Teach your child this vital skill

 

Financial literacy is a vital skill in today’s world. Will your children be able to handle their finances when they became adults? Here are tips to help ensure the answer is yes.

 
Shave spending. Take the weekly allowance to the next level by helping your child develop a budget. Review the results to reinforce good habits.

 
Stress savings. Even young children can grasp the power of compound interest. A simple example is asking your child to put a dollar in a piggy bank. Offer to pay five percent interest if the money is still there in a week or a month. Make the same offer at the end of the first time period, and pay “interest on the interest” as well.

 
Introduce investments. Create a portfolio, either real or paper, consisting of shares of one or more stocks or mutual funds. Make a game of charting the investment’s progress on a regular basis.

 
Cover credit. Take on the role of lender and let your child request an advance on a weekly allowance. Charge interest.

 
Talk taxes. Use word search or crossword puzzles to teach tax terminology. Consider creating a “Family Economy” game using examples from your own budget.

 

 
Lessons in financial responsibility can benefit your children now and in the future. Get them started on the right path.

 

 

 

 

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Victim of a disaster, fire or theft? You may be eligible for a tax deduction

 

If you suffer damage to your home or personal property, you may be able to deduct these “casualty” losses on your federal income tax return. A casualty is a sudden, unexpected or unusual event, such as a natural disaster (hurricane, tornado, flood, earthquake, etc.), fire, accident, theft or vandalism. A casualty loss doesn’t include losses from normal wear and tear or progressive deterioration from age or termite damage.

 
Here are some things you should know about deducting casualty losses:

 
When to deduct. Generally, you must deduct a casualty loss in the year it occurred. However, if you have a loss from a federally declared disaster area, you may have the option to deduct the loss on an amended return for the immediately preceding tax year.

 
Amount of loss. Your loss is generally the lesser of 1) your adjusted basis in the property before the casualty (typically, the amount you paid for it), or 2) the decrease in fair market value of the property as a result of the casualty. This amount must be reduced by any insurance or other reimbursement you received or expect to receive. (If the property was insured, you must have filed a timely claim for reimbursement of your loss.)

 
$100 rule. After you’ve figured your casualty loss on personal-use property, you must reduce that loss by $100. This reduction applies to each casualty loss event during the year. It doesn’t matter how many pieces of property are involved in an event.

 
10% rule. You must reduce the total of all your casualty or theft losses on personal-use property for the year by 10% of your adjusted gross income (AGI). In other words, you can deduct these losses only to the extent they exceed 10% of your AGI.

 
Have questions about deducting casualty losses? Contact us!

 

 

 

 

Are you reviewing these 5 areas to benefit your business?

As a business owner, monitoring operations and dealing with everyday problems no doubt takes up the bulk of your day. But carving out time for a comprehensive review can benefit your business. Here are 5 key areas to consider.

 
Insurance coverage. Automatic renewal may appear to be a time-saver. But you might be missing out on necessary updates and the opportunity to revise your coverage. Sit down with your insurance agent and discuss your business operations, focusing on risks from new ventures or changes in laws. Make sure you have suitable liability coverage.

 
Tax Strategy. A month after you file your tax return, make an appointment with your tax advisor. Go over your return together and identify opportunities for tax savings. Question everything, starting with whether you’re using the right form of business entity. Ask about recent changes in the tax code and how they might benefit your business. Make your advisor a partner in your business strategy.

 
Succession planning. Have a specific plan for each key managerial position, including yours. Will you promote from within or recruit externally in the case of an unexpected vacancy? Which managers can be cross-trained to keep your business operating during the short-term absence of another employee?

 
Banking relationships. Schedule a meeting with your controller or chief financial officer to go over your cash balances and banking relationships. Then both of you meet with your banker. Address service concerns or problems that arose during the year. Look for ways to reduce idle cash, boost interest earned, and improve cash flows.

 
Personal Estate Planning. Your company is likely a significant part of your estate. A good estate plan is essential if you hope to pass it on to your heirs. But your company, your personal circumstances, and the tax laws are continually changing. Make sure your plans are current.

 
Contact us for more suggestions. We can assist you in securing your business’s long-term success.

Did you enroll in HealthCare.gov? You may be eligible for a federal tax credit

If you or a family member enrolled in a qualified health plan offered through a government insurance marketplace, such as HealthCare.gov, you may be eligible for a federal tax credit. The amount of the credit varies depending on your household income and can be claimed on your tax return. Alternatively, you have the option to receive all or part of the credit in advance in the form of payments to your insurer that reduce your health insurance premiums.

