Money Basics are important to your business

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Business Tips Pay attention to money management basics Launching a small company can be exhilarating, like entering an extreme sports competition with huge risks and prodigious rewards. But keeping a business profitable year after year may not always generate such exuberance, especially if you're the one responsible for balancing priorities and covering day-to-day expenses. Like it or not, monitoring such mundane matters as cash flow, inventory, collections, and taxes often distinguishes winners from losers in the business arena. Conscientious owners who keep a close eye on their financial resources may still be in the fight five years after opening their doors. Entrepreneurs who neglect their accounts may find themselves posting "going out of business" placards after a year or two of frustration and dashed dreams. Unfortunately, some owners never discover what went wrong. Even if you've hired a top-notch accountant or bookkeeper, it's wise to acquire at least a basic understanding of the following business fundamentals: • Cash flow. Liquidity is the lifeblood of your business. Like a doctor assessing the health of a patient, gaining insight into cash — how much money is in the bank, how much is coming in, how much is going out, where the cash is being spent — can help you reach a proper diagnosis. Even if the firm seems healthy, knowing where your cash is flowing can inform crucial decisions, prompting adjustments that may stave off disaster before it strikes. • Assets and liabilities. The listing of balance sheet accounts lets you know how much is tied up in inventory, how much you owe and how much is owed to you, how much equity you've contributed to the business, and other factors that may affect your company's health. For example, a balance sheet that's heavy in accounts receivable may indicate a problem with too-lenient credit policies. A large cash balance may signal missed investment opportunities or sluggish payment of outstanding loans. • Business versus personal accounts. Of course, if the line between the company's books and your personal finances becomes blurred, your diagnosis may become distorted. Keeping personal and business budgets separate makes it easier to manage taxes and track financial transactions. Setting up discrete bank accounts — including a separate payroll account for employee social security, income taxes, and Medicare — is also crucial. If you'd like additional suggestions about managing your company's resources, give us a call. Please call us if you have any questions. Tax season is here. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.

