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Volume 29; Tax Saving Tips for the Remainder of 2016

Posted by Admin Posted on Nov 03 2016

 

TAX SAVING MOVES FOR THE REST OF 2016


Written by: Ashley Hoeffken, Staff Accountant
                  
Tax planning before the end of the year can be a great benefit in helping you save on your taxes. The following are some ideas on how to efficiently manage your tax liability.

  • Electing to claim sales and use tax as an itemized deduction instead of state income taxes. Some taxpayers make this election when they purchase “big-ticket” items such as motor vehicles, boats, homes and home building materials. This election can also help lower those who owe AMT taxes.

 

  • Traditional IRA and Roth IRA year-end moves. Taxpayers can covert funds in a traditional IRA to Roth IRAs within 60 days of a distribution. Why would someone want to do this? Traditional IRA distributions are taxed as ordinary income with a few exceptions. However Roth IRA distributions are tax-free if they are “qualified distributions”. To be a “qualified distribution” the distribution would be made after the 5-tax-year period that begins with the first tax year for which the taxpayer made the contribution to a Roth IRA and when the account owners is 59 ½ years of age or older, due to a death, disability or for the purchase of a qualified first time homebuyer. Traditional IRAs are subject to the lifetime required minimum distribution rules that Roth IRAs are not subject to, in addition to many other tax advantages.

 

  • Charitable contributions. Individual taxpayers who are at least 70 ½ years old can contribute to charities directly from their IRAs without having the amount of the contribution included in their gross income. Making this tax move may also reduce their tax liability even more than if they would have just received the distribution and then contributed that amount to a charity.

 

  • Energy tax incentives. Taxpayers may be eligible for a nonbusiness energy property credit when purchasing “qualified energy efficiency improvements” that must be placed in service before 2017. Such improvements include insulation material or systems that are designed to reduce the heat loss or gain of a home, exterior windows, skylights, and exterior doors, metal roofs with appropriate coatings or asphalt roofs with cooling granules. To qualify for the credit, the components must be expected to last for at least five years and can’t include amounts paid for onsite preparation, assembly, or original installation.

 

  • Expensing deductions. Business can elect to expense certain lower-cost business assets rather than capitalizing them. In previous years, assets purchased for $500 or more had to be capitalized; however now that amount has increased to $2,500 or more. To use this many businesses file a “de minimis safe harbor election” to expense those assets in the year that they were bought and placed in service. Businesses can use this to save the Code Sec. 179 allowance for assets that don’t qualify for this election. And unlike the Code Sec. 179 expensing deduction, there is no aggregate annual dollar limit on the amount that can be deducted under the de minimis safe harbor election. Businesses benefit because amounts expensed under the safe harbor won’t eat into their $500,000 Code Sec. 179 expensing limit.

 

Year-end tax planning is so important so you can take advantage of the many temporary “extender” tax provisions that are still in the Code. These provisions such as business tax deductions, tax credits and other tax-saving laws are in effect through 2016 and the continued renewal may be uncertain.  Please let us know if you would like to meet with anyone to discuss what you can do to manage your tax liability for 2016 and future years.

 

SPECIAL REPRINT:
FAIR LABOR STANDARDS OVERTIME REQUIREMENTS


Written by: Natasha Swan, Executive Assistant               

On May 18th the Department of Labor released the Final Rule on overtime that increased the thresholds for overtime rules, expanding the number of employees eligible for overtime pay. Here is an overview of the new mandates:

  • Under the Fair Labor Standards Act (FLSA), employees who work more than 40 hours in a week are entitled to overtime pay, unless they meet the requirements of certain wage and duties tests.
  • The Salary level for exempt employees (non-overtime eligible employees) will increase to $47,476 annually ($913 per week) (from the current $23,660 annually) on December 1st, 2016.
  • To qualify for exemption status, a white collar employee(exempt employee) generally must:
    • Be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed.
    • Be paid more than a specified weekly salary level, which is $913 per week
    • Primarily perform executive, administrative, or professional duties, as defined in the department’s regulations (the duties test)
  • Employers will be required to implement the updated salary level requirements via:
    • Increasing the salary of any employee who meets the duties test to at least the new salary level ($47,476 annually) to retain his or her exempt status
    • Pay an overtime premium of one and a half times the employee’s regular rate of pay for any overtime hours worked
    • Reduce or eliminate overtime hours- Some employers will use this option to reduce the burden of increase wages
    • Reduce the amount of pay allocated to base salary (provided that the employee still earns at least the applicable hourly minimum wage) and add pay to account for overtime for hours worked over 40 in the workweek, to hold total weekly pay constant.
  • The FLSA rules encompass businesses with 2 or more employees, however coverage isn’t solely determined based on the number of employees.

    Generally, employees of enterprises that have an annual gross volume of sales made or business done of $500,000 or more are covered by the FLSA. In addition, employees of certain entities are covered by the FLSA regardless of the amount of gross volume of sales or business done. These entities include: hospitals; businesses providing medical or nursing care for residents; schools (whether operated for profit or not for profit); and public agencies.

    Even if an employer is not covered on an enterprise-wide basis, employees may be individually covered by the FLSA if their work regularly involves them in commerce between States (“interstate commerce”). The FLSA covers individual workers who are “engaged in commerce or in the production of goods for commerce.

Companies have until December 1, 2016, to make determinations on which employees to reclassify as nonexempt and implement the changes.

Employers should have documentation on how they determined any status changes and should discuss changes with employees before changes are put into effect.

For more information or further questions please visit the DOL's Final Overtime Rule webpage. Or, feel free to reach out to one of our tax professionals at any time.

 

IMPORTANT TAX DATES TO REMEMBER


The due dates for tax returns on extension are growing near. If you have a return on extension and we will be preparing the return, please have your tax preparation information to us as soon as possible so we may complete in a timely manner for you.

Here is a recap of important tax due dates to keep in mind for the remainder of the year:


January 16, 2017 - 2016 4th quarter estimate payment due              
                 

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Becker and Rosen CPAs, LLC Disclaimer

This newsletter is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of this newsletter should not be acted upon without specific professional guidance. Please call us if you have questions. 

Links to Third Party Websites
For your convenience, this newsletter may contain hyperlinks to websites and servers maintained by third parties. We do not control, evaluate, endorse or guarantee content found in those sites. We do not assume any responsibility or liability for the actions, products, services and content of these sites or the parties that operate them. Your use of such sites is entirely at your own risk.

 

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