2015 Year End Business Planning Checklist
- Tax Extenders - These are temporary tax provisions that are reinstated by Congress on a regular basis. Unfortunately, in recent years, these provisons have been renewed in the eleventh hour and only extended for a single year. That is proving to be the case once again this year. There are several key provisions which impact many of our clients that expired at the end of 2014. While there is general bipartisan agreement that these tax extenders need to be acted upon, there is no guarantee when and if they will be passed. If passed, they will likely be retroactive to the beginning of 2015. A separate communciation will be sent out as soon as an update on these tax extenders is available.
- Section 179 Expensing - For 2012-2014, the maximum Section 179 deduction was $500,000 for federal and MA tax purposes. Section 179 allows taxpayers to expense certain tangible personal property in the year placed in service rather than depreciating over the asset's useful life. The Section 179 limit has returned to $25,000 for 2015. Many believe legislation will be enacted to restore the enhanced amount of $500,000.
- Bonus First-Year Depreciation - This federal tax break was available as a 50% deduction in the first year that qualified property was placed in service for 2012- 2014. This provision has expired and it is unclear whether it will be extended.
- Research Tax Credit - This federal tax credit had been in place for many years and was generally calculated as 20% of qualified research and experimental expenditures. Many states including MA and CA also offer a research tax credit. Most believe Congress will extend this popular credit which has saved businesses nearly $11 billion annually. If your company is involved in research activities and we haven't previously claimed this credit, please contact Jennifer to discuss in more detail to determine whether your business might qualify for this credit, if extended.
- Asset Capitalization Regulations - While not new for 2015, we want to remind clients about the IRS final 'repair' regulations governing when taxpayers must capitalize and when they can deduct expenses for acquiring, maintaining, repairing and replacing tangible property. These regulations, which are generally effective beginning 2014, are lengthy and complex. While many of the provisions may not be applicable to your business, a lower capitalization threshold is now in effect. Generally speaking, all privately owned companies without audited financial statements, must now capitalize asset purchases greater than $500. Please review your company's asset purchases for 2015 and make sure that amounts greater than $500, on a per item basis, are capitalized and those less than or equal to $500 are expensed.
- Affordable Care Act (ACA) - Two key provisions of the ACA, commonly referred to as Obamacare, that impact businesses go into effect for 2015. Both the employer shared responsibility rules and the requirement to report health insurance information are now effective for applicable large employers (ALEs). Some transition rules have been put in place with regard to the definition of ALEs. For 2015, an ALE is defined as an employer with at least 100 full-time equivalent employees. Starting in 2016, the law will be fully phased in and an ALE is an employer of 50 or more full-time equivalent employees. If an ALE does NOT offer affordable health coverage that provides a minimum level of coverage to its full-time employes, the company may be subject to an employer shared responsibility penalty if at least one of the ALE's full-time employees receives a premium tax credit for purchasing individual health coverage through a Health Insurance Marketplace. Each ALE is also now subject to the Form 1095-C - Employer-Provided Health Insurance Offer and Coverage reporting. If you think your company has 50 or more full-time equivalent employees in 2015, you should be working with an ACA consultant to ensure compliance. If you need assistance in this area or further information regarding this complex law, please contact us.
- New MA DOR Website scheduled to be released November 30, 2015 - Many of you may have received an email from the MA Department of Revenue notifying you of the upcoming release of MassTaxConnect. This new on-line tax filing system will replace the existing Webfile for Business system. The transition to MassTaxConnect is supposed to be seamless and your exisitng username and password will carryover to this new system. One of the major benefits of this new system, as outlined by the MA DOR, is that a business will now be able to remit virtually all tax types using one system. For example, alcohol and fuel excise taxes previously were filed using separate systems. Additionally, with MassTaxConnect taxpayers will be able to send and receive direct and secure messages with the MA DOR. This will allow taxpayers to get their tax questions answered in a timely manner without any phone call wait times.