New Law allows Small businesses to expense rather then depreciate certain assets

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips Beginning in 2016 and retroactive to 2015 in select circumstances, the IRS created a new audit­proof option that you can use to improve your tax deductions. The new option allows you to avoid depreciating certain assets and instead simply write them off. For example, say you buy two $2,000 computers for your office. Under the old rules, you likely had to treat the computers as capital assets and either: 1. depreciate them using the five­year depreciation table, or 2. elect Section 179 to expense them immediately. (Note that if you used Section 179, you had to hold the computers for five years to avoid recapture of some expensed amounts.) And then, whether you depreciated the assets or expensed them, you had to carry them in your books of account and track them for your tax return. This was a pain. But now, because of some new rules, you can avoid the capitalization and recapture rules. And this new rule allows you to remove those expensed assets from your books of account and tax returns. And it’s easy. You simply need to · follow a few simple rules, · likely insert some magic language that we will give you for your expense policy, and · do this today (this is the “act fast” part). Silver Lining In 2013, the IRS issued its final tangible­property regulations.1 This is a tome containing more than 250 pages of detailed regulations that most tax pros, business owners, and rental property experts dreaded, particularly at first glance. The property regulations, also commonly referred to as the “repair regs,” explain new tax rules that generally require you to capitalize amounts paid to buy, produce, or improve tangible property but that also allow you to deduct certain amounts as business expenses. The silver lining in the new regulations that we discuss in this article is the “de minimis” safe harbor that, when implemented, requires you to immediately deduct as business expenses assets with a certain dollar amount that you select (within limits), and gives you a regulatory advance agreement from the IRS that it will not, in an audit, challenge your election to expense. Safe Harbors: One of Two Dollar Limits The new rules contain two safe harbors; one of the two applies to you. You either have or don’t have an “applicable financial statement” for your business. If you have a CPA audit or something similar done to your financial statements, you have an applicable financial statement (AFS). The difference between having an AFS and not having one is this: With an AFS, you can create tax­deductible $5,000 expensing per invoice or invoice item. Without an AFS, you can create tax­deductible $2,500 expensing per invoice or invoice item. How to Take Advantage of the Safe Harbor To benefit from the safe harbor, you need to take four steps. Step 1: Have—and Stick to—an Expense policy For safe harbor protection, you must have in place an accounting policy—at the beginning of the tax year—that requires expensing of amounts paid per invoice item of property costing $2,500 or less (less than $5,000 with an AFS), and amounts paid for items with economic useful lives of 12 months or less. And you must comply with this expense policy in your books and records. If you establish a policy to expense amounts paid for items costing $2,500 or less, for example, you must expense every such item in your books. You can’t expense some of those items and capitalize others. Greedy? You can set your expense policy threshold above the safe harbor threshold, but the safe harbor applies only to amounts that don’t exceed the $2,500 threshold. Suppose, for example, you require the expensing of amounts paid for items below $3,100. The safe harbor will apply only to invoices or items that don’t exceed $2,500. So why wouldn’t you always set your expense policy threshold to the maximum safe harbor? Because the threshold applies not only to your tax return but also to your financial statements, and you may have reason to look better to your shareholders than you look to the IRS. Step 2: Put the Expense Policy in Writing If you have an AFS, the IRS requires that you have your expense policy in writing.9 As a proprietorship or small corporation, you likely don’t have an AFS, and you likely don’t have your expense policy in writing. And it’s likely that your historical expensing amount will not prove a history of $2,500 as your expense policy. This is a problem. It’s compounded by the fact that the IRS does not require you, as a non­AFS taxpayer, to have your expense policy in writing. Why? Because, as the IRS says in the preamble to its expensing regulations, “the de minimis safe harbor is intended to provide recordkeeping simplicity to taxpayers by allowing them to follow an established financial accounting policy for federal tax purposes, and allowing retroactive application is inconsistent with such purpose.” Your prior established expense policy is likely far below $2,500. To increase your expensing to $2,500, you need your expense policy in place now. Don’t waste a minute. Here’s some language you can use: Company Name Effective: January 1, 2016 For both book and tax purposes, the company (a) expenses assets costing $2,500 or less on a per invoice or per invoice­listed item basis, and (b) expenses assets with an estimated economic useful life of 12 months or less. For added proof that this policy is real and in place, sign the policy as an owner, date it, add a witness’s signature, and consider having the statement notarized. Tax year before January 1, 2016? In Notice 2015­82, the IRS grants safe harbor to years before 2016, but only if you had established expensing policies in those years. This means you had either a written policy or a consistent application of your expensing dollar amount. Step 3: Save Your Invoices The safe harbor applies only to items documented by invoices.12 That’s good. Remember, the invoice proves the purchase, and the canceled check or credit card charge proves that you paid the money. You want both proof of purchase and proof of payment in your tax file. Itemized versus lump­sum invoices. To apply the safe harbor on a per­item basis, you want the invoice to identify the separate items. Say you buy 20 computers that cost $2,000 each. If the invoice lists each computer separately—or at least notes the number of computers and the per­unit cost—the safe harbor lets you deduct the entire $40,000. Step 4: Make the Election on Your Tax Return You must make the election in your tax return every year you want to use the safe harbor.13 To make the election, you attach a statement to your federal tax return and file it by the due date (including extensions).14 The statement must be titled “Section 1.263(a)­1(f) De Minimis Safe Harbor Election” and include your name, address, and Social Security number, plus a statement that you are making the de minimis safe harbor election under Reg. Section 1.263(a)­1(f). Here’s some language for the safe harbor election: Taxpayer Name Taxpayer Address Taxpayer Social Security Number Taxpayer hereby elects under Reg. Section 1.263(a)­1(f) de minimis safe harbor expensing of up to $2,500. Two things here. First, the election is an annual event. Second, you can change your accounting policy on expensing any year. But if you make a change, make sure you have that change noted in a new or amended beginning­of­the­year written expense policy. Takeaways Because you save tax dollars, you want to use the new expensing safe harbor when you can. Here’s why: 1. Safe harbor expensing is superior to Section 179 expensing because you don’t have the recapture period that can complicate your taxes. 2. Safe harbor expensing takes depreciation out of the equation. 3. Safe harbor expensing simplifies your tax and business records because you don’t have the assets cluttering your books. In summary to put safe harbor expensing in place: 1. Have an expense policy in place at the beginning of the year. 2. Put the expense policy in writing, and comply with it. 3. Keep the invoices. 4. Make the annual election to expense on your federal income tax return. Please call us if you have any questions. Tax season is here. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.

