The Tax Increase Prevention Act of 2014, which was signed into law on December 19, renewed through 2014 a long list of personal and business federal income tax breaks that had been allowed to expire at the end of 2013. Because Congress habitually allows these breaks to expire before restoring them for a year or two, they have become known as "the extenders."
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The Affordable Care Act (ACA) established a number of so-called "market reform" restrictions on employer-provided group health plans, starting with plan years beginning in 2014. These restrictions generally apply to all employer-provided group health plans -- including those furnished by small employers with less than 50 workers. Even worse, there's a punitive penalty for running afoul of the market reform restrictions. The penalty, under Internal Revenue Code Section 4980D(b)(1), equals $100 per-day per-employee, which can amount to up to $36,500 per-employee over the course of a full year. Yikes!
The IRS has issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
1. Improve cash flow. If your business is seasonal, ask your biggest vendors to let you stock up now but pay when customers buy. Also, check into renegotiating your leases to pay only those nine or 10 months out of the year when you experience the greatest number of sales.
2. Investigate new products. For the next few weeks, have your customer service personnel keep a list of products that customers would have bought from your company if you stocked them. Then, calculate how much revenue you would have earned by stocking the three most requested items.
3. Reduce waste. Ask your production foreman to estimate how much you spent in the last six months on lost production, manufacturing errors, injuries and re-works. Then, calculate how much extra you would have made by paying your crew a small percentage of the materials waste reduction and hourly pay required to fix mistakes.
4. Do some spring cleaning. Ask your plant foreman to give you a list of equipment that's idle most of the time. Calculate how much you would save in insurance, carrying charges, property taxes, income taxes, maintenance and storage space by getting rid of it.
5. Solicit money-making ideas. Ask everyone who performs day-to-day work in your business - such as delivery people, administrative assistants, customer service personnel, janitors, production employees -- to write down five ways your company can become more profitable. You may be surprised by the great ideas you receive
6. Renew old acquaintances. Send letters or e-mail messages to customers who discontinued doing business with your company. Thank them for their past patronage and ask them to come back. See how many call to reinstate their accounts.
7. Reassess priorities. Ask your billing department to rank your customers by the dollars they spend. Then figure out how much more money you'd make by transferring your time and money from servicing the lowest-producing 80 percent to "wowing" the top 20 percent.
8. Evaluate billing practices. If you currently bill customers a fixed amount every month, calculate how much you'd save in monthly mailing costs and increased cash flow by billing in advance every two months instead.
9. Stop expenses from falling through the cracks. Figure out how much you spent last year for products and services that were shipped to customers but not authorized by them. Set up a system to get customers' approval in advance and avoid this wasted expense. Then check and see how much you spent last year in overnight priority packages and shipping. Calculate how much you could have saved if just 75 percent of those packages weren't sent so they'd get to the recipients the following day.
10. Cut back on overtime. Ask your payroll manager to give you a list of employees who were paid overtime last year. Initiate a bonus to departments who get their work done on time without incurring any expensive overtime.
Think of what you can do with the savings from just these 10 ideas. It will motivate you to do even more to enhance your company's bottom line.
Your medical practice, currently running as a C or S corporation, may be considering the idea of converting to a limited liability company (LLC) or limited liability partnership (LLP). Under the right circumstances, that could be a good idea from a tax perspective. Here's why: Both LLCs and LLPs can be treated as partnerships for federal tax purposes. The tax rules for partnerships are far more flexible than the corporate rules.
Whether the residential real estate market is up or down, there are always homeowners who want to -- or have to -- sell their homes. If you're a prospective seller making your property look like a model home in the hopes of raking in a nice profit, now is a good time to review how taxes will factor into the transaction. With the home sale gain exclusion tax break, the profit from selling your principal residence might be free from federal income taxes (and possibly state income taxes too). The rules are straightforward for most sellers.
Does your company's health insurance plan include health reimbursement arrangements (HRAs) or flexible spending accounts (FSAs)? If so, you should know these plan components are both subject to the Affordable Care Act (ACA) and its "market reform" provisions. The Department of Labor and other principal agencies have issued another round of guidance1 to answer some of the frequently asked questions about health care reform, including questions about the use of HRAs and FSAs.
As if the process of getting married (or divorced) isn't difficult enough, couples also need to take income tax considerations into account before tying (or untying) the knot. That's particularly true for those who plan a change in marital status late this year or early next year. A taxpayer's marital status for the entire year is determined as of December 31. A taxpayer who is married (or divorced) on that date is treated as if he or she were married (or single) all year long.
Unlike traditional home sales, which generally slow down during the holidays, the prime seasons for buying and selling vacation homes are fall and winter -- when snowbirds flock to warmer weather and ski bunnies head to the slopes. Before you dive into vacation home ownership, here are some financial issues to consider.
The big advantage of Section 529 college savings plans is that withdrawals used to cover qualified higher education expenses are free from federal income tax (and usually state income taxes too). That part is very easy to understand, but the full story on withdrawals is not so simple. What are qualified expenses? What happens if you take out money for expenses that aren't qualified?