Displaying items by tag: small business

What's your plan for living a long life?

Most people believe they are likely to live a long life past their 80s.

When you live a long life, you are more likely to need long-term care. Maybe you've seen this with an aging parent, a friend or a neighbor.

The real question then is "how will it impact your finances?".

Special tax incentives for people who plan.

Tax incentives are ow available to those who plan ahead.

Business Owners

Business Owners who plan now can take advantage of special tax incentives for tax-qualified long-term care insurance protection. Living a long life is likely. Planning for it is a real necessity and a smart financial move. Long-term care insurnce protection can be 100% tax deductible as a business expense. Plus, owners can choose who is covered, even spouses. Realize that it costs no more to work with an experienced professional. Your long-term care insurance agent can help you get the coverage that's best suited for you and your business.

In a nutshell, business owners can deduct the cost of long-term care insurance protection for themselves, for their spouses and sonetimes even teir parents on a favorable basis. You may use pre-tax corporate dollars to pay for your post-retirement asset protection.

A word of caution. Waiting can be a big mistake because you must "health qualify" for long-term care insurance coverage.

If you choose to prepare your own financial statements, you will need to gather a long list of items for your tax preparer.  The below list will assist you to come well prepared to meet with the tax preparer.

Use this tax organizer checklist to assist you in gathering information and documentation necessary for the preparation of your business income tax return.

Profit and loss statement for the tax year
Yes   No
Balance sheet as of the last day of the tax year
Yes   No
Balance sheet comparison for last day of tax year vs last day of previous tax year (if available) To easily determine asset acquisitions. For the purpose of retained earnings reconciliation. Verify that no changes have occurred to prior year-end balance sheet after journal entries to adjust for the that year’s tax return have been recorded
Yes   No
If you are a QuickBooks/Peachtree user, please save the general ledger for the entire tax year into a Microsoft Excel spreadsheet or Acrobat Reader (pdf) format and provide the general ledger to me in an e-mail / save in electronic format and provide to me.
Yes   No
Listing of additions to assets recorded on the balance sheet during tax year with a description of the item, purchase date and amount paid (including financed amount). Please indicate whether items are brand new and do not include items which have been expensed. [Simple definition of an asset: Any item which was purchased (incl sales tax) for $350 or more from which the business will benefit for more than one year must be classified as an asset.]
Yes   No
Listing of any assets disposed of during tax year – how disposed of and amount sold for
Yes   No
Bank reconciliation
Yes   No
If there has been a change in the ownership structure, please provide names of e.g. new investors with names, addresses, social security number, date of investment and amount for each date
Yes   No
Additional paid-in-capital per owner, date contributed and amount contributed
Yes   No
Distributions/draws per owner for the tax year
Yes   No
Total miles driven and business miles driven for each business vehicle for which you use actual method. (Form to complete on pg 2. Do not provide data on personal vehicles used for business for which you use the mileage reimbursement method)
Yes   No
Forms W-3, W-2s, 1096, 1099-INT, 1099-DIV
Yes   No
Was medical insurance offered to employees (incl owners)? If an S-corporation, what amount was paid in premium for an owner who owns more than 2% of the S-corporation? Was the premium amount added to gross wages on the owner’s W-2?
Yes   No
Charitable contributions to [501(c)(3)organizations]:
Provide cash amount (includes cash, check, credit, debit). Provide non-cash amounts, description of items, dates donated and to which organization. If this is not provided, we will assume that the entire amount was donated in cash
Yes   No
Provide identification numbers (if you have not provided it before):
Federal employer identification number
State identification number (not state unemployment insurance ID number)
Yes   No
Yes   No
Padgett income tax engagement letter, signed and dated
Yes   No

 

Small businesses and their workers have good reason to pay attention to some of the key provisions in the recently enacted health reform legislation. Whether a business will be affected by them depends on a variety of factors, such as the number of employees the business has. Below is an overview of the provisions in the new law that will have the biggest impact on small business. If you would like more details about these provisions or any other aspect of the new law, please do not hesitate to call your local Padgett office.

Tax Credits. The new law provides small employers with a tax credit (i.e., a dollar for dollar reduction in tax) for non elective contributions to purchase health insurance for their employees.

Eligibility. To qualify, a business must offer health insurance to its employees as part of their compensation and contribute at least half the total premium cost. The business must have no more than 25 full-time equivalent employees (“FTEs”), and the employees must have annual full-time equivalent wages that average no more than $50,000. However, the full amount of the credit is available only to an employer with 10 or fewer FTEs and whose employees have average annual full-time equivalent wages from the employer of less than $25,000.

Years Available. The initial credit is available for tax years beginning in 2010 through 2013. Health insurance coverage purchased from an insurance company licensed under state law will qualify for this first phase. After 2013, the credit is only available on coverage purchased through a state exchange and is only available for two years.

Amount of Credit. For tax years beginning in 2010 through 2013, the credit is generally 35% of the employer’s non elective contributions toward the employees’ health insurance premiums. The credit is 50% for tax years beginning after 2013. The credit phases out as firm size and average wages increase.

Special Rules. The employer must reduce the deduction for the amount it pays in health insurance by the dollar amount of the credit. For example, if an eligible small employer pays 100% of the cost of its employees’ health insurance and the amount of the tax credit is 35% of that cost, the employer can claim a deduction for the other 65% of the premium cost.

Exclusions. Self employed individuals – including partners and sole proprietors, 2% shareholders of an S corporation, and five percent owners of the employer are not eligible for the credit. There is also a special rule to prevent sole proprietorship’s from receiving the credit for the owner and their family members.

Penalty Exemption. Employers with fewer than 50 employees aren’t subject to the “pay or play” penalty for not providing coverage to their employees. For businesses with at least 50 employees, the possible penalties vary depending on whether or not the employer offers health insurance to its employees. These provisions take effect Jan. 1, 2014.

Padgett Business Services puts out a monthly news letter with important information concerning small business accounting needs. This article on how Health Reform Impacts Small Business in 2010 is an example of an article in our news letter. Feel free to subscribe to our accounting news letter or get the information in our blogs.