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Staffing at our Firm

Posted by Admin Posted on Aug 04 2017

Staffing at our Firm - we want to welcome a new member to the Wittenberg CPA team – Meghan Phelps has joined our firm in our Shelton office, and will be replacing Sheri Burgess, who has left our firm to work more actively in her family owned business.  Meghan had been working in Seattle providing comprehensive accounting services for a law firm.  She recently moved to Mason County and is enjoying acreage and a more reasonable commute time to work!  Please join us in welcoming Meghan to our firm, and as the year quickly moves on please let us know if we can assist you with any financial, business or tax planning issues, or compliance issues relative to your company.  We offer an array of services, including payroll and business tax preparation, full service accounting, and software and business consulting services.  We also want to take this opportunity to thank our loyal and devoted clients - we sincerely appreciate your ongoing support and patronage!  Mike and Staff

Hobby versus Business Activities

Posted by Admin Posted on May 18 2017

 

Hobby versus Business Activities - If you are on the fence as to whether to classify your activity as a business or a hobby, it’s important to understand the differences as well as the reporting requirements relative to hobby activities:

 

  1. Is it a Business or a Hobby?  A key feature of a business is that people engage in it to make a profit.  Consider nine factors when determining whether an activity is a hobby or a business. Make sure to base the determination on all the facts and circumstances.
  2. Allowable Hobby Deductions.  Within certain limits, taxpayers can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.
  3. Limits on Hobby Expenses.  Generally, taxpayers can only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss isn’t allowed to offset other taxpayer income.
  4. How to Deduct Hobby Expenses.  Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Expenses may fall into three types of deductions, and special rules apply to each type. See Publication 535 for the rules about how to claim them on Schedule A, as Itemized Deductions.

 

Please contact us if you’d like to discuss whether your activity more resembles a “hobby” as compared with a business activity.  Mike and Staff

 

Tax Return Extension Requests

Posted by Admin Posted on Apr 07 2017

 

Tax Return Extension Requestsnow that its April and the individual tax filing deadline of 4/18/17 is right around the corner it may be time for you to consider an extension request, to allow you some additional time to file your tax return. The request for additional time is made with a Form 4868, Application for Automatic Extension of Time, which must be completed and remitted to the IRS by the initial filing deadline of 4/18/17. The process is fairly straightforward, and will allow you up to 6 months of additional time to file your individual tax return. The most important step in preparing an extension request is to determine whether you’ll owe taxes when your return is filed later in the year.  If you are projecting that you will owe taxes when you eventually file, you can make an extension payment, either by check, which should be mailed along with your extension request or by direct debit from your bank account. Not only will the extension request provide you with additional time to complete and remit your tax return, it will allow you peace of mind, so you aren’t later subjected to a late filing & payment penalties. Please contact our office if you have any questions, or if we can assist you in making an extension request.  Mike and Staff

 

Business Entity Procedures

Posted by Admin Posted on Mar 09 2017

 

Business Entity Procedures – whether you own an LLC, INC, LLP, or another hybrid type of legal entity for your business, the following are some important procedural reminders to make sure the business entity you set up is well maintained and protecting you from potential legal and compliance pitfalls.  One the simplest and most important procedures is to be sure that you sign all documents as the “Member” of your LLC, the “President” of your INC, etc.  This is especially true when signing legally binding documents, such as lease agreements, note agreements, etc.  Another important task is to title and insure all real property, vehicles, etc., in the company’s name, not in your personal name(s).  Also, now that 2017 is well underway, if you haven’t had an official company meeting to discuss the policies and procedures of the company, now is the time to do so, and be sure to document the decisions made.  Finally, if you company is a corporation (INC), it’s extremely important to set up your owner compensation at a “reasonable” level, both in terms of adequacy, and in terms of allowing you as the owner to consider funding your company sponsored retirement plan.  Please contact us if we can answer any questions, or help you along the way with setting up these business entity procedures.

 

Business Planning

Posted by Admin Posted on Feb 15 2017

 

 As business owners it’s important to take the time, at least once a year, to think about your business and make plans for the coming year.  Whether or not your plans are translated into annual “minutes” for your business or not, there are a few key considerations:

 

  • Employee reviews – have you taken the time to meet with each of your employees to hear their perspectives and plans?

  • Financial review – have you reviewed your company’s performance to determine fiscal trends that might need to be looked into further, so you can adjust operations accordingly?

  • Business succession and long term planning – if you haven’t prepared a business plan for your company in a while, or ever, it would be wise to go through the process of preparing a plan for your company, in order to refine your goals and plans.  The SBA provides some very useful guidance in setting up a business plan.

    Please contact our office if we can assist you in the planning needs for your company.  Mike and Staff

 

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Wittenberg CPA, PS

 

2017 Tax Season News

Posted by Admin Posted on Jan 17 2017

 

The IRS will begin accepting electronically filed tax returns for the 2016 tax year on Monday, the 23rd of January.  This tax season the initial filing deadline for individual tax returns is 4/18/17, however all pass through entities (e.g. LLC’s and S Corporations) must file by 3/15/17 this year, which is a change from prior tax seasons.  Another change for this tax season is that tax returns generating refunds and reporting either EITC’s (earned income tax credits) &/or ACTC’s (additional child tax credits) will be delayed at least until 2/15/17.  A couple of reminders for business owners as we move rapidly into 2017; the first is that the State of WA’s minimum wage rate increased to $11 per hour effective the first of this year. Also, at the beginning of each calendar year it’s always a good idea to complete a new Form W-4, in order to update your income tax withholding for the coming year, especially if you’ve had a change in personal circumstances, such as marriage, children, additional itemized deductions, etc.  Also, if your company, no matter how small, has paid for services (e.g. professional services, subcontractors, etc.) please review the Form 1099 reporting requirements to find out if you should  issue Form 1099’s.  Also, keep in mind that a new requirement this year is that Form 1099’s must be issued by 1/31/17 to all qualifying recipients.  Please  contact us if we can be of assistance to you and/or your business over the tax season, and throughout the year!

 

 

 

 

 

Year-End Reminders!

Posted by Admin Posted on Dec 19 2016

 As the year rapidly comes to a close there still might be some end of the year actions you can take in order to soften your 2016 tax bill.  For business owners, making the needed purchase of an asset, and/or making bonus and/or retirement plan payments are useful income tax savings maneuvers.  For individuals, there’s still some time to maximize your retirement plan contributions through payroll.  It’s also worth considering making year end donations, or paying for medical expenses if you believe you’ll be able to “bunch” them into the current year and benefit from taking them as itemized deductions.  One type of deduction that is often missed is that for the use of your vehicle, whether for business or personal use.  For the 2017 calendar year, the standard mileage rates have been announced by the IRS; for business related vehicle use its 53.5 cents per mile, for charitable vehicle use its 14 cents per mile, and for medical vehicle use its 17 cents per mile.  Please contact us if you have any questions or need our assistance in making some last minute maneuvers over the next couple of weeks, and certainly let us know if you’d like our help in determining your 2016 projected income tax liability. Mike and

Update for Overtime

Posted by Admin Posted on Dec 09 2016

 

 

 

Dear Business Clients, We wanted to follow up with you about a memo that we sent out in June of this year, regarding the Overtime Rule that US Department of Labor was implementing, effective December 1, 2016. On November 22, 2016, a US District Court Judge granted an Emergency Motion for Preliminary Injunction, which stopped the Department of Labor from implementing and enforcing the rule from taking place.

