12 Months, 12 Tax and Business Priorities for 2014
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Houston CPAs Chris Haas and Chris Masters of Doeren Mayhew shared a month-by-month list of business and tax planning priorities and when you should complete them.
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12 Months, 12 Tax and Business Priorities for 2014
- 2. Perform Year-End Close What? ⢠Accruals ⢠Prepaids ⢠Updated depreciation numbers ⢠Bank reconciliations ⢠Inventory adjustments ⢠A/R reserves Copyright Š 2014
- 3. Perform Year-End Close Why? ⢠Aids the tax return prep and attestation processes â better information to your CPA means a faster process with fewer complications ⢠Better projections of potential tax due results in better cashâflow planning ⢠More time to make additional adjustments if necessary Copyright Š 2014
- 4. Perform Year-End Close Best practices: ⢠Work with your accountant to discuss adjustments made in prior years ⢠Perform physical inventories ⢠Look at cash collections after year end ⢠Look for expenditures that potentially belong in the prior year Copyright Š 2014
- 5. Prepare for Your Return How? ⢠Begin gathering data now for your 2013 return ⢠Using the tax organizer:Â ď§ Summarizes data in orderly format ď§ Shows priorâyear amounts reported ď§ Asks key questions your tax preparer needs to know ď§ Avoids overlooking key data Copyright Š 2014
- 6. Prepare for Your Return How? ⢠Corporate return checklist ď§ Trial balance ď§ Fixed assets ď§ Equity accounts ď§ Foreign taxes paid ď§ State information Copyright Š 2014
- 7. Prepare for Your Return Copyright Š 2014
- 8. Prepare for Your Return What to expect? ⢠Section 179 and bonus depreciation ď§ 179 Limits: $500,000 in 2013; $25,000 in 2014 ď§ Bonus â 50% in 2013; goes away in 2014 ď§ Qualifying assets â tangible personal property ⢠R&D ď§ 2013 tax credit ⢠DPAD (Domestic Production Activities Deduction) ď§ How to calculate ď§ Qualifying activities â U.S. manufacturing, construction services, engineering and architectural services, software development, etc. Copyright Š 2014
- 9. File Extensions, Finalize Attest Services What/why? ⢠C corporation and S corporation extensions ď§ ď§ ď§ ď§ 15 days left to file or extend corporate returns One month to go before personal returns due Flowâthrough income affects personal returns Should have a good idea of taxable income for cashâflow planning Copyright Š 2014
- 10. File Extensions, Finalize Attest Services What/why? ⢠Attest service finalization â banks require financials within 90 days ⢠Covenant calculations and how tax planning effects them ⢠Discussions with the bank Copyright Š 2014
- 11. Estimate Quarterly Tax What? ⢠Due dates for individuals ď§ April, June, September, December ď§ Can pay through withholding Copyright Š 2014
- 12. Estimate Quarterly Tax Why? ⢠Safe Harbor ď§ Avoid underpayment penalties and interest ⢠CashâFlow Planning ď§ Spread capital requirements evenly throughout year Copyright Š 2014
- 13. Estimate Quarterly Tax Safe Harbor Calculation Pass-Throughs/ Individuals Corporations Prior-Year Tax Liability 500,000 110% Safe Harbor Amount 550,000 - 50,000 - 125,000 125,000 125,000 - 375,000 - Total Amount Paid In 425,000 - Additional Amount Due Q4 125,000 2014 Estimated Tax Payments - Prior-Year Overpayment Applied Projected Withholding Estimated Tax Payments: Qtr 1 Qtr 2 Qtr 3 Pass Throughs/ Individuals Corporations 2013 Projected Tax Liability 600,000 - 110% Safe Harbor Amount 660,000 - 50,000 - 152,500 - 2013 Projected Withholding Q1 2014 Estimated Tax Payment Copyright Š 2014
- 15. Analyze Banking Situation Why? ⢠Changes in operations ď§ Volume increases ď§ Product mix changes ⢠Past performance versus prior year and projections ⢠Market condition changes Copyright Š 2014
- 16. Analyze Banking Situation Best practices: ⢠Be prepared ď§ Banks love information ď§ Presentations provide confidence ⢠Know your goal ahead of time and prove it to the bank Copyright Š 2014
- 17. Focus on Foreign Asset Reporting What? ⢠Report of Foreign Bank and Financial Accounts (FBAR) ⢠Financial interest in or signature authority over one or more accounts in a foreign country ⢠Aggregate value of $10,000 at any time during calendar year ⢠Form 8938 for individuals Copyright Š 2014
- 18. Focus on Foreign Asset Reporting Who/When? ⢠U.S. persons ⢠⢠⢠Citizens Residents Entities formed under the laws of the United States ⢠June 30 due date â no extension available ⢠âMailbox ruleâ does not apply â must be received by due date ⢠Electronic filing Copyright Š 2014
