Your Accountants and Business Advisors
HSA provides comprehensive tax compliance and consulting for businesses and individuals. Our team of highly experienced accountants implements a hands-on approach to navigate the evolving and complex tax system. Our tax services also include family wealth planning, estate planning, and retirement planning. We look forward to partnering with you and believe you will find our commitment to quality and responsiveness unmatched.
Tax Plan From the New President-elect
During Mr. Trump’s campaign, he released several tax proposals to immediately work
with Congress to enact. Watch for these and other changes coming in the “first 100
days” in office:
- Lower business taxes to 15% for all business entities
- Reduce the number of individual tax brackets to 3, down from 7
- Deductions, savings accounts, and rebates for childcare and elder care
- Repeal and replacement of Affordable Care Act (Obamacare)
- Increase the standard deduction
- Repeal the 3.8% net investment income tax
- Repeal the Estate and Gift tax
Lame-Duck Tax Extenders
Several business and individual tax provisions are set to expire in 2017 unless extended by Congress. Higher education tuition and fees deduction; state sales tax deduction; mortgage debt forgiveness exclusion; and mortgage insurance premium deduction are a few of the provisions set to expire after 2016. Energy incentives make up many of the other expiring incentives.
2016 Year-end Strategies
Maximizing income and expenses thru the end of the year is a common planning technique. With the decrease in business income taxes proposed by the new President-elect, your planning may need to include deferral of income into 2017 and accelerating expenses for 2016.
- Accrual method taxpayers can consider review of accounts receivable to determine if there are any accounts to deem worthless and write off as bad debt.
- If you are paying a bonus to employees, you may accrue the liability and pay them out within 2 1/2 months after year-end.
- Cash basis businesses can delay invoicing customers so payments are not received until 2017.
Property & Equipment Expense Limit Increased
Tracking depreciation on small assets over the course of the asset life is a tedious and time consuming process. Effective in 2016, the IRS has increased the diminimis safe harbor limitation from $500 to $2,500 per invoice for qualifying purchases used in your business.
Depreciation and Tax Advantages
Capital equipment and improvements have a generous allowance of $500,000 for Sec 179 write offs in 2016. In addition, you may write off an additional 50% as Bonus depreciation, then take regular depreciation thereafter.
Heavy vehicles over 6,000 GVWR, used at least 50% for business, have major tax advantages. Sec 179 expensing, bonus depreciation and regular depreciation can all be used to write off the full value of a qualifying new heavy vehicle. The limit for SUV’s over 6,000 GVWR is $25,000, and for lighter vehicles and luxury vehicles the limit allowed is $11,160.
“Must Have” Documents for any Size Estate
Will/Living Trust – Name your beneficiaries, name a guardian for minor children and pets, and appoint a personal representative to administer your Estate. If you hold your property and assets in a living trust, your estate will not have to be filed thru probate court. Depending on the size of your Estate, this can be an expensive and time consuming process.
Health Care Power of Attorney & Health Care Directive – This document allows your selected health care agent to make medical decisions for you in the event you become incapacitated or incompetent, as well as direction regarding use (or non-use) of life-sustaining treatment.
Financial Power of Attorney – In the event you become incapacitated or incompetent, you give a trusted person durable power of attorney authority allowing them continue to take care of your financial matters.
Personal Property Memorandum – This memo provides additional detail to your will for specifying items of property you may want given to someone other than who is named in your will. This can be modified from time-totime without the assistance of an attorney.
It is also important to talk to your named personal representative about your estate plan. They need to know where to find your important documents and list of contacts such as attorney, accountant, and other relatives. Additionally, consider the online and social media accounts that may need to be cancelled after your death.
Your HSA professional team can help coordinate these documents with your legal counsel and other trusted advisors, and assist with other actions you can take to help make Estate planning easier for you, your personal representative, and your heirs.
Sale of Small Business Stock
Gain on the sale of small business stock could be fully excluded from tax. The stock must have been purchased before September 27, 2010 and held for more than 5 years.
If you are planning for business succession, talk to your HSA tax professional about this exclusion.
