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.

1. 12 Months, 12 Priorities
for Your Business in 2014
Chris Haas, CPA
Chris Masters, CPA
Shareholders at Doeren Mayhew

2. Perform Year-End Close
What?
• Accruals
• Prepaids
• Updated depreciation numbers
• Bank reconciliations
• Inventory adjustments
• A/R reserves
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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
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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
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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
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6. Prepare for Your Return
How?
• Corporate return checklist
 Trial balance
 Fixed assets
 Equity accounts
 Foreign taxes paid
 State information
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7. Prepare for Your Return
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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.
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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
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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
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11. Estimate Quarterly Tax
What?
• Due dates for individuals
 April, June, September, December
 Can pay through withholding
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12. Estimate Quarterly Tax
Why?
• Safe Harbor
 Avoid underpayment penalties and interest
• Cash‐Flow Planning
 Spread capital requirements evenly throughout
year
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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
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14. Analyze Banking Situation
What?
•
•
•
•
Line of credit extensions
Personal guarantees
Working capital increases
Interest rate
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15. Analyze Banking Situation
Why?
• Changes in operations
 Volume increases
 Product mix changes
• Past performance versus prior year and
projections
• Market condition changes
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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
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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
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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
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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
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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
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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
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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
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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
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24. Assess Cash Flow
What?
• End‐of‐year cash forecast
• Rolling 13‐week cash flow
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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
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26. Conduct Strategic Planning
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27. Conduct Strategic Planning
Gather
feedback
Build
consensus
Determine the
opportunities
to exploit and
threats to
mitigate
Develop an
action plan for
moving
forward
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28. Perform Tax Planning
What/why?
• Maximize deductions, defer income
• Accelerate depreciation
• Tax projections for cash flow purposes
• Cash vs accrual basis
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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
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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
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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
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32. Perform Tax Planning
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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
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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
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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
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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
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37. Questions?
Chris Haas, CPA
713.860.0206
haas@doeren.com
Chris Masters, CPA
713.860.0206
masters@doeren.com
Copyright © 2014