June 16, 2014, is the due date for making your second installment of 2014 individual estimated tax. Your check to the United States Treasury should be accompanied by Form 1040-ES. June 16 is also the due date for calendar-year corporations to make their second quarter 2014 estimated tax payment.
If you hold foreign bank or financial accounts and the total value of your account exceeds $10,000 at any time during the calendar year, you may be required to file a Treasury Department report known as the FBAR. It’s easy to overlook this requirement because it’s separate from your federal income tax filing, with a different deadline and strict rules.
FBAR refers to “Form 114, Report of Foreign Bank and Financial Accounts.” That form is new this year, replacing the prior Form 90-22.1.
Your 2013 Form 114 must be filed electronically with the Treasury Department no later than June 30, 2014. No filing extension is available.
Contact us if you need details or filing assistance.
The new 3.8% Medicare surtax on net investment income (NII) appears to be here to stay. If this tax caught you by surprise when you filed your 2013 tax return, you should be better prepared this year.
Here’s how the tax works.
If your investment income exceeds certain thresholds, you may owe a 3.8% Medicare tax on the excess. The taxable amount would be the lesser of (a) your net investment income (NII), or (b) the excess of your “modified adjusted gross income” (MAGI) above $200,000 for singles, $250,000 for spouses filing jointly, or $125,000 for spouses filing separately. MAGI is adjusted gross income increased by certain deductions and exclusions.
Net investment income includes items from most taxable income sources, such as interest, dividends, capital gains, passive activity income, and the like. However, certain other items – including income from an active trade or business, tax-exempt interest and distributions from qualified plans and IRAs – are specifically exempt.
Note that items exempted from the definition of NII could still cause problems because of the way the surtax is calculated. For instance, if you’re over age 70½ and you take a required minimum distribution (RMD) from your IRA, the payout increases your MAGI. This could push you over the threshold for the 3.8% surtax or add to the amount you already owe.
What can you do now to reduce your exposure to the surtax? Consider these five potential strategies.
Please contact our office for additional information on the strategy(s) that may be right for your particular situation.
A recent Tax Court decision will change the way the IRS applies the law on IRA rollovers.
For years, the IRS has interpreted the IRA rollover rules to mean that a taxpayer could do one rollover per year for each IRA he or she owned. In doing a rollover, the taxpayer is not taxed on the funds taken from the IRA so long as the funds are redeposited into an IRA within 60 days of the withdrawal.
The recent court decision changed the way the tax rule is applied, ruling that the limit on rollovers should be applied on an aggregate basis – that is, only one rollover per year is allowed for all the IRAs a taxpayer owns. If a taxpayer takes funds from one IRA and rolls the money back into an IRA within 60 days, he or she can't do any other tax-free rollovers within the following 365 days.
This change goes into effect January 1, 2015; therefore, the aggregate rule won't apply for rollovers done during the remainder of 2014. Note, also, that trustee-to-trustee transfers can still be done as often as the taxpayer likes; the limit doesn't apply to these transfers because the taxpayer never has possession of any of the IRA funds.
The quality of the customer service your company provides will have an effect on the net profit of your business.
Even with the best of intentions, many companies only give lip service to this very critical area. It is necessary that every employee be tuned in to how he or she can contribute to outstanding customer service – the kind of customer service that keeps customers coming back again and again.
"Customer service" includes every element of the sales transaction between your business and a customer. Though you may consider customer service just a matter of being polite to customers, it actually involves many areas, including the following:
Every one of your employees should be able to compile a list of the behaviors that contribute to good customer service in your specific line of business. Have your employees bring their lists to a staff meeting and compare notes. Discuss the areas where your company could improve customer service. Then decide on specific actions to take and decide who will take them and when. It's important to follow through to be sure that the changes you decide to make are actually made.
Get your employees involved. Be persistent and consistent in improving customer service. Your net profit will show the positive results of your efforts.
Many small business owners share one problem, especially in their early days. It's being over-reliant on a single customer or supplier for much of their business. If you're in that position, your business is operating with higher risk. Just as with investments, you don't want all your eggs in one basket. Your goal should be a well-diversified portfolio of customers and suppliers.
That's in an ideal world. In the real world you may have to live with the situation, at least short-term. But there are steps you can take to understand your risk and, over time, to change it.
Measure the problem. Work with your managers and accountant to quantify how your sales break out by customer. You only need do this for the top five or ten customers to see whether you have an over-reliance problem. If you're a manufacturer or retailer, take a similar look at your principal suppliers. Quantify how dependent you are on the top few.
Understand the risks. List the factors that could jeopardize your business with your chief customer or supplier. These will vary with your specific circumstances. They might include a natural disaster that interrupts your customer's business or that prevents you from shipping or receiving goods. It could be a change in the marketplace or a new technology that cuts demand for your product. It could be actions by your competitors. It might even be problems in your own operation, such as a drop in quality, delays in shipping, or poor inventory control. The list may be daunting, but until you understand the risks, you can't develop solutions.
Look for ways to minimize your risks. Brainstorm with your managers on long-term steps to reduce each risk. It might be to enter new markets or to tweak your product design. Think through contingency plans to address possible disasters or find alternative suppliers. Discuss how you would respond to changes in the marketplace. Try to set measurable goals for change and clearly assign responsibility. Changing the situation won't be simple, and it may take a long time. But that's what strategic business management is all about.
For assistance with this issue or with any of your business concerns, give us a call.
As summertime approaches, tax planning is probably the last thing on your mind. The problem is that if you wait until December, there’s little time for changes to take effect. But if you take the time to plan now, you still have six months for your actions to make a difference on your 2014 tax return.
Making time for 2014 tax planning now not only helps reduce your taxes, but also helps to put you in control of your entire financial situation. Tax planning should be a year-round process, but it’s especially effective at midyear.
Give us a call for guidance in implementing the best moves for your particular situation.
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