- Review your company's YTD financial statements - Is your bookkeeping and accounting up to date? Do the results make sense in relation to the prior year and your current business environment? Have transactions been recorded to the proper accounts? Need help with this process? Sechrest & Bloom is available to assist you as needed. If we typically perform bookkeeping services for your company and you have not already provided us with the necessary documents through September 30th, please contact Kathy or Trish as soon as possible to schedule. We are only able to provide proactive recommendations if the accounting records for your business are current.
- Check the YTD Net Income on your P&L - Where do you stand for the year? If you have a larger than expected profit, consider making a major purchase that can be expensed this year with the Section 179 deduction. If your business is a cash basis tax filer, consider the timing of year end expenses. Keep in mind that an expense is deductible at the time charged to a corporate credit card, even for cash basis filers.
- Year end Bonuses & Retirement Plan Contributions - Year end bonuses are a great way to reward employees for a job well done. Please remember that such amounts must be included in an employee's W-2 so be sure to carefully report the information to your payroll service provider. Retirement plan contributions (profit sharing, pension, SEP, employer 401(K) and SIMPLE plan matching contributions) are a great way to save for retirement on a tax deferred basis and can also be an effective tool for managing your company's taxable income. Did you know that retirement plan contributions (excluding employee deferrals) do not need to be funded until your tax return is filed or due, even for a cash basis filer? The SEP contribution limit for 2015 is $53,000. If you'd like Sechrest & Bloom's assistance in calculating a year end bonus and associated federal and state withholdings for an S-Corporation shareholder, please contact Jennifer soon to schedule.
- W-2 Reporting - As a business owner, certain items must be included in your W-2 as other compensation not subject to Social Security or Medicare taxes. If your business is an S-Corporation, the cost of employer paid health and dental insurance premiums must be included in the W-2s of all > 2% S-Corp shareholder/employees. The personal use of a company owned automobile is a taxable fringe benefit that must be included in an employee's W-2 as well. Forgiveness of employee loans is also taxable compensation. It's expensive to correct W-2s and payroll reports, so check soon with your payroll service provider to find out their reporting deadline. If you have specific questions regarding what items may need to be included in your company's W-2s, please contact us.
- Form 1099-MISC Reporting - Do you have all of the necessary information in your accounting system to complete Forms 1099-MISC? These forms must be issued to all individuals or unincorporated entities (such as LLCs) your business pays $600 or more for services during a calendar year. Additionally, a 1099-MISC must be issued when a company pays $600 or more for rent or legal services, regardless of the payee's tax classification. Note, however, that payments made with a credit or debit card are NOT subject to reporting on Form 1099-MISC as such payments are reported by the payment settlement entity on Form 1099-K. For all vendors that meet these criteria, make sure the vendor profile is complete with name, address and SSN/EIN. If not, gather this information before year end by requesting the vendor to complete a Form W-9 - Request for Taxpayer Identification Number and Certification. Forms 1099-MISC must be mailed to the recipients by January 31st. Sechrest & Bloom is available to prepare 1099-MISC forms on your behalf but will need all information no later than January 15th.
- Inventory - If your company has inventory, take a physical inventory count prior to year end and make any necessary adjustments for book to physical count differences in your accounting system before year end.
- Accomplishments - List all of your company's accomplishments during the year and share with your staff. They will appreciate this and feel part of your team.
- Website - Check all of the links on your company website and be sure they are active. Also, review your website content and update as appropriate.
- Goal setting - Write out goals and objectives for 2016.
- For your reference, the table below summarizes some important figures for 2015 and 2016.
|Social Security wage base||$118,500||$118,500|
|401K elective deferral||$18,000||$18,000|
|401K catch-up deferral >= 50 years old||$6,000||$6,000|
|SIMPLE plan elective deferral||$12,500||$12,500|
|SIMPLE plan catch-up deferral >= 50 years old||$3,000||$3,000|
|Defined benefit plan contribution||$210,000||$210,000|
|Business mileage reimbursement rate||$.575/mile||not yet released|
Call us for help if you need more information or guidance on completing the steps above.
Year end tax packages will be mailed the week of December 7th. Please be on the lookout and review prior to year end. A little advanced planning could save your company money by reducing your tax liability and/or tax preparation costs.
We wish you an enjoyable Thanksgiving holiday spent wtih family and friends!
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