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

  1. 1. 12 Months, 12 Priorities  for Your Business in 2014 Chris Haas, CPA Chris Masters, CPA Shareholders at Doeren Mayhew
  2. 2. Perform Year-End Close What? • Accruals • Prepaids • Updated depreciation numbers • Bank reconciliations • Inventory adjustments • A/R reserves Copyright © 2014
  3. 3. Perform Year-End Close Why? • Aids the tax return prep and attestation  processes – better information to your CPA  means a faster process with fewer  complications • Better projections of potential tax due results in  better cash‐flow planning • More time to make additional adjustments if  necessary Copyright © 2014
  4. 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 © 2014
  5. 5. Prepare for Your Return How? • Begin gathering data now for your 2013 return • Using the tax organizer:   Summarizes data in orderly format  Shows prior‐year amounts reported  Asks key questions your tax preparer needs to  know  Avoids overlooking key data Copyright © 2014
  6. 6. Prepare for Your Return How? • Corporate return checklist  Trial balance  Fixed assets  Equity accounts  Foreign taxes paid  State information Copyright © 2014
  7. 7. Prepare for Your Return Copyright © 2014
  8. 8. Prepare for Your Return What to expect? • Section 179 and bonus depreciation  179 Limits: $500,000 in 2013; $25,000 in 2014  Bonus – 50% in 2013; goes away in 2014  Qualifying assets – tangible personal property • R&D  2013 tax credit • DPAD (Domestic Production Activities Deduction)  How to calculate  Qualifying activities – U.S. manufacturing, construction  services, engineering and architectural services, software  development, etc. Copyright © 2014
  9. 9. File Extensions, Finalize Attest Services What/why? • C corporation and S corporation extensions     15 days left to file or extend corporate returns One month to go before personal returns due Flow‐through income affects personal returns Should have a good idea of taxable income for  cash‐flow planning Copyright © 2014
  10. 10. File Extensions, Finalize Attest Services What/why? • Attest service finalization – banks require  financials within 90 days • Covenant calculations and how tax planning  effects them • Discussions with the bank Copyright © 2014
  11. 11. Estimate Quarterly Tax What? • Due dates for individuals  April, June, September, December  Can pay through withholding Copyright © 2014
  12. 12. Estimate Quarterly Tax Why? • Safe Harbor  Avoid underpayment penalties and interest • Cash‐Flow Planning  Spread capital requirements evenly throughout  year Copyright © 2014
  13. 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 © 2014
  14. 14. Analyze Banking Situation What? • • • • Line of credit extensions Personal guarantees Working capital increases Interest rate Copyright © 2014
  15. 15. Analyze Banking Situation Why? • Changes in operations  Volume increases  Product mix changes • Past performance versus prior year and  projections • Market condition changes Copyright © 2014
  16. 16. Analyze Banking Situation Best practices: • Be prepared  Banks love information  Presentations provide confidence • Know your goal ahead of time and  prove it to the bank Copyright © 2014
  17. 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 © 2014
  18. 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 – no extension available • “Mailbox rule” does not apply – must be  received by due date • Electronic filing Copyright © 2014
  19. 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 © 2014
  20. 20. Focus on Foreign Asset Reporting What? • Form 8938 – 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 © 2014
  21. 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 © 2014
  22. 22. Conduct a Budget Review What? • Review key budget components:  Income statement  Cash‐flow statement  Balance sheet • Create new expectations for remainder of  year based on actuals Copyright © 2014
  23. 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 © 2014
  24. 24. Assess Cash Flow What? • End‐of‐year cash forecast • Rolling 13‐week cash flow Copyright © 2014
  25. 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 follow‐through on initiatives • Helps develop clear and consistent communication • Assists in formulating succession plans • Helps the business stay on track toward goals • For multi‐location businesses, helps achieve consistent  results Copyright © 2014
  26. 26. Conduct Strategic Planning Copyright © 2014
  27. 27. Conduct Strategic Planning Gather  feedback Build  consensus Determine the  opportunities  to exploit and  threats to  mitigate Develop an  action plan for  moving  forward Copyright © 2014
  28. 28. Perform Tax Planning What/why? • Maximize deductions, defer income • Accelerate depreciation • Tax projections for cash flow purposes • Cash vs accrual basis Copyright © 2014
  29. 29. Perform Tax Planning C corporation vs. S corporation: • C corp pays tax at the entity level; S corp is a  flow‐through • Double taxation with C corp • No capital gains rate in C corp environment • S corp allows for more favorable sale of  business Copyright © 2014
  30. 30. Perform Tax Planning 3.8% Medicare tax: • High earners will be hit – additional .9% on wages  over $200,000 for single taxpayers, $250,000 for  married filing joint • Passive income subject to tax – capital gains,  dividends, interest • Active income from trade or business is exempt • Material participation test – 500 hours or more • Real estate professionals exempt Copyright © 2014
  31. 31. Perform Tax Planning Recent legislation: • Mostly taxpayer adverse – higher rates and  fewer deductions • Itemized deduction phaseout (Pease  Limitation) once AGI exceeds $300,000 • Repair and maintenance regulations Copyright © 2014
  32. 32. Perform Tax Planning Copyright © 2014
  33. 33. Budget for the New Year Why? • Serves as a planning and decision‐making 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 © 2014
  34. 34. Budget for the New Year What? • 3 levels:  Budget with assumption based on current trends  Budget with flexible assumptions based on  projected performance  Comprehensive budget for multiple companies or  departments Copyright © 2014
  35. 35. Budget for the New Year Best practices: • Tie the budget into overall company goals and  question the merit of items that don’t align • Include line‐item details for allocating funds to  facilitate expense tracking and align spending  with goals • Update it regularly to reflect actual spending • Monitor monthly – variances are either warning  signs or opportunity signals Copyright © 2014
  36. 36. Conduct Gifting What/why? • Estate lifetime exemption limits – $5.34 • Need for valuation if giving away assets  without readily available FMV • Beneficial to gift appreciating assets • Annual gift limits  $14,000 per donee per year  Spouses can each gift up to $14,000 per donee Copyright © 2014
  37. 37. Questions? Chris Haas, CPA 713.860.0206 haas@doeren.com Chris Masters, CPA 713.860.0206 masters@doeren.com Copyright © 2014

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