Unifled Taxes?

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips We all know the annual ritual: once January rolls around, you gather your tax documents to file your tax returns by the deadline. Sometimes (or maybe all the time!) you need an extension. And maybe you don’t meet the extended deadline, and now your return is late and unfiled. Then the next tax season rolls around, and you still haven’t filed last year’s return—so you don’t want to do the current one either, out of fear of the IRS or because you need last year’s data. Now your problem is snowballing—and if you let fear grip you, it can continue for years . . . before the IRS decides to do you in. Don’t let this problem get ahead of you. Let us give you a road map for achieving peace of mind by getting right with the IRS. If you have late, unfiled tax returns, you have an urgent problem that you should start to fix ASAP. The possible consequences include: You are at risk of the IRS preparing your returns for you giving you no dependents and no deductions and there is a possibility of criminal prosecution. The best way to avoid criminal prosecution is to come forward and voluntarily file any delinquent returns. The IRS has a time­honored policy that, in general, it will not criminally prosecute for failure­to­file those taxpayers who come forward and file their past­due tax returns. Don’t forget you may have had a refund all those years. Sad to say you can’t get anything beyond three years back from April 15th the current year (i.e you can still get a refund for 2012, 2013, and 2014, but not 2011 going back). If you owe, you always owe. If you have a long­standing problem, in most cases the IRS usually shows you some mercy. In general, the IRS requires you to file the most recent six years of tax returns to be in current compliance with your tax return filings. However, if they filed your seven year and older returns for you, they may not have given you all your dependents and deductions and you owe for the old ones. In that case you may want to file all your returns. Once you file a tax return, the general three­year statute of limitations on assessment of tax starts to run.7 If you never file a tax return, you give the IRS open season with no time limits to assess tax for that unfiled tax year. If your business has unfiled payroll tax returns but made all of its required tax deposits, and the returns show no tax owed, go ahead and file those delinquent returns. But if you made only some or none of the required tax deposits, and your payroll tax returns show that you owe the IRS money, you need to take special care before you file them. If you run your business as a limited liability company or corporation, you are not personally liable for the payroll tax balances; only your entity is. However, the IRS can potentially transfer liability for the “trust fund” portion of payroll taxes to you as the person responsible for allowing the business entity to fail to pay the IRS. What are “trust fund” taxes? They are the taxes that you collect on behalf of your employees and send to the IRS—namely, the employees’ federal income tax withholdings and their half of FICA taxes. If you have unpaid trust fund taxes, it is in your best interest to pay off the trust fund portions first. To do this, you send a designated payment to cover the trust fund taxes. The IRS honors such designations.12 If you don’t designate the payment, the IRS applies the payment to the non­trust fund taxes first! If you have not filed older tax returns whether one or ten, we are here to help. Just give us a call, the consultation is free. Please call us if you have any questions. Tax season is here. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.

Health Insurance Penalties 2016 | Joseph Becker

Standard mileage rate for 2016 is less than 2015

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips Standard Mileage rate for 2016 has decreased. The IRS recently announced the mileage rate for business driving in 2016 will be 54¢ a mile, a decrease from the 2015 rate of 57.5¢ per mile. You can use this rate for cars, vans, pickups, and panel trucks instead of tracking the actual costs of operating those vehicles for business purposes. An annual study of the fixed and variable costs of operating an automobile is used to determine what the standard mileage rate will be for a given year. In addition to the mileage rate, a separate deduction may be claimed for parking fees, tolls, interest relating to the purchase of the automobile, and state and local personal property taxes. The standard business mileage rate isn't applicable to automobiles used for hire, such as taxicabs, or for fleets of automobiles you use simultaneously. One other caution: You can't use the standard rate if the vehicle was previously depreciated by other than the straight-line method, including bonus depreciation or the Section 179 deduction. A depreciation component of 24¢ a mile is included in the 2016 business mileage rate (the same as 2015). This depreciation reduces your cost basis in the vehicle. You have a choice when using your vehicle for business. You can use actual expenses which include gas, repairs, maintenance, tolls, washing, parking, and depreciation. It is important to note that under the actual expense method you have to track your business and your personal mileage. The business expense deduction is based on a percentage of your business miles to total miles. Or you can use the standard mileage rate (business miles times $.54 per mile). Using the standard mileage rate you only track your business miles. In most cases the standard mileage rate provides a larger deduction. When you use the standard rate you can use commuting miles (to and from your business office or client (unless you work out of your home and have a home office)). You cannot deduct gas, oil, repairs, or car insurance. You can deduct parking, tolls, and car washes. Whether you are using actual expenses or using the standard mileage rate you must keep a log of your business mile usage. If you have a smart phone you can download an app that well help you track your mileage. Please call us if you have any questions. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.