 

What this means, is that the previous salary threshold of $455 per week ($23,666 per year), still stands, until further notice. However it is still extremely important to determine whether or not your employee continues to qualify as salaried , overtime-exempt, not only by the salary threshold, but also by the “Duties” test, even though the salary threshold is currently unchanged.

 

We will be closely following the status of this injunction, and will certainly notify you as we know more. If you have any questions about how this update affects your company, and your employees, please don’t hesitate to contact our office.

 

Wittenberg CPA's Website - New and Improved!

Posted by Admin Posted on Nov 09 2016

 

If you haven’t checked out our website in a while please go and review the new features and tools we’ve added @ www.wittenbergcpa.com.  Now you can sign up for our e-newsletter, access tax and financial tools, research issues in our financial guides section and generally get to know our firm and the services we offer.  As the year winds down please let us know if you have any business or personal tax or financial planning needs that we can assist you with.  We also want to take the time as we near the holiday season to say thank you to our clients for your trust and loyalty in working with our firm – we sincerely appreciate you!  We also want to thank our professional associates for your collaborative efforts in meeting the needs of our mutual clients.  Thank you, Mike and Staff

 

Consulting versus Insulting Firms

Posted by Admin Posted on Aug 31 2016

Most business owners will likely need some financial and general business planning advice from time to time.  Unfortunately, there are what we like to call “insulting” firms out there, which approach businesses and their owners, falsely guaranteeing better performance and more profits.  The problem is that these firms, and the “insultants” they send out in the field, posing as business consultants, are actually focused on bettering themselves and the companies they represent, by charging outrageous fees, for advice that at best might be considered common sense solutions.  So, if you are approached by someone like this, you should be very skeptical, and you should also let them know that you’ll be contacting your trusted accountant, and/or your financial advisors for advice instead.  Please contact us if you would like to talk about your personal and/or your business planning needs – we are always here to help you and your business succeed! 

Wills and Related Documents

Posted by Admin Posted on Aug 31 2016

 

While it’s typically not on the top of anyone’s “to do” list, if you either don’t have a will in place, or haven’t updated your will in a while, it’s extremely important to take care of it right away. We recommend meeting with an attorney, because your will should be tailored to your needs and requirements, however there are also some "do it yourself" options out there on the web, if consulting with an attorney isn't an option for you. The main thing is that you establish a current will and durable power of attorney, in order to take care of the details of what will happen to your assets, your children, as well as your medical requirements, upon your death or incapacitation. Another consideration is for you to set up a “living trust”, otherwise known as a revocable trust, which can be very useful in transferring one’s assets to beneficiaries, while avoiding the hassle and publicity of the probate process. Finally, one of the most important and often overlooked tasks, is to review the “beneficiary designations” stated on your retirement plans, whether company sponsored, or in your personal name, to make sure you have the correct beneficiaries of these plans named for that particular retirement asset. Please contact us if we can answer your questions, or help you sort out what needs to be done under your specific circumstances, as well as to assist you and/or your attorney in completing these extremely important legal and financial tasks.

 

Business Accounting Promotion

Posted by Admin Posted on Aug 31 2016

 

Great news!  Wittenberg CPA is currently offering some great promotions from now through the end of 2016. We are offering free, initial set up for any new business clients needing payroll and other business accounting services, in addition to a $150 account credit to our existing clients for the successful referral of any new business client. For those business owners who are considering making a change in their accounting services provider, but who are not quite sure of the possible benefit, we are also offering a free review, where we would go over your financial information and tax returns with you, to determine what changes could be made in order to benefit your business.

 

For more information about how we can better serve you, contact us at 360-426-0230, or visit our website at www.wittenbergcpa.com.

 

New Overtime Exemption Rules

Posted by Admin Posted on Aug 31 2016

 

You may have heard rumors that the Department of Labor was issuing updated requirements, pertaining to salaried, overtime-exempt employees. These requirements have been finalized, and a new Final Ruling has been issued, with an effective date of December 1, 2016.

 

In the past, in order for an employee to qualify for the overtime exemption, three tests had to be met; (1) the employee had to be paid a predetermined and fixed salary, not subject to reduction because of variations in the quality or quantity of work performed (“salary basis test”); (2) the amount of salary paid had to meet a minimum specified amount (“salary level test”); and (3) the employee’s job duties had to primarily involve executive, administrative, or professional duties, as defined by the regulations (“duties test”).

 

With the new Final Ruling, the employee must still continue to meet the required three tests, in order to qualify for the exemption; however, the salary level test has now increased from $455 to $913 per week. The good news is, for the first time ever, employers are able to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

 

Remember that non-discretionary bonuses and incentive payments are forms of compensation promised to an employee, in accordance with any pre-determined standards. Holiday bonuses are considered discretionary, and therefore, do not count towards the salary threshold; nor does any benefit paid to an employee, such as medical insurance, retirement, HSA contributions, etc.

 

These bonuses and incentive payments must be paid on a quarterly or more frequent basis, in order to count towards the standard salary level. In the event that an employee does not meet the standard salary level in a given quarter, in conjunction with the incentive payments, employers are allowed a “catch-up” payment, which must be paid within one pay period of the quarter ending, in order for the employee to meet the standard salary level requirement.

 

To prepare for the upcoming changes, you’ll first need to decide whether or not your current salaried overtime–exempt employees still qualify under the duties test, as well as the salary basis test. If the employee’s annual salary threshold is currently more than the updated requirement of $913 per week ($47,476 annually), then there is nothing further that you will need to do.

 

However, if your employee’s salary is less than the required threshold, you’ll need to either raise their annual salary to at least the new threshold, or switch the employee over to an hourly wage. If you decide to switch over to the hourly compensation method, the employee will no longer be overtime exempt, since the requirement of the exemption is to meet all three requirements (duties, salary basis, and salary level).

 

Please contact us at your earliest convenience to discuss how these changes impact your business specifically, so that we can help you prepare for the transition, before its upcoming implementation date of December 1, 2016.

 

Why Hire a CPA Firm

Posted by Admin Posted on Aug 31 2016

 

We always appreciate the opportunity to explain why you should engage a CPA (Certified Public Accounting) firm like ours, as compared with hiring a bookkeeping or a tax preparation only service, especially since our fees can be higher on average, relative to those other types of services. Probably the most significant benefit of engaging a CPA firm like ours is the education and experience levels that we can offer you and your company, inherent in the services we provide. Whereas anyone can put out their “shingle”, advertising bookkeeping, and/or income tax preparation services, CPA firms are held to a much higher standard of education, knowledge and ethics. For example, CPA’s are required to not only have a college degree in accounting, we are also required to have a minimum of 40 hours of continuing education on an annual basis, in the fields of accounting, tax law, business finance, personal financial planning, and other related studies. Unfortunately the nationally syndicated companies, advertising their income tax and/or payroll preparation services by “professionals”, are instead staffed by individuals with minimal training and experience, in a mass production type of atmosphere, without requiring these same educational standards or ethics.  Please contact us if you’d like to discuss how we can assist you, and/or your company with its accounting, business start-up, income or business tax preparation, or any of the other types of services  we provide.  Thanks!  Mike and Staff

 

Health Care & Your Income Taxes - New On-Line Tools!

