As summer enters its final stages, now is a good time to review your tax situation and make moves to help manage your tax obligation. This issue discusses a recent IRS announcement for those using the Marketplace to purchase their health insurance and includes seven simple ideas to help small business owners. For those looking for a little fun, test your knowledge of some once common phrases that are no longer commonplace.
As always, should you know of someone who may benefit from this information please feel free to forward this newsletter to them.
ACA Strikes Again.
The Affordable Care Act (ACA) continues to evolve as the IRS begins to address challenges faced during the past tax season. A recent IRS announcement warns taxpayers who use the Premium Tax Credit to file their 2014 tax return immediately. Failing to do so may cause the IRS to deny using the Premium Care credit during 2016. Here is what you need to know.
Who? Anyone who uses the Marketplace to purchase their health insurance and receives the Premium Tax Credit. The IRS announcement applies to;
What happens. If you are impacted by this announcement you will no longer be eligible to receive pre-payment of the Premium Tax Credit in 2016. You will need to come up with the money to pay for your entire health insurance premium each month.
Action to take. If you do not want this to impact you, file your 2014 tax return as soon as possible. File now even if you filed a tax extension giving you until October 15, 2015 to file your tax return.
To learn more please review IRS Health Care Announcement: IRS 2015-40
Seven Simple Ideas to Help Your Small Business
If you are like millions of taxpayers trying to make a living running a small business, you know it is tough out there. Here are seven ideas to help your business survive and thrive.
|Understand your cash flow. One of the biggest causes of business failure is lack of understanding cash flow. At the end of the day, you need enough cash to pay your vendors and your employees. If you run a seasonal business you understand this challenge. The high season sales harvest needs to be ample enough to support you during the slow non-seasonal periods.
Recommendation: Create a 12-month rolling forecast of revenue and expenses to help understand your cash needs.
|Know your pressure points. When looking at your business, there are a few big items that drive your business success. Do you know the top four drivers of your financial success or failure? By staying focused on the key drivers of your business success will be easier to come by.
Recommendation: Look at last year’s tax return and identify the key financial drivers of your business. Do the same thing with your day-to-day operations and staffing.
|Inventory matters. If your business sells physical product, you need a good inventory management system. This “system” does not have to be complex, it just needs to help you keep control of your inventory. Cash turned into inventory that becomes stuck as inventory can create a major cash flow problem.
Recommendation: Develop an inventory system with periodic counts to ensure you do not have shrink (theft) issues and that can help identify when you need to take action to liquidate old inventory.
|Know your customers. Who are your current customers? Are there enough of them? Where can you get more of them? How loyal are they? Are they happy? A few, large customers can drive a business or create tremendous risk should they go to a competitor.
Recommendation: Know who your target audience is and then cater your business toward them and what they are looking for in your offerings.
|What is your point of difference? Once you know who your customer is (your target audience), understand why they buy your product or service. What makes you different from others selling a similar item?
Recommendation: If you don’t know what makes your business better than others, ask your key customers. They will tell you. Then take advantage of this information to generate new customers.
|Happy with your support team? Successful small business owners know they cannot do it all themselves. Do you have a good group of support professionals helping you? You will need accounting, tax, legal, insurance, and employment help along with your traditional suppliers.
Recommendation: Conduct an annual review of your resources, be prepared to review your suppliers and make improvements where necessary.
While libraries are filled with small business advisory books, sometimes focusing on a few basic ideas can help improve your business’ outlook. Please call if you wish to discuss your situation.
Plenty to Gain with Tax Planning
Consider conducting a tax planning exercise now to see if you can take actions to minimize your taxes. Here are some ideas to get you started.
Assess your income. Begin by determining how your income this year will compare to last year’s income. Then apply any tax implications this income change may cause. If your income is rising, you may be moving into the next higher tax bracket. Your income could also trigger a phase-out that will prevent you from taking advantage of a deduction or tax credit formerly available to you.
|Changes in deductions. Examine if there will be changes in your itemized deductions this year. Typically this happens when there is a change in your life. Here are some examples;
What tax changes impact you. Over the past few years a number of items in the tax code keep expiring, only to be extended once again late in the year. Review your past income tax return to ensure some of the expired provisions will not surprise you this year. While there is still time for Congress to make changes, you will want to plan accordingly.
Manage your retirement. One of the best ways to reduce your taxable income is to use tax beneficial retirement programs. Now is a good time to review your retirement account funding. Are you taking advantage of your employer’s retirement plans? Are you saving money to invest in your future through the various retirement savings options?
Look into credits. There are a variety of tax credits available to most taxpayers. Spend some time reviewing the most common to ensure your tax plan takes advantage of them. Here are some worth reviewing;
|Child Tax Credit|
|Earned Income Tax Credit|
|Premium Health Credit|
|Elderly and Disabled Credit|
|Educational Credits (Lifetime Learning and American Opportunity Credit)|
No surprises please. Conducting a tax planning review now allows you time to take advantage of tax code provisions to reduce your tax obligation. Remember some tax saving ideas may require funding on your part. It is best to identify them now so you can save cash to take advantage of them prior to the end of the year.
Those Oddball Idioms
|As technology and other advances shift the cultural landscape, we run the risk of losing old idiomatic expressions that were once popular. Here are a number of common English expressions that run the risk of joining the dinosaurs. How many can you define? How many do you still use? Enjoy.|
What does each of these phrases mean?
|1.||Do a runner|
|2.||When pigs fly|
|3.||Cat got your tongue?|
|4.||One track mind|
|5.||Chew the fat|
|6.||Jump the shark|
answers: 1.a; 2.c; 3.d; 4.a; 5.d; 6.c; 7.c
- The kids did a runner at the restaurant to avoid paying their bill.
- “Sure, he’ll pay me back. When pigs fly.”
- “Who broke my vase? What’s the matter, cat got your tongue?”
- “All he talks about is soccer. Boy, he sure has a one track mind.”
- “Come on over, let’s chew the fat.”
- This refers to episode 1, season 5 of the program Happy Days, when Fonzie jumps over a shark while on water skis. It is commonly acknowledged this was a turning moment (for the worse) in the show’s history. The phrase is used to define the moment a popular television program begins its decline. The moment is usually due to a character change or a shift in writing. Don’t remember this moment? Click here to view a clip.
- “He always disagrees with me. He just loves being the devil’s advocate.”
As always, should you have any questions or concerns regarding your situation please feel free to call.