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%.

American healthcare is poised for some pretty radical changes over the next several years – changes that are relevant to everyone from the youngest child to the oldest retiree. If you’re a small business owner or an employee of a small business, you’re probably wondering whether the new laws and regulations will impact you. Read on to learn about potential changes to your insurance and healthcare premiums.

Changes Starting in 2010

The upcoming healthcare changes will be phased in over the next few years. Although the bulk of the new regulations are slated for 2011, 2013, and 2014, there are two significant changes taking place in 2010.

During the period of 2010-2013, as the new regulations are gradually introduced, qualified small business owners are eligible for a tax credit of 35% on their contributions to health insurance premiums for their employees. Known as the Small Business Health Care Tax Credit, this perk is available only to small business with fewer than 25 employees and average wages of less than $50,000 annually.

In addition, parents will now be permitted to include adult children (up to age 26) on the coverage offered by tax-qualified, employer-provided health plans.

Changes starting in 2011

From 2011-2015, small business employers will be eligible to receive federal funding if they provide their staff with wellness programs.

Small businesses will also be permitted to form collectives or alliances in order to purchase employee health insurance policies at better rates. The online programs that will make this possible, known as SHOP or Small Business Health Options Programs, will receive state-level funding from federal sources.

You can also expect to see some more specific changes to permissible medical expenses. The definition of qualified medical expenses will be altered to exclude over-the-counter medications. This affects all Health Savings Accounts (HSAs) and Archer Medical Savings Accounts (MSAs), as well as reimbursements through Health Flexible Spending Arrangements (Health FSAs) and Health Reimbursement Arrangements (HRAs). The annual limit on allowable medical expenses from flexible spending accounts will be capped at $2,500.

Finally, a “cafeteria plan,” which allows employees to pick and choose benefits as needed, will be introduced for small business staff and the self-employed beginning in 2011.

We’ll explore some more details on the upcoming healthcare changes in our next post.

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• Budgets and Business Planning: Whether you’ve just launched a new business or own an existing corporation, seeking the advice of an experienced CPA can be very helpful in establishing realistic budgets and benchmarks for your business. A strategic plan can make the difference between success and failure in today’s marketplace; a CPA can help you set business goals, establish checkpoints to measure progress, and take measures to encourage growth within your company.
• Assistance with Bonding: Bonding and taxes have different objectives, and a CPA can help you navigate the two areas to achieve the consistency that is favored by bonding agents, increasing your chances of a money-saving tax return.
• Profit and Cost Assessment: In order to understand and improve upon your current business structure, it’s necessary to monitor your systems and consider the costs and benefits of various types of work. A CPA can be helpful in analyzing the profits and costs of various contracts, products, and services you offer, and can give advice on which of these services are most lucrative and which are costing more labor and overhead than they’re worth. This kind of assessment can help you streamline your work to focus on your most productive areas.
• Internal Controls: These can encompass anything from elaborate checks and balances to discourage fraud, to a simple streamlining of your company’s paperwork to make you more efficient. A CPA with experience in your industry can advise you on the best internal controls for your business.
• Technology and Software Support: Your CPA can be an important resource in advising you on any changes you need to make to the technology or software you need to run your business. He or she can suggest software that can improve your financial outlook, and may be able to tell you about compatible technology in other areas.

A CPA is an invaluable team member for any business. Tap into their diverse range of skills to support your company’s growth, stability, and success.

1.  Do you have the best clients?

Reevaluating your client list is probably the first thing to look at when planning your future year. Your marketing plan should focus on the best client fit for you. If the current client list does not fit your focus, think about whether or not you should keep particular clients. Follow the 80/20 rule in these matters. If 80% of your stress comes from 20% of a particular client then reevaluate whether keeping them is worth the trouble. You will need room for the new clients coming in 2010.

2. Are your products and services the best out there? If not, what should you do to improve?

Take a step back and ask a few of your valued customers. They are sure to be honest and will give you some insight into your business. Look at the services that produce the most return on their investment and focus on those. How do you know which products and services are doing the best? Financial analysis or reviewing your books for that information is the easiest and most efficient way.

3.  Are you losing time on different projects? Are we missing critical moments that are costing the company money and time?

Review current systems to see if there are inefficiencies. Flowchart them or put them on a piece of paper and then tear the system apart. Bring your team in to evaluate them with you. You never know what ideas will come out of this analysis that could save you thousands of dollars.

4.  Have you evaluated your strengths and weaknesses, opportunity and threats?

It’s called a SWOT analysis. This analysis can help you decide on which areas need to be focused on most. This should be done at least once a year.

5.  Are you totally lost at this point and feeling all alone? Do you have so many issues you don’t know where to begin?

You need a business coach to help you get through the hard stuff. Business or Executive Coaching is a great way to keep business owners motivated and moving. They keep you accountable for making progress and can give you tons of helpful hints, ideas and development opportunities.

In 2010, businesses that do the hard work now will definitely reap the benefits and will be more successful. Ultimately, you will have to ask a lot of questions of yourself and others before you can have a realistic view of the future. Your bookkeeping and financial records can answer the important ones that matter most. If you’re confused how they can help or don’t know where to begin, please give us a call. We can help.

As we head into the heart of December, it’s time to start planning year-end tax strategies. There are several ways to maximize your 2009 savings by minimizing your taxable income through smart deductions. Below are a few tips:

• Retirement contributions: If you haven’t already reached the limit, now is the time to max out your contribution to your corporate 401K account. If you don’t work for a company, you might also consider contributing to a traditional IRA or SEP (self-employed) IRA. Your CPA can help you identify which retirement plans must be funded before the end of 2009, and which can be funded after the New Year.
• New vehicle deductions: Are you planning to buy a new car, truck, motorcycle, or RV in the coming year? If you complete the purchase before the New Year, you may be eligible to write off the sales tax as a deduction, depending on the amount of your total household income.
• Homebuyer and homeowner credit: In 2009, legislature was passed that granted first-time home buyers up to $8,000 in tax credits. This deduction is limited to taxpayers who have not bought a home in the last three years and whose incomes are below the maximum limit. If you’re planning to purchase a home in the near future, doing so before the end of the year will increase your 2009 tax savings. In addition, current homeowners may be eligible to deduct up to $6,500 in tax credits.
• Eco-friendly appliances: Federally funded programs are offering special rebates for appliances—furnaces, dishwashers, refrigerators, and washers and dryers, among others—that have earned an Energy Star rating for environmentally friendly design. Rebate values vary by state, ranging from $50-$200 per product, so be sure to check with your CPA for details.
• Business expenses: If you own a business or do independent consulting work, now’s the time to tally up your receipts and determine the amount that can be deducted as work-related expenses. If you’re anticipating any large business purchases in the coming months, you might consider making them now to boost your deductions. Your CPA can also help you analyze how depreciation schedules might impact your tax situation.

Remember, every situation is different, and this is just a sampling of end-of-year tax considerations. To make sure you’re taking advantage of all eligible tax deductions, it’s best to consult with a qualified tax professional. With the proper planning and guidance, you can kick off the New Year with some extra cash to spare.