Posted by Admin Posted on Aug 31 2016

 

Since the implementation of the new health care act has been so complicated, especially for those who participate in either the Federal or a state based health insurance marketplace (exchange), the IRS’s Taxpayer Advocate Service has developed some new web based tools.  The Premium Tax Credit Change Estimator is a tool that can be used when your life circumstances change (e.g. changes in income, marital status, etc.), so you can figure out how much your “Advance Premium Tax Credit” will change based upon the changes in your life circumstances. 

 

The Individual Shared Responsibility Provision Estimator is a tool to determine how much you can expect to pay as an “Excess Advance Premium Tax Credit Repayment”, upon the filing of your annual tax return, if you don’t have “minimum essential coverage”, and if you also don’t qualify for an exemption from this provision. 

 

These tools are meant to provide you with information relative to these two aspects of Affordable Care Act (ACA) compliance, however if you have any questions as to how these rules apply to your particular circumstances, please contact us  for further assistance. 

 

Local Sales Tax Increase

Posted by Admin Posted on May 27 2016

Effective April 1, 2016, the City of Shelton’s sales tax rate increased from 8.6% to 8.8%. This rate increase is due to the establishment of a Transportation Benefit District (TBD), and the taxes generated will be used for transportation services. As local consumers, we all just need to get used to paying a higher rate of sales tax, however for businesses the change requires some additional complexity.

If your business reports on a “cash basis” method with the Department of Revenue, invoices that were sent out at the old tax rate, but not received until after 4/1/16, will need to be reported during the period the actual sale occurred, in order to report and pay the correct sales taxes collected. This would mean for most businesses, that they would need to amend the excise return for the period in question, and include the sale that was received after the April 1st sales tax increase.

If your business reports on an “accrual basis” method with the Department of Revenue, the change should be seamless, aside from making sure that you setup any invoices after April 1st using the new rate of 8.8%.

If you need assistance with updating your accounting software, registers, etc., just contact us and we would be happy to assist you with implementing this change for your business.

It’s FAFSA Filing Season too!

Posted by Admin Posted on May 27 2016

If you have a college age child in your household you are more than likely needing to file a FAFSA (Free Application for Student Aid) form this time of year, even if you don’t expect your child to qualify for grant type funds, they may qualify for a scholarship or other financial support. While it’s best to complete and file the FAFSA early during the tax season, you can use estimates from tools like this income estimator, in order to meet the required FAFSA filing deadline, and then later update the FAFSA with actual amounts from the most recent tax year.   The good news is that once you’ve prepared the most recent year’s tax return, your financial information can be efficiently updated by using an IRS data retrieval tool, so you won’t need to spend the time to complete the FAFSA form all over again!  Please contact us if you have any questions, or if we can assist you in the process of preparing a FAFSA form.

Healthcare Excise Taxes Delayed

Posted by Admin Posted on May 27 2016

The Act delays the imposition following healthcare excise taxes:

  • Medical Device Tax. The Act provides a two-year moratorium on the 2.3% excise tax imposed on the sale of medical devices. The tax will not apply to sales during calendar-years 2016 and 2017.
  • Cadillac Medical Insurance Tax. A 40% excise tax imposed on high-cost employer sponsored health coverage (often referred to as the Cadillac tax) was scheduled to take effect for tax years beginning after 2017. The Act delays the tax for two years. It will now be imposed for tax years beginning after 2019. The Act also makes this tax a deductible business expense.

New Rules for Information Reporting

Posted by Admin Posted on May 27 2016

Accelerated Due Date for Reporting Employee and Nonemployee Compensation. Currently, a business that pays nonemployee compensation totaling $600 or more in any tax year to a single payee must file a Form 1099-MISC (Miscellaneous Income) with the IRS by the last day of February of the year following the calendar year to which such returns relate (or March 31 if filed electronically). Similarly, employers must file Form W-2, Wage and Tax Statement, to report wage paid to employees with the Social Security Administration (SSA) by that same date.

The Act accelerates the date that Forms 1099-MISC and W-2 must be filed with the IRS and SSA. Starting with 2016 calendar year Forms 1099-MISC and W-2, which are to be filed in 2017, the returns must be filed with the IRS (or SSA) by January 31 of the year following the calendar year to which such returns relate and they are no longer eligible for the extended March 31 filing date for electronically filed returns.

Penalty Relief for De Minimis Errors on Information Returns. Substantial penalties can apply for failing to file correct information returns and to furnish correct information to payees. The penalties are the same regardless of the size of the error in the amount reported. For returns required to be filed after 2016, the Act establishes a new safe harbor from penalties if the return is otherwise correctly filed but includes only a de minimis error of $100 or less ($25 or less in the case of errors involving tax withholding). In this case, the issuer is not required to file a corrected return and no penalty is imposed, unless the recipient of such the incorrect return requests a corrected return.

Other Business Tax Breaks

Posted by Admin Posted on May 27 2016

Tax Breaks Made Permanent. Business provisions made permanent by the Act include the following:

  • Research and Development (R&D) Credit. The Act retroactively and permanently extends the R&D credit. Additionally, beginning in 2016, eligible small businesses ($50 million or less in gross receipts) may claim the credit against Alternative Minimum Tax (AMT), and the credit can be utilized by certain small businesses against the employer’s payroll tax (i.e., FICA) liability.
  • Break for S Corporation Built-in Gains. When a C corporation converts to S corporation status, the corporate-level Section 1374 built-in gains tax generally applies when built-in gain assets (including receivables and inventories) are turned into cash or sold within the recognition period. The tax is only assessed on built-in gains (excess of FMV over basis) that exist on the conversion date. The recognition period is normally the 10-year period that begins on the conversion date. However, for S corporation tax years beginning in 2012 through 2014, the recognition period was five years. The Act makes the five-year recognition period permanent retroactive to tax years beginning in 2015. In other words, for gains recognized in 2015 and beyond, the built-in gains tax won’t apply if the fifth year of the recognition period has gone by before the start of the year.
  • Differential Pay Credit for Small Employers. The Act retroactively and permanently extends the credit for eligible small employers that provide differential pay to employees while they serve in the military. The credit equals 20% of differential pay of up to $20,000 paid to each qualifying employee during the tax year. Additionally, beginning in 2016, the Act modifies the credit to apply to employers of any size, rather than employers with 50 or fewer employees, as under current law.

Work Opportunity Credit (WOTC) Hiring Deadline Extended through 2019. The Act retroactively extends the general deadline for employing eligible individuals for purposes of claiming the WOTC to cover qualifying hires who begin to work before 2020. With respect to individuals who begin work for an employer after 2015, the PATH Act also modifies the WOTC to apply to employers who hire qualified long-term unemployed individuals (i.e., those who have been unemployed for 27 weeks or more) with the credit with respect to such long-term unemployed individuals equal to 40% of the first $6,000 of wages.

Tax Breaks Extended through 2016. The following business tax breaks were retroactively extended for two years through 2016:

  • Credit for Building Energy-efficient Homes. The Act retroactively extends the $2,000 or $1,000 (depending on the projected level of fuel consumption) per-home contractor tax credit for building new energy-efficient homes in the U.S. to qualifying homes sold by December 31, 2016, for use as a residence.
  • Energy-efficient Commercial Building Property Deduction. The Act retroactively extends the deduction for the cost of an “energy efficient commercial building property” placed in service during the tax year for two years, for property placed in service before 2017. The maximum deduction for any building for any tax year is the excess (if any) of the product of $1.80, and the square footage of the building, over the total amount of the Section 179 deductions claimed for the building for all earlier tax years.

