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Bring your corporate minutes up to date

Posted on January 11, 2012 by lucy

Writing up the minutes of board of directors’ meetings is not exactly a high priority for most business owners. Yet well-documented corporate minutes can provide valuable supporting evidence if your tax positions are ever questioned.

Minutes are especially important where any kind of related-party transactions occur, such as payments, loans, or distributions between the company and its owners. For example, the IRS may challenge the amount of compensation paid to a business owner as unreasonable. Corporate minutes that document the factors considered by the board in approving the compensation can be a strong defense against such a challenge.

Another area that receives close scrutiny from the IRS is the amount of earnings that are retained in the business rather than distributed as taxable dividends. A penalty applies to retained earnings over a certain limit unless they can be justified by business needs. Corporate minutes can be a strong piece of supporting evidence if they clearly spell out the reasons that the company needs to retain funds — for example, to purchase assets or for working capital.

Posted in Business Tips | 1 Comment

Tax time is the right time for a financial review

Posted on January 4, 2012 by lucy

Now is an ideal time to review your financial affairs. You have to gather information to prepare your tax return at this time. Why not take one more step and do something positive for your financial well-being?

The following suggestions will get you started on your financial review:

  • Hold a discussion with your family. Spouses and children need to share and prioritize their financial aspirations.
  • Write down your financial goals. How much money will you need to meet each goal? When will you need the money, and how will you get it?
  • Do a net worth statement (a list of your assets and debts), and compare it to last year’s statement. Are you gaining or losing ground?
  • With your goals (and the effects of inflation) in mind, review the performance of your investments.
  • Take steps to protect what you already have. Goals may become instantly unobtainable if you lose your present assets or your income potential.
  • Do you have adequate disability insurance coverage to replace take-home pay if you become incapacitated?
  • Do you have the proper amount of life insurance if you or your spouse should die?
  • Do you have replacement value property insurance on your home?
  • Do you have adequate insurance for calamities such as automobile accidents or lawsuits?
  • Make sure that you need all of the insurance that you have. Do not duplicate employer-provided coverage. Review your coverage annually; do not just automatically renew policies.
  • Review your will and your estate plan. Did your situation change during 2011 (marriage, divorce, births, deaths, move to another state, for example)? This year, the top estate tax rate is 35% with a $5,120,000 exemption. Make appropriate changes to your will and estate plan.
  • Review your credit use. Keep your credit card bills current. If you’re finding that hard to do, it’s probably time to cut up some of those credit cards and get your debt under control.
  • Organize your records. If you had trouble assembling data for your financial review, you need a better system. Set one up.

For help with any aspect of your review, call us. We’re here to assist you in any way we can.

Posted in Tax Tips | 1 Comment

Put financial gifts on your holiday shopping list

Posted on December 14, 2011 by lucy

When planning gifts for children on your holiday list, you might want to think beyond the traditional retail offerings. Consider financial gifts that can bestow benefits for many years to come.

Some financial gift options you might consider:

  • U.S. savings bonds. Savings bonds are used by many families to introduce children to the savings concept. I bonds are indexed for inflation and can provide relatively attractive rates of return.
  • IRAs (regular or Roth). For 2011, you can contribute the lower of $5,000 or the earned income of the child. An early financial start can produce amazing benefits from compounded interest accumulated over several decades.
  • Stocks or mutual funds. Equities are a good way to introduce a child to the investment world.
  • Collectible stock certificates. Vibrant framed certificates are available for many companies. A Disney, Dream Works, or Coca-Cola stock certificate can provide a colorful reminder of the importance of investing for the future.
  • Collectibles. Postage stamps or coin collection kits can provide years of enjoyment and form the basis for some life-long hobbies. An interesting gift idea is an official U.S. mint proof coin set for the year the child was born.

Please call us if you would like to review the tax issues related to any of these financial gift options, especially if you are considering a larger amount.

Posted in Tax Tips | 13 Comments

President Obama signs new tax law

Posted on December 8, 2011 by admin

On November 21, 2011, President Obama signed the “Three Percent Withholding Repeal and Job Creation Act” into law. This new law repeals three percent withholding on certain payments to government contractors. The law, H.R. 674, was amended to include the “Vow to Hire Heroes Act” which provides tax credits to employers who hire unemployed veterans.

The law creates the “Returning Heroes Tax Credit” and the “Wounded Warriors Tax Credit.” Employers may qualify for a credit of up to $5,600 for hiring a veteran who has been looking for employment for more than six months. A credit of up to $2,400 applies for veterans who have been unemployed for more than four weeks but less than six months. Employers who hire an unemployed veteran with service-connected disabilities who has been looking for work for more than six months may be eligible for a tax credit of up to $9,600.

The credits apply to new hires after November 21, 2011, through December 31, 2012. For more information about the new law, contact our office.

Posted in Tax Changes | 3 Comments

To succeed in business, have a plan

Posted on December 2, 2011 by admin

Taking a trip without a map may get you lost, and rying to run a business without a plan is likely to have the same result.

A business plan is a map, your company’s written guide into the future. Not only does a good plan let you know where you are and where you’re headed, it provides potential lenders and investors with a portrait of your company.

Each plan will differ, but certain items are essential.

  • First, you must define your market niche and identify the competition. How does your product or service differ from theirs?
  • Next, determine your product and delivery costs; then look at your product pricing.
  • Do you need new equipment or skills to compete now and in the future?
  • What is your marketing scheme?
  • How will you get the capital you need for your plans?
  • Examine your key operating ratios, and determine projected profits for years covered by the plan.
  • Most business plans fail because they lack detail. A well-developed plan gives a new company immediate respect in the eyes of lenders, not only because it shows you to be thorough and far-sighted, but because lenders rarely see good business plans.

Wayne Gretzky, when asked the reason for his success said, “Some people skate to where the puck is. I skate to where the puck is going to be.” A good plan should help you do the same for your business.

Posted in Business Tips | 3 Comments