Starting in 2016, applicable large employers (ALEs) under the Affordable Care Act (ACA) will have to file Forms 1094-C and 1095-C to provide information to the IRS and plan participants regarding their health care benefits for the previous year. Both the forms and their instructions are now available for ALEs to study and begin preparations for required filings. In addition, organizations that expect to file Forms 1094 and 1095 electronically can peruse two final IRS publications setting out specifications for using the new ACA Information Returns system.
Keep in mind that ALEs are employers with 50 or more full-time employees or the equivalent. And even ALEs exempt from the ACA’s shared-responsibility (or “play or pay”) provision for 2015 (that is, ALEs with 50 to 99 full-timers or the equivalent who meet certain eligibility requirements) are still subject to the information reporting requirements in relation to their 2015 health care benefits.
If your company is considered an ALE, please contact us for assistance in navigating the ACA’s complex requirements for avoiding penalties and properly reporting benefits. If you’re not an ALE, we can still help you understand how the ACA affects your small business and determine whether you qualify for a tax credit for providing coverage.
If you’re planning to pass ownership in your business to the next generation, it’s critical to find the best way to do so. One option is a family limited partnership (FLP).
To implement this strategy, you set up a limited partnership and transfer ownership interests to it. Then you give some or all of the limited partnership interests to your heirs.
Control of the FLP remains with the small percentage of partnership interests known as “general partnership interests,” of which you retain ownership. Thus, you reduce your taxable estate by giving away assets (the limited partnership interests) without giving up control of the underlying assets. In other words, you can continue to run your business.
Because the limited partners lack control, these interests can often be valued at a discount. When making a gift of an FLP interest, obtaining a formal valuation by a professional appraiser is essential to establish the value of the underlying assets and partnership interests.
A major risk of FLPs is IRS scrutiny. The agency often challenges FLPs it believes are invalid. That’s where we come in. We can help you establish and maintain a sound, defensible FLP. Please call us.
For much of this year, uncertainty surrounded whether Congress would extend relief in the area of depreciation-related tax breaks. On December 18, clarity finally arrived with the passage of the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act). Here’s a look at the impact on two “classic” depreciation breaks:
1. Enhanced Section 179 expensing election. In 2014, Sec. 179 permitted companies to immediately deduct, rather than depreciate, up to $500,000 in qualified new or used assets. The deduction was phased out, dollar for dollar, to the extent qualified asset purchases for the year exceeded $2 million. Under the PATH Act, these amounts have been made permanent (indexed for inflation beginning in 2016) rather than allowed to fall to much lower limits.
2. 50% bonus depreciation. In 2014, this provision allowed businesses to claim an additional first-year depreciation deduction equal to 50% of qualified asset costs. Bonus depreciation generally was available for new (not used) tangible assets with a recovery period of 20 years or less, and certain other assets. That 50% amount has been extended for the 2015, 2016 and 2017 tax years. But it will drop to 40% for 2018 and 30% for 2019.
To reap these benefits on your 2015 tax return, you must acquire qualified assets and place them in service by December 31, 2015. These are but a few of the ways the PATH Act affects business tax planning. Please contact us for more information.
Like many business owners, you probably have much of your wealth tied up in your company. And this fact may be creating a conflict between the desire to transfer ownership to the next generation and the desire to stay in control. One potential solution: Recapitalize your business into voting and nonvoting shares.
From an estate planning perspective, the sooner you transfer ownership of your business to the next generation, the better. That way, future appreciation and income are removed from your estate and avoid gift and estate taxes.
Recapitalization can allow you to reap the tax benefits of gifting ownership interests without your having to cede control of the business to your children.
For example, you might retain 10% of the company in the form of a voting interest and allocate the remaining 90% among your children in the form of nonvoting shares. You continue to manage the business while removing a large portion of its value from your taxable estate.
To discuss this strategy further, please give us a call. We can help you explore recapitalization as well as other ways to refine your succession plan and estate plan.
You probably track a variety of data to determine where your business stands. Monitoring both financial and nonfinancial key performance indicators (KPIs) — such as debt to equity ratio and customer service response times — can help you spot problems and set objectives. But a great way to take your business data one step further is to see how your KPIs stack up against previous periods or those of other companies in your industry.
Start by benchmarking your KPIs from one period of time (for example, a quarter or year) to another. Doing so will help you spot trends pointing to future problems so you can deal with them before problems actually arise. If your accounts receivable days are lengthening, for instance, this might indicate that your collections are lagging and a cash flow crunch is looming.
For industry benchmarking, various sources are available. A good place to start is your industry trade association. Bear in mind, however, that some ratios have slightly different versions. It’s important to know exactly which ratio is being used when comparing your results to those of other companies.
We can help you find the right industry benchmarking data and crunch all of the numbers, both internal and external. Please give us a call.