Cost Recovery Provisions

Posted by Admin Posted on May 27 2016

Enhanced Section 179 Deduction Made Permanent. The Act retroactively restores and makes permanent the (1) enhanced maximum Section 179 deduction of $500,000 (same as in effect from 2010 through 2014), (2) enhanced Section 179 deduction phase-out threshold of $2 million (same as in effect from 2010 through 2014), and (3) rule allowing Section 179 deductions for qualified real property. Without this change, the maximum Section 179 deduction was scheduled to be only $25,000, the phase-out threshold was scheduled to fall to $200,000, and there was to be no Section 179 deduction privilege for real estate.

Additionally, for tax years beginning after 2015, (1) the $500,000 and $2 million limits will be indexed for inflation, (2) the special $250,000 deduction cap that previously applied to qualified real property will be eliminated, and (3) air conditioning and heating units will be eligible for expensing.

15-year Depreciation for Certain Real Property Improvements Made Permanent. The Act retroactively extends and makes permanent the 15-year straight-line depreciation privilege for qualified leasehold improvements, qualified restaurant property, and qualified retail space improvements.

Bonus Depreciation Extended through 2019. The Act retroactively extends bonus depreciation for qualifying new (not used) assets that are placed in service during 2015 through 2019 (2020 for certain assets with longer production periods). The bonus depreciation percentage is 50% for property placed in service during 2015 through 2017 (2018 for certain assets with longer production periods), and phases down to 40% for property placed in service in 2018 (2019 for certain assets with longer production periods), and 30% for property placed in service in 2019 (2020 for certain assets with longer production periods).

For new passenger autos and light trucks subject to the luxury auto depreciation limitations, the bonus depreciation increases the maximum first-year depreciation deduction by $8,000 for vehicles placed in service through 2017, $6,400 for vehicles placed in service in 2018, and $4,800 for vehicles placed in service in 2019.

Family and Individual Tax Breaks

Posted by Admin Posted on May 27 2016

Tax Breaks Made Permanent. The Act makes a whole slew of favored individual provisions permanent, including the following:

  • Deduction of State and Local General Sales Taxes. For the last few years, individuals who paid little or no state income taxes had the option of claiming an alternative itemized deduction for state and local sales taxes. The sales tax deduction option expired at the end of 2014, but the Act makes this option permanent starting in 2015, so that itemizers can elect to deduct state and local sales taxes, instead of state and local income taxes, for tax years beginning in 2015 and beyond.
  • IRA Qualified Charitable Contributions. For 2006–2014, IRA owners who had reached age 70½ were allowed to make tax-free charitable contributions of up to $100,000 directly out of their IRAs. Such contributions were called Qualified Charitable Distributions (QCDs), and they counted as IRA Required Minimum Distributions (RMDs). Charitably inclined seniors with more IRA money than they needed could reduce their income tax bills by arranging for tax-free QCDs to take the place of taxable RMDs. This break expired at the end of 2014. The Act makes this tax break permanent, so that it’s available for QCDs made in tax years 2015 and beyond.
  • $250 Deduction for K-12 Educators. For the last few years, teachers and other eligible personnel at K-12 schools could deduct up to $250 of school-related expenses paid out of their own pockets—whether they itemized or not. This break expired at the end of 2014. The Act makes this deduction permanent, so that it is allowed for 2015 and beyond. Also, beginning in 2016, the $250 cap will be indexed for inflation, and professional development expenses will be deductible under this provision.
  • Qualified Conservation Contribution Breaks. Qualified conservation contributions are charitable donations of real property interests, including remainder interests and easements that restrict the use of real property. Liberalized deduction rules applied through 2014 that increased the maximum write-off for these contributions. The Act makes these liberalized rules permanent.
  • 100% Gain Exclusion for Qualified Small Business Corporation (QSBC) Stock. The Act retroactively restores and makes permanent the 100% gain exclusion (within limits), and the exception from alternative minimum tax preference treatment for sales of QSBC stock that expired at the end of 2014. Note that you must hold QSBC shares for more than five years to be eligible for the 100% gain exclusion.
  • American Opportunity Tax Credit (AOTC). The AOTC is a credit of $2,500 for various tuition and related expenses for the first four years of post-secondary education. This credit is phased out for AGI starting at $80,000 (if single) and $160,000 (if married filing jointly). This break was set to expire after 2017. The Act makes the AOTC permanent.
  • Parity for Employer-provided Transit and Parking Benefits. The Act retroactively restores and makes permanent the parity provision that requires the tax exclusion for transit benefits to be the same as the exclusion for parking benefits. Thus, for 2015, employees can receive tax-free transit benefits of up to $250 a month—the same as for tax-free parking benefits.
  • Favorable Rule for S Corporation Donations of Appreciated Assets. The Act retroactively restores and makes permanent the favorable shareholder basis rule for stock in S corporations that make charitable donations of appreciated assets. For such donations, each shareholder’s tax basis in the S corporation’s stock is only reduced by the shareholder’s prorata percentage of the company’s tax basis in the donated assets. Without this tax break, a shareholder’s basis reduction would equal the passed-through write-off for the donation (a larger amount). The provision is taxpayer-friendly because it leaves shareholders with higher tax basis in their S corporation shares.

Credits for Qualified Solar Electric and Water Heating Property Extended through 2021. The 30% credit for qualified solar water heating property and solar electric property expenditures was scheduled to expire for property placed in service after 2016. The Act extends this credit through 2021. For property placed in service in calendar-years 2017—2019, the credit remains at 30%. The credit is reduced to 26% or property placed in service in calendar-year 2020, and 22% for property placed in service in calendar-year 2021.

 

Tax Breaks Extended through 2016. Individual tax breaks that weren’t made permanent or extended through 2021 by the Act, were extended for two years through 2016, including the following:

  • Tax-free Treatment for Forgiven Principal Residence Mortgage Debt. For federal income tax purposes, a forgiven debt generally counts as taxable Cancellation of Debt (COD) income. However, a temporary exception applied to COD income from cancelled mortgage debt that was used to acquire a principal residence. Under the temporary rule, up to $2 million of COD income from principal residence acquisition debt that was cancelled in 2007–2014 was treated as a tax-free item. The Act retroactively extends this break to cover eligible debt cancellations that occur before 2017.
  • Mortgage Insurance Premium Deduction. Premiums for qualified mortgage insurance on debt to acquire, construct, or improve a first or second residence can potentially be treated as deductible qualified residence interest. The deduction is phased out for higher-income taxpayers. Before the Act, this break wasn’t available for premiums paid after 2014. The Act retroactively extends the break for premiums paid before 2017.
  • Qualified Tuition Deduction. This write-off, which can be as much as $4,000 or $2,000 for higher-income folks, expired at the end of 2014. The Act retroactively extends it through 2016.
  • $500 Energy-efficient Home Improvement Credit. In past years, taxpayers could claim a tax credit of up to $500 for certain energy-saving improvements to a principal residence. The credit equals 10% of eligible costs for energy-efficient insulation, windows, doors, and roof, plus 100% of eligible costs for energy-efficient heating and cooling equipment, subject to a $500 lifetime cap. This break expired at the end of 2014, but the Act retroactively extends it for two years, to apply to property placed in service before 2017.