Do you know how your business is doing as of right now?

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Business Tips Balance sheet analysis provides planning opportunities Learn to dissect your company's balance sheet to discover opportunities for growth, imminent shortfalls, financial disasters in the making, and trends both favorable and unfavorable. To jumpstart your analysis, focus on the following key indicators. Current ratio. The current ratio is calculated by dividing current assets by current liabilities. Current assets generally include cash, investments, short-term accounts receivable, inventory, and supplies. Current liabilities include payroll and other short-term payables, as well as current payments on long-term debts such as mortgages or bank loans. These accounts are classified as "current" because you generally expect to convert them to cash or pay them off within a year or during the current business cycle. For example, you might buy inventory on credit and plan to pay suppliers using proceeds from current sales. The rule of thumb: If your company's current ratio is greater than one, you have enough short-term assets to cover short-term obligations. If the number dips below one, your business may be headed for trouble. On the other hand, if the current ratio is three or above, you could be neglecting profitable investment opportunities. For instance, you might have too much money sitting in a low-interest bank account when the funds could be used to develop a new product line, liquidate long-term debt, or invest in a more lucrative venture. Working capital. Subtract current liabilities from current assets to arrive at this number. Like the current ratio, working capital indicates whether your company has enough cash (and short-term assets that can be converted to cash) to meet current obligations. Banks analyze this number because they're reluctant to loan money to a business that's barely covering existing commitments. The greater the amount of working capital, the more likely your company will make payments when due. Debt-to-equity ratio. You can calculate the debt-to-equity ratio by dividing total liabilities by total equity (assets minus liabilities). The debt-to-equity ratio indicates whether your company is relying excessively on debt to finance current operations. Like the spendthrift who finances an extravagant lifestyle with credit cards, a business that's heavily leveraged may find itself careening toward bankruptcy. Analyzing this ratio can help you make needed corrections before it's too late. Generally speaking, the lower the percentage, the stronger your company's financial health. Call us if you have any questions. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.

Congress renews expired tax breaks

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips Congress renews expired tax breaks You're probably familiar with tax provisions that expire on an annual basis, also known as "extenders." In mid-December 2015, Congress renewed the extenders that expired last year. But this time, the extender renewal went further than making the breaks retroactive to the beginning of 2015. Some of the rules are now effective through December 31, 2016, some are effective through 2019, and some are effective permanently. Other provisions made changes to existing tax rules that were not part of the extenders. What does that mean for you? For one thing, it means you can benefit from tax breaks such as bonus depreciation, expanded Section 179 expensing, and residential and business energy improvement incentives on your 2015 federal income tax return. Here are three rules that are back in place for 2015 — and that were permanently extended, meaning they'll also be available in future years. • State and local sales tax deduction. If you itemize, you can choose to deduct sales taxes you paid during 2015 instead of state and local income taxes. You can claim your actual expenses or use optional IRS tables. • Educator expenses. If you're a teacher who spends your own money for classroom supplies, you can claim up to $250 of your expenses as an above-the-line deduction. You may be able to deduct additional out-of-pocket expenses if you itemize. • Charitable donations from your IRA. Are you age 70½ or older? You can make a tax-free distribution of up to $100,000 from your IRA when the money is paid directly to a qualified charity. Please contact us to discuss how this new law could affect you. Call us if you have any questions. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.