- 19. Focus on Foreign Asset Reporting Why? ⢠Penalties up to $100,000 for willful civil infractions ($10,000 for nonwillful infractions) and $500,000 and 10 years in prison for criminal violations ⢠Voluntary disclosure program ⢠Avoid criminal prosecution ⢠Reduce exposure and penalties ⢠Covers the last eight tax years Copyright Š 2014
- 20. Focus on Foreign Asset Reporting What? ⢠Form 8938 â Specified Foreign Asset Report ⢠New since 2011 ⢠Goes beyond foreign bank accounts to include foreign stock, foreign entity interests, foreign real estate if held in a foreign entity ⢠Higher reporting threshold ⢠File with 1040 ⢠Penalties similar to FBAR Copyright Š 2014
- 21. Conduct a Budget Review Why? ⢠Budgets must be monitored and adjusted to be useful tools ⢠Assumptions made seven months ago may not still apply ⢠Material changes to various accounts may exist Copyright Š 2014
- 22. Conduct a Budget Review What? ⢠Review key budget components: ď§ Income statement ď§ Cashâflow statement ď§ Balance sheet ⢠Create new expectations for remainder of year based on actuals Copyright Š 2014
- 23. Assess Cash Flow Why? ⢠The summer months are often slower, causing a cash drag ⢠You may have estimated payments coming up ⢠Consider capital expenditures coming before end of year to maximize depreciation Copyright Š 2014
- 24. Assess Cash Flow What? ⢠Endâofâyear cash forecast ⢠Rolling 13âweek cash flow Copyright Š 2014
- 25. Conduct Strategic Planning Why? ⢠Takes strategy from mind of business owner and into implementation mode by the management team ⢠Focuses activities and major initiatives ⢠Creates accountability and followâthrough on initiatives ⢠Helps develop clear and consistent communication ⢠Assists in formulating succession plans ⢠Helps the business stay on track toward goals ⢠For multiâlocation businesses, helps achieve consistent results Copyright Š 2014
- 28. Perform Tax Planning What/why? ⢠Maximize deductions, defer income ⢠Accelerate depreciation ⢠Tax projections for cash flow purposes ⢠Cash vs accrual basis Copyright Š 2014
- 29. Perform Tax Planning C corporation vs. S corporation: ⢠C corp pays tax at the entity level; S corp is a flowâthrough ⢠Double taxation with C corp ⢠No capital gains rate in C corp environment ⢠S corp allows for more favorable sale of business Copyright Š 2014
- 30. Perform Tax Planning 3.8% Medicare tax: ⢠High earners will be hit â additional .9% on wages over $200,000 for single taxpayers, $250,000 for married filing joint ⢠Passive income subject to tax â capital gains, dividends, interest ⢠Active income from trade or business is exempt ⢠Material participation test â 500 hours or more ⢠Real estate professionals exempt Copyright Š 2014
- 31. Perform Tax Planning Recent legislation: ⢠Mostly taxpayer adverse â higher rates and fewer deductions ⢠Itemized deduction phaseout (Pease Limitation) once AGI exceeds $300,000 ⢠Repair and maintenance regulations Copyright Š 2014
- 33. Budget for the New Year Why? ⢠Serves as a planning and decisionâmaking tool ⢠Creates a framework for managing expenses ⢠Provides measurement tools and benchmarks ⢠Helps prepare for emergencies or revenue slowdowns ⢠Betters your understanding of expenses relative to revenue generation ⢠Enhances internal control when budget variances are investigated ⢠Alerts you to the need to adjust your plan based on differences in budgeted versus actual numbers Copyright Š 2014
- 34. Budget for the New Year What? ⢠3 levels: ď§ Budget with assumption based on current trends ď§ Budget with flexible assumptions based on projected performance ď§ Comprehensive budget for multiple companies or departments Copyright Š 2014
- 35. Budget for the New Year Best practices: ⢠Tie the budget into overall company goals and question the merit of items that donât align ⢠Include lineâitem details for allocating funds to facilitate expense tracking and align spending with goals ⢠Update it regularly to reflect actual spending ⢠Monitor monthly â variances are either warning signs or opportunity signals Copyright Š 2014
- 36. Conduct Gifting What/why? ⢠Estate lifetime exemption limits â $5.34 ⢠Need for valuation if giving away assets without readily available FMV ⢠Beneficial to gift appreciating assets ⢠Annual gift limits ď§ $14,000 per donee per year ď§ Spouses can each gift up to $14,000 per donee Copyright Š 2014