Money Matters

A new year means New Year’s resolutions, cold weather, and tax returns! It’s a good idea to check this item off your to do list as early as possible, so make your appointment with your tax advisor today. Here's a handy checklist of the documents you’ll want to bring to your appointment.

Copies of Prior Year Returns

If you are a new client, please bring copies of your federal and state income tax returns for the last three years.

New mileage rates went into effect Jan. 1 and they are lower than the 2015 rates. The Internal Revenue Service's "optional standard mileage rates"are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

The 2016 standard mileage rates for the use of a car, van, pickup or panel trucks are:

If you conduct business either partially or in whole at home, you may be entitled to a home office deduction on your taxes. Here are a few things you should know about the home office deduction.

First, the portion of your home you are claiming the deduction must be used regularly and exclusively for business purposes. This area of your home must also be your principal place of business, or a place where you meet clients or customers in the normal course of business. It also applies if the space is a separate structure not attached to your home, like a garage or studio.

If you have a family-owned business, chances are you have likely hired (or are planning to hire) an easily accessible hiring pool: members of your own family. Doing so has its pros and cons; only you know if employing those closest to you will be advantageous to your business. While we cannot tell you whether you should hire your family, we can advise you on how you need to treat them with respect to wages and specifically payroll taxes.

One of the advantages of hiring family members is the exclusion of some payroll taxes on their wages. Depending on what type of business you have (corporation, partnership, or sole proprietorship) and depending on which family member you employ (child, parent, or spouse), you may not need to pay:

• Federal Unemployment taxes (FUTA)
• Social Security and Medicare taxes (FICA)
• State Unemployment Insurance (UI), Employment Training Tax (ETT), and State Disability Insurance (SDI)

The rules for each of these taxes varies, so we advise you to contact your tax preparer to ensure you are paying your family employees correctly and to ensure you are reporting wages and taxes correctly. You can then make a well thought-out decision as to whether these tax breaks will be worthwhile to you and to your family./p>

Business One: “Fred” is a skilled electrician. He worked 20 years for the same company, and one day realized that he was getting paid $20 per hour but was billing $80 an hour for his time. “This is unfair!” he thought, so he decided to sit for the contractor’s license exam and open his own business. He had $10,000 saved up, and he knew that he would be able to get clients the same way his boss did very easily.

• Create a Business Plan! Have something in writing detailing your business plan. Establish goals, procedures and policies; set deadlines for reevaluating your business, etc. Meet with your financial and business advisors to make sure you’re on the right track. Ensure that you have a budget and projection, at least for your first year in business, preferably for the first two years, and consult with professionals to compare.
• Determine your business structure. What type of organization will you create? Will you operate as a sole proprietor or as a business entity (corporation, partnership, etc.). If you have set up an LLC – elect the tax reporting entity.