2016 Year End Business Planning Checklist
|Beginning 2016 (changes in bold)
|Old Law, Prior to 2016
|Partnership (includes multi-member LLCs)
|C-Corporation (calendar year)
|C-Corporation (June 30 fiscal year)
|Forms W-2/W-3 to IRS
|Forms 1099-MISC/1096 to IRS
|FinCEN Report 114 (FBAR)
• Section 179 Expensing - The maximum Section 179 deduction was permanently increased to $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 PATH Act also allows a business to elect to treat up to $250,000 of qualified real property, which includes qualified leasehold improvements, qualified restaurant property and qualified retail improvement property, as Section 179 property. Prior to this change, such real property improvements had to be depreciated over 15-39 years, depending upon the asset class.
• Bonus First-Year Depreciation - This federal tax break is available as a 50% deduction in the first year that qualified property is placed in service through 2017, 40% in 2018 and 30% in 2019.
• Asset Capitalization Regulations - After much petitioning by CPAs, the IRS increased the de minimis safe harbor limit from $500 to $2,500 effective January 1, 2016. Generally speaking, all privately owned companies without audited financial statements can now expense asset purchases less than or equal to $2,500 rather than capitalizing and depreciating. Please review your company's asset purchases for 2016 and make sure that only amounts greater than $2,500, on a per item basis, are capitalized and those less than or equal to $2,500 are expensed.
• Research Tax Credit - This popular federal tax credit has been in place for many years and was made permanent by the PATH Act. In addition to making the research credit permanent, the PATH Act also provides for two additional options for certain companies to utilize the credit. 'Eligilbe small businesses' may now use the credit to offset Alternative Minimum Tax (AMT). Additionally, certain startup companies that meet the 'qualified small business' definition may use the credit to offset up to $250K of employer payroll taxes. Generally the federal research tax credit is calculated as 20% of qualified research and experimental expenditures. Many states including MA and CA also offer a research tax credit. 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.
• Affordable Care Act (ACA) - For 2016, one key provision of the ACA, commonly referred to as Obamacare, has changed from the prior year that could impact small businesses. For 2015, both the employer-shared responsibility rules and the requirement to report health insurance information became effective for applicable large employers (ALEs). However, some transition rules had been put in place with regard to the definition of ALEs. For 2015, an ALE was defined as an employer with at least 100 full-time equivalent employees. In 2016, the law is fully phased in and an ALE is any 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 employees, 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 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, 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.
• 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, for both C- and S-Corporations, that must be included in an employee's W-2 as well. It's expensive to correct W-2s, so check with your payroll service provider to find out their reporting deadline (many are mid-December). If you have specific questions regarding what items may need to be included in your company's W-2s or need assistance with the taxable personal use of company automobile calculation, please contact us. Also note that the W-2/W-3 filing deadline for both the IRS and MA DOR has been accelerated a month and is now January 31, 2017.
• 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. (See attached pdf copy of this form if needed.) Sechrest & Bloom is available to prepare 1099-MISC forms on your behalf but will need all information no later than January 16th. Forms 1099-MISC must be mailed to the recipients by January 31st (no change from prior years). However, the reporting to the IRS and MA DOR has been pushed up a month and now must be mailed by January 31, 2017, if amounts are reported in Box 7 - nonemployee compensation. The penalties for late/non filing of Forms 1099-MISC are SIGNIFICANT. If a 1099 is filed within 30 days of the due date, the fine is $100/Form 1099, if filed by August 1st, the fine is $200/Form 1099, if filed after August 1st or not filed at all, the fine is $520/Form 1099. These fines assume both the recipient and IRS copies are filed late.
• 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 2016 is $54,000. 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.
• Inventory - If your company has inventory, take a physical inventory count as close to year end as possible and make any necessary adjustments for book to physical count differences in your accounting system before year end.
• 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 2017.
• For your reference, the table below summarizes some important figures for 2016 and 2017.
|2017 (changes in bold)
|Social Security wage base
|401K elective deferral
|401K catch-up deferral >= 50 years old
|SIMPLE plan elective deferral
|SIMPLE plan catch-up deferral >= 50 years old
|Defined benefit plan contribution
|Business mileage reimbursement rate
|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 emailed the week of December 5th. 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 with family and friends!
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