Archive for December 2015

Ways to Reduce Your 2016 Taxes

It’s never too early to start thinking about ways to reduce your 2016 tax liability.  Planning early in the year is a must!

  1. Contribute to your retirement plan until it hurts! Depending upon what type of employer sponsored plan you have you can you have the opportunity to contribute a large amount to the plan:

401k       $18,000 plus catch up for age 50 or over $6,000

Simple  $12.500 plus catch up for age 50 or over $3,000

The employer may provide a matching contribution.  At least contribute the % that the employer matches; this is “free” money to you!

Also please realize the amount of money contributed to your retirement plan is pre-tax; thus saving you on average 25% Federal and depending on what State you reside in 3.5%-6%.  (The tax savings is based on the average tax bracket of 25% Federal)

If your employer does not offer a retirement plan consider an IRA contribution.  $5,500 (catch up $1,000) contribution will still provide tax savings)

Please remember these contributions are tax deferred; not tax free.  You will be paying tax when you withdrawal the money at retirement.  But the expectation is you will be in a lower tax bracket at retirement.

  1. Consider an employer flexible spending plan. These plans are great if you have any out of pocket health expenses or dependent care expenses.  The plans are pre-tax; thus saving you Social security, Medicare, Federal, and State taxes.  But keep in mind with these plans you are required to use the funds within the period of time or lose the funds.
  2.  Consider increasing your non-cash charitable contributions. Instead of dropping those clothes, household items, and toys at the “box” on the corner, consider a charity that provides a charity receipt.  Realize you will need to do the legwork and provide a list of what was donated, a value, and date it was donated.  But isn’t tax savings worth that extra work?
  3.  Harvest your losses-as the year-end comes to a close ensure your financial advisor is looking at your portfolio and harvesting any losses against the gains that have occurred in the portfolio. This should be reviewed every year.

These are just a few tips to help reduce your taxes as you move forward for 2016!

Accounting and tax services are provided by Wamhoff Accounting Services, Inc. and is independent of VSR Financial Services, Inc.

Until next time!

Announced late Tuesday night (December 15), congressional leaders unveiled a widespread deal on tax extenders, making some tax law provisions permanent and temporarily extending others. After a congressional vote, the new law has been enacted.

Titled “The Protecting Americans from Tax Hikes Act of 2015” (aka PATH), the Act renews and makes permanent dozen of important tax provisions that bring relief to individuals and create incentives for job creators. It also temporarily extends other provisions.

The most positive aspect of this legislation is that many of the perennially expiring provisions are made permanent. This bill takes some of the guesswork out of the equation. It means businesses can now plan effectively. Tax planners would gain more certainty because the bill would make permanent many important tax provisions. They can operate with the certainty that, if they create and follow their tax plan, the can achieve the anticipated tax result. This certainly advances the premise that tax incentives actually work to incentivize businesses to spend, rather than simply result in providing tax benefits to businesses that guess right.

Put simply, more permanence in the tax code will be a good thing and this bill will provide the kin of permanence individuals need to manage their financial assets and businesses need to grown their businesses.

On our short list  of 5 key provisions affecting businesses that would be made permanent are:

  1. the Section 179 expensing
  2. the Section 1202 Small Business Stock Capital Gains Exclusion
  3. the Research & development Tax Credit
  4. the tax break for mass transit and parking benefits
  5. the rule reducing to five years (rather than 10 years) the period for which a S corporation must hold its assets following conversion from a C corporation to avoid the tax on built-in gains.

(NOTE: While temporarily extending bonus depreciation, the legislation phases it out. The Work Opportunity Tax Credit, which gives businesses a tax incentive to hire the disabled, welfare recipients and economically challenged individuals, would be renewed for five years.)

On our list of 5 key provisions affecting individuals that would be made permanent are:

  1. the enhanced American Opportunity Tax Credit
  2. the enhanced Child Tax Credit
  3. qualified charitable distributions from IRAs
  4. the above-the-line deduction for teachers who buy school supplies
  5. the option to claim as an itemized deduction state and local general sales taxes in lieu of a deduction for state and local income taxes

BUSINESS HIGHLIGHTS

Code Section 179 Expensing

Section 179 expensing, which determines the amount of an investment a small business is allowed to write off entirely in the first year rather than being depreciated over multiple years, would be made permanent and its level would be increased. This providion permanently extends the small business expensing limitation and phase-out amounts in effect from 2010 to 2014; and sets a new threshhold $500,000 for small business expensing and $2 million phase-out, from the current amounts of $25,000 and $200,000, respectively.

Bonus Depreciation

A separate provision that allows 50 percent of the cost of improvements to be written off under “bonus deprecation” would be extended for five years, and would be expanded to cover stores and restaurants that are owned rather than just those that are leased.

Retailers and Restaurants

The bill would make permanent a provision that allows retailers to depreciate remodeling and other improvements to their stores over 15 years rather than the previous standard of 39 years. THe provision, which also applies to restaurants, is important because retailers typically remodel every five to seven years. In addition to helping keep stores attractive to customers and profitable, the remodeling work creates tens of thousands on construction jobs each year.

Research and Development Tax Credit

The Act permanently extends the research & development tax credit and, for the first time, allows for eligible small businesses to claim the credit against the alternative minimum tax liability.

Affordable Care Act

The bill would also delay some of the taxes associated with the Affordable Care Act.

 

For six straight years, [Wamhoff Accounting Services] has been named one of the Best Accounting Firms in the St. Louis Area by St. Louis Small Business Monthly (SBM). Each month, SBM polls CEOs, entrepreneurs and business leaders to identify the best companies across multiple industries. With over 200 companies nominated in the category, Wamhoff was, once again, named in the top three.

“This is our 40th year in business, and our continued presence at the top of ‘best-of’ lists is a testament to our team’s excellence in staying true to our value,” says Robert Wamhoff, president of Wamhoff. “Very simply, at Wamhoff, we help our clients with finances – but we recognize that finances are more than dollars. Finances represent hope for the future and comething beyond current circumstances. Our team is resolute in standing with our clients to vision how finances can be a part of their vision.”

To achieve this deep level of commitment to clients, Wamhoff’s accounting services go beyond helping with taxes, bookkeeping, and financial statements. Wamhoff’s team of accountants also assists with establishing new businesses.

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The Best Accounting Firms in St. Louis were announces in the May, 2015 issue of St. Louis Small Business Monthly. The top three were honored at an awards luncheon on October 20, 2015.