Avoid underpayment penalties

Avoid underpayment penalties

Check the total taxes you've already paid in for the year through withholding from your wages and/or quarterly estimated payments. Are you underpaid? Consider adjusting your withholding for the final months of 2015 or increasing your remaining quarterly estimate. If you employ household workers, include the payroll taxes you'll owe for them in your calculations. Call us for assistance.

Take time for tax planning

Take time for tax planning

Take time to review your 2015 tax situation while there are still a few months to make adjustments. Can you benefit from bunching your itemized deductions? Will increasing your retirement plan contributions cut your tax bill? An investment in a tax review could make a significant difference in your final tax bill for the year.

October 15 is a final tax deadline

October 15 is a final tax deadline

Time's almost up if you requested a six-month extension to file your 2014 federal income tax return. October 15 is the final date for filing your 2014 return; the IRS generally does not give filing extensions beyond that date.

October 15 is also the deadline for undoing a 2014 conversion of a traditional IRA to a Roth IRA. If you converted your traditional IRA to a Roth last year, you can switch it back to a regular IRA without penalty if you do so by October 15.

Want to know more? Contact our office. 

How to reduce inventory risk in your business

How to reduce inventory risk in your business

Study the balance sheet of most retail or manufacturing businesses, and you'll find inventory near the top of the asset list. Accountants define inventory as raw materials, supplies, work in progress, and finished goods. It's the stuff sitting on shelves, parked in the lot, or being produced in the factory – merchandise that managers expect to sell in the normal course of business. Buying, storing, handling, and insuring that stuff is expensive. As a high-value asset, inventory often represents a significant risk, and mitigating that risk is crucial to maintaining profitability.

To reduce inventory risk in your business, consider the following:

*                 Too many or too few goods. Nothing beats a comprehensive and consistently applied inventory tracking system for making sure you don't overbuy from vendors or underestimate the needs of your customers. The best information systems will capture detailed sales histories and forecast demand with reasonable precision. In addition, regular contact with customers may help to identify emerging demand or dissatisfaction with existing products. These conversations, in turn, can influence your inventory purchase decisions.

*                 Obsolescence. Most inventory declines in value over time. To mitigate this risk, a manager should track revenue data and regularly move inventory via special promotions, discounting, and sales. Paying to hold and insure obsolete merchandise drains profits. Make room for fresh inventory by creatively moving the inventory that's already on your shelves.

*                 Damage. Managers should identify the causes behind frequent damage. Perhaps employees need better training in handling goods; perhaps more stringent policies need to be set. Some retailers, for example, limit the number of boxes that can be stacked on pallets. Maybe the company's packaging is not sturdy enough, or a change of suppliers is warranted. Knowing why your inventory is being broken is the first step to reducing that risk.

*                 Theft. Establishing physical safeguards – locks, lighting, fences, cameras, and the like – can help protect merchandise, whether it's housed in the store or warehouse. Taking time to perform thorough background checks on employees may also reduce fraud risk. Hiring an independent auditor to review inventory levels is often a good preventive control, a control that sometimes ferrets out theft. If employees know that management routinely checks the company books and counts inventory, they may be less likely to shuffle goods from the warehouse to their homes or engage in "creative" accounting.

Discuss money before you marry

Discuss money before you marry

Couples often enter into marriage without ever having had a serious discussion about financial issues. As a result, they find themselves frequently arguing about money. If you are planning a wedding, here are some steps you can take to get your marriage off to a good financial start.

*                 Premarital financial discussions. You and your intended might enjoy the same movies and the same kinds of food, but are you financially compatible? Take some time to discuss your finances before you tie the knot. Talk about your assets, your debts, your credit ratings, and your financial attitudes, including your spending and saving habits. Do you share the same goals, such as having children, buying a home, or continuing your education? How will you finance your dreams?

How will you handle your finances as a married couple? For example, who will pay the bills? Will you maintain joint or separate checking accounts? If you maintain separate accounts, how will you split your expenses?

*                 Premarital financial counseling. Every couple needs to work out their own style for handling money. Call upon your accountant to assist you in setting up a budget, controlling your taxes, and mapping out a financial plan for your future.

*                 Premarital legal counseling. If you have substantial assets, discuss the merits of a premarital agreement with your attorney. If your partner has substantial debt, ask your attorney how you can protect yourself from his or her creditors.

Perhaps you plan on buying a house together or combining financial accounts. Your attorney can advise you on the best way to hold title to your assets.

Discussing your finances before you say "I do" may increase your chances for living happily ever after. Give us a call if you would like assistance in this area.

A Quick Recordkeeping Guide

A Quick Recordkeeping Guide

Is your file cabinet overflowing? Do you hesitate to purge tax information because you're not sure what to keep and what to discard? Here's a quick guide to help you cut through the clutter.

*                 Expenses. Substantiation for deductions includes charitable donation acknowledgments, receipts for employee business expenses, and automobile mileage logs. Retain these at least seven years after you file the return claiming them.

*                 Income. The same seven-year rule also generally applies to common tax forms such as 1099s showing interest, dividends, and capital gains from banks or brokerages, and Schedule K-1s from partnerships and S corporations. The IRS recommends holding on to your W-2s until you start collecting social security.

Tip: Shred interim income reports once you've compared the totals to annual forms.

*                 Retirement accounts. You may have to calculate the taxable portion of distributions, so keep records detailing your contributions until you've recovered your basis.

*                 Tax returns. The statute of limitations is usually three years but can be six years if underreported income is involved. In cases of fraud or when no return is filed, the IRS has an indefinite time period for assessing additional tax.

As a general rule, keep federal and state returns a minimum of seven years.

For additional information, including how long you should store business papers and payroll reports, please call. We'll be happy to help you establish a records retention schedule.

Watch year-end mutual fund transactions

Watch year-end mutual fund transactions

The income tax effects of mutual funds can be complex, and poorly timed purchases or sales can create unpleasant year-end surprises.

Mutual fund investors (excluding qualifying retirement plans) are taxed based on activities within each fund. If a fund investment generates taxable income or the fund sells one of its investments, the income or gain must be passed through to the shareholders. The taxable event occurs on the date the proceeds are distributed to the shareholders, who then owe tax on their individual allocations.

If you buy mutual fund shares toward the end of the year, your cost may include the value of undistributed earnings that have previously accrued within the fund. If the fund then distributes those earnings at year-end, you'll pay tax on your share even though you paid for the built-up earnings when you bought the shares and thus realized no profit. Additionally, if the fund sold investments during the year at a profit, you'll be taxed on your share of its year-end distribution of the gain, even if you didn't own the fund at the time the investments were sold.

Therefore, if you're considering buying a mutual fund late in the year, ask if it's going to make a large year-end distribution, and if so, buy after the distribution is completed. Conversely, if you're selling appreciated shares that you've held for over a year, do so before a scheduled distribution, to ensure that your entire profit will be treated as long-term capital gain.

If you're considering buying or selling mutual funds and would like more information about the tax effects, give us a call.