New Tax Breaks. The Act also includes a number of new individual tax breaks, including:

  • Allowing tax-preferred distributions from section 529 accounts to be spent on qualifying computer equipment and technology purchases.
  • Allowing ABLE accounts (tax-preferred savings accounts for disabled individuals), which currently may be located only in the state of residence of the beneficiary, to be established in any state. This will allow individuals setting up ABLE accounts to choose the state program that best fits their needs, such as with regard to investment options, fees, and account limits.
  • Allowing a taxpayer to roll over distributions from an employer-sponsored retirement plan [e.g., a 401(k) plan] and traditional IRA (that is not a SIMPLE IRA) into a SIMPLE IRA, provided the SIMPLE IRA has existed for at least two years.

2016 Payroll Considerations

Posted by Admin Posted on May 27 2016

We are writing to remind you to update certain pertinent information on behalf of your employees, as is either required by law, or is relevant to your company’s record keeping needs. Please refer to our website, for relevant government forms including; Form W-4, INS Form I-9, and the DSHS New Hire Reporting information, which are discussed below.

Also, please note that the State of Washington’s minimum wage will remain $9.47 per hour, effective January 1, 2016.

Please have each of your current employees complete a 2016 Form W-4. The annual completion of this form allows your employees to assess their withholding status, as well as confirm their social security number, marital status and mailing address.

Each new employee must complete a 2016 Form W-4 (lines #1-7) along with their signature, date of hire and date of birth. As the employer, you need to complete lines #8-10 of the Form W-4. Remember that you must also complete and retain a form I-9, making sure that all sections are filled out completely. The I.C.E. (Immigration & Customs Enforcement) can fine your company up to $50 per incomplete, and/or incorrectly completed section, which can add up to $200 per form.

Please let us know if we can answer any questions about these requirements, or assist you with the DSHS New Hire Reporting requirements.

We’d also like to remind you that Washington State law requires (under RCW 50.12.070 and WAC 192-12-050) that the following information be maintained by all employers:

  • Name (in full) of the employee
  • Date of birth 
  • Social Security number
  • Days and weeks when work was completed
  • Dates and hours worked (specific time in and time out)
  • Wages paid for each separate pay period
  • Location where work was performed
  • Date when hired or re-hired to work
  • Date when the individuals name was removed from the payroll
  • Cause of separation from work due to discharge, quit, etc.

According to the State of Washington these employee records are to be kept for at least four years, but our office recommends seven years. We also recommend that you maintain an employee policy and procedure manual, and that you review the overall content of your employees’ files annually for completeness.

In addition to maintaining the above employee information, we also recommend that you maintain two binders separate from your employee’s files. One that holds copies of your employee’s W-4’s; present employees first, with past employees in the back. The second one should hold copies of your employee’s I-9’s, in the same order as your W-4 binder. Using this approach you would be able to provide the required employee information to an auditor, if requested, without pulling each employee’s personnel file.

Please don’t hesitate to let us know if we can assist you in completing the required employment forms, or to help you understand the rules, as they specifically apply to your company.

Staff News

Posted by Admin Posted on May 27 2016

   First off, we are welcoming back Beccie Beck, who has returned to work as staff accountant in our new Olympia office location. Beccie is looking forward to working with our Olympia area clients, and will be providing accounting services, including payroll and excise reporting, as well as accounting software support and review services.

   Additionally, Katie Arnold is being promoted to the role of manager at our Shelton office. She will become more involved in the management of the overall firm, as well as responsible for managing the firm in Mike’s absence.  The Shelton office staff will remain the same, as Sheri Burgess and Chrissy Hammond will continue in their roles as staff accountants on the WCPA team.

   On the education front, Katie is continuing her studies in accounting so she can complete her bachelor’s degree, with the goal of obtaining her CPA certification.  Chrissy is nearing the completion of her master’s degree in business administration and also has her sights set on obtaining her CPA certification.  As is the case each year, all staff members will be participating in continuing education programs throughout the rest of the year, in order to fortify their knowledge in accounting principles, and payroll and excise compliance matters.

New File Share Portal

Posted by Admin Posted on May 27 2016

In addition to personnel news, we want to let you know that we’ve set up a new file share portal through File Genius, so if you’d like to send or receive confidential information, or software backups, to/from our office please let us know, and we’d be happy to send you the instructions for interacting with us via this new file share tool.

New Office Opening

Posted by Admin Posted on May 27 2016

   We are pleased to announce the opening of a second office in Olympia on October 12th! Our new office will be located on the 3rd floor of the Security Building at the corner of 4th Ave and Washington Street in downtown Olympia. As we get underway at this new location, our office hours will be Monday through Thursday each week, from 9 am to 2 pm. Please stop by for a visit at 203 4th Avenue E., Suite 307, Olympia, WA. Hours at the Shelton office will remain the same.

   With the opening of the new office, we plan on better serving our Olympia area clients and we also look forward to working with new clients. In order promote our Olympia office, we are offering free, one time set up for any new business clients to our firm needing payroll and other business accounting services. We are also offering our existing clients an account credit of $150 for the successful referral of any new business clients to our firm.

Don’t Overlook Estate Planning

Posted by Admin Posted on May 27 2016

For 2015, the Federal unified federal gift and estate tax exemption is a generous $5.43 million, and the federal estate tax rate is a historically reasonable 40%. However the State of WA estate tax exemption is only $2,054,000, so even though your estate may readily avoid Federal estate taxes, it may be subject to State of WA estate taxes without proper planning. The annual Federal gift reporting exemption threshold remains $14,000 for the 2015 calendar year.

Therefore, even if you already have an estate plan, it may need updating to reflect the current estate and gift tax rules. Also, you may need to make some changes that have nothing to do with taxes at all. Please contact us if you think you could benefit from an estate planning tune-up, and we’ll coordinate with your attorney and investment advisor, as necessary, in order to make sure your overall plan is effective.

Take Advantage of Expected Extensions of Important Business Breaks

Posted by Admin Posted on May 27 2016

Several very favorable business tax provisions may dictate taking action between now and year-end. As this was written, these breaks had expired. However, Congress will likely extend them through this year. That could happen relatively late in the year, and you may have to move quickly to take advantage.

  • Larger Section IRC 179 Deduction. Under the Section 179 deduction privilege, an eligible business can often claim first-year depreciation write-offs for the entire cost of new and used equipment and software additions and eligible real property costs. For tax years beginning in 2015, the maximum Section 179 deduction is currently only $25,000. However, Congress will likely increase the maximum allowance for tax years beginning in 2015 to $500,000 (same as for 2010–2014).

Note: You cannot claim a Section 179 write-off that would create or increase an overall tax loss from your business. Please contact us if you think this might be an issue for your company.

  • Section 179 Deduction for Real Estate Expenditures. Real property improvement costs are generally ineligible for the Section 179 deduction privilege. However, a temporary exception applied to tax years beginning in 2010–2014. The exception expired at the end of 2014, but we expect it to be extended to cover qualifying real estate expenditures placed in service in tax years beginning in 2015. If that happens, your business could immediately deduct up to $250,000 of qualified costs for restaurant buildings and improvements to interiors of retail and leased nonresidential buildings.

Note: Once again, you can’t claim a Section 179 write-off that would create or increase an overall business tax loss.

