant changes in tax laws and policies. The proposed changes according to the Biden tax plan will require being proactive when they become implemented. This calls for your attention to work with a partner that cares about your vision and plans for your business.

McMill CPAs & Advisors has experienced CPAs and tax professionals who can competently answer any questions you have about the proposed Biden tax plan and the impacts it has on your Northeast Nebraska business. We offer personalized consultation and tax services to help your business manage tax planning and achieve financial success. Please contact us today.

Dave Ramsey – Taxes Education

At McMill CPAs and Advisors, we love being able to help educate our community. One way we do this is through sponsoring and presenting at Dave Ramsey events. These events are aimed at helping students learn wise money habits early on.

On 4/26/19 our very own Andrew Steffensmeier took to the stage to discuss insurance and taxes at Norfolk Catholic High School. In this presentation, Andrew reviewed:

  • Where your tax dollars are being spent
  • What the different types of taxes are
  • The basics of insurance

These presentations are always free and available to you. To get your copy of this presentation, download it below:

Taxes-presentationDownload