Introducing the 2017-18 Tax Planning Guide

Tax planning guideTaxes are important, especially as you’re running your business. Paying attention to tax laws, and planning in a timely fashion for taxes, can seriously help you in the long run. For instance, you can estimate your tax liability and even look for ways to reduce it. That’s why we created our annual tax planning guide.

The guide highlights all sorts of information related to tax planning and tax law. Topics include:

  • Executive compensation
  • Investing
  • Real Estate
  • Business Ownership
  • Charitable Giving
  • Family & Education
  • Retirement
  • Estate Planning
  • Tax Rates

To learn more, or download the guide, click here.

Change could be coming …

There’s a large possibility that tax laws could be seriously changing, thanks to a change in White House administration and Republicans maintaining a majority of Congress. But for now, following current tax laws is the way to go.

However, it’s important to know that change could come quickly and you need to be ready to respond. We encourage you to have a tax adviser who can help you navigate these changes if they happen.

Tax Records & the Statute of Limitations

Recently, we discussed a little thing called record retention (you can read about it here), otherwise known as when to keep it and when to throw it away. Today, we’re talking about the statute of limitations in regards to your taxes. No, they’re not the same thing.

The statute of limitations does not refer to the amount of time you hang on to your tax records. Rather, the statute of limitations refers to the length of time you and your pals at the IRS can make changes to your tax return. In other words, this is the length of time when the IRS can assess additional tax, or you can claim a refund.

There’s no one set rule related to the statute of limitations and the IRS (shocking, we know). Rather, it depends on a few things:

Did you file a return?

The following assumes you did (if you didn’t, we have a bigger problem). In general, the statute of limitations for the IRS is three years from the due date of the return or the date of filing (whichever is later). We say in general because there are a whole bunch of “ifs” related to this. Here are just a few.

If you had a substantial omission (more than 25 percent) of your gross income on your tax return, the IRS extends the statute of limitations. How long? Six years from the time the IRS makes its assessment.

If the IRS files suit against the taxpayer to collect previously assessed taxes, the statute of limitations is generally 10 years. In other words, once the IRS issues an assessment, the IRS has 10 years to pursue legal action and collect on tax debt. They do this through a variety of mechanisms, including garnishing your wages.

If you paid late or failed to pay the full amount of your taxes, you can incur interest fees and additional penalties. These vary, obviously, based on the severity of the situation. We will say this, though: missed filings or errors in filing can actually be considered a crime with criminal ramifications. So it’s best to get your taxes paid on time and in full.

Be aware that other tax authorities (a.k.a. state and local governments) set their own statutes of limitations.

Did you attempt to file a fraudulent return? Or not file a tax return at all (intentionally)?

Then congratulations, there’s no statute of limitations. No, this doesn’t mean the IRS can never audit you. Rather, what it means there is no deadline for the IRS if it can establish that you, the taxpayer, have: 1) filed a false or fraudulent return; 2) willfully attempted to evade tax; or 3) failed to file a return.

In other words, if you have intentionally not filed taxes, or filed them fraudulently, the IRS always has the option to come after you. Further, they raise the interest and penalties related to these transactions. And we really shouldn’t have to say this, but we will. Tax evasion and tax fraud are CRIMES. So if you mess up, it’s best to come forward voluntarily and work with the IRS to establish a payment plan and resolve the issue.

 

De Minimis Threshold: A Lesson in Latin & the IRS

Recently, the IRS updated the de minimis threshold for taxpayers without an applicable financial statement (AFS). Confused? Trust us, this is a good thing.

First, a Latin lesson. De minimis is a Latin expression meaning “about minimal things.” So what does this have to do with the IRS? Well a de minimis threshold is the lowest payment value required to count toward payments on a given project. In other words, if the value of a payment is under the de minimis threshold, it does not have to be reported.

So what’s with the IRS’ change of heart? Well several taxpayers made sure to let the IRS know that the previous threshold ($500 on a per-invoice or per-item basis) wasn’t really working for them. They even gave a few reasons: (1) the threshold was too low to truly reduce the administrative burdens of complying with the repair regulation requirements for small taxpayers (read, it caused a lot of time and paperwork without adding any real value), and (2) the amount paled in comparison to the $5,000 safe harbor provided for taxpayers who have an AFS.

And now a financial lesson. An applicable financial statement (AFS) is one prepared in accordance with U.S. Generally Accepted Accounting Principles. In other words, it’s something your accountant helps you do. And no, not all businesses need one. Here’s a refresher on why you might. 

The change, effective January 1, 2016, raises the de minimis threshold to $2,500 on a per-invoice or per-item basis for taxpayers without an AFS. It’s effective for expenditures incurred in taxable years beginning January 1, 2016. This change will simplify record-keeping requirements for small businesses. In other words, the IRS just made your life a little bit easier. Happy New Year.

De minimis

Want to know more? This change is great and all, but with it comes new elections and policies and procedures that need to be put in place effective January 1, 2016. So make sure to chat with a tax specialist about how to implement this in your organization. What, you thought it would be easy? Have we taught you nothing about taxes so far?

 

Year-End Tax Planning

It’s hard to believe, but 2015 is quickly coming to a close. In the midst of holiday busyness, family time and hoping for no significant weather changes, it’s important to take the opportunity to do some year-end planning, especially regarding your taxes.

“But it’s not even close to April 15! I don’t want to think about my taxes,” you say. While it might not be your favorite thing on the to do list, here are a few reasons why it’s important to look at tax planning early:

tax planning guidePlan ahead and (possibly) save later. By doing year end planning, you can review steps you might take to minimize your tax liability.

Keep up to date. Tax legislation is constantly changing. By keeping up to date on legislation, you can incorporate current and future tax law changes into your current tax planning.

Start now and keep planning. Year-end planning is always important. However, the best opportunities to save or defer taxes come when you understand the effect of transactions that can happen over multiple years. Couple this with your knowledge of current and future tax changes and you will be well on your way to tax planning.

You don’t have to know it all. Check out our 2015 Tax Planning Guide, which discusses current tax law and steps you can take to minimize your taxes. Download the guide.

Want to know more? Feel free to reach out any time. Taxes might not be your favorite thing, but guess what, it’s one of ours.