Business Valuation Updates
The IRS has issued new proposed regulations that could substantially limit the ability to take discounts on valuations of closely held businesses. Discounting is the idea that a closely held business does not have the same market of potential purchasers as compared to a publicly traded company.
If you own stock in a public company, there is a daily active market to sell and buy those shares. However, with a closely held business, there is not a stock exchange for their shares. This makes it inherently more difficult to sell closely held business stock. To encourage buyers, the business would have to sell below fair value. This price reduction is referred to as a discount.
The current rules allow business owners to transfer (via gift) shares of a Company for less than the fair value of the business. In many cases, discounts of 30% to 40% are standard. An owner can gift stock worth $100, but only have $70 charged against his lifetime gifting limits.
The proposed regulation is under review. Therefore, it might be time to review your current closely held business situation to see if you should take advantage of this tax strategy before it might go away.
More International News
HSA’s International tax specialist can help companies convert tax traps for the unwary into opportunities. Effective upfront international tax planning can reduce a company’s global tax costs by minimizing the potential for paying double taxes to a foreign jurisdiction and the United States. Companies with profitable export sales may realize permanent tax savings by utilizing an Interest Charge Domestic International Sales Corporation (IC-DISC).
Below are potential forms that may be required for businesses with international activities:
- 1120F – U.S. Income Tax Return of a Foreign Corporation
- 114 – Report of Foreign Bank and Financial Accounts (FBAR)
- 5471 – Information Return of U.S. Persons With Respect to Certain Foreign Corporation
- 8865 – Return of U.S. Persons With Respect to Certain Foreign Partnership
- 1042 – Annual Withholding Tax Return for U.S. Source Income of Foreign Persons
- W-8 BEN-E – Certificate of Status of Beneficial Owner for U.S. Tax withholding and reporting – entities
- 1118 – Foreign Tax Credit – Corporation
- 4876-A – Election To Be Treated as an Interest Charge DISC
Wealth Management Team
Our wealth management team, the investment arm of our firm, employs a disciplined and structured approach to planning, aimed at developing and implementing a comprehensive plan customized to the needs of each of our clients. We are committed to a fully-integrated “total wealth management” approach that is designed to address your entire financial condition. Our wealth management services provide access to a menu of services including:
- Investment advisory services
- Investment management
- Financial retirement planning
- Insurance planning
- Risk management
- This approach is structured to provide you with substantial benefits, including:
- Time-saving coordination of financial services
- Several service providers to choose from
- Synergy in coordinating financial and estate plans
- We hope you, like so many of our clients, will come to rely on our team for all of your financial service needs.
Navigating Social Security
Social Security income is still a major source of income for over 60% of retirees. With the two major planning strategies eliminated last year, you may need to revisit your planning techniques to ensure retirement will still meet your needs.
Start your planning by going to https://www.ssa.gov/ and go to “my Social Security” link. Here you can create an account and print your retirement benefits statement, Social Security Administration no longer mails these statements to you.
Then consider these important questions:
- Should I apply for Social Security as soon as possible or delay benefits?
- Can I still work without losing my Social Security benefits?
- Will my benefits be taxable?
Our wealth management financial advisors can assist with your retirement strategies to help maximize Social Security benefits with your other investments.
Are you turning 65? – Medicare Basics
Medicare is a health insurance program for individuals age 65 or older. You should apply for Medicare about three months prior to turning age 65, even if you do not plan to retire at age 65. If you don’t enroll in Part B and Part D when you’re first eligible, you may have to pay a late enrollment penalty.
There are four parts to Medicare:
- Part A is hospital insurance which pays for inpatient hospital and certain follow up services. There is no cost to you for Part A.
- Part B is medical insurance which pays for doctors, outpatient hospital care and other medical services. There is a fee for Part B, you may opt out of this part if you are covered by another group plan.
- Part C is also known as Medicare Advantage and provides you the option to choose all of your healthcare services thru a private insurance carrier. This comprehensive plan replaces Part A and Part B, and you can customize it to include prescription drugs, vision, and other services.
- Part D is for prescription drug coverage.
You are not automatically enrolled in Medicare. Their website is very easy to navigate and you can sign up quickly online. Either visit the website at www.medicare.gov or call toll free 1-800-MEDICARE (1-800-633-4227).