 
Either way, you need to file a federal income tax return. That’s the case even if you’re usually not required to file. In the case of advance payments, failing to file your tax return can prevent you from receiving the credit in future years.
To make sure you received the correct amount of the credit, or to claim it, attach Form 8962, Premium Tax Credit, to your return.

 
For questions or filing assistance, please contact our office..

3 income-tax-smart gifting strategies

If your 2015 tax liability is higher than you’d hoped and you’re ready to transfer some assets to your loved ones, now may be the time to get started. Giving away assets will, of course, help reduce the size of your taxable estate. But with income-tax-smart gifting strategies, it also can reduce your income tax liability — and perhaps your family’s tax liability overall:

 
1. Gift appreciated or dividend-producing assets to loved ones eligible for the 0% rate. The 0% rate applies to both long-term gain and qualified dividends that would be taxed at 10% or 15% based on the taxpayer’s ordinary-income rate.

 
2. Gift appreciated or dividend-producing assets to loved ones in lower tax brackets. Even if no one in your family is eligible for the 0% rate, transferring assets to loved ones in a lower income tax bracket than you can still save taxes overall for your family. This strategy can be even more powerful if you’d be subject to the 3.8% net investment income tax on dividends from the assets or if you sold the assets.

 
3. Don’t gift assets that have declined in value. Instead, sell the assets so you can take the tax loss. Then gift the sale proceeds.

 
If you’re considering making gifts to someone who’ll be under age 24 on December 31, make sure he or she won’t be subject to the “kiddie tax.” And if your estate is large enough that gift and estate taxes are a concern, you need to think about those taxes, too.

To learn more about tax-smart gifting,contact us.

Be aware of these four IRA rules

 
If you have an individual retirement account, you’re aware of how complicated the rules can get. Here are four to remember as you prepare your 2015 federal income tax return.
1. Are you searching for one more tax deduction? It’s not too late to contribute to your IRA and claim a deduction for 2015. Under current tax rules, you can establish and contribute to your IRA up until April 18, 2016 (April 19 if you live in Maine or Massachusetts). If the IRA is the traditional, tax-deductible kind, you can deduct that contribution on your 2015 federal income tax return. If you’re under age 50, the maximum contribution is $5,500. If you were 50 or older by December 31, 2015, you can contribute up to $6,500.
2. You can make a contribution to a traditional IRA and convert it to a Roth later. Although a conversion now will generate taxable income that’s reportable on next year’s federal tax return, qualifying withdrawals from the Roth will be tax-free when you retire. If your circumstances change, you can choose to “recharacterize” your new Roth as a traditional IRA by moving the funds back within a specified period. You also have the opportunity to “reconvert” the funds to a Roth again after a recharacterization.
3. If you turned 70½ in 2015, you’re now required to take an annual minimum distribution from your IRA (and, unless you’re still working, from other retirement plans also). If you chose to delay taking your first distribution last year, April 1, 2016, is an important deadline. That’s the last day you have to take your initial distribution or you’ll be subject to a 50% penalty on the amount you should have taken.
4. The age of 70½ also lets you benefit from the now-permanent tax break for making charitable contributions from your IRAs. While it’s too late to make a contribution for 2015, you can exclude direct transfers of up to $100,000 from your gross income this year. The donation counts as part of your required minimum distribution.
For more tax breaks related to IRAs and other retirement plans, contact our office.

Make a 2015 contribution to an IRA before time runs out

Tax-advantaged retirement plans allow your money to grow tax-deferred — or, in the case of Roth accounts, tax-free. But annual contributions are limited by tax law, and any unused limit can’t be carried forward to make larger contributions in future years. So it’s a good idea to use up as much of your annual limits as possible. Have you maxed out your 2015 limits?

 
April 18 deadline
While it’s too late to add to your 2015 401(k) contributions, there’s still time to make 2015 IRA contributions. The deadline is April 18, 2016. The limit for total contributions to all IRAs generally is $5,500 ($6,500 if you were age 50 or older on December 31, 2015).
A traditional IRA contribution also might provide some savings on your 2015 tax bill. If you and your spouse don’t participate in an employer-sponsored plan such as a 401(k) — or you do but your income doesn’t exceed certain limits — your traditional IRA contribution is fully deductible on your 2015 tax return.