As a business owner, you shoulder many responsibilities — but have some perks as well. One benefit worth considering is setting up your own retirement plan that allows you to make larger contributions than you could as an employee.
For example, the maximum 2015 employee contribution to a 401(k) plan is $18,000 — $24,000 if you’re age 50 or older. Compare these limits to the amounts available to a business owner (that is, a “self-employed” individual) under:
- A profit-sharing plan, for which the 2015 contribution limit is $53,000 — $59,000 if you’re age 50 or older and the plan includes a 401(k) arrangement, or
- A defined benefit plan, for the maximum future annual benefit toward which 2015 contributions can be made is generally $210,000.
More good news: As long as you set up one of these plans by December 31, 2015, you can make deductible 2015 contributions to it until the 2016 due date of your 2015 tax return.
Additional rules and limits do apply. For instance, your employees generally must be allowed to participate in the plan, provided they meet the requirements for doing so. Intrigued? Please contact us to learn which plan would work better for you.
When you start envisioning all of the potential threats to your company, it’s easy to get overwhelmed. A good way to get a handle on risk management is to break down the overall task into focus areas. Examples include:
Competitive risk. Identify your top three to five competitors. Then devise the strategy it will take to get or stay ahead of them. Think in terms of innovation, production and marketing.
Compliance risk. Many business sectors are now subject to increased regulatory oversight. Be it health care benefits, hiring processes, independent contractor policies or waste disposal, factor the latest compliance requirements into your business objectives.
Internal risk. The economy is far better than it was several years ago. But fraudsters still have plenty of other excuses for malfeasance from which to draw. Re-evaluate and reinforce your internal controls to protect what’s yours.
A divide-and-conquer approach such as this can make risk management much easier. And you don’t have to take on this critical challenge alone. Let us help you choose the right focus areas and then pinpoint risks specific to your company.
When you started your business, or otherwise assumed ownership of it, you more than likely created a business plan. This critical document provides management, investors and lenders with an overview of the company’s game plan as well as an assessment of current operations. Complete plans traditionally include six components:
- Executive summary,
- Business description,
- Industry and marketing analysis,
- Management team description,
- Implementation plan, and
Some owners might balk at compiling a comprehensive business plan, but it’s an absolute imperative when running a company. Why? Because your business plan can predict the future — or at least it should.
If the plan includes the six components above, adheres to sound strategies and contains accurate data, your company’s future (or a fair approximation thereof) will be spelled out in black and white. But if what’s described is unrealistic or no longer applicable, the future of your business will be just as murky.
Need some help in determining whether your business plan is still the crystal ball it needs to be? Please contact us. We’d be happy to assess your plan and offer constructive feedback based on our firm’s experience and know-how.
If your company wants to acquire another business, you’ll need to anticipate many challenges. To improve your odds of success, it’s important to devote resources to intensive tax planning before — and after — your deal closes.
During deal negotiations, you and the seller will likely discuss issues such as to what extent each party can deduct their transaction costs and how much in local, state and federal tax obligations the parties will owe upon signing the deal. Often, deal structures (such as asset sales) that typically benefit buyers have negative tax consequences for sellers and vice versa.
Tax management during integration is also important. It can help your company capture synergies more quickly and efficiently. You may, for example, have based your purchase price on the assumption that you’ll achieve a certain percentage of cost reductions via post-merger synergies. But if your tax projections are flawed or you fail to follow through on earlier tax assumptions, you may not realize such synergies.
Negative tax consequences of an acquisition can haunt a company for years. Let us help you avoid them and identify tax benefits that can improve the acquisition as a whole. Please contact us for more information.
Many employers with long-established 401(k) plans hesitate to add automatic enrollment. (Under an “auto-enroll” feature, eligible participants automatically join the plan unless they affirmatively elect otherwise.) Employers’ hesitation may arise from unfamiliarity or just a reluctance to rock the boat. Yet there are several good reasons to “bother” with auto-enroll:
Broader participation. First and foremost, many statistical studies over the years have shown that auto-enroll boosts plan participation. This, in turn, increases a 401(k)’s value to both your organization and its staff. It can also improve retention — especially if you match contributions.
Boosted productivity. Higher participation means more employees are funding their retirements. Therefore, they’re more likely to retire rather than stay on the job indefinitely to pay living expenses. A dynamic workforce tends to be more productive than a stagnant one.
Better bargaining. The greater the participation rate and dollars in the plan, the more leverage employers have to negotiate with service providers. So auto-enroll can simply lead to a better 401(k).
Converting to auto-enroll does entail some work. You’ll need to adopt a written plan document, arrange a trust for the plan’s assets, potentially upgrade your recordkeeping system and formally give notice to employees about the change. Interested? Please let us know how we can help you further consider auto-enroll and undertake the process of adding it to your 401(k).