  • 50% First-year Bonus Depreciation. Above and beyond the Section 179 deduction, your business can also claim first-year bonus depreciation equal to 50% of the cost of most new (not used) equipment and software placed in service by December 31 of this year—assuming the 50% bonus deprecation break is extended to cover qualifying assets placed in service in calendar-year 2015. We expect that to happen, but it could be late in the year. If so, be prepared to act quickly in order to take advantage.

Note: 50% bonus depreciation deductions can create or increase a Net Operating Loss (NOL) for your business’s 2015 tax year. You can then carry back the NOL to 2013 and/or 2014 and collect a refund of taxes paid in one or both those years. Please contact us for details on the interaction between asset additions and NOLs.

Employ your Children

Posted by Admin Posted on May 27 2016

If you are self-employed, you might want to consider employing your child to work in the business. Doing so has tax benefits in that it shifts income (which is not subject to the Kiddie tax) from you to your child, who normally is in a lower tax bracket or may avoid tax entirely due to your child’s standard deduction. There can also be payroll tax savings since wages paid by sole proprietors to their children age 17 and younger are exempt from Social Security, Medicare, and federal unemployment taxes. Employing your children has the added benefit of providing them with earned income, which enables them to contribute to an IRA. Children with IRAs, particularly Roth IRAs, have a great start on retirement savings since the compounded growth of the funds can be significant.

Remember a couple of things when employing your child. First, the wages paid must be reasonable given the child’s age and work skills. Second, if the child is in college or entering soon, too much earned income can have a detrimental impact on the student’s need-based financial aid eligibility.

Set up Tax-favored Retirement Plan

Posted by Admin Posted on May 27 2016

If your business doesn’t already have a retirement plan, now might be the time to take the plunge. Current retirement plan rules allow for significant deductible contributions. Even if your business is only part-time or something you do on the side, contributing to a SEP-IRA or SIMPLE-IRA can enable you to reduce your current tax load while increasing your retirement savings. With a SEP-IRA, you generally can contribute up to 20% of your self-employment earnings, with a maximum contribution of $53,000 for 2015. A SIMPLE-IRA, on the other hand, allows you to set aside up to $12,500 for 2015 plus an employer match that could potentially be the same amount. In addition, if you will be age 50 or older as of year-end, you can contribute an additional $3,000 to a SIMPLE-IRA.

Consider Selling Rather Than Trading in Business Vehicles

Posted by Admin Posted on May 27 2016

Although a vehicle’s value typically drops fairly rapidly, the tax rules limit the amount of annual depreciation that can be claimed on most cars and light trucks. Thus, when it’s time to replace a vehicle used in your business, it’s not unusual for its tax basis to be higher than its value. If you trade the vehicle in on a new one, the undepreciated basis of the old vehicle simply tacks onto the basis of the new one (even though this extra basis generally doesn’t generate any additional current depreciation because of the annual depreciation limits). However, if you sell the old vehicle rather than trading it in, any excess of basis over the vehicle’s value can be claimed as a deductible loss to the extent of your business use of the vehicle.

Plan to Avoid of Minimize the 3.8% Net Investment Income Tax

Posted by Admin Posted on May 27 2016

The net investment income tax, or NIIT, is a 3.8% surtax on investment income earned by higher-income individuals. It first took effect in 2013. After filing your 2014 return, you may have been hit with this extra tax for two years, and you may now be ready to get proactive by taking some steps to stop, or at least slow, the bleeding for this year and beyond.

NIIT Basics. The NIIT can affect higher-income individuals who have investment income. While the NIIT mainly hits folks who consistently have high income, it can also strike anyone who has a big one-time shot of income or gain this year or any other year. For example, if you sell some company stock for a big gain, get a big bonus, or even sell a home for a big profit, you could be a victim. The types of income and gain (net of related deductions) included in the definition of net investment income and, therefore, exposed to the NIIT, include—

  • Gains from selling investment assets—such as gains from stocks and securities held taxable brokerage firm accounts—and capital gain distributions from mutual funds.
  • Real estate gains, including the taxable portion of a big gain from selling your principal residence, or a taxable gain from selling a vacation home or rental property.
  • Dividends, taxable interest, and the taxable portion of annuity payments.
  • Income and gains from passive business activities (meaning activities in which you don’t spend a significant amount of time) and gains from selling passive partnership interests and S corporation stock
  • Rents and royalties.

Are You Exposed? Thankfully, you are only exposed to the NIIT if your Modified Adjusted Gross Income (MAGI) exceeds $200,000 if you are unmarried, $250,000 if you are a married joint-filer, or $125,000 if you use the married filing separate status. However, since these thresholds are not all that high, many individuals will be exposed to this additional tax. The amount that is actually hit with the NIIT is the lesser of: (1) net investment income or (2) the amount by which your MAGI exceeds the applicable threshold. MAGI is your “regular” Adjusted Gross Income (AGI) shown the last line on page 1 of your Form 1040 plus certain excluded foreign-source income net of certain deductions and exclusions.

Planning Considerations. As we just explained, the NIIT hits the lesser of: (1) net investment income or (2) the amount by which MAGI exceeds the applicable threshold. Therefore, planning strategies must be aimed at the proper target to have the desired effect of avoiding or minimizing your exposure to the tax.

  • If your net investment income amount is less than your excess MAGI amount, your exposure to the NIIT mainly depends on your net investment income.You should focus first on strategies that reduce net investment income. Of course, some strategies that reduce net investment income will also reduce MAGI. If so, that cannot possibly hurt.
  • If your excess MAGI amount is less than your net investment income amount, your exposure to the tax mainly depends on your MAGI. You should focus first on strategies that reduce MAGI. Of course, some strategies that reduce MAGI will also reduce net investment income. If so, that cannot possibly hurt.

Perhaps the most-obvious way to reduce exposure to the NIIT is to invest in tax-exempt bonds via direct ownership or a mutual find. There are other ways too. Please contact us to identify strategies that will work in your specific situation.

Convert Traditional IRA into Roth IRA

Posted by Admin Posted on May 27 2016

A Roth conversion is treated as a taxable liquidation of your traditional IRA followed by a nondeductible contribution to the new Roth IRA. While the tax hit from converting is unwelcome, it may be a relatively small price to pay for future tax savings. After the conversion, all the income and gains that accumulate in your Roth IRA, and all withdrawals, will be totally free of any federal income taxes—assuming you meet the rules for tax-free withdrawals. In contrast, future withdrawals from a traditional IRA could be hit with tax rates that may be higher than today’s rates.

Of course, conversion is not a no-brainer. You have to be satisfied that paying the up-front conversion tax bill makes sense in your circumstances. In particular, converting a big account all at once could push you into higher 2015 tax brackets, which would not be good a good thing. You must also make assumptions about future tax rates, how long you will leave the account untouched, the rate of return earned on your Roth IRA investments, and so forth. If the Roth conversion idea intrigues you, please contact us for a full analysis of the relevant variables.

Sell Loser Shares and Give Away the Resulting Cash; Give Away Winner Shares

Posted by Admin Posted on May 27 2016

You may want to make gifts to favorite relatives and/or charities in conjunction with an overall revamping of your holdings of stocks and equity mutual fund shares held in taxable brokerage firm accounts. To get the best tax results from your generosity, do not give away shares that are currently worth less than you paid for them. Instead, sell the shares, and take advantage of the resulting tax-saving capital losses. Then, give the cash sales proceeds to the relative or charity.