 
Evaluate your options
If you don’t qualify for a deductible traditional IRA contribution, see if you qualify to make a Roth IRA contribution. If you exceed the applicable income-based limits, a nondeductible traditional IRA contribution may even make sense. Neither of these options will reduce your 2015 tax liability, but they still provide valuable opportunities for tax-deferred or tax-free growth.
We can help you determine which type of contributions you’re eligible for and what makes sense for you.

4 Tips for recruiting new talent

Your people are your business’s key asset. As such, when it’s time to get new people, either to replace someone, or because your business is expanding, you need to make sure that you’re getting the best. Below are some helpful hints and strategies to make sure that when you’re seeking out new talent, you find the people who have the most to offer!

1.Start at home: Not literally, of course, but you should start your recruiting in-house. Look at the people you already have. Are you making the most of their talents? If you start your search among your current employees, you’ll be more likely to discover hidden talent, plus they are already familiar with your business, culture, and clients. Also, by recruiting from within, you show all of your employees that you appreciate their individual talents, strengths, and accomplishments, boosting morale dramatically.

 
2. Involve your staff: Your staff knows the ins and outs of your business like no one else. Their ideas, input, and suggestions often come from a place of experience and knowledge. Take advantage of that when you’re recruiting. They can recommend candidates, help review resumes and qualifications, and even participate in the interview process. By involving them, you also help ensure that your new hire will get the support they need to be successful. If your employees help in the hiring process, they are just as invested in that new hire’s success as you are.

 
3.  Use the right tools: You might look for new employees by putting an ad in the paper or posting on Craigslist, and you might get some replies, but if you’re not using sites like LinkedIn, you will be missing out. Professional networking sites are places where professionals gather to meet one another, talk about issues, and seek out opportunities. If you want to cast a wide net, with quality in mind, listing your opening on a site like this is key. Plus, you can very quickly look a potential candidate’s profile to get a sense of their experience, strengths, and interests.

 
4.  Let go of “perfect”: The perfect candidate just doesn’t exist. That being said, if you want to find the best candidate for the job, you need to start by defining what exactly is important and why. For instance, if you require that a candidate must have a certain degree, ask yourself why exactly that is. Perhaps you are concerned about a specific skill set, or character trait like persistence. Recognizing what you really need in a candidate can open you up to people you may have never considered, ultimately helping you to find the candidate that can best mesh with the rest of your staff, and of course, do the job well.

 

If you keep these tips in mind the next time you find yourself in need of new talent, you’ll be surprised at not only the caliber of candidates you attract, but also the reception they receive from the rest of your staff.

Wishing you the best,

McFadyen & Sumner, CPAs PA

New tax benefits available when claiming the research and developmental credit

 

If you conduct qualified research activities, you may be eligible to claim a federal income tax credit known as the “research and development” credit. This credit is now permanent and may benefit you when you design, develop, and improve business products or processes. Beginning in 2016, the research and development credit can be applied against your alternative minimum tax liability. In some cases, the credit may also be applied against up to $250,000 of payroll taxes

2 benefits-related tax credits just for small businesses

Tax credits reduce tax liability dollar-for-dollar, making them particularly valuable. Two valuable credits are especially for small businesses that offer certain employee benefits. Can you claim one — or both — of them on your 2015 return?

 
Retirement plan credit
Small employers (generally those with 100 or fewer employees) that create a retirement plan may be eligible for a $500 credit per year for three years. The credit is limited to 50% of qualified startup costs.
Of course, you generally can deduct contributions you make to your employees’ accounts under the plan. And your employees enjoy the benefit of tax-advantaged retirement saving.

 
Small-business health care credit
The maximum credit is 50% of group health coverage premiums paid by the employer, provided it contributes at least 50% of the total premium or of a benchmark premium. For 2015, the full credit is available for employers with 10 or fewer full-time equivalent employees (FTEs) and average annual wages of $25,000 or less per employee. Partial credits are available on a sliding scale to businesses with fewer than 25 FTEs and average annual wages of less than $52,000.
To qualify for the credit, online enrollment in the Small Business Health Options Program (SHOP) generally is required. In addition, the credit can be taken for only two years, and they must be consecutive. (Credits taken before 2014 don’t count, however.)

 
Take all the credits you’re entitled to
If you’re not sure whether you’re eligible for these credits, we can help. We can also advise you on what other tax credits you might be eligible for when you file your 2015 return.