This isn’t news to any tax preparer (we have heard it all before) – Congress will pass last minute tax law, clients don’t get preparers information on time, the IRS has to delay processing tax returns. This posting by Daniel Hood summarizing an AccountingToday survey of tax professionals just writes down in stone all our tax preparer worries: http://www.accountingtoday.com/news/tax-season-worries-late-laws-late-clients-late-start-69023-1.html There is also talk of most preparers raising preparation fees this year. Well, with the cost of supplies, staff and other items (tax prep software, for instance) increasing, it is obvious prices will go up for tax preparation. As far as the other worries above, thank goodness for extensions! I have a feeling they will be going up, too. For financial, accounting and tax musings, You can count on us to count for you! Email: bstonercpa@sbcglobal.net Phone: 818-317-6035 Website: www.briantstonercpa.com Has been Featured On https://twitter.com/bstonercpa
CPA Tax Musings: S Corporation Compensation vs. 401K Contributions
Before the year ends, one thing I have been doing a lot of is year end business planning. I have a lot of entertainment and professional clients with S Corporations that need a sitdown meeting to decide how much compensation they need to take to meet the reasonable compensation rules, plus they have solo 401K retirement plans that they want to contribute to. This is where a decision has to be made – take the absolute minimum reasonable compensation (I have software that can calculate a compensation amount) and possibly forgo some 401K contributions. If my clients want to maximize their 401K contributions, they will need to take $134,000 in wages (the passthrough profit on the S Corporation K-1 doesn’t count) to get the maximum 25% employer contribution of $33,500 (134,000 x 25%). That plus the $17,500 maximum employee deferral ($23,000 if over 50) gets them the maximum contribution of $51,000 ($56,500 if over 50). The offshoot is that on the first $113,700 of wages the client will owe 15.3% of social security tax (12.4% FICA and 2.9% Medicare) but will get a tax savings on all the 401K contributions (if a California resident probably a third of the contribution.) Say the California client [...]
Tax Musings of a Burbank CPA: Buy Your Equipment Before These Tax Breaks Expire!
As the year ends, that is not the only thing that ends – both the fifty percent bonus and Section 179 expense writeoffs also bite the dust unless Congress extends them. See more details in this post in CFO by David M. Katz: http://ww2.cfo.com/tax/2013/12/buy-equipment-tax-breaks-end-adviser-says/ Now just remember that Congress can extend these provisions up until the end of 2014 (or beyond – remember New Years Day 2013 for the last extender extension.) Now of course no one wants this to go on for the whole year, so I am sure they will not wait this long again and will get it done as soon as politically expedient (I mean convenient, oh, I don’t know what I mean) but if not, there may still be some time to get all this done. For financial, accounting and tax musings, You can count on us to count for you! Email: bstonercpa@sbcglobal.net Phone: 818-317-6035 Website: www.briantstonercpa.com Has been Featured On https://twitter.com/bstonercpa