On the other hand, do give away shares that are currently worth more than you paid for them. Because the charitable organization is tax-exempt, it can sell your donated shares without owing anything to the IRS. Most likely, your relative will pay lower tax rates than you would pay if you sold the shares. In fact, relatives who are in the 10% or 15% federal income tax brackets will generally pay a 0% federal tax rate on long-term gains from shares that were held for over a year before being sold. For purposes of meeting the more-than-one-year rule for gifted shares, count your ownership period plus the recipient relative’s ownership period, however brief. Even if the shares are held for one year or less before being sold, your relative will probably pay a lower tax rate than you (typically only 10% or 15%). However, gains recognized by a relative under the age of 24 may be taxed under the so-called Kiddie Tax rules.

Take Advantage of 0% Rate on Investment Income

Posted by Admin Posted on May 27 2016

For 2015, the federal income tax rate on long-term capital gains and qualified dividends is still 0% when those gains and dividends fall within the 10% or 15% federal income tax rate brackets. This will be the case to the extent your taxable income (including long-term capital gains and qualified dividends) does not exceed $74,900 for married joint-filing couples ($37,450 for singles). While your income may be too high to benefit from the 0% rate, you may have children, grandchildren, or other loved ones who will be in the bottom two brackets. If so, consider giving them some appreciated stock or mutual fund shares which they can then sell and pay 0% tax on the resulting long-term gains. Gains will be long-term as long as your ownership period plus the gift recipient’s ownership period (before he or she sells) equals at least a year and a day.

Giving away stocks that pay dividends may be another tax-smart idea. As long as the dividends fall within the gift recipient’s 10% or 15% rate bracket, they will be federal-income-tax-free.

Warning No. 1: If you give securities to someone who is under age 24, the Kiddie Tax rules could potentially cause some of the resulting capital gains and dividends to be taxed at the parent’s higher rates, instead of at the gift recipient’s lower rates. That would defeat the purpose. Please contact us if you have questions about the Kiddie Tax.

Warning No. 2: Also, be aware that if you give away assets worth over $14,000 during 2015 to an individual gift recipient, it will generally reduce your $5.43 million unified federal gift and estate tax exemption, as well as trigger the requirement of a gift tax return filing. However, you and your spouse can together give away up to $28,000, without reducing your respective exemptions.

Time Investment Gains and Losses

Posted by Admin Posted on May 27 2016

The 2015 federal income tax rates on long-term capital gains are the same as last year: 0%, 15%, and 20%. However, the maximum 20% rate for higher-income individuals can only affect singles with 2015 taxable income (including long-term gains) above $413,200, married joint-filing couples with income above $464,850, heads of households with income above $439,000, and married individuals who file separate returns with income above $232,425. Higher-income individuals also could be hit by the 3.8% NIIT, which can result in an effective marginal federal income tax rate of up to 23.8% (20% + 3.8%) on 2015 long-term capital gains.

As you evaluate investments held in your taxable brokerage firm accounts, consider the tax impact of selling appreciated securities (currently worth more than you paid for them) before the end of this year. For most taxpayers, the federal income tax rate on long-term capital gains is still much lower than the rate on short-term gains. Therefore, it often makes sense to hold appreciated securities for at least a year and a day, before selling in order to qualify for the lower long-term gain tax rate.

Biting the bullet and selling some loser securities (currently worth less than you paid for them) before year-end can also be a tax-smart idea. The resulting capital losses will offset capital gains from other sales this year, including high-taxed short-term gains from securities owned for one year or less. The maximum rate on short-term gains is 39.6%, and the 3.8% NIIT may apply too, which can result in an effective marginal Federal income tax rate of up to 43.4% (39.6% + 3.8%).

Watch out for the latest tricks and scams by IRS impersonators!

Posted by Admin Posted on May 27 2016

Scammers and Fraudsters continue to try and scare and trick taxpayers, especially older Americans, into paying bogus taxes and penalties, and even giving out personal information that can lead to identity theft. We’ve had clients receive calls threatening collection action or potential lawsuits over false claims of taxes owing. These scam opportunists will even use caller ID spoofing tactics to make it look like they are calling from a legitimate phone number. They also use what appears to be official IRS letterhead for written correspondence, or official looking email addresses and content to fool email recipients into believing they are actual IRS representatives. Keep in mind that the IRS will never call to demand immediate payment, and they will not call to take your credit card or banking information over the phone. The IRS will also never make threats of sending the police or other authorities, or threaten a lawsuit if you don’t respond to their requests. Of course, if you have any concerns or any doubt whatsoever about the authenticity of anyone contacting you on behalf of the IRS, make sure you ask for their proof of their identity, and more importantly let them know you will be in contact with our office and/or reporting the incident on the Treasury Inspector General for Tax Administration’s website.

Residential Renewal Energy – Federal Tax Credit

Posted by Admin Posted on May 27 2016

If you are considering making a solar, wind or other similar renewable energy improvement to your home, don’t forget to figure in the 30% Federal tax credit into your calculation of the overall net cost of the project. The tax code still allows for this significant tax credit for the installation of solar electric, solar water heating, small wind, geothermal heat pumps and fuel cell improvements to your primary residence, at least through 12/31/16. This Federal tax credit applies to the overall installed cost of the equipment, including the cost for new wiring, piping, etc., in the year the improvement is made. Also, if you aren’t eligible for the full credit in the tax year that the improvement is made the credit balance can be carried ahead and applied to a subsequent year’s tax return filing. There are some additional requirements that must be met in order to qualify for the credit, so please refer to this Department of Energy newsletter for these additional specifications. Please contact us, if we can assist you in determining whether making a renewable energy upgrade to your home would make sense for you!

Wittenberg CPA’s 20th Anniversary!

Posted by Admin Posted on May 27 2016

This year marks our 20th year in business serving our clients in Mason and Thurston Counties. We have much to be thankful for and much to look forward to as we move ahead, so stay tuned for news of future plans. In the meantime we wanted to summarize our services, so you will keep us in mind as your and your company’s needs change. As a CPA firm we offer everything from one time consulting engagements to full charge accounting services, where we maintain your company’s accounting, prepare payroll, as well as all of the required excise and payroll tax reports. But why hire a CPA firm like ours? It’s because our firm can give you as the owner confidence that the accounting and compliance aspects of your company are in good order, allowing you as the owner to focus on the business operations of the company, instead of worrying about whether the company is in compliance with the myriad of reporting responsibilities, which can bog a company down, or worse, if not done properly. Additionally, when we review a company’s accounting, we make sure that the company’s accounting system is adjusted properly, so it reflects the company’s current financial position and operations. With access to the company’s fully adjusted and current financial information, the owner can adequately evaluate the company’s performance, and it can also be accessed by a potential third party user, such as a bank, for loan qualification. Please refer to our client’s testimonials to review what some of our business clients are saying about us, and please contact us to discuss how we can help you and your business succeed. Thank you clients and friends for 20 wonderful years! Mike and Staff.

2015 Year End Considerations for Business Clients

Posted by Admin Posted on May 27 2016

We are writing to remind you of some of the year end procedures that your company should consider, now that we are in the final month of the calendar year. While not all of these issues are directly relevant for your company, they should be reviewed in order to determine their usefulness to your company’s needs.

