Changes starting in 2013

Beginning in 2013, the itemized medical expense deduction floor will be raised from 7.5% to 10% in order to limit tax-subsidized medical expenses.

Estates and trusts will be required to pay a Medicare contribution tax of 3.8% on the lesser of either their undistributed net investment income, or of their adjusted gross income in surplus of $11,200 (the current highest tax bracket threshold).

In addition, a tax of 0.9% will be instated on earned income over $200,000 (for individuals) or $250,000 (for families). Individuals and families with income over these limits will be required to pay a Medicare contribution tax of 3.8% on the lesser of either their net annual investment income (including interest, royalties, dividends, rent, trade or business income, self-employment income, estates, trust and property), or of the amount of their annual gross income exceeding the $200,000 or $250,000 limit.

Starting in 2014

Beginning in 2014, small business owners will be able to buy health insurance for groups of over 100 employees via the SHOP insurance programs set up in 2011 (see Healthcare Changes for Small Business, part 2: 2010-2011). In 2014 and 2015 only, small businesses that purchase group health insurance plans through SHOP will receive a tax credit of 50% on these contributions.

Meanwhile, companies with over 50 employees will be penalized $2,000 annually for every employee who ends up on a government-subsidized health care plan rather than being covered by an employee plan. Most people who are not eligible for Medicaid, Medicare, other government-sponsored coverage, or some form of employer-provided health insurance will be required to maintain their own minimal coverage or pay a penalty.

Low income households – those with income levels between 100% and 400% of the Federal Poverty Line – will qualify for a refundable health insurance premium tax credit. The Federal Poverty Line is current set at $10,830 for an individual, $3,740 per additional person and $22,050 for a family of four.

Finally, corporations with assets of over $1 billion will be required to pay higher estimated tax payments in July, August, and September of 2014 as this figure is raised to 15.75%.

Although there’s no surefire way to bullet-proof yourself against a tax audit, a good CPA can help make the process less painful by offering helpful tips like these:

1. Keep records for at least the past three years. The IRS typically initiates audits within 18 months of a filing, but by law they have up to three years before the statute of limitations ends. By having all of your forms and receipts organized and easily accessible, you’ll greatly reduce stress in the event of an audit. When you work with a CPA, you’ll receive all of the year’s tax documents neatly packaged for your files.
2. Avoid math mistakes. Although a numbers blunder doesn’t necessarily mean you’ll be audited, honest mistakes can result in increased attention from the IRS, which is rarely a good thing. A CPA will check all calculations meticulously before submitting your return.
3. Acknowledge red flags before the IRS does. If you have an unusually large deduction or another anomaly, include copies of all related documentation to head off any confusion or suspicion. The IRS agent examining your return will recognize your efforts to remain compliant.
4. Be cooperative. Remember, an auditor is just doing his or her job. If you react belligerently, you could be opening yourself up to closer scrutiny. Clearly and politely answer the questions that are asked of you, but don’t volunteer additional information. When you treat the auditor with respect, you’ll most likely find the experience to be less unpleasant than you anticipated. One of the bonuses of working with a CPA is that he or she will negotiate directly with the IRS on your behalf.

Facing a tax audit can be scary, but you don’t have to do it alone. Above all, the most effective tool you can have is a qualified CPA. A certified tax professional can guide you through the process, address your questions and concerns, and prevent common pitfalls, all of which will help you get through the ordeal with the least possible amount of pain and hassle.

If you think an accountant’s role is limited to preparing and filing annual tax returns, it’s time to adjust your expectations. Many of our new clients are pleasantly surprised to find out how much work we’re prepared to take off their plate.

One of the biggest mistakes business owners can make is withholding information from their CPAs. While basic financial data— W2 and 1099 forms, real estate interest statements, receipts for business expenses—is important, we dig deeper to ensure a clear understanding of our clients’ businesses and long-term goals. Below are some of the most important things to convey to your tax professional before tax season:

• Major life changes. These can apply to your personal or professional life. Examples of events to share with your accountant include the merger or sale of a business, the purchase of a new property, or an impending divorce or marriage. Any of these things can impact the distribution of your business profits.
• Projected income changes. Whether you anticipate fiscal challenges or you’re about to launch a revolutionary new product that promises to boost your revenue, it’s wise to let your accountant know what you’re expecting. Your CPA can help with any cash flow or re-investment concerns.
• Retirement goals. Do you have a timetable for when you’d like to retire? As a self-employed entrepreneur, are you unclear on the differences between a traditional IRA and a Roth IRA? Regardless of your age, it’s never too early—or too late—to discuss retirement options with your CPA.
• New projects or investments. If your business is venturing into new markets or about to start offering a new product or service, this change in direction could have an impact on your tax strategies.

As you approach tax season, a well-informed CPA is one of the most important business tools in your repertoire. The more your tax advisor knows about your current situation and long-term plans, the better he or she can help you achieve your personal and professional goals.

You wouldn’t set off on a cross-country journey without your GPS system—so why risk navigating the sometimes turbulent waters of business ownership without a qualified tax professional to guide you?

Considering the proven benefits of hiring a Certified Public Accountant, it’s surprising that a significant number of business owners don’t use one. What’s stopping them? Below are a few of the most common reasons we’ve heard, along with some facts to set the record straight.

Excuse #1: “I built my business from the ground up. Surely I can handle filing a tax return.”

While it’s true that the most basic tax returns can be completed with relative ease, a CPA’s services go well beyond filling out a few forms and sending them to the IRS. A good accountant will provide financial guidance throughout the entire year, not just during busy tax season. He or she will help you create a long-term strategy for growth and success, looking beyond the numbers to identify the unique challenges and goals of your business.

Some entrepreneurs and start-up business owners are used to doing everything themselves, and that “DIY” mentality can extend to their taxes. While it can be tempting to try and save some money by taking care of your own accounting needs, it’s important to understand that enlisting the services of a CPA doesn’t mean you’re incapable—to the contrary, it signifies that you care enough about your business to invest in its growth and dedicate more resources to essential areas.

Excuse #2: “I’ll just go online or buy a book to find all the tax information I need.”

Although there is extensive information available on the Internet and in tax books, no amount of singlehanded research can replace the benefits of a personal relationship with a CPA. When you meet with a tax professional, he or she will be able to get a clear picture of your goals and challenges, analyze the nuances of your situation, and make a customized recommendation. While knowledge and education are essential, they’re most effective when combined with a face-to-face consultation that’s driven by YOUR individual needs.

Excuse #3: “My business isn’t big enough to warrant a CPA.”

It’s a common misconception that only very large, lucrative businesses need a CPA. The truth is, companies of all sizes and profit margins can benefit from the services of a tax professional. An experienced CPA can help with all aspects of your business financials—tax returns, bookkeeping, payroll, financial analysis, in-depth reporting, and more. This will allow you to dedicate more resources to revenue-boosting activities, such as marketing strategies, product development, and client satisfaction.

Excuse #4: “I can’t afford to hire a CPA.”

Considering the significant tax and efficiency savings provided by a good CPA, a more accurate statement would be “I can’t afford NOT to hire a CPA.” With our reasonable rates and value-adding services, our professional tax services are a no-brainer investment in the success of your business.