12 Months, 12 Priorities for Your Business in 2014 Chris Haas, CPA Chris Masters, CPA Shareholders at Doeren Mayhew
12 Months, 12 Tax and Business Priorities for 2014
Nov 01, 2014
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 Priorities for Your Business in 2014
Chris Haas, CPAChris Masters, CPA
Shareholders at Doeren Mayhew
Copyright © 2014
Perform Year-End Close
What?• Accruals• Prepaids• Updated depreciation numbers• Bank reconciliations• Inventory adjustments• A/R reserves
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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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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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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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Prepare for Your Return
How?• Corporate return checklist Trial balance Fixed assets Equity accounts Foreign taxes paid State information
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Prepare for Your Return
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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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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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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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Estimate Quarterly Tax
What?• Due dates for individuals April, June, September, December Can pay through withholding
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Estimate Quarterly Tax
Why?• Safe Harbor Avoid underpayment penalties and interest
• Cash‐Flow Planning Spread capital requirements evenly throughout year
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Estimate Quarterly Tax
Pass-Throughs/Individuals Corporations
Prior-Year Tax Liability 500,000
110% Safe Harbor Amount 550,000 -
Prior-Year Overpayment Applied - - Projected Withholding 50,000 -
Estimated Tax Payments:Qtr 1 125,000 - Qtr 2 125,000 - Qtr 3 125,000 -
375,000 -
Total Amount Paid In 425,000 -
Additional Amount Due Q4 125,000 -
Safe Harbor Calculation
Pass-Throughs/Individuals Corporations
Prior-Year Tax Liability 500,000
110% Safe Harbor Amount 550,000 -
Prior-Year Overpayment Applied - - Projected Withholding 50,000 -
Estimated Tax Payments:Qtr 1 125,000 - Qtr 2 125,000 - Qtr 3 125,000 -
375,000 -
Total Amount Paid In 425,000 -
Additional Amount Due Q4 125,000 -
Safe Harbor Calculation
Pass Throughs/Individuals Corporations
2013 Projected Tax Liability 600,000 -
110% Safe Harbor Amount 660,000 -
2013 Projected Withholding 50,000 -
Q1 2014 Estimated Tax Payment 152,500 -
2014 Estimated Tax Payments
Pass Throughs/Individuals Corporations
2013 Projected Tax Liability 600,000 -
110% Safe Harbor Amount 660,000 -
2013 Projected Withholding 50,000 -
Q1 2014 Estimated Tax Payment 152,500 -
2014 Estimated Tax Payments
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Analyze Banking Situation
What?• Line of credit extensions• Personal guarantees• Working capital increases• Interest rate
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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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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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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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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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Focus on Foreign Asset Reporting
Why?• Penalties up to $100,000 for willful civil infractions ($10,000 for nonwillfulinfractions) 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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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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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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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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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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Assess Cash Flow
What?• End‐of‐year cash forecast• Rolling 13‐week cash flow
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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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Conduct Strategic Planning
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Gather feedback
Build consensus
Determine the opportunities to exploit and threats to mitigate
Develop an action plan for
moving forward
Conduct Strategic Planning
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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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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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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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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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Perform Tax Planning
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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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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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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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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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