1. 1099 Requirements – The first issue to consider is whether or not your company is required to prepare 1099 Forms for vendors and service providers that you have paid in 2015. Please refer to the general requirements for Form 1099/1096 reporting, to determine the circumstances under which your company would need to file these reports. We also want to provide you with access to the IRS website, where you can access the 2016 Form 1099, and instructions, as well as the related W-9 form.

2. Annual Company Meeting – If your company is incorporated (either C or S corporation) the officers and shareholders are required to hold at least one annual meeting in order to determine matters that are essential to the management and operations of the company. Please refer to your company’s articles of incorporation and bylaws, or consult with your company’s attorney to determine the annual meeting requirements for your company. Limited Liability Companies (LLC’s) are not required to hold annual meetings, however this practice is recommended to clarify company policies, and make changes in operational matters. In order to provide you with some guidance with respect to relevant issue, please look at some example topics to be considered for your company’s annual meeting.

3. Record Retention – The minimum required period for retaining financial records is 3 years, which is the standard statute of limitations look back period, which the IRS and other tax authorities enforce. However, our office recommends a 7 year archiving of relevant tax and accounting supporting information, in order to make certain that any prior year issue can be resolved, with the proper factual financial and employment data.  Please refer to our website for more specific record retention guidelines.

4. Re-seller’s Permit – If you are eligible for a re-sellers permit, as issued by the State of WA’s Department of Revenue (DOR), the re-seller permit can be applied for with the Department of Revenue, in order to allow your business to make wholesale purchases, including qualified contractors. The permits allow businesses to purchase items or services for resale, without paying retail sales taxes. However if your purchases are subject to sales taxes, typically for items used by your company, but were not paid at source, remember that you are required to pay use taxes, in lieu of sales taxes, at the time you file your combined excise tax report.

5. Retirement Benefits – If you haven’t already, remember to consider establishing an employee benefit type of plan, in which the employees, as well as the owners/officers of the company can all receive benefits. You may want to consider establishing a retirement type of plan, such as a SIMPLE IRA plan, which allows employees to defer a portion of their wages, along with a relatively modest company match, as a means to deferring taxable income of the employee as well as allowing a deductible, non-payroll taxable form of compensating your employees. Please refer to our Summary of Retirement Plan Options.

 6. Health Savings Plan – Another consideration is to set up a health saving account (HSA) plan, which when combined with a lower premium cost “high deductible” type of medical insurance plan, allows the employees of the company, as well as the company, at the discretion of the ownership, to contribute toward a medical savings account, which can be either used by the employee during the year of contribution, or else carried over indefinitely for future medical costs, and/or eventually as a retirement type of fund, similar to an Individual Retirement Account (IRA).  

7. Medical Insurance Premiums – If your business is an S corporation, remember that the medical insurance premiums paid out on behalf of the shareholders must be reported along with wages on Form W-2. The premiums can still be paid out by the S corporation on behalf of the shareholders, however the total premiums must be included as part of the shareholder’s wages, tips, other compensation, and also on lines 3 and 5, subject to Social Security and Medicare taxes. The amount of premiums paid should also be reported on Line 14, as a separately reported line item, so that the nature and amount of the payments is clearly stated. Please note that this reporting requirement, as per IRS Notice 2008-1, does not change the fact that these medical insurance premiums are deductible by the shareholder when paid.  

8. Written Consent for Copies of Tax Returns – Federal law requires that in order to directly provide 3rd party users (e.g. bankers, lenders, insurance agents, etc.) with a copy of your tax return, or with information from your tax return, we must obtain a written consent form from you prior to the release of this information.

9. Affordable Care Act – Given the implementation of the ACA (Affordable Care Act), we understand that as a company owner, you, as well as your employees, may have specific concerns or questions regarding various compliance aspects of the law, so please don’t hesitate to contact us if you’d like to discuss how the changes may impact you and your company.  

10. We are here to help! – As the year winds down and you complete your company’s accounting procedures, such as the counting of your company’s year end inventory, and the reconciling of your company’s annual accounting, please let us know if you have any specific questions and/or concerns that we can assist you with – we are here to help!

Tax Scams and ID Theft

Posted by Admin Posted on May 27 2016

Tax scams take many different forms, so being aware of recent trends will help you to avoid them. The most common recent scams are phone calls and emails from thieves who pretend to be from the IRS. They use the IRS name, logo and/or a fake website to try to gain access to your account and steal your money. They may also try to steal your identity, so here are several tips from the IRS to help you avoid being a victim of these tax scams:

The IRS will never:

  • Initiate contact with you by phone, email, text or social media to ask you for your personal or financial information.
  • Demand immediate payment. The IRS will not call about taxes you owe without first mailing you a notice, detailing the taxes, and related interest and penalty, if relevant.
  • Require that you pay your taxes a certain way – the IRS allows several different payment options, which the taxpayer can select from.

Be wary if you get a phone call from someone who claims to be from the IRS and demands that you pay immediately. Here are some steps you can take to stop these scams, if you know that you don’t owe taxes:


  • Report the incident to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” to the comments of your report.

If you get a ‘phishing’ email, the IRS offers this advice:

  • Don’t reply to the message, under any circumstances.
  • Don’t give out your personal or financial information, under any circumstances.
  • Forward the email to the IRS at phishing@irs.gov. Then delete it.
  • Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.

If you are an existing client, please contact us if you’ve been contacted by someone, whether by phone or email, who you suspect was attempting to defraud you, or steal your identity.  These are very serious issues, so we want to know what happened, and also know that we are here to help and support you through the process.

The Affordable Care Act and Your Income Taxes

Posted by Admin Posted on May 27 2016

Which category of individual tax return filer do you fall into and how do you avoid the “Individual Responsibility Payment” (i.e. tax)? Are you covered under a “qualifying health insurance plan” (e.g. employer or medicare coverage), which offers “minimum essential coverage”, and are therefore exempt from the payment?  Are you in an exempt category, due to your income level, or other qualifications, which allows you to avoid the payment?  Or did you buy your health insurance on either the Federal or State of WA health care exchange and are therefore receiving an “Advance Premium Credit”, which means when your tax return is prepared you’ll either receive an additional premium tax credit, or else you’ll pay the individual responsibility payment?  Since this is the first year of required reporting of the ACA on your annual individual income tax return, along with its related taxes and credits, there is a new degree of complexity in preparing even the simplest of tax returns, so please contact us if you have any questions or need our assistance in preparing your 2014 income tax return. We also want to take a minute to welcome Chrissy Hammond to our staff – please tell her hello when you call or come by our office.

Tax Season News

Posted by Admin Posted on May 19 2016

The IRS is now accepting all tax returns via their e-file program.  The biggest single change that is required this tax year for an individual taxpayer has to do with ACA compliance –   http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Affordable-Care-Act–What-to-Expect-at-Tax-Time.  As a reminder, with the start of the new calendar year it’s a very good time to update your income tax withholding from wages with your employer, which can be done by completing a Form W-4.  The IRS offers a useful “withholding calculator” tool, for your use in determining how much withholding to have taken out of your wages or retirement benefits. Also, please note the following IRS allowable mileage rates for the 2015 calendar year; business rate of 57 1/2 cents per mile, charitable rate of 14 cents per mile, and the medical and moving rate of 23 cents per mile.  Finally, please bear with us as we update our firm’s website for tax and payroll related resources and links, and certainly contact us, if we can answer your questions, or if you’d like to schedule an income tax appointment with our firm.