We often get requests for a list of best practices from people who are starting a new business venture. Here is a practical, but by no means exhaustive list of best practices. Realize that selecting the type of business entity best suited for your situation is complex, and it is best done with some support from a CPA or your lawyer. You will want to protect your personal assets from a liability suit directed at your company. You can do this by creating one of several forms of Limited Liability Business organizations, such as an LLC, Corporation, S Corporation, Partnership etc.
If you are purchasing an existing company or a franchise, you should engage the services of a lawyer or CPA as quickly as possible. There are significant tax and accounting issues associated with these kind of ventures.
INITIAL COMPANY SETUP:
Set up your Limited Liability business organization. We assume you are in Florida, so you will set up your business on the Florida SUNBIZ Web Site.
Obtain a Federal EIN number. This number is used in lieu of your social security number, in all your business reporting requirements. It limits exposing your social security number in your business affairs.
CPA Accounting & Tax Solutions, a full service accounting and tax services company, is providing the following list of excellent websites, offering education and tips on identity theft.
We believe the best defense against identity theft is awareness, education, and aggressive management of your Identity information. Identity theft is now a major problem with fraudulent tax returns, where your identity data is used to file a tax return and collect a refund. Your legitimate return is then returned by the IRS. Several sites below provide excellent information on this subject.
If you have any concerns about Identity Theft in general or as it relates to your personal or business tax returns, contact us immediately at 239-596-6050. Learn more on our web site: www.CpaAccTax.com. You can also email me at firstname.lastname@example.org.
There are credit monitoring services available today that will monitor your credit status, detecting and informing you of new credit account setup. The following link identifies many of these services. We think it is useful as a list of available services, but offer no opinion on the quality or cost effectiveness of the services. If you are interested, research each and decide. Again knowledge and awareness are your best defenses.
Time is growing short to strategize and execute retirement savings plans for 2013. As you know, CPA Accounting and Tax Solutions continually blogs about the importance of retirement savings. We often see tax clients approaching retirement age with little or no savings. There are tax advantaged retirement savings plans available to you. These small business retirement plans are more complicated than personal Traditional IRA or ROTH IRA’s, and it is wise to seek professional help in reviewing and selecting the best option for you and your company. We partner with some of the best Certified Financial Planners in Southwest Florida. Together we can analyze your company’s financials and help you select the most tax effective strategy.
Remember also, that CPA Accounting and Tax Solutions offers free consultations on your Accounting, Payroll, and Tax Preparation needs. We will analyze prior year tax returns as well. We often discover overlooked tax deductions, which can be recovered through amended tax returns. Please remember that we can only offer these free consultations before the beginning of tax season. Feel free to call us at 239-596-6050.
Following are some 2013 Federal Income Tax reduction strategies:
Fund your Traditional IRA: If you are eligible, you can contribute to a tax deductible traditional IRA up to April 15, 2014. For Tax Year 2013, you can contribute up to $5,500 in a traditional IRA, and if you are age 50 and older, you can get an additional $1,000.
While ROTH IRA’s do not reduce your taxable income directly, do not overlook this superb longer term tax strategy.
Contribute to your 401k, or 403b. If your employer matches some of your contributions, you should always contribute at least the amount your employer matches. For example, if your employer will match up to 3% of your salary, be sure you contribute 3% into your 401K. At this point you will have saved 6% of your salary, and reduced your taxable income by 3%. 401k or 403b contributions must be made by 12/31/2013 for the 2013 Tax Year. You can contribute up to $17,500, plus $5,500 more if you are age 50 and older.
FREQUENTLY ASKED FEDERAL INCOME TAX QUESTIONS (FAQ 1)
DATA AS OF CURRENT FEDERAL TAX LAW, WE WILL MONITOR AND REPORT NEW TAX LAW LEGISLATION
While we wish Federal Taxation was simple and straightforward, unfortunately it is not. We thought we would begin posting questions to frequently asked questions. Few questions relating to Federal income Taxes can be answered with “YES or NO”, or in a few words. We at CPA Accounting and Tax Solutions will try to convey the basic information in as few words as possible. The federal Tax rules have become so complex, highly inter-related, that very frequently the answer to your question starts with “IT DEPENDS”.
As we mentioned in our last BLOG , saving toward retirement must be one of your top priorities. I see many people continue to work well beyond the traditional retirement age of 65. While some people are very happy working beyond 65, too many are required to work to make ends meet. You should begin to save systematically, as early in your working career as possible. Regular investments produce spectacular results over time through compounding. In future blogs, I’ll run a few examples to demonstrate the power of regular savings. Starting a savings plan with small monthly investments, creates the savings habit. Then increase the monthly amounts as you are able, and you will be amazed at how much you have after 5 years.
One thing that is absolutely certain in these uncertain times is the fact that we all getting older. That means someday we will either be retired, or want to be retired. For most of us, we will need savings to be reasonably comfortable in retirement, and we will need a lot more savings than you think. Speaking from experience, and contrary to what most young people think, you really don’t cut back on your living expenses that much when you retire, unless you have no choice. Most people are healthy and active retirees, playing sports, travelling, giving back and so on.
Sadly, the savings rate in our country is very low. Many young and middle aged people have little or no savings at all. It is hard to save because people tend to think you need to put a lot away, but in fact, regular systematic savings result produce amazing results, even with amounts as small as $25 a month. Next we are going to tell you how you can save for the future, and gain a tax advantage as well. Continue reading →
The so called “Fiscal Cliff” has been averted, at least for the moment. As a result, there are NO changes to your Federal taxes, UNLESS your income EXCEEDS $450,000 if you are married, or $400,000 if you are unmarried. This means the Bush Tax Cuts which we have had for the last 10 years remain in effect for you.
If however, if your income is either at the $400,000, or $450,000 level depending on your marital status, your taxes revert to the tax plan in place before the Bush Tax cuts.
Information provided below covers some Personal Federal Tax changes related to the Fiscal Cliff legislation, and some changes which were already scheduled, or were not part of the Fiscal Cliff legislation.
Please remember that the Fiscal Cliff tax bill requires the creation of very specific tax regulations, and that at this point, only very general information is available. As the negotiations continue through March, to determine the spending cuts and debt ceiling, changes are always possible.
We will keep you posted through our Web Site, WWW.CPAACCTAX.COM, and our Blog accessible from our Web Site.
SOCIAL SECURITY / MEDICARE:
The 2013 Social Security Wage Base is scheduled to increase to $113,700, an increase of $3,600 from the 2012 wage base of $110,100. The Medicare tax remains at 1.45% tax with no limitation on income subject to the tax.
In 2013 wages subject to the Medicare tax, which exceed $200,000, will be taxed an extra 0.9% as part of the ObamaCare Health Care legislation. (Note that this tax applies only to the employee, and does not impact the employer matching Medicare tax).
We are sorry to report thatas of January 1, 2013, the Social Security tax for employees will increase to 6.2% from 4.2%. (The employer side has been and will remain 6.2 %.)
FEDERAL INCOME TAXES:
As part of the Obama Care legislation, beginning in 2013, there is an additional 3.8% tax on investment income, which exceeds $250,000 for married couples or $200,000 for non married couples.
As part of the Fiscal Cliff legislation, if your income as discussed above is $450,000, or $400,000, your top tax rate rises from 35% to 39.6%. Capital Gains tax rates will rise from 15% to 20%. Your Schedule A deductions will become subject to limitations once again. We will outline these pre Bush Tax Cuts in more detail in the next few weeks.